Annual Report Highlights FY 13-14 - REC

Company’s financial history suggests that companies source of funding has changed in the last 10 years.  Company has become less dependent on government and more on the bond market and foreign currency.  Others like commercial paper, short term demand loans and term loans from banks fluctuate based on the need.  Exposure to foreign currency borrowing could increase currency fluctuation risk. Of the 17,621 crores foreign currency borrowing 11948 cr (67%) has been hedged and the remaining remains unhedged. Any wild currency swings will have considerable impact on the company earnings.

As per 12^th 5 year plan a capacity addition of 88537 MW of power generation capacity is planned to be added with matching transmission and distribution. Planning commission estimates than an investment of 14 Lakh Crores would be required to achieve this. In the Generation-Transmission-Distribution link the Distribution is the weakest link which is a threat to India’s growth story.  A reform in this area is required if the growth story has to be made intact and it is a challenge due to state Discoms.  For production, fuel supply is another constraint and coal India is unable to match the growth needs. There is scope for the government to reform the entire sector and make it viable.

Company disbursed a total sum of 37,970 cr in this financial year. Operating income was at 17,018 cr and profit after tax at 4683 cr.  Total loan assets stood at 1.48 lakh crores. Overdue from defaulting borrowers was at 993 cr and recovery rate was at 97.9%. Gross NPAs was at 490 cr which is 0.33% of total assets and the net NPA was at 353Cr which is 0.24% of total assets.  Not sure if they are not counting the recovery defaults into NPAs.  Company is rate Baa3 by international rating agencies which is rating for government as well. Domestically it is rate AAA by our rating agencies. Company mobilized around 36934 crs this year.  Around 17,403 came from institution bonds and 6000cr through tax free bonds and around 5350 through capital gains tax free bonds. Rest are form other sources as commercial paper and term loans. Company funds generation, transmission and distribution projects besides electrification of villages and pump set energization. So, they are in the entire power life cycle. Company has been laying special thrust in investing in projects to reduce AT&C losses.  Company has disbursed 12987 cr towards generation projects and 10789 towards transmission and distribution projects.  It has disbursed a meagre 134 cr towards renewable energy.  In addition to this, company has disbursed around 2687 cr towards RGGVY and DDG subsidy.

Company maintained debt to equity of 6.11 times and the ROE stood at 24.57%.  Cost of funds stood at 8.48%.  All the rescheduled loans are shown under standard loans and there were no substandard or doubtful loans.  The number of borrowers in the rescheduled category were at 18 compared to 14 last year and a total of 32313 Cr (22429 cr last year) has been rescheduled.  Rescheduled loans form 21% (32313/1,52,852 cr)of the total assets of the company.  This is scary.  Need to keep a close watch on this number as this could turn out to be a problem for the company as it is not clear how much slippages will be there from this figure which could mean meagre future profits or losses in some cases.