Power Minister RK Singh stresses on speedy resolution of stressed assets; asks PFC, REC to explore cheaper fund raise options

By Deepanshu Bhandari

Union Minister for Power and New & Renewable Energy RK Singh has advised state-run Power Finance Corporation Limited (PFC) and Rural Electrification Corporation Limited (REC) to explore better and cheaper options for raising funds, including from offshore sources.

The statement from the minister came while he was reviewing the performance of the government owned power companies.    

He said that the overall objective was to ensure that the power sector value chain gets access to cheaper funds. 

The Minister also emphasised the need on the settlement of stressed assets with minimum hair-cut, calling it the most important aspect.

He directed PFC and REC to carry out a strategic analysis to adapt to the changed business environment in the sector with an overall objective to deliver power to consumers at a reasonable cost.

REC is a public infrastructure finance company in India’s power sector. Similarly, PFC is an Indian financial institution under the ownership of Ministry of Power, Government of India.

The Minister highlighted the government’s vision is to make available affordable power for all 24x7. In this context, he stressed the need for improving competitiveness of both institutions with a view to increase their market share. 

He also advised that both the organisations should be nimble footed and dynamically adapt to the changing market needs, increasing renewables, and make efforts to reduce their cost of funds.

The Minister also stressed upon the need for speedy resolution of Stressed Assets and suggested a slew of measures for both the organisations in this context, which includes ensuring that the stressed assets are resolved at a fair value with a minimal haircut for PFC and REC and in line with the national interests.

He emphasised that both the PFC and REC must increase their outreach by establishing a physical presence across the country. 

He also directed that the system of oversight on the projects funded by PFC and REC should be tightened, which includes increasing frequency of inspections by the company officials as well as by hiring expert professionals from the market. He also laid emphasis on strengthening the risk management framework of both the Institutions.

Further, Singh also expressed his concern at the finances of some Distribution Companies and suggested remedial measures to PFC and REC, including establishing presence of their lender nominees in the Board of Directors of DISCOMs of concern.

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The power sector has been facing problems for quite some time. However, with rising demand, the outlook of the sector is also improving. So, the government now wants to complete the stressed-assets settlement with minimum hair-cut, which is minimum loss or minimum write-off to company. The government wants to focus the sector more on recoveries.

REC, PFC are doing good today, yielding good returns. Keep an eye on these stocks. This is a good chance to buy these companies' stock.

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Similarly, Zee Business Managing Editor Anil Singhvi has advised to included Tata Power stocks as well in the list. This is a profit-booking stock. On 6th October, REC share price dipped 0.40 per cent to Rs 161.10, PFC share price declined 0.21 per cent to Rs 142.10 and Tata Power share price dropped 2.06 per cent to Rs 175.65.   

(Disclaimer: The views/suggestions/advices expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)