Saturday, December 2, 2023

​Lending to renewables will go up tenfold: REC

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State-run infrastructure finance company, REC Ltd, clocked record quarterly net profit in the September quarter. REC chairman and managing director Vivek Kumar Dewangan tells Kalpana Pathak that the company is targeting a tenfold increase in lending to the renewable energy sector and boost the share of renewable energy in its total loan book to 30% over the next seven years. REC also aims to become a net zero non-performing assets company by the financial year 2025-26. Edited excerpts:

Given the emphasis on net zero, are you looking at increasing your exposure to financing of renewable assets?
Yes. As part of our business strategy in line with the global energy transition ambition of India, we want our renewable energy portfolio to increase to Rs 3 lakh crores from the present Rs 30,000 crore. That will be a tenfold rise in the next seven years. In the first half of the current financial year, our total sanction has been Rs 1.95 lakh crore, of which over 25% or over Rs 49,000 crore has been to the renewable energy segment. Going forward, the aim is to increase our renewable energy portfolio to 30% of our total outstanding loan, up from 7% currently. What kind of renewable assets are you looking at financing?

We are looking for hybrid solutions. For solar with storage, and wind with storage. We are also looking for pumped storage hydropower projects. Also, green hydrogen and green ammonia pipeline is coming in a big scale which we are looking at. On our radar are also electric vehicles. We are targeting financing of around 10,000 electric buses this fiscal and 50,000 electric buses by FY25. Charging infrastructure is also an area we are interested in. Do you plan to diversify in lending to sectors other than power and infra?

Yes. After we received our Maharatna status, the Ministry of Power allowed us to diversify into non-power infrastructure and logistics sectors. So, last year, we sanctioned Rs 85,000 crore to infra and logistics. In the first half of this financial year, we sanctioned Rs 1.95 lakh crore, of which roughly 20% has been sanctioned for infrastructure and logistics. Going forward, there will be a substantial increase in lending to non-power logistics and infrastructure. We are also looking at road assets, expressways, highways, airport infrastructure etc.You are targeting net zero NPAs by FY26. How do you plan to do that?In the last seven quarters, we have been able to ensure that not a single new NPA is added to our kitty. Since most of the renewable energy is coming from the private sector, our disbursement to the private sector will increase. But we are taking due care that we are targeting only good asset quality and good credit-rated private sector companies. We don’t want to repeat the mistake of coal-based thermal power plants which became stressed in the past. While lending to the private sector, we are taking care that revenue cash flow should be assured and there should be no likelihood of it becoming an NPA.How do you plan to raise funds to finance more projects?

We have a diversified portfolio that we tap into. With the rise in the loan disbursement figures, we are disbursing more and borrowing more as well. The cheapest source is 54EC bonds which is a capital gains tax saving instrument that we get at the rate of 5.25% only. The second option is FCCB and FCNR loans where we have been able to do innovative hedging. So, our cost is coming below 7%. Domestically, we take corporate bonds and term loans from banks. Currently, our share of FCCBs is increasing. Earlier, it was 22% and now it is 24% as it is a cheaper source of financing. We want to bring down our cost of financing from the present 7.23% to 7%.

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