The Andhra issue would soon get resolved. They have started paying back developers. The IREDA has given it some money. PFC-REC is also providing some support. The Andhra case, though a dampener, is also an eye-opener. That is the worst that can happen to a renewable project.
PTC India Financial Services (PFS), a major lender in the power sector, is gradually reducing its exposure to coal-based electricity generation. The NBFC is diversifying its source of funding, and sees 2020 to be a turnaround year. CEO Pawan Singh tells FE’s Anupam Chatterjee how the recent developments in renewable energy have been an eye-opener. Excerpts:
Are you affected by the diminishing utilisation levels of coal-based power plants?
We are reducing our exposure to the thermal power sector. We have brought our exposure down from 30% last year to less than 10% now, and this will go down even further. By June-July, the share of thermal power in our lending portfolio should be around 4-5%. Around 60% of our portfolio is renewable energy and around 20% comprises various infrastructure projects such as transmission lines, sewage treatment plants, HAM road projects and some better-performing discoms.
In the light of the recent development in Andhra, what makes you optimistic about the renewable energy sector?
The Andhra issue would soon get resolved. They have started paying back developers. The IREDA has given it some money. PFC-REC is also providing some support. The Andhra case, though a dampener, is also an eye-opener. That is the worst that can happen to a renewable project. But the silver lining is that the Centre, courts and regulatory bodies have come together in support of developers, uplifting the prominence of sanctity of the contract. This seldom happens in the country. This, I take in a positive stride. No arbitrary decision has been vindicated by higher authorities. But there are other issues with renewable energy as well.
Our projects are facing much of curtailment issues. The renewable PLFs are comfortable. There are issue of regular payments from a few discoms, but none of them has defaulted. Our lending model already incorporates that factor. It already provides protection for 9-12 months for counter party risks. It is already an in-built and accepted risk in the renewable business. All lenders do that, some for six months, some nine, some twelve months, but a cushioning exists.
What is the current status of stressed assets in your portfolio?
We have been able to recover roughly about Rs 1,000 crore in the last one year. Our stressed portfolio of Rs 1,600-1,700-crore has come down to about Rs 500 crore and even these are in their advanced stage of resolution. Our net non-performing accounts (NPA) stood at 3.92% at the end of Q2FY20, down by 5%. We have reduced our NPA size by Rs 1,100 crore in the December quarter itself. Our business is based on the return-on-asset model. Now, with the denominator getting reduced, all operating parameters are going to improve – yields, spreads and net interest margins are going to improve. All parameters critical to NBFC are going to improve.
What avenues are you exploring for raising funds?
We have raised Rs 500 crore at base rate. For the first time, the Saarc fund has given us $15 million. The Japan International Co-operation Agency, in its first private sector lending, will be investing $30 million. The International Finance Corporation too funded $60 million. We are expecting these disbursements in January. We would reach a total borrowing level of Rs 5,000 crore.
We are raising foreign funds for a number of reasons. We need to diversify our source of borrowing. As an aftermath of the recent NBFC crisis, banks have stopped lending to us. We are also doing partial credit enhancement (PCE). In the first tranche of funding through this route, we expect Rs 580 crore in January.
Normally, we would have A+ rating, but with PCE support from SBI, these borrowings would be rated as AA+. This is the first-of-its-kind model being tried in the country.