Gujarat State Financial Corporation (GSFC) has been fined Rs. 11,800 by the Bombay Stock Exchange (BSE) for non-compliance with corporate governance requirements for the quarter ended September 30. The fine specifically relates to the absence of Independent Directors on the company's Board of Directors and its Committees.

Non-Compliance Details

The BSE imposed the fine based on the following non-compliances:

GSFC's Response

GSFC has contested the fine, citing the following reasons:

1. Governing Act: The corporation's Board constitution is governed by the State Financial Corporations Act, 1951, which doesn't provide for Independent Directors.

2. Ongoing Amendment Process: GSFC has requested amendments to the State Financial Corporations Act, 1951, to align it with SEBI (LODR) Regulations, 2015.

3. Inapplicability of Certain Regulations: The corporation argues that Regulation 17(2A), which requires a specific quorum including at least one independent director, is not applicable to GSFC as it's not among the top 2000 listed entities.

4. Waiver Request: GSFC has requested BSE to waive the fine until the State Financial Corporations Act, 1951, is suitably amended.

Implications

This situation highlights the challenges faced by statutory corporations in complying with newer corporate governance norms when their constitution is governed by older acts. It also underscores the need for harmonization between various regulatory frameworks to ensure smooth corporate governance across different types of entities.

As the matter remains unresolved, investors and stakeholders of GSFC should keep a close watch on further developments, including potential amendments to the State Financial Corporations Act, 1951, and BSE's response to the waiver request.

Gujarat State Financial Corporation (GSFC) has reported a net loss of Rs 3,196.00 lakh for the quarter ended September 30, 2025, according to its latest financial results. This marks a slight increase in losses compared to the Rs 3,144.73 lakh loss reported in the corresponding quarter of the previous year.

Financial Performance

The corporation's financial situation remains challenging, as evidenced by the following key metrics:

Key Observations

1. Eroded Net Worth: GSFC's net worth remains completely eroded, with the corporation facing significant liquidity problems.

2. Non-Performing Assets: The gross Non-Performing Assets (NPAs) stand at Rs 39,736.76 lakh, representing 100% of gross advances.

3. Discontinued Lending: The corporation has discontinued its main lending functions since FY 2001-02 and currently focuses only on recovery operations.

4. Government Shareholding: The Government of Gujarat holds 55.09% of GSFC's shares.

5. Earnings Per Share: The Basic and Diluted Earnings Per Share (not annualized) for Q2 FY26 is Rs. (3.59), compared to Rs. (3.53) in Q2 FY25.

Auditor's Observations

The statutory auditors, M/s. Pankaj R Shah & Associates, have issued a qualified opinion in their Limited Review Report, citing two main concerns:

1. The financial results are prepared on a going concern basis despite the completely eroded net worth and default in repayment obligations.

2. Dues payable to the Government of Gujarat are subject to confirmation and adjustment, potentially affecting interest and penal interest calculations.

Management's Response

GSFC management maintains that as a statutory corporation established under the State Financial Corporations Act, 1951, it continues to prepare accounts on a "going concern" basis. The corporation has approached the Government of Gujarat to make the loans interest-free from July 01, 2012, and is awaiting a decision on this matter.

Despite the challenging financial situation, GSFC continues its recovery functions while grappling with historical losses and liquidity issues. The corporation's future remains uncertain as it navigates through these financial difficulties under the oversight of the Government of Gujarat.