New Delhi: Power Finance Corp sees profit rising by a quarter in 2009-10, helped by increased lending to power projects, and estimates interest spread would be around 2.5% for the year, its chairman said.
Satnam Singh said in an interview late on Friday the state-run lender is also open to funding Larsen and Toubro and Mitsubishi Heavy Industries’ joint venture to make power equipment in India.
PFC is targeting loan disbursements of Rs23,000 crore for the year to March 2010. It has Rs1.33 trillion of outstanding sanctions, to be disbursed over the next three years.
“Our profit growth is in line with asset growth. Since I am looking at asset growth of 25% or so, profitability should grow at that level,” Singh said.
In the 2008-09 fiscal year, PFC reported a profit of Rs1,980 crore, on net sales of Rs6,572 crore.
Singh said PFC’s interest spreads, the difference between its average lending and borrowing rates, could come down to around 2.5% from the 2.66% of the June quarter.
The spread has risen an annual 49 basis points due to interest-rate resets on some loans last year, when rates were at a seven-year high. PFC resets rates on floating loans every three years.
“(The) 2.66 is slightly on the higher side on that account,” Singh said. For the full year, “it may not be 2.6, may be marginally lower -- 2.5 or 2.55.”
PFC would begin to take equity stakes in power projects this fiscal year, Singh said, moving away from its traditional role of a pure lender.
Singh also said PFC was open to funding power equipment makers, who are setting up manufacturing units in India.
Apart from Mitsubishi, Toshiba Corp and the JSW group have a venture to make power equipment locally. Similarly, Alstom has tied up with Bharat Forge.
Power minister Sushil Kumar Shinde on Thursday said some of these joint ventures would start investments shortly.
“These new joint ventures that are coming up, (like) Mitsubishi-L&T, we are open to funding all these. This product we are coming up with this month. Later we will start sanctioning,” Singh said.
Shares in PFC have risen 64% so far this year, outperforming the broader market’s 55% rise. On Monday, they were marginally down on the day at Rs218.50 by 10:52 a.m., while the Mumbai market was up 1.4%.