Chennai: With questions being raised about its relevance and the government funding, the Rural Electrification Corporation (REC) has restructured its business.
Originally formed with the mandate of funding the state electricity boards (SEB) in connecting villages and pump sets, the REC has decided to broad-base its portfolio by lending to all power projects - private/public in generation, transmission and distribution. The company is also actively involved in assisting its borrowers (mostly SEBs) to swap their high cost debt.
"We have done due diligence for 23 power projects and will be funding the same. Some of the non-rural power projects we are funding are the Vishnu Prayag project at Uttranchal state, Vijayawada Thermal Project, Andhra Pradesh and a 4-mw hydel project in Tamil Nadu. We have swapped high cost debt to the tune of Rs2,500 crore," says Abhay Misra, executive director.
According to him the company has zero non-performing assets (NPAs) in its advances portfolio of Rs60,900 crore. This was largely due to rescheduling of loans to eight SEBs after their default.
Last fiscal REC had sanctioned Rs12, 126 crore and disbursed Rs6,611 crore. The company earned an interest income of Rs2,033 crore and an after tax profit of Rs579 crore. The recoveries stood at Rs6,625 crore. For the first quarter of this fiscal the interest income stood at Rs508 crore and the after tax profit stood at Rs 160 crore.
"The central government has stopped infusion of funds and we are tapping the market," Misra says. Last year REC mobilised Rs4,415 crore through the issue of bonds and this year also it has hit the roads with 54 EC Capital Gain Tax Exemption Bonds. For the current year REC's average cost of funds is expected to be in the region of 6.5 per cent and the average lending rate will be around 8 per cent.
On the anvil are the infrastructure bonds carrying a coupon rate of 5.6 per cent. According to Rakesh K Arora, joint chief (F&A), REC hopes to mobilise Rs4,500 crore with this issue.