REC Limited
NSE:RECLTD
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REC Limited
Earnings Call Analysis
Q1-2025 Analysis
REC Limited
REC Limited has shown a robust performance in Q1 of FY25. The company secured sanctions worth INR 1,12,791 crores, a 24% increase compared to the same quarter last year. Disbursements increased by 28%, rising from INR 34,133 crores to INR 43,652 crores. The company's asset under management (AUM) also saw a growth of 17%, reaching INR 5,29,739 crores.
REC Limited aims to sustain a growth trajectory of 15% to 20%, with a strong likelihood of maintaining a 17% growth rate. This would enable the company to double its AUM to approximately INR 10 lakh crores by 2028-2029, ahead of their initial target of 2030.
The company is making significant inroads into renewable energy, with sanctions in this segment growing by 59% in Q1. They sanctioned INR 39,655 crores worth of renewable projects, and disbursements in this area surged by 249% to INR 5,351 crores. Infrastructure logistics also saw impressive growth, with sanctions increasing by 122% and disbursement growing by 78%.
REC Limited recorded an increase in net interest income by 30%, from INR 3,712 crores to INR 4,713 crores. The net profit rose by 16%, from INR 2,961 crores to INR 3,442 crores. The company has successfully reduced its average cost of funds by 18 basis points, now at 7.05%. Their net interest margin stands at 3.64%, an improvement from 3.28% last year.
Going forward, REC Limited aims to maintain a net interest margin above 3.6% for the next 4-5 years. They anticipate substantial growth in their renewable portfolio, estimating it to form 30% of their total AUM by 2030, up from the current 8%. The company is targeting disbursements of around INR 190,000 crores for the current financial year.
The company's gross NPA has reduced from 3.28% to 2.61%, and the net NPA from 0.97% to 0.82%. They are in advanced stages of resolving several large non-performing assets, with expected write-backs of INR 2,000 crores in the current financial year. The management is confident that the credit costs will normalize to about 0.4% once these resolutions are complete.
Despite growing competition in the renewable energy financing space, REC Limited’s rates remain competitive. They are targeting a 20% market share in the renewable energy sector, capitalizing on India's goal to install 500 gigawatts of non-fossil fuel capacity by 2030.
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Ladies and gentlemen, good day, and welcome to the REC Limited Q1 FY '25 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to Ms. Sweta Daptardar from Elara Securities Private Limited. Thank you. And over to you, ma'am.
Thank you, Neha. Good morning, all. On behalf of Elara Securities, we welcome you all to Q1 FY '25 earnings Conference Call of REC Limited. From the team management team we have with us today Mr. Vivek Kumar Dewangan, IAS, Chairman and Managing Director; Mr. Vijay Kumar Singh, Director of Projects; Mr. Harsh Baweja, Director of Finance; and other senior officers from the team.
Without further ado, I'll hand over the call to Mr. Vivek Kumar Dewangan for his opening remarks, post which we can open the floor for Q&A. Thank you, and over to you, sir.
Good morning to all the participants. It's my privilege to welcome you all in this conference call. As you might have seen, our quarter 1 results for the current financial year, we have been able to maintain the growth trajectory which we had achieved last year. You might have noticed that our sanctions have gone up by 24%. In Q1 last year, we had been sanctioned INR 90,707 crores.
But in the current financial year, in Q1, our total sanction stand at around INR 1,12,791 crores. The disbursement has seen a growth of 28% from last year's Q1 disbursement of INR 34,133 crores. Our disbursement have reached the level of INR 43,652 crores at the end of Q1 of this current financial year.
The asset under management has seen a growth of 17%. You might have noticed that in FY '23, our loan assets had increased by 13% from INR 3,85,000 crores to INR 4,35,000 crores in the last financial year '24, our asset under management had grown at the rate of 17% from INR 4,35,000 crores to INR 5,09,000 crores. In Q1, we have been able to maintain the growth trajectory of 17%, and our asset under management stands at INR 5,29,739 crores.
Going forward, we hope to maintain a growth trajectory between 15% to 20%. And most probably, it is going to be more than 17%. If we maintain this 17% growth in the next 4 years, we'll be able to double our asset under management to about INR 10 lakh crores by the year 2028-'29 itself.
Earlier, we that we'll be able to cross this INR 10 lakhs by the end of 2030. But if we are able to maintain this 17%, and we are quite hopeful that we might be able to reach the target of asset under management of INR 10 lakh crores before 2030, maybe '28, '29 itself will be able to achieve.
Two significant developments have happened as it regards to our portfolio is concerned. The renewable energy sanctions, renewable portfolio has seen a growth of 59% as far as sanctions are concerned. In Q1, we have sanctioned for it worth INR 39,655 crores, while the disbursements saw a growth of 249% disbursement was to the tune of INR 5,351 crores from the renewable energy portfolio. With regard to infrastructure logistics sanctions have grown up by 122% in Q1, which was about INR 19,815 crores, and disbursement increased by 78% to about INR 7,982 crores in Q1.
The total borrowings outstanding has increased by 15%. Borrowing has increased from INR 3,97,582 crores in last Q1 to current year financial year Q1 to about INR 4,58,794 crores. Our debt worth has been a growth of 19%. Now it stands at INR 72,351 crores. The interest income on loan assets has increased by 20% as compared to Q1 last year, which was INR 10,465 crores. In Q1 of current financial year, our interest income on loan asset is about INR 12,514 crores.
The net interest income has increased by 30% from INR 3,712 crores last year in Q1. the net interest income has increased to INR 4,713 crores in the current financial year Q1. The net profit has seen a growth of 16% from last year's Q1 of INR 2,961 crores or Q1 profit after tax is INR 3,442 crore. The yield on interest-bearing loan assets has increased from 9.82% last Q1 to this year 9.99%.
We have been able to reduce our average cost of fund by 18 basis points from last Q1, it was 7.23%. Now our average cost of funds is about 7.05%. The interest rate has also improved from 2.59% to 2.94% as compared to Q1 of the last financial year. The net interest margin has also improved last year Q1, it was 3.28%. And current year, given our net interest margin stands at 3.64%.
Going forward, we'll be able to maintain this net interest margin of more than 3.6% in the next 4 to 5 years. The return on net worth is about 19.51%, debt-to-equity ratio is 6.27, the capital adequacy ratio is comfortable at 26.77%.
Another significant figure is that our gross NPA has come down by 7%. It is about 2.61%, our total assets, while last year Q1, it was 3.28%. The net NPA has also come down from 0.97% to 0.82%. I would like to highlight that the growth opportunities are tremendous, particularly with regard to energy taking place in India as Government of India is committed to install 500 gigawatt capacity or installed electricity capacity from non-fortune trade sources. Right now, we are about 192 gigawatt capacity. Another 308-gigawatt capacity will come as per India's 14 national electricity plants, which has estimated that country will require about INR 24 lakh crore for this energy transition, which is taking place with regard to installed capacity up to 500 gigawatts plus storage solution plus evacuation through green energy corridor.
So we do anticipate a huge growth in our loan book pertained to the renewable portfolio, which is at present 8% of our total asset under management. It will grow substantially to about 30% by the year 2030. It will touch a figure of INR 3 lakh crore from the current level of about INR 39,000 crores.
Ministry of Power, Government of India has also brought out clearcut road map of providing base load actually because commercially viable to solution are still a challenge for the country. The pump storage project cost is quite high, battery energy storage, we depend again on the import of the batteries. For the time being of the next 5 to 6 years, the base load will come from the coal-based generation only. That's why Ministry of Power has that country will require another additional capacity of 94 gigawatt capacity for which debt financing would be to the tune of INR 6.6 lakh crores.
For that also, we are targeting this 20% of this business opportunity with regard to growth in the thermal generation. Another thing that I would like to highlight is that Government of India has made it vision very clear that by the year 2047, India aspires to become a developed country. As of now, our per capita consumption electricity is only 1/3 of the world average. And per capita emission of carbon dioxide is also 1/3 of the world average.
In our pursuit to become a developed country, our per capita consumption electricity will definitely increase. Right now in U.S.A., the per capita consumption in electricity about 10 to 12x of the world average. So our per capital consumption electricity may not reach to the level of U.S. level. But hopefully, we'll be able to cross the world average, and that also entails more than four to fivefold increase as per per capita consumption electricity is concerned.
We are committed for a sustainable development of our growth story. And REC is going to play a crucial role in the nation building with regard to the vision of Government of India to become a developed country by the year 2047. With these opening remarks, we are open for question and answer now.
[Operator Instructions]
The first question is from the line of Dhaval from DSP.
Congratulations on good performance. I had two questions. First is relating to provisions. So sir, our original expectation for current financial year was a reasonable amount of write-back probably similar to what we had seen last year for the full year. .
However, in 1Q, we have seen some bit of addition on specific standard accounts. So does that mean that we are changing our guidance or we will see more write-backs in the rest of the 9 months, if you could throw some color around this, that would be very useful. So that is my first question, and then I have 1 more.
Yes. Let me address this question. We had made a provision of about 17% in respect to our website, and we had a total of 16 ahead at the beginning of this current financial year. Out of the 16 stays said, are heading towards liquidation for which we already made 100% provisioning. Remaining are the operating asset, and we are in advanced stage of resolution of these stage assets like in the plant at Nasik, then we had KSK in Chhattisgarh.
The bidding process has begun under NCLT process, and we hope to see a good response because a number of the expression interest that we received a tremendous more than 20, 25 applications have been received in respect of each of these stage assets. And they are very good quality bidders are there. We hope to have a very good resolution like for KSK Mahanadi, the trust and the iteration account itself is having INR 10,000 crores. So we hope to have a good resolution from this operating assets, and we hope to get a write-back of more than INR 2,000 crores in the current financial year. Yes, your point is correct that as per -- in the current year, Q1, we have made expected credit loss on account of some loans from Andhra Pradesh. That became from special mention accounts 1 to a special mission account 2. But with the announcement in budget for support to the Andhra Pradesh initiative, we hope that this will also become the standard asset sooner than later.
So sir, overall, would it be correct to assume that we will see more than INR 2,000 crores of write-back in the rest of the 9 months, so that for the full year, we have guidance -- we meet our guidance. I mean just operationally, this AP account, do you see it getting normalized in the next 1 to 2 quarters? Would that be a fair assessment?
Yes, 3 to 4 months -- maximum 3 to 4 months because whatever budget announcement has been made, that will start flowing to Andhra Pradesh and their financial position is likely to improve tremendously.
Understood. Got it. Sir, the other question is relating to growth and specifically on thermal generation. So we've seen recently NTPC gave a very strong guidance around capacity addition and they've given a road map around it.
Just wanted to get an update on the balance. So they've given an outlook on the 26 gigawatts. So just wanted to get an outlook on the balance, which was supposed to come from players like NLC and Damodawali and some of the state gencos, how is the plan progressing there? And any -- if you can give some update around that opportunity because that is where our lending opportunity will really emerge. So some update around that would be quite useful.
You're right, actually, that out of 94 gigawatt capacity, NTPC has targeted 26-gigawatt capacity, but out of 26-gigawatt capacity, 6 to 8 gigawatt capacity will come in the joint venture of NTPC and other organization. So NTPC joint venture projects, we have been financial. When they do is on a stand-alone basis, we are not financing because they are a cheaper source of financing available.
So we are targeting about 74-gigawatt capacity will be able to finance to joint venture companies of NTPC, Damodarawali Corporation, with NLC state demos. Most of the projects are coming in the state sector. And these are all brownfield projects, they are not greenfield projects because some of the old power plant, which had retired in place of that, they are bringing the new units in the existing plant actually. For that, balance of plants, we will then be able to utilize the existing facility with regard to the coal handling facility, handling capacity of the existing plant could be utilized.
So we hope that out of 74-gigawatt capacity, which will come stage genco and joint venture of NTPC and Damodar Valley Corporation. We are targeting market share of 30% to 40%.
Got it. Sir, one last clarification is on the disbursement expectation in the renewables, including hydro project, so we've had a good start compared to 1Q '24. Just for the full year, how this growth is likely this momentum that you've seen in 1Q, if you could give some perspective on disbursement for the full year. So that would be very useful. Like what kind of growth we can see? Would it be in similar zone or lower? Because our sanction last year was quite strong in this space.
It will depend on the progress of the project, the execution of the project actually. Most of the renewable energy projects normally get commissioned in time and the execution level is far. Those projects which we have sanctioned last year, the disbursement only to the tune of 10% of the project cost. If INR 100 was sanctioned last year, they had only INR 10, but current year, the line will be about 40% to 50% of this project value. So out of INR 100, INR 40 to INR 50 would be disbursed this year in renewable energy project.
Last year, our total disbursement for the entire year was INR 1,51,000 crores. This year, in Q1 itself, we have been able to take INR 43,000 crores. We hope to cross INR 190,000 crores of disbursement in the current financial year, it may go up to INR 2 lakh crore also depends on project execution. Out of this, say, INR 190,000 crores or INR 2 lakh crore that we are targeting for this in the current financial year. The transmission and distribution sector will constitute about 40%, then renewable disbursement is going to increase substantially about 20%. We are targeting a minimum 20% will come from the renewable energy segment, then remaining will come from conventional generation and infrastructure logistics.
The next question is from the line of Shreya Shivani from CLSA.
I have two questions. The first is on the infra segment. So till last year, we had an idea of the projects that you were disbursing for, I mean, Mumbai Metro and Bangalore Metro were some of the projects. Can you give us some details of what kind of projects we have disbursed for in 1Q? Are the PPP model? Or are they still government projects that you are basically participating in? That's first. And sir, second on your gross Stage 3. So it looks like Lanco Amarkantak is still not removed from gross GS 3, right? So when something like that happens that you've already written back the provisions, which you did last quarter, but probably all approvals have not come through and that's why you've not removed Lanco from GS3. So in that case, if this gets delayed any further, will you have to build more provisions for this? Or how does the accounting work in such a situation, if you can help us understand that.
Let's say, first tell you about this disbursement with regard to infrastructure loyalties. Sanctions, this year, we have been able to do for -- this multimodal corridor this State Road Development Corporation. We had to sanction project work INR 10,000 crore, then Expressway is there from corridor from Jalna To Nanded. And we are targeting -- with regard to disbursement, you had asked about disbursement with regard to infrastructure loyalties. Other than this, MMRDA Metro project and Mumbai-Pune Expressway, the disbursement of there in Hindustan Petroleum Refinery for substantial disbursement has happened. Then we also financed Jindal Steel plant in Odisha. That also has seen growth. And airports, we have done Visakhapatnam Airport, then Goa Airport. Disbursement has started doing there also and some road projects, HAM projects, their disbursement have increased.
With regard to this delay in this Lanco Amarkantak is Lanco Amarkantak is hearing in NCLT's already over actually. And NCLT has reserved the order. Now they have started -- they are doing technological order of completion of hearing. So we hope that the final order will be issued in the month of August itself like Nagai, we got the orders on 29th of July. There, we don't have to make any extra provisioning because the NCLT resolution is happening based on the resolution plan or something. And we'll get some additional because we had taken -- not taken a write-back amount. We'll get some additional write-back from Lanco Amarkantak also.
Got it. And just one last clarification. So the projects which are probably closer to resolution right now, which we should pay attention to KSK, or Nagai also, something that we should probably keep an eye on if you can.
Nagai had already done. I mentioned that on 29th July, we've got the final order from NCLT. Nagai has already been resolved. And we have restructured this TRN Energy, that resolution plan has already been completed. Then power, that resolution is going to be completed now. And with regard to KSK Mahanadi, and, the bidding order has already commenced actually. So we hope that I think the last date of filing bid submission is in the month of August itself. By the end of August, we'll get that amount final bidding based on that we'll be able to resolve in the next 2 to 3 months.
Got it, sir. And sir, just clarification Nagai was a INR 550 crore project, right?
Nagai is INR 561 crores was our outstanding and they are -- we had made 71% provision, but expected recovery is INR 183 crores. Our expected recoveries to the tune of 33%. There will be small write-back will also be there in this fraternity.
The next question is from the line of Manish from PhillipCapital.
I have 3 questions. One pertains to the sanction in the generation side. Can you give us some color whether it pertains to a public sector entity or private? .
So I think we have done a total of 4 large scale thermal power projects. Three of them are in the state sector. One is in -- 2 are in Madhya Pradesh, 1 in Maharashtra and 1 is in DVC investment work. So total roughly for 3,440 megawatt capacity has been sanctioned, both in state and DVC for total loan amount of INR 31,000 crores.
And typically, what can be the yields in this projects if you can give some color
Energy and generation project, it depends on the rating of the entity, actually. It varies from 9.5% to up to 10.5% or 11% also. Depends on the rating of the entity, which is executing the project.
And if I may just add the highest yield that we are getting is actually on the thermal transition projects, which is in excess of 10% as of now on the outstanding loan book. And that is what actually we are also targeting that will take a good share in thermal generation capacity financing opportunity, where the yields will be higher as compared to other segments in the past sector.
Got it. The next question is on the foreign currency borrowing. So in last 4 years, the share of foreign currency borrowing increased from almost from 16% to 30% right now. How should we look at this space? Can you increase your foreign currency borrowing further from here?
Yes. As of now, our foreign currency borrowing is cheaper option as compared to domestic borrowing actually and we have used some innovative hedging techniques. That's why our all-in costs, including hedging cost is below 6.7% actually. Most of the term loan in foreign country which we have taken. So we are that's why you might have seen that proportion of foreign currency going has increased substantially to about 29%.
Sir, you can still increase that there is no internal cap around that. Is that correct understanding?
No, no, no. So there is no internal cap as such. But we have to apply to RBI in case we want to go under the approval route. Under the automotive route, it's only 750 million that is allowed in a year. So under approval route, we normally apply for USD 2 billion at one step, which has allowed for a period of 6 months. So it depends upon RBI also as to how much approval they grant. On that basis, we raise the foreign currency accordingly. But FCNRB loans are in addition to that. So there is no cap on that. It's only for the external commercial borrowing, which is for a tenor longer than 1 year that we have to take the approval of the RBI.
So the current approval are in claim right now or we have to apply just to get a clarity about FY '25 foreign currency borrow amount?
Already about 700 million is, which is present available to us. So after that, once we adjust that, in that case, we'll be approaching the RBI. So normally, they done the approval within a period of 1 month. So that's not a difficult process. Last year, we applied thrice, and we got the approval also thrice for USD 6 billion.
Got it. And finally, if you can share Stage 2 asset number for the quarter -- at the end of the quarter?
The loan balance against the stage 2 assets is INR 54,333 crores. And against which the final ECL is INR 552 crores.
This includes that account, correct, if I'm not wrong?
Sorry, couldn't get you.
This includes that AP accounts whose got.
Some of them, the -- this stage 2 assessment, it is mainly from Andhra Pradesh.
The next question is from the line of Shreepal Doshi from Equirus Capital.
My question was on infrastructure projects front. So last quarter, we have seen decent traction across sanctions, disbursements and also the share of infrastructure book increasing. So incrementally for the year and how are we seeing that book shaping up in the overall loan book mix? And then as well, if you could highlight the blended yields in this particular segment for us.
Yes. Right now, actually, our hands are full with our power sector project and renewable energy projects, actually, we are getting a number of projects from the renewable energy portfolio and as well as convention generation. So we are a bit choosy with regard to financing infrastructure loyalties now. We have taken a conscious reason to be a bit choosy.
Initially, we had -- we are cautious. First year, we had sanctioned only those projects which were supported by the state government guarantee. Now we are targeting only those infrastructure and logistics projects where our yield is more than 9% and where the asset quality is good and where the entity is good and where the revenue cash flow is insured.
Based on that, only we have decided to go slow on this infrastructure logistics. Right now, our total portfolio infrastructure logistic is about 12% of our total asset under management. Going forward, it may go up to, say, 20% by the end of 2030. So 30% will come from renewable enregy project, 20% from infrastructure logistics, remaining 50% will come from conventional generation, transmission and distribution.
Sorry. Got it, sir. That was helpful. Sir, the second question was on the trend that we saw during the quarter, where there was an internal movement between 1 and 2. Are we seeing any further -- any other account, which is also behaving in a similar manner?
No. Only in respect to Andhra Pradesh was there, no other account is there, which is we're moving from stage 1 to stage 2. And Andhra Pradesh, the situation is going to improve now actually because budget, a lot of support has been announced in respect to Andhra Pradesh. So we hope that they'll become a standard state in next 3 to 4 months.
This is no other state we are experiencing or seeing any such behavior, which could lead to such -- I mean, slip between Stage 1 to Stage 2.
No, no, other state, only Andhra Pradesh was left.
The next question is from the line of Nikhil Nigania from Bernstein Private Wealth Management.
My first question is on renewable loans. I wanted to understand, are we funding merchant renewable plants as well? Or is PPA condition precedent for loan disbursement?
So largely, the project that we have sanctioned so far are in the category of having PPA and PPA from largely again from and NTPC like organizations. We have done a few for the state PPA as well. 95% of our total funding is based on PPA only. And there's a very small component of C&I and of course, a very, very small component of merchant also.
Understood. And would it be fair to assume the strategy won't change going forward, the preference would be towards PPA and to minimize merchant renewable plants?
Yes, yes. Going forward also, we are giving priorities to only those players which are having PPA along the business 20, 25 years PPA with regard to renewable energy projects.
That's helpful. And secondly, just on that note only. In terms of competition on funding the renewable space, do you see incremental interest from banks to lend to renewable plants or is still largely you and your peers?
Competition is there, definitely, everybody wants to increase their green portfolio they are very competent. But our rates are quite competitive as compared to banks and obviously, in respect to our peers also. So we are targeting a market share of about 20% because the space is so big and because I told you that 308 gigawatt is going to come in the next 4 to 5 years. So we are targeting a market share of 20% of this renewable energy opportunity which is coming out.
Understood, sir. If I may squeeze in one last question. Regarding the loans disbursed in line as part of the LPS scheme, I wanted to understand what kind of guarantee do we have with is it state guarantees? Or is it something like the tripartite agreement we have for the RDSS loans, if you could give some clarity on that?
So on the LPS scheme, all the loans advanced to all the state DISCOMs are backed by state government guarantee. So that is actually -- that was the scheme of LPS. So entire loan outstanding is having a collateral of state government guarantee.
And with regard to RDSS, also RDDS counterpart funding also. That also is that state government guarantee supported by the mandate, which has been insisted by the Ministry of Power. The RDSS loans counterpart funding will be supported by state government guarantee, and direct debit mandate in fear of Reserve Bank of India.
Got it, sir. Sir, but then the unsecured loans, which we see as part of the book, if you could give some color, what are those then which went up also this quarter.
We had a hypothetical asset hypothecation would be there. Otherwise, you can throw your light.
So I think largely, the projects are our CapEx projects. But then some of the projects like LPS, LIS and RBPF these 3 categories are non-CapEx project, but all of these 3 categories, LIS, LPS and RPF are government guarantee.
So virtually, there are certain loans, MTL, FCL, et cetera, which is a very small component. And there also the state government guarantee in most of the cases is there. But sometimes we take some time to get the government guarantees. So till that time, we are shown as unsecured. But once we get the guarantee, then automatically they are transferred to the secured category.
The next question is from the line of Arvind from Sundaram Alternatives.
Congratulations on a good set of numbers. Sir, like when I see distribution sanctions and disbursements in the last 4 quarters, especially RPP and LPS and LIS schemes, these -- especially the disbursements have been almost equal to the last 9 quarters of sanctions like mentioned that we have disbursed almost all the sanctioned numbers. I mean going forward, like where would the disbursements in the distribution part of the schemes will come from? Because since you mentioned that 40% of the overall disbursements will come from distribution schemes, which set of schemes are you referring to, sir? Like are you referring to distribution CapEx or anything else?
Let me just throw a light on this. Most of the disbursement in distribution segment will come from revamped distribution sector scheme. Now all the loss reduction that have already been awarded last year. Now after election, the execution speed is increasing. And some of the states which have not been able to qualify under recent evaluation framework, so they are seeking bridge loan from March till the time they have become eligible for Government of India's guarantee, they'll also be seeking bridge loan. So we do see a substantial jump with regard to RDSS financing. At LPS, you may be aware that NPS schemes started in June 2022 and it is for a period of 4 years. So still some disbursements are there. Some disbursements will keep happening until 2026. And is a revolving bill payment facility that disbursement -- the repayment and disbursement will keep happening. But largely, it will come from RDSS loss reduction award.
Plus, we are also financing this prepaid smart meters. Prepaid smart meters, 25 crore prepaid smart meters has to be installed in the country. Out of 25 crore, 14 crore prepaid smart meter orders have already been placed. So this is being done by AMIP service provider, which are private players. They are doing on totex mode. And they'll be installing the prepaid smart meters and they'll be operating and maintaining it for a period of 10 years and then get a return from the distribution company at the rate of per meter per month rate for which they are submitted. So with this private sector players, also, we are financing under prepaid smart meter category. Both prepaid smart meter and loss reduction work are going to increase substantially in the current financial year.
And just if we can throw light on the renewables portfolio also, sir, like we have sanctioned a large chunk of orders in the renewable space. Let's say, like in the last 5 quarters, I can see like almost INR 1 lakh crores of renewables has been sanctioned. But can you give us an idea of like how much would be large hydro and how much would be non large hydro?
Yes. Let me just give you a brief background. Last year, in the month of July, we had organized Green Finance Submit in Goa on the sidelines of G20 Energy Working Group Meeting. And we had done detailed one-on-one interaction with the renewable energy developers, OEM for the electric buses and other technology providers also, and we have been able to sign MoUs worth INR 285,000 crores in July 2023. After that, after signing these MOUs, we sanctioned INR 136,516 crore projects, which covered the entire gamut to renewable energy category like solar projects, we have sanctioned about INR 20,956 crores. Solar model manufacturing was INR 1,555 crores. Large hydro was INR 32,450 crores. Then wind turbine managed was about INR 3,195 crores. Wind power project was INR 3,453 crores. Hybrid solar wind was INR 10,098 crores. Small hydro all INR 837 crores. Pump storage project were worth INR 28,304 crores, green hydrogen, green ammonia projects, about INR 8,000 crores we have sanctioned. Electric buses with associated infrastructure, we have sanctioned about INR 7,214 crores. So you can see that entire gamut of renewable energy projects we have been sanctioning. Last year, the sanction was INR 136,000 crores. And this year also sanctioned will cross INR 150,000 crore easily or may go up also.
And you may see that the ideally renewable energy projects other than large hydro project take time on the 6- to 8-year time for commissioning. But rather than large hydro project, solar and wind projects, they do get commissioned very fast within a period of 2 to 3 years. So a lot of disbursed. Whatever we have sanctioned in the state of project other than large hydro projects, they'll get -- all get disbursed in the next 2 to 3 years.
The next question is from the line of Ashish Sharma from Oaklane Capital.
Just on the credit cost first. So you mentioned that around INR 2,000 crores of write-back can flow through. So do you expect this to flow through in FY '25 itself or there will be some spillover to FY '26? And second question, related to that, is that ex of write-back in a normalized, what should be the credit costs we should assume? .
As I have mentioned that these operating assets like thinner power plant in Nasik, KSK Mahanadi in Chhattisgarh and Hiranmaye project in West Bengal, they are in advanced stage of bidding, and we hope to conclude the bidding in the month of August itself. So all the bids are going to be received in August, and we will be able to finalize it by September. And we'll be able to submit the final resolution plan to the NCLT and say by the end of October to December period, it's all resolutions will be submitted. So we hope that all this INR 2,000 crores write-back will get in the current financial year itself. Do you would like to add any...
Sir, second question was on normalized credit costs, assuming write-backs are not there, what should that number be?
See, otherwise, the credit cost is only in respect of the standard asset to provisioning which we are making, that is only about 0.4%. So once all these assets are resolved and there wouldn't be any virtually NPAs, which will be in our books. So by 31st March, all of them will be resolved, either it will be a technical write-off or otherwise, they will be resolved. So after that, it will be only standard asset provisioning would be there. Nothing else.
Okay. Perfect. And just one clarification, you had mentioned on the growth part that disbursements would be stretching INR 190,000 crores in this year, which is closer to 20% growth. But on the guidance on the growth path, we are being a little conservative. Is it that we should assume higher payment the prepayment rates higher?
Actually, we are targeting growth of 20%, but to be on the innovative side, because some of the repayments are also happening actually. And what happened in the renewable energy project that the developer wants to come out of the project after selling the project actually. So the repayments are quite positive in respect to renewable energy project. That's why the growth we are tagging from, it may vary from 17% to 20%.
Perfect. Because at 18% disbursement growth should be closer to 20%. I mean, I think that's why you would clarify that you were conservative in your guidance?
Yes.
The next question is from the line of Nishant from MLP.
I just had one question. If you've spoken or engaged more with the RBI, what's the latest thinking on the project finance norm that was proposed to?
See, as you might recall that when we had this conference call after our annual results, that time, RBI has come up with this dark guidelines with regard to higher provisioning for the under construction projects over a period of 3 years actually, that was draft pending. And RBI had sought comments from all the state projects by 15 or June. We all submitted our comments. With regard to REC, let me clarify that since REC is an NBFC, non-banking finance company, and we have been following Ind AS norms, accounting norms. Our profitability will not be affected at all. Should RBI stick to its own guideline? That is -- I think is what we are explained that they'll perhaps not keep that stick provisioning norm. But should they do it? What will happen is that we'll have to keep higher provisioning for under capital projects what will those projects which are delayed projects. If we had to make higher provisioning, the trade cost, the cost of lending will increase a bit in respect of those projects which are under customer and which are delayed projects.
Got it, sir. So sir, historically, when RBI has made any kind of like these provisioning norm change or accounting changes, like even when NBFC has transitioned to ECL, they also provided for a mechanism saying, look, you will operate at least with the floor key or India provisions will not be lower than your IGAAP provisions. So now if the regulation is such where the banks have to operate at this 5% standard asset provisioning, do you think that you, despite being an NBFC will be prescribed to maintain a floor on this thing? Because that's traditionally how the RBI has operated. So we're not very privy to how the RBI is thinking. So if you could shed some light on how the RBI engagement is going on over there?
Actually, we have our Board approved ECL policy. And according to this, the floor is whatever is in the policy is there, we are already maintaining as per Ind AS. And every quarter, when the results are public before that, we have a comparison of provisions as per the RBI norms and as well as for the IND AS. IND As has given effect in our balance sheet also. And whatever the difference is there, if any difference is there, that is always passed to the OCI through impairment business account.
And in case if the RBI comes up with a new policy, we'll abide by that, but we have -- not only we -- and all the NBFCs have given their observations and the comments on the proposed policy. Let's wait for the final outcome, and we'll be abide by that.
Sure, sir. Sir, just one last question. In terms of time lines, like when can we expect to hear the final guideline?
Only RBI knows. We cannot give time line.
The next question is from the line of Aditi from Siri Research Private Limited.
My first question is that after are you people with the composition of the current loan growth where your core assessing the relation transmission and distribution is not doing or margin at this point?
Sorry, you have to be a little louder.
Aditi, we could not hear you clearly. Could you please repeat?
Yes, sir. Sir, how comfortable are you with the composition of your current loan book with the core assets that is generation, transition and distribution are not growing or either marginally growing?
Yes. As -- in the opening is, I had mentioned that conventional generation sector is looking at actually some more this conventional generation projects, coal-based summer capital is going to be bad debt next 5 to 6 years. So right now, our portfolio of conventional enregy is about 28%. It might increase from 28%, it might go up to 30%, 32% also. And transmission and distribution, as part of energy transition, this evacuation renewable energy will still require any green energy corridor. The transmission will -- we hope that would to maintain that transmission portfolio. And with regard to distribution, it will -- we'll be able to maintain that distribution portfolio also because what is going to happen is that is RDSS will continue in the next 2 to 3 years. Thereafter, what has happened that the entire distribution network in the country is quite old, 40- to 50-year old.
The distribution companies will need to standard it or replace it. And this CapEx requirement in distribution sector will be there in next 10 to 20 years, actually. But as I mentioned that our renewable energy portfolio will increase right now, it is only 8% of our total loan book. It will increase to, say, about 30% in next 5 to 6 years.
That share of conventional generation, transmission and distribution will all combined will be about 50% to 60%.
Sir, but the government is saying on CapEx, why is it not going in your loan book?
Sorry, you're not very clear.
your voice is not clear, please be a little louder.
Sir, the government is spending quite a few hefty amount in CapEx. So why is it not growing in your loan book?
Government is funding a lot of CapEx, so why it's not growing.
So I think you're talking about perhaps RDSS in which government is giving grant of 60%. In fact, I have to explain this maybe slightly in greater detail. So what is happening is that government grant is contingent upon utility meeting certain benchmarks or some certain parameters. Now some utilities are meeting, and therefore, they are able to draw this 60% grant from the government on time. Despite that 60% grant, they still need funding for 40%.
Now initially, what utilities are doing that they are utilizing the 60% and doing the CapEx loss. And therefore, our disbursement in such utility was slightly delayed. But then there are utilities who are not able to meet certain parameters, and they need this bridge financing. Loss reduction, which is close to INR 140,000 crore works have already been awarded. Now the pace of work is picking up.
And the disbursements have started. In the coming quarters, you will see that a lot of disbursement is happening, particularly in those states who are not able to meet the parameters, which we call REF in RDSS, they'll need rich funding, they'll also need this 40% remaining amount as well.
So I think since this has been awarded only 6 months back, some of these states are getting this support of 60% grant from the government and many are not still able to get it. The disbursement is likely to pick up now in RDSs projects.
Okay. Sir, my second question is that what is the lending rates in the infrastructure and logistics against the traditional assets?
Infrastructure logistics also, it is more than 9%, 9% to 10% of it. And traditional also almost same actually, traditional sector also 9% to 10%. In some cases, it is up to 8.5 like rated distribution companies under RDSS, they are getting 8.75%. But mostly it is between 9% to 10%, it can go up to 10.5% also.
The next question is from the line of Jigar Jani from BNK Securities.
Congratulations on a great set of numbers again. Just 2 questions. One, on the rooftop solar, see, I believe we were planning to finance certain CPCs involved in the scheme. So what are the plans on that? And the second is a bookkeeping question. Out of the 7 assets, which are under relation, what is the quantum of that in the state?
Okay. With regard to rooftop solar, primary has been made national program implementation agency. Our first priority is installed 1 crore rooftop solar at the earlier part. But this segment, we are not targeting to finance actually because these are being. We are not into retail financing. Banks are financing this by rooftop solar individual household, they are giving collateral fee loan at the rate of 7%.
But with regard to government building, Government building work has been assigned to the public sector are taking. They have each been assigned different state government and different departments. Should the state government department or the central government department, our CBS to do on Wesco then they'll require financing from REC. But government building. Otherwise, if they are doing on CapEx mode, they will not require any financing. So you can throw some more light in.
So particularly on the RTS for the household, the funding is largely by the public sector banks and some NBFCs also. But then there is one large component of putting this rooftop solar on government buildings also more central department as well as state department.
And this is the rooftop are actually quite large as compared to household and that is where if these projects are being put on Wesco and maybe in very few cases, not even on CapEx, there is a funding opportunity available. This particular activity for state government and central government building of installation has a target now.
And this, I think, will see some activity happening in financing this particular segment in times to come in maybe Q2 and Q3. And with regard to.
And that regard this 18% provision asset, we have 7 assets. We are a total outstanding values to INR 2,200 crores and against which we have already made 100% provision. We have a RBI-compliant technical write-off policy and we are considering these projects for technically write-off in the months to come. That is already under evaluation.
Okay, sir. And any sizing you have for the rooftop solar? I know it's too early, but would this be coming more in FY '26? Should we expect some opportunity out of this?
Maybe yes, maybe -- I mean for household, it's a very retail sort of a funding some funding, which actually banks are taking care. The states are in the process of preparing plant and once -- and they have time to prepare and submit that plan once that plan is submitted by them. the quantum of the CapEx requirement would then be known, and the opportunity will then come thereafter. So I think this will happen maybe 3 to 6 months from now and over a period of next 2 to 3 years.
Ladies and gentlemen, we'll take this as a last question. And I hand the conference over to the management for closing comments.
I would like to thank all the participants for asking very pertinent questions and we were able to throw more light on our business strategy. And going forward, we would like to maintain the growth trajectory, the traction that we have got last year. And going forward, we'd like to accelerate the pace of our growth and may go from 70% to 20%, as mentioned earlier. Thank you so much. Thank you to all of you.
On behalf of Elara Securities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.