The Kerala Infrastructure Investment Fund Board (KIIFB) has reported a standalone net loss after tax of ₹483.82 crore for the second quarter ended September 30, 2026. The loss was slightly lower than the ₹513.36 crore recorded in the previous quarter, but it took KIIFB’s cumulative net loss for the first half of the current financial year to ₹997.19 crore.

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Regulatory filings submitted by KIIFB to BSE Limited show that the loss is not simply the result of weak project income. It is driven largely by the way the agency’s funding is accounted for, its heavy interest payments on market borrowings, spending on infrastructure projects that do not generate commercial returns, and provisions required under lending rules.

Why KIIFB reports a loss

KIIFB’s biggest source of money is not treated as income in its profit-and-loss account. Under the Kerala Infrastructure Investment Fund Act, funds given by the Kerala government -- mainly its share of motor vehicle tax and cess collected on petrol and diesel -- are credited directly to KIIFB’s Corpus Fund-Revolving Account.

These amounts are treated as capital support for infrastructure spending, not as revenue. As a result, they do not appear as income in KIIFB’s profit-and-loss statement, even though they are central to financing the agency’s work.

During the six months ended September 30, 2026, KIIFB received ₹2,790.86 crore from the state government through motor vehicle tax and fuel cess. Because this money is treated as capital rather than income, KIIFB’s recognised operating income remains much lower than its operating and financial expenses.

Heavy interest burden

KIIFB has raised more than ₹8,600 crore through market borrowings, including several issues of unsecured non-convertible debentures, or bonds. The interest rates on these bonds range from 8.49 per cent to 9.67 per cent per annum.

These borrowings help KIIFB finance infrastructure projects across Kerala, but they also create a large recurring interest burden. The interest payments weigh heavily on the agency’s profit-and-loss account.

For the second quarter, KIIFB’s interest service coverage ratio stood at 0.39, while its debt service coverage ratio was 0.24. In simple terms, these ratios indicate that KIIFB’s income is not sufficient to comfortably cover its interest and debt-repayment obligations from its own earnings.

Spending on public projects

KIIFB finances a wide range of infrastructure projects in Kerala, including roads, public buildings and social infrastructure. Many of these projects do not generate direct revenue or earn enough commercial returns to cover their costs.

As a result, KIIFB has to absorb expenses such as land acquisition, engineering and project execution. These costs are necessary for public infrastructure but do not produce matching commercial income for the agency.

During the period, KIIFB also recognised ₹338.99 lakh under direct project costs for infrastructure activities linked to the state government’s ‘CM with me’ initiatives.

Loan provisions add to loss

KIIFB’s financial results were further affected by rules governing the classification of loans and provisioning for possible losses.

Five revenue-generating projects under its special purpose vehicle, KSFDC, were reclassified from standard assets to sub-standard assets during the 2025-26 financial year. This happened because repayment agreements remained unexecuted beyond 24 months after disbursement.

Under applicable income recognition, asset classification and provisioning norms, KIIFB made a provision of ₹389.10 lakh for these loans. It also reversed interest income of ₹386.85 lakh.

Further disbursements made during the first half of the current financial year required an additional provision of ₹58.52 lakh, adding to the agency’s expenses.

KIIFB’s ₹483.82 crore net loss in the second quarter highlights the difficult financial structure of the public infrastructure financier. It receives large statutory allocations from the state, but accounts for them as capital rather than income. At the same time, it carries substantial market debt and finances projects that may not generate direct commercial returns.

The result is a recurring accounting deficit, even as the agency continues to receive substantial government support and fund infrastructure across Kerala. The latest disclosures put the spotlight on the pressure created by high borrowing costs, non-commercial project spending and provisioning requirements on KIIFB’s financial performance.