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 Q2 FY '19 Earnings Conference Call, hosted by Prabhudas Lilladher Pvt. Ltd. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Shweta Daptardar from Prabhudas Lilladher Pvt. Ltd. Thank you, and over to you, ma'am.
Yes, thank you, Tanvie. On behalf of Prabhudas Lilladher...
Shweta, this is [ Justine ] from Power Finance, could you just hold on for 2 minutes, top management has yet to join us?
We have the management connected. Ms. Shweta, you may proceed now.
Thank you, Tanvie. On behalf of Prabhudas Lilladher, I welcome you all to Q2 FY '19 Earnings Call of Power Finance Corporation. We have the management represented by Mr. Rajeev Sharma, Chairman and Managing Director; Mr. C. Gangopadhyay, Director of Projects; and Mr. N.B. Gupta, Director of Finance. I would now like to hand over the call for Mr. Sharma for opening remarks, after which we can open the floor for Q&A. Thank you, and over to you sir.
Thank you very much for giving us this opportunity. Good evening, everyone. I welcome you all to this conference call. I called this conference call to share with you recent developments in Power sector, PFC's financial and operation performance in second quarter of FY '18/'19 and business outlook going forward. Firstly, I will share a few recent developments in the Power sector. As you must be aware, government of India had launched a pilot scheme for procurement of 2,500-megawatt powers on midterm basis. PFC Consulting Limited was the novel agency for the program, which was received for 1,900 megawatt at tarry for INR 4.24 per unit without any escalation for next 3 years. Recently, under this scheme, PPA was signed for 1,900-megawatt with various states like Bihar, West Bengal, Talengana and Tamil Nadu. The successful results include RKM PowerGen 550-megawatt, Jhabua Power 100 megawatts, MB Power Madhya Pradesh 175 megawatts, SKS Power generation Chhattisgarh 300-megawatt, Jindal India Thermal Power 125 megawatts, IL&FS Tamil Nadu Power Company 550 megawatts, and GP Power Ventures 100 megawatts.This will help in reviving stressed projects, which were not operating due to lack of PPAs and also improve the viability of some projects under resolution. PFCCL on behalf of these will aggregate the power demand under subsidy policy and will shortly come up with a scheme for medium-term PPAs along with co-linkages. On the Power demand front, we are witnessing an increase in demand for Power, the peak demand for first half year has grown by almost 8% from 1.64 lakh megawatts during April - September 2017 to about 1.77 lakh megawatts during April - September 2018. The energy requirement also witnessed 6% growth from 620 billion units in the first half of 2017/'18 to about 658 billion units in first half of FY '18/'19. Going forward, we expect the Power demand to increase at a similar pace considering the government's focus on Soubhagya and 24/7 Power for all. On the coal supply front, Ministry of Power is already reviewing the status with Ministry of Coal and Ministry of Railways. This year has already seen an increase of 10% in coal dispersals compared to last year. Considering the approaching winter season, we do not see any impact due to coal shortages. High-level in power committee, under the chairmanship of Cabinet Secretary, is likely to come out with recommendations shortly on various issues related to power sector. Now I will share highlights on PFC's performance. On business growth front, we have shown robust loan growth of more than 13% this quarter with gross loan assets at INR 2,92,648 crores, as against INR 2,58,050 crores in Q2 of previous year. On profitability front, our profit for half year FY '18/'19 has shown a growth of 16% with profit at INR 2,728 crores, as against INR 2,348 crores profit in H1 FY '17/'18 based on Ind AS reporting. Our interest spreads and NIMs for the last 2 quarters has been steady at around 2.5% and 3.30%, respectively. Going forward, we expect the interest expressed to be maintained at these levels. This quarter, we witnessed our highest ever disbursement in second quarter of the financial year with disbursement of INR 17,505 crores in Q2 FY '19. Thereby, making our H1 disbursement stand at INR 30,486 crores, which is an increase of about INR 4,000 crores compared to previous year. We continue to make efforts in refinancing commission project and financing greenfield renewable projects.I would like to inform you that there is no addition to stressed assets other than what we have indicated in the last financial year. On the NPL or Stage III front, we saw one of the earlier stressed projects with loan of INR 960 crores, slip into Stage III. At the same time, one state sector loan of about INR 5,300 crores got upgraded due to completion of a specified period with reversal of 4.6% net provisions that is about INR 250 crores. Our net NPA for this quarter stand at 4.66%, which is similar to NPA level of Q1 FY '19. I am glad to inform you that our capital adequacy ratio has improved from previous quarter and is comfortable at 17.91% against the RBI requirement of 15%, despite the additional provisioning that PFC has been doing due to Ind AS and RBI norms. Let me now explain our loan asset book. We have a total loan asset portfolio of about INR 2.93 lakh crores; out of which, government sector loans are INR 2.41 lakh crores, that is 82%; private sector loans are INR 52,000 crores, that is 18% regarding government loan book of INR 2.41 crores, government sector borrowers are continuing to serve their dues regularly. Therefore, we do not see any stress in respect of government sector borrowers. In case of private sector exposure of about INR 52,000 crores about INR 22,000 crores private sector loans, that is 8% of loan book, are regularly servicing their dues and we see no stress. Therefore, 90% of our total asset book is not having any kind of stress. Out of the balance, private loan assets of about INR 30,000 crores, that is 27 projects, as mentioned earlier, we expect minimal haircut in 5 loans aggregating to about INR 5,000 crores. Against the balance private loan assets of about INR 25,000 crores, 55% provisions have already been made. Now I will share the update on the other 22 stressed projects with you, that is apart from the 5 projects that I mentioned earlier. 5 projects with our exposure of INR 8,254 crores are in advanced stage of resolution. These projects are GMR Chhattisgarh, Jhabua Power, KSK Mahanadi, we are in discussions with H1 bidders are underway to close deals. Indiabulls, Amravati and [ SR Mahan ], where onetime settlement offer submitted by adjusting management are under finalization. We, therefore, see a likely resolution in these 5 projects, where the total provision already made is approximately 48%.In RKM Powergen Stage I and II, with our exposure of INR 5,155 crores, good news is that PPA for 550 megawatts under pilot PPA scheme is signed now. We are now awaiting consent to operate clearance from the government of Chhattisgarh to complete the restructuring exercise post RP for rating. The provision already made for the projected 43%. In Indiabulls Nashik, we have an exposure of INR 3,001 crores. Talks with Maha Genco is still underway. We have filed a petition in NCLT under IBC in line with provision of RBI 12 February surplus. Next NCLT hearing is on 26th November, 2018. The company is also making efforts to revise the PPA with Maharashtra, which is under litigation. The provision already made for this project is 39%. Nine projects with our exposure of the INR 8,100 crores are being resolved through NCLT. The total provision already made in these 9 projects is 74%. Also, other projects where aggregate exposure of lenders was more than INR 2,000 crores, PFC and lenders have filed petitions with NCLT, under IBC, except for GMR Chhattisgarh. However, the petitions have not been taken up further in view of the honorable Supreme Court's order. Four projects with our exposure of INR 298 crores are being resolved through BRT or surfacing. Mechanism in these projects already have 100% provisioning. Balance to projects with our exposure of INR 250 crores are RS India and OTS proposal has been submitted by promoters, which is under consideration for a Stonefield project, which has been filed under NCLT recently. The total provision already made for these 2 projects is 59%. Therefore, the 22 projects, which are under various stages of resolution, amounting to INR 25,000 crores already have provision coverage of 55%. Based on the bids received for stressed assets so far, we do not see any additional provisioning going forward. Further, the additional provisioning of INR 1,400 crores, done as a matter of prudence, in line with RBI norms is likely to reverse upon RBI clarification. Even in the sales of RBI clarification, INR 1,400 crores will reverse over a period as indicated in our conference call during Q1. We believe in terms of provisioning, our provision coverage is adequate to absorb losses on stressed assets, which are under resolution. PFC has also been interesting with bidders for its stressed assets. The feedback we got from the market is that some of the bidders who participated in expression of interested state, and finally did not submit the bid, cited that were 2 primary reasons, among others, which are they were trying up with local partners for taking a commercial and technical call on these stressed projects, and they were also unsure of the liabilities that might come up in an outside NCLT process.However, they are now quite keen to participate in NCLT process, given that liability issue gets addressed, and also they are now in advanced stage of tying up with local technical partners to take commercial call on the Power project. We have also been in discussion with some State Power utilities, who have shown keen interest to participate in the bidding process for the stressed projects under NCLT. We, therefore, believe that the interest in bidding for stressed projects might be higher in NCLT process. Hence, even if Supreme Court, on 14 November 2018, closes the window for resolution outside NCLT, the interest of bidders of under NCLT, may be higher if not the same. Further, the high-level Empowered Committee constituted for stressed assets has already held discussions with intent to expedite the resolution of sectoral issues impacting power projects, and report is expected to be finalized very shortly. It is also expected that issue of cancellation of BPAs and FSAs under NCLT will also be looked at for a possible solution to retain the value of the project under NCLT. With the government of India, and all the stakeholders taking necessary steps and with likely uptick in power demand, we are optimistic that the stressed projects are likely to fetch better valuations going forward. With regard to our foreign currency borrowings, our total foreign currency exposure is USD 3.6 billion, that is 11% of total borrowings. Out of USD 3.6 billion, USD 2 billion, that is 56%, is already hedged. Out of the balance open portion, USD 700 million, that is 20%, will mature after almost 9 to 10 years. And as per RBI guidelines, upfrontizing is not mandatory. USD 950 million, that is 24%, has average maturity of 2.5 to 3 years. And there is sufficient time to maturity for this open portion. We, therefore, do not see significant impact due to current volatility in the exchange rates. I will now touch upon the issue of liquidity. In wake of the issues post the IL&FS default some of the investors had raised concerns regarding the liquidity in the market. I wanted to take this opportunity to assure you that we have adequate liquidity for our operations and business growth, which can also be seen from -- will from our disbursement numbers for this quarter and half year. We also have about INR 10,000 crores in the form of undrawn CC or OD limits. We also have about -- details with respect to liquidity have already been shared in our presentation. Further, on our lending exposure to IL&FS Group, we have funded 5 SPVs with exposure of INR 2,500 crores. However, we would like to inform you that these are wind projects, which have positive features like: they are all commissioned projects; these projects also have good PPAs; they have demonstrated plant load factors in the range of 30% to 50%, in the first half of this financial year. Additionally, co-obligor structure is also in place, which gives additional comfort. It is also understood that ORIX Corporation of Japan is likely to take over majority ownership in these projects. Further, the trust and retention account for these projects have witnessed adequate cash flows. Given all these positives, we do not see any risks in PFC funded IL&FS projects. Now let me share with you the business going forward. Our focus will continue to be on refinancing business to add more commissioned projects to our asset base. We have also sent some waste to energy projects until date, and we will continue looking for financing opportunities in this space. Already one more waste-to-energy project is under appraisal. Renewable business will continue to be our focus area. We will continue to make efforts to mobilize higher amounts under 54EC bonds. Going forward, along with exploring other avenues for diversification, we are also exploring to raise foreign currency bonds and also planning to tap masala bonds to diversify our borrowings. To conclude, we have made a smooth transition to Ind AS reporting system with our net profit growth for the half year, reported at a growth rate of 16%. With total provisions reaching INR 17,162 crores this quarter, we have adequately provided for our stressed assets and we do not see additional provisioning going forward. We, therefore, believe that the worst is behind us now in terms of provisioning for stressed assets. We are also likely to see reversals from additional provisioning on RBI norms, upon receiving clarification from RBI on reversals on some stressed assets. We also believe from the market feedback that resolution, under NCLT, is likely to see significant interest from the Investor Community, particularly with power sector issues being addressed at the highest-level in the country, where we are expecting recommendations to come out shortly. With our continued focus on diversification on lending business, we intend to maintain our loan growth going forward. Now we are open to questions.
[Operator Instructions] The first question is from the line of Bunty Chawla from B&K Securities.
As you said, you have funded IL&FS project. So can you share the amount? How much loan outstanding we have on the IL&FS? As well as how much the holding and how much is to SPV?
Our exposure to IL&FS is INR 2,500 crores. These are commissioned wind projects and all these are 5 SPV. And most important thing is that interest and retention account sufficient cash flow is there.
These are to SPVs, nothing to hold coal company assets, sir?
No, sir. I'm naming the SPV: Lalitpur Wind Energy Pvt. Limited, [ Khancavge Wind Energy Pvt. Limited, Latesi Wind Power Limited ], Etesian Urja Limited, Wind Urja Pvt. Limited. And all these SPVs are having 100% PPA with the State Power utilities.
Okay. So sorry, these are currently standard assets, nothing as such?
No. No issue at all, as on date.
Okay, sir. And sir, as you said, one NPS deliver into this quarter. So can you share the name and what was the reason behind that?
Yes. Yes, it is Haldia. The project is Haldia. And Haldia, they didn't have PPAs. Now they have got PPAs from West Bengal Power Distribution Company for 2 units. Two units are commissioned, third unit, they don't have PPA, so they are not interested in commissioning. So now they are ready to supply power because they have to get coal. And it was fully stressed earlier and it has slipped into NPA because on time, they could not start supplying power to West Bengal Power Distribution Company.
Okay, sir. And sir, as you have seen there, this kind of growth has been better. But the percentage in terms of private sector has been increased in the AUM per se. So what -- which private sector exposure you have increased? Or can you share how much will be wind and how much will be the generation and like that, if it is possible?
Actually, the renewable projects are come being set up by the private sector only. So if our share is increasing in renewable, like we have refinance of about INR 700 crores [ Nehtra Group ] project. Similarly, others are, I think, government sector. But private sector generally, this as may -- maybe there...
Our position 18% last year.
But last time, also it was 18%. This time, also it is 18% of our loan book.
Okay. No I was comparing with Y-o-Y on the 15% to 18% increase in that. Okay sir. And sir, recently, you've rated the ECB foreign currency loan, as you have said in the press release. So what will be the average cost for that, currently, including the hedging cost as such?
See, we have ECB of $250 million. The overall cost including hedging cost comes around 8.56%.
8.95%?
8.56%, Bunty.
Okay, 8.56%.
Compared with the domestic of 9%.
Okay and lastly on this, after this liquidity issue has happened, post 20th September as such. So what are -- we are expecting how much cost of funds has increased for us? And how we are expecting for next 2 quarters, sir?
If you see our presentation in compared to the last quarter, last cost of -- our cost of borrowing was 8.08%, it has moved to only 8.09%. So the more or less the cost of borrowing is same, average cost of borrowing.
Yes, sir. But this sale has happened post September 20, so mostly the impact will be coming in the H2 FY '19 as compared to H1 FY '19. So what are our expectation? How much cost will increase?
It is very difficult to answer as the next quarter, then we will discuss and then we will tell you.
But this 8.08%, it's been given and I'm comparing with the first quarter only.
Okay sir, can you share that number, how much post this liquidity issue, so if you have to raise the CPs or the term bonds, how much impact, how much increase in cost in those?
It's difficult to tell because I have all a lot of repayments also, which is indeed a higher cost, which ranges on 9.5% to 10% also. So it gets very difficult to assess what would be the right average cost.
The next question is from the line of Punit Srivastava from Daiwa Capital.
My first question is on tax rate. If you see the tax rates have continued to be quite high, I mean, we understand that you get some advantage on the tax side lending long term and so effectively, tax rate should be lower, but it remains high, in fact, it's gone up higher Q-o-Q. Can you explain the reason for that? And also, the DTL amount was also quite high. If you can just throw some light on that?
See, we have lost -- we are taking DTA as well as DTL, both. So ultimately, the -- my average tax is around 32% to 33% only, and that is on the figure which is appearing in my headphones.
Okay, sir. But that is the gross tax rate, but you get an advantage. Do you get any advantage in long-term lending?
See we get some benefits of long-term lending, but see -- what is the impact of that? Long-term funding?
[indiscernible]
But it is a very minimum amount. Note that -- see that we have to pay only for the additional amount only, additional lending, which we have done in this quarter, only for that impact will be there. No.
Okay, okay. Sir, so on a normalized basis, how much should we can assume the tax to be this year?
That is around 26% to 27% because we have treated DTA and DTL, that is why it is coming to 32%.
Right sir. And this DTLs -- are these like technically noncash, right?
Yes. I said cash is 26% around, rest is noncash.
Right. And just one technical question, the spread has been almost flat but margins have improved. Is there any reason or anything to read into it?
See these are mathematical figures. See that there's a small variation only. It has moved from 3.26% to 3.33%. There is a spread of 2.49% to 2.50%. These are mathematical figures only. These are more or less the same.
The next question is from the Gaurav B. from FirstRand Bank.
Sir, what do you view as Stage II as on 38 (sic) [ 28 ] September?
See, Stage II definition as per industry is only if there is a default of more than 30 days. That is categorized as Stage II. So we have only INR 3,000 crores is in Stage II only.
And this does not include IL&FS assets?
Yes. IL&FS, they are there servicing centers, so that will be Stage I only.
Okay. So any provisioning you have done on IL&FS exposure? Nothing as of late?
No. It's not required, no?
Not required, no because...
It say is standard asset and, as I told you that in PRA, we have sufficient amount available.
Okay, sir. And I need one clarification. The reserves for the bad and doubtful debts you have, is it a part of capitalization?
It's part of capitalizations.
See that there was we haven't made a provisions capitalized by profit reduced, so it is not a part of network.
RBDD is a part of network, that's what if you're asking.
But do you account RBDD while calculating the capitalization ratios?
Yes, yes.
Yes, it's the network that is included and obviously, the capitalization ratios will include this.
Okay. Because if we take comfort of higher provisioning because of this reserve and if this is a part of capitalization and if we use this reserve for providing higher provisions going ahead, this will endanger your capitalization also going ahead.
See as per RBDD guidelines, they are Tier 1 and Tier 2. So whatever provisions may -- which we make it was in the category of Tier 2. And again, there's a cap of 1.25% of the maximum. So we are taking Tier 2 capital maximum of 1.25% of my provisionings of loan book.
So any incremental provisioning in this reserve is through P&L?
Yes.
Provisioning is through P&L. Yes, you are right.
The next question is from the line of M.B. Mahesh from Kotak Securities.
Just wanted to clarify on a couple of things. You indicated that GMR, Chhattisgarh, Jhabua Power, KSK Mahanadi, the buyers are still active and you're reaching the final stages of negotiation. When are you likely to close this? And for Jindal Thermal and Essar Mahan Ware and OTS has been accepted? When are likely to complete that as well?
GMR, Chhattisgarh, we have selected the H1 bidder. And the proposal has been sent to all the lenders for seeking approval of their boards. And similarly, Jhabua Power, we have already signed with one party for onetime settlement and INR 100 crores bank guarantee had been given by the party. So remaining amount is to be given within 3 months. And this Jhabua Power also, we are seeking approval of different boards. So they are at various stages. Similarly, in Amravati and Essar Mahan, OTS proposals have been received. Lenders have discussed and, again, there were certain issues in Amravati, but now all issues have been resolved. And now we will be doing the -- to still end for this. And similarly, in case of Essar Mahan, though we are not the lead, ICICI Bank is the lead. But I understand all issues are resolved, and they are in the process of finalizing.
So in all these cases the negotiations are largely over. There is no more further additional negotiation in these cases. However, there is an approval process for each of these institutions and banks. So that approval process is currently going on, and as soon as all approvals are in place, we should be able to obtain the documents and then take it forward further.
But you mentioned KSK Mahanadi as well, right, in the call?
KSK Mahanadi, there was a negotiation and finally, in the lenders community, that has not been accepted totally. So therefore, it is -- right now already filed for NCLT and it will have its logical end there.
Around 20, 21 lenders had agreed and remaining 5, 6 could not give their consent. That's why it could not be closed. So now it depends. Maybe we may go to the NCLT. Already this file is there.
Just one thing on GMR, Chhattisgarh as well as for, yes, let's say, in the case of Amravati or in any of these cases, do you require 100% approval from lenders or...
Yes, 100%.
You see, everyone will have to agree and sign the financial documents. So if anyone is not agreeing, it will not end or it will not conclude.
And in these cases that you've mentioned out here, borrowing for KSK Mahanadi, how confident are you that 100% of the lenders will approve in this case?
No, that's what we said. In case of KSK Mahanadi, since 100% consents have not been achieved. Our sense is that it is heading towards NCLT and perhaps it will get resolved under NCLT.
No. I'm saying for the rest of the cases, which is GMR, Jhabua Power, Essar....
In the rest of the cases, the difference is that the negotiation process is largely over. And so the consensus making within the lenders has almost been arrived, and therefore, now it's a process of taking approvals from each of the managements. So therefore, we are quite confident that, that approval process will end shortly and then we'll be able to end up with the financing agreement.
Sure. And one last question from my side. You said ORIX Corporation is likely to take over the Power assets of IL&FS, which includes even the thermal side as well?
No. We are not a lender in thermal. We are a lender in only 5 SPVs of wind. But there also they are inviting expression of vendors. They are very good parties I'm told.
And in any case, we are not directly connected to that because we have never lend to the holding company. We have lend to the SPV, and our security interest is entirely different. And therefore, whether ORIX takes additional stake or not, it will not impact our interests or the cash flows.
The next question is from the line of Abhishek Saraf from Deutsche Bank.
Sir, just on this Haldia project, which slipped this quarter. So you said that earlier, there were not getting any commission and getting approval for commissioning of 2 units. Now that they have got commissioning, so do you expect that probably, this can -- this slippages can reverse sometime in near future?
They are supposed to supply -- start supplying power to West Bengal Power Distribution Company, because they've got PPAs for 2 units only. So when they start supplying power, I think this should get brighter. I can say that.
By end of this financial year, they should be generating revenues and also starts submitting the date, as per the program. They got slightly delayed because of the coal issue. Because they could not procure enough coal for starting the furnace. Now that issue has been more or less sorted out, and they are going to start the generation.
Okay, okay. And sir on, I think, you mentioned INR 5,300 crores worth of state -- loan to state entities were reversed this quarter, right? Did I hear...
Yes.
And which ones were these, sir?
It's a Malwa project of 2x600-megawatt in Madhya Pradesh. Madhya Pradesh Powergen Co.
Okay, okay. Fair enough, sir. And one last thing on IL&FS. So in all our exposure analysis are secured, right? They are secured assets against the cash flows?
Yes. We have sufficient money in our TRA account. These are 5 SPVs and we don't have to do anything with the holding company.
The next question is from the line of [ Pranab Rajni ] from B&K Securities.
Just to get a quick update from your side. So since our share is increasing in the renewable sector, can you please tell what is the moratorium period for a project to start? And how long does it take to commence operations?
Renewable project, generally...
It generally takes about 6 to 9 months for completion of the project with implementation, and we give around 6 months to 1 year of moratorium, depending on the situation. And thereafter, the debt servicing, it will begin. And even if...
So supposedly, if it takes 1 year for operations to come in, so after how long do you expect it to generate the cash flows?
See after commissioning -- immediately after commissioning, the cash flows will start. The only thing is a moratorium is given so that a certain amount of disservicing capability is built up into the TRA. So we generally offer about 6 months of moratorium or, in certain cases, up to 1 year of moratorium. And -- thereafter, the repayment begins and anyway interest is serviced all along. Interest servicing -- on interest servicing, there is no moratorium.
[Operator Instructions] The next question is from the line of [ Bartov Johnson ] from NVS Brokerage.
I must say, first of all, the way you explained was excellent, it was really amazing. Sir, I just have a question regarding the 22 stressed projects. Can you just walk me through again on all these projects? Because I just got a couple of them and I had skipped a couple of them, while you are just going through the project.
Okay. Out of this 5 projects with our exposure of INR 8,254 crores are in advanced stage of resolution. These projects are GMR, Chhattisgarh, Jhabua Power, KSK Mahanadi, where discussions with H1 bidders are underway to close the deals. Indiabulls, Amravati and Essar Mahan, where onetime settlement offer submitted by existing management are under finalization. In RKM Powergen, Stage I and II, with our exposure of INR 5,155 crores, good news is that INR 550-megawatt PPA under pilot scheme is signed.
Of the government, right, of the new pilot scheme of the government?
Pilot scheme of PTC and Power Finance Corporation. Regarding the Indiabulls Nasik, we have an exposure of INR 3,000 crores, talks are with Mahan Jankush still underway, 9 projects with our exposure INR 8,100 crores are being resolved through NCLT.
Where, where? So which are INR 8,100 crores?
INR 8,100 crore projects.
So when you have in Nasik, Indiabulls were around INR 3,000 crores, then?
This 9...
It was...
9 projects with an exposure of INR 8,100 crores.
They're all in NCLT right now?
East Coast Energy, Ind-Barath Madras, Ind-Barath Utkal, Lanco Amarkantak, Shree Maheshwar, Konaseema Gas, Kvk Nilachal, Jal Power, Krishna Godavari and [ Stronefield ].
Okay, got it. Got it, sir. Okay, so how do you perceive the power going forward as in, you just said that you will be pushing more towards renewable energy. So any -- can you just walk us through something like what was the kind of demand on all the country you're seeing? And what kind of progress the country you're seeing put into the renewable energy?
Actually, if you see during the last 2, 3 months, demand of power, if you see in that Power exchange, rates have gone as high as INR 7 -- INR 18, during peak time. After completion of Saubhagya Scheme by December end, roughly 28,000 megawatts additional demand will be created in the system. Moreover, we have to be a little more realistic, elections are around the corner, so most of the states are trying to pump 24/7 power, even in rural areas. They require more power. That's why some of the developers came back to me and told me, sir, why did you help us to sign PPAs? We are making good money without signing PPA. INR 8 per unit, INR 9 per unit. So after, and moreover, because of pressure from climate change and environmentalist experts, some old plants like Badarpur has been closed for good now. Similarly, we have identified some subcritical plants in the country being run inefficiently by state gencos, they will also be closed. It's a question of time. So further new projects, new PPAs will come into the system. So there is no shortage of PPAs and demand is increasing. With the implementation of these selective skills that I told you, Soubhagya, IPDS, RAPDRP. Because system is being improved, more power is being pushed into the system, quality and reliability of power is better, so there are less number of interruptions. If your system is good, it can absorb more power, can supply more power to more people.
Correct, correct sir, correct. And if not missing any, can you even share NIMs margin would be something, which you try to maintain these current margins going forward, right, sir?
Yes, we -- if you see quarter-on-quarter, we are almost maintaining.
It was slight on 3.33 our own and 3.26 prior to this in Q1.
The next question is from the line of [ K.O. Rasher ] from Reliance Nippon Life Insurance.
I actually have a bookkeeping question regarding the accounting of derivatives that we are doing in the P&L. So is this entirely noncash in nature and how is it accounted for? Because I see it in the income side as well and in the expense side as well. So if you could throw some light on that?
As far as new accounting system, we have to carry out MTM on all that hedging transactions. So whatever hedging we have taken, we have to work out MTM. So that is the amount which is reflected on the income side. But side by side, on variation also, we have to show the expenditure. So they are the both sides. If you can see that income side, which is the MTM of hedging transactions and the expenditure side, which is a loss on the variation on the foreign exchange. Ultimately, you have to see the net increase, on that, because there is a requirement of the law, we have to show separately. But ultimately, the netting figure is important.
Okay, understood. So this would be basically noncash in nature, right?
Yes, this isn't cost [indiscernible] yes.
And the incremental costs that we are incurring due to the currency impact would be still incurred under the finance cost head?
Finance head cost...
Yes, definitely, it is finance cost. Incremental, sir.
Okay, okay. And my second question was regarding the reversal that you spoke about the Madhya Pradesh project. So that was under -- accounted under our Stage III assets?
No, that was under Stage I or II because these are the assets, which we have created -- we made a NPA 2 years back, to 2017. But after completion of the specific period as per RBI guidelines, earlier it was carrying a 5% of provisioning, no? So now that has been reversed after completion was specified there. Because we are -- they are maintaining both RBI norms as well as the Ind AS norms.
The next question is from the line of Abhishek Saraf from Deutsche Bank.
So just one small thing on the composition of disbursement. So if I see on Slide 13, the loan composition in terms of generation Transco and Distribution is more skewed toward generation at 70%, while distribution is 15%. But on an incremental basis, if I see sir, the distribution for this quarter was around 43% of the overall disbursement. And while Genco was 32% and Transco was 14%. So is there anything we are trying to consciously, means, alter the mix? If it is, then why is it so? Or is it happening right now just because depending on the demand right now?
See generation side, our main disbursements on the renewable, and you know the size of the renewables, no? So that what we were having earlier 60%, 70% on generation side, that figure will not be there nowadays. We have been disbursing on distribution side and substantially what have been disbursed on distribution that is around 43%.
Because state, actually, because of these flagship schemes, states has to -- have to upgrade and strengthen their subtransmission and distribution system to absorb power in the rural areas as well as in the urban areas. If they have to provide 24x7 Power for all. So apart from getting, taking money under these flagship schemes, they are also taking loans to strengthen their system. That's why our share in transmit as well as distribution is increasing. And larger generation project, coal-based projects are not being conceived now, where large chunk of money used to go. These renewable projects are smaller in size and they don't have so much of capital expenditures according to the size. Because projects should be, if you have to compare them with thermal project, size has to be too high, too massive, which is not there.
The next question is from the Amit Rane from Quantum Securities.
I just want to know how many accounts are likely to be referred to NCLT, if that stay goes through the Supreme Court.
Nine projects are already are with NCLT and 6 projects are likely to go to NCLT after this Supreme Court order, if we are not able to resolve them outside NCLT. Because different boards of the lenders are trying to resolve and take a view. If we fail to resolve them, then we will go to NCLT.
And how much is the amount for these 6 projects?
Roughly INR 15,500 crores.
And our provision coverage on that?
Provision, I told you, almost 52% around...
55%
55% we've already done in most of the cases.
NCLT cases.
And in NCLT cases, it is more.
Right. And sir, last question on the provisions that we have over and above the RBI requirement, some [ INR 14 billion]. Can you throw some more light when are we likely to hear from RBI?
We have already requested RBI, but on as matter of prudence, we have taken whichever is higher. So we have provided on higher side. In case we get any clarification, we will revert that amount and the amount is around INR 1,400 crores.
That was the last question of the session. Due to time constraint, we'll hand it over back to Ms. Shweta Daptardar for closing comments.
On behalf of Prabhudas Lilladher, we thank the management of Power Finance Corporation. Thank you all.
Thank you very much, ma'am. Thank you so much.
Thank you. On behalf of Prabhudas Lilladher Pvt. Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.