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89.95
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Updated:22 Oct, 2020, 15:59 PM IST

BSE
89.95
Change Change %
1.55 1.75%

Updated:22 Oct, 2020, 16:01 PM IST

LETTER TO SHAREHOLDERS:

Ladies and Gentlemen,

It gives me great pleasure to welcome you all to the 27th Annual General Meeting of Your Company. Your Company continues to grow from strength to strength every year, and I am delighted to share its performance. The performance recorded by Your Company in FY 2012–13 is even more impressive in the backdrop of slowdown in Indian economic growth and the challenging environment posed by power sector with issues of fuel supply and weak financial health of DISCOMs.

Despite the tough environment, Your Company has seen yet another year of significant achievements. Your Company, this year, has recorded unprecedented levels of annual loan sanctions of Rs. 75,147 Crore and loan disbursements of Rs. 45,151 Crore. Your Company has registered loan asset growth of 23% and net profit growth of 46%. The profitability was driven by an increase by 62 basis points in the interest spread, coupled with strong asset growth and sound asset quality. Amidst market concerns of higher NPAs, Your Company has not added any new NPAs. In fact, it has seen one of the existing NPAs converting into a Standard Asset, thereby reducing net NPAs as a percentage of loan assets to 0.63%, as against 0.93% last year. With a net profit of Rs.4,420 Crore, Your Company is among the top 10 profit making PSUs in the country. Our profit per employee figure remains one of the highest in the land, having improved even further. It now stands at Rs.11.5 Crore per employee as against Rs.8.9 Crore per employee last year.

The Economy

Economies of the world have reached an unprecedented state of interconnectivity. No longer can any country claim to be an island in the sea of business. Economies like the US and China, which were thought to be seemingly self–sufficient and self–sustaining, have also seen sluggish growth due to the global slowdown.

Economic reports indicate that India has also seen GDP growth slowing down to 5% in line with the global slowdown. There was a marked deceleration in agriculture, industry and services. Dampening sentiment led to a cutback in investment as well as consumption expenditure – two principal drivers of growth. Inflation remained at high levels, fuelled by the pressure from the food and fuel sectors. The large fiscal and current account deficits continue to cause grave concern.

It is imperative that India regains its high growth trajectory sooner rather than later. The critical factor hindering growth, other than high Current Account Deficit and Fiscal Deficit, is also the lack of adequate infrastructure to spur economic growth. Govt. of India in its budget session announced measures to give a push to infrastructure investment emphasising the need to get back to higher GDP growth. Recently, the Hon'ble Prime Minister, in his Independence Day speech, reiterated that to facilitate investment, the Government has taken many steps to speed up the process of government clearances for industry, build an environment more conducive to trade and industry and increase investment in the economy. A special Cell has been set up to facilitate clearances for big projects. The Cabinet Committee on Investment is working to remove hindrances in the way of stalled projects. Inadequate supply of coal had become a major problem affecting the efforts to increase electricity generation, which has been resolved to a large extent.

It is estimated that to sustain about 8–9% economic growth about US$1 Trillion worth of infrastructure spend is required. A significant portion of this investment pertains to the power sector. The performance of the Indian power sector, being the key infrastructure sector, is therefore critical.

Indian Power Sector

The Indian Power Sector has seen significant acceleration in generation capacity addition. The installed capacity reached 223 GW as on 31st March, 2013 with a record capacity addition of about 55 GW during the XI plan (2007–12), followed by more than 20 GW of capacity addition in FY 2012–13 alone. The capacity addition has come from a wide spectrum of sources and technologies, ranging from super critical technology on one end, to small size renewables on the other. Further, with the shift from a controlled environment to a competitive regime, the private participation in the sector has increased by leaps and bounds to about 31% of installed capacity as on 31st March, 2013. 

Govt. of India is addressing the hurdles related to the generation sector. The recent measures in this regard include presidential directive to Coal India Ltd to enter into FSAs to the revised extent of 78 GW, pass through of imported coal cost, compensatory tariff for projects having viability issues and fixation of domestic natural gas price according to production sharing contract mechanism.

On the transmission side, it is estimated that the Southern Grid will be connected with the rest of the country by the end of January, 2014, which means that, in the next four to five years, India would have the largest capacity grid, i.e., close to 200 GW. This would have inter–regional capacity of 65 GW.

On the distribution front, Govt. of India has taken several steps to enhance the viability of distribution sector. Some of the significant initiatives and developments of distribution sector are as below:–

1. All States have increased tariff during 2012–13 in the range 0–37%. For 2013–14, so far, 22 states already issued tariff orders increasing the tariff in the range of 0–31%.

2. R–APDRP scheme of Ministry of Power, Govt. of India, with an objective to reduce AT&C losses below 15%, has picked up pace during 2012–13, with the current status being: completion of asset mapping and consumer indexing for 853 towns, establishment of base line data of 1095 towns, commissioning of 15 data centres, achievement of go–live (Part–A) in 358 towns as against the total eligible towns of 1401 towns under the scheme.

3. Financial Restructuring Package notified by Ministry of Power, Govt. of India provides for 50% of short term loans of DISCOMs upto 31.03.2012 to be taken over by State Govt. and restructuring the balance 50% by banks. 4 states (i.e. UP, Rajasthan, Haryana and Tamil Nadu) are participating in the scheme for an amount of about Rs.92,000 Crore. Additionally, 6 States (i.e. Jharkhand, Kerala, Bihar, Andhra Pradesh, Himachal Pradesh & Meghalaya) participation in the scheme is underway for an amount of about Rs.27,000 Crore.

4. Your Company and REC together have sanctioned about Rs.35,000 Crore worth of transitional loans to DISCOMs to fund the cash gap as per the FRP of respective State Govt.

5. Ministry of Power, Govt. of India has taken the initiative and issued first Integrated Rating in March 2013, which is an attempt to facilitate a uniform and harmonized approach to rate State Power Distribution Utilities.

6. A Task Force on Private Participation in power distribution under Shri B. K. Chaturvedi, Member, Planning Commission, studied the Franchisee Model and the PPP Model, and has endorsed both of them, leaving it to the States to choose a model which they think is more suited to their needs. Standard Bidding Documents for appointment of Input Based Urban Distribution Franchise were also issued by Ministry of Power, Govt. of India in June 2012 to facilitate private participation in distribution sector.

The aggressive implementation of R–APDRP, FRP scheme and efforts towards privatization of distribution sector is expected to enhance the overall viability of Indian power sector going forward.

Performance Highlights

You will be delighted to know that during the FY 2012–13, Your Company has earned net profit of Rs.4,420 Crore registering a growth of 46%. The Total Income of the Company was Rs.17,273 Crore registering an increase of 33% over last year. With the reversal of the RBI's stance towards softening of interest rates since beginning of year 2012, Your Company has seen the interest spread increase by 62 basis points, from 2.25% in FY 2011–12 to 2.87% in FY 2012–13.

During the FY 2012–13, Your Company sanctioned loans of Rs.75,147 Crore and disbursed Rs.45,151 Crore to State, Central and Private Sector entities. In addition, under R–APDRP Schemes sanctions and disbursement were made to the tune of Rs.3,728 Crore and Rs.1,217 Crore respectively. These impressive numbers take Your Company's Cumulative Sanctions to Rs.4,17,836 Crore excluding Rs.35,143 Crore under R–APDRP scheme and Cumulative Disbursement to Rs.2,54,116 Crore excluding Rs.6,720 Crore under R–APDRP. The loan sanctions outstanding and yet to be disbursed as on 31st March, 2013 stands at about Rs.1.64 Lakh Crore (excluding R–APDRP).

Further, Your Company has made a total provision of Rs.121 Crore for Non–Performing Assets (NPA) against Loan Assets in its Annual Accounts. After making provision on NPAs, the level of net Non–Performing Assets (NPAs) has been recorded at Rs.1,013 Crore which is 0.63% to the Total Loan Assets as on March 31, 2013. Additionally, in line with RBI norms this year, Your Company has taken an initiative of standard asset provisioning at 0.25% in a phased manner. To this effect, an amount of about Rs.133 Crore has been provided this year. Your Company has also built up reserve for bad and doubtful debts to the extent of about Rs.1,409 Crore as at 31st March, 2013.

During FY 2012–13, the international credit rating agencies Moody's, Fitch and Standard & Poor's have given long term currency issuer ratings of Baa3, BBB– and BBB– respectively to Your Company, which are at par with sovereign rating for India. In terms of domestic ratings, the long term domestic borrowing programme (including bank loans) was awarded the highest rating of AAA, while the short term domestic borrowing programme (including bank loans) was awarded the highest rating of A1+ by CRISIL, ICRA and CARE.

Based on strong credit rating, Your Company has raised funds to the tune of about Rs.40,500 Crore this year. Out of this, about Rs.30,000 Crore is through taxable bonds, US$500 million is through ECBs, Rs.1,276 Crore is through tax free bonds and the remainder is through commercial paper and term loans. Your Company has raised tax free bonds from a diverse investor base through both private and public issue route with the coupon rate ranging between 6.88% and 7.86% for two different tenors of 10 and 15 years respectively.

Other Business Highlights

1. PFC Consulting Limited (PFCCL) – A wholly owned subsidiary of PFC

PFCCL, mandated to promote, organize and carry out consultancy services related to the power sector, offered its Services to 42 clients spread across 21 States/UTs. During the FY 2012–13, the total income of PFCCL was about Rs.36 Crore and net profit was about Rs.16 Crore. In addition, PFCCL also undertakes the work of Ultra Mega Power Projects (UMPPs) and Independent Transmission Projects (ITPs), the progress of which is indicated subsequently.

PFCCL intends to tap the opportunities available in the technical consulting domain, through a Joint Venture (JV) with a consulting organization having international experience of providing consulting solutions in Thermal Generation segment of the Power Sector. In this regard, an Expression of Interest has already been received from both global and domestic players, and is being scrutinized for finalizing the JV partner.

2. PFC Capital Advisory Services Limited (PFCCAS) – A wholly owned subsidiary of PFC

PFCCAS is exclusively focused on debt syndication services for the power sector including Identification of Lenders, Preparation of Information Memorandum / Term Sheets and assisting them in documentation for power generation projects, such as thermal, hydro, wind and solar. PFCCAS has generated a total income of Rs.1.78 Crore and net profit of Rs.85 lakhs in its first full year of operations i.e. FY 2012–13.

3. PFC Green Energy Limited (PFCGEL) – A wholly owned subsidiary of PFC

PFC Green Energy Limited (PFCGEL) received its certificate of registration to function as a Non–Banking Financial Company (NBFC) from the Reserve Bank of India during the year, and commenced its business operations in March, 2013. The company intends to capture substantial market share in the renewable energy sector going forward.

PFCGEL has an authorised share capital of Rs.1,200 Crore and during the year the paid up capital has been increased from about Rs.5 Crore to about Rs.110 Crore.

4. Other developments

The Facilitation Group has been set up by Your Company to expand PFC's financing business beyond its traditional products into new areas of Forward & Backward linkages to the Power sector, like Fuel Sources Development, setting up of Equipment Manufacturing facilities and Nuclear Power Projects, among others. From its inception, till FY 2012–13, Facilitation Group has sanctioned cumulative loans amounting to Rs.3,372 Crore and disbursed Rs.993 Crore.

Your Company has selected TATA Capital Ltd as a partner to launch a Private Equity Fund of US$ 1 billion. We are in the process of forming a JV with TATA Capital Ltd to launch PE Fund for equity financing of power projects, with the consent of Ministry of Power.

PFCs Support To Ministry Of Power, Government Of India Schemes

1. Restructured Accelerated Power Development & Reforms Programme (R–APDRP)

As the Nodal Agency for the Ministry of Power's R–APDRP scheme, Your Company has disbursed the entire amount of Rs.1,217 Crore released by Ministry of Power under R–APDRP during the FY 2012–13 to the state utilities. The cumulative disbursement under R–APDRP is Rs.6,720 Crore as on March 31, 2013.

During FY 2012–13, 170 towns have gone live in seven states, namely, Andhra Pradesh (24), Gujarat (43), Karnataka (10), Maharashtra (16), Madhya Pradesh (45), Uttarakhand (2) & West Bengal (30). In such towns, all business process software modules are functional and energy audit reports are being derived from the system.

As far as implementation of Part–B projects of R–APDRP is concerned, during FY 2012–13, utilities have tied up counterpart funding amounting to Rs.5,901 Crore. With this, cumulative counterpart funding tied up amounts to Rs.14,665 Crore, out of which Rs.4,666 Crore is from Your Company. Implementation work has commenced cumulatively in 822 towns, to strengthen & improve distribution system and reduce AT&C losses to 15% or below.

For capacity building and to recognize the need to keep pace with technology, contemporary knowledge and skill, Your Company imparted training on various themes to 16,457 personnel of Power Utilities against MoU target of 8,000. 

2. Ultra Mega Power Projects (UMPPs) 

Your Company has been designated as the Nodal Agency for the development of Ultra Mega Power Projects (UMPPs), with a capacity of about 4,000 MW each. Sixteen (16) such identified UMPPs are located at Madhya Pradesh (Sasan), Gujarat (Mundra), Andhra Pradesh (Krishnapatnam), Jharkhand (Tilaiya), Chhattisgarh (Surguja), Karnataka, Maharashtra (Munge), Tamil Nadu (Cheyyur), Odisha (Sundargarh), 2 Additional UMPPs in Odisha and 2nd UMPP in Andhra Pradesh (Prakasam), Tamil Nadu, Gujarat, Jharkhand (Deoghar) and Bihar. Of the 16 identified UMPPs, four have been transferred to the successful bidders emerging as per tariff based bidding process, following the guidelines issued by Ministry of Power, Govt. of India.

Of the remaining UMPPs, Request for Qualification (RfQ) for Chhattisgarh UMPP and Odisha UMPP were issued in March, 2010 and June, 2010 respectively. Responses for RfQ for Odisha UMPP were received on August 1, 2011. However the two referred UMPPs are awaiting revised Standard Bidding Documents. Other UMPPs namely, Coastal Karnataka Power Limited, Coastal Maharashtra Mega Power Limited, Coastal Tamil Nadu Power Limited, Sakhigopal Integrated Power Company Limited, Ghogarpalli Integrated Power Company Limited, Tatiya Andhra Mega Power Limited, Deoghar Mega Power Limited, Bihar UMPP, Gujarat 2nd UMPP and Tamil Nadu 2nd UMPP are under various stages of development.

3. Independent Transmission Projects (ITPs)

Ministry of Power (MoP) has also initiated Tariff Based Competitive Bidding Process to develop transmission capacities in India, in order to bring in private sector participation. MoP has appointed Your Company as Bid Process Coordinator, for two (2) projects and PFCCL (wholly owned subsidiary of Your Company) for nine (9) projects. Out of these eleven (11) projects, four (4) have already been transferred to the successful bidders and the remaining are under process.

4. Ministry of Power's Integrated Rating Framework for State Distribution Utilities

During FY 2012–13, Ministry of Power, Govt. of India has formulated an Integrated Rating Methodology covering the State Power Distribution Utilities with Your Company as the Nodal Agency for coordinating these activities. The main objectives of the integrated rating system for the state distribution utilities are to develop a mechanism for incentivizing/dis–incentivizing the distribution entities in order to improve their operational and financial performance, evaluate all utilities in the power distribution sector on the basis of current levels of performance as well as on relative improvements in performance achieved on a year to year basis, facilitate realistic assessment by Banks/FIs and enable funding with appropriate loan covenants, and to serve as a guiding factor for Govt. of India's assistance to the state power distribution sector under various initiatives.

The Integrated Rating framework covers all state distribution utilities (including SEBs/utilities with integrated operations) except state power departments. The integrated ratings shall be carried out on an annual basis by independent credit rating agencies.

The first Integrated Rating exercise covering all the 39 state distribution utilities was carried out by ICRA and CARE, and the same were declared on March 19, 2013.

Other Initiatives

1. Corporate Social Responsibility (CSR)

Your Company has implemented its CSR policy in all earnest and with great zeal. Your Company has entered into a MoU with Govt. of India for spending 0.5% of PAT towards CSR activities as part of its Corporate Social Responsibility. The company had accordingly allocated Rs.15.29 Crore for CSR initiatives in the FY 2012–13.

However Your Company had sanctioned projects/activities worth Rs.19.34 Crore in FY 2012–13 and disbursed Rs.16.09 Crore for the projects sanctioned in FY 2012–13 & FY 2011–12. During the year Your Company had implemented wide range of activities in the field of solar energy, skill development, relief to the victims of natural calamities in various states etc.

2. Sustainable Development (SD) Activities

The aim of the Sustainable Development Policy is to ensure that Your Company becomes a socially responsible corporate entity by finding ways to develop social, financial and environmental resources that meet the needs of the present, without compromising the ability of future generations to meet their own needs. Your Company has entered into an MoU with Ministry of Power, Government of India for spending Rs.50 lakh plus 0.1% of Profit After Tax (consolidated), exceeding Rs.100 Crore of the last year, towards Sustainable Development activities during the year.

During the year, Your Company had allocated Rs.3.46 Crore for SD initiatives. However, Your Company sanctioned projects/ activities worth Rs.4.32 Crore and disbursed Rs.3.47 Crore in the FY 2012–13.

Awards And Accolades

Your Company's performance was recognized well, which is reflected in the awards and accolades received during the year as listed below:–

1. SCOPE Gold Trophy for "Best managed Bank, FI or Insurance Company" from H.E. President of India. 

2. Dun & Bradstreet PSU Award in the NBFC Category for business size, growth, profitability and governance.

3. PSU Award from Dainik Bhaskar for "Special recognition for contribution in Power Distribution Sector"

4. Jindal Global Business School–Top Rankers Excellence award in category of "Best Organisation of the year".

5. "Mighty Masters–Largest Balance Sheet and Topline Non–Manfacturing Navratna" award from Dalal Street.

6. ICC PSE Excellence Award for "Best Human Resource Management".

7. Enertia award for "Best Power Financing Company".

8. India Power Award for "Large Financial Institution".

Strategy

The strategy of Your Company is to remain a dominant player in the Indian power sector by continuing the growth story with a focus on financing power sector and making inroads into new avenues of business to accelerate growth of the Company. Your Company has developed a wide range of products and services and innovates continuously to cater to the changing needs of clients across the value chain of the power sector, which enables it to further consolidate its position. Your Company also plans to capture additional business in the areas of renewable energy, loan syndication and equity financing related to the power sector, in order to expand its operations beyond traditional financing.

Additionally, Your Company shall continue to play a vital role by implementing Govt. of India schemes and will help create a more sustainable development of the Indian power sector. While Your Company is focused on retaining its dominant position and developing the power sector, it will do so by adopting sound governance principles and fulfilling corporate social responsibilities.

Acknowledgements

As our shareholders, your contribution and continued support to PFC means the world to us. Our success is built on the foundation of your trust, and for this, we thank you. Your Company is also truly grateful for the support it has received from its Board of Directors, Investors and Valued Clients.

My sincere and heartfelt thanks go out to the Hon'ble Minister of State for Power (Independent Charge), Secretary (Power), officials of the Ministry of Power, Ministry of Finance, Reserve Bank of India, Department of Public Enterprises, Securities and Exchange Board of India, National Stock Exchange of India Limited, Bombay Stock Exchange Ltd., Planning Commission, CEA, C&AG, Statutory Auditors and other concerned Government Departments/Agencies at the Central and State level, The World Bank, The Asian Development Bank, USAID, KfW of Germany and various international financial institutions/banks, Commercial Banks, Financial Institutions, Registrars and other agencies for their continuous support. I also appreciate the continuous and unwavering support of our friends in the Electronic and Print Media.

In the end, I thank the employees of PFC, for their efforts and incredible hard work in making PFC the company it is today. As always, we continue to create opportunities for a better tomorrow. 

(SATNAM SINGH)

CHAIRMAN & MANAGING DIRECTOR

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