According to Sambitosh Mahapatra, Sector Lead, Power and Utilities at Pwc India, the concessional financing by financial institutions will assist in tiding over short-term cash liquidity issue of discoms and will help all the upstream and dependent players in the sector
New Delhi: The bailout package of Rs 90,000 crore to power distribution companies (discoms) will not have any negative financial implication for Power Finance Corporation and Rural Electrification Corporation (PFC-REC), according to experts.
In a major push to revive the financial health of ailing state power discoms, the centre has announced a one-time relief of Rs 90,000 crore through PFC-REC. The announcement received a big thumbs-up from the industry players, who termed it a much-needed stimulus to boost the financial health of the distribution sector.
Shubhranshu Patnaik, Partner at Deloitte India said this huge lending facility is coming up with state governments’ guarantee and is risk-protected to a reasonable extent. “It is likely to be a short-term facility which would be backed by respective states as guarantors,” said Patnaik.
According to Sambitosh Mahapatra, Sector Lead, Power and Utilities at Pwc India, the concessional financing by financial institutions will assist in tiding over short-term cash liquidity issue of discoms and will help all the upstream and dependent players in the sector. He added the recovery of money won’t be an issue at all with respective states taking guarantees.
“It has a positive impact on PFC and REC through enhanced size of portfolio and state government guarantees backing the lending. This move will infact make their loan book portfolio look good,” Mahapatra said.
Anish De, National Head, Energy and Natural Resources at KPMG India said: “Rs 90,000 crore is a huge amount and it is being lent to already bankrupt discoms. It is very necessary for liquidity at this juncture but it would not have made sense without states acting as guarantors.” He also said had the states not been acting as guarantors there would have been much wider implications and it would have affected the credit ratings and cost of funds of lenders.
PFC had completed the acquisition of REC in March last year for Rs 14,500 crore. Post the acquisition, credit ratings agency Moody’s had said the acquisition will weaken PFC’s capital profile as it is buying the government’s stake in REC without raising any equity.
The stake acquisition by PFC was in pursuance to the in-principle approval from the Cabinet Committee on Economic Affairs for strategic sale of 52.63 per cent of paid-up equity, along with the transfer of management control in REC.