See disbursement target of Rs 40,000cr in FY13, says PFC

State-run Power Finance Corporation has set a disbursement target of Rs 40,000 crore in FY13, informed CMD Satnam Singh. In an interview with CNBC-TV18, he said the company has already disbursed Rs 17,000 crore in the first half of the current fiscal year. Moreover, he clarified that there has been no sluggishness in demand for credit.

Singh further added that the restructured APDRP scheme is being implemented very aggressively. PFC has also launched a private placement issue today, he said.

Here is the edited transcript of the interview on CNBC-TV18.

Q: The margin improvement was taken well by analysts on your stock or your company but, the worry remains on what kind of loan growth you are likely to see because that’s where you have gotten sluggish. Is there any guidance that you can set out in terms of loan growth you hope to do, both on quarterly basis as also for the next year?

A: We have targeted disbursement of about Rs 40,000 crore in the current financial year. In the first half we have already disbursed Rs 17,555 crore which if compared to quarter on quarter, is 19 percent higher and is 23 percent higher if considered on a half year basis.

As far as creation of assets is concerned, in the quarter ending September ’12 it is 28 percent higher. Our loan growth is not showing a sluggish trend. It is wrong to say there is a sluggish trend. We have outstanding sanctions, meaning commitments which are yet to be disbursed, to the order of Rs 169,000 crore. It will be disbursed over a period of three-four years. I do not see any sluggishness coming on that account.

Also read: PFC to set up USD 1-bn equity fund with Tata Capital

Q: What about asset quality, there has been an improvement this time around on a quarter on quarter basis but, it is marginal? What kind of asset quality target do you have for FY13 and how soon do you think you would see a resolution to the coal linkages issue thereby helping your asset quality further?

A: The figure of net non performing assets has improved primarily because asset growth has taken place. There has not been any new addition to non-performing assets in the last quarter. Going forward, government has taken up very big initiatives both for improvement of financial health of distribution companies and the fuel supply agreement.

The current indications are that Coal India is likely to sign most of the agreements wherein they are going to commit that at least 65 percent of the required coal quantity will be supplied by them. If 65 percent is supplied, there is no likelihood of any defaults to any of the lenders. As far as financial health of DISCOMs is concerned, major initiatives are in place, financial restructuring plan has already been approved by the cabinet, Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) has also extended transitional finance to the extent of about Rs 19,000 crore each to the six state distribution companies.

Tariff revision in most of the states has already taken place except for one, West Bengal. The loss reduction scheme, the restructured Accelerated Power Development and Reforms Programme (APDRP) is being implemented very aggressively. Around 215 towns have already been integrated and they have shown a loss of 1 percent to 10 percent even without upgradation of the system through administrative measures. On all fronts, efforts are made to bring the sector back on track.

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Q: In terms of margins, what kind of guidance have you set out for FY13, is it beyond 4.3 percent level that you clocked in this quarter and as we see an improvement in the interest rate scenario, do you think your net interest margins could improve?

A: We match repriceable assets and repriceable liabilities on a year to year basis. However, the timing of repricing of assets is only four times a year that is on a quarterly basis, whereas repricing of liabilities were taking place each time Reserve Bank of India tinkered with the interest rates. In the last one-and-a-half year or so, the Reserve Bank was increasing the rates every now and then. Therefore, there was a time lag because of which our spread and NIM came down a bit in the last one year. However, since RBI has put a full stop to that from January ’12, our spread and margins have come back to the normal level and they are likely to stay at this level.

Q: How soon do you plan to go ahead with your borrowing plans? The ECB borrowing on the one hand and the tax free bonds that you were planning to do in the second half of FY13?

A: As far as ECB is concerned, we have invited courts for three year paper and we are likely to finalise that shortly. For mark to market (MTM) programme, we have already conducted the road shows and we are going to price it in the next one week or so.

As far as tax free bonds are concerned, we have launched our private placement issue today and hopefully, all these options which we have for raising resources will help us bring down our average cost of borrowing.