PFC - Power Finance Corporation Ltd Share Price

Management's outlook for Power Finance Corporation (PFC) emphasizes a robust financial performance paired with strategic growth initiatives for FY26. PFC reported a consolidated profit after tax (PAT) of Rs. 30,514 crores, a 15% increase from the previous year, alongside a remarkable standalone profit of Rs. 17,352 crores, reflecting a 21% growth. The consolidated net non-performing asset (NPA) ratio improved to 0.38%, compared to 0.85% in FY24, indicating a strong focus on asset quality.

Key points from management regarding the future include:

1. Loan Growth Forecast: PFC expects a loan growth of 10-11% in FY26, slightly moderated from previous guidance due to anticipated lower disbursements in the distribution sector as government schemes like LIS and LPS phase out.
2. Dividend Declaration: A final dividend of Rs. 2.05 per share was announced, complementing a total of Rs. 15.80 per share for FY25, reinforcing the commitment to shareholder returns.
3. Funding Strategy: PFC raised Rs. 1.11 lakh crores in FY25, with plans to maintain a diversified portfolio where approximately 76% is sourced domestically. They have a proactive approach to managing foreign currency risks, with 95% of their portfolio hedged.
4. Renewable Energy Focus: The renewable portfolio reached Rs. 81,031 crores, marking a 35% increase from the previous year. As India targets significant renewable capacity by 2030, PFC aims to finance new technologies like integrated solar-wind hybrids.
5. Nuclear Energy Expansion: The government's initiative for expanding nuclear energy presents new lending opportunities for PFC, with plans to develop 100 gigawatts by 2047.

PFC's management expresses confidence in navigating changing market dynamics while focusing on sustainable value creation, thereby ensuring resilience in the energy finance sector.

1. Question by Abhijit Tibrewal: "What has changed in the last six to nine months prompting the moderation in loan growth guidance? Are issues like land acquisition and PPA signings affecting this?"

   Answer by Parminder Chopra: "The main change comes from our distribution sector disbursements, which are now nearly complete, especially under the LPS scheme. Last year's guidance for growth was 12-13%, and now, we're moderating it to 10-11%. While land and PPA issues are sectoral challenges, I don't believe they will significantly hinder our overall growth."

2. Question by Shreya Shivani: "What operational changes have affected the trend from sanction to disbursal over the years?"

   Answer by Parminder Chopra: "Previously, thermal projects were the majority of our high-value sanctions. Now, we mostly see sanctions for lower-capacity renewable projects with shorter gestation periods. This shift means that while we have more sanctions, the actual disbursements are less, leading to the observed lag."

3. Question by Shweta: "What is the current sanctions number and how is RDSS expected to drive growth moving forward?"

   Answer by Parminder Chopra: "As of FY25, our sanctions total is about Rs.39,000 crore under the RDSS scheme. With tenders recently placed, we expect disbursements to ramp up, especially compared to previous years where delays were common."

4. Question by Shreepal: "Will margins compress in FY26 given the focus on DISCOMs and renewables?"

   Answer by Parminder Chopra: "We maintain our guidance for a spread around 2.5%. Prepayment patterns can vary year by year but are normal in our business. Growth expectations remain between 10-11%, which accounts for such fluctuations."

5. Question by Chintan Shah: "Considering the growth trends, what do you expect for asset quality, especially given private sector growth?"

   Answer by Parminder Chopra: "Our focus on financing renewable and private sector projects should continue to support our asset quality. As we adapt to funding needs in these sectors, we expect to mitigate risks without significant slippage."

6. Question by Prashant: "Given the changes in the repo rate, can we expect costing pressures on margins?"

   Answer by Parminder Chopra: "Although we recognize the cost of funds could influence margins, our average liability period helps us manage this. We anticipate maintaining our spread guidance despite borrowing dynamics."

7. Question by Bhojwani: "What factors contributed to the upgrades and downgrades of DISCOM ratings?"

   Answer by Manoj Sharma: "Rating changes are based on financial performance metrics, including subsidy support and efficiency improvements. The improvements, notably from RDSS, have led to upgrades for several DISCOMs while some have faced downgrades due to persistent issues."

8. Question by Avinash: "Why has there been an increase in provisioning coverage for stages one and two accounts?"

   Answer by Parminder Chopra: "The rise in provisioning reflects prudent practices based on RBI guidance. We are taking a more cautious approach to ensure we are well-prepared for any unforeseen project financing risks."