RECLTD — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
MR. KUNAL SHAH · — ICICI SECURITIES LIMITED
ICICI SECURITIES LIMITED
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
CHAIRMAN AND MANAGING DIRECTOR AND DIRECTOR TECHNICAL — REC LIMITED
MR. AJ0Y CHOUDHURY · - DIRECTOR FINANCE
DIRECTOR FINANCE —
REC LIMITED · MR.
MR.
V.K. · SINGH
SINGH —
EXECUTIVE · DIRECTOR
DIRECTOR
TECHNICAL — REC LIMITED · MR. R LAKSHMANAN, EXECUTIVE DIRECTOR - REC
MR. R LAKSHMANAN, EXECUTIVE DIRECTOR - REC
LIMITED · MR.
MR.
SANJAY · BANSAL
BANSAL —
EXECUTIVE · DIRECTOR
DIRECTOR
FINANCE · — REC LIMITED
REC LIMITED
REC LIMITED · MR.
June 23, 2020 Ladies and gentlemen, good day and welcome to the REC Limited Q4 FY2020 earnings Conference Call.
As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity ibr you to ask questions after the presentation concludes.
Should you need assistance during the conference call, please signal an Operator by pressing “i” then “0” on your touchtone phone.
Please note that this conference is being recorded.
I now hand the conference over to Mr Kunal Shah from ICICI Securities.
Thank you and over to you Sirt Thank you Ayesha and good evening all ol’ you.
This is Kunal Shah from ICICt Securities.
We have with us Mr Sanjeev Kumar Gupta — Chairman and Managing Director and Director Technical.
Mr. Ajoy Choudhur - Director Finance, Mr. V.K.
Singh — Executive Director Technical and Mr Sanjav Bansal — Executive Director Finance from REQ to discuss the developments in the power sector, to review the FY2020 earnings and also to let us know what is the status on the resolution of the stressed assets as well as the progress on special long term COVTD transitional loans to D[SCOMS.
So over to you Sir1
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
Mr. Kunal, Mr. Lakshmanan is also there.
I-Ic is an Executive Director looking after the stressed assets.
He is also here along with the other team.
DVII) is stoning with the confercnce call please.
He will be givnig a brief overview of REQ.
Thank you very much and welcome to this conference call.
It is toy privilege to be before you and interacting with you on REQ and its results.
Just at the outset before we discuss the salient point of our financial results.
I “ould just like to give an overview of (lie power seciur in the context of REQ. how variotis issues have intluenced our operanons and how we have adopied and coped up with the situation going fotward.
As you know that Indian power sector over last (èv years, five-seven years have undergone a massive transformation.
While we have a very adequate generation capacity, capacity of 370GW and our peak load is close to 180GW and particularly in last three to four years we can see that in the country we have energy shortage or the peak shortage less than I % So as far as availability of power is concerned. this is a changed scenario where power is available.
Generation segment and transmission segment have played reasonably well but of course (here have been issues of some stressed assets in the private sector that we will discuss- Distribution sector has seen a massive intervention from central government also, power being a concurrent subject, central government keeps hand in hand with the slate government bccatise almost 90% power distribution in the country is still ni the hands of State enterprises and over the years we can see that there has been massive aids, grants through cetitrally sponsored scttetnes to particularly improve the power distribution, which is normally considered as a weak element, it is basically a flilcnim and cash box of the power sector.
There are various schemes to improve the distribution infrastructure and operational performance of the sector in the urban
MR. KUNAL SHAH · — ICICI SECURITIES LIMITED
REQ Limited June 23.
2020 and rural areas I am very happy to tell you that apart from our universe of being a po’ver infra financier, we are also nodal agenc for various government programs REQ fits in the Government of India scheme of things to oversee implementation of these government sponsored program, so while on one pomt of time we take pride in meeting almost 20% of po’ver infra investment requirement of the countiv. on the other side we have been yen socially responsible to partner with Government of India to assure access nf power to all the villages and households iii the country’.
As oftoday, all villages and household of the country stands electrified.
I mean to say that now with all the power generating, transmission and distribution infrastructure ii place as access to the power is available, India, as a country is poised to develop forward.
You carl very well see our per capita electric consumption today, to be precise, comes out to be 1,182 kwh as against the world average of around 3000 kwh with that view each and every one of you can appreciate that we have to go miles away and have just started.
Things are quite well in place and still works to further modernize systems are in progress since we are one of the largest power generating nations and going forward to assure Ihis reliable, quality, affordable power to the country. ibis is a all the more required thai transmission grids have to be modernized and there has lobe adequate investment in the distribution infrastructure as well as transmission sector On the generation front as the global energy transitions are occurring, basically the conventional power is giving a shift towards renewable power.
India is one of the largest. the fastest growing country’ as far as renewable power is concerned, particularly solar and wind.
With that perspective, REQ also has aligned its business needs with reference to these developments, particularly this 2019-20. as you can see that our results also exhibit the Same, I will say those results are excellent, hut for certain issues because of the global pandemic, like all others, have influenced us also .
With this perspective, we have to see that even for coping up with this particular event which has influenced our operations In the sense that it has affected, basically, a very critical element of power value chain that is distribution.
At the end of the financial year there was a national loekdown which continued for another one and a half months, then there was a moratorium on the payment by RBI so detmniteLy the recovery from the consumer to the DISCOMS was affected.
DISCOMS are supposed to pay transmission companies and generators in complete, when this value chain was disturbed because on one side the supply side and demand also svent low because industrial and commercial activities was nol there Second thing, it was only a domestic demand and because of the lower tariff structure for this category in Ihis country you can see that DISCOMS total receivables suffered a huge setback.
But again government has intenened and made efforts to introduce liquidity into the system so that all elements of this value chain fuitction smoothly.
Government of India has introduced this Rs 90,000 Crores fund liquidity into this sector so that all the DISCOMS which were influenced because of non-recovery
REC LIMITED · MR.
June 23.
2020 from the consumer or low recovery froni the consumer, could pay to all the Generators including renewnhle energy generators ]PP, transmission companies etc.. and ultimately it is a chain so this thing should go On.
I am again pleased to nithrm you that REC happens to be one of the agencies which has been entrusted with this task.
We are going on well in this area and adequate progress has been made.
We have no liquidity problems as of now and as per the targets entrusted to us we will fulfill these responsibilities.
I would comment with reference to COVID as to how the things tiave changed.
As far as REC is concerned whether it is COVID or no COVID, our operations have not been much influenced because we are IT enabled technologically advanced company.
We did not take time to ensure seamless operations ever) during COV[D times when there was a national Iockdown and lockdos,i in various states, all our operations continued.
We are capable and we adopted to work. ecry one of us from our home or from anywhere.
So basically, all otir banking operations, all otir disbursements, all normal meetings. all interactions everything vent on very. very smoothly and there is no issue.
Still now while we work from our offices. ve still are taking sak guards to protect our work force but as tar as our operations are concerned they are seamlessty working and moving on uninhibited without any hindrance or obstruction Going forward with the business, I see again with a hope, I see again with an opportunity, apart from this 90,000cr liquidity where 50% of these funds will flow through REC.
Second, we have started thinking, not now but for the last two to three years of late beyond our power business, for some of the business we have started looking at other avenues also.
And Tarn happy to share with you that we have begun with our share tn financing other irrigation related power infrastructure also, you can see this electrical and electro mechanical infrastructure for large pumping units which are directly state owned projects where in our thnding goes with So as t was lust mentioning that this is one area wherein we have taken it as a major diversil’ication initiative and even in the last year, we had t’iitanced good number of projects to the state of Teiangana and to Andhra Pradesh and gotng forward we ‘viii be looking to hind the state of Chhatiisgarh and Madhya Pradcsh so I mean we have taken initiative where we are having yen’, very good assets totally guaranteed by the state government, the repayment through state budgets and also the security of our assets, so basically this is one area “e have begun and at the same time I think I can give you statistics of last year and previous we have financed close to 41,000 Crores of these major projects of state owned irrigation departments.
Again it is a government account but hilly state government guaraittee, so this s’as one area.
Moreover in this area we have our obligation towards clean power to reduce greenhouse gas emissions in line with our obligation in the Parts protocol wherein we have embarked on a very massive program for 175 GW of this
June 23, 2020 renewable power.
REC has taken a marked initiative to take a large share in this renewable energy segment going forward and in 2020-2021 will see that we will pick up a good number of projects.
Our focus has been always for good developers and even In 2020-21 we have almost sanctioned close to 6,000 Crores of renewable projects arid the developers had been very good developers with global standing like SoflOank.
Engie - GreenCo and even noted Indian developers like Adam. the Avadha. so REC has taken these exposures to very, very good developers and we are very. very interested to have these quality assets adding (0 our porttolio.
At the same time, we are playing a important role now, we have started financing green mobility, particularly electrical buses we have started financing , we have begun with a project of some 350 Crores till now to finance these electrical transportations and particularly in this area going forward there will be a number of projects.
We have made a policy and accordingly this is also one area which is going to be our niche area going forward and not only this we will also be covering the entire ceo system including all storage systems, charging infrastructure etc. and I hope that particularly may be even 8% to 10% of our new business io REC we would like ii should be from new diversification and Ihese sources going forward and major thrust on such renewable projects.
Apart from the noni,al business of generation. transnussion, distribution, rettetvable. smart grids, normal business from the power conventional sector vould always be there.
Definitely we had some stressed accounts and our team has worked tirelessly, relentlessly to resolve certatit accounts and we have resolved some of them, may be “-hen we discuss details here we will be giving the final Iigtire and by far as you have seen our results we have been able to maintain those stressed asset levels to bare minimum, almost ‘ye have been able to arrest then, to industry’s lowest level.
Apart from thts I would just take this opportunity to just narrate certain achievements of our financial results for the year March 31, 2020.
You can see the disbursement (his time was all time high of Rs.75,667 Crores it was 5% higher than last year.
Our loan book had grown by 15% reaching Rs.3.22 lakh Crores as on March 31, 2020.
Our total incotne has increased by 18% to Rs.29,855 Crores, net interest income increased by 15% to Rs.l0,425 Crores.
The interest spread has increased by 2 bps to 3.26%.
As t mentioned COVID-19 lockdown did not impact the operations as the company leveraged its IF capabilities to undertake disbursements and service of borro’ing obligations.
There was an oplion in moratorium poltcy allowed by the company to its borrowers in view of our RBI advisories butt would infon’n you that particularly principal and inlerest dues of only 5,171 Crores have been deferred so far on account of moratorium.
In spite of moratoriun, allowed by the company. company has already recovered more than 78% of the total recoveries due for March 2020 amounting to Rs.9.500 Crores.
Our company has access to diverse source of borrowings including corporate bonds, 54EC bonds. term loans from banks, external commercial PageS of 26 REQ Limited June 23, 2020 borrowings.
More than 20,000 Crores has been raised post March31 including Rs.14,000 Crores from domestic markets and Rs.6,000 Crores in international market including US$500 million raised through IJSD bonds where in REC became the first Indian company to successfully raise such bonds during COVID-19 pandemic on May 12, 2020.
In addiuon. it also raised US S300 million from New development bank for a tenure of ID years at most competitive rates out of that US $240 million is already hedged REC has comfortable liquidity position as of now with balance of Rs.
14500 Crores and already tied up term loans from different banks of Rs.6000 Crores.
This will enable REC comfortably to meet its committed liabilities and the disbursement for a month.
Capital adcquac ratio was at 16.06% as on March 31,2020, ihe companies has also raised Rs 2,000 Crore sub debt to cushion its regulatory capital by around 90 bps. The situation has been under close watch by the management to lake prompt action in the best interest of the company and stakeholders in an optimized manner.
In financial year 2019-2020, Ihe USD and Indian rupees depreciated at 2.92% till Febniary 2020, but in March 2020 depreciated by 5.35%.
Thus in entire year it depreciated by 8.30% .
Currency has been impacted adversely due to this pandemic COVID 19.
However, since March 2020 to june 2020 the USD-INR is stable in the rangc of 75.50 to Refore the implementation of md-AS before April 1,2018, the forex gain loss was used to be amortized over the (entire of the loan on unhedged loans and hedged loans s’cre not to be reinsiated till they were hedged and the liability fixed In case the same policy was adopted the profit before lax would have been higher by Rs 1145 Crores.
Further iii case of reverse swap ofRs 5.147 Crores the all in all cost is coming to 5.55% as against domestic bonds cost of 8.82% with average breaking point of US-INR of Rs.99 mark-to-market losses, again that are only notional The net stage 3 assets as on March 31,2020 stand at Rs.
10,704 Crores which is 3.32% of loan book.
The provision coverage ratio against that stands at approximately 50%.
So this is regarding the salient ponits of our financial results which are already in the public domain and some associated comments which I wanted to mention before this August body of investors.
Now I would welcome you for questions.
I have sty team headed by our Director finance and they are quite eager and quite keen to answer all your queries on any subject you feel like, you are welcome REQ Limited June 23.
2020
Moderator · Conference Operator
Thankyou very much We will “ow begin the question and answer scssion The first question is from the line of Sankalp Jam from SBt Life- Please go ahead
Sankaip Jam
Thanks for taking the question Mv first question is that that percentage of total assets borrowings would be hedged
MR. AJ0Y CHOUDHURY · - DIRECTOR FINANCE
60% of our extenmal commercial borrowings are hedged & 40% are unhedged.
Sankalp Jam
Okay and will that be particular tenure over which or under which we kind of hedge or not hedge?
MR. AJ0Y CHOUDHURY · - DIRECTOR FINANCE
No, there is no particular tenure but generally long tenure borrowings are unhedged and the short tenures are all hedged.
Actually, RN guidelines stiptdates that only up to 3 years borrowings are required to be fully hedged.
So up to that 100% we have hedged and beyond 3 years and upto 5 years only 70% are required to be hedged and beyond 5 years. there is no hedging requirement from RN.
However, we have hedged beyond thai also as per the policy which we are having.
In respect of the asset l,ah,lilv management and the risk management policy which we are having, we are hedging other borrowings also which arc more than 5 years.
Today itself we hedged a borrowing of 10 years.
80% of thaI 300 million which we have raised, that we have hedged ourselves.
So we keep on seeing the market levels and depending upon the correct time we just keep on hedging whatever funds we are horrowing.
Sankaip Jam
Okay Thanks, my second queshion is that Isow has the aimual borrowing plan got impacted due lo special DISCOM package of close to 90,000 Crores?
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
As of mow, we are keeping our annual borrowing program at the same level because in the mitial months we expect that the capex programs will be sotnevhat impacted and our disbursemeist will be slow in such capex program and of this 90,000 Crores also 45,000 Crores will be share ofREC, will make for part of it, but going forward we will see and revtew the position.
In our view there will not be so much of incremental increase in our borrowing program this year, it will remain at the same levels.
Sankalp .Jain
Alrighi and finally have you received any kind of special line of finance froni the government specially for this DISCOM package say from LIC, EPFO or NSS Fund?
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
Not so far.
Though we have written to them for allowing us some access of such fluids but so far there has not been any such thing
REC LIMITED · MR.
June 23, 2020 Rut only thing is chat RBI is considering to increase the exposure oithe REQ and PFC they are considering not to consider us a group so to that exteni exposure night go up.
We are in constant touch with LIC, EPFO and NSS find and there might be some assistance from them in so far as lending to REQ.
Okay and will the private Sector also benefit from the scheme because it might not be easy for them to get a state guarantee to get hind release from REQ or PFC?
Private genco would indirectly benefit because basically the liquidity package primarily mandates the use of this hinds by the DISCOMS and the scheme also envisages that these loans would bc directly dispersed to the IPP and the CPSU. so whatever are the IPP dues which are lying wilh the DtSQOMS as of March 3], 2020, most of il we are expecting would get benefit by this scheme.
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
Alright and just last question from my side how do you see the share of power and lion-power in the loan book changing in thc long term?
I just told you that ultimately when you say power, normally, I said that even our diversification, and diversification means we are changing the sector from power in frastructure to say irrigal ion infrastructure sector, but even in that infrastructure sector also we have restricted our role only to the power components and these electro mechanical components though do not directly belong to power utility. ii is for other infrastnacture segment, but that is all aligned with power.
Ajoy Clioudhury
Alright.
Thanks a lot.
That is all from my side.
Thank you.
The next question is from the line of Subrat Dwibedy from SB] Life.
Please go ahead.
Thanks for taking my question I have couple of questions related to disbursement and borrowing plan. so you mentioned 1,1 lakh Crores would he tons] borrowing plan for the year outof that how much would be through bonds and what is the timing in first halt second half if you could give some indication?
Generally our borrowing mix is that domestic bonds constttute close to 60% of our borrowing so we do not see any change in that and around 50.000 Crores.
S2 billion ]JSD witl be from overseas markel aparl from that 50 Crores EQ bonds and Ihe domestic loans and external commercial borrowing loans will constitute another 20%-25%, so the mix that we already have will continue LIus year.
Ajo Cliotidhury ________________
REC LIMITED · MR.
June 23, 2020 Subrat Uwibedy If 60,000 Crores is roughly what you are targeting for raising through domestic bopds then will the second half he very heavy because in QI only around 13.001) Crores have been raised through bonds btu roughly around 20% of a total borrowing requirement?
MR. AJ0Y CHOUDHURY · - DIRECTOR FINANCE
Going forward we will have to see how the market behaves so we have sanctions from the banks to the extent of around 20,000 Crores, so it depends on how the market behaves.
We might as well lower our borrowings from the bond market ifwe find it is not to our liking but we believe that given the kind of liquidity that is available today we should be able to raise around 60,000 Crores front the bond market this year.
Subrat L)wibedy
Okay now on the disbursement side this entire 45.000 Crores DISCOM relief will be disbursed this year itself or some of it might go to next year because there is some reform related disbursement also for the second phase?
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
I think this 45,000 Crores which is our share in this 90,000 Crores liquidity induction we will be able to disburse this amount within this financial year.
Subrat Dwihedy
Okay so that means (hat since your borrowing is increasing by 20% so your advances this year could he in the range.
(he disbursements will be around 90,000 Crores, 20% over last year out of which 45,000 you are saying would be for the DISCOMS relief so for the capex projects it will be only 45.000 Crores this year, is it?
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
You see that basically particularly these are lithe uncertain times as far as disbursements are concerned.
The pipeline for our capital projects is full and ‘ye have huge undishursed commitment, but going forward as we have seen in this particular quarter, we see that the capex progress is very, very slow this time because of the movement of the labour and all those things and I thitik the entire country is suffering as far as this part is concerned for the capital expenditure projects ton., Going forward “e hope that situatioti improves and we find no reason why ii should nol improve, and accordingly, our capex will also progress because it is all in line, all our projects and everything is lined tip so we are just estimating shat this slowdown in our capex will be substantially made good by this 45.000 Crores liquidity and we may have our targets for having this disbursement, and it may so happen that we may, if the situation improves in the days to come.
As far as disbursement program is concerned it is intact, it is only thc slowdown that has interrupted because of this COVID situation.
45,000 injection which we are doing is basically making good the disbursement which we otherwise would have made through our capex program. ihal I think will be ensured in ibis financial year particularly for these two quarters from this liquidity because capex we are anticipating to be slow in at least these first two quarters of the year.
REQ Limited June 23, 2020
Subral Dwibedy
Okay and just one last thing from my side, you mentioned that going ahead renewable and foil-power. new sources of disbursement could form a significant portion of your overall disbursements, so over a period of tune will private sector share go up because this renewable aid other sources till be primarily to the private sector?
Nonnally you see that as far as this renewable part is concerned, we will definitely do much better this year.
I think the disbursement last year we had ctose to Rs.5,800 Crores and our sanctions were to the tune of some Rs.7,500 Crores.
You can see, that were our sanctions last year for the entire year, this year we already have sanctions close to Rs.9,000 Crores, so going forward definitely we anticipate increasing 11w share at least two to lhree limes.
So, this year, and I say it is all in power,, so I will not say its power or non—power, only thing is thaI some ceilversioii to renewable segment bccause of the normal foctis of the country and thrust in this thnig.
We will be taking our fair share into this fight.
No Sir I wanted to know the renewable disbursements will mostly be io the private sector right not government sector?
Mostly ii” ill he 10 the private sector but Ihete arc prern good number projects even in the state sector also.
Okay ihank you Sir.
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
Thank you.
The next question is from the line of Gourav Kochar front Mirae Asset.
Please go ahead.
Good evening Sir.
Thank you for taking my question.
A couple of questions from my side firstly, since ihe repricing of loans happens once iii three years and with Ihe funding cosl also coming down for us on an incremental basis, what is the outlook on FY202 I margin?
FY202 I should be much better year. ve do not expect that the currency to depreciate further and we have very healthy loan book with the incremental disbursement to the tune of almost Rs.75,000 Crores- Rs.80.tiOti Crores So. thai should give us a fair increase in our margins and we expect much better return on our nd worlh.
Sir, what percentage of your book would be coining for repricing in this year?
Around 20% of our book will be repriced this year Okay and since given that this will happen after three years there could be some materials in terms of the delta the revision could be say anywhere between 30 to 40bps if that is right on the yield front? do noi think so.
Our card rates have so far not revised going forward we will see.
REC LIMITED · MR.
June 23.
2020 Is it repricing linked to something external or it is your own something like an MC’L or the internal calculaled rate?
Sartjeev Gupta;
Gourav Kochar
Ajo’ Choudliury:
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
Gaurav Kochar;
MR. AJ0Y CHOUDHURY · - DIRECTOR FINANCE
Internal card rate.
Okay.
Sir on the hedging hid you mentioned that we hedge around 60% of the extended borrowings so in FY2020 we have seen that the currency has depreciated at least in three quarters and as a result we have had some unhedged losses.
So, just in context of this had we been better off with the hedge or had we hedged it 100% what would have been the MTM on that versus the current loss.
Just to get a sense on whether we are better off hedging entirely or keeping some bid open for currency non-fluctuation?
Ifwe had hedged our portfolio 100% then obviously the currency loss would have been lower but you see ii is not the hedging or not hedging. the difference this year has come because now under (he md-AS schcme we have to account for the enttre currency loss in a single year, earlier we were able to amortize our currency losses and apart from the currency loss there is also the derivative valuation on the tnd-AS, it mandates to account that what is the price that we will get upon unwinding We do not have any intent of unwinduig our derivative position, it is a kind of insurance that we have taken against currency.
Btit because of the forward movement and the MCV that they calculate, the banks and all value theta at a much lower rate than what we are covered with, So, that is why these are certain notional losses that have come about.
All hedged loans are held up to maturity now.
That we are hedging till one year or three years, it is till maturity we are doing our hedging.
So, the impact has come because we are now having to account for it in the same period under the new accounting standards.
Sure, I understand Sir but Just in the context of remaining unhedged had we been better oil had we hedged 100% currency in this year versus what we are currently Just wanted some comments around that if yuu could?
Yes, probably this year the losses would have been a linle lower but over the tenurc of the loan it not has made much difference, but this is also u’ue that the cost of hedging is substantial.
If you see over a period 10 years, the depreciation in Rupee is about 3 5%-4% and that is also the cost ot’hedging.
So, over along tenure it does not really make so much of difference, some tunes in between periods some difference will make impact. but overall, it does not make so much of dift’erence.
Right sure Sir, in terms of the business mix currently we would be anywhere close to 83-17 or 82-18 government and private.
Going forward as a strategy would like to maintain this mix or probably you would hedge somewhere in favor of non-government book?
It is going to be the same at least for this year.
Gourav Kochar
REQ Limited Jutie 23.
2020
Gaurav Kochar
Sanjcev Gupta:
Caurav Kochar
Okay sure, and coming to the assel quality Sir what is the impact on the ongoing project with this COVID thing because of some labor issues, because of supply chain disruption do you see some of the projects getting delayed or getting stressed?
You see that as far as these prolecis arc concerned ofcourse there will be delay and that delay will be controlled in the sense because RBl has also acknowledged this thing.
Becausc once we have a lock down and these projects are all labor intensive projects, because of the re location and dislocation of these labors mid all that, entire capital intensive nifra projects have suffered, but I Ihink some kind ofexemption like RB] given moratorium in cerlain cases, may be given, I think shift in COD or the dale of commissioning of these projects, we are hoping that going forward there will be some relaxation on this commissioning dale or like Ihal, accounting for this kind of unavoidable disruplion.
Sure, and do you foresee any sorl of NPA coining from on account of this or do you say deferring the date would probably solve?
Can you please repeat the question?
Yes, do you see any NPA coining out of this because to this loekdown extension or anything of that sort that fear may be in this year’?
There is no given fear as far as that is concerned.
No major castialties.
Laksh,iianarm: No major casualties.
Three or four projects have been identified which could carry forward that hut then, we are closely tnonitoring and working with them mid we hope they will not get into any issue
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
Sure Sir, if you can quantift what could be ihal total quantum of that to our account’?
We have ruughly four to the operating assets in nhieh our total exposure is 6000 to 7000 Crores but those have adequate PPA. we have adequate tie up of those and they are operating very optimally as of now and we do not really see any risk coming in these particular projects.
Lakshmatian
Alert Bansal
Only issue could be the delay in payinelit by the DTSCOMS but that I think the total liquidity package is helping the DISCOMS so we are hoping that the cash flow will flow back to the DtSCOMS which will help them handle their cash flows issue.
Thank you The next question is l’roni the me ut Ateet Bmisal from Nippon Mutual Funds.
Please go ahead.
Sit’, just wanted to check we have quite large plans for disbursement this veal, so ‘ye have already raised Rs.2000 Crores as tier 2 bonds is that understanding correct in the first quarter?
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
Yes, that is right.
Ii t.ia
REC LIMITED · MR.
June 23, 2020
Aleet Bansal
And do you have any plans to raise farther equity to shore up our capital adequacy given we have aggressive plans of disbursements because our debt equity ratios are also at SX as of March so given the aggressive disbursement plans we could have higher number over there?
MR. AJ0Y CHOUDHURY · - DIRECTOR FINANCE
We believe that going forward the results will be good, this year has been impacted by this forex loss so the internals accruals should be sufficient to take care of the debt equity ratio to some extent and of course we are rigorously pursuing the resolution of NPAs and once we arc able to make some impact there, definitely our debt equity ratio and the CR.AR will definitely improve Ateet Bansal; Okay.
Thank you.
Moderalor
Thank you.
The next question is from the line of Anand Ladha from HDFC Mutual Fund.
Please go ahead,
Anand Ladha
Sir just wanted to understand on the resolution of NPA in terms of any large exposure like even few exposures which were supposed to get resolved in coming quarters.
So, if you can give some color in the next two to three quarters what sort of resolution one can expect to happen?
Lakshmanan
Overall the gross NPA stands at Rs.2l,256 Crores and we have net NPA after positioning Rs 10.704 asof3l° March 2020.
So, roughly our NPAs are covered by provisioningto the extent of 50% and in the last year close to 13 prolects have been either completely resolved or the resolution has been approved and it is under implementation.
These 13 projects account for Rs.l0,221 Crores.
So, to give a break up. out of these five projects which have been completei resolved, that accounts for close to Rs 2400 Crores. in which three projects Lanco Anpara, Prakash industries and Everest Power we have got 100% recovery and in couple of other projects Ratan ]ndia and Lanco Teesta we have got a recovery in the region of 50%- 55% and going fonvard, resolutions which have been approved and are under implementation account for close to Rs.6,000 Crores.
These are five projects in which Essar Power transmission we have resolved such that there is a 100% recovery plus ‘ye are expecting that the account could be upgraded very shortly while we have close to Rs.
1100 Crores of exposure and then like FACOR Power this has been resolved under the IBC process where Vedanta is the successttil bidder.
So, they are in the process of taking over the assets where we are expecting a 75% recoven and we are expecting close to Rs.350 Crores of recovery in these asset and lliranmayi Energy. thatagain has been approved while there is a 70% recovery and Tndbharat Utkal and R.
K.
M Powergen have also been restructured, So, there also the recovery is close to 50% and apart from this Rs.
1.840 Crores worth of three projects accounting for that are under liquidation where the bids have been received and it is itt the process of NCLT approvals, we are hoping that that should be done over the course of next three to four months.
So, (his is roughly like 50% of NPA account that are either resolved or
REC LIMITED · MR.
June 23, 2020 they are in the advanced stages of recover, and apart from that we are pursuing close to Rs.4,923 Crores worth of five projects where “e are working outside the NCLT process in terms of restructuring.
So. in thai we have projects like GAil, Dans hnergv and Ratan India Nasik and TRN power.
These are also close to resolution and from all these projects we do not foresee any haircut except in Ratan India Nasik where that could be an issue and rest of the other projects we see ] 00% recovery and apart from that there are balance projects, there are 12 projects which are under IBC out of which nine have been admitted under [BC and they are in various stages of expression of interest and bids have been received for approvals and another three projects which have been recently filed with NCLB which are pending admission.
So, that is the overview for the strcssed assets.
Anand Ladha
Perfect Sir Thank you for giving such a breakup.
Sir there are few exposures if you can quanti’ where they are in terms of resolution process like KSK Mahanadi which has admitted to NCLT if you can clarift like where they are in terms of the resolution process.
IPCL Haldia and Essar Mahan?
Ajoy Choudhury
IPCL I laldiawe have approved the resolution plan
it is in the rating process.
We are working with the rating agencies where, as per the RB], 2 ratings are required So, we are working with the rating agencies for the rating so once it is done, I think we will look forward on the documentation and KSK Mahanadi the RP has been appointed and they are in the process of going with the expression of niterest and tlurd project which you asked?
Essar Mahan.
P.ssar Mahmi recently we have tiled with NCLT, I believe ICICI is there, so they have filed on behalf of the lender and parallelly there are a couple of other companies which are interested iii (his asset.
So, in the lenders forum we are discussing with them as tve]l and we are also exploring debt settlement under section 230 of the companies act also.
So. actively we are pursuing both the portions so that is where we stand today.
Okay, Sir if ] have to look at our provision coverage is approximately 50% odd do ‘ye anticipate any more provision.s requireinetil in FY202 1 for these existing assets?
No, in fact we regularly review all our stress assets and this year also if you see we have increased our provision coverage in some of the assets.
So, the assessment that we have made is in consultation with that.
So, I was explaining about the provisions of rate so as of now we think that our provisional coverage is adequate, going forward we will continuously review and see what has to be done, Okay, Sir based on the bid we have or (he resolution plan we have for different assets do we expect some more provisioning need on those assets? t4; - ______________
REC LIMITED · MR.
June 23, 2020 Sanjeev Gupta; No in fact some of the projects like Essar transmission we are expecting write back As of now we do not see any project where addition provisional will be required but it is a continuous process as I said and we svill continue to review the position, take opinions from external specialists and if required we will definitely make additional provisions, if needed, L.akshmanan Just to supplement in fact most of the resolutions we had claimed before these recoveries are either 100% or it is in the region of 50%-55% and 70% whereas, if you see our overall provisioning are 50% So, to that extent we are expecting quite a few of these assets during the current year there could he write back in terms of provisioning and every quarter we do a detailed review in terms of the expected credit-loss mechanism based on the different parameters like each asset is evaluated and if need he like we alter provisioning. .lnand Iadha: Perfect, and Sir if you can say on this NPA book of Rs21,000 odd Crores are we accruing any interest or the fact thai as when the assets get resolved we will start getting accniing interest in some of these expocures?
Ajoy Choudliury
No, we are accounting for these on cash basis, on receipt basis but in some of the projects we are receiving revenues For example. as I said Essar Power Transmission, we are receiving 100% but beeaus.e of the RRt nonns, which stipulates cooling oil period so it has not been upgraded Similarly. ii case of Some other protects, we are receiving some money and accounting for them on receipt basis like KSK Mahanadi..
Lakshmanan There are couple of other projects there is a Dans Energy is there, GATI is there, these assets are regularly servicing their interest and there is a very marginal deficit in the interest but accounting is on cash basis we do not recognize on a accrual basis.
Anand Ladha
Okay, Sir as and when there is assets get resolved do we expect our margin to improve further from the current level Sir?
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
Yes, definitely.
Anand Ladha
And Sir lastly on the special Discern package of Rs.90,000 Crores which the government has given is there any methodology in terms how much spread we can expect to earn those lending?
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
I think we should have a competitive spread because overail the borrowing mix we have is cost of fund and the rate at which we are lending this special transition plan has two-three components, one where we are lending against the govemment receivables which has certain concessional rates but that is covered by 100% state govemmeni guarantee so that gives us a better leverage in terms of this asset and the other window is under the working capital limits which are available So, thai we are lending at that norma] card rate and there are certain other states where they need a relaxation for their limit for which the Union Ministry is going to the cabinet.
So, over all we expect the margins to remain healthy.
REC LIMITED · MR.
Jutie 23, 2020 Okay, is it fair to assume spread will remain in the range of 200 plus basis is for this in committal new lending also?
Anand Ladha
Ajo Choudhun’:
Sorry?
Is it fair to assume spread of 200 basis point plus for this new DISCOM lending?
No, this is a special package and with government guarantees we expect spread of around 150 basis point to 200 basis point.
Okay, thank you.
Moderator · Conference Operator
‘ikas Garg: Sanjeev Gupta Thank you.
The next question is t1’un the line of Vikas Garg from Imivesco Mutual Fund.
Please go ahead.
Thank you for taking my question.
Just two of them, one is on the SEB package of Rs.45,000 Crores and how much has been disbursed already to SEB’s from your side and second question is if you can throw some liglil on the SEWs financial health now when there was an announcement b’ the Finance Minister regarding the Rs.94,000 Crores receivables at the SEB level for which Rs.90,000 Crores package was annotinced though PFC and REQ that was made some’fte,e ni the second week of May and snice then the lock down has been extended till May end and even now there isa partial lock down.
So. how the situation at the SEB levels now from your assessment mid is there any possibility of increasing this financial package from Rs.90,000 Crores of current number?
Yotir first question was on Ihe disbursement and under the special package.
Nou mentioned Rs.2.500 Crores as the first loan under this package which we are expecting the disbursement could happen over the next few days and anolher Rs.
15,000 Crores vorth of loans are tinder sanction which we are expecting should be done before 30th oflune and out of that Rs, [5,000 Crores is the first tranch close to Rs.7,500 Crores we are expecting disbursement could happen before 30a of June so that is the present status.
Vikas Garg
[lust miss a first term which you said what number has been disbursed already?
No, loan of Rs.2,500 Crores has been sanctioned which we are expecting disbursement could happen over the next few days and another Rs.
15,000 Crores worth of loan are under sanction and out ofthat 50% is the first tranch disbursement Rs.7,500 Crores that is expected to happen before 3O of June.
Okay.
Lakshmanan And overall we have got a expression of interest in terms of the Discoms intention to take loan is close to Rs.93.000 Crores both REQ and PFC put together.
So. the original package size was anticipated as R.s.90,000 Crores and we are having interest from DtSCOMS and states which is also approximately In that region.
So. as of now we do not anticipate this
Anand Ladha
REC LAmi/ed June 23, 2020 package going up We will have to wait and see for finther response but as we stand today we do not anticipate this going up significantly and third thing in terms of thc SEWs financial position, ‘.es.
April and May the collection efficiency of (he [JISCOMS went down by 25% to 30% and over au the revenues dipped by 40% to 30% in different statcs, But from June onwards we are seeing the revenues coming back to close to normal level, they are probably close to 80%-85% and may be going forward in the Q2 we are expecting the revenues of DISCOMS be stabilized.
Vikas Garg
Okay. so which means the recoveries have not been made from Ihe short fall which happencd in the month of April and May where the revenues would have fallen short by almost 40% So, in the month of June whether recoveries has been happening on that or that 80% which you satd is the June collection short fall as of now even there?
Ajoy Chouclhury
It is a mix of both, at our level it might be very difficult to exactly commcnt on this point but as we understand on qualitative basis there is a mix both of recovery and some of the state electricity regulators and governments they have given some relief to the industries and to domestic consumers in terms of installments also.
So, the recovery could happen over the next three to four months.
Vikas Garg
Okay thank you mid Sir just one follow up question on the first part, as of now nothing has been disbursed for the SEB ujider that special package though the sanctions are there while you have already raised the bonds upon Rs 13,000 Crores in QI and through some oilier means as well that you raised.
So, is it good to undersland that the borrowing that you have done so far is for your normal of business routine aspect and when you start disbursing for the SEB package then you have to hit the market again for the incremental borrowing?
[.akshmanan It isa combination, not that all the finds have been really raised, certain things have been tied up wherewe can draw as when we need and these borrowings which have already been raised, it is meeting our regular disbursement as velI as the dtsbtirsement which are lined up which is to the tune of close to Rs.8.000 Crores to Rs.l0.000 Crores over the next 10-15 days mid apart form that our own repayment commitments are also there.
So. it is a combination of these three, so that is being actively managed as the situation emerges.
Right and Sir it was indicated that the entire Rs.
45,000 Crores will get disbursed in this financial year itself but will it be safe to assume that it would be quite front ended and possibly over next two-three months the entire package may he disbursed because ‘ye have already received intent of Rs.93,000 Crores combined for PFC and REC?
Lakshmanan Tt might not happen in next two to three months because the policy has two tratiches.
So. first tranch would go as oer theapplications because each state has to do their own ittternal processes, accruals from their own competent authonty which could be the finance department or the state cabinet and there is one more element where the Union cabinet
REC LIMITED · MR.
June 23, 2020 approval is required for Uday limit relaxation also.
So: some portion of this release will be ticd up to the-se factors also.
So. may be like close to Rs.60,000 Crores is claimed, that is eiicuinbrances are not there.
So, we are expecting may be ifthe first tranch could get disbursed within Q2. QI is coming to an end where we are expecting to close Rs 10,000 Crores and may be another Rs.15,000 to Rs.20.OllO Crores could happen in Q2 and the rest could spill over 10 Q3 and may be some in to early Q4.
Vikas Garg
Okay mid Sirjust one last question if t can slip in, it is on the asset quality ofthe loans which are made to the governntetit agencies, the state government agencies either DI,SCOMS or gencos or what so ever and we have had 0% NPA’s over there.
Now Sir, some of those loans are guaranteed by the state government and some of them are in fact I would majority of them are not guaranteed.
So, just two thuigs over there Sir from your risk assessment perspective, does it really matter to you whether the state government guarantees there for those loans because any ways we have 0% NPA thus from a spread perspective we should be indifferent whether the state guarantee is there or not there so that is first question, and second question is from do you see any assel quality Issues are cropping up in that slale agency exposures becatise sonic bit of evident problems are being seen at all the level and will he jusi kind of very difficult situation to continue to maintain that we have 0% NPA on the state sponsored agency” Lakshmanan Basically, for state sector borrowing also we have a detailed appraisal procedure and we follow certain prudential norms and our own policies.
So, norinally,when we do lending, we follow those provisions.
So, in such cases ‘ye do not insist on the state goeniment guarantee. but whereas this is a special package where we are relaxing ceriain norms and we are going beyond the normal levels so, nate government guarantee is being taken as a pan of this policy as a additional security and second this state govermmient security we have a significant advantage in terms of our capital adequacy in terms of the risk weighted asset.
So, that is significant advantage, we have a combination in terms of state secior lending where we take state guarantee and where we do not take.
Okay and Sir, on the situation of 0% NPA as of now which is on state agency paper is it expected to be similar going forward as such?
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
We expect to have 0% slippages on Ihc state sector projects.
We expect ihe same going forward
Vikas Garg
Okay thank you very much
Moderator · Conference Operator
Thank you The next question is from the line of Saket Yadav front India Capital Please go ahead. -err :,: RECLhnited June 23, 2020 Saket \‘adav: Thank you Sir.
Just wanted to understand on stage three assets as you mentioned earlier that there are four accounts of about Rs.6000 Crores which we are tracking closely but at the same time there also about Rs.
10.000 Crores worth of projects which may see an upgrade.
So, is it fair lo expect thai over (he next three quarters the gross NPA’s from Rs.2 1.250 Crores should actually come down rather than increase even despite whole COVID related problems’?
1akshmanan: The asset upgrade goes by (he RB! policy where we have resolved or settled, where ills OTS and immediately gets squared oft’.
In the case of restructuring there is a monitoring period after which the asset is upgraded.
So. couple of assets t’e expect io be upgraded in this financial year which could be in the region of Rs.2000 Crores but the rest of the assets have a slightly longer moniioring period in terms of the 10% recovery which the RB! circular mandates.
On the stage three assets are all NPA so that is part of the Rs.
10.000 Crores.
Saket Yadav
Right and Sir these four assets which you mentioned which we are monitoring closely those are all private assets and they are not problelnatic as of now is ihe understanding with this monitoring them closely if any issues come up?
Lakshmanan Rs.6000 Crores account which we are closely monitoring as of now they do not have any stress hut given the current scenario, we are concerned that these are the accounts which should be closely monitored so we are closely tvorking with the borrowers and tracking these accoutits.
SaUd Yaday
I understood, Sirjust one more thing on the lax rate bit this quarter our tax rate actually seem high on the PBT bit from next quarter I understand may he transitioning into the new tax now so our lax rate should around 22%-23% is that understanding is correct?
MR. AJ0Y CHOUDHURY · - DIRECTOR FINANCE
Yes, our tax amount should go down going forward This year of course there was an impact of delèrred tax as well as write back because we had made provisions and on that we had created deferred tax asset but because of the decrease in rates we had to reduce our deferred tax ascelsas well.
So. going forward deftnitelv the reduction in the tax rate will give us the benefit of reduced tax amount.
Sak’et Yaday: Sir what the applicable tale could be if one wants to get a sense.
In the past we were around 29% so just wanted to understand now what will be the normal rate going forward for us?
Ajov Choudbury
It should be between 20% to 22%.
Sakct laday
Understood.
Sir, just one final question from my side, can yott also help us understand the slippage that we have seen this quarter on the stage three asset I think till last quarter we were about at Rs.I9,500 Crores and this quarter we have gone to about Rs.21,200 Crores so the shppagc which happened was it before the moratorium was applicable and hence it slipped or what let to the slippage?
REC LIMITED · MR.
June 23, 2020 Lakshmanan Basically one number is added that is basically because of certain payment issues with the DJSCOMS where it is before the stale regulators, but ‘Se are hopehil that these claims are legitimate and we are also working with the Discom.
So. hopeffilly once the paymeni issue with the DISCOM is settled iii the thermal generator we are hopetül (hat the asset could be resolved very quickly.
Saket Yadaw
Underslooti Thank you
Moderator · Conference Operator
Thank you.
The next question is from the line of Andrew Vcnieicher from (inaudible) 1:10:31 Partnership.
Please go ahead
Andrew Venieicher
I was wondering how your relationship with the PFC given the ownership of you and has changed anvthitig in strategy or our operanons?
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
I think Ihe relationship is as how ii has staried out lasI year 2019 we are working as a standalone company of course PEC is holding company and we are subsidiary company except that there is no change other than one PFC nominee director is on the hoard of REC that had been ihe only change and management conirol is lhrough Ministry of Power Government of India.
Andrew 4’eleicher: Do you think this affects competition in the sector at all?
If you see our results and our performance \ve do not think so.
We have not found any such thing in our operalions 0 our experience. .Xndrew Venteicher: Historically before the tie up did you compete more vilh PFC?
Pardon please?
Andrew Venicicher
Did you compeme more wiih PFC hismorically before the lie-up with PFC? before PFC brought stake in REC?
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
You are talking aboul merger, are you?
Andrew Venteicher
Just before PFC took the stake in REC “as there more competition with PFC?
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
Yes. ‘e ‘ere very independent company at that time, that competition ‘‘as there aher that also ii is going on as it is. nothing has changed till that.
MR. AJ0Y CHOUDHURY · - DIRECTOR FINANCE
Just to add that there is so much othusirtess in the power sector that from conipetiiion atiyway is not very significant our course, we are able to get sanctions, both the companies are able to manage sanctions and disbursemenl So, there is a bit of competilion as our Chairman has said but as it was before now also there is some bit of competition but the business is huge.
Modcralor
Thank you.
The next question is from the line of lihavik Dave from Nippon India Mutual Fund.
Please go ahead.
REC LIMITED · MR.
June 23, 2020 I-Ti good evening Sir.
One question is regarding the dividend payment that we will make in FY2021, will the number be similar or because of this COVTD issue and Rl31 riot very co,nthnable with t3nancial entities giving out dividends to their shareholders, will that affect REC as well?
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
No, we do not think it will affect in fact we arc going forward, we expect better results because this was one of a case of exchange forex loss and there was lot of notional derivalive losses that came in this year, we think our business will be good and our margins will be better gotng.
Bliavik Dave
One data point, on the card rate that you have, what was the card rate maybe last revised care rate that we had for discoms and private sector, at what yields are we lending?
Sanjeev Gupta; So, it is different for different category.
Rhavik Dave
But broadly ranged?
Ajoy Chotidhury
Our yield this year has been 10.59% and a spread of 3.24%.
Bhavik Dave
Lastly you mentioned that you expect reasonable amount of recoveries of that Rs.20,000 odd Crores, Rs.2.000 Crores can get upgraded and the remaining Rs.8,000 can get restructured so what proportion of this Rs.20,000 odd Crores where you will see 100% kind of recovery, I missed that explanation that you gave to one of the previous participants.
So, which are the accounts where you expect 100% recovery?
IaLshmanan These figures like approximately we can say 40% of the account t think we should be expecting close to 100% reco’erv.
Rhavik Dave
‘Fhat, quantum will be in
Lakshmanan
You can say close to Rs.7,000 Crores to Rs.8,000 Crores.
Bhavik Dave
Okay and most of these will be restructured, so it will not be upgraded?
I,akshmanan: Yes, most of it will be restructured.
Bliavik Dave
The Rs.2000 Crore upgrade there you will tiot have to take any additional provisions because you ll already be at 50% to 60% provisioning ott those.
Lakshmanan
Yes, there is no additiooal provisioning in fact those accounts have already cleared off their dues and they are in surplus.
Bhavik Dave
Okay and this Rs 6.000 Crores that you mentioned are under stress are stage 2 and they are monitoring them closely before they slip into NPAs?
Lakshmanan 1 hat is right, that 6000 Crores, they are n stage wherc tse are following regular risk management policy, we keep monitoring those accounts.
V. K. Singh
Bh’avik Dave:
Ravi Agarwal
Lakshrnanan
Sanjay Bansal
REC LIMITED · MR.
June 23, 2020 How many accounts and which will be these accounts if there are any in sizable reasonable accounts?
These are all private sectors generating stations account and they largely like Everest Power etc so these are the assets.
Okay Sir Thank you so much.
Thank you The next question is from the line of Ravi Agarwai horn L’TI Asset Management Please go ahead.
So, your target is 45,000 to be disbursed in thts year so my understanding is that there are two tranches and there is a condition which is supposed to be completed before the disbursement of tanch 2s, what do you think about this whether the SEBs and the electricity boards will be able to meet the conditions for disbursement of tranch I, there are the conditions about the meters to be put in this smart metering the billing efficiencies and all those things so. is it not quite a less time to complete all these formalities?
Just to clarit\’. actually tranch I conditions all the SEBs the distribution companies whom we are in touch with, they are quite comfortable in meeting this stage I pre disbursement condition.
In smart meter, they have to submit a plan, they do not have actually install smart meter, they do not have to complete it so they will have to give action plan which is credible and in stage 2 they s’ill have to submit, the main requirement is the loss reduction plan which they will have to submit.
So. that also they are in the process of preparing that so betwecn stage I and stage 2 that is tranch 1 and tranch 2 we expect to normally have a two months to three months gap in the meanwhile I think they should he able to in consultation with MOP satis’ the stage 2 tranch condition as well.
So, really do not foresee any hold up with these conditions.
So, alright.
What 1 understood that they have to show that these all work has been done and nocjusc the promising things that we are doitig this because (hat was the case with L’day bonds also so there were also some similar conditions about the pre—conditions. pre-disbursetnent conditions which is supposed to be made hut they were never done and completed in that maimer so basically this is agaut the case happening so this is my understanding, now how much are you expecting to be borrowed to the coming quarter ti-nm the domestic bond market?
Around Rs.
10,000 Crores to Rs.
15,000 Crores we will take from the domestic bond market during this quarter.
What has been the total borrowing for the tlrst quarter from the domestic botid market?
Around 18,000 we have borrowed front the domestic bond market so far Ravi .4garwal: I 8,000
SANJAY · BANSAL
Yes.
18,000.
Rail Agarwal
My other question, just be a repetition of what already has been answered so just a consolidated number, what is the total amount of number which is in the NCLT process and which has been dealt outside the NCLT process just a broad number?
L,akshmanan:
Ravi .kganiai
Ajoy Choudhury
Rail Agarwal
Ajoy Choudhury
Like ills close to Rs.
10.750 Crnres that is under KCLT process and rest Rs.] 1,000 Crores odd is outside the NCLT process.
Okay and my last question would be around, how much is moratorium availed and what is the current status of the entire moratorium part of this loan book?
In the first quarter, the moratorium was availed for Rs5, 170 Crores, in the next quarter we expect around Rs.6,000 Crores to Rs 7,000 Crores of moratorium will be availed of out ofour total recoveries of around Rs 10.000 Crores.
I could not get the last part sorry? tn the first quarter there was a total amount of Rs.5,171 Crows of dues which was around 30% of the total dues where moratorium was allowed and in the second quarter we expect that this amount will be around Rs.7,000 Crores that will be arotind 70% of the dues for the second quarter.
Okay.
Thank you
Moderator · Conference Operator
Thank you.
The next question is from the line of Andrew Veoteicher from (inaudible) 1:22:28.
Please go ahead.
Andrew Venteicher
Ajoy Choudhury
MR. AJ0Y CHOUDHURY · - DIRECTOR FINANCE
I jt,si wanted the follow-up on thc forex questions I notice that other comprehensive income loss had a few items related provided to their rupee, could you explain this?
See the forex loss has been to the tune of Rs.23,00 Crores this year hut as I said that now with the new accounting standards we have to account for ihe entire forex loss for the same period so that has impacted our bottom line, but overall there are certain derivative valuation also which are somewhat notional in nature so those valuations has also impacted adversely.
But separately there would be other comprehensive income and losses, that in turn can affect the cash flow hedges and cost hedging reserve?
Other comprehensive income losses include Rs.575 Crores that is because of the derivative transactions which are notional in nature, we are already hedged and these derivative valuanons are belowthe cover thai we have already taken so that 001 includes Rs.575 Crores of that amount, we have adopted the hedge accounting and under that accounting (his Rs.575 Crores is cooling.
Apart from that OCt includes some investment related profits and gains REC’ Limited June 23, 2020
REC LIMITED · MR.
June 23, 2020 those are minor, but largely this is the amount of Rs.575 Crores of lower valuation of derivatives.
SANJAY · BANSAL
Okay, that is related to the hedge accounting but then the item to be and in your result release the net transaction exchange loss that part is not related to hedge accounting?
Yes that is right.
Okay and in the part that is hedge accounting, can you split how much ofyour hedging follows hedge accounting versus is not hedge accounting?
Roughly around 60% of our total foreign currency borrowing is hedged so we have to check the amount of hedge at evety quarter, at the end of cvcrv quarter.
So. in case of those hedges wheteby the options are undertaken so not effective hedging there we take it as a forcign currency loss otherwise it has taken other comprehensive income so whatever the effective hedges are there that is taken into the other comprehensive income because that is only notionai loss wInch we are having otherwise their hedged up to the maturity as such we do not have to incur any loss in respect to that because our liability in any case is covered so for that purpose itself it is taken into the other comprehensive income and not shown above the line Oka and is thai offset by maybe the derivati es fair value being higher or what is the offset of the losses and other comprehensive inconle line’?
Actually these MTM losses are there which have shown as the other comprehensive income so they are virtually by the end when the few commercial borrowings whatever the hedges are there, there is absolutely maturtrv. they “ill be zero so as such ihey will keep on reducing as the loan approaches the maturity period so that is the reason it has shown in the other comprehensive income because it is not going to atTect the profitability as such it is onl the notional loss winch we are with.
Ajoy Choudhun
Thank you.
The last question is from the line of Vikas Garg from Invesco Mutual Fund.
Please go ahead.
Sir, just a follo up question of the earlier question, which was asked by some gentlemen. hat t gather is that there is some collection of close to Rs 15,000 Crores to Rs.
16.000 Crores on a quarterly basis and then there was some 30% and then 70% moratorium in the quarter that you said, how would be the run rate of your repayments of the debt on a quarterly basis, just putting in the perspective of that Rs.
15,000 Crores of collection which happens on a quarterly basis, against that how much would be the run rate for debt repayments?
Yes, we have around Rs.
15,000 Crores to Rs.
16.000 Cores of recoveries every quarter so almost ourhorroving liabilities are slightly higher than this so if you see the average maturity
REC LIMITED · MR.
June 23, 2020 ‘ikas Garg:
Ajo Choudhurv
of our assets is around 6.24 years and the average maturity of our borrowing is 3.99 years so the borrowing liability is slightly higher as compared to our receivables.
So. just putting both the things together and also the earlier response that no” Rs.13.000 Corers to Rs.l4,000 Crores of bonds have been ratsed so far in the QI, so it looks like most of these bonds which would have been raised would have beeti actually utilized to bridge the cash flow mismatch because of the moratorium that has been taken by the underlying bortowers and possibly when the disbursement on the SEB loan starts under the special package that would be the incremental borrowing that would be done in next few days or it is aRs.I0,000 Crates on end June and possibly Rs.t5,000 Crores in the month ofJuly. is what you kind of indicating?
So, moratorium our Borrowers have taken only to the extent of 30% of our recoveries so to that extent our cash flows have been alright so that plus the borrowing actually takes care of our disbursement pius our repayment commitments and sttll we have certain credit Itnes which have been tied up and it cast be drawn as and when we actually meet the disbursement.
Ajoy Choudhurv
Okay.
Thank you.
Sir.
Thank you.
The last question is from the line of Rahul Marathe from tCICF Prudential Pension Fund.
Please go ahead.
Thank you Sir for taking my question.
So, this was regarding the forex impact which we saw in Q3 so if you could just tell us, what would have beet, the profitability had this dollar appreciation would have not occurred?
If this dollar appreciation had not happened in the tnonth of March, ‘cc would have made an additional profit of around Rs.
1200 Cores.
Okay and also follow-up oti that only, so you are saying as per md-AS we have to record all the losses and profits on our forex positions in P&L, so where does the offsetting hedge positiott takes place, does it go directly into the balance sheet?
Yes, it goes into the balance sheet. cmally now that md-AS says is that you price entire foreign currency borrowing at the current rate and then value the derivatives separately.
So, when we value the entire currency and the derivaiive is valued separately, what happens is the derivatives valuation is somewhat lower than the cover that we have taken.
Earlier, tvhat we ‘acre doing was that we were valuing the unhedged currency at a current rate and the hedged currency at the hedge rate but now the derivative valuation has come up where derivative is separately valued and the valuation comes from the banks which they have taken where the valuation is lower than that cover that we have taken so therefore there is an element ofnotional loss which actually going forward as we approach the tenure of the loan it will be squared off.
REC LIMITED · MR.
June 23.
2020
SANJAY · BANSAL
So, vill we see reverse is going fonvard?
Yes, as we approach over a period of time.
So, Ijuci vaitted to knovvhether [his Rs.
1200 Crores ofhigher profitahilily which wc would have had not for this appreciation. vill we see reverse over a period of time that we will recognize this Rs.
1200 Crores till the maturay of our loans?
It will be reversible and in this particular quarter itself you will see the reversal if the dollar is not appreciated to that extent it is in the range of 75.50 to 76 so in this particular quarter itselfthere will be some reversal both on account ofMTN as well as (he derivatives valuation. ‘ikac Garg:
MR. SANJEEV KUMAR GUPTA · — CHAIRMAN AND
Okay.
Thank you.
Thank you.
I would now like to hand the conference over to the management for closing comments.
So, thank you very much.
It has been really wonderifil interaction wiih each and every one of you.
We havc noted your all points and appreciate all the questions which I hope that our team members and experts have been successfully able to deliver to your satisfaction and thank you very much.
Moderator · Conference Operator
Thank you.
On behalf of ICICt Securities, that concludes this comifercnce.
Thank you for joining us and you may now disconnect your lines.