Power Finance Corporation Limited (PFC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Power Finance Corporation Q3 FY '24 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Shweta Daptardar from Elara Securities Private Limited. Thank you, and over to you, ma'am.

Thank you, Manav. Good evening, everyone. On behalf of Elara Capital, we welcome you all to the earnings conference call of Power Finance Corporation to discuss the Q3 and 9 months FY '24 earnings performance. From the esteemed management team today, we have with us Ms. Parminder Chopra, Chairman and Managing Director, with an additional charge of Director Finance. Without much further ado, I now hand over the call to Ms. Chopra for her opening comments, post which we can open the floor for Q&A. Thank you, and over to you, ma'am.

Yes. Thank you, Shweta. A very good evening and a warm welcome to all of you. I would like to start this call by sharing an update on a very important milestone for PFC. In January 2024, PFC has received RBI approval to establish a wholly owned subsidiary in IFSC GIFT City Gujarat. As you might be knowing that IFSC GIFT City is India's first financial services center. The government's vision is to make IFSC Gift City as a global financial hub, which will provide services not only to India but to the entire world. IFSC provides host of regulatory advantages like 100% tax exemption on income for 10 consecutive years, no GST on service, benefits on withholding tax and many others. At PFC, we are proud to be part of this vision. I would like to share that PFC will be the first government NBFC to foray into IFSC. PFC's IFSC subsidiary will unlock avenues for us in international lending space and help in taking PFC's brand global. Now I'll discuss PFC's financial and operational performance for quarter 3 and 9 months for FY '24. On the consolidated front, we continue to see strong performance. The consolidated PAT for current financial year 9 months is at INR 18,900 crores, an increase of 26% from the corresponding period year. The profit after tax for the quarter Q3 is at INR 6,294 crores, a 20% jump from the corresponding quarter previous year. The group's loan asset book registered a 19% year-on-year growth in the first 9 months of FY '24. As on 31st December 2023, the consolidated loan asset book stands at INR 9,54,483 crores. On the asset quality front, owing to our concentrated resolution efforts, the consolidated net NPA ratio is now below 1% and is at 0.86% as compared to 1.15% in December 2022. If we talk about the stand-alone performance for 9 months 2024, PFC's profit saw a 26% increase from INR 8,113 crores in 9 months '23 to INR 10,232 crores in 9 months '24. The rise in profit is mainly due to increase in the interest income on the increased asset base. Movement in INR being range-bound and stable provisioning due to no additions in the NPA assets. The profit after tax for the quarter is at INR 3,377 crores, which is a 27% increase from the corresponding previous year. Continuing with the endeavor to share our success with the shareholders, this quarter also, our Board has declared an interim dividend of INR 3.5 per share. With this, the cumulative interim dividend for FY '24 stands at INR 8 per share on the enhanced capital base. Now coming on to our key financial indicators. If we look at the yield for 9 months '24, it's at 10.02%, which is 10 bps increase from first half year '24 yield. As we have been sharing in our earlier communications, the impact of interest rate increase has now started reflecting in our yield. The cost of funds for 9 months is within the expected range of 7.47%. And if you remember, we have always been talking about the spread and our guided range. And accordingly, our spread for 9 months 2024 is at 2.55% and NIM is at 3.42%. On the capital front, our capital adequacy ratio as on 31st of December 2023 is at 26.86% with Tier 1 capital of 24.28%. Now I'll discuss our progress on the asset quality. This quarter, we have successfully reached resolution in Dans Energy loans of INR 413 crores. This is in line with the guidance shared earlier. The resolution involved restructuring of the existing debt outside NCLT. After the resolution, the asset has moved out of Stage 3, that is the NPA category. I'm happy to share that there are no new slippages for the last more than 1 year in our nonperforming assets. With this, our net NPA ratio is below the 1% mark at 0.90%. This is the lowest net NPA in the last 6 years. Further, our gross NPA has also declined significantly by 69 basis points from 4.21% in the 9 months '23 to 3.52% in the 9 months of FY '24. Now after the Dans Energy resolution, we have 21 stress projects of INR 16,000 crores approximately under Stage 3. Of these projects, 8 projects worth INR 2,174 crores are being resolved. [Technical Difficulty].

Ladies and gentlemen, thank you for patiently waiting. We have the management line connected with us. Over to you, ma'am.

Yes. Thank you. I'm sorry, the line got disconnected. We were talking about the resolution of the asset. We were discussing the assets under NCLT. So 13 projects worth INR 13,899 crores are being resolved under NCLT. Out of which 7 projects worth of INR 2,620 crores are under liquidation process. And 6 projects worth INR 11,200 crores approximately are at various stages of resolution in NCLT. Out of the 21 projects, Lanco Amarkantak project of INR 2,376 crores is in advanced stage of resolution. It's a 1,920 megawatt thermal generation project, and the resolution is being pursued under NCLT. As you might be aware that the lender-backed resolution plan was submitted to NCLT as a successful resolution plan. Subsequent to the submission of lender-backed resolution plan in NCLT, multiple parties expressed interest in submitting a better resolution plan for the project. On this, NCLT has allowed the lenders to again conduct the Swiss Challenge process. The Swiss Challenge process has been done on 6th of February. And based on the evaluation and after approval of COC, the successful resolution plan shall be submitted to NCLT for approval. If we talk of the provisioning, we have maintained a 24 -- maintained 74% provision coverage on Stage 3 assets, which we believe is adequate. This quarter, we have also increased provisioning on Stage 3 assets considering the current resolution status of the project. This has resulted in an overall increase in the provisions despite positive developments like the resolution of the Dans Energy project, which led to provision reversal. Now coming over to PFC's loan book. In the first 9 months of the current financial year, we have disbursed around INR 79,000 crores. Our disbursements have risen by around 1.7x on a year-on-year basis. The rise in disbursement is mainly driven by lending to distribution sector under government schemes and lending to the renewable energy sector. The uptick in the disbursement has led to 16% year-on-year growth in our loan asset book. Our loan asset book as on 31st of December 2023 stands at INR 4,57,000 crores. For FY '24, we expect to maintain loan asset growth at similar levels as that of FY 2023. Regarding the future loan growth outlook for FY 2025, there are 2 areas, which we feel will complement. One, the PFC's traditional lending business in conventional and renewable energy. This will be supported by the first -- by the Pradhan Mantri Suryoday Yojana, which presents a tremendous business opportunity. As you know that the scheme was announced by our Honorable Prime Minister on 22nd January 2024. Under the Suryoday Yojana, 1 crore households across the nation will get solar rooftop. The Suryoday Yojana has been launched to accelerate the implementation of 40 gigawatt of solar rooftops vision. The scheme will help the country to become self-reliant in the energy sector. The scheme will be implemented through the state DISCOMS and through SPVs set up by 8 central public sector undertakings under the Ministry of Power. Our subsidiary, REC Limited has been appointed as the nodal agency to oversee the overall coordination and implementation of the Suryoday Yojana. To achieve the target of 40 gigawatts, the total financial layout is approximately to the tune of INR 2.4 lakh crores based on the tentative implementation cost of INR 60,000 per kilowatt. Out of this, around 50% on an average funding is expected to come through common subsidies. This translates to a potential funding opportunity of INR 1.2 lakh crores in the coming years. Further, the scheme will also create additional lending opportunities for PFC across the entire solar value chain like equipment manufacturing, et cetera. To leverage these funding opportunities, our Board has today approved funding to the tune of INR 1.70 lakh crores. We believe that the scheme will add to our growth prospects in the coming years. Another potential funding area we see is the continued lending opportunities in distribution sector under the government scheme. In 2022, the Government of India has launched LPS that's the late payment surcharge scheme to provide financial assistance to DISCOMS for clearing their legacy dues as of 3rd of June 2022. The scheme has been a great success, resulting in more than 60% reduction in the legacy dues. Till 31st of December 2023, PFC has cumulatively disbursed INR 33,312 crores under LPS. Also, the carrot-and-stick approach adopted under LPS has improved the fiscal discipline among the DISCOMS by regulating the open excess of DISCOMS on nonpayment of its dues. To support this numbers from FY 2023 till present, an amount of around INR 8 lakh crore has billed to DISCOMS. Out of this, only less than 10% is currently overdue. To manage these dues, PFC is extending up to 1 year revolving bill payment facility to DISCOMS. Till 31st of December 2023, PFC has cumulatively disbursed INR 51,000 crores under the RDSS scheme. Next year also, we expect funding to continue under the above 2 government schemes. Additionally, we also see pocket of opportunities to emerge around the revamped distribution sector scheme depending on the pace of CapEx work implementation under the scheme. Leveraging on these promising avenues, we see a positive loan asset outlook for the next financial year. Before I close, I want to address 2 regulatory events. One, as PFC has declared on the exchange about the LCR penalty yesterday. The recent penalty of INR 8.80 lakh is imposed by RBI. The penalty has been imposed for noncompliance with certain provisions of RBI liquidity risk management frame of NBFC. On this, let me assure everyone that this penalty does not reflect PFC's overall liquidity position. Maintaining liquidity coverage ratio is a means to have readily realizable liquid assets for potential liquidity event. It's not measure or reflective of company's day-to-day liquidity position. PFC is comfortably placed on liquidity front and is meeting all its obligations without any issue. Now coming on to why this penalty has been imposed. The penalty arose due to difference in interpretation regarding eligible high-quality liquid assets. PFC considered callable fixed deposits as HQLA while RBI didn't consider this as eligible HQLA for LCR computation. This resulted in a gap in LCR for March 2022, leading to the penalty. Now we are aligning our approach with the RBI interpretation to ensure compliance. I want to emphasize that this does not impact our business operations or financial strength. PFC remains committed to the highest standard of regulatory compliance. Now coming on to the draft circular issued by RBI on January 15, 2024. This circular brings government NBFCs like PFC under the purview of RBI's credit concentration norms. Now there have been concerns among investors that this will impact our lending abilities, especially for our government book. Let me assure you that PFC has been proactively managing credit concentration for years. We have been complying these norms to our private sector loan book since 2010. And in 2022, we have adopted them for our government borrowers in line with RBI's specific direction. Currently, we have ample headroom for lending for our government book also. We have around INR 12.8 lakh crore of available exposure on our total government book. For our top 10 borrowers constituting around 40% of our outstanding book, we have over INR 90,000 crores of exposure available. Additionally, exclusion of state government guaranteed loans from exposure limit provides even more flexibility. Thus, PFC is well positioned to support the government lending business and contribute to the power sector growth. To conclude, quarter 3 has been a stable one, demonstrating our commitment to consistent performance and we look forward to building upon this momentum. Thank you for joining the call. Now we are open to the Q&A.

[Operator Instructions] We have our first question from the line of Shreya Shivani from CLSA.

Ma'am, I have 2 questions, and it's mostly regarding the loan growth and disbursals. So particularly coming to the disbursals for the LPS scheme. So until last -- until September '23, you had mentioned that for the stand-alone book, the sanctions for under LPS has been 705 billion, of which disbursals were 315 billion. And right now, you updated that the disbursals till December is at 333 billion right? So what was the reason that the disbursement in this quarter under this LPS scheme was lower? And effectively, half of the disbursals are less, right, of the sanction of the amount that you have sanctioned. So will that -- what is the reason -- I mean should I expect this lower disbursal under the DISCOMs for the next quarter also because that's the only way we can get to the loan growth for FY '24 that you are mentioning that you will repeat FY '23 loan growth in FY '24, that is 13% loan growth, which means we will slow down in the fourth quarter. So I want to understand the dynamics of this. And ma'am, on FY '25, given that we still have growth drivers with many of the segments and probably infra segment also, which the disbursals have started happening now. Can we get any guidance on FY '25, that would it be much better than FY '23 or '24, which you're indicating will be at 13% growth. So largely, my questions are around these.

Yes. Shivani, you have asked two questions. Let me address the first question about the LPS scheme. As you might be aware that the LPS scheme based on the outstanding amount of this dues has a provision of opting for installments between 12 monthly installments to 48 monthly installments. So wherever number -- the amount of the installment was less, there the 100% disbursement has already been made. So there are a few cases where the option was to go ahead with the installments maybe for 36 or 48 installments. So accordingly, only in those cases, the installments are being paid right now and accordingly, the LPS disbursement. So as and when, it is maturing. So it is going to be discontinued further. And accordingly, our disbursements may be lower step by step going forward. So that was on the LPS. On the infra sector, the total sanctions by PFC till date was INR 31,222 crores. So there are certain other major sanctions in pipeline. And apart from that, as you are aware that it always takes some time between the disbursement -- sanction and the disbursement. So because the borrower has to comply with certain precommitment conditions and the document which happen and then certain pre-disbursement conditions are required and only then the disbursement starts in infrastructure. So until now, the disbursements in the infra space has been to the tune of around INR 2,726 crores and we see gradually growing in the current financial year and in the next financial year.

Got it, ma'am. And any guidance for FY '25 because as you were saying that LPS scheme disbursals will slow down. So FY '24, we should only expect 13% growth, anything on FY '25?

See, as I told you, there are two more schemes that one, the Suryoday scheme, which has been announced for the rooftop solar and you might be aware that PFC has been proactively sanctioning even loans for the equipment manufacturing. So we are there to promote the honorable Prime Minister vision of rooftop solar as well as Make in India concept. So we have funded to the top manufacturers, all the top companies for the solar equipment plant. One is that. And otherwise, also, we are looking for the opportunity of funding for installation of the rooftop solar also going forward. The other thing is the RDSS scheme. I agree there has been -- till now there has been the slower pace for the progress under the RDSS. But now in most of the cases, the award of the contract has already been made, INR 1,28,000 crores award has already been made under the loss reduction. And otherwise, also, the prepaid meters have also been ordered. So once the orders are placed, actually, execution of the contract starts. So eventually, whatever are the disbursements under RDSS that we will be going forward doing. So I think that gives us -- apart from the normal generation, be it conventional generation, be it renewable generation, transmission or CapEx under distribution, these 2 schemes will give us the added advantage. And RBPS, we already said that is there for the current dues and that we will continue to fund for the -- in the short term.

Got it, ma'am. Just last question, how much disbursal in the LPS scheme for the remaining installments is left versus the sanction? Because this quarter, you've not given the sanction number for LPS scheme?

The PFC has cumulatively sanctioned around INR 61,000 crores and disbursement of approximately INR 33,000 crores has been made. So we are expecting that the balance will be over a period of -- from 22 to maximum installment is for 48 months. So over a period of next 2 to 3 years, the balance installment -- will be paid.

[Operator Instructions] We have a next question from the line of Shreepal Doshi from Equirus Capital.

Congrats on good set of numbers. The first question was pertaining to the NPA resolution. So in case of Lanco Amarkantak, you said there has been a revision in the resolution plan because earlier if we recall, like REC and PFC were supposed to form a third party and then run the Lanco Amarkantak franchise. So what is the change in the resolution plan now?

See, as I told you that there has been a better offer for the resolution under the resolution plan. And you know that PFC, REC was -- as a lender-backed resolution plan has submitted the plan for the value maximization because we were thinking that what the actual realizable value we are not able to receive. So we have bidded the project on the estimation that we will do some value accretion, and we'll be able to fetch a better price. So based on the tentative quotes, which were received, the lenders have approached NCLT to allow for the fresh bidding process, so that is how that -- as I informed you that the process has been run on 6th of February, and evaluation is being done. So once the evaluations are over, then we will be submitting the successful resolution plan to the NCLT for approval.

Okay, okay. Okay, so we'll wait for new bidders now for this project?

Yes, we will wait for the successful resolution plan evaluation and then we will go.

Got it. Any other account, which is in advanced stages of resolution apart from this Lanco Amarkantak?

See, there is -- we are also looking for resolving another asset in the current financial year, that is a hydro asset that is outside NCLT and we hope to achieve the resolution -- finalize the resolution plan.

Do you mind sharing the name ma'am, like or what is the quantum of exposure that we have?

It's similar to the Dans, it is the Shiga Hydro Project. So approximately INR 500 crores is the PFC's outstanding.

And then the last question was pertaining to growth side. So as the earlier participant was also alluding. So you are guiding for 13%, 14% growth for FY '24? Or like is there a disconnect there?

See, as of now, what I can say is the growth is going -- for the current financial year, it is going to be within this range only, which we are expecting it for the -- expected for the previous year, maybe somewhere around 12% to 15%.

Okay. Okay. And for FY '25, since there are -- there is RDSS also, which you've seen better momentum. So in FY '25 will the growth momentum be better?

Yes, we are expecting it to be in the similar range for the next financial year also.

We have a next question from the line of Jigar K from B&K Securities.

Just wanted to know what was the sanctions that we have done till 9 months FY '24 for this year?

Till now sanctions made are to the tune of INR 1,44,000 crores.

Understood. And would it be possible to share what would be our provision covered on Lanco that we are carrying on the books?

Just a minute. Maybe it's around 50%.

50%. Okay. Okay. And ma'am, just on the growth front, again, circling back to growth, we have seen REC, our subsidiary grow at a much faster pace and they also are capitalizing on the similar run rate that we have on the REC side infra as far as the government projects. Any particular reason why there has been such a sharp difference in between growth for us and REC? And secondly, if I have to look at last quarter, you had said medium to long-term growth would be around 15% to 20%. So would now there be a little bit downgrade on the lower side, we are looking at the growth for a year over the medium to long term, somewhere around 15% overall?

See, on the growth front, I just don't want to compare it with REC because every company has its own policy. But we want to have a sustainable growth over a longer period of time. That is what I can say. And if you see that we have been talking of -- you rightly said that in the last call, I said 15% to 20% growth. So till Q3, we have already -- have a growth of around 16%. And you may be surprised that why I'm saying 12% to 15% growth. But you know that under Q4, otherwise also our disbursements in the previous year are on a higher side as compared to the earlier Q3 -- earlier 3 quarters. So this year, as a matter of strategy, we have taken care. And if you would have seen that even in the first quarter, we have very good growth numbers as compared to the previous years. So we want to have our disbursements also spread equally over the full year and on each of the quarter. So this is the change in the strategy we have done in the current financial year. And that is why I'm saying that our growth is going to remain within these numbers. And I can assure you that it is going to be there on a sustainable basis for quite a longer time.

Understood. And just lastly, we would maintain our NIM and spread guidance, right, 3.5%, approximately NIMs and 2.5% spread is what we would be looking at?

Yes, that will be where we are -- hope to maintain and our guidance is for those numbers.

We have a next question from the line of Nishant Shah from MLP.

Yes. Congrats for the quarter and just like in part, my question has been answered, like the questions again around like growth. So we are like a little well capitalized right now. You mentioned about like mobilizing more than 1 trillion of fresh like funding for next year. How should we read this? Is it like you're anticipating better growth next year or some more infrastructure projects getting operationalized and you're preserving your capacity for that? Or how should we kind of think about like growth for next year. This year, it's well taken. There's probably some base effects in 4Q and stuff. But for the next year, how should we think about growth?

See, as I told you that the growth next year also, we are looking at the similar numbers. The growth is primarily going to come on, one, renewables, a lot of work is being done on the renewable side, on the energy transition and on the equipment manufacturing, there is a lot of scope for the equipment manufacturing in India. And on the other hand, we are expecting that RDSS, disbursement under RDSS sanctions is going to pick up from the next financial year. So these are the 2 fronts. There is another factor if you have heard the Honorable Minister of Power statements that to meet the power requirement of the country, there is a need to add some conventional -- to focus on the conventional energy generation also. So by that, we mean that we will be adding certain new thermal power projects or wherever the thermal power projects were stalled, there will be -- work will be restarted, which gives an opportunity to fund us that because historically, we have been the major lender in all such projects. Hydro, again, the government has a lot of focus on the hydro project. Everybody is talking about the huge capacities coming out in the Arunachal Pradesh and Northeast. So we are working on that, and we will be having, I think, good share in those activities also. Wherever there is a long-term requirement of the fund is there and that too with a longer gestation period and the quantum is higher, I think we are well equipped to fund all those projects. This is on the energy side. And now if we talk of the infrastructure, slowly, as I told you that whatever sanctions we have already done, we are expecting it to materialize into disbursement in the next financial year. Further, there are number of proposals in the pipeline, be it funding of the metros, we are funding for the ports. Earlier also, we have shared the data we are funding for the Waste to Energy projects. A lot of energy transition, e-bicycle, that -- all fronts we are working on and we hope to capture our share in these -- all these areas.

A couple of follow-up questions there. Firstly, you mentioned on probably preserving some capacity for thermal and hydro and other conventional like nonrenewable traditional like power financing. Would you be able to quantify how much should that be? And the second part to that question is renewable, we understand is a lower margin or lower kind of yield business. Should we then read this as, okay, if you do more thermal projects, will it come at higher loan spreads because there's added risk over there? And therefore, how should we think about margins in that context? And secondly, just more a qualitative question, like it's both PFC and REC are now diversifying away from being power sector financier into more infra -- broader infra financiers. So could you talk about like what kind of capacity addition you've done in terms of human capital, hiring people from outside for assessing these nonpower-related projects. Power has been our forte, but what about the other projects? Like could you talk about that a little bit? So those are the 2 follow-up questions to that.

Okay. You talked about the capacities to be added. So as of 31st of December 2023, the total capacity, installed capacity is around 400 gigawatts, which is expected to be doubled in the next 5 to 6 years. We are expected to reach to around 800 gigawatt and of which around, as per the Honorable Prime Minister statement, around 50% is going to be the renewable capacity. If we see the National Electricity Plan, the total capital investment of approximately INR 33 lakh crores is required for, if we talk of the 500 gigawatt capacity addition -- in addition and the battery storage and the capital investment for nonfossil fuel basis. And 19%, we are expecting for the investment in the fossil fuels. So if we see these numbers and if you see our current market share, we have been funding to the tune of 20% to 25% of the total lending for the power sector on a stand-alone basis. So going by these numbers, you can very well work it out. It is primarily -- it doesn't talk of the energy transition, it is basically only funding for the capacity addition, which we are talking. If we are talking of the energy that -- equipment manufacturing, energy transition, then the requirement of funds would be much more in the power sector. Apart from this, the distribution sector and accordingly, the transmission sector is further requiring the capital infusion. With regard to the infrastructure sector, as I think I have shared earlier also, initially, we are looking at the projects being funded by the banks and taking a share of that. We know that till now we have capabilities only in the road -- in the power sector. But slowly, slowly, we are building our capabilities in the other infrastructure sector, maybe the road, refineries, metros and ports, et cetera. So we are building capacity of our existing employees as well as we are looking of the sector-specific experts also to strengthen our appraisal.

Understood. And could you talk about like margins on the conventional projects? Like am I to interpret that if you do more traditional financing, does that improve our margins going ahead?

So you know that in the -- you rightly said in the renewable space, there is always a pressure on the margins because we are facing tough competition and still we are one of the largest financier for the renewable sector. And when we talk of -- it is being compensated by the existing generation transmission and the distribution sector portfolio. And going forward also, I agree that conventional generation gives a bit higher margin but now the companies have a lot of avenues for funding. So the competitive pressure is always on us. So that is why we have always been giving the guidance that we will be able to maintain our spreads at around 2.5%.

We have our next question from the line of Sonaal from Bowhead Investment Advisors.

Ma'am, my question was pertaining to growth. And let me give you a background why everybody is trying to clarify that. Since our long-term guidance is 15%, 20%, and we are expecting 13% growth this year and almost similar growth of 13% next year. What people are trying to understand is that are we being conservative and this is a generic number we are giving being a conservative management? Or is it that the growth is going to be significantly back ended. And therefore, while growth is only 13% this year and next year, the cumulative growth rate is 15%, 20% from a long-term perspective. And therefore, for future years after '25, the growth rate will be significantly higher.

See, just to throw a number, we can throw any numbers, that's a different thing, but we are wanting to be a bit realistic. I have not given any number of 13% for the current financial year. I told that it will be -- it is going to be around 15% for the current financial year as well as we are looking for the similar number for the next financial year also. But you should appreciate the fact that on the growing base, so if 15% has already increased this year and on the growing base, we are assuring you 15% growth. So that there will be repayments also. So on an average, we have an asset book of -- average life of asset as 6 years. So on an average, you can work out that if we have funded INR 4,60,000 crores is our outstanding book, what would be the average repayment and on the new -- on the expanded base, how much we have to disburse, you can very well work out the numbers. So I think we would like to give realistic targets of around 15%.

Just a counter question to that. Since you mentioned that long term is 15%, 20% and your base will continue to increase in the long term, so you have talked about between 15% and 20%. Are we expecting that despite higher base of 15%, 20% growth over the long term because the capacity addition of thermal, which happens the growth on account of that will come to us with a lag because that's a long process of the projects being started and then you're disbursing as the CapEx happens?

I think your concern is right that whatever capacities we are expecting right now to be at. But this is not a too longer target. We are looking for next 3 to 5 years only. Whatever sanctions we -- as of now, we have, it is going to mature in the next 2 to 3 years and whatever additional sanctions we are doing. See, this -- I agree that for the new hydro project, it's going to take time, but there are certain thermal capacities for which only expansion has to be done. So it's not going to take time like in case of the greenfield projects. So there is a scope of expansion in the existing projects, there we are looking at adding the new capacities. So it is not going to take for the long term, and it will be, I think, can soon be coming. Ministry of Power is expecting that this required capacity will be added in the next 2 to 3 years. So based on that, we think that there is enough opportunity with the energy transition, looking at the new avenues, everybody, you have seen in the budget, VGF is given for the offshore range. So there is a new area coming up. There is a progress on the hydrogen front. So all these taken together, we think that it is a sustainable level of growth.

We have our next question from the line of Kaitav from Anand Rathi.

Congratulations ma'am. I had 2 questions. Number one was if you can highlight what is the competitive intensity right now given that the sector macro has improved. So are banks now looking more at this area? What are you seeing on the ground?

See, you know that under the renewable, we are already facing competitive pressures from the banks and other FIs. But if we see that for the -- thermal or the hydro, you know that the cost of project is huge. So it will not be possible for any of the lenders to fund it on stand-alone basis. So there has to be consortium and the type of exposures we can take none of the other financiers are able to take. So we, as a group, I think, have an upper hand in funding of the thermal project or be it hydro project. So there may be smaller portions, which can be taken over -- taken up by the banks, but they have sectoral limits. They have exposure limits, individual company exposure limit. So we are, I think, well positioned to take higher exposure in all such projects.

Got it. Ma'am secondly, in terms of cost of funds during this quarter, given that several banks have been complaining about tight liquidity conditions, what are you seeing on the ground? And does that change any guidance in the near term at least? I know long-term outlook, we still maintain the NIM and spread. But short-term, does it in any way change the outlook?

See, we are -- you rightly said that there is a tight liquidity in the market and interest rates are hardening even though there has not been any change in the RBI rate. But if you see that during -- in the current financial year, based on our increased cost of funds, we have reviewed our interest -- lending interest rates and we have increased them in line with our increase in the cost of funds. That is why eventually you are seeing that we are able to maintain the spread over the period. And we hope to maintain those because we are reviewing our interest rates on a quarterly basis.

We have our next question from the line of [ Steven ] from [ Stockpile ].

My questions have been answered.

We have our next question from the line of Niharika from Aequitas Investments.

So my first question is just a follow-up of last participants. You said that our lending rates now we are increasing in line with the increasing cost of funds for us. But I believe that our reset period is a bit longer. So can you just elaborate on the fact that how much time will it take to actually pass on the rates? And will we see some contraction in the margins?

See, our reset period, in some cases, it's 1 year, it's 3 years or 5 years. So we have different reset date depending on the option, which has been chosen by the borrower. So even if it is like 1 year, so whatever is the card rate as on date, that will be applicable on the reset. So automatically, if our cost of borrowing is increasing, so all reset will be happening on the revised rate. So apart from the new disbursements, which are taking up -- which are being done at the revised rates. So I hope that will not impact our churns or spread efforts.

Okay. That was helpful. And my second question is on Dans Energy. So how -- did we have any write-back on the provisions or basically how much was the provision and how much was the recovery on that?

There has been a provision reversal of around INR 79 crores during the current quarter. So in this case, I think 90% recovery rate was there.

90%. My other question is on Lanco. So I just want to understand management's view on it. So if we are getting better bids for it, are we still bidding from our side and still we are okay to take it again on our books? Are we basically submitting another bid not as a lender but as a takeover of Lanco Amarkantak in our book?

I think you -- till the time evaluation is done, I would not like to share this information. And on -- I think earlier, I would like to correct myself. Earlier, we said that we are maintaining a provision of 50% in case of Lanco, but actually, it is 76% we are maintaining the provisioning in case of Lanco Amarkantak. And we are expecting reversals in case the -- this new plan is accepted by the NCLT.

Okay. And I'm not sure if this was answered or not, what is our sanction book as on date, as on 31st of December?

The current year sanctions are approximately INR 1,44,000 crores. And I think -- from the previous year, we are continuing maybe around -- I don't have the figure right now, but it may be somewhere between around INR 1.5 lakh crores.

Okay. So basically, again, on the interest side, how are we planning to basically manage the cost of funds? Basically, are we planning to take more foreign loans or, because the interest costs are hardening, particularly in India.

See if interest rates are hardening in India, and I think there is a similar situation if we borrow it from the international market also. So if we see, as on date, we have 18% borrowing in the foreign currency, 19% is the RTL from the bank's FIs and the domestic bond constitutes 58%. So major are these sources. But we always try to optimize the mix to ensure that our overall cost of borrowing remains within the range. So it all depends on the market, whether the bond market is -- gives us that opportunity. And we -- as earlier said, we have always told that we wanted to maintain around 20% of our borrowing in the foreign currency market. Last year, we have raised funds in the JPY. This year, we have raised funds through the syndicated loan in dollars also. So it is around 12.42% borrowing in the -- these 9 months, which has been done in the foreign currency. There are -- bonds constitute approximately 44%. You know that we have also launched public issue, which gave us the INR 2,824 crores. RTL also this year, we have raised, lot of them and constitute around 25% of the total borrowing.

We have our next question from the line of Sarvesh Gupta from Maximal Capital.

Most of my questions have been answered. Just for the Q4, what is the expected disbursement and the kind of disbursement growth rate that you're assuming for the next year?

See, we have said that we will be able to maintain loan growth of 15%. So we hope to -- I think -- so we will be able to maintain that. This is what I can say.

Understood, ma'am. And secondly, on the infrastructure side, you had said that the disbursements is only INR 2,000 crores as of now. So what are the plans for the next year in this particular segment?

See, as I told you that this year, we have until now sanctioned around INR 33,000 crores in the infrastructure sector. So we are expecting the disbursements to pick up, maybe a few disbursements we will be able to make in this current quarter but most of them is going to go in the next financial year. So it's going to take time for this converting into disbursements.

Understood. And finally, you said that sanctions that you have done this year is INR 1.44 lakh crores, and last year, cumulative sanction, which was not disbursed was INR 1.5 lakh crores. So are we -- in total, is there around INR 3 lakh crore, which is sanctioned but not yet dispersed or what will be the value as of now?

See, I don't have the numbers I told you, I've just given my guess work. I don't have the numbers right now for the sanctions, which are yet to be disbursed for the previous year.

No. As of now, do you have cumulative sanctions, which are not yet disbursed?

No, no, no. That number I told you that I don't have that number. But current financial year, INR 1.44 lakh crore has been sanctioned. But for the previous year, it's just my estimate that it's around INR 1.5 lakh crores. The number may not be correct also because I don't have.

We have our next question from the line of Himanshu from Elara Capital.

I have just one question. So I just want to know about the renewable portfolio traction, how we are going, who will see in the future, are we being tax conservative on the renewable portfolio traction, ma'am?

I couldn't get you. Can you please repeat?

Yes. So basically, I just want to know about like how, going forward about the renewable portfolio, how are the traction we are seeing in a -- good opportunity we are seeing in future about the FY '25 or '26.

Yes. Yes. We are looking for -- I think if you see on an overall basis, as on date, our renewable portfolio is approximately 12%. So we are looking for, I think, in the next 2 to 3 years, it may be around 20% of the total portfolio.

We have our next question from the line of Nilesh from Bank of India Mutual Funds.

My first question was on the MOU, which we signed in July of last year for around INR 2.4 lakh crores in Goa. What's the status of there? What are -- where are we in that stages?

So that was a combination of equipment manufacturing, few of the borrowers were intending to borrow for the hydrogen. There were certain simple plain wind and renewable projects. So if you see our sanctions to the wind and disbursements is increasing day by day. And so at that point of time, MOU has been signed. Equipment manufacturing, if you talk, we have sanctioned the project even for the Adani, ReNew, Suzlon, all the big players in the market, we have sanctioned equipment manufacturing facility, which is going to be a big push for the Make in India. So slowly, slowly, all those MOUs -- under all those MOUs, we are sanctioning as and when the borrower is ready with the DPR and the appraisal is being done.

So any number which you can quantify, out of INR 2.4 lakh crores, what has been sanctioned till date?

Right now, I don't have those numbers, which -- we will share with you separately.

Okay. My second question was on the infra side. Today, of course, we have sanctioned amount of INR 33,000 crores. But on the software aspect, wanted to understand, until some time back, we were improving or increasing our capacity, hiring sector experts for the sanctioning, et cetera, or deep understanding of the projects and sector. So where are we today in that? Do you think have we filled the gap. Going ahead, say, FY '25 onwards, can we expect a decent growth rate as far as infra lending or sanctioning is concerned? So what's happening at the ground level at PFC's level?

See, at PFC, we have been sending our employees for the advanced training programs to build the capabilities for appraisal for the infrastructure sector. If we talk of few of the sectors like biomass, we can talk of the refineries, we can talk of the ethanol projects. Our employees have appraised number of projects and have built the capabilities to appraise it. On roads, we have sanctioned a number of projects. So we are adding to the capabilities of the employees. And wherever required, we do take the help of the external experts as of now, and we are planning to have those experts on our roles also going forward.

Got it. My last question from my side. I just wanted to understand on the competitive intensity. Of course, you touch base on it in previous participant's question. But since 5 years before and a lot of PSU banks balancing for a lot of its capacity to sign more at a high-value check versus today. So can you help me understand 5 years back, out of INR 100 loan disbursed to power sector, what was PFC, REC or maybe [indiscernible] power financiers market share. What is today after 5 years? And how is -- what is your assessment of this going forward?

See, earlier also, I think the assessment was made when we acquired REC, Government of India holding in REC. At that point of time, it was assessed that around 20% to 25% market share PFC has and a similar share is there for REC also. That is why if you remember, we have taken the approval of the Competition Commission of India at the time of acquisition. And if you talk today also. So today, we will be -- may, we have not assessed, but it's -- that we may be maintaining the same market share as of now also.

So the market shares are expected to be same. So I wanted to understand that this 50 gigawatt of renewable expected per annum for next 7, 8 years, why are we anticipating a lower growth rate going forward? Because if I see solar capacities has been in the range of 14, 15 gigawatt additions per annum in the past. But now you're talking about at least 50 gigawatt in renewable space. So what is stopping us from giving that higher guidance? Or are you assessing something else, which we are unable to understand?

I'm not assessing something else, but the only thing is that whenever there is something on the ground, and it is in my hand, only then I'll be able to share any guidance. So giving any number and not able to fulfill the expectations of the investor, I really don't want to commit any such number.

Okay. But in general, you expect market shares to remain similar?

Yes. That is there. And I have shared with the expected CapEx in the sector also the numbers, that I have shared. So this is what I can say at this point of time.

Thank you. Due to time constraint, that was the last question for today. And I now hand the conference over to Ms. Shweta Daptardar for closing comments. Over to you, ma'am.

Thank you, Manav. On behalf of Elara Securities Limited, we thank the management of Power Finance Corporation to provide us the opportunity to host this earnings call. Thank you, team. Thank you all.

Yes. Thank you very much. Thank you.

Thank you. On behalf of Elara Securities Private Limited, that concludes the conference. Thank you for joining us and you may now disconnect your lines.