PFC to raise up to Rs 60,000 cr in FY16

Capital will primarily meet the funding requirements of power sector units and projects

State-owned Power Finance Corporation (PFC) plans to raise up to Rs 60,000 crore through short- and long-term borrowings in the current financial year to primarily meet the funding requirements of power sector units and projects.

It disbursed approximately Rs 44,300 crore in loans during 2014-15 and sanctioned loans worth Rs 60,000 crore. PFC’s loan assets at end of March 2015 stood at Rs 2.18 lakh crore — 15 per cent growth over the previous year.

CARE Ratings has assigned ‘AAA’ rating to the borrowing plan for the current financial year. The ratings factor in the majority ownership by the government of India and strategic importance of the development of power infrastructure in India.

PFC, registered as an infrastructure finance company with the Reserve Bank of India, has healthy capitalisation levels, diversified resource profile. It has comfortable liquidity and asset quality.

The rating strengths are partially offset by its high exposure to weak state power utilities and high sectoral as well as borrower concentration risk.

CARE Ratings said during the nine months ended December 2014, PFC reported a net profit of Rs 4,399 crore on a total income of Rs 18,671 crore. Its gross non-performing loans stood at 0.96 per cent. Capital adequacy was 21.05 per cent at the end of 2014.

Another rating agency, CRISIL, said PFC caters only to the power sector, with 68 per cent of its advances to state power utilities (SPUs) as on December 31, 2014. SPUs constitute an inherently weak asset class owing to their poor financial risk profiles.

The aggregate losses (excluding subsidy) of SPUs were around Rs 93,000 crore in 2011-12. Steps such as tariff hikes by many states over the past two years and restructuring of debt of some SPUs were likely to strengthen the power distribution sector over the long run, CRISIL said. However, effective execution is extremely critical for the debt restructuring to produce the desired positive impact.

A broad-based political consensus is necessary to implement the much-needed tariff increases to ensure that the overall performance of SPUs improves.

Seventeen per cent of PFC’s advances as on December 31, 2014, were to the private sector, compared to 15 per cent as on March 31, 2014. Over the past two years, private sector players had become vulnerable to asset-quality risks due fuel availability, fuel price rise, and long-term power purchase agreements for assured power offtake, CRISIL added.