Loss and gain are “bound to happen” in business, Kerala finance minister K.N. Balagopal has said in a bizarre defence after an Opposition leader revealed the exchequer lost ₹101 crore following a PSU’s investment in a debt-ridden Anil Ambani company.

Congress leader V.D. Satheesan alleged the Kerala Financial Corporation (KFC) had invested ₹60.8 crore in a crisis-hit Reliance Commercial Finance Ltd (RCFL) in 2018-19, and hidden it from successive annual reports. He said the KFC finally declared recovering ₹7.9 crore “following liquidation” (of the company) when, he claimed, it should have earned ₹109 crore from the investment.

RCFL is no longer part of the Anil Ambani group. It was acquired by Authum Investment and Infrastructure, a non-banking financial company (NBFC), in 2022 for ₹1 crore as part of a resolution plan.

Addressing a news conference in Thiruvananthapuram, Satheesan on Thursday urged an anti-corruption probe against the KFC and asked the state’s Left government to release the contract behind the investment.

Balagopal told reporters: “The KFC invested in RCFL during 2018 as per the norms. When it comes to doing business, loss and gain are bound to happen. I don’t think there has been a deliberate lapse on the part of the KFC.”

Balagopal’s predecessor, T.M. Thomas Isaac, was finance minister when the investment was made. He argued that the KFC had invested the money after studying the ratings, in keeping with the norms.

“The surplus amount in any financial institution will be invested as debentures or in scheduled banks as per its policies. Two top key credit agencies had given double ‘A+’ ratings to RCFL,” Isaac said.

Balagopal said the state government was hoping to get half the amount invested as compensation. “There is a case ongoing at Mumbai High Court. We are hoping that KFC will get half of the investment made in RCFL,” he said.

The KFC, which provides medium and long-term credit to small and medium-scale undertakings, had invested the ₹60.8 crore as non-convertible debentures (NCDs) in RCFL on April 26, 2018, in keeping with a decision of its asset liability management committee, Satheesan said.

Satheesan argued the investment could not have happened without the knowledge of the CPM leadership. He alleged that procuring a commission was the main objective behind the investment and that the KFC director and board members were in the dark about it.

“This was initiated at a time when Anil Ambani’s companies were on the verge of getting liquidated. His industries went bankrupt during 2015-18,” Satheesan said.

“Incidentally, the KFC hid this crucial information from their annual report during 2018-19 and also during 2019-20. Strangely, this popped up during the 2020-21 annual report where it claimed that they managed to get back ₹7.90 crore following liquidation. In reality, KFC should have been actually getting ₹109 crore and instead got a paltry ₹7.90 crore.”