Rural Electrification Corporation (REC), a Navratna Central Public Sector Enterprise that provides loans to SEBs/ State Power Utilities for investments in rural electrification schemes, plans new projects to boost its fee-based income. HD Khunteta, CMD, REC spoke to Amrit Ghosal in this interview with the Free Press Journal
You recently released your Q1 results wherein total income was up 23% and PBT and PAT were reported up 13%. Can you tell us more about the quarter and your outlook for the current quarter?
During the Q1, the total interest income amounted to Rs 2313 crore against Rs1877 crore in the previous year. The annualised yield on loan was 11.04% in Q1 of FY 12 as against 11.11% in the previous year.
With the increase in the interest rates in current financial year, we expect to maintain the yield on the loans in Q2 also.
How well- funded are you to power this growth story, and how does the rural market look like in these times of monetary tightening from the RBI?
What are your fund raising plans in the current fiscal? Our total requirement for the market borrowing for the year 2011- 12 is about Rs 28, 000 crore and out of this at the end of the Q1 we have raised over Rs3000 crore from the market.
The company follows judicious mix of raising resources from the various sources both from domestic market and abroad. Last year, we raised about $ 1.17 billion from international market at very competitive rate, including $ 500 billion through Reg S Bond which are also listed on the Singapore Stock Exchange. Despite monetary tightening, we expect no problem in meeting our market borrowings programme for the current financial year.
FY 12 Q1 appears to have shown a sharp increase in NPAs this time?
You have shown net NPAs of Rs. 227 cr. Vs Rs. 2 cr. For the comparable quarter last year. What has caused this kind deterioration in loan quality? In case of our borrower Account, there was non receipt of interest due consecutively for two quarters and in terms of REC Prudential Norms the said loan of total outstanding of Rs 250 crore has to be classified as NPA in the Q1 FY 12. There is no cause of alarm of any deterioration in the loan quality.
What areas of focus do you have in the current economic situation – and how much are you expanding in areas of green power, say, solar?
We are focusing on expanding the business of financing power projects to include projects having backward and forward linkages to power projects.
We are also developing new opportunities to have fee based income. The thrust of the Government of India on the renewable energy sector, and several policy initiative on this front, including the mandatory renewable energy purchase obligations imposed on the distribution companies are creating favourable climate for the sector. During the financial year 2010- 11, six numbers solar projects were sanctioned for a total project cost of Rs. 621.06 crore and loan assistance of 390.71 crore.
As a Navratna PSU, where do you see the larger picture at a time when there is a push for rural development to take the fruits of growth into the hinterlands?
As a Navratna PSU engaged in core infrastructure sector i. e. Power and as a nodal agency for the flagship programme of Government of India i. e. RGGVY dealing with the rural people, we expect to play major role especially in the power sector giving a big push for rural development.
As a financier, how do you read the financial health of State Electricity Boards and Rural electric Cooperatives – the main agencies that you fund?
The financial health of State Electricity Boards is an area of concern and we are closely monitoring the same and keeping the various factors affecting the health of the borrowers in view while taking financing decisions.
What is the overall power sector scenario in rural India, and how do you envision your Corporation growing to meet rising demand?
Under RGGVY Scheme of the Government of India, infrastructure is being created for providing power for all by 2012 and as per the present indications we hope to achieve the same.
Some insights into your loan portfolio – is it usually longer term, and at what rates do you finance and has there been a change in the overall operating matrix given the current market conditions?
Yes, most of our financing is Term loan on long- term basis. Our interest rates are most competitive in the industry and keep on changing based on the market conditions and our cost of funds. There has been no major change in the overall operating matrix.
You are also the nodal agency for channeling funds under the RGGVY ( Rajiv Gandhi Grameen Vidyutikaran Yojana)… what has been your financing under this scheme so far and where is it he added in the current fiscal?
Under RGGVY upto 31st March, 2011, 573 projects covering electrification of 118499 un- electrified villages ( provisional revised coverage 111062) and 2.46 crore BPL households ( Provisional revised coverage 2.33 crore) costing Rs. 26349.03 crore have been sanctioned by the ministry of power for implementation. During the current financial year, the scheme is targeting to cover 14500 number of villages for electrification and provision of free electricity connection to 52 lakh BPL households.
