Loans to 4 govt entities account for 43 pc of KFC loan book

THIRUVANANTHAPURAM: Close to half of the loan book of Kerala Financial Corporation (KFC) has been claimed by four large entities controlled by the government.

KFC reported a net profit of Rs30.11 crore for the second quarter ending September 30, 2023 (Q2) compared with Rs55.28 crore a year ago – dropping by 45.53 per cent year-on-year.

While KFC’s loan to KIIFB stood at Rs916.68 crore as of September end, 2023, exposure to Kerala Social Security Pension Ltd (KSSPL) was at Rs500.13 crore, followed by Vizhinjam International Seaport Ltd (VISL) at Rs418.69 crore and that to the financially strained KSEBL being at Rs1018.06 crore.

While the total loan book of KFC amounted to Rs6,931.20 as of September 30, 2023, the exposure to the aforesaid four companies amounted to Rs2,853.56 crore, accounting for about 43 per cent of the total loans.

Interestingly, the KFC claims that its main objective is to boost industrial growth in the state by strengthening the MSME industrial sector.

Referring to the four large loans, KFC has stated, “These (four) loans are secured only by the sovereign guarantee of the Government of Kerala (GoK) and do not have any other security.”

The change in the NPA picture shows the quality of KFC loans has deteriorated during the financial year.

The gross NPA has grown to 5.44 per cent as on September 30, 2023 compared with 3.11 per cent at the start of the financial year.

Likewise, the net NPA has soared more than three times from 0.74 per cent to 3.30 per cent during the said period.

High leverage

KFC’s debt-equity leverage has been very high as of September 30, according to financial analysts. While the equity of this government-owned NBFC stood at Rs982.63 crore, the volume of debt has grown to Rs6,701.54 crore as of September 30, 2023 taking the debt-equity ratio to a high of 6.82 times.

The loan portfolio of the Corporation as on September 30, 2023 was Rs6,931.20 crore comprising standard advances of Rs6,553.81 crore, substandard advances of Rs 299.86 crore and doubtful advances to the tune of Rs77.53 crore.

KFC stated that the Corporation availed a total of Rs 1,686.24. crore as foreign currency loan from State Bank of India (SBI) and South Indian Bank (SIB) for tenures not exceeding 183 days on a fully hedged basis.