Kerala government-owned NBFC has high leverage ratio at 6.82
CL Jose
THIRUVANANTHAPURAM: The Kerala Financial Corporation (KFC), the 99 per cent Government of Kerala-owned non-bank finance company (NBFC), has got the board approval to raise up to Rs2200 crore through the issue of bonds during the current financial year.
KFC’s borrowings as of March 31, 2024 stand at Rs7,248.17 crore, which have been mostly raised through the issue of bonds.
Talking to businessbenchmark.news, a financial analyst explained that raising further debt could elevate the relatively high debt-equity ratio that stayed at 6.82 as of March 31, 2024.
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The government has shored up the paid up capital of KFC by 70 per cent during the year from Rs426.50 crore to Rs726.50 crore.
During the same period, the net worth (paid up capital + reserves) or the equity of KFC has marginally improved from Rs925.84 crore to Rs1,063.67 crore, but has not yet effectively brought down the debt-equity ratio, or the leverage ratio.
The net worth has failed to grow significantly over period in the absence of meaningful accretion of profit from operations though the government has infused capital a few times to retain the net worth at a healthy level.
Profit is modest
KFC reported a net profit of just Rs63.10 crore for the fourth quarter ending March 31, 2024 compared with Rs54 crore for the same period last year.
However, the capital to risk weighted assets ratio (CRAR) or the capital adequacy ratio (CAR) maintains a relatively healthy of 25.52 per cent as of end FY24.
KFC has been able to enjoy healthy CRAR, maybe, due to the government guarantee enjoyed by a substantial portion of its loan book, as these loans – basically borrowed by the government related companies, carry lower credit risk.
While KFC’s loan book is valued at Rs7,368.33 crore as of March end, four government-related companies alone account for 37.20 per cent of the total loans, at Rs2,741.35 crore.
The four companies are KIIFB (at a current outstanding of Rs833.35 crore); Kerala Social Security Pension Ltd or KSSPL (Rs650 crore); Vizhinjam International Seaport Ltd (Rs352.57 crore) and KSEB (Rs905.42 crore).
