PFC net dips 39% at Rs 980.2 cr

Power Finance Corporation (PFC), the power sector development finance institution, has reported a 39 per cent drop in net profit, from Rs 1,606.99 crore in 2003-04 to Rs 980.20 crore in 2004-05, on account of the shift from cash to accrual basis accounting.

On a like to like basis, however, its profits after tax was up 22 per cent from Rs 804.47 crore in 2003-04 to Rs 980.2 crore.

The shift in accounting from cash to accrual basis in case of loans with terms of more than 5 years, increased the operating income in 2003-04 by Rs 646.04 crore. A corresponding shift in accounting of tax payments, resulted in an additional payment of Rs 64.52 crore during 2004-05.

Additional deferred tax liability in respect of special reserves was created during 2004-05. This has resulted in lower income of Rs 141.62 crore, the company said.

The company is studying the possibility of entering the insurance sector and has plans to increase the focus on transmission projects in the current fiscal.

In addition, the initial public offer is also slated for this fiscal.

"We have set up an internal group which is looking at the regulatory norms we have to comply with, in order to enter the insurance business. In the current fiscal, we should see some movement on the insurance front," said Arvind Jadhav, chairman and managing director, PFC.

"Currently, other financiers to the power sector are also tapping the bond markets, term loans and other banks for finances. The foray into insurance should help us raise funds at low cost," Jadhav added.

The company had earlier considered a foray into banking, however, minimum lending norms for the banking sector had made the move unviable for a financial institution focussed on the power sector, said officials.

"The focus on transmission and distribution will be increased. We are studying the transmission capacity at the state level to identify the gaps that need to be filled. For the current fiscal, we have allotted Rs 600 crore for transmission and distribution. If the requirements in the sector are more, we would look at tying up with other financial institutions or spreading the investments over the next few years," Jadhav said.

In 2005-06, the company is looking at borrowings of Rs 9,500 crore. This will include Rs 1,000 crore to be borrowed from overseas, he added.

It has targeted loan sanctions of Rs 17,625 crore and loan disbursement of Rs 9,515 crore for the fiscal.

The India Power Fund, a venture capital fund for the power sector, proposed to be set up by PFC, is likely to be activated by August, said Satnam Singh, director-finance, PFC. Approval for contribution from various sources including banks, Power Trading Corporation and PFC had been received, he said.

The fund is expected to start with a corpus of Rs 500 crore in August. Five of the six directors for the fund have already been identified.