The Hindu Business Line : KFC makes Rs 1.77-cr net profit

The State-owned Kerala Financial Corporation (KFC) has recorded a net profit of Rs 1.77 crore in 2005-06 as against a net loss of Rs 2.30 crore in the previous year.

The corporation also substantially improved its operating profit to Rs 11.38 crore from Rs 53 lakh in 2004-05.

According to the annual report of the corporation, the total sanctions during the year were at Rs 121.13 crore as compared with Rs 109.81 crore in the previous year. Out of the total number of sanctions of 368, the small-scale industries sector accounted for 174 and the balance by non-SSI sectors.

Total recovery

The total recovery was at Rs 213.89 crore, which, however, was lower than Rs 244.68-crore registered in the previous year.

The recovery would have been higher than in 2004-05 but for the application of model code of conduct following the declaration of elections in March, says the report.

The net non-performing assets of the corporation increased to 56.89 per cent from 52.36 per cent in the previous year. This has been attributed to the switchover of period of classification to 90 days from 180 days earlier. The capital-to-risk assets ratio improved from 16.96-18.88 per cent on account of capital contribution by the State Government and transfer of profits earned to reserves.

The State Government provided share capital contribution of Rs 2 crore, thereby taking its aggregate holding to 90.53 per cent from 90.41 per cent in 2004-05.

WEAKNESSES

The report notes that the corporation's weaknesses are high cost of funds and high proportion of NPAs. Consequently, efforts are on to reduce the cost of funds through measures such as debt-swapping and broad-basing of resources.

NPAs

In the case of NPAs, the corporation is contemplating floating of an asset reconstruction company with the support of the State Government and the Small Industries Development Bank of India.

This will also enable the corporation to raise resources at lesser cost and also widen the resources base.

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