PFC plans to raise Rs 1.18 trillion, eyes domestic retail bond market

Fund will help the firm make up for the loss in borrowing during lockdown

State-owned Power Finance Corporation (PFC), the largest lender to the power sector, will raise Rs 1.18 trillion this financial year, as the dust settles on the lenders’ market, hit by the Covid pandemic. 

PFC will tap the domestic retail bond market to raise close to Rs 83,000 crore, making it the largest amount to be raised through bonds by the company.

The fundraising plan is to make up for the loss in borrowing during the past few months of lockdown, slowdown in the lender market and funds crunch as it had given special loans to state-owned power distribution companies (discoms).

Among other avenues that the financier would opt for are foreign currency borrowings, short-term borrowings and commercial papers. The board of PFC, on December 30, approved the revised plan for raising resources during the current financial year.

Senior company executives said PFC would approach the domestic retail bond market in January 2021 so as to conclude the process before March.

“This borrowing plan was in abeyance since February as the markets were impacted by the Covid pandemic. Now, we require funds because there was no repayment to us due to the loan moratorium given by the Centre to our borrowers. But we could not get moratorium from our lenders and so additional funds are being raised,” said an executive. He said that loans given by PFC and Rural Electrification Corporation (REC) to state-owned discoms also led to resource shortfall for the two lenders. REC is a subsidiary of PFC since the last financial year.

In June 2020, the finance minister, under Aatmnirbhar Bharat package to boost the economy, announced a special liquidity infusion scheme for the ailing power distribution sector. The size of the loan scheme was Rs 90,000 crore, for discoms to clear their dues to the power generating companies. PFC and REC lent Rs 45,000 crore each.

But despite this, the sector’s lender would now be wary of loss-making discoms. Earlier this year, the boards of PFC and REC approved the proposition that no loans would be given to any discom incurring losses, said an official.

“PFC and REC will not lend to any discom, which is making financial losses, has high AT&C losses and has not filed for tariff revision from April 1,” said an official.

 PFC is also witnessing a marked shift in its lending portfolio owing to stress in thermal power generation and no new private investment. It is expected that renewable energy (RE) and transmission & distribution (T&D) would attract bulk of the lending by PFC, going forward, along with new segments such as lift irrigation project, electric mobility and energy efficiency.

Growth in loans to the T&D segment by PFC has been 387 per cent in the past five years. In comparison, growth in loan assets in thermal power generation has been 16.56 per cent for PFC. Though a late entrant in the renewable space, its RE assets basket stands at Rs 37,005 crore. 

“In renewable, most of the funding is to private borrowers. In conventional generation, it is a mix but the majority is to the government sector only,” said the PFC management during an inestor meet in June. State-owned NTPC has 20 Gw of coal-based power generation projects at various stages of development. “Renewable is a good opportunity. We are getting a lot of renewable re-financing proposals. Of course, discoms and transmission is there. Then, we are diversifying into smart city and e-vehicles,” the PFC management told investors.