Power Finance Corporation Ltd
NSE:PFC
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
314.95
570.6
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Power Finance Corporation Ltd
You don't have any saved screeners yet
Good day, ladies and gentlemen, and a very warm welcome to the conference call of Power Finance Corporation Limited to discuss the financial year FY '18 and Q4 FY '18 earnings, hosted by Edelweiss Securities Ltd.[Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Kunal Shah from Edelweiss Securities. Thank you. And over to you, sir.
Thank you, Ali. And good afternoon, everyone. This is Kunal Shah from Edelweiss. Today, we have with us Mr. Rajeev Sharma, Chairman and Managing Director; Mr. N.B. Gupta, Director, Finance; Mr. D. Ravi, Director, Commercial; and Mr. C. Gangopadhyay, Director, Projects, from Power Finance Corporation to disclose their financial year FY '18 results.Over to you, sir.
Thank you very much, Kunal. Good afternoon, everyone. I welcome you all to this conference call. I called this conference call to share with you PFC's FY '17/'18 performance and PFC's asset quality in the context of new RBI circular on 12 February 2018.Firstly, I will share with you highlights on PFC's performance.On business growth front, we have shown robust loan growth of 14% in FY '17/'18. And loan assets grew from INR 2,45,500 crores to INR 2,79,000 crores. The strong loan growth was due to high disbursement of INR 64,400 crores in FY '17/'18. The strong disbursements in FY '17/'18 have come from 100% jump in loan refinancing of INR 13,750 crores compared to INR 6,900 crores last year. This will be impetus to our commission loan asset portfolio. Further, we saw 260% jump in renewable business of INR 9,000 crores compared to INR 2,500 crores last year.In my earlier conference calls, I have indicated that we were looking to diversify our borrowing portfolio. Accordingly, we raised USD 800 million through syndicated loans during December '17 to March '18, in addition to USD 400 million raised through green bonds in December 2017; raised FCNR (B) loans of USD 460 million during December 2017 to March 2018; raised INR 5,000 crores through a structured deal with LICS at very competetive rate, which was well below triple-A benchmark rate; refinanced existing external commercial borrowings of USD 450 million in March 2018, reducing the effective cost of interest to PFC. Further, refinancing of another existing ECB of USD 250 million is at final stages, and reduced interest rates of interest will be effective [indiscernible] 2018. Repricing of existing ECB of JPY 43,668 million also being explored. We continue to tap 54 EC bonds on a regular basis for further reduction in cost, which is being issued at coupon of 5.75% for a period of 5 years.Based on our efforts to diversify our borrowings and cost-reduction measures, our average cost of funds reduced by 23 basis points from 8.41% to 8.18%, but capital adequacy ratio is comfortable at 20% against the RBI requirement of 15%. On profitability front, our profit in FY '17/'18 has shown a growth of 175% with profit at INR 5,855 crores, as against INR 2,126 crores profits of last year. Our spread for the year is 2.77%. We saw a fall in spread due to competitive pressures, and also due to our efforts to tap more commissioned assets, which entails lower spreads. However, we expect to maintain profitability through increased volume of business. The profit for FY '17/'18 got positively impacted due to provision reversals on upgradation of assets, which is in line with the guidance we've shared with you in our earlier conference calls. However, on the other hand, due to additional provisioning on account of applying RBI circular dated 12 February 2018 as a measure of prudence, though it was not applicable to us, our profit got impacted adversely. The adverse impact was due to additional provisioning and income reversal. Based on all these and other normal provisions made, our profit stood at INR 5,855 crores.Let me explain why we have applied RBI circular dated 12 February 2018 though it is not applicable to NBFCs like PFC. We, being a consortium lender to banks, do most of what -- stressed assets. We align with our consortium lenders and applied RBI circular of 12 February 2018, as a result of which additional NPAs were declared and related provisioning was made in Q4. Hence, we have seen it -- seen a dip in Q4 profit. By applying RBI circular, additional 6 NPAs were declared in Q4 which amounts to about INR 12,000 crores. With all this NPA ratios for the year extended, gross NPA with RBI circular of 12 February 2018, 9.57%; and without applying 12 February RBI circular, 5.28%, which is an improvement from 12.5% of the last year. Net NPAs with RBI circular of 12 February 2018, 7.39%; and without applying 12 February 2018 RBI circular, 3.52%, which improved from 10.32% last year. With RBI circular, our net NPAs increased by 3.87%. Otherwise, our actual net NPA is only 3.52% without RBI circular of 12 February 2018, out of which the 1.60% belongs to government sector and balance 1.92% belongs to private sector.Now let me explain our loan asset book. We have a total loan asset portfolio of INR 2,79,000 crores, out of which government sector loans are INR 2,28,000 crores. That is 82%. Private sector loans are INR 51,000 crores. That is 18%. Regarding government loan book of INR 2,28,000 crores, government sector borrowers are submitting dues regularly. Further, we are not envisaging any stress in respect of government sector borrowers. Government NPAs will be almost 0 by FY '18/'19, with reversal INR 4,600 crores. In case of private sector exposure of about INR 51,000 crores, INR 20,000 crores, private sector loans. That is 7% of loan book are regularly submitting their dues, and we see no stress. Therefore, 89% of what total loan asset book is not having any kind of stress. Balance private loan assets of INR 30,750 crores are stressed, for which provisions of INR 9,524 crores are already in place. That is 31% is provided for.Now I will share with you the revival measures and the rate for some of the major stressed assets, as we have already shared the revival measures for all the stressed assets in the presentations uploaded on our website.GVK Ratle, a hydro project where PFC has an exposure of INR 817 crores. Borrower has agreed for an onetime settlement and also started paying the installments. And currently, we are in the process of executing the settlement agreement.Dans Energy and Shiga Energy are hydro projects in Sikkim where PFC has a total exposure of INR 1,000 crores. PPAs for these projects have been signed with Haryana discom now, and shortly, they will commence power supply. Hence, these projects are likely to be out of stress.Southeast U.P. transmission projects, where PFC has an exposure of INR 2,476 crores. Talks are on with UPPTCL, UP Power Transmission Corporation Limited, for project takeover. We do not expect any significant haircut on this account. In RattanIndia Nashik project, PFC has an exposure of INR 3,000 crores. We are in talks with government of Maharashtra for project takeover. Four major thermal power projects are already under bidding for change of management, where PFC has an exposure of INR 6,300 crores. These projects are GMR Chhattisgarh, where 5 bidders already submitted nonbinding offers, binding offer documents to be released today; KSK Mahanadi, where 15 expression of interest was received. 13 got qualified, and RFP is to be issued for bidding. Essar Mahan, where expression of interest is to be floated in a week's time. Jhabua Power, where expression of interest was floated on 15 May. Today is the last date for submission. RKM Powergen thermal projects, with an exposure of INR 5,000 crores. Borrower submitted restructuring plan, which was discussed in lenders meet. We are likely to finalize the terms of restructuring by the end of June 2018.9 projects are being resolved under NCLT route, with exposure of 8,100 crores. These are under various stages of resolution.Now let me share with you the business going forward.We have signed MOUs with the state sector utilities for about 60,000 crores. Our focus will continue to be on refinancing business to add more commission projects to our asset base. Renewables business will also be our focus area. Our high disbursement level of INR 64,400 crores is reflection of the changes we've made to our policies, products and procedures. We will do -- we will continue to align for better market offerings to capture business. Our efforts to diversify pool of borrowings will also continue to reduce our cost of funds.Now we are open for questions. Thank you very much.
[Operator Instructions] The first question is from the line of Mahrukh Adajania from IDFC Securities.
So I just wanted to know or to check the status of Lalitpur power...
We are not a lender in Lalitpur.
Okay, okay, sir. So my other question is that you mentioned that, the government of Maharashtra, you're discussing for project takeover. Is there any precedence to the state government's taking over? Does that happen?
[indiscernible] but its committee has been constituted by Principal Secretary, Power of Maharashtra. In the meeting, I was also there. This [indiscernible] has met twice. They have already appointed SBICAP for asset valuation and NTPC for technical due diligence. And in the vicinity of Nashik project, there is one Eklahare project of Maharashtra Genco which is 37 years old; and they are going to phase out that project. And Nashik is in loan centers. So they wanted projects. Because if they can get the cheaper projects, then the new greenfield project is good for the state government.
Okay. And during the -- for all these projects, where there's bidding, or even in RattanIndia, where there is project takeover, what could be the rough haircut?
It's very difficult. I am not an astrologian, but definitely haircut will be -- it will vary from project to project, depends on the project status.
The next question is from the line of Amit Rane from Quantum Securities.
Sir, I have one question on revenue. How much is the interest reversal For FY '18 and Q4 FY '18 on a [indiscernible] basis?
Just wait. See that in Q4, for earlier period, we have reversed 265 crores. For the year...
We will come back to you for the year [indiscernible].
Sure, sir. And one more question. That is on yield on earning assets. It just gone down by 64 basis points, so going forward, where do we see this number from 10.96% currently?
We will be able to maintain that.
The next question is from the line of Sangam Iyer from Subhkam Ventures.
Sir, I just wanted to understand. You said that you have signed MOUs, 60,000 crores for refinancing and other things put together. So could you just show some light in terms of what's the kind of disbursement and loan book growth that you are looking at for the next financial year?
This year, we disbursed 64,400 crores, so definitely it will be more than that.
So because last time, in November, December, when -- in your call, we indicated 10% growth in loan book. We have done pretty well in terms of the loan book growth. So what's the -- I mean, should we see something similar to what we have done this year? Or I mean what I'm trying to understand is if are we now moving away from -- are we moving towards the growth trajectory coming back?
Loan growth will be in the range of 10% to 15%. Because this year, it is 14%.
Correct, sir. So it will be pretty similar to what you did this year?
We'll be able maintain this between 10% to 14%, 15%.
Okay, okay, okay. And sir, on the provision requirement going forward, if you had to look at it, how should one be looking at the overall provisioning given that now the additional private sector also [indiscernible]?
[indiscernible] almost for all the stressed projects, except 2...
RKM...
RKM Powergen, which high court has given us [ stay ]. I mean what -- we are making its provisions, but we have not declared this as NPA. And another is transmission project in U.P., southeast transmission. Except these 2 projects, we have already provided for all the stressed projects.
And we declared NPAs.
And declared NP also, in line with 12 February 2018 circular, though it was not applicable to us. So it's a very, very prudent practice which we are following.
So going forward, how should one look at the overall provisioning for this? We have -- this year, we have taken all the pain in terms of the NPA being recognized and provisioning also being done, which to a certain extent was -- brought them to the restructuring reversal. So going forward, how should one be looking at the provisioning?
See we have only made 31% provisioning from [ 8 ] stressed assets. And you can see, next year, we are going to have a reversal of around INR 1,000 crores of provisioning the project which will be commissioned with the outcome NPA of the restructured assets. [ So that we will have ] like 3% or 4% cushion will come from this INR 1,000 now. So around 35%, 36% provisioning is already there. We don't see that we have to make substantial provisioning in the coming years.
So should one be looking at a next figure of around 300, 400 crores for the year next year?
That is very difficult to say right now because that's -- in a number cases we have gone through NCLT, it will depend on the outcome.
Yes, but given the commentary that we indicated, the haircut expected is -- to that extent, the provisioning is made. So that's I was just trying to...
Depends upon the resolution being finalized for different projects. And how much will be the effect, we can't predict it at this juncture.
You see we are now are in the middle of this RBI notes which came in February and as per that, with 180 days of window is available for the resolution and in which it will go for NCLT. Now we are in the process of bidding 5 or -- 4, 5 projects. We are in the process of bidding; and some more projects, we are taking action. So how we [indiscernible] that deal happens. We will know, but it takes a couple of months. And by the end of August, we will definitely know how many projects we are able to actually resolve. And then we may come to some type of conclusion, but today it will be quite messy.
And we are making all sincere efforts to resolve these 4, 5 projects so that they should not go to NCLT.
Got it, sir. Got you. Sir, just one more question from my end. Given the way the yields are moving up, the cost of borrowing for us, how should one -- we -- how easy would it be to pass-on this -- the costs given the kind of scenario in the sector?
During that -- also there we have been able to reduce our cost of funds. I already explained it.
But if the borrowing costs go up, definitely we are going to increase out rates also.
Because rupee is also depreciating. That's why -- that's also another worry that we have given the exposure moving from 4% to 8%, of the overall volume.
More than 60% of our principal is already held.
Okay, okay. So currently your -- what percent of the loan book would be floating? Everything will be floating right now.
You're talking about foreign currency loan.
No, no, your loan book.
Loan -- yes, loan book, we have reset period of 3 years. In most of the cases, they reset after 3 years only.
So when does the next reset coming, set in? I mean to what percent of the loan book there is a reset coming in, in terms of the yields?
We will come back to you. We have to check, yes.
The next question is from the line of Bunty Chawla from B&K Securities.
There is an news article that PFC's power projects of around 14,000 megawatts should or might go down into insolvency [indiscernible], out of which 3,000 is already [indiscernible] and already have been taken in NCLT. So rest, around 10,000 megawatt, of around 20,000 crores, can you throw some light on that? Is it a power private project? Or it is NPA already. How it is the -- so can you throw some light on that?
Roughly 5,975 megawatts and 8,126 crores for that. We have 7 projects. 9 projects which are already lined up for NCLT. Either they have been admitted, or they are being sized within NCLT.
Okay. So these 8,126 crores lined up for NCLT currently, these are as NPA on your books, or restructured as [indiscernible].
NPA already. And we have [indiscernible] -- yes.
Already an -- okay, already with NPA. So rest, around...
[ I think it's percent ] provisioning already against NCLT loans of 8,126 crores [indiscernible] crore already provided for.
Okay, okay, sir. And sir, one more thing. These standard private projects which is currently 20,000 crores exposure, are there any chances they'll become an NPA or turning into a restructured? How is the status currently right now -- yes?
There is [indiscernible]. They are roughly 7% of my loan book, and they are regularly paying. Many of them are commissioned to a level. We have refinanced them. And some are [ high prepaid ], which are having good repayment and making timely repayments.
Okay, okay, okay, sir. And sir, lastly, my concern is, if you see the disbursement number during this quarter, it was around INR 26,000 crores, out of which private sector has been the huge chunk of it with around INR 7,000 crores. So can you share to what borrowers are -- any status on that? Or any light on that, what is -- about INR 7,000 crores?
Actually, this time, there is a jump in renewables front refinancing. Because it -- last year, we disbursed around 2,500 crores for renewable. This time, we have disbursed around 9,000 crores. And many projects in renewable sector has been refinanced, means they are already commissioned. There is no risk. Timely payments are being made. We are getting payments. We have all PPs, so risk is very, very less.
The next question is from the line of Rukun Tarachandani from Kotak Asset Management.
You mentioned that there are 4 to 5 projects which are currently not lined up for NCLT and wherein you have this 180-day period wherein we're trying to find a resolution. What is the total outstanding amount for these 4 or 5 projects?
Like GMR Chhattisgarh... [indiscernible].
One is GMR Chhattisgarh [ 2 into 685 ] megawatt. We have 5 bidders already submitted nonbinding offers. And then there is KSK Mahanadi. And our exposure is INR 3,300 crores. And another project is Essar Mahan, where EOI is to be floated in a week's time. And our exposure is INR 1,300 crores. Another is Jhabua Power, where EOI was floated on 15 May and today is the last date of submissions. And our exposure is INR 764 crores.
Understood, sir. These are the 4 projects which are currently you are trying to find a resolution...
Yes, resolution.
Can you give us a...
And RKM Powergen is also there.
Sure, okay.
Yes.
And can you us a broad sense? I mean, what will be the provisioning, cumulative provisioning, for this developing? [indiscernible] of what might be the incremental provisioning we did if things don't go our way in the coming quarters?
All these projects are already NPAs. We have already made the provisions, but it's very difficult whether -- if we are able to resolve, it's good. 31% already done. And what will happen if they go to NCLT? It will be difficult to register its movement. And if we are able to resolve, we have change of development there, so it will be reversed also. And these are [indiscernible] projects. And having -- KSK Mahanadi is having PPU for 4 units. Jhabua Power is having PPU for 71% capacity. So they are good projects.
Understood. And can you give us some sense on the margin, collective NIMs going forward, what is your expectation for the next year?
NIM. We expect that we have been pushing to maintain that present level of NIM. This year, it was 2.77. Interest spread was 2.77, NIM was 3.76. So we expect that, we have been pushing to maintain the same in the current year, also.
The next question is from the line of Rohan Mandora from Equirus Securities.
Sir, can you help me to understand the movement of gross NPA in private sector. And during the quarter from 8,690 crores to 21,687 crores. How much come in from due to this RBI and how much came from restructure [indiscernible]? What came from outside of these 2.
It was of this 12th February 2018 circular, we have declared KSK Energy, Jhabua Power, RattanIndia Amravati Project, RattanIndia Nasik Project, Lanco Amarkantak, Dans Energy, 6 projects and NPA. And because of this, our NPA -- gross NPA, it has increased to 9.57%, which was 5.28% without this RBI circular.
With the modest strength of imports.
And then total amounted, INR 12,000 crores, these 6 projects.
And 950 was [indiscernible] ...
And 950 crores of provisioning.
Okay. [indiscernible] the circular, other than that, [indiscernible] played with around 19 projects [indiscernible] . So that [indiscernible]. One is GMR project.
GMR project was still around 1,000 crores. Okay?
East Coast we [indiscernible] around 400 crores for INR 3 million.
Now that refers to the east coast, which is strong again for us.
Okay. So both of you know [indiscernible] during the [indiscernible]
The next question is from the line of Giriraj Daga from K M Visaria Family Trust.
Yes. [indiscernible]. Just one on investing, like [indiscernible] disbursement. What is the income the [indiscernible] we are getting, if we are going for the -- for next year's project, [indiscernible].
Refinance same rate has been from 9.6% to 11%, depends on the project.
Our average is 10.2%.
Average is around 10.25%, 10.3%.
Would that be [indiscernible] situation that you are looking at the, incrementing to the spreads getting contract, because we are incrementally [indiscernible] point 253 while our currency are about 10.7?
[indiscernible] I'm sure it was. You see, in the month of March, it was around 8% only, so we should compare the 10.3% over the 8% only.
Okay. So we expect it's still the 2.3%, 2.4% on term? [indiscernible]
Yes.
The next question is from the line of Sudhanshu Totla from Paradise Merchants Private Limited.
Your results are very good, but why the market is not giving the, when the, where did credibility give, while you are showing EPS of INR 22, dividend of INR 7.80 , even then, you are, I think, in terms of the -- it is the lowest in the shares? Why is it so?
You are also one of the investors, you have to try to convince them. That make me disappointed that in, despite of such wonderful result, market is not recognizing it. What [indiscernible] to me. I have limited resources, and I have limited interactions with the investor.
Yes. But [indiscernible] there is some credibility gap there, they are not giving the -- they are not giving the -- they are not sharing the confidence in the figures of your NPAs or restructure, something like that.
We are so confident, I am sharing everything with you in our presentation. This time we are trying to clarify each and everything so that there is no ambiguity and so on. And anytime you can approach us, our finance team, we are always open. We are a government company, how can we hide or conceal anything?
Kindly see our presentation which we uploaded in our website. We have given the status of each and every project.
The next question is from the line of Mahrukh Adajania from IDFC Securities.
So I just wanted to check that the GMR project also which had been in the quarter, which was that?
GMR Chhattisgarh actually, we have been [indiscernible] with SDR, and in January, it's completed that 18 months, so it became [indiscernible] on 29th January.And now it is at the bidding process.
The next question is from the line of Prashant Jain from HDFC Mutual Fund.
So my question, what is the difference in the settlement of loan on the NPA resolution process outside the NCLT and in the NCLT? And what are the key differences?
Before going to NCLT, we are trying to resolve this. These are some good projects like KSK Energy, Jhabua Power, KSK lending PCF for 4 units, GMR Chhattisgarh. It's a good project. It is commissioned. It is super critical units. They are not Chinese units. And it is generating even today. So we are creating that there will be less haircuts if we are able to resolve before going to NCLT. We are making all sincere effort to resolve these full 5 projects: RKM, KSK Energy, Jhabua, GMR, Chhattisgarh, before NCLT, because after 31st August, all these projects has to go to NCLT, we don't have any other option. So we are making all sincere efforts along with other lenders to resolve these projects.
Listen, I appreciate that, and I understand that. My question was that what are the key differences in the process of resolution outside NCLT and in NCLT? I mean, if it had been -- why should one be successful if the other one is unsuccessful?
You see these are actually different phases of [indiscernible] resolution. The Phase 1 is that the lender strives themselves within the consortium to result and arrive at -- in a win-win situation, which may be more [indiscernible] in terms of [indiscernible] So therefore, if that Phase 1 is successful, it doesn't go to NCLT. NCLT is again, has [indiscernible] process, so therefore when we...
I appreciate that. My question was that, when you are trying to do a manual change outside the NCLT, there again, you will call for expression of interest, then you will call for bidding along that. So broadly the NCLT process is also same. So I mean, if it fails, I mean what can make it fail outside with NCLT, I mean, which under NCLT can be successful. What are the effects of that?
Now if you -- if you've seen the RBI circular of 12 February, you must have seen that, the phase 1, that is where the lender are trying hard for resolution outside the NCLT, it's more flexible. There can be a resolution of 3, 4 types. One is that I can pursue with the borrower to make the payments, number one. Number two is that we can offer a kind of restructuring scheme; number three would be that would be a change in management. So there are myriad options available: A change of management is only 1 option out of the 4. However, when it goes to NCLT, the change of management is inevitable. So therefore, in terms of flexibility, if you talk in terms of flexibility of restructuring, NCLT will obviously restrictive in terms of only one option, whereas outside NCLT, within that 180 days window available, I have some kind of flexibility, I can [indiscernible] from changing of promoter or do a restructuring without a change of promoter also. [indiscernible] So therefore flexibility is moot, and therefore I think that the lender, the cost cutting of the consortium is always to have a resolution within that framework of 180 days. In failing which, it goes to NCLT. NCLT has got pros and cons. As we said, it's a statutory process. And it's a time limit course given. Now there's time limit. [indiscernible] But it's NCLT, there will be claims for all the stakeholders, and therefore ultimately a resolution will be found. If at all a resolution is found, and since there is a time limit and since all these liabilities are disclosed, so therefore under NCLT, we feel, as lenders, we feel that under NCLT, the amount of haircut that we have to pay, perhaps we will know that is that -- in the first phase, where they may be found among the flexibility available in that.
Understood. And then one, it's a big question from me, that these projects, the 4 major thermal projects and there are a few others where you are trying to resolve them outside the NCLT. What is the debt level per megawatt broadly, sir? And the second delicate question is you mentioned you are getting 5 EOIs and 15 EOIs for different projects. What are the types of companies that are expressing interest? Without giving names, if you could give me some sense of...
Actually per megawatt cost is around more than 8 crores per megawatt, 8 to 8.5 crores. 7 to 8 crores you can say. And type of investores are ILFS, you have Torrent Power, your Adani, JSW. When -- some funds are also there.
And what is the, I mean, what is the cost of a new comparable parkland model? I mean, it's on all the circuits?
I think supercritical will be 7 crores, even NTPC setting up plants. It's 7.5 crores per megawatt, 7 crores to 7.5 crores per megawatt.
So broadly, the debt is close to the current replacement costs, broadly?
Yes, broadly.
The next question comes is from the line of Abhishek Saraf from Deutsche Bank.
Just one question on this interest rate reversal. So going forward, because this quarter NIM has been depressed, you've seen decline due to an interest reversal, so what or how do you see it panning out in the coming year? And also, in the same with regards to -- on Slide #23, you have broken down the private sector loans, [indiscernible], standard but stressed. So which is, I believe, 13% of the private sector stressed. So what is this moment [indiscernible] and whom have you given this to? And can this really put some interest reversal in the coming year?
RKM PowerGen, where we have 5,000 crores exposure, 1,000 is there in the southern standard. 1,000 is already standard, and standard southeast transmission, 2,500 crores. These 2 projects are there.
So just on this margin thing, probably I missed earlier the question, and I think somebody asked on the margin. So can you share your assessment of the margin going forward? So do you expect that the interest reversal, which were big this year, could probably drop out next year?
Our investment spending this year, 2.77%. And we are hopeful to maintain this. And quarter results of 2.65%. So we will be maintaining almost there, but volume is also increasing in business [indiscernible].
Keep that most of the assets have already been categoried as NPA, and we are not accounting for any income on these assets. So we are not expecting any reversals at least not in coming days.
The next question is from the line of Nilanjan Karfa from Jefferies.
Hi, sir. Just looking at the Slide 26, where you talk of roughly T 100 (sic) [ 8,100 ] megawatt of capacity, right? In many of these, you are suggesting there is a management change on the way. Just want to understand, how do you get -- have you -- sorry. Is it management change or promoter change? And if it's management change, how is the payment structure?
No, it's change of management, or the...
Change of promoters.
Change of promoters. I think we are using the terms synonymously.
Okay. Because a change of management does not change the character of the project or the financial status of the project.
We expect more workers.
It should be promoter, right sir?
Yes.
Okay and similarly in the next one, it's actually the RKM PowerGen, if you are restructuring, we would have to classify that as NPL? Or we don't have to?
Actually, High Court has given us the stay. There is some stay from High Court that we can't declare it as NPA, but we are providing in this RKM already 10%.
The next question is from the line of Dhruv Muchhal from Motilal Oswal Securities.
So just to understand the NCLT process. So for instance, if a plan goes in NCLT, and there are no -- there is not much interest, to make it happen from Lanco, and it eventually goes to liquidation. So do the existing contracts just get expired, existing [indiscernible] and so the value of the asset will [ depreciate ] like anything? Or is it not the case?
We, at the moment, we cannot really expand in this. We have got -- other than this Lanco case, we do not have much more, much [indiscernible] examples so far. We've got, in most of the cases we are now trying some kind of resolution. And maybe not the next 2 to 3 months, the situation could become clearer. The Lanco example that you give is to be seen in a different light. Because that [indiscernible] was not really our project. It is, basically we are a contractor. [indiscernible] contractor, and developer of our projects. But we are talking in terms of actual past projects. So with the actual past projects, with certain amount of valuation will go to NCLT, that will be investors waiting for such projects, have very narrow interest in the market. I mean, at this point of time we can only say this.
Okay, but is there a sense if going to liquidation, would the contracts expire and that is why it is best to get it done before the NCLT process starts?
I do not get the question, exactly.
The point is if it goes into liquidation, if the process goes into liquidation, will the existing contract expire? And that is the reason we prefer to get it done before the NCLT because there's a risk of there is no interest in NCLT because it will go into liquidation, and if the contract expire?
Well, this is also -- this also cannot be outside at this point of time, because generally, in the PPA, there is not [indiscernible] provision. And in case it goes into NCLT, the PPA immediately cancels also, but it's not certain thing. In certain cases the PPA may also stay. It depends on the buyer and seller. Basically the PPAs, it's quite rewarding to get discount. I don't think there is any reason for that discount to cancel the PPA, simply because of management issue. So I mean, there's 2 company issues will get resolved, we will come to know. And it is all these projects, they have [indiscernible] criteria [indiscernible] marketing criteria, they can always end there.
So secondly, you said 31st August is the day before which all these will go into NCLT. So why is the 31st August, and I mean, how is that coming out?
Around 1 March, we got 12th February circular says that within 180 days, all accounts, more than 2,000 crores, should be resolved within 180 days or go to NCLT. No other option is available.
[indiscernible] after cost much then it is [indiscernible]
The next question is from the line of [indiscernible] from Systematic Shares and Stock.
My question is actually, the RBI circular is not applicable to us. And what amount of profit headwind would have been without the RBI circular? If it’s not applied RBI circular, then what amount of profit would be there?
If you had made a provision of INR 950 crore-based, we have declared around INR 12,000 crore of assets as NPA due to this RBI circular. Had it not been done, the portion of 950 crore which we had made would not have been there, so my profit would have 1,000 but not some income reversals also.
So that means that [indiscernible] around close to it, 1,800 crores. See that there was something else I don't have right now, but it should have been more than 7,000 crores.
Yes. Definitely more than 7,000 crores. I am not giving the exact number, we have to see the reversal.yes, what is to 950, so it [indiscernible]
More than 7,000 crores.
And sir, you said that being a government company, you don't have the resources -- so much of resources to [indiscernible] the investors. So being a listed company, you can always [ meet to invest better ].
[indiscernible] on the lighter side, but like a private company, I don't interact so much with the investors.
[indiscernible]
We are meeting on 31st in Bombay.
The next question is from the line of Prashant Jain from HDFC mutual fund.
Sir my question is this new power bill, which you're likely to be introduced in the mosoon session, what are the key provisions in there? What are the implications? And it will, this will become a reality? I mean, on paper it looks too good.
Frankly speaking, I'm not clear about this. Ministry has not yet sort our comments, so I can't comment. Maybe state utility must have been [ alt their ] views, must have given their views. We are not very clear.
The next question is from the line of Bunty Chawla from B&K Securities.
[indiscernible] are going under NCLT and fewer or nearly one under NCLT. And your provision coverage of around 31%, 32%. So should we understand that these provisions have to be moved to 50% as RBI has told for the banks, those who are under NCLT?
On this project, there is no guidance from the RBIs. So at this juncture, we can't say. There is one for initial projects. So initial press projects which render the rights we see. For us, it's not there. But 38% provisioning is already there. But if you see 12th February circular, it very clearly says that whatever the RBI's instruction for this [indiscernible] will be limited to only those projects, not for the [indiscernible] projects. And for NCLT given, we have made provision around 38%
So okay, so it's not -- there's no room to be increased to 50% asset?
[indiscernible]
Due to time constraints, we will take the last question from the line of [ Siddarth Mheta ], individual investor.
My question is related to the wind power projects going forward. Will you be funding these projects going forward? And do you see them as viable projects over the next 1 or 2 years? 3 years? 4 years?
To rewind my board meeting, one project I have, 1,000 crores I have refinanced, today we have approved. And in my 9,000 crores, [indiscernible], last year, many projects -- solar projects were there, which we have refinanced. And from maintenance growth groups, Continuum, Metra, so we are already on the lookout for good projects in renewable space.
Okay, all right. And one other question -- and one other -- one question which is very similar to the earlier question, asked by the earlier gentlemen. And that is the provisioning that you think 38% for NCLT cases and roughly 30% for the non-NCLT --.
31%.
31%? So 31% is for NCLT?
No, no. All. Total. Total.
Total is 31%, and NCLT cases are 38% provision.
Yes.
So [indiscernible], has there been any experience for you as to what percentage of the haircut is likely when the companies are going into NCLT and not going into NCLT, do you have --
[indiscernible] these set the stage. So it -- and it varies from project to project, in power sector, these projects is a complicated project in itself, so it's very difficult to [indiscernible], frankly speaking.
So on an average, you feel that 38% is approximately the right number?
[indiscernible] The other thing is, you [indiscernible] now taking a lot of interest in the projects where we are going for bidding. So that's for the market, it's taking it out of interest, therefore, we believe that the situation is not clearly as [indiscernible].[indiscernible] for taking a lot of interest in power projects in the market.
Last question. And this relates to, as you know, which is not your industry, but a lot of the public sector banks have been coming up with NPLs quarter after quarter, and every quarter, they tell us now that the worst is over. So what is your feeling? Is it that we have reached -- finally reached a stage where the worst is actually over, or this is just always something that is unpredictable and management is doing its best, but then nobody can predict anything? Is it [indiscernible] there? Or we are finally at a stage where we have some level of confidence?
I can't talk about banks. I can talk about PFC, where our exposure to government sector is 82%, out of 2,80,000 crores, and 7% private sector is also, there is no stress. So 89% of my loan book is very straight, so I am fully confident that on 89% percent there are no issues. And on 11%, there are some issues, but out of those 11% projects also, some are having good PPAs, some are having [indiscernible] also, and we are making sincere efforts with the support of the state governments, Ministry of Power, Ministry of Finance, but it's very difficult in the democratic society to find a resolution because it's a small lender, with having exposure of 10, 20 crores. He can block the resolution process. And in some projects, there are as many as 27 lenders. So you can appreciate when the joint lender forum have been abolished by RBI. So how to reach a consensus among result of this lenders is difficult. And only, we have declared all stressed projects and NPA, except 4 projects, RKM; Shiga power is a hydro project; and Transmission project in U.P.; and Haldia project in West Bengal.
All right. Good luck to yourself and your entire team in resolving these issues in the coming --.
We are essentially resolving [indiscernible]
That is the last question. I now hand the conference over to Mr. Kunal Shah for closing comments.
Thank you, entire management team of Power Finance Corporation for patiently answering all the questions, and also sharing such a detailed project-wise disclosure. And thank you, all the participants for being on the call. Thank you. Have a good day.
Thank you very much, Kunal, thank you. and all the investors, thank you very much for guiding us in the growth of the company. Thank you.
Thank you. Ladies and gentlemen, on behalf of Edelweiss Securities Limited, that concludes this conference call.