FINANCIAL INFORMATION
PTC

Chairman's Speech at AGM of PFS

Ladies and Gentlemen,

It gives me great pleasure to welcome you all to the 12th Annual General Meeting of your Company. Your Company has evolved over these years for growth of renewable footprint in country. At the outset, I would like to thank you all for the confidence reposed and the support extended to the Company. It is your confidence and support that enables us to grow every year despite inherent challenges of financial sector. The Financial Statements for the year ended 31st March 2018 along with the Directors’ Report and Auditors’ Report have already been circulated to you. With your permission, I would like to take them as read.

During the financial year 2017-18, your Company completed 11 years of service to the Infrastructure sector of the Country. On reaching this milestone your Company has an outstanding loan book of over Rs 12,800 Crores and together with non-fund base portfolio, the loan portfolio exceeds Rs 14,300 Crore. During the year completed, your Company has made sanctions of Rs 8,250 Crores.

 

Macro Overview

The Indian economy is undergoing a transformational change led by Union Government with increasing trend in growth. The power sector which has been the lifeline of the economy, is one of the prime drivers of economic growth & social development and accordingly, the sector’s development is being given due importance in the national planning and resource allocation process.

India has set an ambitious plan to add 175 GW of renewable energy generation capacity by 2022 and is being counted globally as a country leading investments in renewable energy.

The total installed power generation capacity in the country crossed the 325 GW mark as on 31st March 2018. The renewable energy sector which includes solar, wind and bio-fuel, has added 11,788 MW of capacity to the grid in FY2018. Though the renewable energy capacity addition fell short of its target (14,510 MW) for the fiscal, it exceeded the capacity added by conventional segment which stood at 9,505 MW. Renewable energy sources have achieved power parity and in some tenders, solar tariffs have even fallen below the cost of the most competitive coal-based generation. The Renewable Energy capacity is poised to see further additions in line with the Government’s vision of installed capacity of 175GW by 2022.br />
Your Company focuses on attractive opportunities across the infrastructure sector especially the renewable energy projects, other areas such as power transmission, roads and highways, ports etc. are also witnessing action. Infrastructure sector is the key driver for the economy and possesses the potential for propelling overall development of the country. The sector continues to enjoy focus from Government both in terms of policy related initiatives and development of infrastructure in the country. New projects are being undertaken and government is poised to ensure all round development of the infrastructure sector of the country.

 

Infrastructure requires huge investment and PFS is focused to meet the challenges and tap the potential opportunities in coming years. The Company is focused and constantly eyes opportunities to continue with the growth momentum with more cautious approach considering the stress in various projects with various lenders. Your Company is also in the process of addressing concerns with its portfolio of projects so to come out more effectively as each project has different set of challenges.

 

Operational Highlights

The portfolio of PFS has been growing at CAGR of 25% and achieved so by changing gears well in time from financing conventional projects to renewable sector primarily wind and solar, and also by taking incremental exposure in phased and prudent manner to mix sector like roads, ports, transmission and infrastructural logistics projects.

PFS focuses on attractive opportunities across the infrastructure sector especially the renewable energy projects, road projects based on hybrid annuity model, ports and infra logistic etc. The aggregate debt sanctioned (net) by the Company has crossed Rs 23,000 crore mark and the portfolio (fund based and non-fund based) has crossed Rs 14,000 crore mark as at 31st March 2018. Your Company has sanctioned financial assistance to 192 projects of wind & solar amounting to Rs 23,300 Crore and loan outstanding at the end of FY 2017-18 of Rs 7,323 Crore. Out of the 90 live projects in solar and wind sector, 79 projects are operational. Incremental sanction to thermal projects in last five years has been minimal, reducing share of thermal to around 10% in the total portfolio from earlier 49%.

PFS has been improving its portfolio outlook by adopting prudent practices in the decision making process based on robust due diligence and continuous monitoring methodology its Borrower. PFS is focused on funding the projects of such developers which have proven track record and promote its investment decision to existing borrowers and during the year more than 20% of total loan given to such existing borrowers, who have never defaulted in serving PFS dues in the past.
The power sector is witnessing stress and several projects in the country (both operational and under construction) are facing challenges. As at 31st March 2018, PFS has non-performing loans aggregating to Rs 838 crore, projects having aggregate loan outstanding of Rs 854 crore are under corrective action plan (SDR/ OSDR) and standard restructured projects aggregating to Rs 207 crore. Further, only two wind projects aggregating to Rs 71.45 Crore are NPA which comes to 0.56% of outstanding loan and are in the advance stage of resolution.

The Company is continuously engaged in resolution of such loans and is working proactively with the consortium members. Regular lenders’ meetings are conducted, detailed feedback obtained from lenders’ independent engineers and financial advisors to see that project development activities may be continued unhindered. Discussions are held with promoters’ and other stakeholders to work out a financially viable solution. The Company also engages consultants / professional agencies for working out effective solution / resolution for such cases.
The approach of PFS is to progressively reduce the NPA level by resolution of stressed assets through measures like sale to new investor or ARC/reference to NCLT/or through resolution plan under Samadhan/ Sashakt Scheme. Case by case approach towards resolution is being pursued by PFS. A special team has been set up to deal with and find resolution of stressed assets.

Performance Highlights

The operational performance in FY 2017-18 has been affected due to higher provisions/ non recognition of interest on stressed/ NPA loan accounts. The interest income remained almost at the same level in the FY 2017-18 at Rs 1,113 Crore as compared to Rs 1,114 Crore during FY 2016-17.

Other income includes Rs 147 Crore arising as dividend income/ profit from sale of equity investment made during the FY 2016-17 as compared to Nil for FY 2017-18. Increase in finance charges is due to increase in portfolio size and also includes amortization of foreign currency translation aggregating to Rs 7.62 Crore as compared to Rs 14.41 Crore during FY 2016-17. Other expenses amounting to Rs 40.52 Crore during FY 2017-18 constitute 3.64% of interest income and 0.32% of loan book as compared to Rs 35.94 crore for FY 2016-17 which constituted 3.22% of interest income and 0.34% of loan book in respective previous FY 2016-17.

The profit before tax (PBT) for FY2017-18 stood at Rs 104.94 Crore compared to Rs 528.68 Crore during FY 2016-17. The profit after tax (PAT) for FY 2017-18 stood at Rs 24.70 crore. However, if neutralized for impact of stressed assets the adjusted Net Interest Income for the FY 2017-18, would have been Rs 517.83 Crore and adjusted net profit after tax would have been Rs 345.33 crore as against Rs 24.70 Crore.

The challenging business scenario in Power sector has affected the profitability for financial year 2017-18. Accordingly, the Board of Directors of the Company have recommended a dividend @2% i.e. Rs 0.20 per share for the financial year 2017-18.

Credit Rating

The credit rating agencies have also maintained their view about your Company and its robust business strategy with its healthy earnings profile. CRISIL and ICRA has assigned its highest rating “CRISIL A1+” and “ICRA A1+” to the Commercial Paper Programme of PFS wherein ICRA has also assigned its highest rating “ICRA A1+” to the short term loans availed from banks. Long term instruments are rated “CRISIL A+/(Stable)” by CRISIL, “ICRA A+(Stable)” by ICRA, “CARE A+ (Stable)” by CARE and “BWR AA (Stable)” by Brickworks.

Corporate Social Responsibility

Your Company aligns its social responsibility theme and commitment in the areas of the environment that its business is engaged in. The objective of PFS’s CSR Policy is to consistently pursue the concept of integrated development of the society in an economically, socially and environmentally sustainable manner and at the same time recognize the interests of all its stakeholders. During FY 2017-18, your Company organized a skill development programme for the underprivileged youth in Bhadla district of Rajasthan in skilling them in the solar energy sector. Further your Company also participated in the cleanliness drive in Bhikaji Cama Place under the Swachch Bharat Abhiyan, with partnership of the parent company i.e. PTC India Ltd.

Corporate Governance

Your Company’s philosophy of Corporate Governance stems from its belief that the spirit of good governance lies in adherence to highest standards of transparency, accountability, ethical business practices, compliance of law in true letter and spirit, adequate disclosures, social responsiveness and commitment to the organization to meet stakeholder’s aspirations and societal expectations. Being an Infrastructure Finance Company, PFS regularly pursues businesses that maximize returns while effectively managing the inherent risks. Decision making and execution is driven by its governance structure, ethics and value systems. Your company ensures its employees to act ethically all the time. PFS’s philosophy of Corporate Governance embodies the dual goals of protecting the interests of all stakeholders while respecting the duty of the Board and Senior Management to oversee the affairs of the Company and promote long-term growth and profitability.

Appreciation

I thank all our esteemed shareholders, who have reposed faith in us. My sincere thanks go out to the Ministry of Power, Ministry of Finance, Reserve Bank of India, Securities and Exchange Board of India, National Stock of India Ltd, BSE Ltd, Registrar, various commercial banks, Financial Institutions in India and abroad and the esteemed promoters of our assisted projects for their continued support and confidence. I extend my sincere thanks to my colleagues on the Board for their involvement and mature counsel.

I would also like to acknowledge the contribution of employees of PFS without whose continuous and untiring efforts none of this would have been possible.

Let me conclude by a quotation;

“In financial market Return of Capital is more important than Return on Capital”.

The management and employees of your company subscribes to this basic fundamental of investment.

Thank you, Ladies and Gentlemen.

Deepak Amitabh
Chairman

 

PTCPTC

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