Ladies and Gentlemen,
Welcome to the 37th Annual General Meeting of your company. Let me
begin by congratulating you for yet another year of stellar financial performance by your
Company.
OPERATIONAL & FINANCIAL PERFORMANCE
The year 2022-23 was the year of resurgence for PFC, as we
emerged from the adverse impact of COVID and achieved impressive growth
along with outstanding financial performance.
I am delighted to share that, in FY 2022-23 we have delivered the
highest ever net profit of J11,605 crore, up 16% from the previous
fiscal. This is the third consecutive year in which we are setting a
new record for the highest annual profit. We registered double-digit growth of 13% in our
loan asset book.
As a result, loan asset portfolio surpassed the J4 lakh crore mark and
stood at J4,22,498 crore as on March 31, 2023. We have also achieved an all-time high loan
sanctions of J2.32 lakh crore and
disbursed J85,756 crore during the year, underscoring our role as the
principal lender to the Indian power sector. On the asset quality front also, significant
strides have been
made in reducing Non-Performing Assets, resulting in the NPA ratios
dipping to their lowest levels in the past seven years. In the fiscal year 2023, the Net
NPA ratio stood at 1.07%. Coupled with strong growth, consistent profits and stable asset
quality, we continued to have a robust net worth of J68,202 crore. Continuing with our
commitment to maximise shareholders return,
we have declared a dividend of J13.25 per share, which equates to
impressive 132.5% on the share face value.
MACRO-ECONOMIC SCENARIO & POWER SECTOR OUTLOOK
The global macroeconomic scenario in FY 2022-23 has been challenging,
but India has been one of the few bright spots, with the economy continuing to grow at a
robust pace, supported by healthy domestic demand and prudent monetary policy.
This favourable economic environment is set to benefit the Power
Sector's growth. Untapped demand potential is significant, driven by India's vast
population of nearly 1.44 billion.
The Government's "Make in India" initiative and the
Production-Linked Incentive scheme are expected to further boost demand. Projections
indicate a 7.18% Compound Annual Growth Rate (CAGR) in India's electricity consumption
until 2027.
To address this growing demand, additional capacity would be needed.
Government plans to double the installed capacity, with addition of around 500 GW of
capacity by 2032, with 87% from
non-fossil fuel sources and 13% from fossil fuels, requiring an
estimated investment of approximately J31 lakh crore.
An integral aspect within the power sector value chain is the role of
distribution companies (Discoms).
Over recent years, Discoms
have grappled with financial and operational challenges, which has put
a strain on the entire power sector value chain. However, a
transformative shift is underway. The government has undertaken
significant reforms for Discoms
over the past two years. The impact of these reformative measures, as
part of the Revamped Distribution Sector Scheme (RDSS), is evident. All India level
AT&C losses are at 16.5% in FY 2021-22, which is significantly lower than FY 2020-21
figure of 21.5%. The ACS-ARR gap, which is the cash-adjusted revenue gap per unit of
electricity sold, significantly improved to 40 paise per unit in
FY 2021-22 compared to 89 paise per unit in FY 2020-21.
Equally noteworthy is our success in implementing the LPS Rules. Over
the past year, we have disbursed loans worth J16,800 crore to power distribution companies
under these rules.
I am delighted to share that, in FY 2022-23 we have
delivered the highest ever net profit of J11,605 crore, up 16% from the
previous fiscal. This is the third consecutive year in which w are setting a new record
for the highest annual profit.
The settlement of current dues are also being monitored rigorously with
the help of PRAAPTI portal, which is set up and maintained by our subsidiary, PFCCL. The
scheme has brought in the much needed fiscal discipline in the sector, which is helping
all the players across the power sector value chain.
The power sector is currently at an interesting juncture, which creates
plethora of growth opportunities for PFC.
Embracing the motto 'Nayi Soch Nayi Raahein,' PFC is boldly moving into
new directions, shaping the future through innovative ideas and forward-looking
perspectives.
Forayed into Infrastructure Financing
On 25th August, 2022, PFC was granted the mandate by the Ministry of
Power to extend lending support to the infrastructure and logistics sector. With the
amendment in
the Memorandum of Association, PFC's lending capabilities have
been extended to encompass the wider infrastructure and logistics sectors. This is one of
those milestone decision, which will play a crucial role in PFC's long term business
growth. The idea is to gradually build it over time and creating a complementing business
line as the power sector matures.
Under the new mandate, we have supported projects in the domains of
healthcare, sea water desalination, petrochemicals,
optic fibre networks, roads, ports,
and metro rail systems. In the last financial year, we have sanctioned
projects worth J16,700 crore to
non-power infrastructure segments. Being a new funding area for PFC,
our present focus is on building appraisal and monitoring capabilities. Majority of the
projects we have funded till now are from the Government sector.
Forging a Greener Future through integrating Environment, Social and
Governance (ESG) pillars
In today's world, climate change is one of the most critical challenges
we face. Among its drivers, the energy sector emerges as pivotal, with its transformation
deeply impacting society. Recognising this, the Indian government has unveiled the
'Panchamrit' agenda, aiming
for a non-fossil energy capacity of
500GW by 2030, a billion-ton carbon reduction, a 45% emission intensity
decrease by 2030, and net-zero emissions by 2070.
PFC is fully committed to the Government's vision for a Greener
India. Over the years, PFC has consciously adapted its business model to tap renewable
energy business by making structural changes to integrate climate risk into our appraisal
and loan policies, as well as incorporating climate change considerations into our pricing
strategies. This has led to PFC's renewable portfolio multiplying by over 6 times in last
6 years, currently standing at J48,200 crore. Today PFC is India's largest renewable
financier, supporting almost a fifth of the India's renewable energy capacity.
We are also focussing on reducing adverse environmental impact of
fossil fuel based projects,which is demonstrated by over J2,500 crore of loans sanctioned
for implementing Flue Gas
De-sulphurisation (FGD) systems.
Notably, PFC has sanctioned loan of J633 crore to Blu Smart for the
purchase of 5000 passenger Electric Vehicles (EVs). This move is expected to lead to
emission savings exceeding 100,000 tons
of CO2 equivalent. To put this into perspective, it's
equivalent to the CO2 absorption capacity of over
5 million fully-grown trees in a year. This transaction also marks the
largest E-vehicle asset finance
initiative in India, poised to greatly enhance the adoption of clean
energy alternatives. Further, PFC's funding of J6,112 crore to refinance 1,227 MW solar
and wind projects of JSW Energy Group underscores its commitment to sustainable energy. In
alignment with Government initiative for making
urban India "Garbage Free", PFC has cumulatively sanctioned
waste to energy projects worth J1,600 crore with a combined capacity of 192 MW. Notably,
more than 80% of the disbursement for these projects has already been made.
Our commitment to making a sustainable future is strong, and we are
taking big steps forward. In the current FY 2023-24, PFC is steadfastly working to
institute a well-structured approach to our ESG practices, seamlessly
integrating Environmental, Social, and Governance principles into our
operations. In this direction, PFC has already taken tangible actions to integrate ESG
into our business. Recently, to have a focussed approach towards ESG, a
dedicated Environment, Social, and Governance (ESG) unit has been
established. This centralised ESG unit will work in close collaboration with various
stakeholders to chart the ESG course for PFC.
These endeavours constitute a few immediate steps we have taken towards
ESG integration. Our promise is to keep lending responsibly and sustainably. But we are
not just making changes for ourselves—we are leading the way for the entire energy
sector.
PFC'S FUTURE BUSINESS THRUST AREAS
We will continue to increase
our financing in our traditional business areas of generation and
T&D space. This will be further
complemented with infrastructure financing. In addition to these areas,
our financing endeavours will also be closely aligned with the government's goals and
vision for the power sector particularly in clean energy space and RDSS.
Renewable & Emerging Technologies in Clean Energy Space
In order to achieve India's energy transition targets, the share
of renewable energy in the energy mix, which is presently about 27%, will have to reach
50% by 2030. This requires quadrupling of the present solar and wind generation capacity.
We would also have to add about 10 GW of pumped storage capacity and over 100 GWh of
battery storage in order to meet the energy balancing
needs. Commensurate equipment manufacturing capacity and evacuation
infrastructure also need to be in place.
Given the huge investment required for decarbonisation of our economy,
funding of energy transition related projects will be PFC's mainstay
for the foreseeable future. PFC is focused on funding entire value
chain of energy transition. In addition to the traditional solar/wind projects, we are
also
exploring bankable projects in the
fields of renewable equipment manufacturing, energy storage, green
evacuation corridors and electric mobility, green hydrogen
and ammonia production and manufacturing of electric vehicles.
Revamped Distribution Sector Scheme (RDSS)
Your company has been designated by the Government of India as the
nodal agency for the implementation Revamped
Distribution Sector Scheme (RDSS)
RDSS has an outlay of J3,03,758 crore covering Smart metering and
infrastructure works, with an estimated Government grant of J97,631 crore. The objective
of the
scheme is to reduce AT&C losses to pan-India levels of 12-15% by
2024-25 and reduction of ACS-ARR gap to zero by 2024-25.
The funding under the scheme will be from the Government grants, and
balance will be counterpart funding from PFC or our subsidiary REC or State's own
equity for infrastructure works.
Before the counter-part funding starts, the action plans submitted by
the State Discoms are to be approved and Government grant portion is to be released based
on achievements of milestones. The action plan approval process is complete for nearly all
Eligible States of PFC. Further, sanctioned work is being awarded by Discoms and the grant
release cycle has started
On Capex side, 80% of the tenders for loss reduction projects have been
floated and 40% of the works awarded.
Around J1,679 crore of grant has been released so far by PFC. With the
progress we have made, we expect counterpart disbursements under RDSS to commence towards
the end of FY 2023-24.
In conclusion, we remain optimistic about our future growth. By
leveraging favourable market conditions and maintaining our commitment to prudent lending
practices, we expect to continue growing at a similar pace as we have witnessed this year.
CORPORATE GOVERNANCE & SOCIAL RESPONSIBILITY
At PFC, we are committed to upholding the highest standards of
transparency, accountability, and disclosure. As a publicly listed company, we adhere to a
comprehensive framework of
corporate governance frameworks and policies such as the Companies Act,
2013, SEBI's Listing Obligations & Disclosure Requirements Regulations, DPE Guidelines
etc. We also have various risk management Committees at Board level & senior
management levels which oversees the key functions of our company and provide strategic
directions in each area.
This ensures that every aspect of our work is guided by principles that
promote integrity, fairness, and responsible conduct.
ACKNOWLEDGEMENT
Before I conclude, I want to express my heartfelt gratitude to our
shareholders who have reposed faith in us. I am grateful to the Hon'ble Union
Minister of Power, New and Renewable Energy, Hon'ble Minister of State for Power and
the officials of Ministry of Power for their support and guidance. I also thank the Board
of Directors for their valuable guidance, our client utilities, employees, various
ministries, investors, auditors, regulators and other stakeholders of PFC for their
continued support.
Let us move forward with renewed determination, knowing that our
efforts are contributing to a brighter, more sustainable future for India.
Together, we can continue to light up lives, power progress, and make a
lasting impact on our nation's growth story.
Thank you, and let us make Power Finance Corporation's journey ahead
even more remarkable.
Parminder Chopra
Chairman & Managing Director