PFC looks to further reduce NPAs through resolution of stressed assets
Power Finance Corporation Ltd (PFC), India’s leading Government owned NBFC in power sector, is looking further bring down its Non-Performing Assets (NPAs) with resolution of stressed assets. PFC’s NPAs are at four year low now as the state-owned lender was able to resolve 2 projects with an exposure of Rs 2,850 crore last year while it has been able to reach resolution for 2 more projects totalling 1,350 crore this year.
Moreover, the company is also in the process of resolving two more stressed project totalling Rs 5,300 crore. While events like one time settlement with promoter are immediately factored in the books and bring down NPAs, restructuring of bad loans as per RBI guidelines takes time.
Further, the accounts for PFC have remained satisfactory even after the moratorium period. Repayments on 84% of its loan book, which is mainly in the government sector, has remained steady. For the remaining 16% of the portfolio, PFC has already made sufficient provisions. Given the low interest regime, PFC’s cost of funds has substantially reduced by 25 basis points while yield on loan book are stable at 10.6%-10.7%. As a result, PFC’s spread has gone up by 25 to 30 basis points.
During the second quarter of FY 20-21, PFC registered a 54% rise in loan sanctions reaching Rs.50,119 crore from a year ago. Disbursals in the same period stood at Rs.28,826 crore compared to Rs.18,366 crore a year ago.
In the last three years, PFC has shifted its focus on transmission and distribution business from the traditional generating companies. PFC has also sanctioned counterpart funding to the GOI schemes like Integrated Power Development Scheme and Deen Dayal Upadhyaya Gram Jyoti Yojana.