PFC

PFC, which is engaged in financing power generation, transmission and distribution projects, posted a set of good numbers for Q3FY13.  It beat all forecasts and posted a 41% rise in Net Interest Income (NII) at Rs.1548 crore and net profit came in at Rs.1117 crore, up less than one percent from Rs.1108 crore on YoY.  Sequentially, the performance was much better with a 8% rise in net profit.

Some foreign broking and research firms have put a “buy” on the stock after the numbers based on better and aggressive power sector reforms and restructuring of State Electricity Boards (SEBs). Almost 21% jump in its loan book is expected in Fy13. Implementation of the Shunglu Committee recommendations for distribution sector reforms will reduce the counter-party risk for its power generation clients and this will be a big trigger for the company. It has put in place stricter norms for loans, wherein PFC sanctions loans to private projects only after the project secures power purchase agreement and coal linkages. Though many allege that PFChas been losing out to aggressive private sector lenders, it is interesting to note that compared to these banks, who have large chunks of restructured loans, PFC does not have such loans on its books.  The CCEA approved the scheme for Financial Restructuring of Discoms and this is good news for PFC as debt-servicing of SEBs will improve and PFC’s involvement in the restructuring will be limited, given its low short term debts. Long term outlook remains positive.