Tax-free bond issuance of Rs 5000cr likely in Sep-Oct: REC

The public sector unit on Friday said its profit after tax during April-June increased 32% at Rs 877 crore , against Rs 662 crore in the corresponding quarter the previous year.

The company’s total income for the first quarter also increased by 30% to Rs 3,093 crore against Rs 2,373 crore in the similar period last year.

The EPS for the first quarter is Rs 8.88 per share. The loan asset book of the corporation has been recorded at Rs 1,06,632 crore and the outstanding borrowings Rs 89,565 crore, as on June 30.

Currently, the cost of borrowing is at 8.1%, Khunteta says. “We expect FY13 bottomline growth at 15-20%,” he told CNBC-TV18.

He said the company’s tax-free bond issuance of Rs 5,000 crore is likely in September-October. 

A leading lender to the power sector, REC provides loans to state electricity boards and state governments, among others.

Below is an edited transcript of his interview with Udayan Mukherjee and Sonia Shenoy.

Q: Your net interest margins have improved in the current quarter to above 4.5%. Do you see yourself keeping it above this level for the rest of the year?

A: The margins have increased on account of the increase in the yield on the loans, which have increased by 40 basis points even though the cost of borrowing has also increased by 20 basis points. The spread has increased by around 28 bps, which has also resulted in increase in the net interest margin to 452 bps. So I hope that in the remaining period of the current year we will be able to sustain the net interest margin at around 440 bps.

This is on a conservative basis because sometimes the margins may be higher by 10 points and sometimes may be lower by 10 points. But overall, we will be able to maintain the margins at around 440 bps and spread at around 325-330 bps. Our expectation is that bottom line growth may be around 15-20%.

Q: What do you expect to see in terms of cost of funds for the rest of the year and do you have any plans of coming out with any tax free bonds because of the government’s big pipeline in the next two quarter?

A: At present the cost of borrowing is 8.10%. We expect it may be around 8.25% for the whole of the year. But at the same time, the yield on the loan will also be around 11.60%, so we will be able to have the spread of around 330 bps.

As for the tax free bond is concerned, we are likely to get approval for Rs 5000 crore and the issue may be launched in the month of September or October subject to getting the approval from the CBDT (Central Board of Direct Taxes).