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Plan to Raise $450M Through Bonds, Syndicate Loans: REC

  • Over and above the USD 300 million already raised by them, Rural Electrification Corporation tells CNBC-TV18 that it is also looking at raising USD 450 million through bond issues and syndicate loans. “We have put up the plan to raise USD 1 billion through FCCB to the ministry of power,” said HD Khunteta, director of finance at the company.The company’s total capital requirement is Rs 28,000 crore out of which they have raised Rs 20,000 crore.Speaking about the loans to state electricity boards (SEBs), Khunteta says that they are not seeing an alarming rise in non-performing assets (NPAs). “There is no pressure as far as state dues are concerned. We are getting most of the payments on time,” he said.
  • Q: Have you had to reschedule any of your SEB loans at this point in time and how much of a pressure do you think it would put on your asset quality?
  • A: As on date, there is no pressure as far as state dues are concerned. We are getting most of the payments from most of the SEBs. Meghalaya is the only one which has delayed the payment one quarter and the amount is only around Rs 3-4 crore. All other states are making the payment on due date, so no restructuring has to be done so far. Where the DISCOMMS, transmission companies or generation companies are concerned, no restructuring has been done so far.As far as the asset quality is concerned, total gross non-performing assets (NPAs) are around 0.45% and net NPAs are 0.25%. Only Maheshwar project has become an NPA. The project is around 85% completed and because of lack of infusion of equity by the promoter the project has been delayed. But except this case or another case like Konaseema, all are making payments on due date.
  • Q: I believe REC is looking to raise between USD 500-600 million via some kind of a overseas offering what instrument are you leaning towards at this point and how soon would you want to raise that money?
  • A: Around USD 300 million we have raised in the month of August which has already been hedged around 7.35% to 7.37% compared to the domestic rate of around 9.60%. Further we are planning to go for road show in the last week of January or first week of February to raise USD 200 million through bond issue.We are also planning to raise around USD 250 million through syndicated loan. The mandate was given to State Bank of India, but so far the confirmation is not there. But we are looking to other options like Bank of Tokyo Mitsubishi and others. So far, USD 300 million has been raised, USD 200 million we are going for the road show and for balance USD 250 million will be tied up shortly.
  • Q: Your earlier proposal had been to raise as much as USD 1 billion. Will these various fund raising alternatives be sufficient in order to meet your capital requirements and what kind of dilution will you finally see once you have done these three tranches?
  • A: Plan was to raise was Rs 28,000 crore out of which Rs 20,000 crore has been raised. The balance Rs 8,000 crore can be raised through forex /domestic loans. So raising funds is not an issue for us. You can see that the Rs 20,000 crore which was raised by us has an incremental cost is at around 8.72% and we are entering the spread of around 3.25% and net interest margins are at 4.4%. So we are able to sustain both the spread and net interest margin.As per dilution is concerned, so far there is no dilution in the equity. Whatever the funds have been raised it is through debt instrument only. We have put up the plan to raise USD 1 billion through FCCB to the ministry of power and the meeting was also held in the department of disinvestment. The total issue size maybe reduced to USD 500 million, but it is subject to cabinet of approval or other necessary approvals.
  • Q: As an industry veteran, what is your view on the Shunglu Committee recommendations? How soon do you think they could come on board and how difficult would it be to actually implement? Also, will it really help to address the SEB issue?
  • A: The Shunglu Committee has recommended their report and it has to be accepted by the state DISCOMs, state governments and ministry of power to be implemented. They have a number of good recommendations, and if it is implemented it will definitely help the power sector. But the central government has already constituted another committee under BK Chaturvedi and they will also submit a report. So finally I can’t say at this time, but I think if state DISCOMs and state governments are agreeable, then the report can be implemented at any time.But their consent is also required for the formation of the SEBs, where the line of credit will be provided by the RBI and some conditions which has been let down in the report that has to be accepted by the state DISCOMM. If they do not comply by that, then the RBI will make the payment to the SEB and they will deduct the amount from their domestic grant, so that requires the consent of the state. What I can say is that the report is excellent and if it is implemented then definitely it will help the power sector.
  • Q: How is disbursement looking at this point in time? What kind of sanctions have you done in the quarter gone by and what is the target for the fiscal?
  • A: Up to November 30, the growth in disbursement is around 23% and sactions were at around Rs 38000 to Rs 39000 crore so which is more or less at the same level as of previous year and loan book growth is around 20%. We are able to sustain the growth in the loan book.
  • As far as top-line or bottom-line is concerned, the top-line growth may be 20% but if we take the impact of that forex adjustments, then the growth in the bottom-line may be around 5%. If we exclude that, then the bottom-line growth maybe around 12 to 15-16% like that. That is a possibility by the end of this year.

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