Power Finance Corporation Ltd
NSE:PFC
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Power Finance Corporation Ltd
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Good day, ladies and gentlemen, and a very warm welcome to the Power Finance Corporation's Q3 FY '21 Post Results Conference Call, hosted by Prabhudas Lilladher Pvt Ltd. [Operator Instructions]I now hand the conference over to Mr. Pritesh Bumb from Prabhudas Lilladher Pvt Ltd. Thank you, and over to you, Pritesh.
Thanks, Ali. Good afternoon, everyone. We would like to welcome the management of Power Finance Corporation, represented by Mr. R.S. Dhillon, Chairman and Managing Director. He will be accompanied by the 2 EVs. We will have a brief remarks on the results by the CMD, and then move on to the question-and-answer session. Thank you, and over to you sir.
Good evening, everyone. I welcome you all to this conference call. Today, we have declared our results for third quarter and 9 months ending December 2020. And we have arranged this call to share with you, PFC's performance for the period.I am glad that now the COVID situation is gradually receding, and the economy is reverting back to its pre-COVID levels. On this note, I would like to start to -- by sharing with you the power sector outlook. On the electricity generation front, I would like to highlight that after the COVID pandemic, the electricity generation has witnessed a growth trajectory consecutively for the last 5 months, and now is on the revival path.Also, as our economic activity is increasing after COVID lockdown, the power demand is improving. In December, we had touched an all-time high of 189.6 gigawatt. The negative impact of the pandemic on power demand is slowly seeing a reversing trend.Further, considering improved microeconomic backdrop and sustained generation growth, Moody's has upgraded the outlook for Indian power sector to stable from negative. In view of the improving economic indicators, Moody envisaged a potential for improvement in power demand and a more stable picture for the sector. Also, the recent budget announced by Honorable Finance Minister brings series of supportive measures for the power sector.The government has announced a reform-based, results-oriented scheme for power distribution sector with an envisaged outlay of around INR 3 trillion over the 5 years. I believe that it would help in strengthening the distribution space and benefits the entire power sector value chain.Further, in sync with the government's objective for clean energy, the government has announced its plan to set up large solar power capacity alongside rail tracks and on land owned by railways. I feel that these measures would provide new lending avenues to PFC.On the stressed asset front, too, PFC has -- government has proposed setting up of ARC and AMC to take over the existing stressed debt and manage it through an alternative investment fund. Further, government has also proposed for strengthening the NCLT framework. I feel that this would help in taking stress off from the lender's balance sheet and also enable faster resolution of stressed assets.I believe that revival in the power generation and power demand and various reform measures for the power sector are positive catalysts for not only pushing the growth of the Indian economy but, consequently, the power sector also.Now I would like to share the key financial highlights for the quarter. So let me start by giving an update on PFC's stand-alone financial performance. I am happy to share that in quarter 3 '21, PFC had recorded highest ever quarterly profit of INR 2,336 crores, a jump of 39% from quarter 3 '20. For 9 months, also the profit saw 45% increase compared to the previous 9 months FY '20.Now sharing some of the key financial indicators. For quarter 3 '21, the yield is at 10.68%. If we look at previous quarters, the yield has continued to be in stable range. Also, we have been consistently focusing on reducing our cost of funds. This quarter also, the cost of funds is at 7.48%, a reduction of 27 basis points from quarter 3 '20. Driven by efficiencies in yield and cost of funds, the spread for the quarter 3 2020 is at 3.2% and NIM is at 3.63%.Also, I would like to touch upon PFC's capital levels. In quarter 3 2021, PFC's CRAR increased by 89 basis points from Q3 '20 to 20.21%. Also PFC's net worth reached at INR 52,015 crores, crossing the INR 50,000 crores mark for the first time.Talking about the capital levels, I'm sure all of you would be waiting for the dividend announcement. On this, as you may all know, PFC at various forums -- RBI at various forums has been stressing the need for maintaining capital -- adequate capital buffers for NBFCs. This ideology is also reflecting in the draft guidelines for dividend introduced by RBI and the discussion paper released by RBI on revised regulatory framework for NBFCs.In line with this, PFC is now focusing on capital acquisition and shoring up its capital level. In the above backdrop, PFC is in discussion with the government regarding dividend declaration. Further, we are also waiting for clarity on the implementation of the draft guidelines on dividend issued by RBI for NBFCs.Now coming to consolidated financial performance. I would like to inform that consolidated PAT for Q3 '21 is at INR 3,963 crores, an increase of 17% from Q3 '20. Consolidated loan asset book registered a 13% growth as on 31st December 2020, as compared to previous period. Due to resolution of stressed assets in both PFC and REC, consolidated net NPA ratio is declining quarter-on-quarter and is currently at 2.12%. Overall, I am glad that despite a challenging environment, PFC Group has delivered remarkable financial performance.Coming to the update with regard to asset quality. Firstly, as we have indicated in previous call, I am happy to inform that R.K.M Powergen loan of INR 5,105 crores, in which PFC is the lead, has been successfully resolved outside NCLT and has been moved out of stage 3, that is nonperforming category. Sufficient provisioning was available against the project, and we do not see any major impact on our P&L. Further, as a prudent measure, 10% provisioning continues to be maintained against the loan asset.With this, our gross NPA levels have drastically come down to 5.85% during the quarter compared to 8.34% in 9 months 2020. Further, our net NPA ratio is also at 3 point -- is at 2.30% compared to 3.94% in 9 months 2020. This is in line with the rate indicated earlier.Post the R.K.M resolution, a total of 24 projects are under stress. Out of these, currently 14 projects of INR 16,185 crores are being resolved through NCLT and remaining 7 projects of INR 5,161 crores are being resolved outside NCLT. Keeping in view the general slowdown in resolution of projects, particularly those in NCLT, provisioning against stage 3 assets has been enhanced from 53% in 9 months '20 to 61%.Further, we would like to highlight that for one of our stage 1 borrowers, that is TANGEDCO, the rating has shifted from Category B to Category C. I would like to inform that PFC has adopted the rating issued by Ministry of Power, which is being done by a recruited external agency. Now owing to this change in rating, additional provisioning of around INR 600 crores has been created against the borrowers. This is in line with the IndAS guidelines for provisioning on ECL model. This has led to major increase in provisioning levels.This has also -- this also reflects the robustness of our ECL model in capturing the impacts of such events on the provisioning levels. I feel that with adequate provisioning buffer, our balance sheet is well protected to take care of future resolutions in the stressed assets.Moving on to PFC borrowing portfolio. PFC has always been emphasizing on diversifying its borrowing market. In line with this objective, I am glad to share with you that in January 2021, PFC successfully raised funding from retail investors through public issue of taxable bonds. PFC saw a phenomenal response from the investors with issue being oversubscribed by 9x over the base size of INR 500 crores. PFC mobilized INR 4,429 crores under the issue for a tenor ranging from 3 to 15 years at a competitive cost ranging from 4.40% to 7.15%.Also, this marked the many first for PFC. This was the first such issuance by a power sector PSU as well as the first public sector issue of taxable bonds by a PSU in the last decade. Also, this was the first such successful floating rate tranche under the issue by a CPSU, wherein PFC was able to raise INR 1,216 crores out of the total funds mobilized. I feel that this has opened up a new low-cost borrowing avenue for PFC, and we plan to consider such issuance in the future also if the market is favorable.Continuing with our objective of diversifying of borrowings, I would like to highlight that PFC in January 2021 has successfully raised USD 500 million through USD-denominated bonds under Reg S route with a fixed coupon of 3.35% and a maturity of more than 10 years. This issue was -- this issue with a base size of USD 300 million received an oversubscription of 5.1x. Such phenomenal response during this pandemic reflects confidence of global investors in PFC business as well as its credit portfolio and the growth story of PFC power sector.Further, as you may all recall that due to sudden depreciation of USD to INR rate, PFC's financial year '19/'20 profits were adversely impacted. Now this financial year, the USD to INR is moving in a favorable range, leading to positive impact on PFC's profit. However, considering the risk arising out of increasing foreign currency borrowing portfolio, we are continuing with our efforts on protecting our balance sheet from foreign currency fluctuations.According to quarter 3 '21, PFC's hedging ratio for exchange risk for portfolio with residual maturity of up to 5 years stands at 74%. Therefore, I conclude that we would like to share a status update on the Atmanirbhar DISCOM scheme.Under the Atmanirbhar DISCOM scheme, so far PFC has sanctioned INR 65,793 crores under the scheme and has disbursed INR 21,870 crores towards tranche 1. For PFC and its subsidiary, REC, combined together, sanctions stands at INR 1,31,726 crores and disbursement stands at around INR 46,074 crores. The pace of disbursement has slowed down momentarily, but we are expecting that it will pick up as disbursement for tranche 2 are in pipeline.To conclude, I would like to say that this quarter, all -- this quarter has all been about delivering on the past promises, and I feel that despite a tough operating environment, PFC has been successful in holding its promises and delivering a robust performance.So now we are open to questions.
[Operator Instructions] First question is from the line of Kochar Gaurav (sic) [ Gaurav Kochar ] from Mirae Asset.
I have a few questions. Firstly, the disbursement saw a sharp decline this quarter, both on the generation as well as on the distribution front. On the distribution front, you explained that we have sanctioned, and probably, will do it in second tranche in coming quarters. But on the generation side, also, the disbursement slowed down. Any specific reason for this, sir?
Because of COVID, the implementations of projects has been delayed, and the site mobilization and mobilization with respect to the material has been slow. So that's why the project disbursement have come down to around 50% to 60% of the last year levels.
Okay. Okay. But this -- on the generation side in 2Q, we saw very good traction. So between 2Q and 3Q, what changed, sir?
Sir, disbursement, earlier, tranche 1 was there, which we had made earlier. And under moratorium, moratorium we had also given for 6 months. So that, we sanctioned the equivalent amount of the loan. So that is coming as the sanctions.
Okay. So -- yes.
Sanction and disbursement.
Yes. About the disbursements under the distribution category, so under Q2, we have started disbursing the loans under the Atmanirbhar scheme. And most of the loans have been disbursed in the Q2, whereas comparatively, there was a lesser disbursement under the Q3.
Right, ma'am. And with respect to generation, in 2Q, the growth was pretty -- the disbursement was around INR 10,000 crores, which slowed down to INR 1,700 crores in this particular quarter. So is it mainly, as sir also mentioned regarding the implementation of project getting delayed, was that the reason?
This is one of the reason. And the other is under Q2 till 31st of August, we have booked the loans under the moratorium scheme. So accordingly, the same has been shown under the disbursements.
Okay. Okay. Sure. And on provisions, we completed around INR 1,300-odd crore provision in this quarter. All of this is used as additional PCR? Or we have made some standard asset provisioning over and above what we consider in our PCR?
See, it is basically based on ECR only. But as sir has already told that one of the stage 1 assets, that is, TANGEDCO, has been downgraded from Category B to Category C. So more than INR 600 crores provisioning was on account of that only.
Okay. But all of this is part of the PCR, 61% that we calculate?
Right, right. 61% is only for the NPA category, stage 3. But this particular asset is against the stage 1 category. TANGEDCO is still under stage 1 because we have been receiving all the dues in a timely manner. It is only that in the annual rating, which is being done by the Government of India Ministry of Power. The category of the state has been -- TANGEDCO has been downgraded from Category B to Category C. That is why, based on the expected credit loss metrics, it has been -- additional provisioning has been done.
Sure. Sure. So this INR 600 crores do not form part of the NPA provisioning? This is expected.
Right. This is set.
All right. Got it. And ma'am, regarding the 17 projects under NCLT and 7 outside NCLT, with respect to resolution maybe in 4Q or next 2 quarters, anything that you see getting resolved or is closer to resolution in the next quarter or next 2 quarters?
So we have 2 of these projects under NCLT, Jhabua Power and South East U.P. So going forward, we think that during the next 6 to 9 months, these should be resolved.
Okay. Okay. Sure. And my last question was on yield. When is the next revision on yield that would be taken in our portfolio? And how much is it going to be in terms of the large division and this division? What is the delta that we are seeing on our yields?
See, yield till now has been constant in the range of 10.66% to 10.68%. But with a reduction in the cost of borrowing, we are working on the same. And maybe going forward, we would pass on some benefit to the -- our customers.
We are working on that, and this, we are going to do in this quarter.
Okay. The revision will happen in this quarter, is it?
Right.
The next question is from the line of Kunal Shah from ICICI Securities.
Again, to touch upon on the provisioning side. So if we look at the provisioning outstanding from September to December, so September, it was INR 16,700 crores, and now it is down to INR 16,100-odd crores. So definitely, I think this R.K.M is moving out. But then it seems beyond the INR 600-odd crores, there is extra provisioning also being done. So is it like entirely specific? Or we have increased some standard assets provisioning as well? Because that is also up from INR 1,800 crores to INR 3,100 crores. So what will be the -- exactly the split of the entire provisioning net of the release from R.K.M?
See, as you know, that we have done additional provisioning of around INR 1,300 crores during this quarter, right? And during this quarter only, on account of R.K.M, there has been reversal of around INR 2,000 crores and has been taken out from the provisioning. So that is why you are seeing as the net figure from INR 16,275 crores to INR 16,088 crores.
Okay. So maybe on a net basis, that's coming down by INR 700-odd crores?
Right, right, right. And there might be certain minor additional provisionings on the other accounts, but this is the major one.
Okay. And would it be fair to say that INR 600 crores is towards that one account and the balance INR 700 crores, which is there, that is, again, more of a specific? Or that is also towards stage 1 and stage 2? Because we are seeing the increasingly provisioning towards stage 1 and stage 2. So is it like a standard, which has created within this INR 1,300 crores?
First, our -- the expected credit loss module, so we have been doing provisioning project specific. So there is no general buffer, what -- no such type of buffer is there. So it's all against specific assets, we are making provisions.
Okay. Okay. But there was nothing said it would be spreaded across the project, and there were no, say, 1 or 2 projects on which that additional provisioning would have been created?
Right, right, right. This was the major one, which I have -- we have already informed you.
Okay. Sure. And again, in terms of touching upon the resolution part, so no doubt there were like few projects, which were in the advanced stage and you mentioned like Jhabua and South East U.P. will come through. But what is the expected time line? Because I think last time also we had highlighted that maybe many of them are still much more indeed advanced stage, okay? So be it in terms of KSK and all. So how should we look at most of these projects getting it? So last time, what we highlighted in terms of the Lanco, KSK and all, so now what is the progress of that in some of these projects? And even like IPC or Haldia, yes?
So as you are aware, because of COVID, this NCLT resolution and outside the NCLT resolution has been slowed down. So in -- you were asking about -- in Bharat Utkal that -- with that regard, there was a bid by JSW, and that has been withdrawn and -- because of some material change, and the next hearing is on 25th of February. And what other projects you were indicating?
Lanco, KSK.
Lanco also, there were 2 bids which we had received. And the bids are not to our recovery, which we were anticipating, and we are thinking that what to do next. So CoC meeting will be held. And based on that, we will be deciding.And KSK also, it is already under NCLT. And there were 2 other subsidiaries of KSK, which were to be merged with the resolution of this project. So that is not being done. So the joint resolution -- we thought that we'll go ahead with the joint resolution along with the other 2 subsidiaries also.
So does that mean that you highlighted like Jhabua and South East would happen over the next 6, 9 months, then should we assume that this might take some more time for getting resolved? Or maybe this should also -- we can expect it over the next couple of quarters or 2, 3 quarters?
So that will depend on the NCLT process. That is not -- we cannot put a time line on resolving the projects under NCLT.
[Operator Instructions] The next question is from the line of Punit Srivastava from Daiwa Capital Markets.
Sir, so the first question was again on the provisioning side. Of course, you explained the INR 6 billion going to one project. But I just needed to confirm, was there any rise in provisions for the state loans this quarter in terms of your ECL provisioning -- general provisioning?
See, this is standard for what we are seeing is the state sector loan only. And this is the only loan where the major provisioning is happening. Otherwise, there might be smaller, smaller change in the other projects because we have not many state sector projects. So this is the major one, which we have already informed you.
Okay. So in terms of -- there was no increase in terms of regulatory provisioning, right, during the quarter?
No.
Okay. And one question on the generation loans. They have declined. Of course, there was a slowdown in disbursements during the quarter. But nevertheless, the entire loan book has declined during the quarter, if you can just throw some light on that?
So this -- two of our borrowers have prepaid us. And that was because these were the generation projects, and they got the money under the Atmanirbhar program, and they had cash flow, so they prepaid us.
Was that in the state sector or in the private?
No, this was in the state sector. Majorly, it was in the state sector. One CPSU was there.
And the other also in the state sector.
And -- in the state sector only.
State PSU.
Okay. Got it. Sir, just one last question. On the margin side, of course, it's been holding up strong, and spreads are also strong. But historically, if we see the margins, the spread has gone down even to a low of 2% earlier. So in that context, sir, what kind of risk you are seeing to the spreads and margin going ahead? Leaving aside the...
We are diversifying our borrowing portfolio so that we can raise money at a lower cost, and whichever side, we see that our cost of borrowing is going to reduce from the -- we will see whether from the bond side, from the retail bond side. So we'll decide going forward and see how we can reduce our cost of borrowing and maintain our spreads.
And in the longer time, we would like to rationalize our spread, and we would try to pass on the benefit of the lower cost of borrowings to our customers.
So sir, can we say, sir, in that context, with -- do you expect the spreads to come down from these levels?
Yes. You know that our yield has been remaining constant for quite a long time, and whereas our cost of borrowing is reducing continuously. So in the current regime..
We will -- we are thinking of going ahead, and we will see what benefit we can pass on to our borrowers.
The next question is from the line of Anand Laddha from HDFC Mutual Fund.
Sir, we have been making additional provision on the stage 3 asset. So now under NCLT, we have a coverage of 65%. Do you believe that this is enough provisioning? And incrementally, we don't need any more provisioning? Or do you still believe that if there is a delay, you will have to keep on making higher provisioning on the NCLT exposure because of the ECL increase?
So we -- in the -- if you see in the past, we are recovering around 50% to 60% of our debt, whatever resolutions has taken place. So this provisioning should suffice in the coming times also.
And as per our provisioning model that we have to work out the expected credit loss on each results quarterly basis. So in case of any major development, be it positive, be it negative, we will review the expected credit loss of the specific project.
And in the current quarter because we have provided INR 600 crores on TANGEDCO, on what condition or what could be the requirement for us so that we can reverse this provision? Or this will continue to remain as a standard asset provisioning?
So this was based on the rating of TANGEDCO. So going forward, if their financial condition improves, automatically the -- this rating will improve, and this will get reversed.
Okay. Sir, this quarter, we have a fee income of [ INR 112 crores ]. Was there any one-off in this fee element?
See, that fee income includes that -- as sir has told you that there was a prepayment of certain loans, that income includes the prepayment charges for the fee.
And if you can quantify, what's the quantum of that?
See, right now, we don't have the figures upfront.
We will share that with you.
Okay. Also, sir, in the P&L, there has been a mark-to-market loss on fair value changes in -- this quarter, INR 76 crores. And in 9 months, it's almost like INR 500 crores. So this mark-to-market loss on -- or a fair value change, this -- on what part of the investment book, we are taking this?
Pardon, can you repeat?
We have a mark-to-market loss or we call a fair value change this quarter of INR 76 crores. And in the 9 months, this is almost like a INR 500 crores per fair value change. So on which part of the investment book, we are taking this fair value change?
See, this is on the -- mark-to-market is on the basically hedged loans.
The next question is from the line of [ Subrat Dwivedi ] from SBI Life.
So this is on TANGEDCO. It is still paying on time, right? So in terms of DPD, it would be on time. There is not a single day of delay for TANGEDCO, right?
Yes.
Yes. We have been getting the payments on time.
Okay. So it's just that your internal rating, there was a downgrade, which is why the provisions have increased?
Right.
So in ECL model, we have this probability of default and loss on probability -- loss on default. So for rating, if it is downgraded, then the probability of default decreases -- increases. So with that respect, that provisioning has been increased.
Yes, this is a standard thing, and the probability of default has been linked to the rating of the company.
Understood. Understood. And this is based on past financials, ECL model?
Yes, yes, it's based on the ECL model.
No. I mean ECL model is completely based on past financials?
See...
It's mostly based on the past performance. But going forward, also, we'll see that what is the general probability with respect to default happening.
So it also takes care also -- since it has been downgraded, what would be the future probability because the rating -- linking to rating is one part. And the past performance, that is a different part. So taken together, this particular thing comes up.
Okay. And my last question on government sector loans. So here, is there any loan which is more than 0 DPD, less than 90 DPD? From 1 to 90 DPD, are there any loans?
So in the government sector, as you might know, that there has been certain delays in -- there are always a bit -- a little bit of overdues are there. But there has not been any single government sector project, which is under the stage 3.
Okay. No. So at one point of time, I think on the stage 2, it was quite a large amount, which was there. I think last quarter, you had disclosed that. And prior to that, in government sector, never there used to be any sort of delay. So has there been any movement in stage 2?
See, after the moratorium, a few of the states have delayed payment, but they all got cleared before it is 90 days overdue.
So in -- our borrowers in the state sector are mostly state Gencos, so they are not covered under the liquidity package. But however, whatever cash flow they have, what they used to pay to the central generators, that cash flow is available now for the state Gencos. And slowly, with moratorium getting over and the COVID conditions coming better, so the stage 2 assets in the state sector would come down as they will get payments from the DISCOM, and they will be able to pay us.
The next question is from the line of Shreepal Doshi from Equirus Securities.
Sir, my first question was, sir, with respect to the 2 resolutions that we are expecting in the next 6 to 9 months, that is, Jhabua Power and South East U.P. Transmission. Sir, what is our coverage for these 2 projects? Because, for Jhabua Power, I remember that -- you had said that NTPC is a successful bidder there. So what's the update, sir, there?
So NTPC was the H1. But during discussions, they had reduced their offer, and we are in discussions with them. And CoC is discussing the way forward for this. And for Jhabua, we have already made a provision of 56%.
And in South East, it's...
In South East also, the resolution is -- it is under NCLT, and we have extended the date for its submission, and the provisioning we have already made of 41%.
Okay. Okay. Sir, my second question was with respect to our exposure in TANGEDCO. So what would be our exposure there, like for which we created INR 600 crores of provisioning?
Around INR 30,000 crores.
Okay. INR 30,000 crores. Okay. And sir, on our stage 1 and 2, do we see any risk of any accounts slipping to NPA because of this COVID event?
So mostly, these are in stage 2 or state sector projects. And from the past, what we have seen is that some delay is there in payment, but ultimately, they make the payment, and we do not see any NPAs in this segment.
Okay. And sir, what is the additional provisioning that we have done over and above the NPA provisions that we have? Like -- I mean, what would be the COVID buffer sort of a number that we would have created?
See, the -- as we have already told that it is against a specific asset. We have not created any COVID buffer. It is the expected credit loss, we have worked out each project wise. And based on that, the provisioning has been done and -- under stage 1 and stage 2.
Okay. Okay. Got it. Got it. And ma'am, one last question was that what -- like have you restructured any of the accounts? Or do we have anything which we look at of -- to restructuring the new -- like which would require restructuring, any account?
See, in this quarter 3, we have restructured the R.K.M. The resolution has successfully been implemented. And we are in the process of restructuring another project. So that, we will become -- maybe we expect it to resolve it in this particular -- Q4 of this financial year.
One -- this project, India Power Haldia, that resolution has been approved by PFC and REC.
The next question is from the line of [ Pranav Tendulkar ] from [ Rare Enterprises ].
Sir, what was our exposure to R.K.M?
INR 5,015 crores.
Okay. So that is the whole exposure that we have?
Right.
Okay. So -- and what is our exposure to India Power Haldia?
INR 959 crores.
Okay, sir. Sir, in next year, including the projects that you mentioned, how many projects in your estimate could be resolved through various mechanisms like the NCLT and outside NCLT?
It will all depend on how the progress takes place. As we had indicated, there are 17 projects under NCLT resolution. And outside, it is 7 number of projects. And INR 16,000 crores is under NCLT and INR 5,000 crores outside NCLT.
One, we are expected to resolve in the next quarter. Out of which, one we are expecting to resolve in this Q4.
Correct. That you mentioned, that is the India Power?
[Foreign Language]
Correct. Sir, out of the standard private that is outstanding with us, that is, I think, INR 37,000 crores and -- INR 37,642 crores, are all projects operational?
No, no, no. That is not -- out of the outstanding loan, you are saying to the private sector?
Yes, yes. Outside -- outstanding standards. So INR 37,642 crores is standard, and I think INR 21,300 crores is stage 3. So I'm saying that standard INR 37,642 crores, how many of these are operational?
See, some of them are under implementation, some of them, but majority of them are operational.
Okay. So 70%, 80% would be operational, roughly?
Yes.
Okay, sir. Okay. So that is one. And my last question is, sir, so as you mentioned that you have sanctioned around the INR 65,793 crores for Atmanirbhar scheme for DISCOMs. And REC and you, total, have sanctioned INR 1,31,000 crores. So what is the time line when this gets disbursed and it results in the reduction of receivables on Gencos?
So this was in 2 tranches. So tranche 1, mostly, we have disbursed, and tranche 2 is based on the form-related conditions. They have to submit an action plan for reducing their AT&C losses. They have to submit an action plan with respect to reducing the gap -- ECS-ARR gap, they have to. So that has to be submitted by them.And other things are also there like installation of smart meters and payment of subsidy from the government and clearing of government dues. So all this is related. And only after they -- these conditions are fulfilled, we will be able to disburse in the tranche 2. So we see that within maybe next 6 months or so, we should be able to disburse a good amount in tranche 2 with respect to the utilities, which give us an action plan.
Right, right. So it is conditional, and it will be disbursed throughout next 1 year, probably?
The next 6 to 9 months.
Okay. Sir, also, these DISCOMs after COVID, has their core receivables improved? Like, are they now at least pricing it properly so not to create new receivables? Because this looks like a running problem. Every time government rescues, and then DISCOMs don't budge to their old ways. They will always revert back. So if you just consider core receivables that they are -- so are there any new receivables getting created even after the COVID demand has been regularized?
So if the receivables are put on this portal, PRAGATI portal, which is in the public domain. And there is -- there has been a slight increase in the number of receivables.
Correct. Correct.
But eventually, with the [indiscernible] and government dues getting cleared, so their receivables will eventually be reduced.
And this stage -- this tranche 2 disbursement will take place, and this will help in reducing these receivables.
Yes. So that was my exact point that even if you have disbursed around INR 46,000 crores, the receivables have not reduced at all -- in that PRAGATI portal itself, the receivables have not reduced at all in spite of you disbursing. So that was how my question coming from.
See, the tranche 1 what we have disbursed has reduced their payables to the Gencos and the IPP. So eventually, they'll be get -- it is against the subsidy dues and government electricity dues, which they are supposed to receive. So it will take time to dilute those receivables.
But you are correct in the sense that actually their collection efficiency has take -- some meeting in the COVID time. The collection, as reported by DISCOMs, has reduced...
So that has not reverted back to normalcy?
It will take some more time. That's the general indication, but they are working on it. And these installation of smart meters and other initiatives of Government of India is in that direction only so that to improve on the collection efficiency and their billing efficiency.
And that acceptance of that new technology, smart meters, et cetera, is good on DISCOM parts? Or is it like old only? Like, they're not worried about that much?
So the smart meters, it will be -- before you buy the electricity, you have to pay for it. So it is advancing their, means, payments. So that is obviously better for them.
No. Are they implementing with good force? Or the they're lacklustre in the implementation of the -- so for example...
They are implementing. And under the new scheme, the thrust will be on installing these smart prepaid meters.
The next question is from the line of [ Mohit Bhansali ] from [ Bonanza Portfolio Limited ].
Sir, in the initial -- in your initial remarks, you have mentioned that dividend, you are not able to pay because RBI draft guidelines and buffer and all, so just wanted to know, out of curiosity, that it's a hypothetical question that when you think that this deliberation and everything will be sorted out and you will be able to decide the dividends, how much can be paid?
So as you are aware that the adequacy buffer should be there -- adequate capital buffer should be there. And with this draft guidelines coming for dividend, so we are in discussion with the government. And we -- based on the discussions, we will see what and when we will be able to give this dividend.
Sir, that is what I wanted, sir, tentative time, some, you can give that when clarity will come?
This quarter, maybe end of this quarter.
The next question is from the line of Andrew Lundstrom from The WindAcre Partnership.
You discussed earlier passing on some benefits to your customers from the yield or the spread. And I wanted to ask if that is because of some competitive pressure that you expect or that you already see? Why would you pass that benefit on?
In November also, we had this thing.
So this is a normal thing. Based on our cost of borrowing, we decide the interest rates. And the benefit of the lower cost of borrowing would be normally passed on to our customers.
November [Foreign Language].
In November also, we had passed on this benefit.
Okay. Earlier, you also mentioned that you had received bids for the Lanco resolution that were low. Can you talk a little bit more about that? What is the amount of that loan? And why don't you think the bids were at the level that you were hoping?
So in Lanco, we had received 2 resolutions from 2 parties. And the bids were around INR 1 crore per megawatt. So what we think because 2 units here are operational, 2 units of 300 megawatt, and 2 units of 660 megawatts is under construction. So we think that the value offered is not what we were thinking of getting. So going forward, the lenders are seeing what options are available to us to recover a better -- get better value for the project. And one of the options is for -- we may decide to get into the -- or taking over the project.
Okay. Are there any negative developments like this on any other loans besides in Bharat Utkal?
Any other loans with this Genco options.
So as we had also indicated, if we do not get a good value for Jhabua also, we can see what will be the way forward because that is also an operational asset, which is running at 55% PLF.
The next question is from the line of [ Nikhil Niyati ] from [indiscernible].
Sir, can you share exactly what happened in R.K.M Powergen? And what is the restructuring it has gone through?
So in R.K.M, we have done a restructuring, and 60% we have recovered in the project.
Sir, so I -- we just wanted to understand what exactly has happened in the restructuring? I mean who -- which party is going to run the project now? How -- what do you mean when you say you have recovered, just to make money and come -- the project has been bought out or what has happened?
It is with the existing management -- yes, existing promoters.
And our money has been repaid?
No, it has not been repaid.
The loan has been restructured with the existing promoters only.
So when you say resolved, it's basically just you have reset an arrangement with an existing promoter wherein you have given him, say, another modified cash flow schedule according to each CSP to repay the loan? And obviously...
This depends on the sustainable and an unsustainable debt.
And what is the -- I mean, what is the current -- this is around 1,300 gigawatt plant, right?
No. It's 4 units of 360 megawatts.
So this is completely operational now?
So 3 units are working and 1 unit will be -- we'll start operating within a certain -- within in our time frame.
And we are the sole lender over here?
No, no, no. We are not the sole lender. There are a number of lenders in this.
So 3 units, which are operational, which will come to, let's say, around 1,000 megawatts, over 1,080 megawatts. So over there, how many -- how much total debt is there? And I mean, now how much debt has to be serviced?So our debt will -- when you say 60% recovered, our debt is INR 3,000 crores which is there on these 3 units. There will be some other debt, which will also be there of the other lenders. So what is the total debt, which should be serviced by the 3 units?
Overall, the debt will be more than INR 9,000 crores on the project.
And so do we pursue that these 3 will be able to recover that much of capital that will be servicing this INR 9,000 crores of debt?
So INR 9,000 crores, as we had indicated, that recovery is 60%. And going forward, we think that this will be based on the restructuring and the rating sustainable debt and the project getting RP4 rating. So obviously, this will be -- they will be able to repay to us. That's why we have...
Because if you say 60% of INR 9,000 crores, then also it will mean around INR 6 crores per megawatt needs to be repaid just on the debt front.
The advantage in this project [Technical Difficulty]
Nikhil, just hold on, it seems the line for the management got disconnected. Participants you are requested to stay connected while we reconnect the management. We have the lines of the management reconnected. Nikhil, you may want to repeat your question?
Yes. So I was just on -- firstly on this, R.K.M., we are just wanting to understand that if you say 60% of the debt of total INR 9,000 crores, then, too, it will mean that from 1,080 megawatts, INR 5,400 crores of debt will have to be serviced. So yes, I think the management was highlighting some features related to the project, which would help this.
So based on the resolution plan, the sustainable debt was INR 5,600 crores. You are correct with respect to that. So we think that this -- at least this debt should be stable.
This being a pithead thing, the variable cost is very low. And it has long-term PPA with UP and Telangana. And in Atmanirbhar, they have got also not -- some respite. So this is exactly what is our resolution plan is based on actual performance and PPAs, which we have.
Okay. So the PPAs are there for almost 100% of the quantity?
Yes.
Okay. If you can just highlight the top 5 projects of the outstanding loans to private sector, which is in -- under this INR 16,185 crores NCLT? Top 5 projects, if you can just highlight?
Largest would be KSK.
You mean KSK Mahanadi, right? And that would be what amount, roughly around INR 3,000-odd crores?
INR 3,300 crores for KSK; then Lanco Amarkantak, INR 2,376 crores; South East U.P. is INR 2,263 crores; and SR Power, INR 1,345 crores; and in Bharat Utkal, INR 1,368 crores. These are the top 5.
Okay. And as we understand, I think there is resolution talks ongoing for the whole Lanco Group, bunch of loans, which you mentioned, that INR 1 crore per megawatt bid that you already received. And will you get other loans also apart from just the loans from the Lanco Group.
No. Lanco Group, this exposure only we have.
Yes. Lanco Group resolution is a different resolution process. This is a project-specific resolution process, which we are running through NCLT. This is for Lanco Amarkantak Power specific. Lanco Infra is another resolution which is going on, where we are not a lender.
Understood. Sir, out of the 17 projects of INR 16,185 crores, how much would be already commissioned and how much would be undercommissioned?
Jhabua is commissioned. KSK is, again, a partially commissioned project. Again, Lanco is up -- 2 units are commissioned.
SR Power is commissioned. South East is partially commissioned, and...
So these are the major projects.
Okay. So basically, we can say that [Foreign Language] it is reasonable to assume that at least INR 3 crores to INR 4 crores per megawatt one should be able to expect with our PPAs in place?
That is our expectation. But as we are indicating, we are not getting this value.
Okay. And we can -- what we are seeing in the last 15 months is that your disbursements to the generation space, especially in the private sector, disbursements have slowed down a lot. So can we assume that going ahead, we'll be very, very selective on the private sector, and our focus will be in looking at more of the public sector side? Because our track record on the private sector is very challenged. It's pretty -- I mean it has been probably because of the sector slowdown and all, but there has been a very large NPA over there.
No. On the contrary, our private sector exposure is actually increasing, if you look at renewable portfolio. Renewable portfolio is where the private sector investment is coming today and looking at a large number of refinancing proposals and also greenfield proposals. And in generation -- coal-based generation, obviously, there are very few projects happening. So there is no opportunity also.
And we are picking up good promoters for these renewable projects. We have one of our major borrowers is Azure, then Ostro, Adani, ACME. So these are -- they have a very good experience in implementing renewable projects.
And finally, sir, what would be the approximate yield that you would be getting in this private sector renewable projects?
So in renewables, we have -- we give thrust to renewable projects, and the interest rates are varying from 10% -- 9.9% to -- up to 11% also.
Due to time constraints, that was the last question. I now hand the conference over to the management for their closing comments.
Thank you very much for the interaction, and as you have seen, we have given good results and the highest quarterly profit, which we have given this quarter. So the results have been good. And I hope the market also responds according to that.
Thank you very much. Ladies and gentlemen, on behalf of Prabhudas Lilladher, that concludes this conference call for today. Thank you for joining us, and you may now disconnect your lines.