REC looking to increase share of green energy in its loan portfolio to 30% by 2030: CMD

New Delhi: State-run REC Limited is looking to increase the share of green energy in its lending portfolio from the current 6.8 percent to 30 percent by 2030, said Vivek Kumar Dewangan, Chairman and Managing Director (CMD) REC Limited. “REC’s loan book currently stands at Rs 4,35,000 crore. By the year 2030, our total loan book is going to be about Rs 10 lakh crore. Out of that, REC is targeting to lend about Rs 2.4 lakh crore in the RE segment by FY 2030,” the REC CMD told the press at an earnings conference on Thursday.

REC’s sanction in RE space has grown from Rs 7,034 crore in FY 2017-18 to Rs 21,317 crore in 2022-23 and its loan book in RE space has grown from Rs 7,506 crore in FY 2017-18 to Rs 29,073 crore in 2022-23. REC has set a target of sanctioning Rs 75,000 crore in the RE sector during the ongoing financial year (FY 2023-24) in order to achieve its loan book target by 2030.

REC to provide foreign currency loans to lenders: CMD

Commenting on the funding avenues that REC is exploring to finance green energy projects in India, Dewangan said that REC is looking to set up a subsidiary in GIFT City, Gandhinagar. “Once that happens, we will be able to start extending foreign currency loans to our lenders,” said the REC CMD. The GIFT City in Gujarat is India’s first operational greenfield smart city and international financial services centre. The subsidiary that REC sets up in GIFT City will be registered as an overseas arm which will save the cost of hedging for REC when extending foreign currency loans.

In addition, REC will use green bonds, ECBs, domestic bond market, domestic loan market, etc to raise funds.

REC’s exposure to distribution sector will increase: CMD

On being asked if the non-banking finance company will limit its exposure to the power distribution sector in the future, considering the risk involved, the REC CMD said that the share of power distribution segment in REC’s loan book is around 27 percent at present and it might go up to 37 percent by 2030 but will not come down. “The Revamped Distribution Sector Scheme (RDSS) has really improved the financial health of discoms. To give you an example, discoms’ AT&C losses have come down by 5 percent in the last financial year post-Covid. It has come down from around 22 percent to 17 percent. After the RDSS scheme gets implemented in the next 3-4 years, we are likely to see AT&C losses come down to 12 percent. It might even go to single digits in some states,” he said.

“Under the LPS scheme brought out by the Ministry of Power, payments to gencos have become regular. Now states have started paying discoms the subsidy in advance. They have also chalked out trajectories for bringing down government department dues. These are a few important reform measures which are going to improve the health of the distribution sector. The share of power distribution businesses in our loan portfolio is around 27 percent. It might go up to 37 percent but will not come down,” said the REC CMD.

“The Late Payment Surcharge (LPS) scheme was launched in June 2022. At the time of its launch, the overall outstanding dues of state utilities were to the tune of Rs 1.39 lakh crores. Since then, as a rule, all the states have adopted the scheme and as on date the total outstanding dues now stand at Rs 80,000 crore. In less than a year since its launch, the total outstanding dues have been reduced by 42 percent,” said REC in a statement.

‘Improved credit quality, reduction in stressed assets have improved profits’

The REC management said improvement in credit quality and reduction in stressed assets has led to growth in profits. REC declared its financial results on May 17. The PSU has recorded its highest-ever quarterly and yearly profit at Rs 3,001 crore and Rs 11,055 crore, respectively. Aided by growth in profits, REC’s net worth has grown to Rs 57,680 crore as on March 31, 2023, an increase of 13 percent year-on-year. The loan book has maintained its growth trajectory and has increased by 13 percent to Rs 4.35 lakh crore as against Rs 3.85 lakh crore as on March 31, 2022. Signifying improving asset quality, the Net Credit-impaired assets have reduced to 1.01 percent with Provision Coverage Ratio of 70.64 percent on NPA assets, as on March 31. During the year 2022-23, no new NPAs were added, said the CMD.

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