REC to fund infra and logistics projects up to 33% of its loan portfolio: CMD

Power

After getting approval from the Power Ministry, REC Ltd has started to fund projects beyond the electricity sector. The maharatna category non-banking financial company (NBFC) will fund projects in the infrastructure and logistics sector, REC Chairman and Managing Director (CMD) Vivek Kumar Dewangan said.

"In a significant development, the Ministry of Power has allowed REC to diversify into infrastructure and logistics. The ministry has allowed us to finance up to 33 percent of our outstanding loan book in this sector. FY 2022-23 was the first year when we started funding metro, road, health and IT infrastructure projects," said Dewangan.

So far, REC has financed metro projects by the Mumbai Metropolitan Region Development Authority (MMRDA), the Mumbai-Pune Expressway by Maharashtra State Road Development Corporation (MSRDC), health infrastructure projects in a few southern states, IT projects such as the laying of optical fibre lines and a refinery of HPCL, Dewangan said. He added that the company is also looking at financing projects related to ports.

Dewangan said that capacity building for diversifying in this sector will be done internally by activating its regional offices and REC will rope in 22 consultants and advisors for the purpose.

The state-owned company sanctioned projects worth Rs 2,68,461 crore in FY 2022-23, the highest ever in its history. In FY 2021-22, the total project sanctions by REC stood at Rs 54,421 crore.

Of the Rs 2,68,461 crore, Rs 85,735 crore (32 percent) was for the infrastructure and logistics sector alone, the highest in the case of sector-wise allocation, Rs 81,598 crore (30 percent) was for the transmission and distribution sector, while Rs 45,228 crore (17 percent) was for short-term loans (STL) and revolving bill payment facility (RBPF). An amount of Rs 34,529 crore (13 percent) was allocated for power generation projects, while Rs 21,371 crore (8 percent) was given to renewable projects.

In FY 2017-18, the company’s sanction in the renewable energy (RE) space was Rs 7,034 crore.

In its loan book, the renewable energy space has grown from Rs 7,506 crore in FY 2017-18 to Rs 29,073 crore in 2022-23. As first reported by Moneycontrol on March 31, Dewangan said with such measures, REC will expand its loan book under its RE portfolio to Rs 2.4 lakh crore by FY2030.

“In a short span of time, REC has set a renewable energy sanction target of Rs 75,000 crore for the ongoing FY 2023-24, in order to achieve its loan book target by 2030. Owing to the improved asset quality and resolution of stressed assets, REC recorded its highest-ever quarterly and yearly profit at Rs 3,001 crore and Rs 11,055 crore, respectively. As a result, the earnings per share for the year ended March 31, 2023, stands at Rs 41.86 per share as against Rs 38.02 per share as of March 31, 2022. The return on networth during the year was 20.23 percent,” Dewangan said.

REC’s networth has grown to Rs 57,680 crore as on March 31, 2023, an increase of 13 percent YoY. Its loan book increased by 13 percent to Rs 4.35 lakh crore as against Rs 3.85 lakh crore as on March 31, 2023.

The CMD stated that in FY 2022-23, no new non-performing assets (NPAs) were added to the REC’s portfolios. “Signifying improving asset quality, the net credit-impaired assets have reduced to 1.01 percent with a provision coverage ratio of 70.64 percent on NPA assets, as on March 31, 2023,” he said.

He clarified that REC’s loan portfolio shall be 67 percent for the power sector and 33 percent for non-power infrastructure.