PFC Q3 FY25 earnings call.
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PFC reported a solid Q3 FY25 with standalone net profit of INR 12,243 crore (+20% YoY) for 9M FY25, though the quarter itself saw 10.24% loan book growth to INR 10.69 lakh crore on consolidated basis. Asset quality improved significantly with gross NPA declining to 2.30% and net NPA at 0.73%, while provisioning coverage on NPA portfolio remains robust at 73%. The renewable energy portfolio grew 28% YoY to approximately INR 69,500 crore, positioning PFC as the largest green lender in India. Management maintained full-year loan growth guidance of ~14%, expecting Q4 disbursements to accelerate given historical 37% of annual disbursements typically occur in Q4. Key risks include $9 billion forex exposure with only 95% hedged—potentially INR 450 crore P&L impact per INR 1 rupee depreciation—and potential NPA slippage from stressed asset resolutions pending NCLT approval for KSK Mahanadi (INR 3,300 crore exposure with 55% provisioning, expecting >100% recovery). RDSS execution is finally gaining momentum with 94% of loss reduction works awarded, which should support distribution sector disbursements going forward.
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Guidance to track
- Management expects to achieve similar growth levels as FY2024, citing historical pattern where 37% of annual disbursements occur in Q4, providing confidence in meeting guidance.
- PFC sanctioned INR 90,000 crore for renewable generation in FY25, with ~50% in Q3 alone, and disbursed INR 16,000 crore year-to-date, expecting continued momentum.
- 94% of RDSS loss reduction works awarded and 90% of smart metering works completed; INR 2,500 crore cumulatively disbursed under RDSS with INR 600 crore in Q3.
- Resolution plan filed in NCLT on January 17, 2025; expecting >100% recovery with 55% provisioning maintained, which should result in reversals upon approval.
Risks flagged
- 95% of $9 billion foreign currency portfolio is hedged, leaving ~$450 million unhedged. Each INR 1 depreciation impacts P&L by ~INR 45 crore; theoretical impact of INR 400-500 crore if rupee reaches 88.
- Resolution plan submitted to NCLT on January 17, 2025; approval timeline remains uncertain despite management targeting resolution this financial year.
- One promoter with three waste-to-energy projects totaling INR 130 crore slipped to Stage 3 in Q3 due to technical issues. Analyst questioned whether this indicates broader sector stress.
- An investor (Romil Oza) criticized management for not disclosing recovery amounts from stressed assets, questioning transparency on liquidation values and provisioning on NPA accounts.
Key quotes
- We are expecting that there may be reversals... similarly, on the Shiga, in case of Shiga also, we are expecting that whatever resolution plan is under discussion, we may have 100% recovery.
- We have maintained around 55% provisioning on the project. We expect more than 100% recovery against the project basis the current bids received.
- Definitely, when we talk of the renewable, then we are earning slightly our spreads are slightly lower. But as the profit increases and loan growth continues at the same pace, we are expecting that NIM will be revolving in the similar range.
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