REC Q2: Expect to resolve 6 assets in FY22; GNPAs to fall Rs 3,600 crore, says management

It was a good performance from Rural Electrification Cooperation (REC) in the second quarter, net interest margins came in at 18-quarter high, lower operating costs also aided the robust performance. The quarter-on-quarter disbursements for the company were up 44 percent.

CNBC-TV18 spoke with Sanjay Malhotra, chairman and managing director of the company, to get his take on the earnings and the outlook.

He said, “Going forward, we expect robust demand to continue and that is because India is still a growing economy and so, there is still a lot of demand for energy. We are only 1200 units per capita consumption, which is only 1/3^rd of the global average. The energy transition is another driver for the demand as we all try to mitigate climate change because of concerns on climate. Thirdly, there is a transition from fossil fuels because of environmental concerns, which is going to increase the electrical vehicles and along with that, the electricity demand. So going forward, we expect good demand.”

“We have grown at about 10 percent per annum over the last few years and we hope that we should be able to continue to give that kind of growth,” said Malhotra.

On disbursement targets, Malhotra said, “Last year, we did disbursements of more than Rs 90,000 crore, but that was because we had the liquidity infusion scheme under the Atmanirbhar package because the DISCOMs were actually starved for funds in the wake of the lockdown and the difficulties faced by the consumers in making payments. However, that is going to be out this year. So, we will not be able to repeat that performance but we hope that we should be able to have disbursements in excess of Rs 75,000 crore, which was the number in the year prior to the previous year.”

The power ministry has asked for the speedy resolution of stressed assets and so when asked what should be the quantum of resolution that one should look forward to, Malhotra said, “The company has managed their NPAs well so far and last year we managed to resolve for assets and reduced their NPAs by about Rs 5,000 crore. However, this year, the first six months have been a little slow because of COVID and the time being taken in the NCLT.”

“We have now approvals for two projects and another two projects are in advanced stage in the NCLT. While one we have already done and so this year, we are expecting resolution of five assets,” he added.

“We also expect another asset to be liquidated, so in all six assets - Rs 2400 crore of resolution and Rs 1200 crore of liquidation. So, Rs 3600 crore should be out of NPAs from the gross block of about Rs 18,000 crore,” he said.

He further said they have many more projects for the next year that is about three projects totalling about Rs 1200 crore that are expected to be resolved next year. “We are hopeful that we should be able to reduce our gross NPAs and hopefully, we won't have many new NPAs, so with that caveat, we should be able to reduce our gross NPAs,” Malhotra mentioned.