Gurkhas Finance Ltd. (GUFL) Reports Heavy Loss in Q4 Amid Rising NPL Pressure

Gurkhas Finance Ltd. (GUFL) has published its audited Q4 results for FY 2024/25, revealing a sharp decline in profitability with the company sliding into losses due to rising non-performing loans (NPLs) and weaker revenue generation.

The company posted total revenue of Rs. 838.09 million, down 31.29% year-over-year from Rs. 1.03 billion in Q4 2023/24. Revenues fell across all four quarters, indicating sustained stress in core income streams.

Gross profit stood at Rs. 250.82 million, translating to a margin of 29.93%, slightly lower than last year’s 30.46%. However, net income fell drastically to a loss of Rs. 127.39 million, compared to a profit of Rs. 108.94 million last year. This dragged the net margin to -15.20%, highlighting major financial stress.

For shareholders, EPS (annualized) dropped to -Rs. 14.68, down from Rs. 12.55 last year, while the PE ratio turned negative (-39.77) due to losses. Book Value per Share declined to Rs. 142.45, compared to Rs. 161.28 in Q4 2023/24, reflecting erosion of shareholder value. Despite this, GUFL’s market price per share closed at Rs. 583.63, still higher than last year’s Rs. 720.00, though showing weakening investor sentiment.

Financial Sector Indicators

GUFL’s financial health highlights rising risks:

• Capital Fund to RWA stood at 11.44%, slightly down from 11.63% last year, but still above regulatory minimum.

• NPL Ratio surged to 16.10%, from 12.49% a year ago, signaling a significant deterioration in loan quality.

• Loan Loss Provision coverage was 99.44%, just covering total NPLs, but weaker than last year’s 91.84%.

• Cost of Funds declined to 5.40%, from 7.23% last year, offering some relief in expenses.

• Credit-to-Deposit Ratio fell to 73.28%, down from 79.24%, suggesting cautious lending.

• Base Rate dropped to 8.26%, compared to 10.29% last year, while Net Interest Spread remained stable at 4.56%, helping preserve core lending profitability.

• Net Liquid Asset ratio rose to 38.87%, compared to 31.47% a year earlier, showing stronger liquidity positioning despite earnings stress.