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Kerala Financial Corporation (KFC) has received the State Government nod for a non-SLR bond issue for Rs 400 crore.
Tapping the market in this manner would help raise the size of its loan portfolio to Rs 1,500 crores in coming years, said Yogesh Gupta, chairman and managing director.
GUARANTEE APPROVED
The State Cabinet has approved extending unconditional and irrevocable government guarantee for the bonds for a period of 10 years. The Finance Department has since issued orders to the effect, Gupta said.
The proposal for the bond issue was originally announced in the 2012-13 Budget by Finance Minister K. M. Mani.
This is aimed at extending loans at low rate of interest to the manufacturing, hospitality, entertainment, housing and real estate sectors. This isin addition to its existing client base of small and medium sector enterprises in the State.
The corporation has targeted sanctions of Rs 600 crore and disbursement of Rs 500 crore for 2012-13, Gupta said.
GUARANTEE COMMISSION
The corporation will pay guarantee commission at the rate of .75 per cent of the guarantee amount annually. This is expected to result in addition of more than Rs 3 crore every year to the State’s revenue.
The corporation had recorded a profit of Rs 45.65 crore during 2011-12. It featured the lowest NPA (non-performing assets) level and declared the highest dividend among public sector units in the State.
“KFC is approaching the market from its status as the most healthy and vibrant organisation of the State and a leading State financial corporation,” Gupta said.
“The corporation will go for a credit rating, and considering our good record, we expect to hit if off well with the agencies,” he added.
CREDIT RATING
The bond issue will be floated after completing the process of credit rating and appointing a merchant banker. This process is expected to be completed by next month, Gupta said.
Last year, KFC managed to get the entire bond issue of Rs 200 crore fully subscribed before the date of closing.
As much as Rs 100 crore was fully subscribed to within five working days. KFC had decided to exercise the green shoe option of another Rs 100 crore.
The bonds were issued as debentures with unconditional and irrevocable guarantee offering interest at 9.99 every year per cent payable half-yearly.
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