Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Power Finance Corp Ltd (BOM:532810, Financial) reported a consolidated profit after tax of INR 7,182 crores for Q1 FY '25, marking a 20% year-on-year increase.
- The company's loan asset book grew by 13%, surpassing the INR 10 lakh crore mark.
- The consolidated gross NPA ratio decreased to 2.97% in Q1 '25 from 3.54% in Q1 '24, indicating improved asset quality.
- Net profit for the stand-alone performance in Q1 '25 was INR 3,718 crores, a 24% year-on-year increase.
- The company declared an interim dividend of INR 3.45 per share, reflecting strong financial health and shareholder returns.
Negative Points
- Disbursements for Q1 '25 were slightly subdued at INR 19,483 crores, leading to a lower loan asset book growth of around 10% year-on-year.
- The transformation exercise initiated with Boston Consulting Group has temporarily slowed down normal business operations.
- There were no major additions in provisioning numbers for Q1 '25, but the company created an incremental provision of INR 62 crores.
- The outstanding foreign currency portfolio includes 15% yen-denominated loans, which could pose exchange rate risks despite hedging.
- Stage 2 assets increased to approximately 11% of the total outstanding, up from 7.5% in the previous quarter, indicating some stress in the loan portfolio.
Q & A Highlights
Q: How do you plan to achieve your growth target of 14% for the full year despite the disruptions in infrastructure lending?
A: Parminder Chopra, Chairman and Managing Director: We aim to balance value and volume, and we expect to meet our growth targets for FY 2025. The underlying loan book trajectory is strong, and the recent changes are meant to smoothen and expedite processes.
Q: Can you clarify the status of the Shapoorji Pallonji loan and the due diligence process?
A: Parminder Chopra, Chairman and Managing Director: The due diligence process is still underway, and no funds have been disbursed. The media reports are speculative and inaccurate.
Q: What is the status of the KSK Mahanadi project and the potential cash recovery?
A: Parminder Chopra, Chairman and Managing Director: We have requested NCLT to allow early distribution of surplus cash. The bids received for KSK Mahanadi are being evaluated, and we expect more than 100% recovery.
Q: Can you provide insights into the repayment rates in the genco and distribution segments?
A: Parminder Chopra, Chairman and Managing Director: Repayments have been faster due to the RDSS scheme and LPS scheme. There were no major repayments in the genco space this quarter.
Q: How does PFC handle state utilities that delay payments?
A: Parminder Chopra, Chairman and Managing Director: No state utilities have defaulted. Delays may cause assets to move between Stage 1 and Stage 2, but they are not categorized as non-performing assets.
Q: What is the expected timeline for the resolution of the KSK Mahanadi project?
A: Parminder Chopra, Chairman and Managing Director: The resolution depends on NCLT approval, but we expect it to happen within this financial year.
Q: What is the outlook on margins and potential write-backs from project resolutions?
A: Parminder Chopra, Chairman and Managing Director: We expect to maintain margins between 3.25% to 3.5%. Significant write-backs are expected from KSK Mahanadi and Lanco Amarkantak upon NCLT approval.
Q: What is the rationale behind pursuing infrastructure projects outside the power sector?
A: Parminder Chopra, Chairman and Managing Director: PFC is exploring infrastructure projects to diversify and capitalize on new opportunities, in line with our mandate to fund infrastructure.
Q: Are you funding renewable projects without long-term PPAs?
A: Parminder Chopra, Chairman and Managing Director: Historically, we funded projects with long-term PPAs, but we are now considering merchant power projects based on their merit.
Q: What are the initiatives suggested by BCG, and how will they impact future growth?
A: Parminder Chopra, Chairman and Managing Director: BCG's initiatives focus on improving internal processes and exploring new business areas. We aim to maintain a 14% growth rate in the short term, with potential for higher growth as these initiatives are fully implemented.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
