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Transcript

Conference Call of Power Finance Corporation Limited

Event Duration : 1 hr 23 mins 08 secs

Introduction

Moderator: On behalf of Power Finance Corporation Limited, wishing

one and all a very good afternoon. It is an honor for me to
welcome you to this investor‟s conference where we will be
announcing our Q4 results for the financial year 2009.
Power Finance Corporation Limited as we are all aware is
a listed Navratna Public Sector Enterprise of the
Government of India listed on both the National and the
Bombay stock exchange. With a vision and mission to be
the leading institution in financing, in Power and Financial
sectors that will enable availability of required quality
power at minimum cost to consumers, Power Finance
Corporation Limited provides a large range of financial
products and services for various power projects in
generation, transmission, distribution sector as well as for
renovation and modernization of existing power projects.
Before we begin, permit me to introduce to you our
distinguished dignitaries on the dais. To begin with, we
have Mr. Satnam Singh, Chairman and Managing Director,
Power Finance Corporation Limited; to his right we have
Mr. M.K. Goel, Director, ID&A Power Finance Corporation
Limited; to his extreme right we have Mr. Rajeev Sharma,
Director Projects, Power Finance Corporation Limited and
to his left we have Mr. Devender Singh, Joint Secretary,
Ministry of Power and Government nominee Director on
the Power Finance Corporation Board. Mr. Satnam Singh
will give us the performance high lights of the company
which will be followed by a presentation following which the
floor will then be thrown open for the question and answer
session. I now hand over the mike to Mr. Satnam Singh
and I request you to kindly turn your cells to “switch off” or
“silent mode” please.

Satnam Singh: Good evening everyone and thank you for the
overwhelming response. Of course you all know what has
been the financial market environment in the last financial
year, but to put it in the right perspective, I thought that
since you know that any company‟s performance is
dependent on the environment in which it operates. So, I
thought I will mention of the few aspects of the

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environment in the financial market in which we have

operated in the last financial year.

1. First of course, we were partly affected by the global

melt down and slow down. 2. The financial liquidity for
a certain period of the financial year became a big
issue. 3. The regulator took certain initiatives which
restrained borrowing by Indian companies in the
International Markets. Not all were affected but we
were affected because we being NBFC were restrained
from raising money in the International Market. Later
on these restraints were withdrawn, but by then the
cost of raising resources in the International Market
had gone up so much that it was not possible for a
company like ours, even though we have the best
possible rating – the Sovereign rating in the
International Markets to raise resources from
International Markets. So the environment was pure
dependence on the domestic market. Also, in the
domestic market, the inverted curve was operating.
Short term money was costlier than longer tenure
money. Besides, the Reserve Bank of India which is a
regulatory body for NBFCs had put a clear cut
guideline for us that as far as private sector is
concerned, we cannot exceed the exposure norms
what is applicable for other NBFCs and Banks. So, as
a result of all this the interest rates as you know
hardened and the equity market being dull there were
some difficulty in raising resources for the power
sector.

Before I come to the numbers as to what we did in this

environment, I would like to share with you the good
things which happened for your company in the last
financial year. First of all we were given an award by
KPMG infrastructure group, the award was given by Dr.
Montek Singh Ahluwalia. The award was named as
“Most Admired Enabler - Power”. The other award
which we got was from…it was an India Power Award
for our association in the DRUM Project which as you
know is our training program which US Aid and PFC
are making headway. PFC and US Aid put together
had trained roughly abut 25,000 people, above 25,000
people in the last 3 to 4 years during which this
program has been in operation. We also got award
from Dalal Street for highest profit per employee. Apart
from this our Company‟s name figured in the Global
Financial Brands – first NBFC in the world to figure in
the global financial brands also very recently in the
Forbes, first 2,000 list. So, these are good things
which we have come across in the last financial year.

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Now coming to the numbers, of course many of you would

have seen those numbers on TV or must have seen the
presentation which has already been uploaded on our
website. If you remember our disbursement growth in the
previous years that is ‟07 – ‟08 over ‟06 – „07 was 15%
year on year. Last year ‟08 – ‟09 over ‟07 – ‟08 we
achieved 30%. Our loan assets grew by 25% against 17%
previous year, year on year basis. Gross non performing
assets, we were able to bring down from 0.03% to 0.02%
with a higher loan book of 64,000 crores plus. Our NIM
and Spread were increased, NIM on a year on year basis;
quarter wise numbers we will come to a little later, may be
in the presentation you will see. Year on year NIM was
increased by 10 basis points from 3.74% to 3.84% and the
Spread by 13 basis points from 2.08% to 2.21%. As a
result of this our profit after tax increased by 12% from
Rs.1207 crores to Rs.1355 crores. Here I would like to
mention that in spite of the fact that government has given
some kind of dispensation for amortizing foreign exchange
loss in the coming 3 years, we have not done so, we have
followed our original policy of booking the entire foreign
exchange loss in the same year in which it happens and
we have booked this year about Rs. 253 crores and these
figures of 12% increase are after booking this loss of Rs.
253 crores. If we do not take that into account, the growth
in profit after tax is about 20%. Return on net worth which
you should be happy about increased by 40 basis points to
14.82% and if we do not take into account this notional
exchange loss, then the return on net worth has gone up to
16.42%.

Many times we have discussed whether sanctions year on

year are relevant or outstanding sanctions against which
disbursement is going to take place is relevant. Last time
when we sanctioned 69,000 crores last financial year and
coming quarters the figures were not corresponding to that
kind of figure of 70,000 crores; many analysts asked me,
why is it, are you seeing a slow down? My answer to them
was two things. 1. The 69,000 crores happened because
we had sanctioned, we have issued sanction letters worth
18,000 crores on 31st March. So, if you take that out, if you
had deliberately carried this to 1st April, then this year‟s
sanctions would have been 57,000 crores plus 18,000
crores and earlier years‟ sanctions would have been about
51,000 crores and you would have found that the growth is
50% in sanctions. So, as analysts I would suggest that
you do not look at…not that you do not look at, you
consider, you look at year on year sanctions, but what is
more relevant for the purpose of imagining what is the
growth rate possible for a company like ours is the

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cumulative outstanding sanctions and that figure as of day

is 1,20,000 crores. Even if you assume similar levels of
sanctions going forward, another 60,000, crores would get
added. So 1,80,000 crores and against that disbursement
over next 3 to 4 years, you can guess what kind of
disbursement we are going to have going forward.

We would also like to share with you that we are a MOU

signing company with the Ministry of Power, Government
of India and in the last financial year we have exceeded all
the parameters in the “Excellent Category” in the last
financial year and therefore we are going to get “Excellent”
rating from Ministry of Power and also maybe we will get
some kind of award from Department of Public Enterprises.
Some of the other key highlights of last year…people ask
me the question, how come you were able to disburse
21,000 crores, did you not face any difficulty in raising
resources? Yes we did face, but however, our lenders had
full confidence in us. Last year we raised roughly about
21,500 crores of money for disbursement and more
importantly, we did an issue of 4,100 crores in August –
September which was the largest ever bond issue done by
any Indian Corporate whether Private or Public. Of course
we did face problems because of liquidity and inverted
curve being reverse in the sense that short term money
being costlier than long term money. Therefore you might
have seen that our percentage of bonds, considerably
went up in the first 9 months and lot of analysts did ask me
“Oh you feel that only bonds is the alternative? There is no
other alternative and structure to use with banks have
dried up?” I said “No, the timing is not appropriate”.
Therefore since the timing is appropriate for bond issue,
we have gone for bond issues and when the timing will be
appropriate for structured deals with banks, we will go for
structured deals and that is what we have done. In the last
quarter of the financial year ‟08 – ‟09 we have been having
structured deals and we have not come out with any bond
issue.

The other important aspect, we being Nodal Agency for

Ultra Mega Power Projects, there were apprehensions that
the bidders of Ultra Mega Power Projects may not come
forward because of the global constraints. But we proved
all these apprehensions wrong. We awarded the Tilaiya
UMPP through Reliance Power and there was a very good
response. We received 5 bids for Tilaiya Project. We
have given them certain time as per guidelines for them to
take over the company and we are working on that.

Apart from this, the work is also on in the other states of

Chhattisgarh, Orissa and Tamil Nadu where RfPs for the

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UMPPs are likely to be issued in the next 3 to 4 months

time. The discussions are also on for second Ultra Mega
Power Project in Andhra, in Gujarat and two more in
Orissa.

Given the issue which most analyst know that aggregate,

technical and commercial losses being very high in the
Indian Power Sector and therefore raising a question about
sustainability of Indian Power Sectors in the long-run,
Government of India is wary of this issue and therefore
took a very big initiative of introducing re-structured
APDRP scheme which his primarily aimed at bringing
down the AT&C losses from the present level to below
15% for all towns where the population is above 30,000.
We have been made the Nodal Agency for this scheme.
We are going to get fees for providing this service and the
scheme size is 52,000 crores out of which about 32,000
crores is going to be grant. It is a very, very attractive
scheme for distribution utilities. But at the same time, it is
also performance based that no utility can draw money;
convert the loan into grant unless the performance
parameters mentioned in this scheme are achieved. So,
initially the entire money will be given as loan, later on 50%
of the loan will be converted into grant based on sustained
reduction. Not only reduction in the AT&C losses, but also
sustenance of these losses over a period of 5 years on
10%:10% basis.

As you know that we have always been facilitating the

overall development of Indian Power Sector, keeping this
objective in mind, we have decided to invest in the equity,
not in a big way, but in a small way for 2 power exchanges
– that is Power Exchange of India as well as the Power
Exchange promoted by TCS and NTPC. In Power
Exchange of India our investment is to the extent of 7%
and in the other Exchange it is 16.67%.

Renewable energy has been another area of focus for us.

We have sanctioned 500 crores last year and disbursed
about 178 crores which is 5 times of disbursement in the
previous year. After I had taken over charge, I have share
with you, that…you might have read in the papers also that
we had re-structured the organization by creating new
business units with a view to capture additional business
so that we are able to maintain the growth rate. One such
business unit was facilitation group which is actually
backward integration which means financing coal mines,
gas pipelines, power equipment manufacturing etc. The
other business unit which I have already mentioned was
focus on Renewable Energy, the third one was Consortium
Lending, fourth one was Equity Funding and of course fifth

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one was APDRP but APDRP got into…it was merged into
PFC business per se because of certain operational
issues.

Now what I would like to share with you is that we have

made considerable progress in all these areas of business
and in the financial year ‟09 – ‟10 as far as Consortium
Lending is concerned, we have made an assessment, you
see we have a Power Lender‟s Club in which there are 18
banks, LIC and HUDCO. We have assessed, we have
talked to the members of the Power Lender‟s Club as to
their potential to syndicate the loans for power projects and
according to that assessment, roughly about 20,000 crores
worth of syndication is possible. As far as the facilitation
group, backward integration is concerned, we are in the
process of development of the products and we are in
touch with new companies which are entering into this
business and hopefully, maybe by second quarter, we will
be able to start actually sanctioning the loans for this new
area. As far as Renewable Energy is concerned, we are
supporting Renewable Energy in a big way and there is a
possibility of large sanctions as compared to the last year
in the current financial year.

Lastly, we have been able to maintain our productivity as

you would have seen by the Award by Dalal Street, our
profitability per employee has been 4 crores and the
business which means sanctions per employee has been
180 crores. Our employee work force is highly motivated
and we intend to maintain these productivity levels going
forward and as you know the Pay Commission has already
come out with a notification for our employees. That I think
will add another factor for our employees to be further
motivated and also you know that the name of the game
today for employees is Public Sector employment; Private
Sectors having lost some kind of benefit. Therefore we are
very sure that going forward we will be able to live up to
your expectations. Thank you very much.

Moderator: Now we will have the presentation and then the question
and answer.

Presentation Session

Management: Good afternoon everybody. I will be taking you through a

short presentation which will encapsulate the quarterly as
well as our annual numbers. Well, we have been in the
business for more than 20 years now and we have been
funding projects in all areas, be it generation, transmission
and distribution. We also are funding to all the entities
operating in sectors such as Central Sector Utilities, State

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Sector Utilities, Private Sector Utilities and as of now we

are the key agency for implementation of the various
government plans and policies which include the Ultra
Mega Power Project Plan, the Re-structured Accelerated
Power Development Reform Program, the Drum Program
and the DDM Program. We have achieved higher level of
visibility in the International arena today with recognitions
such as getting into the list of top 500 financial brands as
well as Forbes Global 2000 ranking. It was in the year
2006 that we achieved the Annual Disbursements mark of
10,000 crore rupees and it is in the year 2009 that we have
already crossed 21,000 crores annual disbursement mark.
In the year 2009, we have also awarded the…we have
issued the letter of intent for Tilaiya UMPP to Reliance
Power. Our focus is essentially on providing funding and
that too due to Indian Power Sector. 99% of our core
business consists of providing products such as rupee
term loans, foreign currency loans, short-term loans, to the
various project utilities. We are also providing consulting
services to the Indian Power Sector in the form of Financial
Management of resources, Risk Assessment, Solutions for
improving efficiency. Developing Human Resource Plans,
Project feasibility studies, basically encompassing all the
areas be it structuring their organizations, be it improving
their performance, be it risk assessment, be it project
feasibility studies. Our business strategy would be to focus
on areas such as Renewable Energy, Consortium Lending.
We have also formed specific groups – facilitation groups
for funding projects in the area of power equipment and
fuel linkages, while we will strive to continue to grow in our
existing business.

Our team is supported by a total strength of 316 people

which primarily consists of 200 executives and 116 non-
executives. Out of this 200 executives, we carry diverse
professional background and almost 40% of the executives
have experience greater than 15 years. Our disbursement
per employee today stands at 66 crores and profit after tax
per employee stands at 4.3 crores for which we also got a
recent award.

Here we are presenting a comparison of how we have

faired during the last five years in terms of sanctions that is
the projects which we have approved for funding as well as
disbursements. You can see that in the financial year ‟05
we sanctioned projects worth almost 18,500 crore rupees
and in the year just ended, we have closed with 57,000
crore rupees. In terms of disbursements what we funded
during the financial year ‟05 which was almost 5 years
back was 9,400 crore rupees, whereas today we have
ended the year with a little over 21,000 crore rupees. On

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the sanction side we have achieved a 5-year CAGR growth

rate of 28% on the disbursement side we are maintaining
the growth rate of 19%. If you try to compare what we did
during the 10th 5-year plan and where we stand after
completion of the first 2 years of the 11th 5-year plan, we
sanctioned almost 100,000 crore rupees of projects during
the 10th 5-year plan and after completion of just 2 years of
the 11th 5-year plan we are already through with over
120,000 crores of rupees of sanctions.

In terms of disbursements we did a business of 51,000

crore rupees during the 10th 5-year plan and during the first
two years of this plan we have already accomplished
37,000 crore rupees. Our loan assets increased from
around 29,000 crore rupees 5 years back to 64,400 crore
rupees achieving a growth rate of 21% over a 5-year
period. Our net worth has increased from 6,000 crore
rupees to 9,600 crore rupees today. This includes almost
1,000 crores of funding coming in the form of IPO in the
year 2006 – ‟07. Our total income has almost doubled
from financial year ‟05 to the last ended year, from 3,000
crore levels to 6500 crore rupee levels. We have
registered a 5-year CAGR growth rate of 12% in terms of
total income. Our PAT has been increasing consistently
from 984 crore rupee levels 5 years back to 1355 crores
that we ended up with during the last year. We have been
consistently paying dividends in the range of 35%, 36%
over the last 5 years and the figure for financial year ‟09
relates only to the interim dividend. The final dividend is
yet awaited.

Now the highlights for the year: Our net profit for the year
has increased from 1207 crores to 1355 crores and that is
an increase of 15%, but in terms of comparable PAT, if we
look at certain adjustments that will follow during the
course of the presentation, it has actually increased by
20%. Our total income has increased from 5,000 crores a
year back to 6,500 crores, that‟s an increase of 31%
whereas our net interest income has increased from 1,800
crores to 2,200 crores, that‟s an increase of 25%. Our
gross NPAs have further decreased from 0.03% a year
ago to 0.02% as on 31st March 2009. Our disbursements
for the year stood at 21,054 crore rupees. Our net worth
has increased by 11% on a year on year basis. Now as far
as the current year was concerned, the year gone by was
concerned, we had reported a PAT of 1355 crore rupees
but if you look at a few adjustments which essentially relate
to prior period taxation as well as MTM on foreign
exchange borrowings, we arrive at a figure of comparable
PAT of 1470 crores for the year ‟09 and the corresponding
figure for the year ‟08 stood at 1223 crores that makes it an

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increase of 20%. The same comparison if done on a

quarterly basis for the quarter 4, we had a reported PAT of
391 crores, but if we have to make these adjustments, the
comparison comes to 412 crores as against 333 crores,
that‟s again an increase of 24%. Our interest income
during the year stood at 6,396 crores as compared to a
little less than 5,000 crores a year ago that‟s almost an
increase of 30%. Our other income included 66 crores out
of which almost 17 crores was received as fee for the
purpose of providing services under the re-structured
APDRP program. Our profit after tax for the quarter stood
at 391 crores as against 295 crores for the same period a
year ago.

This is the RoA tree which shows the performance during

the last year as well as the quarter on quarter
performance. Our operating profit for the year has
increased from 3.54% to 3.62%, that‟s an increase of 8
basis points and if you look at the same figure for the
quarter 4, that‟s an increase of almost 23 basis points on
an annualized basis. In terms of the final return on assets,
that‟s the profit after tax. The increase for the period of Q4
has been in the range of 16 basis points. Our RoA for the
year ‟08-‟09 stood at 2.21%.

In terms of our Balance sheet our share holders‟ funds

amount to 10,300 crores as on 31st March ‟09. Our
borrowings stood at 52,000 crores as compared to 40,000
crores a year ago. Current liabilities constitute 3434 crores
out of which almost 1400 crores is interest accrued but not
due as well as another 1500 crores is the provision for
taxation so that‟s almost 2900 crores which is mainly
attributable to this 3434 crores. In terms of loan assets we
stand at 64,500 crores which generates our top line. We
also have investments in the form of 34 crores which
includes equity shares in PTC in Power Exchange and
other bonds. Our total assets have increased from 54,700
crores to 68,000 crores and our loan assets have
registered an increase of 25% on a year on year basis.

The key highlights for the year as well as the quarter, our
yield for the year has increased from 10.11% to 10.92%.
Our cost of funds had also gone up from 8.03% to 8.71%.
But our Spread has gone up from 2.08% to 2.21% that‟s
an increase of 13 basis points. Our NIM has also gone up
by 10 basis points to 3.84%. Our leverage as on 31st
March ‟09 stood at 6.72. Our capital adequacy as on 31st
March 2009 stood at 15.31% as compared to 17.20 a year
ago.

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In terms of quarterly indicators, our yield for the quarter

stood at 11.2%. Our cost of funds for the quarter 8.78%.
Our interest Spread for the quarter increased from 2.10%
to 2.42% that‟s an increase of 32 basis points for the
quarter. Our net interest margin has gone up from 3.77%
to 4.04%, that‟s again an increase of 27 basis points.

Here we are presenting a comparison of how sanctions

have faired for the last 8 quarters and disbursements have
fared for the last 8 quarters. In terms of sanctions, you can
see that more or less during the last quarters we have
been maintaining the sanctions in the range of 14,000 to
15,000 crores, whereas normally, there stands volatility in
sanctions since we are essentially a project driven
organization. In terms of disbursements we were faring in
the range of 3200 to 3300 crores during the last year,
during the year ‟07-‟08 whereas in the year ‟08-‟09 we
have reached the level of 4700 to 5000 crores of
disbursements every quarter. Disbursements for the
quarter 4 ‟09 stood at 6954 crores.

Now sequential comparison of our key indicators; the line

in red indicates the yield. It has gone up from 9.88% to
11.2% for the quarter 4 just ended. Our Spread today
stand at 2.42% as against 1.93% which was for the quarter
1 of FY07-08. Our NIMs have increased from 3.67% to
4.04% during the last 8 quarters. More or less we have
seen that our spreads have been trailing in the range of 2
to 2.1 or 2.2%. In terms of disbursements split into sector
and scheme wise, our disbursements for the year stood at
21,054 crores out of which 76% had been in the
generation side, 6% in transmission side amounting to
1296 crores and another 2% in RAPDRP program that is
325 crores. In terms of borrower category, we have
disbursed almost 70% of the loans to the state sector, 15%
to central sector, and 12% to joint sector as well as 3% to
private sector. As far as quarterly numbers are concerned,
our quarterly disbursement stood at 6954 crores out of
which almost 5500 crores went into generation that is 79%,
348 crores went into transmission which is 5%. In terms of
borrower mix, almost 66% disbursements went into State
Sector, 24% went into Central Sector, 7% went into Joint
Sector and 3% went into Private Sector.

Our cumulative disbursements as on 31st March ‟09 stand

at 113,000 crore rupees. In terms of sanctions, we
sanctioned 44,600 crore rupees to Generation Projects,
5800 crore rupees to Transmission Projects, 1500 crore
rupees to Distribution Projects. In terms of borrower
category almost 52% funding went to State Sector, 32%
went to Central Sector, 14% went to Private Sector.

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For the quarter our sanctions stood at 14255 crores out of

which 69% was into Generation, 11% was in Transmission,
14% was under the Re-structured APDRP program and
6% was under miscellaneous/others category. In terms of
borrowers, 67% of the sanctions in the quarter 4 went into
state sector and 33% went into private sector. Our
cumulative sanctions as on 31st march ‟09 stood at
2,33,978 crores. In terms of loan assets, we have an
gross outstanding of almost 64,421 crores out of which
81% is outstanding in generation projects, 10% is
outstanding in transmission, 5% is outstanding in
distribution and 4% under others category. In terms of
borrower mix, almost 72% of our loans are outstanding
from State Sector borrowers, 14% to Central Sector
borrowers, 7% to Joint Sector, and 7% from Private Sector.
Our gross NPAs as on 31st March ‟09 stood at 13 crore
rupees and we have a very low level of gross NPAs in
terms of percentage at 0.02%. In terms of our borrowing
profile, the money we had borrowed from the market as on
31st March ‟09, the position stood at 70% of our borrowing
stand in the form of bonds, which is 36,882 crores, term
loans from banks and financial institutions to the extent of
26%, short term borrowings of 1400 crores. 95% of our
borrowings outstanding are in the form of rupee loans. In
terms of resource profile, 16% of our funds deployed have
come from equity share holders‟ funds and almost 80% are
in the form of borrowings from various financial institutions
and money markets. The various major projects
sanctioned in the last year, under the Hydel category, the
Tipaimukh Hydel Project was sanctioned in the state of
Manipur which is a 1500-mega watt project. The loan
amount sanctioned to the project stood at 4,772 crores.
Bellary Thermal Power Station Project which is a 500-
mega watt project in the state of Karnataka, amount
sanctioned 1806 crores. Omkareshwar Hydro project
which was a debt financing deal with NHDCL which stood
at 1350 crores. In terms of our share holding, pattern as of
now we are primarily a government held company with
89.78% of our shares being held by the President of India.
The FII share holding stood at 4.01%, Indian Financial
Institutions and Banks hold another 1.92%. With this we
come to the close of this presentation and now the session
is open for queries.

Question and Answer Session

Speaker 1: Sir recently there was a press article that once again we
have missed the power… the new output to be added
target. Now very clearly you are in the thick of the action
because you provide finance to all the three major
segments of power. Can you share with us as to where we

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seem to be missing this target? Whether it is the State

Sector or the Joint Sector or the Public Sector and what
can be done to improve this situation?

Satnam Singh: Well it is alright to say that some press note is there about
missing the target. Missing the target comes at the end of
the plan, not now. What is important for you to know is,
that against the target of roughly about 80,000 plus, mega
watt plan to be commissioned in the 11th Plan the entire
capacity has been awarded which means…which is also
known as the zero date for construction in the first two
years itself. In fact 16% of the capacity has already been
commissioned which was not the case in the earlier plans.
Earlier plans this process of award of the capacity to be
commissioned in a plant used to continue up to the mid of
the plan, leaving thereby very little time for completion of
the construction. I am not saying that everything what we
plan is going to happen, but I will share with you certain
factors; one that this is already awarded leaving an
adequate time for construction. This will be average time
required for construction depending on the size of the
projects is about 36 to 42 months and in this case since
almost all capacity required has already been awarded
more than 36 months is available. So the probability of
slipping existed in the lasted in the last plan also.
Probability of slipping in long gestation projects always is
there till actually they happen. The other part is that some
units or some projects which were planned to be
commissioned in the 12th Plan have already committed to
pre-pone the commissioning to the 11th Plan itself. The
first two Ultra Mega Power Projects, TATAs as well as
Reliance; TATAs for Mundra; Reliance for Sasan have
committed through the process of amendment of the PPA.
When we say amendment of PPA it has financial
implications if they don‟t commission the project by time,
so they have committed, TATAs have committed that at
least 2 units which is a pre-ponement of 17 months and in
the case of Reliance it is a pre-ponement of 3 years. At
least 2 units of each of these projects would come in the
11th Plan itself which adds up to 2920 mega watts. So
even if there is some slippage on the planned capacity
addition to a major extent it will get offset by pre-ponement
of that kind, otherwise, there is adequate balance time
available for expediting even if there is any delay at the
moment which has taken place. So, we do not expect that
actual capacity addition would be widely different from
what it has been planned.

Speaker 1: Sir one more question, of this roughly 80,000 that we are
talking, what could be the share that we would get in terms
of being part of the financing arrangement? Not

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necessarily the full but may be a consortium partner or

what?

Satnam Singh: Well as you know that other than Mundra Project of TATAs
we are there in almost all projects. So, there is no
question of our not being able to capture all the capacity
addition program of the Government of India unless there
is any exposure issue which comes up on the way;
otherwise we are open to funding all such capacity. There
is no project particularly large-sized, large-ticket projects
which can get financial closure without our assistance.
Our net worth size as you know, is three times of most
banks, leaving top 4 or 5 State Bank, ICICI, PNB, Bank of
Baroda etc. And Power projects being capital intensive,
they need to approach institutions like us.

Speaker 2: What is the reason for our skew loan borrowers are mostly
a State Unit? That‟s not the generation profile, so what is
the main reason why our borrowers are mostly State
Units?

Management: Well I am sure you know that till 90s the Power Projects
were the domain of State Power Sector and some
licensees and some Central Sector Projects, all in the
State Center or Joint Sector. Only in the early 90s Power
Sector was opened for Private Sector and that time though
there was a lot of enthusiasm for getting the sanctions and
allocation of the Power Projects later on Private Sector
realized that it is not an easy job, and therefore some
delay took place. Only in sort of 2004, 2005 onwards, that
there is renewed interest by the Private Sector, but for
them to make a considerable difference they would require
and that too this difference is taking place in the sanctions.
But for them to make a difference in terms of percentage
as compared to the overall power market, they would
require considerable time, at least 3 to 4 years. But to
share with you the percentage what is planned to be
incremental, I am not talking of the total, incremental
participation by Private Sector is 9% in the 10th Plan, it is to
be increased to 21% in the 11th Plan and 63% in 12th Plan.
So, really we will start seeing the difference in the
percentages only in the 12th Plan. In 11th Plan even if
incrementally 21% is taken up by Private Sector, overall
basis it will not make much difference in terms of
percentages, though absolute number would look
attractive. And that is why if the players are in the State /
Central / Joint Sector, our lending will be skewed towards
that.

Speaker 3: Sir, I have two questions; one is, you have de-merged your
consultancy business from this year right?

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Satnam Singh: That‟s right.

Speaker 3: And you have not shown the other operating income in this
year‟s financials so just wanted to know what is the other
income coming from that source?

Satnam Singh: Well last year our other income from lease, UMPPs,
Consultancy, Income Tax refund etc was 71 crores, this
year it is 66 crores. And as far as PFC consulting is
concerned, profit after tax is about 10 crores against an
income of 21, 22 crores.

Speaker 3: Okay and sir secondly you said our APDRP sanction and
disbursement have already happened, what kind of
opportunity do you see from fee-based income as well as
disbursement of loans from that particular scheme for the
current year FY ‟10?

Satnam Singh: We have already received a fee-based income of 25

crores. It is a 52,000 crore scheme and our fee income is
going to be about 1% of the loans sanctioned.

Speaker 3: Right, and in terms of disbursement of loans how do you

see this year shaping up sir, for APDRP particularly?

Satnam Singh: I think in the Analyst meet I am not supposed to give any
guidance. If you still want, we will just give you the MOU
target of disbursement is about 23,000 crores and out of
that APDRP is about 1900 crores.

Speaker 3: Okay sir thank you.

Speaker 4: What is the progress of Reliance Power?

Satnam Singh: Well, Reliance Power, the Sasan Project we have

sanctioned 1770 crores and for their Krishnapatnam
Project the proposal is under consideration, we are in fact
co-lead with IDBI for arranging entire debt for
Krishnapatnam Project. As far as progress is concerned,
as of now I can only share with you that financial closure is
expected in this month. But this question you should be
asking Reliance Power and not me!

Speaker 4: As a lender you must be knowing…

Satnam Singh: Yes, I cannot tell you how it is progressing officially; I can
share with you what is our information but performance if
you want to know, you should ask Reliance Power.

Speaker 4: Thank you sir.

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Speaker 5: When you make any lendings to Power Projects what are
some of the key variables you look at before you agree to
sanction loans and secondly what is your internal targets in
terms of equity or project IRRs for which you will probably
sanction a loan?

Satnam Singh: Well, I am happy that some people are asking basic
questions also. We have our dual appraisal system. We
analyze the promoters with a view to make an assessment
as to whether they have the capability to contribute equity
to the extent it is required for the power projects and also
ability to execute the kind of project they are taking up,
that‟s in the promoter‟s analysis we see. But as far as
project analysis is concerned we see the benchmark cost,
we see IRR of not less than…our norm is IRR not less than
12%. We got to see whether the project has all clearances
in place or if not then what is the stage at which these
clearances are; whether it is environment clearance or a
coal linkage or defense clearance or whatever clearances
are required; if forest clearance is involved, even forest
clearance. Apart from that we also see what is the stage
of the agreements with respect to sale of power, with
respect to purchase of fuel, where does it stand; also who
is going to operate the Power Plant, whether the promoter
himself has the capability to operate the plant or is he
going to go through established reputed O&M contractor?
In addition the technology, which technology the project is
going to use, and whether the equipment is being procured
from a domestic supplier or an international supplier?
What are going to be the efficiency parameters at which
these equipment will operate? Like for example we are
currently looking at super critical technology where thermal
efficiency is higher by 7% to 8% as compared to 500
megawatt power projects and like wise. This is a small list,
but there is a very long list.

Speaker 5: Are you differentiating amongst projects which are using

Chinese equipment for example or using any other
equipment?

Satnam Singh: Yes of course, when we look at technology and the

supplier we do look at who is supplying and what is going
to be financial parameters. If you question is whether
Chinese equipment is acceptable or not, then my answer
to that is Government of India has asked Central Electricity
Authority to conduct a study and they have already
submitted a report for unit size up to 600 megawatt that the
performance of up to 600 megawatt is comparable to any
other product in the world and as far as unit size above
600 megawatt is concerned their team has very recently

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returned from China, and they are very, very happy about
it, though they have officially not yet submitted the report.

Speaker 6: Your target for disbursements of 23,000 crores seems

quite modest compared to 21,000 you did in FY09 and
also given that you did about 70,000 crores of sanctions in
FY08 which you I believe most of which will come through
in FY10, FY 11, can you just explain this?

Satnam Singh: We want the analyst to apply their mind. I have also
shared with you that we have outstanding sanctions of
1,20,000 crores which depending upon the stage at which
the individual projects are, disbursement against that
would be sought and new sanctions maybe of the order of
60,000 crores and all put together how much disbursement
would take place is for the analyst to guess. But what I
shared with you is the MOU target entered into with
Government of India which stands at 23,000 crores.
Actually how much we will achieve, I have not said so, so
you got to see what kind of confidence you have in us
based on our past performance and our attitude towards
achievements.

Speaker 6: What kind of re-payments is expected in FY10?

Satnam Singh: Re-payments? Well, re-payments of the order of about

8,000 crores. Re-payment from borrowers you mean?

Speaker 6: Yeah.

Management: Yeah, 7,000 to 8,000 crores.

Speaker 7: Sir, follow up on the question about modest disbursement

which you have tabulated in the MOU, is it because you
think the liquidity problems which you faced last year will
continue this year or in FY10, that‟s why the modest
targets?

Satnam Singh: In my opening remarks I had shared with you that liquidity
issue was there up to December ‟08 when banks were
wary of lending to NBFCs like us. But after that there has
not been any liquidity issue with us and we are not facing
any problem in resource mobilization. The target is MOU
target, what will be the actual achievement I have not said,
so…

Speaker 7: Do you foresee a liquidity problem in the coming months in

the current year sir?

Satnam Singh: No, I just said so, we are not facing any liquidity problem
as of now, future nobody can say, you have to tell me.

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Speaker 7: And sir, one more clarification about the numbers sir, you
mentioned in your speech that you had booked foreign
exchange losses of 253 crores, while in the comparable
slide which was there, exchange losses were only 160
crores.

Management: That is post tax effect.

Satnam Singh: That is post tax, what I mentioned was gross.

Speaker 8: Sir any progress on the Nuclear Power front?

Satnam Singh: As you know that Nuclear Power Projects are currently
being put by Nuclear Power Corporation which is a cash
rich company and since their expansion plans were not
very big earlier, because of restrictions they did not want to
borrow any money from the market or financial institutions.
Now with 1, 2, 3 deals having been put in place, their
expansion plans are increasing sort of multifold according
to our information and we are already in touch with them
and as I have said earlier in many of the forums that we
are open to funding Nuclear Power Projects, we are
exploring the possibility. As soon as the project is ripe for
funding, we will be taking up those projects.

Speaker 8: Sir, would it be correct to assume that whatever MOU you

have does not include anything on the nuclear front?

Satnam Singh: Next one year since we have no idea as to whether they
will be able to submit a project relating to that, we have not
put that into account. There will be many other things.
Some of the developers might not have right now
generated conversation with us, like Solar for example, the
policy is open, there are people who are thinking and it
does not require too much time for preparing a project of
that kind or for that matter any Renewable Project. So
there will always be new projects coming up where quick
disbursement is possible.

Speaker 8: One small question sir, the re-structured APDS for which
you are the nodal agency, where you will be getting 1% fee
income, the scheme will be valid for how many years sir?

Satnam Singh: It is for the 11th Plan. You can put it as 3 years. Yes
Kunal?

Kunal: Sir, out of the sanctions of 57,000 I think we have

sanctioned some corporate level loans to NTPC of 10,000
crores.

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Satnam Singh: That‟s right.

Kunal: What would be the expected draw down? Is it included in

the 23,000 crores of disbursement target which is there?

Satnam Singh: It is not only NTPC, all sanctions have been considered
based on the schedule of disbursement which we asked
for from all the developers and all are included in the
23,000 crores disbursement plan.

Kunal: Sir, generally the Corporate Level loans, how are the draw
downs? Maybe in project levels we see it over the 5
years…

Satnam Singh: It is called a corporate loan because NTPC is an AAA

company, but this loan is against certain specified projects
so based on the progress in those respective projects the
draw downs schedules are drawn.

Kunal: Okay, and sir one more question on your Spreads,

undoubtedly the best Spreads of 2.4% but seeing the
liability structure maybe like 85% or 90% of your liability is
fixed and we are seeing the cost of funds coming down
significantly quarter on quarter from 9.3% to 8.8%, so is
there any significant repayment or may be like you would
have repaid some high cost debt and replaced it with some
low cost debt?

Satnam Singh: That is a normal practice we do, wherever there is a

provision in the borrowing that the borrowing is linked to
the PLR or some other structure where in line with the
market the cost comes down that in any case comes down.
But where there is no provision, there also as and when
market changes dramatically either upward or…upward of
course we don‟t look at, downward, then we do raise that
issue with the respective institutions for possibility of cost
reduction and if not agreed to and if alternative sources
offer us low cost funds, we do re-pay.

Kunal: Sir, would there be a lag impact and we can see these
Spreads again settling back to 2.2 odd percentage over
next 2 or 3 quarters?

Satnam Singh: Say it again, I couldn‟t hear it properly.

Kunal: Maybe the Spreads of 2.4% maybe there is a lag effect

because we are not seeing any decline in your yields, it is
remaining at 11.2% while cost of funds are declining
significantly by 50 basis points. So may be that lag effect
may come over the next 2 quarters or so?

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Satnam Singh: I am not wanting to give any indication of the Spreads in

future, but I would only share that we will maintain as we
have been saying 2% plus Spread and last quarter there
has been a bit of aberration actually because the interest
reset quantum of loan and the income was quite
substantial in the last quarter which is getting reflected into
the Spread. If you want to know the absolute figures, it is
53 crores. It is not an every quarter feature, so you should
go by the yearly Spread of 2.2% or so.

Kunal: Okay and sir what would be the fee income booked on the
Tilaiya project awarded in this quarter?

Satnam Singh: 15 crores.

Kunal: Okay thank you sir.

Speaker 9: Just one question on your private equity business, can you
give us the status update and what is happening on that
side of the business?

Satnam Singh: I am sure you know that venture capital funds in the Power
and Telecom sector do not get any tax break and therefore
last year we had to dispense with the idea of setting up an
India Power Fund and as an alternative to that we had
thought of making an equity consortium on the lines of
Power Lender‟s Club. You know that in Power Lender‟s
Club we have 18 banks, LIC and HUDCO and we look at
the power projects from the lending perspective besides
how much exposure can we take and the balance because
terms and conditions are already agreed to with the Power
Lender‟s Club members we offer it to the Power Lender‟s
Club. On similar lines we are thinking of creating a
consortium. We had written to both National and
International players wanting to invest in equity in Indian
Power projects. There was some response. LIC was quite
positive. Of course as you know that after that all this
turmoil started and so International players not coming
forward so much and even domestic institutions are
thinking twice, so that is why it is taking a bit longer time to
formulate that consortium and the standardized terms and
conditions. However, we have thought of developing a
product which we might be introducing sometime in 3 to 4
months from now.

Speaker 9: There were talks that some plans that PFC itself could take
equity exposure in some of these projects, has there been
any progress on that?

Satnam Singh: Can you repeat that question please? What talks?

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Speaker 9: Plans in terms of PFC taking direct exposure exactly and

part of the same consortium where you would have other
investors also coming in, PFC would also be a part of
equity investor in those projects, any thoughts on that?
Could it be that exactly is it the same type of a structure
which you were saying will come in the next 3 or 4
months?

Management: Yes, I am talking of that only. You see if we want our

consortium members to make investment in equity, we
have got to standardize the terms and conditions first
because they would like to know what is in it for them, so
unless that is finalized, it is not possible to create a
consortium. So it can be done independently. We can
design our terms and conditions and then tell the
consortium and then somebody will come forward and say
no, this is not acceptable to me. So it is a chicken and egg
kind of a thing that we have drafted, we are talking to them
and once those things are finalized, then only headway
can take place.

Speaker 9: Okay thank you sir.

Speaker 10: Sir, a couple of questions actually. Any specific reason

why your disbursement and sanctions are skewed more
towards generations and not transmission space?

Satnam Singh: Well it is not that they are skewed. Yes, figures if you see
yes, but because transmission, there is another major
company Power Grid which is doing the major job of inter
state transmission system. In generation similar structure
does not exist. Of course NTPC is there, but even the
focus, higher focus was there on generation but going
forward, as I have shared with you that distribution, this
initiative of 52,000 crores has been taken by Government
of India, going forward this kind of skewness will not be
there because more and more projects will be sanctioned
in the distribution area.

Speaker 10: Sir, just a follow up on that as well. Even the state
structure is supposed to do a large amount of CAPEX in
transmission space and most of the utilities in state sector
are having some financial constraints as well. Are you
seeing any sings of slow down in that particular space and
that is why you are not moving into it aggressively?

Satnam Singh: You see we had done one exercise in the beginning of last
financial year that whatever power projects we have
sanctioned in the state sector whether do they have
corresponding transmission lines coming up at the time of
commissioning of those projects funded by us and the

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result was, yes. All the utilities had planned transmission

lines in such a way that they will be able to off take the
power from commissioned generating stations. So there is
no issue on that.

Speaker 10: Sir, two more questions actually, one, is there any specific
limit on how much exposure can you have to a particular
corporate group? I am asking particularly in the case of
Reliance Power since they now have got 3 UMPPs is there
any particular specific limitation on that?

Satnam Singh: I shared with you in my opening remarks itself. Reserve

Bank of India has very categorically told us that as far as
private sector is concerned we are supposed to follow the
standard norms for all institutions which are issued by
Reserve Bank of India which are funding infra structure
sectors. So limit is 20% of the net worth per project that
means per single borrower and 35% for the group.

Speaker 10: Have you sanctioned any Merchant Power Plant so far?

Satnam Singh: Not really, but some of the Power Projects already funded
by us, have got some Merchant Power additional available
which is resulting into considerable money making by
them. For example, Jindal‟s Bilari Project, we had done a
re-financing, it was earlier funded by ICICI, 5 years back
we funded it and that project has an option, a part of the
power could be sold on Merchant basis. They are making
a log of money.

Speaker 10: Is there an upper limit to that Merchant Capacity which you
normally consider while approving a sanction?

Satnam Singh: No, our decision to fund any project is not based on this. It
is based on the viability of the project. Now viability has
many features – tariff. Supposing if somebody puts up a
Merchant Power Plant at Rs.9, I am certainly not going to
fund it having known that, that is the kind of tariff at which it
cannot. But let‟s say somebody puts up a Merchant Power
Plant at Re.1, there is no credit risk there so one can
always fund it. Also, if a useless developer puts up a
Merchant Power Plant, I am not going to look at it. But,
yes a company like TATA Power puts up a Merchant
Power Plant or for that matter those who have already got
the experience in Power Sector put up Merchant Power
Plants; certainly they will come under consideration by
Power Finance Corporation.

Speaker 11: Sir, how many UMPPs are we likely to allocate in FY10?

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Satnam Singh: I said it in the opening remarks that RfQs for 3 UMPPs
would be issued in next 3 to 4 months that is Chhattisgarh,
Orissa and Tamil Nadu. That is the first milestone after
that we have to achieve progress and then only we can
indicate. If you go by standard then all these 3 if started
roughly around July, August should be awarded by the
financial year end.

Speaker 11: And sir is Reliance Power eligible to bid in this UMPPs
henceforth?

Satnam Singh: Yes, based on the present guidelines they are eligible to
bid.

Speaker 11: Thanks sir.

Speaker 12 How much of your loan book is under floating rate and in
the fixed rate as of now?

Satnam Singh: Fixed rate and Floating rate – loan book? I think it is about
17% fixed and 83% floating, but out of that 14% year with
10 year re-set and 65% with 3 year re-set.

Speaker 12 And on the borrowing side?

Satnam Singh: On the borrowing side, 15% floating, 85% fixed.

Speaker 12 Thank you sir, and if you could just highlight how much of
your loan book would re-priced in the next year end and if
possible at what rate?

Satnam Singh: Re-pricing I think would be I think about 7,000 to 8,000

crores. But as you know the interest differential in the next
financial years may not be there because in the next year
what will come for re-pricing is „06, „07 disbursements. So,
‟06, ‟07 lending rates and ‟09, ‟10 lending rates as of now
are comparable range with marginal difference. So it is not
going to be a substantial income in the next financial year.

Speaker 12 Sir, on the foreign exchange side how much of exposure is

there in the borrowings?

Satnam Singh: Out of a total outstanding of about 520 million equivalent

dollars, about 245, 246 million is outstanding. I mean it is
un hedged. Out of a total outstanding of equivalent dollars
of 520 million approximately, 246 million is un hedged. It is
on this 246 million that we have booked the loss of Rs. 253
crores and only about 70 million is coming up for
redemption in July and August approximately. Out of that
180 million is coming up for redemption in 2017. So if at all
any actual loss booking takes place, of course we have

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already booked it at 51.45 as of 31st March. It has already

come down to 49 point something, so there is already a
gain as of now. So, we will see what happens on 30th June
and then July, August when the actual redemption takes
place.

Speaker 1: Any risk management factor in mind for keeping it as up to

certain level or something as it has already 230 crores, so
is there any thing you have thought about if that loss goes
ahead of 300, 400 crores, then you might think to hedge it
or anything in mind for that?

Satnam Singh: You see no absolute figure should be used for this kind of
inferences because what one has to see is whether the
average loan rate, the borrowing cost for this foreign
currency borrowing is at what rate? Whether even after
this kind of loss if it is comparable to the alternative
borrowing cost and I can share with you that it is
comparable, it is around 8 point something percent, even
after booking such a high loss and you know very well that
this was an aberration. No currency fluctuates at this rate
as rupee has depreciated in about 6 months‟ time like this.
So, it is an aberration, it will get corrected, the signals are
already there so we are not so much worried about that
part.

Speaker 12: Thank you sir.

Speaker 13: Sir you mentioned about APDRP scheme that 50% of the
loans would be converted into grants if the performance is
satisfactory. What does that translate into? Does that
mean that there would be an interest waver or any
relaxation on principle re-payments?

Satnam Singh: Conversion of loan into grant actually means loan waver
itself; loan is not to be re-paid.

Speaker 13: So would the Company actually be compensated by the

Government for that?

Satnam Singh: Of course! We cannot provide grant, otherwise I would

have said we are going to provide grant! Grant portion will
come from Government of India that is why I said, out of
52,000 crores, 32,000 crores is grant. But initially since it
will be given as loan, we are going to earn interest till it is
converted into grant. Grant we cannot offer, you will not
leave us.

Speaker 14: Sir this quarter your employee cost is considerably low
what is the reason for this?

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Satnam Singh: Is it low? I think it is reasonable.

Speaker 14: Compared to previous quarter of last year…

Satnam Singh: It can only be on account of the provision in a

particular…Q4 we made a provision of 19 crores, Q1 it was
3 crores, Q2 1.98 crores, Q3 1.99 crores like that. But the
variation is because of our de-merger of Consultancy
business to PFC Consulting and those employees who
were earlier booked on the rolls of Power Finance
Corporation, a portion of that since those people had been
sent on deputation to PFCCL that is being booked directly
into the consultancy business.

Speaker 14: Okay and sir, have you heard anything about this ICAI
notification on DTL provisions?

Satnam Singh: I think I have mentioned long time back that in April 2007
we had received the letter from ICAI saying that based on
representation of Power Finance Corporation; we have
decided to amend the article 22 so that PFC does not have
to create deferred tax liability. Now it is a premier
organization of the country, CA institute, 2 years have
passed and they have not taken that final decision as yet
but according to our information, it is at an advanced stage
and the formal decision can come any day.

Speaker 15: Sir a question from my side, one question is, how much of
the loan book is still bagged by Escrow mechanics, and
second is how much of the loan book is still guaranteed by
the State Government?

Satnam Singh: Escrow requirement is a pre-condition. For States Escrow

requirement is a pre-condition and for Private Sector as
you know it is TRA which is a substitute. As far as loans
backed by State Government guarantee are concerned,
that‟s your second question I suppose, it is about 30%.
25%, actually because going forward States are restraining
themselves from giving guarantee and power sector has
been reformed, credit risk having gone down, this kind of
requirement is not there. We are funding based on the
charge on assets, so the overall percentage is coming
down.

Speaker 15: And sir in this last quarter, Q4, do you remember what are
the incremental Spread?

Satnam Singh: In Q4 it was 2.42.

Speaker 15: Sir, I believe that was the outstanding Spread.

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Satnam Singh: It is not an outstanding Spread. I have also shared with

you that a large quantum of loans came for re-set and that
figure was 53 crores which has led to this kind of Spread.
Therefore I also said that you should go by yearly Spread
rather than quarterly Spread. In Analysts parlance it is an
aberration. Because we are not going to get 53 crores of
interest fee income going forward, so don‟t be surprised.

Speaker 15: So that means in Q4 the incremental Spreads were more

in the region of around 2% or something, it was not very
high?

Satnam Singh: Yearly Spread may be the basis.

Speaker 15: Okay thank you.

Satnam Singh: Anything else, anybody else?

Speaker 16: Sir, coming back to the disbursement, the 23,000 crore
target is that an excellent rating target or is it a base
target?

Satnam Singh: Excellent category.

Speaker 16: Okay thank you.

Satnam Singh: Nobody has talked about brain power coming to Public
Sector! You were very worried about attrition rate, now
you are no longer worried about attrition rate I suppose!
Good if there are no further questions we can call it a day?
Thank you very much.

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