Fitch affirms PFC rating at BBB- on strong govt support

Fitch Ratings has affirmed Power Finance Corporation (PFC) rating at BBB- and maintained a stable outlook due to strong government support and its healthy financial performance.
The rating agency also affirmed all PFC's senior unsecured outstanding issues and debt instruments at BBB-.
"PFC's ratings are equalised with those of the country's ratings - BBB-/Stable. This reflects its strong strategic importance, government's indirect support to the electricity sector in the country and control through its majority stake," Fitch said in a note here today.
These factors mean there is a strong likelihood of PFC getting extraordinary state support, if required, the note said.

The rating agency expects the government to maintain a controlling stake in PFC in the long term as it is instrumental in the implementation of national policies on electricity generation and distribution.
"There are several operational links between PFC and the power ministry, which uses the company to implement its objectives through different national plans to develop electric power generation and distribution," the note said.

PFC is one of the two public finance vehicles that provide funds exclusively to the power sector. It is also the largest lender to the sector, with approximately 20 per cent market share.
The Uday plan started in 2015 by the government to bail out public regional utility companies endorses the indirect support of government to the company and the sector, it said.

"This tackles potential non performing loans (NPLs) as well as smoothing asset management. As of December 31, 2016, the Uday programme had repaid roughly Rs 23,900 crore of debt held by these utilities to PFC, close to 10 per cent of the outstanding loans of PFC at the same date," the rating agency said.