KHATKAR INVESTMENTS LIMITED

Executive Summary

KHATKAR INVESTMENTS LIMITED is currently facing financial challenges characterized by negative equity and high long-term liabilities, despite holding valuable investment property assets. The company should focus on improving liquidity, restructuring debt, and possibly injecting new equity to stabilize its financial health and avoid insolvency risks. Immediate attention to cash flow management and asset utilisation will be critical for a positive prognosis.

KHATKAR INVESTMENTS LIMITED - Analysis Report

Company Number: 13889886

Analysis Date: 2025-07-20 18:45 UTC

Financial Health Assessment of KHATKAR INVESTMENTS LIMITED

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1. Financial Health Score: D

Explanation:
KHATKAR INVESTMENTS LIMITED shows signs of financial stress with negative net assets, substantial long-term liabilities, and minimal cash reserves relative to current liabilities. While the company has valuable investment property assets, its balance sheet presents symptoms akin to a patient with a chronic condition: significant liabilities outweighing equity and low liquidity, indicating potential solvency concerns that need prompt management attention.

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2. Key Vital Signs

Metric	Value (2024)	Interpretation
Net Assets (Equity)	-£11,766	Negative net assets indicate insolvency on a balance sheet basis. This is a critical symptom of financial distress.
Fixed Assets (Investment Property)	£400,000	Strong asset base provides collateral and potential for recovery, akin to a strong organ in an otherwise weak body.
Current Assets (Cash)	£5,567	Extremely low cash reserves indicating poor liquidity; “weak pulse” in cash flow terms.
Current Liabilities	£718	Current liabilities are low, which is a positive sign for short-term obligations.
Non-current Liabilities	£416,615	Very high long-term debt, including bank loans (£184,569) and director loans (£231,296), which burdens the company with heavy future obligations.
Net Current Assets (Working Capital)	£4,849	Positive but very small, showing limited buffer to fund day-to-day operations.
Shareholders’ Funds	-£11,766	Mirrors net assets; negative indicates shareholders have an accumulated deficit or losses.

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3. Diagnosis

KHATKAR INVESTMENTS LIMITED is currently operating with negative equity, a classic symptom of financial distress that may signal insolvency risk if not addressed. The company holds a significant investment property valued at £400,000, which is a major strength—this “healthy organ” suggests potential asset value to leverage or sell for recovery.

However, the “circulatory system” — cash and liquid assets — is weak, with only £5,567 in cash. The company is heavily reliant on long-term debt (£416,615), split between bank and director loans. This burden creates a “high blood pressure” equivalent, stressing financial stability and increasing risk of default if cash flows are insufficient.

The small positive working capital (£4,849) indicates short-term obligations can be met, but the minimal buffer leaves little room for operational shocks. The absence of employees suggests the company may be investment-focused (property letting), with limited operational expenses but also limited revenue diversification.

Overall, the company’s financial health resembles a patient with a chronic condition that requires careful management of liabilities and improved liquidity to avoid deterioration.

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4. Recommendations

a. Improve Liquidity and Cash Flow

• Explore avenues to increase liquid cash reserves, perhaps by negotiating better loan terms or injecting additional equity.
• Accelerate rent or income collection related to investment property or other revenue-generating activities.

b. Restructure Debt

• Consider refinancing or restructuring existing bank and director loans to reduce interest and extend payment terms, alleviating immediate cash flow pressures.
• Engage with lenders proactively to manage covenant compliance and avoid triggers for default.

c. Asset Utilization

• Review the investment property portfolio for potential sale or leveraging to raise cash to reduce negative net assets.
• Assess market conditions to determine if property value can be optimised or improved.

d. Strengthen Equity Base

• The negative shareholders’ funds indicate accumulated losses or capital deficiency; new capital injection from existing or new shareholders could stabilize the balance sheet.
• Alternatively, consider a debt-to-equity swap with directors or lenders to reduce liabilities and improve solvency ratios.

e. Financial Monitoring and Forecasting

• Implement robust cash flow forecasting to anticipate liquidity crunches early.
• Regularly monitor financial KPIs to detect and address symptoms of distress promptly.

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