'PFC may go for a private equity fund'

Q&A/ VK Garg

Power Finance Corporation, a new entrant to the Navratna list of companies, has announced impressive results for the quarter "" the net profit of the government-owned company has doubled to Rs 309 crore while net income is up 38 per cent.

The performance will improve further as the company expands operations into, among other things, a private equity fund for the power sector, VK Garg, the chairman and managing director of the company tells Sapna Dogra Singh.

Let's start with Navratna Status. What are the first few major decisions you intend to take after getting autonomy?

We are a finance company and were fairly free in our operations. It does not make any difference to our functioning. In essence, the status is more of an honour for us than anything else.

So the Navratna status has nothing to do with the good numbers that you declared on Monday. What do you attribute the performance to?

No single factor can give you these results which emerge from a complex chemistry. Our core competence is the judgement of risk "" the strength of appraising a project well.

Our net interest income is up 38 per cent during the quarter compared with the same quarter last year. Our spread has improved to 1.93 per cent against 1.71 per cent last year. Yield on assets is up to 9.88 per cent versus 9.01 per cent last year.

Also the operating cost is down to 0.02 per cent against 0.03 per cent last year while NPAs are down to 0.06 per cent.

You share price has touched Rs 200. Do you think PFC is fairly valued?

It is for the market to decide. We are neither over-valued nor under-valued.

Will PFC remain limited to a loan portfolio or will you look at equity exposure too?

The power sector requires a lot of funds. Indian industry is in no position to mobilise the equity required.

We are exploring the possibility of setting up a private equity fund for the power sector, with participation from Indian and overseas investors. We will try to register it as a private fund so that it is out of government control.

What is the size of the fund? Is it $1 billion?

We will announce the size when the approvals are done.