PFC Q1 FY25 earnings call.
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PFC delivered a strong Q1 FY25 with standalone PAT of INR 3,718 crore, up 24% YoY, driven by improving yields (10.08%), stable spreads (2.64%), and NIM of 3.55%. Consolidated PAT stood at INR 7,182 crore, up 20% YoY. The group loan asset book crossed INR 10,00,000 crore (INR 10,04,735 crore), growing 13% YoY, though standalone growth moderated to ~10% due to a temporary BCG-led transformation exercise affecting Q1 disbursements (INR 19,483 crore). Asset quality improved with gross NPA declining to 3.38% (vs 3.82% in Q4 FY24) and net NPA at 0.87% (vs 1.04% YoY). Stage 2 assets rose to ~11% of outstanding (vs 7.5% in Q4), primarily from state utilities with delays in remittances. The company maintains FY25 loan growth guidance of ~14% despite Q1 disruption. Key resolutions in pipeline include KSK Mahanadi (expected >100% recovery) and Lanco Amarkantak (expected ~20% write-back). Distribution contributed 59% of Q1 disbursements while renewables accounted for 18%. Capital adequacy remains robust at 27%.
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Guidance to track
- Management reiterated guidance to maintain similar loan asset growth levels for FY25 despite Q1 disruption from transformation exercise. Expected to achieve targets in remaining nine months.
- Company expects to maintain margins within the guided range of 3.25-3.5% for FY25, citing competitive dynamics.
- Infrastructure book currently at 1.56% (INR 7,400 crore outstanding) of total loan book. Management aims to grow this gradually to 30% over 3-4 years as power sector book also grows.
- Bids received for 1,800 MW project with expected recovery >100% of INR 3,300 crore outstanding. NCLT-driven process expected to conclude within current financial year.
Risks flagged
- Stage 2 assets increased to ~11% of outstanding (vs 7.5% in Q4), driven by habitual delays from state electricity utilities in remitting dues. While none have defaulted, provisioning volatility remains.
- BCG-led transformation temporarily slowed Q1 disbursements. Management expects another quarter for complete process stabilization; any delays could impact FY25 growth targets.
- KSK Mahanadi resolution is court-driven; while management expects FY25 completion, external factors could delay recovery and associated write-backs.
- Media reports speculated on sanctioned exposure for Shapoorji Pallonji infrastructure project. Management clarified sanction was conditional on further due diligence with no funds disbursed; deal outcome uncertain.
Key quotes
- This transformation exercise has temporarily slowed down our normal business operations. I am confident that once the processes stabilizes, we will be able to maintain our growth trajectory for FY 2025.
- In KSK Mahanadi project, where resolution is being pursued in NCLT, we have received 10 bids last week. It's an 1,800 MW partly commissioned project with PFC outstanding amount of INR 3,300 crore. The evaluation of the bid is underway, and we expect more than 100% recovery against the project, basis the current bids received.
- We follow the ECL model, and under stage two coverage, if I say it is 0.92% on an average, whereas in stage one it is 0.85%, on an average.
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