ICRA has assigned the rating 'AAA' to the Rs 440 billion long term borrowing programme for 2014-15 of Power Finance Corporation (PFC). ICRA also assigned the rating of A1+ to the Rs 50 billion short term borrowing programme of the corporation. ICRA has a rating of AAA on the various long-term bond and bank borrowing programmes, an outstanding rating of MAAA to the fixed deposit programme and a rating of A1+ for its commercial paper/short-term debt programme of the corporation.
The highest-credit-quality ratings continue to reflect PFC's majority sovereign ownership and its strategically important role in the implementation of various Government of India (GoI) schemes-such as Ultra Mega Power Projects (UMPPs) and R-APDRP-for the development of the country's power sector. Further, PFC, as one of the major power sector financiers, remains strategically important for the Government of India (GoI), given the latter's objective of augmenting power capacities across the country.
The ratings continue to draw comfort from PFC's adequate earning profile supported by its strong financial flexibility and ability to borrow funds at competitive rates and low credit and intermediation costs. These strengths are partly offset by the corporation's exposure to a single sector, its high concentration of weaker-credit-quality State power utilities and the vulnerability of its exposure to private sector borrowers.
ICRA also notes the Appellate Tribunal of Electricity (APTEL) recommendations on timely tariff finalization by SERCs and the revision/ proposed revision in power sale tariffs by certain states. ICRA continues to closely monitor the developments in the power sector and timely implementation of the aforesaid recommendations and also speeding up of technical and commercial loss measures by state utilities will thus be critical for maintaining the health of the power sector companies.
Similarly, policy level changes to alleviate concerns with respect to fuel linkages for private sector projects, where the share of PFCs exposures has been increasing, will have a critical bearing on its credit profile. As on Dec-13 PFCs exposure to the private sector i.e. Independent Power Producers (IPP) stood at 15% of its total advances. ICRA has taken note of the RBI norms for re- structuring of advances by NBFCs' announced in January 2014, which permit standard asset classification for infra project loans where there is a deferment in DCCO‡. The size of PFC's standard re-structured advances (including NPAs) has come down to 7% of total IPP outstanding in Dec-13. At the same time vulnerability of some of these exposures is high on account of fuel availability constraints, environmental & land acquisition issues and disputed/competitive power sale tariffs.
Going forward, it would be important for the corporation to maintain a strict control over collections from the IPP segment. As on Dec. 31, 2013 PFC had a total advance base of Rs.1,773.33 billion, out of which its exposure to state power utilities accounted for 67% of total advances, followed by central power utilities at 12%, IPPs at 15% and joint sector power utilities at 7%.
Shares of the company gained Rs 2.5, or 1.34%, to settle at Rs 189.25. The total volume of shares traded was 244,047 at the BSE (Monday).
