Power Finance Corporation raises FY21 borrowing limit by 31% to Rs 1.18 lakh crore

State-owned Power Finance Corporation (PFC) will raise 31% more funds in FY21 than its initial plan “to accommodate the moratorium granted to borrowers as per RBI guidelines”, a senior company official said. The company’s board, on Wednesday evening, approved to raise its FY21 market borrowing limit to Rs 1.18 lakh crore from the earlier limit of Rs 90,000 crore.

The limit has been raised as the power sector lender prepares itself to disburse more than Rs 60,000 crore to state-run power distribution companies to help them clear the dues of power generators under the Rs 1.2-lakh-crore liquidity infusion scheme. The rest of the loan under the scheme will be given by PFC’s subsidiary Rural Electrification Corporation.

“In view of the liquidity position in the market, PFC’s highest credit rating, track record and financial health, we do not foresee any challenge to meet the targets and maintain growth momentum, despite the slowdown in the power sector due to Covid situation,” the official added. With outstanding borrowings of Rs 3.24 lakh crore, PFC’s cost of funds in the first half of FY21 was 7.86%, 22 basis points lower than the corresponding period last year. As much as Rs 83,000 crore can be raised under long-term rupee-denominated borrowing in FY21.

In the wake of the risk arising out of the increasing foreign currency fluctuations, PFC is hedging its foreign borrowing portfolio, and has already hedged 72% of exchange risk for portfolio with residual maturity of up to five years. The lender had disbursed Rs 46,096 crore in total till September-end in the fiscal, 60% higher than the same period last year. Under the liquidity infusion scheme, it has sanctioned Rs 60,000 crore and has disbursed more than Rs 20,000 crore till date.

While speaking to investors in early November, PFC’s chairmen and managing director Ravinder Singh Dhillon had pointed that the ongoing fiscal’s borrowing programme needs to be increased “due to the moratorium extended to the borrowers on approximately Rs 20,000 crore dues in line with the RBI scheme and the lending under the liquidity discount scheme leading to enhanced fund requirement”.