comScore

PFC eyes foray into financing road projects with Galfar loan

Diversifying into highway financing comes at a time when the Centre is looking to boost infra projects in the country, through the national infrastructure pipeline (NIP)  (Photo: Mint)
Diversifying into highway financing comes at a time when the Centre is looking to boost infra projects in the country, through the national infrastructure pipeline (NIP) (Photo: Mint)

Summary

It is likely to join a consortium of lenders comprising public sector banks to fund the project

NEW DELHI : State-run Power Finance Corp. Ltd (PFC) is looking to diversify its loan book and venture into funding road infrastructure projects, two people aware of the development said.

Currently, it is in talks with Oman’s Galfar group, which will be developing the stretch of the new National Highway-52 (old NH 65), passing through Salasar, Rajasthan, to the Haryana border, said one of the two people, seeking anonymity.

The construction is being done via a special purpose vehicle, Salasar Highways Pvt. Ltd, which is promoted by Galfar Engineering and Contracting SAOG, and Galfar Engineering and Contracting India Pvt. Ltd. (GCIPL).

“The Salasar highway stretch would be the first highway project lending by PFC, and it will look to expand the road infrastructure portfolio, going ahead," the person added.

PFC is likely to join a consortium of lenders comprising public sector banks (PSB) to fund the project. The talks are yet to take concrete shape, he said.

Queries to a PFC spokesperson remained unanswered till press time.

The power sector lender has been diversifying its loans portfolio to new areas including e-mobility, metro rail, irrigation, and utility scale energy storage, among several infrastructure projects.

The move to funding road projects will be an addition to its growing lending portfolio. In its bid to venture into the e-mobility segment, the non-banking financial company approved a 633 crore loan to Gensol Engineering Ltd last month for the acquisition of 5,000 passenger EVs and 1,000 cargo EVs.

In its FY22 annual report, PFC chairman and managing director R.S. Dhillon said: “With your company’s growing balance sheet, diversification into new infrastructure areas is expected to gather steam in coming years."

Its loan book witnessed growth of 13% in FY23 to 8.57 trillion, compared to 7.58 trillion as of 31 March 2022, according to the firm’s earnings announcement on Saturday.

PFC reported 13% growth in consolidated net profit to 21,179 crore during FY23. “We achieved substantial growth in disbursements and saw remarkable double-digit increase in our loan asset book. Furthermore, our active resolution efforts resulted in improved asset quality, with the net NPA ratio nearly reaching 1%. Also, in FY23, we strategically diversified into the infrastructure sector, a significant milestone decision positioning us for our long-term business growth. So far, we have sanctioned refineries, ports and e-mobility projects," Dhillon added.

Diversifying into highway financing comes at a time when the Centre is looking to boost infra projects in the country, through the national infrastructure pipeline (NIP).

According to the government, there are investment opportunities worth $403.86 billion for road infrastructure under the programme.

A recent report by ICRA said India’s road sector may witness a substantial rise of 16-21% in construction activity in FY24 to 12,000-12,500 km, considering the healthy pipeline of projects, the government’s increased capital outlay, and focus on project completion.

Despite a major policy push for development of highway infrastructure, the pace of highway construction has been slower than anticipated. Ministry of road transport and highways data showed construction in April fell by 75% sequentially to a little over 500 km, marking a poor start to the road-building target for FY24. Only about 523 km of highways were built in April, at just 17.4 km per day as against a target of over 45 km per day for FY24, the data showed.

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
more

MINT SPECIALS

Switch to the Mint app for fast and personalized news - Get App