- Tale of two state-owned NBFCs
- KSPIFCL earned Rs6 crore profit for the nine months ended December 2022
- KTDFC's hallmark is the losses the company rolls out year after year.
Thiruvananthapuram: Can Kerala State Power and Infrastructure Finance Corporation Ltd (KSPIFCL) set a role model for other government owned companies that have collectively been draining the state’s exchequer?
KSPIFCL stands out from the scores of government controlled companies those are perennially in loss, primarily on two counts - that KSPIFCL generates regular profits and the company’s operations are run by a lean team, thus reining in unnecessary operational expenses.
KSPIFCL, which has earned Rs6 crore profit for the nine months ending December 2022, enjoys an extremely healthy capital adequacy ratio (CAR) above 80 per cent as of March 22, 2022.
The company has a lean organisational structure with 10 employees and the entire day-to-day operations are performed by the company secretary and chief financial officer (CFO) under the supervision of the managing director.
This is in stark contrast to the functioning of a similar financing company, Kerala Transport Development Finance Corporation (KTDFC), whose hallmark is the losses the company rolls out year after year.
And more seriously, there are reports that of late, KTDFC’s depositors are up in arms against the company for failing to return their deposits even after maturity.
Depositors remain their fingers crossed wondering whether they can ever get back their hard earned money back despite their deposits are government guaranteed.
There can be parallels that can be drawn between both KTDFC and KSPIFCL as both these companies have been established as financing intermediaries for the funding requirements of two Kerala government-owned utilities – Kerala State Road Transport Corporation (KSRTC) and Kerala State Electricity Board Ltd (KSEB Ltd) respectively.
As is reported, the key reason for the failure of KTDFC is the huge loans provided to KSRTC having turned NPAs. According to rough estimates, KSRTC owes about Rs800 crore to KTDFC and as is known to everyone, KSRTC is unlikely to settle these dues in the foreseeable future.
KSPIFCL business model
KSPIFCL is offering financial assistance by way of short-term loans and working capital loans majorly to the power component suppliers of KSEBL.
For short-term loans, the repayments from the customers are ensured by way of tripartite agreement between KSPIFCL, KSEBL/Agency for Non-conventional Energy and Rural Technology (ANERT) & the customer.
Tripartite agreement ensures that the payment is directly made to KSPIFCL from KSEBL, and the excess funds are returned to the customers on completion of the work. For orders with other government entities, KSPIFCL sets up an escrow account from where the payments to the company are made.
KPFCL was promoted by the Government of Kerala and Kerala State Electricity Board Ltd (KSEBL) mainly for providing financial assistance to power projects.
However, later the Government of Kerala has given approval for providing financial assistance to infrastructure projects and the name of KPFCL was changed to KSPIFCL and registered as an NBFC.
The Government of Kerala holds 59 per cent of equity in KSPIFCL and the rest 41 per cent is held by KSEBL, as on March 31, 2022. KSEBL, in turn, is 100 per cent held by the Government of Kerala, which ultimately enjoys 100 per cent beneficial ownership.