News Detail

• Director finance of Rural Electrification Corpration , HD Khunteta tells CNBC-TV18 that as per current estimates, the interest rate for their tax free bond issue will be around 7.95-8.10%. "For QIP high networth individual, the interest rate will be 50 basis points lower than the rate offered by government securities the previous month," he said.Khunteta goes on to say that he hopes to maintain net interest margins at the same level in the current quarter as well.
• Q: A tax free bond issue from REC is on the anvil. Will you be able to match or will you want to match what NHAI and IRFC offered?
• A: I cannot say at this time because as per the government guidelines rate of interest is to be fixed 50 basic points lower than the G-sec rate prevailing in the previous month. My issue is likely to be open on 5th of March, so whatever the G-sec rates are prevailing on 29th February, the rate of interest will be 50 basic points lower for the QIP portion high net worth people.
• As far as the retail part is concerned, it may be around 30 points lower than the G-sec rate. So as far the present estimate, the interest rate maybe in the range around 7.95- 8.10%.
• Q: What would it do to your cost of funds? Where does it currently stand at, including this tax free bond issuance, and where would NIMs stand at thereafter?
• A: After this issue we will be able to raise around Rs 3000 crore. The offer is Rs 1500 crore plus Rs 1500 greenshoe option. As far as current year is concerned, we will raise around Rs 28,000 crore and lastly we have raised USD 200 million through CHF also. So for the current year target we will be able to achieve.
• The point is that we are able to raise funds at a much better rate. Even you can see on incremental basis we have borrowed around Rs 24,000 crore and our cost of borrowing including most of the part has been hedged. Therefore the cost has come to around 8.6%. So we are able to maintain the straight of around 350 bps like that.
• Q: At the end of your third quarter you said you are blended cost was 8.4%, so the cost of money has gone up?
• A: Blended cost 8.6% is on incremental basis. If you see, the overall cost on the total outstanding of Rs 81,000 crore is around 8.20%. So all that compared to the previous year, the interest rates have gone up by around 30 basic points but yield on the loan side has also increased by around 40-50 basic points, so we are been able to maintain that the speed as well as net interest margin.
• Q: Your spreads were actually at 4.34% when you last spoke to us. That was down by about 13 bps from the quarter ago. For 4th quarter will you be doing around 4.34% or will you even do better?
• A: The net interest margin has come down on account of the two NPAs. One is Maheshwar and other is Konaseema. The total amount is Rs 493 crore. So these two NPAs have impacted our spread and net interest margin, which was 434 bps and 322 bps, and we are hopeful that in 4th quarter we will be able to maintain the net interest margin and speed at the same level as it was in Q3.
• Q: Do you fear any further projects being classified as NPL up until now or something which perhaps is heading down the route in the next few months?
• A: There are some delays by the Meghalaya or some Malana - II project, but we are making a lot of efforts to restructure the loan and to gear the money from the Meghalaya. So we are hopeful that in the month of March we shall be able to get the payment or incase of Malana - II the restructuring will be done.
• Q: Is there anything that you can tell us about what the forthcoming steps can be by the Pulok Chatterjee Committee? We understand that a pass through of imported coal prices would be considered, but that will mean that PPAs which don't allow it will have to be changed. Any idea at all whether that kind of a step is contemplated?
• A: First step has been taken in the right direction by the PMO by asking Coal India to sign the fuel supply agreement by 31st March 2012. Further they have also mentioned that the projects which are likely to be commissioned by 31st March 2015 or by end of 2015 should sign the power fuel supply agreement to which 80% of the requirement.
• But some clarity is still required because pricing is the major issue which is likely to import the coal. Wherever they have already signed the fuel supply agreement to the extent of 50-80% how this will be passed through and logistic issues are also involved and wherever the power purchase agreement has signed without the pass through of the increase in the coal price that matter has to be looked into.
• So I think tomorrow give the number of developers are likely to meet Mr. Chatterjee and all of us are being made to sort out the issue because pricing is the major issue where the power purchase agreement has been signed. Second is in case of merchant power projects or where they have signed the power project agreement to the extent of 30% or likely to be signed in the coming months but 30-40% will be on merchant power they are not likely to get the benefit of that. So all the issues are to be considered by the committee headed by Mr. Chatterjee and all the developers are likely to meet tomorrow and some solution will definitely come.
• So main issue will remain where the power purchase agreement which were signed without that pass through. Second is the pricing of the coal and third is logistic issue. So these will be discussed in the meeting and I am hopeful that solution will definitely come.

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