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Analyst Meet / AGM - Analyst Meet

Targets disbursements of Rs 50000 crore for FY2017

Rural Electrification Corporation

15-Feb-2017, 11:01
Rural Electrification Corporation conducted an analyst meet on 14 February 2017 to discuss the financial performance for the quarter ended December 2016. PV Ramesh, CMD of the company addressed the call:

Highlights:

The loan book of the company was nearly flat over a year ago level at Rs 201937 crore at end December 2016. The loan growth of the company was impacted by prepayment of loans amounting to Rs 31137 crore from power distribution companies (Discoms).
The company has stepped up disbursements to compensate for prepayment of discom loans. The disbursements have increased to Rs 37467 crore in 9MFY2017 compared with Rs 34031 crore in 9MFY2016. The disbursements have picked up to Rs 44000 crore as on date, while the company has targeted disbursements of Rs 50000 crore for FY2017.
As per the company the loan growth for FY2017 may be in the range of 3-5%, if prepayments from Tamil Nadu state discom shifts to next year.
The sanctions have galloped to Rs 67391 crore in 9MFY2017 from Rs 49262 crore in 9MFY2016.
The company is expecting huge lending opportunities in the power sector, particularly in the segments such as renewable energy, modernizing thermal power projects, modernizing transmission and distribution etc. As per the company, the modernization of transmission and distribution holds lending potentials worth Rs 10.5 trillion.
The company is also nodal is for various central government flag programs. The company is sharing knowledge and technology with states, while supporting them in better implementation of flagship schemes in the power sector. The company signed an MoU with 2 states for supporting in addressing of issues in the power sector under five year program.
The other income of the company was boosted by income of Rs 170 crore on investment of Rs 1500 crore in the Tier I bonds of Vijaya Bank and Indian Bank. The coupon rate on these bonds stand at 11%.
The GNPA ratio of the company stood at 2.32% and NNPA ratio at 1.68% at end December 2016. NPA ratio's of the company were mainly impacted by steady loan book.
During Q3FY2017, the accounts of Bhavnagar Biomass Power Projects with the exposure of Rs 25 crore and Ind-Bharat Power (Madras) Rs 416 crore slipped to NPA category, while the account of Alaknanda Hydro Power with the exposure of Rs 573 crore was upgraded.
The restructured advances of the company stood at Rs 19539 crore at end December 2016 down from Rs 23159 crore at end September 2016. During Q3FY2017, the account of UP state power project with the exposure of Rs 4562 crore was upgraded to standard category, while provision of Rs 180 crore was reversed.
Under 5/25 refinancing scheme, the company has exposure of Rs 2000 crore for 3-4 projects.
As per the company, its provision coverage ratio was above 100%.
The RBI has provided dispensation to the company to follow existing 6 months overdue basis NPA recognition norms till 31 March 2017 instead of 4 months as applicable to other NBFCs. The company has requested the dispensation by another 3 years from tighter NPA recognition norms for state sector projects. The company is already following 3 months NPA recognition norms for private sector projects.
However, the company do not expects any impact of shift to lower bucket NPA recognition norms on its asset quality ratios.
The company has witnessed interest income reversals of Rs 200 crore in Q3FY2017, which impacted spreads by 15 bps. The yield on incremental loans for the company stands at 11.5%. The company expects to maintain spreads above 3%.

UDAY scheme

About 21 states and 1 union territory have joined UDAY scheme as on date. As per the UDAY scheme, about 75% of the discom debt will be taken over by state governments, and balance will remain with the discoms. Most state discoms are doing well, post joining UDAY scheme.
About Rs 1.9 trillion of discom loan have been converted into bonds guaranteed by the state governments.
The company has exposure of Rs 78000 crore towards discom sector, of which Rs 31137 crore of exposure has been already been prepaid, while the company expect another prepayment of Rs 12000 crore from the states discoms such as Tamil Nadu (Rs 7000 crore), Madhya Pradesh and Telengana.