The Hindu Business Line : Higher interest spreads boost PFC net

Good show: Dr V.K. Garg, Chairman and Managing Director, Power Finance Corporation Ltd, and Mr M.K. Goel, Director, at a press conference in Mumbai on Tuesday.

Our Bureau

Mumbai, Oct. 10 Higher interest spreads despite the increasing cost of funds, higher disbursements, and lower non-performing asset levels helped Power Finance Corporation report a 22.6 per cent increase in net profit for the second quarter of the current fiscal.

“This sums up our performance for the quarter. Spread, NPAs and new business constitute the basic fundamental strength of a company in the finance sector,” said Dr V.K. Garg, Chairman & Managing Director, PFC, at a news conference here on Wednesday.

Net profit for the quarter ended September 30, 2007, was Rs 282 crore against Rs 230 crore a year ago.

Turnover rose 38 per cent to Rs 1,227 crore (Rs 888 crore).

There was a loss of Rs 22.8 crore on account of foreign exchange differences, against a gain of Rs 16.7 crore in the previous quarter.

The interest spread was 2.04 per cent, and the net interest margin 3.76 per cent, said officials from PFC.

Although no comparable figures were given for the corresponding year-ago quarter, these are both higher than in the previous year, they said.

An indication of increased spreads may be had from the comparable half year figures: the interest spread rose from 1.78 per cent, to 2.01 per cent; while the net interest margin rose from 3.36 per cent, to 3.69 per cent, said Dr Garg.

PFC lent Rs 3,340 crore during the quarter, 25 per cent more than a year ago. Sanctions rose by 370 per cent to Rs 21,865 crore (Rs 4,655 crore).

NPAs fell from 0.23 per cent, to 0.06 per cent: “This is significant, as the industry average is 1.2 per cent,” said an official with the company.

PFC is also resetting loans at higher interest levels to maintain spreads. In the first half of the fiscal, it reset loans worth Rs 4,200 crore; it will reset Rs 3,500 crore of loans in the second half, said Mr Satnam Singh, Director of Finance, PFC.

The loans of an interest band of 6.75-13 per cent are being reset at 11.75-13 per cent.

Going ahead PFC stands to capture more business from the huge capacity additions currently happening in power, said Dr Garg.

PFC will raise debt of between Rs 10,000 crore and Rs 12,000 crore during the second half of the current fiscal. It had raised Rs 7,600 crore during the first half.

PFC’s stock gained by Rs 2.70 or 1.31 per cent on the BSE, to close at Rs. 208.05.

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