Disbursements by power-focused infrastructure companies are expected to surpass Rs 2.9 trillion in 2023-24 (April-March), aided by substantial capital expenditure in the power sector and improving balance sheets, CareEdge Ratings said in a report. Disbursements were at Rs 2 trillion in 2022-23.
This growth in disbursements is likely to enable such infrastructure finance companies to continue gaining market share from traditional banks. The companies include Power Finance Corporation, Rural Electrification Corporation and Indian Renewable Energy Development Agency.
Infrastructure finance companies focusing on power comprise 64% of total loan book of NBFC-IFCs (non-banking financial company – infrastructure finance companies) and IDF (infrastructure debt funds) as on March 31, 2023.
While the exposure of banks to the power sector has remained largely range bound, non-bank lenders have consistently been growing their loan books, supported by government schemes and improved financial position.
Share of infrastructure finance companies’ exposure to the power sector in relation to banks increased to 59% as on March 31, 2023, from 55% as on March 31, 2020. It is expected to rise to 63% by March 31, 2024.
Growth will come from both generation and distribution portfolios, led by the revamped distribution sector scheme and disbursements towards the renewables segment. Traditionally, loan portfolios of power-focused IFCs have been dominated by the generation sector. However, there has been a noticeable shift in the composition of these portfolios.
With the government’s growing emphasis on the renewable energy sector, the share of renewables in these loan portfolios rose to 12% as on March 31, 2023, from 10% as of March 31, 2022. The rating agency expects the share of renewable energy in the overall electricity generation mix to rise to 21% by 2024-25, from 14% in 2023-24.
The asset quality metrics for these infrastructure finance companies have shown a continuous improvement due to negligible loan slippages and recoveries from legacy accounts. This improvement has been further supported by government initiatives, which have reduced legacy dues of generation and transmission companies by nearly half over the past year.
Subsequently, these finance companies are expected to maintain the trend of improving asset quality over the medium term. There are potential risks associated with client and sector concentration, increased exposure to the private sector, as well as inflationary pressures and consequent policy tightening, which could impact growth prospects, the report said.
The post Power Finance Firms’ Disbursements To Top Rs 2.9 Trillion In FY24: Report first appeared on Latest India news, analysis and reports on IPA Newspack.
