The state-owned Power Finance Corporation’s (PFC) diversification drive is likely to help it generate more revenues and wouldn’t adversely impact its funding capability in the power sector, according to analysts.
On Tuesday, the state-run lender said in a BSE filing that its board sanctioned Rs 15,000 crore to a clutch of projects including some in the north east region, but also a greenfield airport in Andhra Pradesh.
“This does not hamper PFC’s ability per se to finance power sector projects… PFC and (its subsidiary) Rural Electrification Corporation Ltd (REC) would benefit as the spread over there borrowing cost for other infra projects would be relatively higher compared to the financing that they were doing in the power sector,”said Sandeep Sharma, senior analysts at ICRA Ratings.
PFC has been diversifying its portfolio for sometime now which includes sectors like irrigation, metro rail, and e-mobility among others.
PFC-REC have in recent years been supporting the state-run power distribution entities (discoms) under a one-time settlement scheme which is designed to salvage the loss-making firms. The Union power ministry has linked the disbursal of funds to the discoms to their timely payments of dues to gencos, as earlier schemes to revamp the discoms including the UDAY scheme launched by the Narendra Modi government did not yield optimum results due to a lack of disincentive for them to improve operational performance.
“Other infrastructure projects would be more of a compliment to overall power sector lending that REC and PFC would be doing. From a strategic perspective, we do expect these other infra projects to continue to remain relatively a small share in their overall book,” Sharma said.
The corporation’s board of directors also reviewed strategic agendas pertaining to the company’s business diversification strategy, including exploring avenues for expanding the business into new market segments and accelerating the funding in the renewable space, the current domestic and international market scenario and its impact on PFC’s borrowing cost, and strengthening of internal systems to improve asset quality, according to a report by the Press Trust of India.
“Both PFC and REC has revised their memorandum. Earlier they were restricted to pass (funding to other sectors), they have modified those so that they can lend to other sectors,” said an analyst who wished not to be identified. Depending upon where the demand comes from, PFC and REC will continue to fund other infrastructure projects,” the person said.