Regarding the Gujarat IFSC branch which you have opened — what is the projected growth we foresee from that over the next 1, 2 years? And do we really have a plan to fund foreign companies or Indian companies in their abroad projects?
We have just received the certificate for commencement of business and being a financial company, so we are expecting that we will be disbursing loans to the various infrastructure sector, including power sector. We are intending to target domestic as well as the foreign companies. From IFSC, we can disburse only in foreign currency. Once we infuse capital more and then definitely we raise debts as funds are the stock in trade for any NBFC. So we will start our operations. We have a healthy pipeline, but it will all depend on basically capital, what we are infusing that how much business we can pick up. Otherwise, we have a lot of interest from various especially power sector developers in India for taking a foreign currency loan from our GIFT City project.
I understand there are some tax benefits if we do that. So generally, our profit margins and all will be much higher once the business there takes off?
There is a tax holiday of 10 years in IFSC GIFT City. So it's very difficult to answer this question that how our profit margins are going to be there in the IFSC GIFT City subsidiary.
Can we expect maybe something like a 10% loan book at the end of 10 years from the foreign borrowings?
PFC has a INR5,00,000 crores plus loan book. So it's not a branch. It's a separate independent subsidiary, which will be functioning. Even if we infuse hypothetically say if we infuse INR1,000 crores as capital, there are always exposures which we need to take and the capital adequacy we need to maintain. So to start with, I think we have to go a bit slow till the time we build on the capital.
Can you quantify the Stage 2 assets? And when is the Andhra Pradesh discom expected to be regularized?
Andhra Pradesh utility, they are regular now in payments. And the Stage 2 — as you already know, that we always have most of the 80% of our book is from the state sectors. And in the state, we have never experienced any of the NPAs coming out, there is slightly delays. A few of the states, there are around that they may fall in 1 quarter in the Stage 2. But in the next quarter, they are upgraded to Stage 1. So this off and on is happening, and most of the Stage 2 projects are in the state sector.
Can you give us the disbursement target for the full year?
See, disbursement — why you want to have the disbursement target? It ultimately boils down to the growth. And we have given a very clear-cut guidance that we are expected to have the similar level of growth as we have in the previous years, and it's around 14%.
On assets under resolution — could you help me with this number on KSK, how may be 100% recovery is on principal or admitted claims in NCLT? Because I understand your admitted claims are higher versus the principle that is there. And on Sinnar Thermal Power plant, could you let us know what is happening over there and what could be the likely recovery?
In KSK, our recovery is more than the claim amount. On Sinnar — we have invited the bids and at one stage we have received the bids but the evaluation process is still on. So I think in a month or so, we may finalize the evaluation and then we will submit it to NCLT after the approval of NCLT only that will able to adjust it.
For FY '25, we are expecting loan growth to be similar to last year, which is around 14% levels. Next year onwards, what is the loan growth that we have in mind?
The loan growth — as our base is expanding, so any higher percentage of the loan growth may not be possible. And at this stage also, if you see the last year disbursements were to the tune of around INR125,000 crores and that's a huge sum. So it will all depend on how the economy grows and how the infrastructure sector picks up within the overall economic growth of the country. So as you are already aware that we are one of the largest lenders in the infrastructure and especially for the power sector. So our contribution is going to be accordingly.
From a sensitivity perspective, if there is a 25 basis cut in the repo rates, what will that translate into the impact on our margins? And second — within your infrastructure and others book, what is the mix of public and private? And likewise, if you look at 1H sanctions in infra sector, what is the mix between public and private? And last — any update from power ministry or finance ministry on the RBI circular on ECL provisions on project financing.
On repo sensitivity — it's very difficult to say because our borrowing is not linked to the repo rate, and we have already seen there has been a downward trend in the bond market. Whereas on the bank loan book front, banks marginal costs are either steady MCLR rate or is increasing. So there has not we have not witnessed any decline in the bank rates, especially in the MCLR rate of the bigger banks. We have around 30% of our borrowing from the bank. So how that mix is going to be there and how the market benchmarks are going to be affected with any cut in the repo, that we have to see before we work out any impact. On infrastructure mix — for the infrastructure sector, 96% sanctions are for the government sector and only 4% is for the private sector. We are following a steady and slow process for funding of the infrastructure sector. And we are cautious because it's a new sector for us. Out of the H1 book, the total sanctions for H1 is around INR23,000 crores, maybe INR24,000 crores, and the percentage may be the same. On RBI circular — PFC, as well as other lenders through their respective ministries and banks also to the Ministry of Finance has taken up the issue with RBI on the infrastructure provisioning circular. So we have to see whatever suggestions have been given what finally comes out in the final version of the circular and only then, we will be able to say something.
On a consolidated basis, our recoveries from nonperforming assets might be upwards of INR8,000-8,500 crores pre-tax. That is between REC and PFC — KSK Mahanadi, Hiranmaye, Sinnar. Our provisioning has been quite conservative. That would add like almost 1/4 of earnings. It would increase our capital adequacy rate (already 25%) to much higher level. Shouldn't growth required especially from PFC and REC be much higher? Like 14% is a very low number?
I think your observation is correct. We have been conservative in provisioning. And as a result, we have we are expecting our recoveries to be good as compared to the provisioning whatever we made. But on the other side, that we require capital for growth. As you have seen that in the previous quarter, we were at around 27%. And this quarter, we are at 24.5%. That all depends on capital adequacy. The risk rate which we assign is very important. We had disbursed a lot of money under various schemes like LPS, LIS, where it was all backed by government guarantee, and a 20% risk rate was required to be assigned to those assets. If we go for the growth in the current scenario, where a lot of capital works are happening — that is going to attract and not backed by government guarantees, that is going to attract a 100% risk rate on those assets. For that purpose and maintaining the capital, for a consistent growth going forward, we need some capital on the regular basis. But yes, to some extent, during the intervening period, we may have some reversals resulting in higher profit. As you know, what is our dividend policy — we always follow the government of India guidelines for the dividend, and we paid 30% of the profit after tax for 5% of the net worth as dividend, whichever is higher. We are going to follow that policy in the coming future years also.
I think your growth projection is too conservative given the total addressable market and the need from the country to add power generation. The market is not discovering the true value of Power Finance Corporation. And at a certain point, you'll have to reveal that PFC is one of the best companies in India right now.
I think you observed that there is a lot of potential for infrastructure and power sector financing in the country. Looking at the overall target for funding of the power sectors, it is expected that a 30 lakh crores is expected to be the funding requirement in 2030. So there is going to be a huge requirement. But with a lot of institutions coming up for infrastructure financing — PFC, REC in any case is there, IIFCL is there, now NABFID is coming up. Apart from infra, traditionally, other than power sector, all infrastructure sector is being taken care by the banks. So I think all the institutions have sufficient headroom available for the growth. We wanted, for the infrastructure sector, as per our earlier guidance, we wanted to be a bit slow and cautious in our approach because it's a new area for us. The power sector — I can assure you that the power sector business as much as we can do, we will definitely be doing.
Adani Power plant supplying power to Bangladesh — if you could give some colour on what is the exposure? What is the loan security mechanism? And if there is any stress foreseen on that asset?
I don't remember upfront what is the outstanding. But definitely, we have funded the project in the Jharkhand, which is supplying power to the Bangladesh. But there has not been any delay of a single day in our recoveries from this project. The promoter is taking care, and we have heard that they are going to get all their payments from the Bangladesh government soon. But otherwise, there is no delay for the PFC servicing.
Last thing confirming — next 2 quarters, what is the expected write-back we can expect if the KSK Mahanadi and all gets resolved in the next 6 months? Can we assume something around INR1,000 crores?
The only thing is that once the evaluation is complete, we will be submitting it to NCLT, but we can't say that when the NCLT approval is going to come. Once we received the NCLT approval and the restructuring plan is implemented, what has been approved by NCLT only then we can go for reversal of the provisioning. I can share you the number that in Shiga, have INR159 crores of provisioning, in TRN we have around INR550 crores provisioning and in KSK, we have around INR1,800 crores provisioning. It all depends on the stage of resolution. And we are expecting that in TRN and Shiga, we will be able to conclude within this financial year.
On margin front — how do you see the margin trending for us for the second half? Given the current situation, will we be near the upper band side of 3-3.5% NIM range or lower side?
See, we always have given guidance that our margins are going to remain at around 3% to 3.5% range. And we expect that we will definitely be within these levels. It all depends on the growth numbers. And if you see that in first half, we are slightly above 3.5%.
First on disbursement side — while disbursements have picked up well after the glitch we saw in 1Q, I wanted to understand have there been higher repayments in renewable or distribution sector because in spite of disbursements picking up, loan growth has been at 10%? Second on asset resolution — you mentioned Lanco and two other loans of INR313 crores. But one of your peers has reported some cash recovery from KSK project approved by NCLT. Didn't that come to you and wouldn't we see some negative credit costs?
I would like to answer your second question first about some cash recovery from one of the stressed assets. We have not accepted that, and that has remained unallocated, and we are waiting for the final resolution to be achieved before we do allocation in the particular asset. So that is lying in the unallocated funds for PFC. On loan book — our recoveries were scheduled a bit higher in the first half as compared to in the second half. So that is the reason that you are not seeing the growth coming in the first half even despite we are having disbursed around INR64,000 crores.
And what's the reason for not accepting it?
How much recovery is there, it will all depend on the final NCLT order. Once we receive the NCLT order, then only we can decide that how much is the principal to be adjusted and how much has been accounted for as the interest. So till such, in our view, we can't allocate it right now. It will not be prudent. So we have not done any provision reversal to that extent.
On the conventional generation book — that book has been steady at the same level for the past couple of quarters. Are we seeing any movement on ground in terms of thermal capex, any sanctions you could talk about?
Yes, definitely, the focus of the government is to almost double the capacity by 2030. And for that, a major chunk, maybe around 84 gigawatts is going to be contributed from the thermal or the conventional part. So this, if we talk of the first half of FY '25, we have sanctioned around INR50,000 crores worth of loan to the conventional project. So there is a movement, and it's picking up. It's going to take another 3 to 4 years for disbursement to have complete in this aspect.
Can you provide colour on the infra portfolio, infra and others? I wanted to know if you can provide some colour on this INR21,000-odd crores of infra plus other projects. Like what are these? Are these pure core infra-assets and the like?
See, infrastructure around — we have an outstanding book of around INR21,000 crores. And the major outstanding balances are, one is the HPCL Rajasthan Refinery. And we have also funded the manufacturing facilities to the various private sector developers. And there are small, small other infrastructure segments where the outstanding is around INR9,400 crores. That majorly consists of the various ports, which are there.
Q1 you mentioned the due-diligence process is underway for Shapoorji Pallonji Group loan and finalization will depend upon completion of the processes. What is the colour on that? Are we lending to Vodafone Group?
Shapoorji Pallonji — we have done a detailed due diligence, but somehow the Board in its wisdom has decided that since it's a new sector for us, so we may not take that high-end exposure. So finally, we have decided not to go ahead with the sanctioning of the loan for Shapoorji Pallonji. And the other known loan, Vodafone — it was never in the consideration zone in PFC. I don't know from where all these media news are coming from.
Can you provide sanction breakup across key segments?
Sanction in the generation — we have sanctioned, in this financial year, we have sanctioned around INR160,000 crores. Around 60% is in the generation. And distribution constitutes to around 17%, infrastructure, 15%; transmission and other sectors, maybe around 8%.
What is our incremental cost of funds? And the latest FCB borrowings — what is the blended cost?
Blended cost for the raising made during the H1 is around 6.27% if we consider the foreign currency loan. And of that, the foreign currency borrowings without hedging if we consider is around 3%. This is the incremental cost of borrowing, otherwise, the weighted average cost of borrowing is around 7.5%.
On infra projects, as you mentioned that for that particular project, it went to the Board and decided not to do it. How does it work? Do all infra projects go to the Board? And if the Board decides, is it mandatory for you to stick to what the Board is saying in these projects?
As per our internal delegation of power, infrastructure project sanctions will go to the Board. And in Board, a collective decision is always done for whatever proposal has been made by the concerned appraising units, then it will go to the Board and Board takes collective decision. Yes, definitely. Board is the competent authority to approve projects.
On the generation disbursement of around INR15,000 crores during this quarter — how much will be renewable?
With respect to disbursement, this particular quarter, we have disbursed around 32% to the generation, out of which 13% is towards the renewable and 19% is towards the conventional project. This is about the Q2 2025.
On margins — given that very soon we might be heading into a declining interest rate environment in India. Can you just explain — when you look at assets, what proportion are fixed and floating? Within floating, at what frequency do they come up for repricing? And on liability side, what proportion are fixed and floating?
On the liabilities front, we have around 27% as the floating rate liabilities and around 72%, 73% as the fixed rate liability. As you know, that most of our borrowing is from the bond market, and bond market doesn't have the depth and the appetite for the floating rate bonds. Whereas on the asset side, we have around 95% of the assets are on the floating rate as in most of the asset lending, we have either a 3-year reset clause or a 1-year reset clause. So based on our overall cost of weighted average cost of borrowing, we do fix the lending rate and whatever is the current lending rate, our repricing of the assets is going to happen at those rates. The average cost of borrowing will be the basis for the internal card rates.
On TRN Energy — what would be your PCR here? Just confirming Sinnar would be 80% and KSK would be 55%? And what would be recovery expectations on TRN and Shiga given we are very close to resolving them?
TRN Energy — we have around 50% provisioning. Yes (Sinnar 80%, KSK 55%). I think our provisioning will be sufficient to take care of resolution process. And there would be slightly write-back also.
This quarter disbursements have been pretty strong. Was it like some disbursements of Q1 which could not be done because of the system change you went through? Or should we see this run rate sustaining? And is this after deciding not to go ahead with Shapoorji — you still think 13%, 14% would be doable?
I think we will be able to keep the pace what we have achieved, and we will be able to get the growth numbers in line with the previous year. You're right.