We plan to increase RE share in portfolio to 30% by 2030: REC CMD

REC Ltd, state-run non-banking financial corporation in the power sector, plans to increase its portfolio in lending to the renewable energy sector to 30% from the current 10% by 2030. Moreover, it plans to double its assets under management to Rs 10 trillion by 2030 with both conventional-energy and RE projects forming the major part of it, Chairman and Managing Director Vivek Kumar Dewangan told Arunima Bharadwaj and Raghavendra Kamath. REC Ltd reported a 33% annual rise in its consolidated net profit for Q4FY24 at Rs 4,079 crore and targets to become a net zero NPA (non-performing asset) company by the end of this financial year.

In the last two years, REC has seen phenomenal growth. In FY23, our loan book increased by 13% but in FY24 it was up by 17%. Going forward, we would like to double our assets under management to Rs 10 trillion from $60 billion to $125 billion by 2030.

If we are able to maintain a growth trajectory, say 15% itself, we will be able to reach this target by 2030. If growth is 17% or more, which we are quite hopeful about, we will be able to reach this target in 2029, one year ahead.

We are targeting 40% sanctions to go to RE projects. And since turnout time is quite fast we are expecting a lot of disbursal this fiscal and the next. Every year till 2030 we will be able to add 3-4% additional AUM from RE projects.

Of the Rs 10 trillion AUM, we plan to sanction Rs 5 trillion to the conventional including -, generation, distribution, transmission sectors. This, we may, increase to Rs 6 trillion. We are focused only on good asset quality, good entity, where revenue cash flows are assured only those non-power infra log we are sanctioning. REC has diversified in the non-power sector in the last few years.

What kind of growth do you see in each segment of your portfolio going forward?

The share of renewable energy in our portfolio presently is only 7% at around Rs 35,000 crore. We see a huge potential and our loan book in the RE sector is going to see a tenfold jump to Rs 3 trillion by 2030. Right now our 90% lending is to the state companies and 10% lending is to the private sector. Since most RE projects are coming in the private sector, this profile is going to change. The share of private sector lending is going to increase from 10% to 30%, and that of the state sector will come down to 70% from 90%.

What about the exposure to non-power infrastructure sector?

The share of non-power infra logistics in our portfolio will grow four times to Rs 2 trillion by 2030 from the current Rs 50,000 crore. In the conventional sector too, we aim to finance projects totaling 74 megawatt (MW) capacity as the government targets the addition of 94 MW of new coal-based capacity by 2032. Nowadays the cost of coal-based plants have increased to Rs 10 crore per MW. So we are targeting a conservative estimate of Rs 3 trillion worth coal based power generation projects. This is the most profitable business for us with the largest margin with more than 10% depending upon the rating of the utility.

What is the status of implementation of the Revamped Distribution Sector Scheme?

Out of 250 million, 140 million pre-paid smart meters have already been awarded; the remaining 11 crore are in the pipeline. These will get installed in the next 2-3 years. Even after RDSS is over, the distribution infrastructure is quite old in the country. It will require continuous upgradation for the next 10-15 years. I see that the distribution sector and transmission sector will require a lot of capex and we will be sanctioning projects in this segment. Some smart metering awards are a bit delayed, perhaps it will be extended. RDSS brings us Rs 70,000-80,000 crore business.

What is your target for sanctions in FY25?

In FY25 we are targeting a minimum sanction of Rs 4 trillion. RE itself has a huge pipeline of more than Rs 1 trillion.

How many non-performing assets do you currently have?

At the start of 2018 we had 36 stressed assets, we have already resolved about more than 21 projects, 15 are left. Of these 15 projects, 7 we have made 100% provisioning, because they are heading towards liquidation. The remaining 8 projects are operational assets, we expect good write back because we already made provisioning of up to 70%.

Initially we have assumed that the haircut will go up to the tune of 70% but practically when we are resolving these issues through NCLT, our haircut is limited to 20-30% only. In the current financial year we will be able to resolve all our stressed assets and are expecting that we will get a write back to the tune of Rs 1,500-2,000 crore.

Once these all get resolved we are targeting to become net zero NPA (non-performing assets) company by this fiscal.