Power Finance Corporation conducted a conference call on 29 May 2023 to discuss its financial results for the quarter ended March 2023. Ravinder Singh Dhillon, CMD of the company addressed the call:

Highlights:

The financial year 2023 was a year of revival for the Indian economy and Power Finance Corporation. The economic environment is looking more optimistic than expected.

The company has recorded highest ever standalone net profit of Rs 11600 crore in FY2023 recording a growth of 16% over FY2022. The focus is always on maximizing returns for the shareholders.

The company has witnessed 20 bps increase in cost of funds to 7.51% in FY2023 on account of market increase interest rates. Spreads stood at 2.53% and net interest margin at 3.36% for FY2023, which are in line with the guided range of the company.

The capital adequacy ratio is healthy at 24.37% with Tier I ratio of 21.61% end March 2023.

The consolidated loan book of the company has a crossed Rs 8 lakh crore mark end March 2023.

The disbursements of the company have jumped 57% to Rs 85760 crore in FY2023 up from Rs 51240 crore in FY2022.

The loan book of the company has increased 13% to Rs 422500 crore end March 2023 from Rs 373000 crore end March 2023. The company is optimistic about the growth outlook and expects similar level of double digit loan growth for FY2024.

The continuous active resolution of stressed assets has helped the company to improve its asset quality in FY2023.

The company has resolved 3 stressed sets with the exposure of Rs 4400 crore in FY2023, which includes South East UP Power Transmission, Jhabua Power and Ind Bharat Energy Utkal.

The company has reduced stressed assets by 21% to Rs 16500 crore end March 2020 3 from Rs 20900 crore end March 2022.

The company has reduced net NPA ratio by 69 bps to 1.07% and gross NPA by 170 bps to 3.91% end March 2023.

The company the company has 22 projects with exposure of Rs 16500 crore under stage 3, of which 13 projects with the exposure of Rs 13900 crore are being resolved under NCLT and balance 9 projects with the exposure of Rs 2600 crore are being resolved outside NCLT.

With the resolution of stressed assets, the company witnessed reversals of provisions without any additional provisioning for FY2023. The company also raised provision coverage ratio on stage 3 assets from 69% to 78%.

The company raised borrowings of Rs 76000 crore in FY2023. The outstanding borrowings of the company increased to Rs 362630 crore end March 2023.

The company has approved borrowings of Rs 80000 crore for FY2024 through various domestic and foreign sources.

On the domestic front, the company has witnessed sharp increase in 54 EC bonds to Rs 6600 crore from Rs 4000 crore last year.

The company raised the foreign borrowings of US$ 1.66 billion in FY2023. The company has hedged 92% of the exchange rate risk on foreign currency borrowings. The balance sheet is adequately protected against foreign exchange fluctuations.

The company would continue to tap the renewal energy opportunity. The company has refinanced the loan of Rs 6112 crore for renewable energy project to JSW Energy.

The company along with REC has been nodal agency for Revamped Distribution Sector Scheme (RDSS) which has Rs 3 lakh crore of outlay.

PFC now also lending to Infrastructure sector, which is a long-term strategic initiative aimed at portfolio diversification and loan asset book growth. It can lend up to 30% of outstanding loan book, subject to 2/3rdnew sanctions in a financial year towards power sector

PFC sanctioned Rs 16647 crore and disbursed Rs 1016 crore till 31 March 2023 with key areas sanctioned includes port, irrigation, oil refinery, fiber net infrastructure etc.

The company has sanction pipeline of Rs 231600 crore which would be disbursed over next 3 years. The company has also signed MOUs of Rs 90000 crore in FY23 with states for financing the power sector value chains. These states includes AP, UP, MP, Kerala etc.

The company cut lending rates by 165-300 bps earlier. However, the company has raised lending rate by 10-15 bps in December 2022 and another 25 bps in March 2023.

The loans of the company are reset in 3 years and about one-third of the book will reset in FY2024.

The company expects to maintain stable margins for FY2024.