Power Finance Corporation Ltd
NSE:PFC
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Power Finance Corporation Ltd
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Ladies and gentlemen, good day, and welcome to the Power Finance Corporation Limited Q1 FY '20 Earnings Conference Call hosted by Prabhudas Lilladher Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Shweta Daptardar from Prabhudas Lilladher Private Limited. Thank you, and over to you, ma'am.
Thank you, Lisa. On behalf of Prabhudas Lilladher, I welcome you all to the 1Q FY '20 earnings call of Power Finance Corporation. We have with us the management represented by Mr. Rajeev Sharma, Chairman and Managing Director; Mr. N. B. Gupta, Director of Finance; Mr. P. K. Singh, Director of Commercial, Mr. R. S. Dhillon, Director of Projects. I would now like to hand over the call to the management for opening remarks, post which we can open the floor for Q&A. Over to you, sir.
Thank you very much. Good afternoon, everyone. I welcome you all to this conference call. We have arranged this conference call to share with you PFC's performance in first quarter of FY '19-'20. First of all, in view of the various news on the liquidity position of NBFCs, I would like to share that PFC is having a comfortable liquidity position. With PCF's high credit worthiness and strong fundamentals, we have faced no difficulty in accessing funds from both domestic as well as foreign markets. During the quarter, PFC raised around INR 31,700 crores. INR 22,700 crore was raised from domestic markets at a competitive rate through a mix of bonds, commercial papers and some loans from banks. Further, PFC's 54EC capital bonds portfolio has tripled from Q1 '19. 54EC bonds are low-cost funding source available to PFC at a coupon of 5.75%. In the coming years, we expect an increase in the 54EC bonds portfolio. On the foreign currency front, INR 9,000 crore has been raised during the quarter. Further, in Q1 '20, PFC came out with its largest international bond issue of USD 1 billion. The issue was oversubscribed 5x by the investors. The phenomenal response showed investor confidence in PFC and the power sector. In addition, USD 300 million has been raised through syndicated loans. Also, I would like to inform that PFC's outstanding foreign currency exposure as on 30th June '19 is USD 5.1 billion. Currently, 49% of total foreign currency portfolio is held for exchange rates. Moreover, 77% exchange risk hedging has already been done on FCL portfolio with residual maturity of up to 8 years. For FCL portfolio with residual majority of more than 8 years, there is sufficient time to maturity for hedging the open portion. Thus, with a well-hedged portfolio, we do not see significant impact due to current volatility in exchange rates. Now I would like to talk about the quality of assets. Firstly, I'm happy to share that resolution has been reached in GMR Chhattisgarh loan of INR 928 crore. The agreement for change in management via stake sale has been signed with Adani Power. Lenders would have to take a haircut of around 50%. PFC already has 51% provisioning available against this project. Therefore, no additional provisioning is required. Further, during the quarter, one project, Suzlon Energy, with loan of INR 900 crore has slipped to Stage 3 category that is NPA. We are already pursuing resolution and 50% provisioning has already been made on the loan. Let me now come to the RBI's 7th June guidelines for resolution of stressed assets by banks and NBFCs. We believe that this would help in quicker resolution of stressed assets. These guidelines are currently applicable on loans where banking industry exposure is INR 1,500 crore and more. Currently, PFC has 30 stressed assets with a exposure of INR 30,400 crore. Now I would share a brief status on resolution of these 30 projects. Out of the 30 projects, in 5 projects of INR 12,100 crore, intercreditor agreement has been signed or likely to be signed under the RBI stressed asset guidelines, 46% provisioning has already been made for these projects. I would like to give an update on some major projects covered above. In Indiabulls Amravati, which is a commissioned project with 100% PPA and FSA intercreditor, agreement has been signed between the lenders. Further, the lenders have been, for instance, agreed to the OTS proposal of the borrower. Now lenders has initiated Swiss Challenge process. 50% provisioning is available against the projects, which we feel is sufficient. In SR Power, which is a commissioned project, the restructuring proposal of the borrower is being evaluated by the lenders. 53% provisioning is available for this loan. There are 12 projects on which the RBI guidelines are not applicable. Out of this, GMR Chhattisgarh has already been resolved. In balance, 11 projects with the aggregate exposure of INR 2,900 crores various resolution options are being explored. 30% provisioning has been made against these loans. In 4 projects with the exposure of INR 298 crores, resolution is being been pursued through DRT or SARFAESI. These projects have been fully provided for. In SR Power transmission, which is a commissioned project, the borrowers' restructuring proposal is under discussion of the lender. In the balance 6 projects, lenders are exploring options like OTS with borrowers, change of management, et cetera. Balance 13 projects with the exposure of INR 14,400 crores are being resolved through NCLT. 61% provisioning is available on them. Against these 30 said projects, 52% provisioning is available, which we believe is adequate. Moving to the financial performance. PFC's profit for first quarter of FY '20 stands at INR 1,383 crore, which is similar to the Q1 '19 level. However, I would like to mention that in the current quarter, we have made a provisioning of INR 220 crore compared to INR 4 crore in Q1 '19. Also, as you are aware, PFC has invested INR 14,500 crore in REC and return on that will be in the form of dividend and accounted for receipt. Thus, this will reflect in PFC's profit in the coming quarters. All our financial indicators, I'm glad to share that as we had indicated earlier, our yield continues to be in a stable range. The yield for Q1 '20 is 10.61% over 10.57% in Q1 '19. Regarding cost of funds, we have been continuously aiming to achieve efficiencies in cost. Despite the challenging environment, we have achieved 18 bps reduction in the total cost over Q1 '19. The cost of fund for Q1 '20 is 7.90% as against 8.08% in Q1 '19. Further, the spread also continued to be maintained. The spread for Q1 '20 is 2.71%, and for Q1 '19 was 2.49%. Overall, the quarter 1 has seen a stable financial performance. Now I would like to share some update on PFC REC merger. PFC's Director of Commercial has been appointed as nominee director in REC Board. Further, PFC is in consultation with Ministry of Power regarding the merger process. On the merger front, I would like to assure you that post merger, PFC will continue to be a government-owned company and be a steady partner in various GOI initiatives in power sector. Lastly, in coming quarters, we see our yield and cost to be in a stable range. Our focus would continue to be on debt, refinancing and renewable business and quicker resolution of the stressed assets. We expect additional business opportunity in view of upgradation required in power plants to meet Ministry of Environment and Forest norms. And now we are open for questions.
[Operator Instructions] The first question is from the line of Kunal Shah from Edelweiss Broking.
This is Prakhar from Edelweiss. So essentially, 3, 4 questions. One is in terms of your cost of funds. So during this quarter, when I look at on a quarter basis, we have seen some rise in your cost of funds. So what explains this rise? And what -- where do you think that this will settle down going forward?
See the cost of funds has gone up from 7.68% to 7.90% if I compare with the last quarter. And you know that various issues involving NBFC in the financial sector. Because generally, for NBFC, the sentiment are mixed, and we are also facing that issues of NBFCs. But in spite of that, my borrowing cost this quarter itself, it has come down to 7.51% CCI that margin cost of this quarter. But, however, there was a repayment also, which was of a lower cost that's why this overall cost has come up -- has gone up from 7.68% to 7.90%. But if we look into the margin cost, it is 7.57% for this quarter.
7.57%?
Exactly.
Yes. And in terms of when you look at your -- of the normalized level of spreads, where do you think that these -- this case will settle at a -- when you consider the entire interest rate scene that we are in, and probably as you highlighted because most of our interaction with various entities suggest that PFC RECs are better of the lot in terms of NBFCs and they are not facing so much of pressure, but what you highlighted something wherein we also see some sort of pressure percolating. So where do we see the spreads eventually panning out to be?
See -- if you see here, this is -- last year, we had a spread of 2.67%, which has gone up to 2.71% this quarter. And as we mentioned earlier also, we expect that our spread will remain in the tune of 2.6% to 2.7%. So I think we are within the range what we are expecting.
Sure. And sir, in terms of asset quality, just some broad numbers. So when I look at your gross Stage 3 assets, there is a net addition of around INR 900-odd crores, which essentially comprises Suzlon, which you highlighted earlier. Now when I look at -- that you have also highlighted 1 resolution playing through in terms of GMR Chhattisgarh. So are there any other further slippages that is there in the numbers, or probably this upgrade is still to reflect in Q1 numbers?
See, that GMR resolution, that impact will be shown in the next quarter. So this resolution has taken place in the month of July only. So that will be reflected in the next quarter. Besides this alone, we don't see any stress in any other resource.
Okay. Sir, what is our ECL assumptions for the new loans that we are making in? What are the ECL assumptions that we're working with as of now?
Sir, overall, we have already made a provision of 52%.
Sir, but on -- so for newer incremental loans that we are working with ECL assumptions of similar for 52%, is that what we are seeing?
See, this is for the stressed assets. If you see -- realize that the other assets, we have Stage 1 and Stage 2, the average might provisioning some[ 51% ].
Okay. And sir, lastly, on -- you highlighted that you are in discussion with the merger with REC, when do you think that this will eventually happen? And secondly, in terms of benefits, probably, what in terms of how you see your cost and revenue impact, if at all, post this merger?
The process of merger is on Ministry of Power, who is regularly monitoring it. Consultant was appointed. Consultant has submitted its report. We have made a presentation also to secretary power yesterday morning, and we will be making a presentation to minister of power now. So government is very keen and very soon time line will be very difficult. Consultant has given 1 year, but I think ministry wants to condense this process and wants to expedite the process of merger. An advantage is as you know, there is total synergy. The REC is our subsidiary now. Subsidiary or parent should not work in the same field. So merger is inevitable. And moreover, REC's 23 offices are located almost in every state. We will get the advantage of that in business, common lending policies, common borrowing policies then resolution of stressed assets, common approach. So there will be many advantages.
Sir, but in terms of -- when you look at REC, so we have seen some step-up in their funding costs, do you think that post our merger that this advantage will continue for REC in terms of higher funding costs? Or probably you'll see some similar benefits in there as well?
Actually, subsidiary can never have rating higher than its parent. So definitely, if it continues for longer, it will be at a disadvantageous position. So merger should happen as fast as possible.
The next question is from the line of Jai Prakash from HSBC.
I was just looking at the interest spread on earning assets and NIM on earning assets. When the spread has increased in this particular quarter, I think a deduction in the NIM, any particular reasons for this?
Because we have made a investment in REC, INR 14,500 crores, so that my net interest income has come down because of the interest burden on that INR 14,500 crores. Because net interest income has come down, so it has the impact on my interest margin also.
Okay. Sure. So this particular investment will only earn dividend and no interest, actually, how is that?
See, we'll get the dividend only. Once we will declare the dividend in that particular quarter, you'll see the impact of.
We'll move on to the next question that is from the line of Nilanjan Karfa from Jefferies.
Three questions. Sir, first of all, it looks like for the year gone by, the average -- the aggregate discount losses could be in the range of, let's say, between INR 20,000 crores to INR 25,000 crores. Any indication of how much lost funding through short-term loans PFC is doing? And if you can also kind of tell us what will be the aggregate between PFC and REC of that loss funding that both of you are doing? That's the first question.
We have been funding these distribution companies for last 34 years. And you may be aware about UDAY, there is a provision. In the office memorandum issued for UDAY that not more than 25% of the last year's revenue, we can extend funding to the distribution companies. So both companies, REC or PFC, both are sanctioning within those limits. We cannot go beyond 25%. And it is being regularly monitored by Ministry of Power also. Moreover, Ministry of Power has started further discussions on improvements in UDAY that how to tighten the -- [ exclude ] your distribution companies so that their cash losses can be reduced and they can become financially viable. Moreover, government is also working on a new scheme that how to incentivize states to reduce aggregate technical and commercial losses. And the new scheme should leverage the disbursements and should link the disbursement with the reform parameters. So you may be knowing that various initiatives are being taken by Ministry of Power, like opening of letter of credit so that all the generators get their payments for the power being supplied by them on time. So this is -- one of them letter of credit and moreover on -- as you were saying, that on discounts losses increased because we are governed by 25% limit of UDAY scheme. So we can't go beyond that.
Right, right, right. That's helpful, sir. And sir, from the same -- the answer that you said, so in order to come to that LC policy, roughly how much LCs have been issued? Because we have also heard, say, for example, in the state of Uttar Pradesh I'm not sure where else this has been implemented, but they have found out the loophole or a possibility that if the user is -- user plants in the state itself, they don't need to provide an LC. Just wanted to also get a sense from you, sir, how is this new LC or the guarantees is -- how much...
PFC is not monitoring the LC opening, but as far as I have come to know from the Ministry in from various meetings, I'm told except J&K almost all the states have opened LCs. As you are saying the type of LC, whether it is for 1 week or 2 weeks, I'm not aware about that. I was also told by someone from the market, but Ministry is very confident and Ministry is saying that we are very happy that this instruction has been implemented by almost all the states. J&K has a particular -- because they are facing particular problem as they should [ one ] not insisted upon, so they were given, I think, 15 days or 20 days time. But other states, it has been reported that it has been opened. Once if the process has started, as you are saying, that LC it is for a shorter period or -- I think with the time, they will evolve with system, and it is important for bringing discipline in the distribution company so that they pay to the IPPs on time. Because otherwise, it creates a stress for us also indirectly. If they don't pay to the IPPs, IPP don't pay to us. Because -- so it's important.
Sure, sure, sure. Sir, 2 more questions. The third one will be on the merger. And -- see, there is a fear that post merger, the GY ownership will fall below 50%. So just wanted to hear from you because you said you are confident that the company will remain as one of the navratnas. Any thoughts how this can be managed?
The process is already -- of merger has started because on the instructions of Ministry of Power, we appointed a consultant. Consultant has given its report outlining the rationale and synergies for merger, and it has clearly given a road map. However Ministry of Power wants that this road map should be condensed. So yesterday morning, we made a presentation before Secretary Power. He is very keen that the merger should be closed within 6 months. So it should be expedited. The CBB which had been outlined, let's say, it has been recommended by the consultant are being discussed with Ministry of Power. And as you are saying, that to continue to be a government company, government has to ensure. We have clearly brought out in our presentation that we would like to continue to be a government company. So now this is the duty of the government to how they can continue this merged entity as a government company. Because what -- different alternatives have been discussed and the best alternative will be implemented, I can say that.
Okay, okay, okay. And sir, lastly, an accounting sort of a question. Sir, which quarter should we assume the dividend from REC to come through for the current fiscal year?
We have to discuss with REC.
It's a bit difficult to say in this quarter, but generally, if you see the past, generally, they depend on quarter 3 or quarter 4.
We'll move on to the next question that is from the line of Rohan Mandora from Equirus Securities.
Sir, I would like to understand new season premier funding, like lift irrigation, smart meter [ recording ] or even the transmission and distribution end. So what kind of a dirty structure do we have there? Is it only the government entity? Or do we also get some sort of underlying effects that have been created?
It's an asset-based funding. Like in lift irrigation, we have charge on the assets and the state government guarantee both. Similarly, in smart grid, it is like any electrical infrastructure, smart grid is not something new, so the type of it, like underground, cabling, some smart meters all those. So always, we have charge on the asset as well as escrow is always there in asset-based funding. In distribution company, we may not be getting the state government guarantee, but we have these 2 thing -- comforts.
Okay. And sir, these assets are essentially owned by the state government?
Yes, sir.
These are not owned by the private entities?
No, no, no.
Okay. Sir, like in average have you seen any cases wherein we have been able to -- like, obviously, in state government, there has been or have been defaults. But in case we want to, like, invoke these charges and then make a recovery, is there a possibility that this can happen given the underlying cable...
Sir, I actually started my career in 1985. So since that time onwards everybody is saying that the state utilities are under stress. They will not be able to pay back. But fortunately, till date, there is not a single NPA in any of the state utility. Yes, sometimes we face problem in the repayment, but it comes before it becomes an NPA. They also appreciate our problems. We appreciate their problems. So till date, we are getting our payments back from all state utilities.
The next question is from the line of [ Mohit Khurana ] from CLSA.
Sir, this is Prakhar. I have just 3 questions. One, sir, on the issue around this Andhra Pradesh and the entire solar power-related issues that have been raised. What would be TSC's exposure in these areas? And maybe if you can comment on REC as well. And what is the risk that you see from your exposures? That's question number one.
We have an exposure of INR 2,455 crores, Metra. But we are getting paid. We are up-to-date, till date. And from Andhra for our government utility loans, we have been paid last week itself by Andhra Utility. So we don't have any outstanding as on date. No critical dues, I can say that.
Okay. Secondly, sir, as part of -- if REC and PFC become 1 single entity, won't there be single party exposure limits that will get triggered across people who are key lenders to you individually? But as 1 single entity that could be an overhang, which probably will require a change in lenders' regulations as well or like insurance company, et cetera? So could you please clarify on that part?
Today, the group exposure is already there. If merged yes, definitely there's an issue in borrowing. But now we'll be taking up this with all the regulators to announce that limit and we are just trying to find out other opportunities also for raising of funds. Like that retail issue -- public issue of the bonds, and other issues.
Okay. And thirdly, sir, in the remark to the previous question, you mentioned that in the last 30-odd years, the SEBs haven't really defaulted even if there have been delays. Don't you think that warrants for a much lower interest rate on the loans that are given to these entities, given that practically the asset quality risk for lenders is 0?
It's not 0, actually we raise that according to the risk. So you may be aware that Ministry of Power has given this responsibility to PFC to rate all the distribution companies, and we get it done through [ PLF ] and ICRA. Half of the states are with [ PLF ]. Half of the states are with ICRA and half of the states are with [ PLF ]. And every year, for the last 6 years, regularly we are undertaking this rating done. And this rating is followed by, not by REC PFC alone, other banks also, all banks also use this rating. And it is risk related. Our interest rates are decided by the rating of the utility.
Sir, may I ask just a blended yield on your...
[indiscernible] Yes, it is important to mention that our interest rates to these government utilities are lower than the private sector loans. I can make this statement.
Sir, may I ask the blended yield you make on the loans to SEB?
Our yield is 10.63.
Average.
That is average. But separately we have to see for government utilities. As [ CNB ] mentioned, that it depends on the rating of the entities, no? But I think it is that rates very strong, 10% to 11.5%.
Okay. And sir, just last thing on the private exposures, wherever the account is either stressed or there is a probability of ICA, et cetera, do you recognize the interest on accrual basis or on cash basis? Because I know you are now in [ India ] so warrants based on the behavioral expectation of the repayment. So can you clarify on the accounting part, please?
Still we are accounting on cash basis only.
The next question is from the line of Ishank Kumar from UBS Securities.
Sir, can you hear me?
Yes.
Yes. Sir, first, on the resolution side. Given the delay in resolution in most of the project, except 1, 2, do we expect more provisioning here? Or do we expect there is some, like, decline in value of the project, and that, that will trigger more provisioning from PFC side?
I think we have already provided the average provisioning is 52%. And the project, which we dissolved this year, there it was around 50%, and there was a provisioning of 51% in this project already. So we don't require to provide for any more, further. Similarly, other projects also I can't predict here at this juncture, but it is already in the range of 50%. So already, this is 52% provisioning, the average provisioning is there. We don't expect any more provisioning required once the resolution happens.
See, 52% is the average provisioning. In some of the projects, we are not expecting any haircut. We expect that whatever the loan we have given outstanding will come back to us. So 52% average is sufficient.
Okay. And in this quarter, we have seen 1 slippage of Suzlon. But, like, are we expecting any further shift from our prices...
No. No. Or any other project is there. No.
And sir, on the yield on asset side, we saw around 5, 6 basis point decline this quarter. We had, like, revised our interest rate from, I think, 28 February, so is this decline on Q-on-Q, is this because of our cut in interest rates?
Not exactly cut in the interest rates because as you know that we have a reset policy after every 3 years. So some of the loan which was getting a higher rate of interest has been repaid by the borrowers. Otherwise, there's no cut of rates -- cut on the rate of interest.
Okay. So then on the yield on asset side, should we factor in some further decline, like, in this financial year or...?
No. We will be able to maintain this.
[ CNB ] has already mentioned in his speech that you'll see that it will remain in the same range only.
Okay. And sir, lastly, on the competitive intensity side, because system is in surplus now and some PSU banks are coming out of PCAs also. So are you like expecting some increase in competition from PSU bank side or you are still not seeing anything there?
Banks are not at all keen to touch power sector. Even the largest bank, SBI, they are keen to go out of the sector. So what about other banks? I don't think, and moreover, power sector, as you must have seen that almost all of billing households in the country have been electrified. Demand of power is increasing and more and more subtransmission distribution upgradation and strengthening is required in a state-powered utility, to absorb more power in urban as well as rural areas. Aspirations of people are increasing. They -- earlier they were having 1 or 2 power points, but now they are purchasing home appliances also. So they require more power in their houses. So to supply -- to ensure that power, and more importantly that all the states in the country have signed 24/7 power for all. It's a standard document signed by the Ministry of Power with all the state governments. And from April 2019 onwards, they were supposed to supply 24/7 power to all the consumers. And it has a road map. Somewhere is they're required to strengthen their subtransmission distribution system, they will take loan from us. If they require additional transformation capacity, they will take loan from us. If they have to ensure reliable and quality power supply to the consumer and they want to -- or to make their system automatic distribution system, smart grid, they want to set up, they will come to us. So there is a lot of opportunity. New areas, like electric vehicles, charging stations, like irrigation, lift irrigation, the electromechanical part of that we have funded. So new areas we are exploring for our business.
The next question is from the line of Chirag Shah from Dalal & Broacha.
Sir, my question is, what will be our dividend policy for this year and maybe for the coming years?
Policy will be the same. Last year, we were exempted by DIPAM that -- because we acquired REC. But the same policy continues to be in place, and we are supposed to follow that dividend policy of Government of India.
Okay. So this year, probably, we are looking at...
As has been said, it has to be 30% of the profit or 5% of the network, whichever is higher.
Correct, sir. So this year -- so we will revert to the dividend payouts, correct?
Yes, yes. Definitely. We can't afford that, not to pay.
Okay. And sir, this formula applies on the consolidated results, correct?
No, no, no. Now REC will give dividend to us. See, REC is our subsidiary.
Both are separate legal entity. Both will operate separately and that -- individually that rule will be applied.
Okay. So that rule will be applied for us on the stand-alone numbers, correct?
Yes.
The next question is from the line of Kushan Parikh from HSBC.
Yes. Hello? Can you hear me?
Yes.
Yes. Yes, so over the last few years, we've seen a lot of stress on the thermal power sector. It seems to be behind us. Do you foresee any similar risk on the renewable side?
Sir, till date we have not seen any, except 1 project, a small project in Gujarat, which was planned. It was a solar project, very small, 10, 15 megawatt -- 10 megawatts. So -- Astonfield. So -- but on -- or because majority of projects which we have been funding in solar or wind have been developed by [ SHAKTI ] or NTPC, PPAs they are having. So we are quite comfortable, and we are timely getting the payments.
Right. But in the recent light of events there, they have been very -- the bidding has been very competitive with rates coming down. Do you see sufficient cover for yourselves and any risks at all?
Sir, you may be knowing we are a dominant player in the power sector. And we have a very robust system of appraisal of projects. We don't just go by the tariff -- aggressive tariff, we go by the numbers, BFCR, their service coverage ratio. If the project can pay that back to us, only then we will take it to our Board. So very robust mechanism of projects appraisal and NTT appraisal goes into the preparation of the agenda which goes to the Board. So we take a very, very conscious decision. We don't see that it's a very aggressive tariff or higher tariff, but if we get our numbers which are required for a viable project, we will fund that.
Okay. What will be your average or marginal cost of lending to the renewable projects?
I think it varies from 10% to 11.5% or 12%. 11%...
10% to 11%.
10% to 11% between -- 10% to 11%, 11.5%.
The next question is from the line of Punit Srivastava from Daiwa Capital.
Sir, my first question is regarding this cost of funds, marginal cost of funds. You mentioned about there were some redemptions and all. But I just needed to check, was there any subordinated bond? I mean had the PFC raised a subordinated bonds as well? I think, especially, in Q4 because of the Tier 2 went up, so is that also impacting the cost of funds in first quarter?
Yes, we had raised around INR 5,000 crores since Q4. And average cost was around 9% for that, but that's a very small amount. So it doesn't make much impact on my overall cost. My total borrowing is INR 2,80,000 crores and INR 5,000 crores is a very small amount comparing to that.
Okay, okay. And can you, please, give a total exposure to renewable energy loans to AP?
AP, it is INR 2,455 crores to Metra, but they are paying back to us.
Right. And sir, regarding this total government, I mean, state government R&D loans, can you give the figure, like total amount outstanding whether they are state government guarantee or maybe central?
Approximately INR 65,000 crores out of our loan book of INR 3,16,000 crores, around 20%.
Okay. Sir, in the annual report, basically, you mentioned that there is government-guaranteed loans and there are these unsecured loans. So how do you create these unsecured loans, I think, which are like around INR 50,000 crores shown in the annual report?
See, only we give secured loan only. But it may happen that sometimes it takes time to create securities. So in between that remains unsecured. So most probably, the figures, I don't know where from you are quoting if that is -- but that is only the timing that is shown as unsecured. But ultimately, it will be converting to secured only.
Okay. Got it.
For noncreation of securities, we charge additional interest. So generally, suppose, we have given time to a developer to create security, so -- but we charge additional interest on that.
Okay. And sir, on the -- you had said this RWA figure. Like how much -- I mean, in terms of how much of the loan book is at 20% risk weighted? How much is 100%? Because we find a difficulty in calculating this RWA.
The risk-weighted is roughly 62%.
Of?
The state government are -- guarantee are INR 63,244 crores, that is 19.38%. And commission projects are INR 1,16,891 crores, that is 35.83%.
On the total loan book.
See, total risk weighted is around 62% because, as you may be aware, for the guaranteed loan, the carry is 20%; for commission, carry is 50%. As [ CNB ] mentioned, that out of INR 3,16,000 crores, 20% is around government-guaranteed bonds and 50% is commission assets. So overall, the average is 62%.
Okay, sir. And sir, there's 1 question on this is REC as well, you told that your incremental cost of fund for PFC was 7.57, would you have the same figure for REC for Q1?
See, right now, we don't have any bifurcation.
We don't have, at this time.
Okay. And sir, on the OpEx side, of course, those are very small figures, but they are pretty volatile figures, like quarter-to-quarter. Is there anything, like they were quite low this time, sir. Is this like are they going to be normalized numbers or any cost to income normalized figure you think should be going ahead?
Can you specially mention which figure you are talking about?
Sir, these are small, I'll just tell you. Basically, the -- this firstly, after the CSR is volatile and then if you see the benefit expenses, employee benefit expenses, cost of -- and all these smaller, smaller, they are like -- they are very volatile.
Firstly [indiscernible], it is very small amount in comparison to my total expenses. This is on actual basis, this is what we have spent this particular quarter. Earlier, we used to account for on accrual of that total liability basis. But after this index, we have to account for on the actual basis only. So this may vary any time because that actual expenditure varies from quarter-to-quarter. And all this implies -- anyway, it's a very small amount, in comparison to the total figures.
Yes, yes. Sure, sir. Sure, sir. I think -- sorry, 1 question more on this provisioning side, you have first given an average provisioning of all the stressed loans. But there -- are there projects where the provisions are low? What is the minimum provisioning you're holding in the stressed projects? And what is the maximum? Maybe if you can give some indication on that?
We have 60% in some projects. And -- so according to that -- so the average provisioning is 52%. But in some projects, it is 40%, in some projects it is 60%, depends.
Right, sir. And sir, on this question or on this, have you seen, there is a CPSC fund launch by the government and there's been some selling also happening from the state from government to CPSC fund and -- CBSC, here. And then we see government holding in PFC declining over a period of time in this fiscal year, because they need to raise their own -- I mean reach divestment targets. So in that context, do you expect government holding to keep coming down this fiscal year in PFC?
See, 1 has already happened in the month of July. So the government holding at present in PFC is around 56%. But we have already taken up with the Ministry and we don't expect further disinvestment by the government in PFC.
The next question is from the line of [ Meshit Shah ] from [ Ambikas and Jakh ].
Yes, firstly, my question was on the dividend that you got exemption and you didn't pay the dividend last year. But you see, you could have paid a nominal dividend to continue your track record. You see, what has happened is that you lost a fantastic track record of dividend. I mean you could have paid even a nominal dividend and continued your very impressive dividend track record.
We will restore back that impressive record this year. So...
But what prevents you from giving an interim dividend right now?
See, I mean, I probably...
Because we will declare it at the right time.
See the issue is that -- which you will appreciate is, that what happens is that REC has become subsidiary to PFC, okay? And we gather dividend credit also. If suppose they -- I get a dividend from REC. So whatever the tax paid on that dividend, I get a credit of that amount. So that's simply we are waiting for the REC to declare first dividend, then immediately we'll declare also to get the benefit of tax.
And my second question is, on the loan growth, how much loan growth do we expect in the current year?
13%, last year, it was -- we will continue to maintain the same.
And going forward, how did you see your asset quality? Because last quarter, you had returned back INR 500 crores. This quarter, you have provided INR 250 crores. Can you give a color on how you expect the next 9 months to pan out?
As on this, we don't expect any more projects slipping into NPA during this year.
There is only 1 project that's known, which has slipped into stress in this quarter. Otherwise, we have increased the provisioning on all of the assets that makes from [ PS2 to PS2 ].
The next question is from the line of [ Ishita ] from Fidelity.
[indiscernible]
Sorry to interrupt [ Ishita ], we are not able to hear you.
Hello, am I audible?
[ Ishita ], you're sounding very soft.
Hello, am I audible now?
A little better. Please proceed.
Yes, sorry. Hello?
Yes. Please, please, tell.
You just mentioned that you increased provision on one of the assets. So I just wanted some color on this provision -- increased provision. So it's basically because of internal stress or the reservations which [indiscernible] because of any external economy. Just wanted some color on the increased provisioning that you've just discussed.
It's a gas-based project, Konaseema, in the state of Andhra Pradesh, and it is NPA for quite some time, long -- so we have made 100% provisioning on this. It is unviable because gas is not available.
Okay, okay. It's also backdated provisioning instead of a forward-looking that's...
Yes.
It would be expected to go down in future.
Yes.
Ladies and gentlemen, due to time constraint that was our last question. I now hand the conference over to the management for their closing comments.
Thank you very much for giving us this opportunity. Thank you. Thank you so much.
Thank you. Ladies and gentlemen, on behalf of Prabhudas Lilladher Private Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.