REC Limited (RECLTD) Earnings Call Transcript & Summary

Welcome to the 52nd Annual general meeting of the REC Limited. In view of the ongoing COVID-19 pandemic, this meeting is being held virtually as permitted by the Ministry of Corporate Affairs and City. The notice of this AGM and the annual report of the company for the financial year 2021 have been sent to all the shareholders by e-mail, the same are also available on the website of the company. You are requested to refer to the instructions given in the notice for any assistance, and in case of any technical difficulty to make call on the helpline number mentioned in the notice. I would now like to first introduce our CMD and other directors to the shareholders. In the center, we have Shri Sanjay Malhotra, Chairman and Managing Director of REC. Shri Malhotra is an IS officer. He's is also an engineering graduate from IIT Kanpur and posts master degree in public policy and from [indiscernible] University. He has over 30 years of experience in various sectors including power, finance, taxation, information technology and mines. Towards his left, we have with us Shri Sanjeev Kumar Gupta, Director Technical of the company. Shri Gupta holds a Bachelor's degree in electrical engineering and has over 39 years of experience in the Indian power sector across [indiscernible] . He has contributed in planning, design, construction, quality assurance and project management of large transmission projects, financing of power projects besides monitoring of government programs. Towards his left, we have Shri P.K. Singh [ Nominating ] Director of PFC and Chairman of a Stakeholder Relationship Committee. Shri Singh is an engineering graduate from IIT [indiscernible] and [indiscernible] environment from IIT Delhi. He's presently Director Commercial of PFC and is holding additional charge of [ director ] projects in PFC. He brings with him 34 years of rich industrial experience. To the far side of left, we have [indiscernible], company secretary and [indiscernible] of the Power Finance Corporation Limited which holds a majority of equity share in the company. Now towards the right side of the CMD we have Shri Ajoy Choudhary, Director Finance of the company. Shri Choudhary is an associate member of the Institute of Cost and Management Accountants of India. He brings with him over 33-year of experience in the Indian power sector across diverse functions, such as international finance, contract management, loans and recovery, corporate accounts, resource [ relationships ] and treasury. And I am Shri Amitabh company secretary and Chief Compliance Officer of REC. I would like to inform that [indiscernible] statutory auditor of REC, Ms. S.K. Mittal and Company and O.P. Bagla and Company Limited have also joined to the VC in this period. Auditor [indiscernible] Mr. Hemant Singh & Associates have also joined the meeting. Shri Hemant Singh is also the scrutinizer for counting of the votes cast for the AG. Before the commencement of the proceeding of the meeting, I would like to confirm that the statutory registers and other documents stated in the notice are available for inspection online. Any member desirous of inspecting the same can write to us at complianceofficer@recl.in. As directed by the [indiscernible] the requirement for appointing proxy has been dispensed with, hence no proxy register has been maintained. Further proceeding of this AGM are also being webcast. I would also like to confirm that the quorum required for the meeting is present. Hence, I request the Chairman Shri Sanjay Malhotra to kindly call the meeting to the order and address to the shareholders. Sir, please.

Thank you. Good morning, ladies and gentlemen. I'm indeed very pleased to welcome you all to the 52nd Annual General Meeting of REC Limited being held virtually. All feasible efforts have been made by the company to enable the members to join the AGM through VC and other audiovisual means and to vote on the items proposed in the meeting. The requisite quorum being present, I call this meeting to order. I hope that all of you have received the annual report and audited financial statements of the company for the financial year 2020/'21. Despite the challenges posed by the pandemic, I am happy to report that your company has performed impressively on all fronts during the last financial year. Before I read out the highlights of REC's performance, let me briefly share with you the economic and industrial overview in which we operate. The global economy is still weathering the setback caused by COVID-19. Most of the economic activities were hit by reduced personnel interaction, uncertainty about economic landscape, lesser investments, change methods of imparting education, and slowdown in the international trade and tourism. It takes some time before trade and industry resume to their pre-pandemic levels. Eventually, the recovery in global economy would be dependent on widespread vaccination and moving ahead with cautious optimism. The Indian economy is also making us steady comeback from the COVID [ show ] with the help of comprehensive policy interventions by the government. Since the onset of the pandemic, the RBI has introduced a slew of measures including moratorium on term loan installments, deployment of interest on working capital facilities, extension of resolution timelines for stressed assets and asset classification standstill, which have helped in easing out pressure on the economy. As per IMS, India is likely to emerge as the world's fastest-growing major economy. The factors which would play a crucial role sustaining the economic recovery are successful containment of COVID besides continued discretionary spending. Power comes under essential services, hence the impact of COVID on the consumption of power was limited, however the sector did face issues such as delayed project [indiscernible] and schedules, pressure on finances and liquidity [indiscernible] . In May 2020, in the backdrop of the pandemic, the central government announced the liquidity infusion scheme for DISCOMs under Atmanirbhar Bharat. Under the scheme, REC and PFC have extended special long-term transitional loans at concessional rate DISCOMs. Against their receivables from state governments enable them to clear their outstanding [ bills ] towards power generating [ surge ] . These loans have provided much needed relief to the power sector by injecting liquidity in the cash track DISCOM during the pandemic. To the picking up of economic activity and enhanced electrification in rural areas, the demand for electricity is increasing. There is also a clear movement towards green energy sources. The government is implementing various reforms to make the sector modern, efficient and sustainable. These initiatives in the power sector likely to enhance the consumer experience and also the overall quality of life. Your company is an [indiscernible] for Deendayal Upadhyaya Gram Jyoti Yojana, a flagship scheme of the Ministry of Power, Government of India covering all aspects of rural power distribution. The company is also the nodal scheme -- nodal agency for operationalization of the [indiscernible] scheme or universal household electrification. It is noteworthy that all [ census ] inhabited villages in the country became electrified as on April 28, 2018. Further electricity connections have been provided to over 2.32 crores households until March 31, 2021, under [ Soubhagya], [indiscernible] and State Government schemes. The company is one of the nodal schemes, one of the nodal agencies for the revamp distribution sector scheme, are reforms based and results linked team with an outlay of over INR 300,000 crore and across budgetary support of over INR 97,000 crores from the government of India over a period of 5 years. The scheme envisages strengthening the distribution sector which is the most important link of the power sector value chain. Under the scheme, reform-based financial assistance would be provided to DISCOM for strengthening their supply infrastructure. The scheme aims to reduce the agency losses to pan India levels of 12% to 15% and ACS ARR gap to 0 by financial year 2024/'25. Recently, your company has prepared a report on key regulatory parameters for all DISCOMs under the power sector reform program. The company has also developed a framework for DISCOM Consumer Service Index under the guidance of the Ministry of Power, thereby, all DISCOMs will be rated based on the services provided to their consumers. During the financial year 2021, your company's sanctioned total loan assistance of INR 1.54821 crores towards various power sector projects, schemes, including loan assistance under Atmanirbhar Bharat. During the financial year, your company also disbursed a total amount of INR 92,987 crores, the highest in history of REC towards various generation projects, renewable energy projects, transmission and distribution projects and other loans, including liquidity infusion under Atmanirbhar Bharat. Apart from the above, your company disbursed total subsidy of INR 4,941 crore from the Government of India under DDUGJY, DDG and Saubhagya scheme. In order to align with the market rate and to contribute towards the overall profitability of the sector, your company has reduced its interest rate structure across the board within this financial year. The total operating income of the company for the financial year 2020/'21 was INR 35,358 crore as compared to INR 29,765 crores during the last financial year of '19/'20. The profit after tax and total comprehensive income for the financial year 2020/'21 were INR 8,362 crores and INR 8,818 crores, respectively, as compared to INR 4,886 crores and INR 4,336 crores in the last financial year. The gross loan asset book of your company as on March 31, 2021 was INR 3,77,418 crores, which is an increase of 17% over March 31, 2020. The net worth of the company also registered an increase of 24%, reaching INR 43,426 crores as on March 31, 2021. The domestic debt instruments of your company continued to enjoy AAA rating, the highest rating assigned by [ Russell ] Gear, India Ratings and Research and ICRA credit rating agencies. Your company also enjoys international credit rating of Baa3 and BBB minus from international credit rating agencies Moody's and Fitch, respectively. Your company's credit impaired assets, Stage 3, continue to be at low level. As on March 31, 2021, the [ gross ] credit impaired assets, Stage 3 were 4.84% of the gross loan assets. And the net credit impaired assets Stage 3 were a mere 1.7% of the loan assets. Your company has created a dedicated team to look into the aspects of rest assets and the resolution of each case through appropriate means. During the financial year 2020/'21, the Board of Directors of your company had declared interim dividend of INR 11 per equity share in 2 tranches. The [ third ] tranches have already been paid. In addition to the same, the Board of Directors has recommended a final dividend of INR 1.71 per equity share of INR 10 each which is subject to approval of the shareholders at this Annual General Meeting. If approved, the total dividend for the financial year 2020/'21 would amount to INR 12.71 per equity share of INR 10 each representing 127.10% of the paid-up share capital of the company. It is higher than the dividend of 110% paid for the last financial year. Your company has recently started functioning from its new office at Gurugram, Haryana, which houses the corporate office of the company. It has a unique building with a 964-kilowatt peak solar PV plant at the rooftop and several state-of-the-art features well suited for a future-ready organization. Moving to the pandemic. There is an enhanced focus on employee well-being, as the last year, employees are motivated and supported to work with high levels of productivity, while maintaining COVID protocols. Your company has a comprehensive risk management policy covering credit risk, operational risk, liquidity risk and market risk. Systemic risk management procedures have been laid down, mitigate such risks. Your company has a premier institute for power sector training at Hyderabad, namely REC Institute of Power Management and Training, REC-IPMT in short. During the financial year 2021, REC-IPMT conducted 1,250 training programs following COVID protocols, which were attended by 28,678 participants with achievement of 82,420 training man-days in total. Your company's CSR funds are channelized through REC Foundation, a society registered under the Society's Registration Act. All CSR initiatives are pursued with a focus on socially beneficial projects to reach a wide spectrum of beneficiaries. During the financial year 2020/'21 the company spent a total amount of INR 147.77 crores towards various CSR projects, including an amount of INR 50 crores towards PM Cares fund. INR 6.93 crores towards providing food, rations, sanitizers, masks, PPE kits, et cetera, and INR 7,200,000 towards providing cold chain equipment to store COVID-19 vaccine. Your company meets all applicable requirements within its ambit under the Companies Act [indiscernible] LODR regulations, EPE guidelines on corporate governance and the secretarial standards issued by ICSI. Company is also pursuing the matter pertaining to appointment of requisite number of independent directors, including women Independent Director on its board, with our appointing authority, that is the Ministry of Power Government of India. During the financial year 2020/'21, your company was confirmed the PSE Excellence Award for Corporate Governance from the Indian Chamber of Commerce as runner-up in the Maharatna and Navratna category. While COVID-19 pandemic has presented several challenges for the business and industry, it has also presented several opportunities for improvement in the power sector. The outcome and reform linked financial package of more than INR 3 lakh crore would assist in the development of the distribution sector. Ambitious plans are lined up for transition towards renewable energy and also towards hydrogen-based energy and smart metering. The production-linked [ center] scheme of battery manufacturing would also enhance the ecosystem for storage manufacturing in the country with positive implications for renewable energy and e-mobility sectors. Your company look forward to diversify into newer emerging fields, not just as a funding partner, but also as a value partner to its subsidiary. In all, your company is committed to the ultimate objective of a robust, resilient and reliable power sector. Before I conclude my address, I express my sincere gratitude to the Honorable Minister of Power and New and Renewable Energy, Honorable Minister of State for Power, Factory Power and other officials of the Ministry of Power for their continued support and guidance. I'm also thankful to the holding company, Power Finance Corporation Limited for their cooperation. I'm grateful to the officials of the Ministry of Finance, Ministry of Corporate Affairs, RBI, SEBI, Stock Exchanges, [ PAG ], auditors, [indiscernible] and other professionals associated with the company for their contribution. My special thanks to all investors, lenders, borrowers and customers for placing their trust in the company. Last, but not the least, I would like to thank my esteemed colleagues on the Board, to all the employees of REC. It is with the continued efforts and cooperation of all of you that REC moves ahead on the part of all-around growth. Thank you. I now request the company secretary to read the notice and the auditors.

Thank you, sir. Before we proceed further, I would like to inform that Vishal Kapoor, Government Nominee Director and Chairman of the Audit Committee has also joined the meeting. Shri Kapoor is a joint secretary distribution, the Ministry of Power, Government of India. He holds a mechanical engineering and post graduate degree in public administration from [indiscernible] besides advanced management program in public policy. He also had great experience from its past assignment with Indian [ Railway ]. Thank you, sir. Now I would like to inform all the shareholders that notice of the 52nd AGM, along with the annual report containing the Board's report, auditor's report and audited financial statements, et cetera, have been sent to the shareholder through email. The same are also appearing on the company's website. Hence, with your permission, the notice is being taken as read. The statutory auditors of the company have audited the standalone and consolidated financial statement of the company for the financial year 2020/'21. The statutory auditors have given their report without any qualification, reservation or adverse remarks or any disclaimer. Further, the CAG of India has also given nil comments on the audited standalone and consolidated financial statement of the company for the financial year 2020/'21. The secretarial auditor of the company in their report for the financial year 2020/'21 have commented that the company did not have requisite number of independent directors, including woman Independent Director on its Board. They have also commented that the composition of the chairmanship and quorum of some of the committee of the Board was not in compliance with the provision of the company's Act 2013 and SEBI LODR regulation 2015. Due to nonavailability of the independent directors, further separate meeting of the independent directors would also not be held during the financial year 2020/'21. In this regard, it is informed that the company has already requested the appointing opportunity of the Ministry of Power, Government of India to appoint requisite number of independent directors, including woman Independent Director on its Board. The matter is under active consideration of the ministry. Once the requisite number of independent directors, including woman independent director, are appointed, the company will comply with all the applicable statutory provisions.

I now request the company secretary to read the items of business from the notice one by one.

Before we take up the item of business, I would like to inform the members that in compliance of the applicable provision of the Companies Act 2013 and SEBI LODR regulation, the company had provided remote e-working facility to all shareholders of the company. From Tuesday, September 21, 2021, 10 a.m. to Thursday, September 23, 2021, 5 p.m. to enable them to cast their votes electronically on the item mentioned in the notice of the AGM. Those shareholders who have already cast their votes through the remotely working process could not be able to cast their vote again in the AGM. However, if you have not cast your vote earlier, you would be able to cast your vote in the AGM through e-voting facility being provided on the [indiscernible] platform. Further, there will be no voting by show of hands. Now I read the item of business one by one. The first item of business, that ordinary business is to receive, consider, approve and adopt the audited standalone and consolidated financial statement of the company for the financial year ended March 31, 2021, along with the report of Board of Directors and auditors there. Item 2 of the notice, to confirm the payment of interim dividend at the rate INR 11 per equity share, which was paid in 2 tranches and to declare financial dividend at the rate of INR 1.71 per equity share on the equity share of the company for the financial year 2020/'21. Item #3 of notice, that is to appoint a director in place of Shri Praveen Kumar Singh, who retires by rotation and being eligible, offers himself for reappointment. Now we go to the item #4, that is to fix the remuneration of statutory auditors for the financial year 2020/'21. Now we go to the special business, and Item #5, which is required to be passed by a special regulation, is to approve raising of funds through private placement of unsecured, secured nonconvertible bonds public debentures up to INR 85,000 crores for the business of the company during a period of 1 year from the date of passing of this resolution in one or more tranches. Now when we go to the Item #6, that is also required to be passed by the special resolution. To approve alteration of object clause of memorandum of association of the company in line with the approval accorded by the Ministry of Power, Government of India, Administrative Ministry of [indiscernible]. Now I would like to inform that the complete text of the above resolution proposing this special business and explanatory statement thereto are appearing in the notice of the AGM. Reworking on the resolution can be done using the e-voting link appearing on the [ NSDL ] platform. Result of the voting will be declared by the scrutinizer after counting of all the votes cast through the remote e-voting and the e-voting done in the AGM today. The consolidated voting results would be announced within the prescribed statutory timeline on the website of the company and will also be filed with the stock exchanges where the shares of the companies are listed. Meanwhile, with the permission of the Chairman, we can proceed with the question and answer of the [indiscernible] .

I now invite the shareholders to give their views on the working of the company and ask their questions through the online platform.

Yes. I just would like to inform the speaker shareholders are requested to keep your point brief and consigned. Further kindly ensure good connectivity and minimum background [ noise ] at your end, so that we can hear you clearly. The shareholders who have not registered as a speaker can also ask questions by using the chat box facility provided on the [ NSDL ] platform. For the sake of avoiding repetition, all the question would be answered at the end. Speaker shareholders can unmute your audio and switch on their web camera when their name is announced and mute the same when their question is over. To first shareholder, I would like to unmute their mic can connect their web camera, [ Shri Santosh Kumar [indiscernible] ].

[Foreign Language]

Thank you [ Santhosh Kumarji ]. Now you can mute your mic and we now call the name of [ Mr. Narendra Kumar ]. Please unmute your mic and start switch on your webcam.

Yes, sir. Am I audible?

Yes, you are audible. Switch on your web camera also.

Good morning, sir. Respected Chairman and Board of Directors. I would like to say thanks to the management for giving excellent results with handsome improved profit in spite of COVID-19 pandemic in the reference period, no doubt in the financial statement as well as in the annual report. But my point is regarding [indiscernible] by affordable LEDs for all. In this regard, as given in the annual report, that our joint venture company, EESL, provides the LED bulbs to domestic users at a low cost. I would like to know that which company was contacted for manufacturing of LED bulbs and whether our company also providing the same offer to the shareholders? If yes, then how can an individual shareholder get the benefit of the scheme. Secondly, that with the current improved scenario after the second wave of the COVID-19 pandemic, how would you plan to reward the shareholders in this financial year '22? Thank you very much to the secretarial department and the staff for conducting the e-meeting and allowing me to give my points to the management and hope we will meet next time with the new [ heights ] of the equity share price. Thank you, sir.

Thank you, [ Shri Narendra Singhji ]. Now we call [ Shri Santosh ] [indiscernible] to please unmute your mic and switch on your web camera. It appears Mr. [indiscernible] has not joined. So we go to the next shareholder speaker shareholder, [ Shri Surendra Kumar Aroraji ]. [ Shri Aroraji ], please switch on your camera and also switch on your mic.

[Foreign Language]

Thank you, [ Surendra Kumar Aroraji ] . Now we call the next shareholder [ Shri Manoj Kumar Gupta ]. [ Shri Gupta], please switch on your mic and camera.

Hello. Good morning, respected Chairman, Board of Directors, fellow shareholders. My name is [ Manoj Gupta ]. I joined this meeting from Calcutta, my residence. So first of all, thanks to you, your team for the excellent results of the company during this effort with COVID-19. And my special thanks to your company secretary and his team, especially [indiscernible] assistant that was called us and who has kept in touch with the investors after our registration. I thanks to the government companies that they do not avoid the investors after sent their registration for speaker. Because I've registered myself in 16 government completes and that keeps in touch with the investors. [ You have ] sent a mail, we will revert back to you near the AGM. So this is a good sign. And you are very young, and you have very smiling. And you lead the complete so many years to take the company on new heights under your leadership. And sir, I do not suggest to issue the bonus here. Bonus will increase the capital burden. Issue the bonus debenture instead of bonus share. Issue a bonus debenture of a coupon of 8% or 6.5% for 3 years. That will be -- that will not increase the equity burden. And sir, what is your view on the privatization of electricity by the central government now the all United Union treaties had started for privatization. In Chandigarh, Calcutta, [indiscernible] Tatanagar, several private sector companies has got union treasury distribution license. So what is your view on this context, sir? And what's your future plan with CapEx -- And sir, have you any plan because REC Electricity Corporation. [Foreign Language] So how you compete with the Prime Minister's region? And thanks for your dividend, and tax I will not say single word about the CSR, you have done a lot of work for the CSR in this pandemic COVID and you have not left anything. And I wish to God for your healthy and prosperous safe long life to you and your Board of Directors. And I'm from Calcutta, and it would be my pleasure to meet you, sir, during my next visit to Delhi. Thank you, sir.

Thank you, [ Guptaji ]. Now we call [ Shri Ajay Kumar ] [indiscernible]. Please unmute your mic and switch on your camera. Shri [ Ajay Kumar ] please join the meeting.

[Foreign Language]

Thank you, [ Ajay Kumar]. Now we call the next shareholder, [ Shri Gagan Kumar ]. [ Mr. Gagan Kumar ], please switch on your camera and also unmute your mic. [ Shri Gagan Kumarji ], please join the meeting.

Am I audible?

Yes, you are audible. Please go ahead.

Good morning, Mr. Chairman, Board of Directors and fellow shareholders. Myself [ Gagan Kumar ]. My DPID is 30020611004452. I'm joining this meeting from Delhi. Thank you very much for giving a chance to speak up at this Annual General Meeting of the company. So nothing much to ask. I only have one query, which is already resolved in your opening remark. Hope to see you all in person in next year in person. Thank you. Thank you so much.

Thank you, [ Gagan Kumarji ]. Now we move to next shareholder, and [ Sri Sanjeev Singh ]. Please [ Mr. Singh ] join the meeting. Unmute your mic and switch on your camera.