IFC status to help REC lend more to private sector

Following the new status, REC will increase its loans to private sector power projects to 18 per cent of total advances by March 2012 from existing 7.5 per cent.

REC was recently granted the IFC status, which is that of a non-banking finance company engaged predominantly in infrastructure.

Besides this, the company also hopes to register a growth of 23-26 per cent in profits as well as sales in the first half this fiscal (April-September) without having any immediate plans to raise its interest rate for borrowers.

"The impact of the IFC status would not be felt this fiscal. Since the 50 per cent envisaged 1,00,00 MW capacity addition in 12th Five Year Plan (2012-17) would come from private sector, it would be felt later on," REC Director Finance H D Khunteta told reporters here.

Khunteta said, "At present company's lending to private sector is just 7.5 per cent of the current outstanding loan of around Rs 70,000 crore. This would be 15-18 per cent by March 2012 of then expected outstanding loan of Rs 1,05,000 crore."

REC is into financing power generation, transmission and distribution projects in the country.

With IFC status, REC can now take an additional lending exposure of up to 5 per cent of its owned funds in case of a single borrower and up to 10 per cent of its owned funds in case of group borrowers.

The total permissible exposure would thus be 40 per cent of owned funds in case of a group of borrowers.

The status will also allow REC to issue infrastructure bonds and raise funds up to USD 500 million (Rs 2,500 crore approximately) through external commercial borrowing (ECB) in a year.

REC is the second company after Power Finance Corp (PFC) to be accorded the status of IFC by the Reserve Bank. PFC was accorded the status in July this year.

Asked about the performance of the company in the first half of this fiscal (April-September) Khunteta said, "The profit as well as sales of the company are expected to see a growth of 23-26 per cent."

About any impact of the recent rate hike by the RBI on it, he said, "We have no plans to change our interest rate for the borrowers. Currently, our cost of borrowing is 7.75 per cent and the cost of lending is 11.2025 per cent."

The firm expects to disburse Rs 10,500 crore in loans in the April-September period of this fiscal. It plans to sanction Rs 35,000 crore during the period and raise Rs 10,000 crore from the market.