MIRA
INFORM REPORT
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Report Date : |
18.02.2011 |
IDENTIFICATION DETAILS
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Name : |
POWER FINANCE CORPORATION LIMITED |
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Registered
Office : |
‘Urjanidhi’, 1, Barakhamba Lane, |
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Country : |
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Financials (as
on) : |
31.03.2010 |
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Date of
Incorporation : |
16.07.1986 |
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Com. Reg. No.: |
024862 |
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CIN No.: [Company Identification
No.] |
L65910DL1986GOI024862 |
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Legal Form : |
Public Limited Liability Company. The Company’s Shares are Listed on
Stock Exchange |
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Line of Business
: |
To Finance Power Projects - Generation, Transmission,
Distribution and Renovation and Modernization |
RATING & COMMENTS
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MIRA’s Rating : |
A (67) |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
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Maximum Credit Limit : |
USD 530431600 |
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Status : |
Very Good |
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Payment Behaviour : |
Regular |
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Litigation : |
Clear |
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Comments : |
Subject is a well established and reputed company having fine track.
Financial position of the company is good. Directors are reported as
experienced and respectable businessman. Trade relations are reported as
fair. Business is active. Payments are reported to be regular and as per
commitments. The company can be considered good for normal business dealings at
usual trade terms and conditions. |
NOTES :
Any query related to this report can be made
on e-mail : infodept@mirainform.com
while quoting report number, name and date.
ECGC Country Risk Classification List – April 1, 2010
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Country Name |
Previous Rating (31.12.2009) |
Current Rating (01.04.2010) |
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A1 |
A1 |
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Risk Category |
ECGC
Classification |
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Insignificant |
A1 |
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Low |
A2 |
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Moderate |
B1 |
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High |
B2 |
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Very High |
C1 |
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Restricted |
C2 |
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Off-credit |
D |
LOCATIONS
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Registered Office : |
‘Urjanidhi’, 1, Barakhamba Lane, |
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Tel. No.: |
91-11-23456000 |
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E-Mail : |
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Website : |
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Regional Office
(West): |
Ground Floor, Mumbai-400 020, |
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Tel. No.: |
91-22-22882440 |
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Regional Office
(South): |
1st Floor (Rear Side), |
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Tel. No.: |
91-44-28602431 |
DIRECTORS
AS ON 31.03.2010
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Name : |
Mr. Satnam Singh |
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Designation : |
Chairman and Managing Director |
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Name : |
Mr. M K Goel |
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Designation : |
Commercial Director |
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Name : |
Mr. Rajeev Sharma |
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Designation : |
Projects Director |
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Name : |
Mr. R Nagarajan |
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Designation : |
Finance Director |
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Name : |
Mr. Devender Singh |
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Designation : |
Government Nominee Director |
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Name : |
Mr. Rakesh Jain |
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Designation : |
Government Nominee Director |
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Name : |
Mr. Ravindra H Dholakia |
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Designation : |
Independent Director |
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Name : |
Mr. P Murali Mohana Rao |
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Designation : |
Independent Director |
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Name : |
Mr. S C Gupta |
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Designation : |
Independent Director |
KEY EXECUTIVES
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Name : |
Mr. J. S. Amitabh |
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Designation : |
Company Secretary |
MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN
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Names of Shareholders |
No. of Shares |
Percentage of
Holding |
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(A) Shareholding of promoter
and Promoter Group |
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1) Indian |
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a) Individuals / Hindu Undivided Family |
700 |
-- |
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b) Central Government / State Government(S) |
1030449300 |
89.78 |
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2) Foreign |
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(B) Public Shareholdings |
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1) Institutions |
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a) Mutual Funds |
24750094 |
2.16 |
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b) Financial Institutions/Banks |
328167 |
0.03 |
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c) Insurance Companies |
10417013 |
0.91 |
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d) Foreign Institutional Investors |
40303280 |
3.51 |
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2) Non – Institution |
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a) Bodies corporate |
23830084 |
2.08 |
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b) Individuals |
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i. Individual Shareholders holding nominal share capital upto Rs.0.100
Million |
15660565 |
1.36 |
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ii. Individual Shareholders holding nominal share capital in excess
Rs.0.100 Million |
1127449 |
0.10 |
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c) Any other |
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i) Non Residence Indians |
292789 |
0.03 |
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ii) Clearing Member |
582306 |
0.05 |
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iii) Trust |
24856 |
-- |
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iv) Foreign Nationals |
97 |
-- |
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Total |
1147766700 |
100.00 |
BUSINESS DETAILS
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Line of Business : |
To Finance Power Projects - Generation, Transmission, Distribution and Renovation and Modernization |
GENERAL INFORMATION
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Bankers : |
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Facilities : |
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Banking
Relations : |
-- |
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Auditors : |
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Name : |
K.K. Soni and Company Chartered Accountant |
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Name : |
Raj Har Gopal and Company Chartered Accountants |
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Subsidiaries : |
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CAPITAL STRUCTURE
AS ON 31.03.2010
Authorised Capital :
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No. of Shares |
Type |
Value |
Amount |
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2000000000 |
Equity Shares |
Rs.10/- each |
Rs.20000.000 Millions |
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Issued, Subscribed & Paid-up Capital :
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No. of Shares |
Type |
Value |
Amount |
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1147766700 |
Equity Shares |
Rs.10/- each |
Rs.11477.700
Millions |
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FINANCIAL DATA
[all figures are
in Rupees Millions]
ABRIDGED BALANCE
SHEET
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SOURCES OF FUNDS |
31.03.2010 |
31.03.2009 |
31.03.2008 |
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SHAREHOLDERS FUNDS |
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1] Share Capital |
11477.700 |
11477.700 |
11477.700 |
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2] Share Application Money |
0.000 |
0.000 |
0.000 |
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3] Reserves & Surplus |
121130.200 |
103600.500 |
81820.800 |
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4] (Accumulated Losses) |
0.000 |
0.000 |
0.000 |
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NETWORTH |
132607.900 |
115078.200 |
93298.500 |
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LOAN FUNDS |
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1] Secured Loans |
0.000 |
0.000 |
0.000 |
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2] Unsecured Loans |
671084.100 |
521601.500 |
406478.100 |
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TOTAL BORROWING |
671084.100 |
521601.500 |
406478.100 |
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DEFERRED TAX LIABILITIES |
469.500 |
554.800 |
12402.500 |
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Interest Subsidy Fund from GOI |
6634.900 |
9089.400 |
10667.500 |
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TOTAL |
810796.400 |
646323.900 |
522846.600 |
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APPLICATION OF FUNDS |
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FIXED ASSETS [Net Block] |
727.700 |
751.500 |
770.000 |
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Capital work-in-progress |
17.300 |
0.000 |
0.000 |
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INVESTMENT |
314.300 |
358.600 |
655.900 |
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DEFERREX TAX ASSETS |
0.000 |
0.000 |
0.000 |
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LOANS |
798557.600 |
644289.900 |
515683.100 |
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CURRENT ASSETS, LOANS & ADVANCES |
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Inventories |
0.000
|
0.000 |
0.000 |
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Sundry Debtors |
0.000
|
0.000 |
0.000 |
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Cash & Bank Balances |
13943.000
|
3928.300 |
6745.000 |
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Other Current Assets |
15927.600
|
13405.700 |
10558.600 |
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Loans & Advances |
18284.100
|
19357.500 |
12592.000 |
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Total
Current Assets |
48154.700
|
36691.500 |
29895.600 |
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Less : CURRENT
LIABILITIES & PROVISIONS |
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Sundry Creditors |
0.000
|
4.500 |
4.500 |
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Other Current Liabilities |
21245.200
|
18607.400 |
11949.400 |
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Provisions |
15730.000
|
17155.700 |
12204.100 |
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Total
Current Liabilities |
36975.200
|
35767.600 |
24158.000 |
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Net Current Assets |
11179.500
|
923.900 |
5737.600 |
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MISCELLANEOUS EXPENSES |
0.000 |
0.000 |
0.000 |
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TOTAL |
810796.400 |
646323.900 |
522846.600 |
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PROFIT & LOSS
ACCOUNT
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PARTICULARS |
31.03.2010 |
31.03.2009 |
31.03.2008 |
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SALES |
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Income |
80021.000 |
65573.700 |
50292.800 |
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Other Income |
747.600 |
261.700 |
107.600 |
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TOTAL (A) |
80768.600 |
65835.400 |
50400.400 |
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Less |
EXPENSES |
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Bonds Issue Expenses |
437.900 |
656.800 |
118.600 |
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Personal and Administrative and Other Expenses |
1057.600 |
867.100 |
809.500 |
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Amortization of Intangible Assets |
4.300 |
2.800 |
0.200 |
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Provision for contingencies |
(5.700) |
21.700 |
(102.100) |
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Provision for Decline in value of investments |
(15.200) |
14.900 |
(2.400) |
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TOTAL (B) |
1478.900 |
1563.300 |
823.800 |
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Less |
PROFIT
BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (A-B) (C) |
79289.700 |
64272.100 |
49576.600 |
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Less |
FINANCIAL
EXPENSES (D) |
49122.400 |
44329.200 |
31707.000 |
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PROFIT
BEFORE TAX, DEPRECIATION AND AMORTISATION (C-D) (E) |
30167.300 |
19942.900 |
17869.600 |
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Less/ Add |
DEPRECIATION/
AMORTISATION (F) |
33.800 |
38.400 |
44.800 |
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Add |
PRIOR PERIOD
ADJUSTMENT |
1.300 |
0.200 |
52.100 |
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PROFIT BEFORE
TAX (E-F) (G) |
30134.800 |
19904.700 |
17876.900 |
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Less |
TAX (I) |
6562.300 |
205.100 |
5809.300 |
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PROFIT AFTER TAX
(G-I) (J) |
23572.500 |
19699.600 |
12067.600 |
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Earnings Per
Share (Rs.) |
20.54 |
17.16 |
-- |
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QUARTERLY RESULTS
|
PARTICULARS |
30.06.2010 |
30.09.2010 |
31.12.2010 |
|
Type |
1st
Quarter |
2nd
Quarter |
3rd
Quarter |
|
Sales Turnover |
24046.340 |
25308.130 |
25756.930 |
|
Total Expenditure |
677.750 |
357.470 |
557.060 |
|
PBIDT (Excl
OI) |
23368.590 |
24950.660 |
25199.870 |
|
Other Income |
129.150 |
590.750 |
54.690 |
|
Operating
Profit |
23497.740 |
25541.410 |
25254.560 |
|
Interest |
14896.430 |
15894.620 |
16227.400 |
|
Exceptional
Items |
0.000 |
0.000 |
0.000 |
|
PBDT |
8601.310 |
9646.790 |
9027.160 |
|
Depreciation |
8.620 |
15.550 |
12.410 |
|
Profit
Before Tax |
8592.690 |
9631.240 |
9014.750 |
|
Tax |
2069.110 |
2622.860 |
2426.270 |
|
Reported PAT |
6523.580 |
7008.370 |
6588.490 |
|
Extraordinary Items |
0.000 |
0.000 |
0.000 |
|
Prior Period Expenses |
0.000 |
0.000 |
0.000 |
|
Other Adjustments |
0.000 |
0.000 |
0.000 |
|
Net Profit |
6523.580 |
7008.370 |
6588.490 |
KEY RATIOS
|
PARTICULARS |
|
31.03.2010 |
31.03.2009 |
31.03.2008 |
|
PAT / Total Income |
(%) |
29.18
|
29.92 |
35.46 |
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Net Profit Margin (PBT/Sales) |
(%) |
37.66
|
30.35 |
35.54 |
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Return on Total Assets (PBT/Total Assets} |
(%) |
61.64
|
5316 |
58.30 |
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Return on Investment (ROI) (PBT/Networth) |
|
0.23
|
0.17 |
0.19 |
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Debt Equity Ratio (Total Liability/Networth) |
|
5.34
|
4.84 |
4.61 |
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|
Current Ratio (Current Asset/Current Liability) |
|
1.30
|
1.03 |
1.24 |
LOCAL AGENCY FURTHER INFORMATION
FINANCIAL PERFORMANCE
REVENUE
The total income during the financial year 2009-10 was Rs.80768.600 Millions registering an increase of 22.68% as compared to Rs.65835.400 Millions in financial year 2008-09. Operating income for the year increased from Rs.65573.700 Millions to Rs.80021.000 Millions showing an increase of 22.03%. Interest income including lease income for the financial year 2009-10 was higher at Rs.78671.600 Millions against Rs.63617.800 Millions in 2008-09.
EXPENSES
Interest and other finance charges for the financial year 2009-10 amounting to Rs.49560.300 Millions accounted for 97.88% of total expenses. Personnel and Administration expenses were 2.09% of total expenses and 0.13% of Loan Assets.
PROFIT
During the financial year 2009-10, the Company earned a net profit of Rs.23572.500 Millions as compared to Rs.19699.600 Millions for the financial year 2008-09 registering an increase of 19.66%.
SHARE CAPITAL
The paid-up share capital of the Company is Rs.11477.700 Millions consisting of 1,14,77,66,700 equity shares of `10 each. The Government of India holds 89.78% of the equity share paid-up capital.
LENDING OPERATIONS
The Company issued sanctions of Rs.592280.000 Millions during the financial year 2009-10. An amount of Rs.244870.000 Millions was disbursed during the same period to State, Central, Private Limited Liability Company and Joint Sector entities, compared to Rs.207290.000 Millions disbursed during the last year. With this, cumulative sanction of Rs.2704800.000 Millions and disbursement of Rs.1372820.000 Millions have been made by the Company as on 31st March, 2010. In addition to above, an amount of Rs.62370.000 Millions sanctioned and Rs.1321.000 Millions disbursed during 2009-10 under R-APDRP scheme. With this, cumulative sanction under R-APDRP stands at Rs.81840.000 Millions and disbursement at Rs.16460.000 Millions.
SUBSIDIARIES
As a nodal agency designated by Government of India for development of Ultra Mega Power projects, the Company has so far established fourteen (14) wholly owned subsidiaries out of which twelve (12) are to facilitate the development of UMPPs and two (2) for the development of ITPs. On completion of the bidding process, so far five (5) subsidiaries have already been transferred to the successful bidder for implementation of the projects.
In addition, the Company had also incorporated on 25th March, 2008, PFC Consulting Limited, a wholly owned subsidiary company to promote, organize and carry on consultancy services and for undertaking the work related to the development of UMPPs and ITPs.
PFC CONSULTING
LIMITED
Background
The Company had been offering consultancy support to the Power Sector through its Consultancy Services Group (CSG) since October 1999.
Leveraging the experience of the CSG Unit and appreciating the growth in the services offered by the Group and recognizing the potential of such services in the reforming Power Sector, the Company decided to organize the services as a distinct dedicated business entity. Accordingly, PFC Consulting Limited (PFCCL) was incorporated in the form of a wholly owned subsidiary on 25th March, 2008, in order to give it requisite autonomy in functions and flexibility in operations. PFCCL is mandated to promote, organize and carry on consultancy services to the Power Sector and is also undertaking the work related to the development of UMPPs. PFCCL has been nominated as the ‘Bid Coordinator’ for selection of developer for the Independent Transmission Projects (ITPs) by Ministry of Power, GoI.
SUBSIDIARIES OF PFC
CONSULTING LIMITED
JABALPUR TRANSMISSION
COMPANY LIMITED (JTCL)
SPV, Jabalpur Transmission Company Limited was incorporated
on 8th September, 2009. It is a transmission system project for ‘System
Strengthening Common for Western Region (WR) and Northern Region (NR)’. The
project includes 756 kV Single D/C line from Dhramjaygarh to
BHOPAL DHULE
TRANSMISSION COMPANY LIMITED (BDTCL)
SPV, Bhopal Dhule Transmission Company Limited was
incorporated on 8th September, 2009. It is a transmission system project for
‘System Strengthening for Western Region (WR)’. The project includes system
Strengthening for WR (Jabalpur-Bhopal, Bhopal-Indore, Aurangabad-Dhule,
Dhule-Vadodra, all 765 kV S/C lines with associated 765 kV substation at
JOINT VENTURES AND
ASSOCIATE COMPANIES
NATIONAL POWER
EXCHANGE LIMITED
In order to promote short term trading through power exchange, the company had promoted National Power Exchange Ltd (NPEX), jointly with NTPC, NHPC and TCS during 2008-09. The company has contributed Rs.833.000 Millions (being 16.66% of paid up equity upto 31st March, 2010) towards equity contribution. NPEX has obtained the in-principle approval for setting up of Power Exchange from CERC. This exchange is yet to start its operation. The Power Exchange will have a nationwide presence in the form of electronic exchange for trading in power. Apart from power trading, transmission clearance will also be taken care of by power exchange simultaneously. It will provide its members a transparent, neutral and efficient electronic platform for power trading.
POWER EQUITY CAPITAL ADVISORS
PRIVATE LIMITED LIABILITY COMPANY LIMITED
An advisory company namely Power Equity Capital Advisors Private Limited (PECAP) was incorporated to provide advisory services related to equity investments in Indian power sector, where their Company is the largest shareholder.
POWER TRADING
CORPORATION OF
Power Trading Corporation of India (PTC) was jointly promoted by Power Grid, NTPC, NHPC and PFC. PFC has invested Rs.120.000 Millions which is 4.07% of total equity of PTC. PTC is the leading provider of power trading solutions in India, a Government of India initiated public-private partnership, whose primarily focus is to develop a commercial vibrant power market in the country.
ENERGY EFFICIENCY
SERVICES LIMITED
Energy Efficiency Services Limited (EESL) was incorporated
on 11th February, 2010. EESL was jointly promoted by Power Grid, NTPC, REC and
PFC with equal equity participation for implementation of Energy Efficiency
projects in
MANAGEMENT DISCUSSION
AND ANALYSIS REPORT
The Management of the Company is pleased to present its Report on Industry scenario including Company’s performance during the year 2009-10.
Industry Structure
and Development
In the year 2009-10 the power sector recorded its best performance in the past six decades with an aggregate capacity addition of 9,585 MW or two thirds of its target i.e. 14,507 MW. This was enabled by the massive contribution of the thermal sector that constituted 95% of the total capacity addition. Even nuclear power contributed an impressive 4.6% against the contribution of the hydro power sector that added only 0.4% during the year.
This improved performance was also facilitated by the improved availability of gas for the power sector. Out of the total installed generation capacity in the country, about 11% is based on gas or liquid fuel (excluding diesel). The availability of gas from KG (Krishna Godavari) basin (D6) and utilization of surplus gas available on fallback basis resulted in better utilization of capacity and higher plant load factor (PLF) as also high growth in electricity generated from gas based plants.
As on 31st March, 2010 the country had an installed generation capacity of 1,59,399 MW. The Government of India, Ministry of Power in the Eleventh plan has set a target of 78,700 MW capacity addition out of which 59,693 MW would be from thermal power projects, 15,627 MW from hydro projects and 3,380 MW from nuclear projects. A greater role was envisaged for the Government, whose contribution would be 81%.
In the light of delays in project implementation, the Central Electricity Authority (CEA) estimated that about 62,374
MW of capacity could be added by the end of eleventh plan. Further, additional 12,590 MW could be possible in the best effort scenario resulting in total 74,964 MW of capacity addition during the XI plan.
During the first three years of the plan period, 22,302 MW of new capacity has been added, which is more than the entire capacity addition of 21,180 MW during the five years of the tenth plan.
Ministry of Power, Govt. of India recognizes the fact that
private investors have important role to play in the power sector growth of
The Government of India has set an ambitious mission of ‘POWER FOR ALL BY 2012’. This mission would require that the installed generation capacity should be at least 2,00,000 MW by 2012. To be able to reach this, an expansion of the regional transmission network and inter regional capacity to transmit power would be essential.
The latter is required because resources are unevenly distributed in the country and power needs to be carried great distances to reach areas where load centers exist. Efficient Distribution of electricity is also essential for achieving the above mission. Bringing down the ATandC losses which are very high is another big challenge. High technical losses in the system are primarily due to inadequate investments over the years for system improvement works, which has resulted in unplanned extensions of the distribution lines, overloading of the system elements like transformers and conductors, and lack of adequate reactive power support. The commercial losses are mainly due to low metering efficiency, theft and pilferages.
The Government of India has launched the Restructured Accelerated Power Development and Reforms Programme (R-APDRP) in the XIth Five Year Plan. The focus of the Programme is on actual, demonstrable performance in terms of reduction in Aggregate Technical and Commercial (AT and C) losses. Projects under the scheme shall be taken up in two parts. Part – A shall include the projects for establishment of base line data and IT applications for energy accounting/ auditing and IT based consumer service centre. Part – B shall include regular distribution strengthening projects. Further, there is an enabling component under Part – C for implementation of R-APDRP and for facilitating the process of reform in power sector. The programme size is Rs.515770.000 Millions, out of which Rs.10,0000.000 Millions is for Part - A and Rs.400000.000 Millions is for Part – B activities and the remaining Rs.11770.000 Millions for Part - C enabling activities to be implemented by Ministry of Power.
Energy is an important input required for economic and
social development.
However, both the Centre and the States have to play a decisive and positive role. The installed power generation capacity has grown many times since independence, however, there is still a peak demand shortage and energy deficit is very high in the country. To mitigate shortage of energy in general and electricity in particular, in addition to augmenting the capacity of energy supply, its efficient use and conservation is also essential. Keeping this in view and to maintain GDP growth of at least 8 to 10%, the Government is initiating several policy measures to accelerate power generation and promote energy efficiency to meet power requirements which will necessitate huge funds requirement.
Growing concern about pollution and global warming has led many individuals and nations to consider the nuclear power as an excellent alternative for future power generation. Apart from technological advancements and increased public awareness, heavy investments are critical to the success of the nuclear industry. Investments by the nuclear industry in both technology and education will likely be seen in the near future. It is definite that the future power reforms will be in the field of nuclear energy.
The devastating impact of climate change has become an issue
of critical importance. Energy production using fossil fuels is the major
contributor to green house gas emission. The solution lies in effecting an
accelerated transition to a low carbon energy economy, which means large scale
development of renewable energy.
This huge requirement of funds simply indicates about the future opportunities for Power Financing sector including the PFC. the Electricity Act, 2003 is an umbrella regulation towards creating a favorable policy environment for development of the power sector. Various power sector reforms have been undertaken under the Electricity Act, 2003 which will bring the positive change in the Power Sector scenario.
Opportunities
/Threats
Power Finance Corporation (PFC) is a leading power sector public financial institution providing fund based and non fund based support for development of Indian Power Sector. Its primary objective is to provide financial resources and encourage flow of investments to the power and associated sectors.
PFC draws upon its vast knowledge of the power sector and
its financing expertise to provide tailor made products and services to its
clients. In addition, PFC provides technical, management advisory and
consultancy services related activities through its subsidiary Company namely
PFC Consulting Limited. PFC’s clients include the power utilities of state,
central and private sector. These clients are involved in various aspects of
the power sector in
PFC’s priorities include not only accelerating the pace of existing business of funding generation, transmission and distribution projects, but also to exploit the new opportunities available in the sector . With this Philosophy PFC has established different strategic business units, focusing on different business segments, conventional and consortium lending to generation, transmission and distribution projects, lending to power equipment manufacturers and fuel producers and suppliers, renewable energy and CDM.
PFC is a key agency in various Govt. of India’s power sector schemes and programmes and has implemented and/or is implementing schemes like Re-structured Accelerated Power Development and Reform Programme (R-APDRP), Accelerated Generation and Supply Programmes (AG and SP), Distribution Reform, Upgrades and Management (DRUM) and Delivery through Decentralized Mechanism (DDM). In addition Govt. of India has designated PFC as the nodal agency to develop Ultra Mega Power Projects (UMPPs) and Independent Transmission Projects (ITPs), based on tariff based competitive bidding process.
In order to promote short term trading through Power Exchange, PFC took the initiative by promoting National Power Exchange Limited jointly with NTPC, NHPC and TCS. Further, PFC also participated in the equity of Power
Exchange India Limited (PXI), a company promoted by NSE and NCDEX. PFC is focusing on renewable energy and accelerating the development of business in Renewable Energy Generation Projects such as Wind, Biomass, Small Hydro, Solar projects so as to give thrust to funding of Renewable Energy Projects in the country. PFC is taking higher exposure in Renewable Energy Generation Projects and offers special interest rates for such projects.
In order to accelerate implementation of Energy Efficiency
Projects, a new company by the name of Energy Efficiency Services Limited
(EESL) has been incorporated as a Joint Venture Company of PFC, NTPC, Power
Grid and REC. PFC has taken lead role in incorporating the company. PFC is also
facilitating State Power Utilities in availing CDM benefits of R and M of old
thermal and hydro projects. The general health of the power sector utilities in
Inadequate availability of Coal and dismal hydel generation owing to the failure of monsoons, attests to its potential is also a constraint in the way of sustained growth of power sector. The power sector is a major consumer of coal using 74% of the total coal production. Coal based power generation projects are put to a stiff test of proving their matter due to shortage in domestic supply of coal.
Of late the competition scenario from the banks is increasing with the increasing bank credit to the infrastructure sector (including power sector). Interest spread of the banks is higher than PFC, even when yield on assets are higher in cases of PFC. The main reason is that banks are having cheaper source of funds in the form of CASA (current accounts and saving accounts).
The risk levels in power projects are quite high. Due to long gestation period and large capital outlay, it makes them susceptible to changes in various factors such as interest rates, statutory regulations and policies, the cost
and availability of raw materials and other key inputs and general economic conditions which could affect projects’ viability in the implementation and operation stages with impact on the ability of borrowers to service the loans. The various risks involved are credit risk, market risk, poor financial health of power sector utilities, regulatory restrictions, forex risk, operational risk and the ability to maintain its recovery performance and asset quality.
Outlook
Large funds needed for setting up power infrastructure augurs well for PFC, which has strong domain expertise and a good track record.
The power deficient situation in the country has seen various governments, both past and present, lay emphasis on attracting investments across the generation, distribution and transmission segments of the power sector. While the initiatives have led companies to commit to setting up new capacities, it entails huge investments.
Thus, it has enhanced opportunities for PFC. While concerns pertaining to higher interest rate, tight liquidity conditions and fears over deteriorating asset quality haven’t spared most of the sectors including infrastructure financing, PFC has been relatively insulated with stable growth in loans, greater expertise, dominant position and,
an ability to sustain spreads and asset quality.
Even as huge investments are being made towards setting up
power-related infrastructure, the growing energy requirements are relatively
unmet demand-supply gap pegged at close to 10 per cent. As
PFC has a dominant position in the power financing business with over 20 per cent market share and PFC’s loans sanctioned to the power sector grew substantially in the last five years. Also, considering that a power project which takes long time to complete sees maximum disbursements happening towards the end of a project implementation cycle, this indicates robust disbursement in the future as well.
PFC has been designated as the nodal agency for implementation of various power schemes as well as Ultra Mega Power Projects (each costing around `16,000 crore); this enables the company to undertake all activities necessary to obtain the appropriate clearances required to establish the UMPPs for a fee. Four UMPPs have already been awarded to successful bidders. With PFC being closely associated with the passage of these projects, there is also possibility to lend to these projects. PFC has also been designated as the nodal agency to operationalise the R-APDRP programme and shall act as a single window service. As nodal agency PFC shall receive a fee as well as the reimbursement of expenditure in implementation of the programme as per the norms to be decided by the R-APDRP Steering Committee.
As a specialized power financier with a sound track record, PFC has vast domain expertise. As power projects involve a large portion (around 70 per cent) of debt financing, PFC ensures easier accessibility of funds as a single source compared to banks, which typically have to adhere to caps on the amount of loans given to a single sector/company/business group. Being a NBFC, PFC is also not required to maintain statutory funds (like CRR, SLR in case of banks) thus, enjoys an exemption from blocking significant portion of funds in low-yielding assets. Despite the movement in interest rates, PFC has been able to maintain a good interest spreads (difference between lending and borrowing rates) as well as good asset quality.
CMT REPORT (Corruption, Money Laundering & Terrorism]
The Public Notice information has been collected from various sources
including but not limited to: The Courts,
1] INFORMATION ON
DESIGNATED PARTY
No records exist designating subject or any of its beneficial owners,
controlling shareholders or senior officers as terrorist or terrorist
organization or whom notice had been received that all financial transactions
involving their assets have been blocked or convicted, found guilty or against
whom a judgement or order had been entered in a proceedings for violating
money-laundering, anti-corruption or bribery or international economic or
anti-terrorism sanction laws or whose assets were seized, blocked, frozen or
ordered forfeited for violation of money laundering or international
anti-terrorism laws.
2] Court Declaration :
No records exist to suggest that subject is
or was the subject of any formal or informal allegations, prosecutions or other
official proceeding for making any prohibited payments or other improper
payments to government officials for engaging in prohibited transactions or
with designated parties.
3] Asset Declaration :
No records exist to suggest that the property or assets of the subject
are derived from criminal conduct or a prohibited transaction.
4] Record on Financial
Crime :
Charges or conviction
registered against subject: None
5] Records on Violation of
Anti-Corruption Laws :
Charges or
investigation registered against subject: None
6] Records on Int’l
Anti-Money Laundering Laws/Standards :
Charges or
investigation registered against subject: None
7] Criminal Records
No available
information exist that suggest that subject or any of its principals have been
formally charged or convicted by a competent governmental authority for any
financial crime or under any formal investigation by a competent government
authority for any violation of anti-corruption laws or international anti-money
laundering laws or standard.
8] Affiliation with
Government :
No record
exists to suggest that any director or indirect owners, controlling
shareholders, director, officer or employee of the company is a government
official or a family member or close business associate of a Government
official.
9] Compensation Package :
Our market
survey revealed that the amount of compensation sought by the subject is fair
and reasonable and comparable to compensation paid to others for similar
services.
10] Press Report :
No press reports / filings exists on
the subject.
CORPORATE GOVERNANCE
MIRA INFORM as part of its Due Diligence do provide comments on
Corporate Governance to identify management and governance. These factors often
have been predictive and in some cases have created vulnerabilities to credit
deterioration.
Our Governance Assessment focuses principally on the interactions
between a company’s management, its Board of Directors, Shareholders and other
financial stakeholders.
CONTRAVENTION
Subject is not known to have contravened any existing local laws,
regulations or policies that prohibit, restrict or otherwise affect the terms and
conditions that could be included in the agreement with the subject.
FOREIGN EXCHANGE RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs.45.38 |
|
|
1 |
Rs.73.08 |
|
Euro |
1 |
Rs.61.60 |
SCORE & RATING EXPLANATIONS
|
SCORE FACTORS |
RANGE |
POINTS |
|
HISTORY |
1~10 |
8 |
|
PAID-UP CAPITAL |
1~10 |
7 |
|
OPERATING SCALE |
1~10 |
8 |
|
FINANCIAL CONDITION |
|
|
|
--BUSINESS SCALE |
1~10 |
7 |
|
--PROFITABILIRY |
1~10 |
7 |
|
--LIQUIDITY |
1~10 |
8 |
|
--LEVERAGE |
1~10 |
7 |
|
--RESERVES |
1~10 |
8 |
|
--CREDIT LINES |
1~10 |
7 |
|
--MARGINS |
-5~5 |
-- |
|
DEMERIT POINTS |
|
|
|
--BANK CHARGES |
YES/NO |
YES |
|
--LITIGATION |
YES/NO |
NO |
|
--OTHER ADVERSE INFORMATION |
YES/NO |
NO |
|
MERIT POINTS |
|
|
|
--SOLE DISTRIBUTORSHIP |
YES/NO |
NO |
|
--EXPORT ACTIVITIES |
YES/NO |
NO |
|
--AFFILIATION |
YES/NO |
YES |
|
--LISTED |
YES/NO |
NO |
|
--OTHER MERIT FACTORS |
YES/NO |
YES |
|
TOTAL |
|
67 |
This score serves as a reference to assess SC’s credit risk
and to set the amount of credit to be extended. It is calculated from a
composite of weighted scores obtained from each of the major sections of this
report. The assessed factors and their relative weights (as indicated through
%) are as follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend
(10%) Operational
size (10%)
RATING EXPLANATIONS
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
>86 |
Aaa |
Possesses an extremely sound financial base with the strongest
capability for timely payment of interest and principal sums |
Unlimited |
|
71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit transaction.
It has above average (strong) capability for payment of interest and
principal sums |
Large |
|
56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
26-40 |
B |
Capability to overcome financial difficulties seems comparatively below
average. |
Small |
|
11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
|
<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
|
- |
NB |
New Business |
- |
This report is issued at your request without any
risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL)
or its officials.