Look to sustain 35% growth in sanctions, disbursement in H2: REC

Power sector is revelling in really exciting times, is the word coming in from REC . Speaking to CNBC-TV18, CMD PV Ramesh said the government’s efforts to ensure power for all by providing a boost to discoms through Ujwal DISCOM Assurance Yojana (UDAY) scheme has led to a robust growth in the sector. Ramesh said the company is majorly invested in power generation, but also equally invested in transmission and distribution, with a pan-India presence. Ramesh feels renewable power like hydroelectricity, wind energy and solar energy is where the future lies. He added the company saw a growth of more than 35 percent notwithstanding the prepayment of Rs 30,000 crore from discoms in the first half of FY17 compared to last year. He expects the growth to be sustainable backed by loan sanctions and disbursements.

The company’s restructured loan book is around Rs 23,000 crore. Below is the verbatim transcript of PV Ramesh’s interview to Latha Venkatesh, Anuj Singhal, and Sonia Shenoy on CNBC-TV18. Anuj: First of all if you could tell us, have things really improved on ground for the power sector because we have seen a big rally play out in stock markets? A: These are very exciting times for the power sector where as you know, number one, we are poised on this major effort by government of India to ensure power for all, extend the power lines to each and every un-electrified village, and power all households. This would mean a fundamental transformation of the rural economy but more importantly is the UDAY scheme which is now restructuring, revitalising the discoms and that is another big area where a major leap is being seen.

The third is the renewables. The government is committed to ensure 175 gigawatt of renewable by 2022 and 100 gigawatt of that by 2020. This another sector, in particularly the rooftop solar taking a major share of this likely investment. We are also making a major investment in the transmission gird modernisation. So, the overall power sector growth is very robust and there is a lot to be excited about. Latha: While it is true that the UDAY scheme took away a large chunk of the debt of discoms, most of them still don’t have enough money to pay even the balance debt or even if they do, they don’t seem to be buying more power. So, where are you making money, are you making money on power generation at all or are you making money more on transmission financing? A: We are a total power sector services enterprise. So, we have a presence across the value chain. Our major investment, of course more than 45 percent, is in the generation sector and we are equally invested in the transmission and the distribution. Both the private, public sector, the organisation that has a pan India presence and then we have the subsidiaries, two of them which are involved in the transmission and distribution services, both consultancy and implementation, coordination, and project management services. Latha: But in generation who is borrowing? A: Generation, the borrowing is in the renewable sector.

The hydro is still picking up, the solar, the wind, and the roof top solar. So, there is still a huge opportunity opening up now and that is where the future is. Sonia: Can you share some numbers with us because there are couple of concerned pockets for the company as far as investors are concerned. One is that loan growth has been very weak, loan growth was just 1 percent in the quarter gone by and the other thing is stressed assets continue to be a big concern, your restructured loans have risen to 11.8 percent versus 11.5 percent in the previous quarter, so, on these two issues, stressed assets and loan growth, what is your view over the next two to three quarters? A: Let me put this across to you. If you look at the first half of this year, our growth has been both 35 percent. This is notwithstanding the fact. We had a prepayment from discoms to the tune of about Rs 30,000 crore. Our disbursements actually had stepped up by 35 percent in the first half of this year compared to the last year and then we are sustaining that growth in terms of both in terms of loan sanctions and disbursements. So, that is on the bucket.

The other one with regard to the restructured loans, we have actually had one of the lowest, we have about Rs 23,000 crore of restructured loans and these relate to less than 10 projects of our total portfolio and 70 percent of them are in the public sector, the gencos, the state electricity boards. Now obviously there has been some slippage in terms of the procurement and the approval process at the state level. Now, these are areas where we are seriously focused on now and then we will ensure that these are brought down Actually, we have just reviewed these and then they are all showing signs of fit progress. This is where the quality of program execution is the area where we are focusing, where we will continue to focus to see that this does not happen. This is not a large problem compared to a loan portfolio of Rs 2 lakh crore, this is relatively small in our view. It looks amplified also because of the prepayment from the discoms to the tune of Rs 30,000 crore.

Source:CNBC