Retail portion of bond issue not yet fully subscribed: PFC

PFC’s tax free bond issue opened up on December 30, for issuance a little over Rs 4000 crore.

Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.
 
Q: What kind of response are you expecting from the issue?

A: We launched our tax free bond issue on December 30 for Rs 4033 crore, including the greenshoe option. The initial issue was only Rs 1000 crores. We have already got very good response on the first two days. We have got Rs 10,000 crore, meaning it’s over subscribed, but we are keeping it open because the portion meant for retailers is not yet oversubscribed.

Even though we have the option to allocate from other categories to this category, in the interest of retailers, we are keeping the issue open up to 16th which is the scheduled date.

Q: Did you have an upsize option on the bond issue; in the sense because of such high interest would you look to expand the size?

A: No our allocation is Rs 5000 crore and therefore we cannot raise anything beyond that.

Q: How much has the HNI portion been oversubscribed?

A: HNI Portion is oversubscribed about 2.25 times and QIB 3.63 times. Retailers till yesterday is about 0.46 times.

Q: Coming back to the basic business, there is lot of concern in some of the public sector banks because of the Kingfisher issue and that having turned as an NPA how worried are you about the asset quality situation for the rest of the year?

A: If you look at the September data, our non performing assets (NPAs) are only 0.22% against asset book of Rs 1,10,000 crore. In the power sector, people are raising issues and concerns about NPAs because of primarily two reasons; one is the financial health of DISCOMs (Distribution Companies) and the coal supply position.

As far as DISCOMs’ financial health is concerned, there are many initiatives which are currently under implementation. For example, after Power Minister’s conference, seven states have already increased the tariff with latest being Tamil Nadu, which has proposed an increase of over 35%. We, along with discussion with other ministries like Ministry of Power, Ministry of Finance and RBI, have agreed to a uniform lending criteria for distribution companies, both for short-term and long-term. Restructured APDRP scheme aimed at bringing down distribution losses is already at advance stage of implementation.

With Gujarat and West Bengal taking the lead, there are about over 80 towns which have already been integrated based on the latest IT technology which facilitates loss reduction. There is Shunglu Committee report which was due for submission sometime in November; it has been submitted to the planning commission on December 15. It proposes creation of an SPV which will take over the distress assets of banks and PFC, REC depending upon the position and agreement by the states. So there is no fear of bad assets in the power sector as far as DISCOMs’ financial health is concerned.

Similarly on the coal issue, because power sector has been able to change its image, everybody thought power sector will plan for ‘x’ but achieve only 50%. This time, in the eleventh plan, they have been able to add capacity to the extent of two and half times of the last plan. That was not envisaged by other sectors like coal and railways and they are not equipped to supply coal for the increased capacity additions. But it is a temporary phenomenon. We are talking of 25 years of coal requirement and if they are not able to supply for a period of six months to one year, it is not a major concern. So if both these issues are seen from this perspective, I don’t see there is any possibility of NPAs going up in the power sector.

Q: There is specific concern on PFC with regard to mark to market losses because of what has happened with the currency. You do have unhedged foreign exposure of close to USD 400 million. How are you planning to provide for that?

A: The Ministry of Corporate Affairs, National Advisory Committee on Accounting Standards (NACAS) and the CA Institute have taken timely decision which is favourable to all the institutions which had borrowed in foreign currency and were incurring notional loss on account of very high depreciation of rupee in a short period of time.

Now the CA institute has allowed option to all such institutions to actually amortize the notional foreign exchange loss till the maturity of the foreign currency loan. In our case, because of this kind of option, we will be getting a benefit of Rs 600 crore plus on the profit up to December’12. So we are grateful to these institutions for taking the corrective decision at the right time.