Power Finance Corporation Ltd
NSE:PFC
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Power Finance Corporation Ltd
Earnings Call Analysis
Q1-2025 Analysis
Power Finance Corporation Ltd
On a promising afternoon, Power Finance Corporation (PFC) unveiled its Q1 FY '25 results, greeted with much enthusiasm by stakeholders. The CEO, Parminder Chopra, shared some remarkable achievements. Notably, PFC's consolidated profit after tax soared by 20% year-on-year to INR 7,182 crores, while the group loan asset book saw a substantial 13% growth, crossing the monumental INR 10 lakh crore mark.
The balance sheet showcased improved metrics with the consolidated gross NPA reducing to 2.97% from last year's 3.54%, and the net NPA ratio falling to 0.84% from 1%. On a standalone basis, the net profit climbed by 24% to INR 3,718 crores, with net interest income mirroring this 24% growth. The yields, spreads, and net interest margins (NIM) all stayed within guided ranges at 10.08%, 2.64%, and 3.55%, respectively, demonstrating stable, predictable performance.
PFC's outstanding foreign currency portfolio stands impressively at USD 8.4 billion, with a commendable 95% hedging against exchange rate risks, reflecting robust risk management practices. This prudent approach minimizes the impact of foreign exchange fluctuations on the profit and loss account.
With a solid balance sheet, PFC boasts a capital adequacy ratio of 27% and a net worth of INR 83,265 crores. The confidence in its financial health is further bolstered by an interim dividend declaration of INR 3.25 per share for the quarter.
The asset quality remains robust, with no new NPAs added and a consistent drop in the net NPA ratio to 0.87% from 1.04%. Several projects, worth a total of INR 4,036 crores, are in advanced stages of resolution, indicating proactive steps in managing stressed assets.
Acknowledging the dynamic power sector landscape, PFC is adjusting its sails to maintain future growth. With initiatives like its collaboration with Boston Consulting Group to enhance lending processes and building capacity for the infrastructure business, PFC aims to stay ahead of the curve. Despite a temporary slowdown due to these transformations, PFC is optimistic about meeting its growth targets for FY '25.
The Indian government's extensive capacity expansion plans in power generation, particularly conventional and thermal capacities, align seamlessly with PFC's growth strategy. With expectations to fund substantial segments of these expansions, PFC's loan disbursements in the upcoming cycles look promising. Additionally, government policies on renewables and innovative technologies strengthen future prospects.
In a significant stride towards ensuring sustainable practices, PFC launched its first ESG report in July 2024. This highlights their dedication to environmental, social, and governance standards, reinforcing PFC’s commitment to broader societal goals while pursuing financial growth.
Despite a disruptive yet necessary transformation phase, PFC is well-positioned for sustained growth. With meticulous risk management, strategic foresight, and robust government support, PFC remains a reliable investment opportunity. Their guidance includes maintaining a growth trajectory with a focus on balanced, sustainable financial health and leveraging infrastructure and renewable energy opportunities in alignment with India’s development goals.
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Ladies and gentlemen, good day, and welcome to the Power Finance Corporation Limited Q1 FY '25 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded.
And I hand the conference over to Ms. Shweta Daptardar from Elara Securities Private Limited. Thank you, and over to you, ma'am.
Thank you, Neha. Good evening, everyone. On behalf of Elara Securities, we welcome you all to Q1 FY '25 Earnings Call of Power Finance Corporation. From the esteemed management, we have with us today Ms. Parminder Chopra, Chairman and Managing Director; Mr. Rajiv Ranjan Jha, Director, Projects; Mr. Manoj Sharma, Director, Commercial; Mr. Sandeep Kumar, Director, Finance.
Without further ado, I now hand over the call to Ms. Chopra for opening remarks, post which we can open the floor for Q&A. Thank you, and over to you, ma'am.
Thank you. Good evening, and a very warm welcome to all of you. We have declared our Q1 results today. I'm happy that I have been able to regularly connect with the investor community on quarter-on-quarter basis.
Before I discuss the results, I would like to introduce our newly appointed Director, Finance, Mr. Sandeep Kumar. He assumed charge on 11 July and brings with him more than 34 years of experience. Sandeep has been instrumental in steering a wide range of financial functions in PFC, including fundraising, accounting, taxation and trading. He is also earlier announced as the CFO for the company. Also, I would like to share that Mr. Shashank Mishra, Joint Secretary, Ministry of Power, has joined [Audio Gap] consolidated performance.
For Q1 2025, the consolidated profit after tax stood at INR 7,182 crores, a 20% increase year-on-year. The group loan asset book registered a growth of 13% and crossed the INR 10 lakh crore mark. The loan asset book stood -- stands at INR 10,04,735 crores as on 30th of June 2024.
On the asset quality, we continue to see a decreasing trend in the NPA level. The consolidated gross NPA has reached below 3% and is at 2.97% in Q1 '25 compared to 3.54% in Q1 '24. The consolidated net NPA ratio for Q1 '25 is at 0.84% compared to 1% in Q1 '24.
Now moving on to stand-alone performance. For Q1 '25, the net profit is at INR 3,718 crores, a 24% increase on a year-on-year basis. The net interest income also rose by 24% year-on-year. The income growth has been supported by improving yields, stable spreads and steady net interest margin.
The yield for Q1 '25 is at 10.08%, the spread is at 2.64%, and NIM is at 3.55%, all within our guided range. The cost of funds also continues to be within our expected range of 7.44%. Also, this quarter, we did not have any major additions in our provisioning numbers. In Q1 '25, we have created an incremental provision of only around INR 62 crores. Going forward, we do not envisage any major adverse provisioning impact unless there is any regulatory changes.
On the foreign currency front, we have an outstanding portfolio of U.S. dollar equivalent of 8.4 billion. Out of this, around 78% of the outstanding portfolio is U.S. dollar-denominated, 15% is yen-denominated and balance 7% is euro-denominated. Further, 95% of the outstanding foreign currency portfolio is hedged for exchange risks. Out of this, nearly 100% of U.S. dollar exposure and 100% of JPY loan exposure is hedged for exchange risks. So with a prudent hedging cover, the range from ForEx fluctuations have a limited impact on our profit and loss account.
Through our prudent risk management strategy and stable revenues, PFC delivered a healthy bottom line in Q1 '25. Also, our balance sheet remains exceptionally strong with a capital adequacy ratio of 27% and a net worth of INR 83,265 crores. Given the robust performance this quarter, we have declared an interim dividend of INR 3.25 per share. With this solid foundation, PFC is well positioned to capitalize the future growth opportunities.
On the asset quality front, I'm happy to share that we continue to maintain a healthy book. We have added no new NPA as such. The net NPA ratio reduced by 17 bps that is from 1.04% in Q1 '24 to 0.87% in Q1 '25. Similarly, the gross NPA levels saw a 44 bps reduction from Q1 '24 to Q1 '25. For Q1 '25, the gross NPA ratio is at 3.38%.
On the resolution front, three projects of INR 4,036 crores are in advanced stage of resolution. Two of these are the same as indicated during our March results, that is Lanco Amarkantak with an outstanding loan amount of INR 2,376 crores, and Shiga Energy loan of INR 522 crores.
The third project is TRN Energy Projects Limited (sic) [ TRN Energy Private Limited ] with an outstanding loan amount of INR 1,139 crores. It's a 600-megawatt commissioned thermal asset. The resolution of this is being pursued outside NCLT. The resolution plan has been formulated and approvals from all the consortium lender is awaiting. On resolution of these three assets, our gross NPA ratio will be below 3%.
Also in KSK Mahanadi project, where resolution is being pursued in NCLT, we have received 10 bids last week. It's a 1,800-megawatt partly commissioned project with PFC outstanding amount of INR 3,300 crores. The evaluation of the bid is underway, and we expect more than 100% recovery against the project, basis the current bids received. We have maintained around 55% provisioning on the project.
So now coming on to the loan asset growth this quarter. The disbursement for Q1 '25 are at similar levels as the previous Q1. The Q1 '25 disbursements are at INR 19,483 crores. I'm aware that this quarter, our disbursements were slightly subdued, which has resulted in a loan asset book growth of around 10% on a year-on-year basis. However, I want to assure you that our loan growth targets for FY '25 remain unchanged.
In this regard, I would like to share an important development with all of you. Embracing change is essential for any growing organization to maintain its future growth. As you all know that the power sector landscape in India is changing at an unprecedented pace marked by rapid technological shift. Concurrently, PFC is also building upon its infrastructure lending business.
To navigate these changes, business priorities and to grow in a sustained manner in future, it is important for PFC to change and adopt to the new business reality. With this vision, around 1.5 years ago, we initiated a transformation exercise in PFC with the support of Boston Consulting Group. BCG has carved out a detailed transformation strategy, including realignment of our lending processes and capacity building for the infrastructure business.
The implementation of Board-approved strategy has been rolled out from 1st April. To implement a change of this scale requires time as it needs employee sensitization, aligning of the existing systems and managing the teething issues. Therefore, the beginning of the financial year has been strategically adopted to bring in these changes. This gives us sufficient time to align the processes and ensure that we are able to achieve our targeted growth level.
Currently, we are yet to fully integrate these changes, and it may take another quarter to completely adopt it. This transformation exercise has temporarily slowed down our normal business operations. I'm confident that once the processes stabilizes, we would be able to maintain our growth trajectory for FY '25. This transformation is crucial for our long-term success as it would strengthen PFC's ability to tap the future opportunities in power and infra space.
Talking about opportunities, the recent Union Budget sets the stage for a cleaner, more resilient and economically vibrant India, aligning with India's vision of a Viksit Bharat by 2047. The initiatives for the power sector, including a focus on energy transition and security, are likely to stimulate demand and capacity expansion. The clear focus on clean and green is encouraging for the sector.
Further, the announcement to formulate a policy for pumped storage projects is a crucial step towards smoother integration of renewable energy, enhancing grid stability and reliability. Also the steps to develop a climate finance taxonomy will be instrumental in attracting capital to accelerate the implementation of clean energy projects.
Additionally, expanding the list of duty exemptions for critical minerals required for equipment manufacturing will help in accelerating the growth of the renewable energy sector. Further, the common push for innovative nuclear technologies will strengthen the sector's promising future.
Overall, the budget has created a strong ground for CapEx growth in the power sector, and PFC is well positioned to capitalize on these long-term project financing opportunities.
Before I conclude, I am pleased to share that PFC launched its first ESG report in July 2024. This comprehensive document outlines our ESG vision and our existing practices in environmental, social and governance domain. The report is available on our website. This initiative demonstrates PFC's commitment to sustainability. And I'm confident that PFC will continue to scale new heights in this domain.
Thank you. And now we are open for questions.
[Operator Instructions] The first question is from the line of Dhaval from DSP Mutual Fund.
Congratulations on good performance. I just had two questions. First was relating to growth. So like you alluded, these changes that you brought about in infrastructure lending may have caused some disruption in the overall growth for the quarter. Just wanted to get some clarity in terms of how do you kind of cover up the next 9 months to achieve your overall growth target of 14-odd percent for the full year? So just if you could give some perspective around that, that would be useful. So that's the first one.
And second is, I'm sure you would have seen the media reports around the Shapoorji Pallonji account I mean, sort of sanction and exposure, et cetera. If you could just clarify how -- I mean how much amount we have given and collateral and the thought process around it, that would be very useful.
Yes, thank you. So with regards to your first question that how do we expect to maintain the growth trajectory which we have given for the FY 2025. So I think our goal is to strike a balance between value and volume. So we are expected that we will, as per our guidance given earlier, we are expected to achieve the same -- similar level of growth for the current FY 2025.
And we don't see any issues in the remaining part of the year because this is -- whatever exercise is being undertaken, that is to smoothen the process, fasten the process and to explore the new avenues, what PFC can tap. But otherwise, our underlying loan book trajectory is very strong, and we hope to meet the targets for the current financial year.
With regard to your second question about the Shapoorji loan, as we have earlier also clarified in -- on the exchange, that the diligence process is still underway and no funds have been disbursed till date. So we have also declared at that point of time that post the completion of the detailed due diligence, Board will take a decision on the merit basis and will accordingly decide what would be the outcome of this deal. And I understand that you are referring to some of the media news in the recent past few days, I can say that these media news are speculative in nature and inaccurate.
Understood. Ma'am, just one follow-up on the growth. I mean, last year, we had this benefit on the distribution lending business, which may not -- part of it may not occur in the current financial year. And REC, for example, had talked about generation CapEx, both on the conventional side and the renewable side being a driver or part offset of the growth delta. Is that the same thought process at PFC as well? Or you think infra will be a far bigger play in the current financial year to sort of see that kind of disbursement momentum that we are looking at for the rest of the year?
I think we and REC are working in the same space as far as the -- be it the power sector or the infrastructure sector. So accordingly, the business, what is they are expecting are, we are also expecting from the similar space.
So last year also, distribution played a vital role in our overall disbursement. And this year also, we are expecting that distribution is going to play a major role. If you see even the current Q1 disbursement, so out of the total Q1 disbursement, 59% is coming from the distribution sector and 28% is coming from the generation.
In generation also, we will be focusing more on the renewable, and 18% of the total disbursement in Q1 is from -- for the renewable sector. So infrastructure, definitely the number will be going to be higher than the previous year. But I think we would like to maintain the earlier approach of steadily growing the disbursement for the infrastructure sector.
The next question is from the line of Shreya Shivani from CLSA.
Ma'am, I have three questions. There was a media article today on KSK Mahanadi, which mentioned that probably they will be allowed to distribute surplus cash amongst lenders, or the other way, the lenders are allowed to distribute the surplus cash. So can you help us understand before any resolution, what are these developments happening over there? And what will be the impact on us?
Second is, ma'am, just on the loan growth, if I was looking at the different segments, particularly the GENCO and distribution segment. So the repayment rate has been a little elevated in both the segments for the past 2 quarters. So DISCOMs, I understand that the RPBF (sic) [ RBPF ] and LPS, LIS repayment rate may have picked up or repayment cycle may have begun, but what about the GENCO segment? Was there any large repayment that happened in this quarter? Or any other color that you can give on that?
And third, just a clarification and just curious that if a state ends up not repaying their certain loans and becomes bad asset for one of the lenders, which is your peer company, has that not happened for you because you peers did take an elevated provision on that one state not repaying their -- or slipping into Stage 2? So has that not happened for you? I'm just curious how it plays out between PFC and REC when state repayments happen?
On your first question about the KSK Mahanadi, that there is an article about distribution of the cash available. Everybody knows that a huge cash is available and lenders have requested for allowing the early distribution of that cash. But I'm not aware that what is the outcome of that case. But otherwise also that RFP was floated for bidding for the KSK asset, and they have received the bids in the last week for that.
And including the cash available, we have got a very good recovery rate, which is expected to be more than 100% of the principal outstanding for the KSK. So in any case, the evaluation is under process. And going forward, as the evaluation is completed, so that will be sale posed to the NCLT for approval. So on that front, we are there.
So if the cash -- so the cash recovery can actually come earlier than the other recoveries, which will only happen after the full project is resolved, all the bidding and the new promoter come in. Is that a fair way to look at it?
We have represented to NCLT for allowing us to withdraw the cash. If the decision comes, then definitely we will have early access of the surplus cash available in the system.
Got it.
So on the loan growth, yes, I agree that repayment has been at a comparatively a little faster pace as compared to the previous quarter. But as you are aware that in the last -- before last 2 quarters, the RBPF scheme was under the sanctioned process, most of the scheme.
Now the sanctioning has been done, a lot of disbursement has been done. And this is basically line of -- sort of a line of credit for them. And it's a short-term loan where once they repay back the loans, then they are entitled to draw it again. So that's a regular process. And I think that RBPF is going to continue.
With respect to the LPS scheme, yes, initially, the disbursements were at a higher pace because most of the states were covered under the up to 3-year category, but now since 3 years have passed and for most of the states that LPS disbursements have peaked out.
So going forward, the LPS disbursements are at a lower pace. But the repayment will start only after the moratorium period is over. So that is how maybe because of the lower LPS disbursements, you may be looking at slightly subdued growth in the -- under -- disbursement under this space.
And on GENCO, was there any large repayment or anything this quarter in any of the renewable or the core GENCO book?
No major disbursement -- no major repayments under the GENCO space. And your last question about the state government, I would like to clarify that none of the states have defaulted neither for PFC nor for REC. So what -- there has been -- we have always been talking that there has been some delays on the part of the state for the remittance of the dues, but they have not been categorized as a nonperforming asset ever.
So forming part of Stage 1 asset or a Stage 2 asset, this depends on quarter-on-quarter basis. But yes, the INR 67 crore additional reserves, which are -- provisioning you are looking at, out of that is -- substantial is on account of that state utilities.
Got it. Sir, even you have increased some provisioning on one state. But are you counting it in Stage 2 now, the entire state? Or is it some bit of it you started counting in Stage 2 and majority is in Stage 1? How does that play out?
As on 30th of June, yes, they were forming part of Stage 2 asset. So I think in the -- during the current quarter, some payments have been received and the status might have changed because it is on the basis of past due date -- number of days.
The next question is from the line of Kunal Shah from Citigroup.
When we look at it in terms of what can actually trigger the higher provisioning on this deferred payment from the state government. Would it be only the seasoning or maybe now we are confident that it will regularize and there is no need for incremental provisioning that could happen, yes?
So as I told you that for the state sector, it generally happens that at times they are forming part of the Stage 2 asset. And maybe in the next 15 days, they clear and they again form part of the Stage 1 asset. And it keeps on happening, but we try to maintain the provisioning whatever is there under the Stage 2, we generally try to maintain for the -- those assets which are habitual going from Stage 1 to Stage 2.
Okay. And secondly, with respect to KSK, any timeline that you would want to highlight in terms of when can we see the overall resolution, maybe cash recovery can happen soon, but overall resolution, how much time would it take? Because there you have still mentioned like it's not in the advanced stage. [Audio Gap] possible in this system?
See, bids has been received and bids are being evaluated. It all depends on the NCLT approval. It's a court-driven process. So for that, I think it's very difficult to give timelines, but we are expecting that it should happen within this financial year.
Okay. And lastly, on the growth side. So when we look at it other than the power sector, when we look at it now that a larger part of at least the transitioning and the processes are there. So how should we look at disbursements to ramp up for the entire fiscal? Any changes out there in terms of what you have been suggesting, and how should we look at full year disbursement from those segments?
See, infra, if you ask me about the number wise, there may be going to be slightly more disbursement, but still a major component is going to be from the power sector, and we are focusing on distribution as well as renewable sector for our group targets.
The next question is from the line of Manish Agarwalla from PhillipCapital.
Ma'am, I have a couple of questions. One is just a clarification on SP Group. Did we sanction the loan or the sanction is not yet done?
See, there was at one stage sanction was there, but that was subject to further clarification and -- which we are in the process of doing the due diligence on those clarifications. So the final sanction will be -- the final will be only after those clarifications we achieve.
Okay. Got it. The other thing I wanted to check was just to get more clarity on the growth. Can you disclose what is the total outstanding sanction which is yet to be disbursed?
See, I don't have that figure right now with me, but my team can -- you can be in touch with my team and they can give you...
Yes. Sure. And the other thing I wanted to check was, what is the status of Stage 2 after Q1, if you can give absolute 100%, that would be helpful.
See, Stage 2 assets are approximately 11% of the total outstanding, and it is purely government sector utilities which are falling under the Stage 2.
So there is an increase on a quarter-on-quarter basis, correct? Because in Q4, it was some 7.5%, if I'm not wrong?
See, it is always -- I told you that there are certain utilities which are off and on following under Stage 2 or Stage 1. So you may see on a quarterly basis, their status being changed from Q1 to -- Stage 1 to Stage 2.
And what would be our promising policy around this? Because if I look at the Q4 number, your Stage 2 provision coverage is lower than Stage 1 provision coverage. So just wanted to check how should we look at the Stage 2 provisioning on a steady-state basis?
See, we follow the ECL model, and under Stage 2 coverage, if I say it is 0.92% is on an average whereas in Stage 1, it is 0.85% on an average. So I told you that where these are the habitual utilities, which are falling off and on from Stage 1 to Stage 2, we generally don't change provisioning unless until they are for a big continuous period that they remain under the Stage 1. So that is why you may be finding that there is a gap of -- still there is a gap of around -- maybe around 7 bps on an average.
Got it. And just final question on the spike in Tokyo Overnight rates. So is there any -- do you see any impact on your incremental spreads because there's a massive spike and we have some borrowings. Obviously, the number is not very high. Do you see any risk there to the incremental spread?
You are talking of the yen borrowing, right?
Yes, yes, yes.
Yen borrowing, we have already 100% hedged. So we don't -- we are not going to have any impact on those in our...
No, no. My question was on the interest rate side. You might be having on the currency side.
Already their interest rate is -- I don't think that there is a significant interest rate on these borrowings. So it's just -- TONA is just 0.25. So I don't think that any increase is going to have any major impact on our borrowing.
The next question is from the line of Shreepal Doshi from Equirus Securities.
Ma'am, the question was on infra lending side. So while we aspire to sort of grow this book incrementally, where would we want to keep a cap on this in terms of the loan book mix? So where would we see this share increasing by the year-end or in the next 3 years' timeline?
See, there has been -- you know that in infra, the sanctions are generally of larger quantum as compared to renewable or distribution. So -- but the disbursement under this happens over a period of 3 to 4 years.
So I think it is going to gradually build up, and it is going to take time for us to achieve the cap of 30% of our total loan outstanding because you know that as our power sector book is also growing, so accordingly, 30% share is going to increase.
So it's going to time for us to hit the highest level. So for that, I think maybe not for the 3, 4 years, at least, which is there in the visibility, I can see that the highest level touching for the infrastructure sector.
So where would we see the share in the next couple of years? Like while 30% is, of course, look like far, but in the next couple of years, where could this be?
Yes, you can see growing our share gradually for the infrastructure sector. Like if I talk of 30th June 2023, it was only INR 1,000 crores what we have disbursed under the infrastructure. There is, when we talk of the 30th June 2024, our outstanding is INR 7,400 crores. So right now, we are at 1.56%. But yes, you will be looking at each year, we will be growing for funding of the infrastructure sector as a total percentage of our book.
Got it, got it. Ma'am, second question was on the NPA pool. So we have 21 projects. And so just wanted to understand how many of these projects are 100% coverage projects, wherein we have 100% coverage?
So out of the total number of assets -- so out of the 21 stressed assets, in 13 assets, we have 100% provisioning. In 2 assets, we have around 80% of the provisioning.
Got it. That's very helpful, ma'am, actually. So these 13 projects can get resolved like -- I mean if you want, you can sort of write them off as well. So what is the status there? Are we seeing any bidding activity there? Or is there any resolution in pipeline for these 13 projects?
See, most of them are under liquidation. Seven of them are under liquidation. So slowly, slowly, assets are being sold in isolation for that. Once all the projects have been liquidated, and we have got an NOC, then we will be writing it off.
And for a few of the other assets, we are trying to find a resolution, and then we will be going ahead. Like there is one -- Maheshwar is there. So there, we are looking for some resolution. There is another, Narasimha Solar, there also we are looking for some resolution. So we are looking for an individual asset based, finding a solution for each of them depending on the requirement.
Got it. Ma'am, just last question on the projects side. So we have Lanco Amarkantak, KSK Mahanadi and some other projects which are in advanced stages of resolution. Apart from that, which are the ones wherein we see -- we have the visibility that it will get resolved in the next, say, couple of quarters?
See, we have already shared about the Shiga where we have approved the resolution plan, and we are expecting that the consortium members will be approving it. We have TRN Energy, which, again, outside NCLT, resolution we are seeking and we are expecting to be resolved soon. So these are other two assets. And in few of the NCLT assets, the RFP has been floated. And once the bids are received, then the process will be taken forward.
Got it, ma'am. That's very helpful. Just last question on sanction pool. So what would be the cumulative sanction pipeline that we have as on 1Q and...
Cumulative sanctions in hand, un-disbursed you are saying, that I already said that the number is not readily available. We will be providing. You can be in touch with my investors and people.
[Operator Instructions] The next question is from the line of Jigar Jani from B&K Securities.
So on the margin front, we have kind of maintained margins at 3.55%. What is the outlook on margins? Because I believe REC was highlighting that their incremental cost of borrowing is even lower than their book cost. So do we see further upside in terms of margins from these levels? Or you are comfortable with these margins for the full year?
And secondly, just a question on the write-backs that you are expecting this year, given that you have close to INR 7,300-odd crores, including KSK resolution, which we are expecting this year. What kind of write-backs can we expect from these resolutions?
See, on the margins front, we have already given a guidance that we expect due to competitive regime, we are expected to maintain our margins somewhere between 3.25% to 3.5% range. So -- and we expect to maintain within this guided range.
On the write-backs, yes, I agree that like I told you that in KSK, we are expecting more than 100% recovery and we have already provided for 55% provisioning. But depending on the NCLT outcome after final approval of the NCLT, we will be writing it back the provision.
Similarly, in Lanco, whatever plan has been -- successful plan has been submitted to NCLT for approval, we are expecting some write-backs in that also, which is, I think, maybe around in the range of 20%. So that also, once we receive the NCLT approval, we are expecting that to be there.
Right. And on TRN and Shiga, any substantial write-backs expected there?
There could be marginally some write-backs in case of TRN and Shiga also.
The next question is from the line of Nikhil Nigania from AB Bernstein.
My question is on the loan sanctions being evaluated for Shapoorji Pallonji loan. If you could give us some color on the rationale to go ahead for this opportunity, given, as you said, there are so many opportunities in the power sector itself to lend. And this seems outside the expertise area or the strength of PFC and looks like a holding company loan. So could you please share the rationale to pursue this opportunity?
So I think -- since PFC has been allowed to fund under the infrastructure sector, so in order to -- I agree that there are enough opportunities in the power sector, but whatever are there in domain in for PFC, we would like to explore all those. But seeing that -- since it is an infrastructure project, housing, we would also like to explore that space. I think so that is a sufficient rationale for PFC for going forward for this deal.
Understood, ma'am. If I could squeeze in a second question. Just wanted to understand, are we funding the renewable -- merchant renewable projects as well? Or is PPA a condition precedent for loan disbursement?
See, historically, we have been funding projects with a long-term PPA. But yes, looking at the current market scenario, we are funding a few of the projects based on their merit under the merchant power also.
The next question is from the line of Gaurav Agrawal from Nine One Capital.
Ma'am, for this year, we are guiding for 14% kind of loan growth, right?
Right. I told that we will be maintaining a similar levels.
Correct. So, ma'am, you mentioned that there are some initiatives which BCG has helped you figure out. So if you can highlight some of those initiatives, which you guys are implementing? And as a result of those initiatives, do we expect higher loan growth in the future? And if yes, what is your vision for a 3-year or a 5-year period, like from the current [indiscernible] lakh crores, how much can we grow to in the next 3 to 5 years?
Initiatives are on the two parts. One is improving our internal processes and due diligence process. And the other is the potential areas where PFC can venture into. We are right now implementing first phase, improving our processes and improving our due diligence, what is required to be done. But the new areas, as I told earlier also, we would like to go in a steady and gradual manner. So they have suggested few areas, but we will be exploring them in time to come.
If I can just push one follow-up because in any organization whenever you take certain initiative, in the beginning, there are a lot of challenges because of which, in the short term, the loan growth or the business growth might look a bit low. But once these initiatives are implemented fully, once the organization is accustomed to all these initiatives, the growth trajectory becomes higher and better.
So with that perspective, I wanted to ask if 14%, 15% is the kind of growth that we would want to grow in the coming years or our aspiration can be of 18%, 20% also once these initiatives are fully implemented?
See, I think in the shorter term, we would like to maintain that we will be growing at around 14% as we have given the guidance earlier.
The next follow-up question is from the line of Dhaval from DSP Mutual Fund.
Yes. Ma'am, just a couple of follow-ups. First is on this Maheshwar, the outstanding is about INR 1,600-odd crores only or it has changed in this period? And what's your coverage on this specific exposure?
See, it is around INR 1,600 crores and 100% has been covered.
Okay. And the other one is relating to, ma'am, on the generation side. So we -- I mean NTPC recently highlighted this large CapEx plan over the next few years. And overall, REC has also been talking about 92 gigawatts of conventional power addition in the next 6, 7 years. So from that standpoint -- and they have been talking about a market share of roughly 35% of -- ex of NTPC portfolio.
So how does PFC sort of see its opportunity in this space? And if you look at our disbursement, largely, they've been flat at about INR 30,000 crores, give or take, for last 10 years in conventional generation. So do you see in this cycle, given what is happening in the power demand side and capacity constrained on peak power, can we see bigger numbers in the coming years and that should support medium-term growth for PFC? Any thoughts around that?
Yes, definitely, out of the -- the Government of India is expected to double its installed capacity from what it is at the present level. And from there, we are looking even adding some of the capacities in thermal also, maybe around, as you said, around 96 -- or 80 to 96 gigawatts. Out of which NTPC is expected to maybe around 25 to 30 gigawatt, and the balance is going to be either in the state sector and in the -- or in the private sector. And we are expecting that our share in the state power sector generation and private is going to remain as it is as we are there as of now.
And ma'am, in the sanctions, you see right now some of these state GENCOs, are the proposals already being under discussion? Or they are still at very early stage? I mean where are we in terms of -- like can we expect some sanctions this year on some of these thermal generation projects?
See, primarily, these projects are coming on the basis of capacity expansion, wherever the existing capacities are available. So expanding those capacities from where these prime numbers is coming in. So we are in the process of -- these are all brownfield projects.
So for -- a few of them have already been enforced and we are in the process of sanction. So I think we are also going to have a sufficient pipeline for this thermal power generation project. But definitely, the focus is going to be on the renewables. So percentage may remain different. But yes, this is where we are going to fund these projects also.
Right. And ma'am, just one last thing on renewables. So we've seen the battery storage projects sort of some initial traction has been gained and prices have been coming down there as well. How are we sort of looking at battery opportunity? And similarly, on pump storage, while not so much traction yet, but just if you could talk a little bit around these two opportunities within renewable, that would be useful.
Our Director, Projects, would like to answer your question.
I think, yes, you are right when you say that battery prices are coming down and last time when it was bid by Gujarat, it was INR 10 lakh per megawatt for battery storage, and now recent bid it has come down as low as INR 5 lakhs -- INR 5 lakhs to INR 6 lakhs. So we are expecting a reduction in price, and that would help a lot in renewal energy sector with the battery energy storage system becoming most cost effective.
But your statement on pump storage, I think a lot of pump storage projects have actually taken off in private sector. And we are one of the first lender in power sector, wherein we have lent to a Andhra project in the private sector, and this is about to get commissioned by next year March. And there are many other projects which are taking off the ground. So pump storage is also coming.
And these battery storage and pump storage together would be very, very useful in making renewable energy souce as a continuous source of energy to the grid and provide more stability to the grid. So we always are keen to be a part of that as a lender.
Ladies and gentlemen, we'll take this as a last question. And I'll hand the conference over to the management for closing comments.
Shweta, that was the last question I assume?
Sorry, ma'am?
That was the last question?
Yes, ma'am.
Thank you very much for hosting the call for us. And thank you, everyone, for joining in. Thank you.
Thank you. On behalf of Elara Securities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect.