THIRUVANANTHAPURAM: Kerala Financial Corporation (KFC), nearly fully owned by the Government of Kerala, is seriously weighing the option of bringing in more strategic investors in order to shore up its capital base, according to informed sources.
This would inevitably resut in the dilution of government shareholding in the company, which is close to 100 per cent currently.
However, talking to businessbenchmark.news, Pemnath Ravindranath, the executive director of KFC, said though KFC has the mandate to dilute government stake by selling shares to outsiders, it may not be an immediate option before the Corporation.
“But I don’t want to rule out that option going forward as KFC needs fund to take its business forward,” he added.
Shareholders
The other marginal stake holders in KFC include Small Industries Development Bank of India (SIDBI), Life Insurance Corporation (LIC) and State Bank of India (SBI), together holding less than one percentage shares.
Kerala Government has reportedly given the go-ahead around four years ago for dilution of its stake up to 75 per cent in KFC. As per the terms of dilution, the new shareholders need to be only government controlled institutions, and not individuals.
This could essentially mean the dilution of shareholding will be through private placement route and not through a public offering to retail investors.
“It’s true we need to shore up KFC’s capital going forward, if not immediately, as we don’t have enough capital to support a significant growth in assets,” Ravindranath added.
KFC has been regularly receiving fund infusion from the government, with Rs300 crore contributed by the government in the past less than three years alone.
Capital base
As of September end, 2024, KFC’s share capital stood at Rs726.5 crore and the reserves at Rs401.40 crore . With this equity capital base, the leverage stood at around 6.15 per cent.
A financial analyst told businessbenchmark.news that a 6.15 per cent leverage (means the total borrowing is 6.15 multiples of its total equity) though not precarious, is not a comfortable ratio.Total borrowings of KFC stood Rs6,933 crore as of September 30, 2024.
“If KFC aims to boost its asset base or loan book meaningfully, the company needs to bring in fresh capital. I don’t know how far the government can keep supporting KFC through capital infusion,” he added.
Q2 performance
KFC that earned a revenue of Rs187 crore for the second quarter ended September 30, 2024, closed the quarter with a net profit of Rs25.31 crore down from Rs30.11 crore the Corporation earned a year ago.
With a total portfolio of Rs7,039.40 crore, an amount of around Rs2,760 crore has been borrowed by the four government-related companies – KIIFB (Rs750 croee), KSSPL (Rs1,000 crore), Vizhinjam International Seaport Ltd (Rs200 crore and KSEBL (Rs812 crore).
