| The rating upgrade reflects S&P's opinion concerning the strength of support from its sole owner, the Indian government (BB+/Stable/B), based on the company's role as the main government agency for financing the electricity sector. |
| The ratings on PFC are constrained by weak asset quality and borrower concentration. The stable outlook reflects that of the sovereign rating. |
| In addition, the outlook takes into account the expectation that PFC's strategic role and its status as a policy instrument of the government will prevail in the medium term, implying support from the sovereign. However, a material reduction in the government ownership of PFC or a major shift in the company's business mix outside its current policy role could result in a rating downgrade on PFC as either factor could dilute government support. |
| "Given the economic and political importance of the electricity sector and PFC's critical role, S&P believes the Indian government is likely to provide funding support to PFC, should it encounter difficulty in servicing its debt obligations," said Standard & Poor's analysis. |
| The ratings on PFC also derive support from a favourable capitalisation level, with common equity at 20.8 per cent of total assets at March 31. |
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