Key Corp

Key Corp is a non-banking finance company (NBFC) engaged in vehicle financing.

The company specialises in financing old/used vehicles and currently finances a large portfolio of old vehicles.  It is based out of the state of Uttar Pradesh (UP) and has operated in this business for over 23 years.  Management foresees ample scope for continuing and expanding its activities.

The company reported marginal operating profits on a reasonably stable revenue base in the last five years except during the 2008/2009 downturn when performance took a hit as expected.  It reported about 30-40 lacs in net interest income on gross interest income of about 80-90 lacs in the last financial year.  It held liquid assets of about 12cr in various equity and debt funds as at 31^st March, 2012.

The business is exposed to economic downturns, which reduces demand for vehicles, and a high interest-rate environment, which increases its cost of operation and squeezes margins.

The business also faces increasing competition from private sector banks, which are aggressively expanding into this area. 

Moreover, there is generally a higher risk of operating in this type of business in UP and similar regions due to the general lawlessness in these areas relative to the rest of the country (for e.g. when collecting dues).

Management have never paid a dividend in the last five years despite drowning in liquid assets raising serious questions about its attitude towards minority shareholders.