BBN Bureau
THIRUVANANTHAPURAM/February 06-2022: Kerala Financial Corporation (KFC) has got the mandate from the state government to provide financial assistance up to Rs50 crore to government undertakings.
A notification issued by the Finance Department, Government of Kerala, has stated that KFC’s request to this end has been approved and the state financial corporation, majority owned by the government, will now be providing financial assistance to state-owned industrial concerns, MSME units and state PSUs.
The notification clarified that such financial assistance will not be restricted by the size of the paid-up capital or free reserves of the said borrowers, and the tenure of these financial assistance will be up to two years.
The Finance department has steered clear of the responsibility to raise funds for the purpose stating that “KFC shall mobilise own fund without any financial commitment/guarantee from the government.”
The board of KFC will be required to put in place adequate internal controls and safeguards in its lending policy. The safeguards suggested also include obtaining credit rating from RBI-accredited Credit Rating Agencies (CRAs) while funding large projects.
KFC’s net profit for the second quarter ending September 30, 2021, had dropped 81.35 per cent to Rs10.32 crore compared with Rs55.34 crore for the same period last year.
Despite a slightly better total revenue of Rs203.52 crore for the quarter under review, the higher interest expenses at Rs148.52 crore compared with Rs118.71 crore and a higher provision against bad debt to the tune of Rs18.45 crore, have weighed down on the bottom line leading to a lower profit for Q2.
High debt-equity ratio
KFC with a net worth of Rs690.56 crore (share capital at Rs426.50 crore and reserves &surplus at Rs264.06 crore), and total borrowings to the tune of Rs3583.87 crore, sits on a relatively high debt-equity ratio of 5.19.
The total assets during the year have marginally improved from Rs4662.49 crore to Rs4699.36 crore as of September end, 2021 (Q2), whereas the total assets as of March 31, 2021 were much higher at Rs5341.79 crore.
