Gujarat State Financial corporation

Business overview Gujarat State Financial Corporation (GSFC) is a statutory body established under the State Financial Corporations Act, 1951, primarily to provide medium and long-term credit to small and medium-scale industrial undertakings (SMEs) in Gujarat and Union Territories of Dadra and Nagar Haveli. Since FY 2001-02, the Corporation has discontinued its main activities of sanctioning and disbursing loans due to competition and financial challenges. Currently, its primary function is the recovery of outstanding dues from previously assisted units.

Key facts (FY 2025-26)

• The Government of Gujarat is the promoter with 53.03% shareholding, and Small Industries Development Bank of India (SIDBI) holds 28.41%.
• The Corporation's main operations are concentrated on debt recovery from assisted units within Gujarat, with regional offices in Gandhinagar, Surat, and Rajkot.
• Total income for FY 2025-26 was ₹1,644.17 lakh, down from ₹1,724.71 lakh in FY 2024-25.
• Net loss for the year was ₹1,272.89 lakh, resulting in accumulated losses carried forward of ₹3,55,244.73 lakh.
• The Capital to Risk Assets Ratio (CRAR) was -802.25% as of March 31, 2026.
• All loan assets are classified as Non-Performing Assets (NPAs), with 100% provision made.

Recent developments (from AR FY 2025-26)

• GSFC continues to focus solely on the recovery of dues, having discontinued new lending activities since FY 2001-02. Management is not contemplating restarting main activities in the near future.
• During FY 2025-26, the Corporation recovered ₹83.04 lakh, a decrease compared to ₹212.29 lakh recovered in the previous year.
• A proposal to make the Government of Gujarat loan of ₹621.36 crore interest-free from July 1, 2012, remains under consideration by the State Government.
• The staff strength has reduced to an effective 6 employees, with 4 on deputation to other government departments.
• New statutory auditors, M/s. J.H. Mehta & Co., have been selected for FY 2026-27, subject to shareholders' approval.

Key risks flagged by management

• Financial statements are prepared on a "going concern" basis despite the Corporation's net worth being completely eroded and default in repayment obligations due to liquidity problems.
• The recovery of dues is expected to diminish over time, given that most remaining loan assets are sticky, under litigation, or relate to non-traceable/non-existing units.
• Dues payable to the Government of Gujarat are subject to confirmation and adjustment, with the impact on interest and penal interest currently unascertainable.

Pros

• Established as a statutory body under an Act of Parliament, indicating historical public purpose and government affiliation.
• Maintains a presence with a head office and three regional offices to manage its recovery operations.
• Has established internal control systems including budgetary control and cost monitoring.

Cons

• Core business of sanctioning and disbursing loans has been discontinued for over two decades, limiting its operational scope to debt recovery.
• The Corporation has accumulated significant losses, with its net worth completely eroded, and faces liquidity problems resulting in defaults on repayment obligations.
• Unable to raise cheap funds, which prevents it from resuming its primary role of financial assistance to SMEs.