Rural Electrification Corporation Limited - IPO Note.
REC has been accorded a "Mini Ratna Grade-I" status and is one of the leading public financial institutions in the Indian power infrastructure. They are engaged in the financing and promotion of transmission, distribution and generation projects throughout India. Although their emphasis continues to be on the development of electrification of rural areas, their mandate has evolved in accordance with the development priorities of the GoI and permits them to finance all segments of the power sector throughout the country.
They provide funding to their clients and assist them in formulating and implementing various types of power project-related schemes. They service their clients through a network of seventeen project offices (Jammu, Shimla, Chandigarh, Jaipur, Lucknow, Patna, Vadodara, Kolkata, Guwahati, Shillong, Jabalpur, Mumbai, Hyderabad, Bhubaneswar, Bangalore, Chennai and Thiruvananthapuram) spread across India.
Participation in Government Programmes
Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)
The RGGVY, has as its objectives the electrification of all villages and providing access to electricity to all rural households in the country, including the electrification of un-electrified, below poverty line households. REC has been appointed the nodal agency for implementation of the scheme and is responsible for complete oversight of the programme from conception to completion. (As on September 30, 2007, they have disbursed a total of Rs. 55,772 million to 25 states under RGGVY,)
Accelerated Power Development and Reforms Programme
The GoI provides funds to SEBs and SPUs under the programme in two components. The balance of the funding for the project must be arranged by the SEB and SPU in the form of internal or external financing or through other means. Since the launch of the scheme, REC has provided counterpart funding for 331 APDRP schemes. (As on September 30, 2007, tbey had total loan sanctions of Rs. 39,754 million and total loan disbursements of Rs. 6,113 million in counterpart loan funding under APDRP.)
Accelerated Generation and Supply Programme
The GOI launched the Accelerated Generation and Supply Programme, which provides interest subsidies for projects involving renovation, modernization and life-extension of coal, thermal and hydro power plants, completion of ongoing generation projects, construction of transmission links, system improvements and grants for various studies, subject to fulfillment of certain conditions. (As on September 30, 2007, REC had total loans outstanding under AG&SP of Rs. 13,379 million)
GoI Tariff-based Competitive Bidding Scheme
The GoI launched a scheme under the Electricity Act to invite private sector investments in major transmission projects pursuant to which private developers are proposed to become transmission service providers on a "build, own and operate" basis. The GoI has identified 14 transmission-
International Cooperation And Development
REC's International Cooperation and Development division coordinates with bilateral and multilateral agencies for projectbased funds and to forge partnerships with international agencies. This division currently has two active projects and also fosters their participation in the DRUM programme.( JBIC.- Japan Bank for International Cooperation & KfW - Kreditanstalt fur Wiederaufbau)
Central Institute For Rural Electrification
REC established the Central Institute for Rural Electrification at Hyderabad, a training institute established for the purpose of designing and conducting training programmes on various aspects of power transmission and distribution systems and non-conventional energy systems.
Strengths
- Their business is profitable and financial position strong.
- Their overall cost of funds is competitive.
- They employ a pro-active approach to client relationships.
- They occupy a key strategic position in the GoI's plans for inclusive growth.
Strategy
- Capitalize on increased investment in the Indian power sector.
- Leverage their broad mandate to continue their growth and diversify their asset portfolio.
- Increase their involvement in consortium lending and private sector participation in the Indian power sector.
- Implement technological innovation to manage their growth and remain a dynamic organisation.
Key Concerns
Their business and their industry are dependent on the policies and support of the Government of India.
- They have a significant concentration of outstanding loans to certain borrowers and if the loans to these borrowers become non-performing, the quality of their asset portfolio may be adversely affected.
- They currently fund their business in significant part through use of borrowings that have shorter maturities than the maturities of substantially all of their new loan assets, they will be required to obtain additional financing in order to repay their indebtedness and grow their business.
- Their profitability and growth will be dependant on their ability to maintain a low effective cost of funds.
- They take advantage of certain tax benefits available to them as a lending institution. If these tax benefits were reduced or no longer available to them it would adversely affect their results.
- The level of NPAs in their loan portfolio has increased due to their recent implementation of revised prudential norms and could further increase beyond their expectations.
- They may not have obtained sufficient security and collateral from their borrowers, or they may not be able to recover, or there may be a delay in recovering, the expected value from any security and collateral.
- They have granted loans to the private sector on a non-recourse or limited recourse basis, which increases the risk of nonrecovery.
- Their ability to borrow from various banks may be restricted by recent guidelines issued by the RBI imposing restrictions on banks in relation to their exposure on NBFCs, including them, that may adversely affect their growth and margins.
- Certain SEBs that were their borrowers have been restructured and they may not have transferred the liabilities associated with their loans to newly formed entities.
- They may not have complied with the terms and conditions set forth in their NBFC registration certificate.
- They will continue to be controlled by the GoI following this Issue, and their other shareholders will be unable to affect the outcome of shareholding voting.
- The power sector financing industry is becoming increasingly competitive and their profitability and growth will depend on their ability to compete effectively and maintain a low effective cost of funds.
- Delays associated with receipt of GoI funding for RGGVY (Rajiv Gandhi Grameen Vidyutikaran Yojana) or other failures in its implementation may affect their financial condition or their reputation.
- There is ambiguity as to whether they are subject to recent amendments of Reserve Bank of India regulations requiring them to adopt prudential norms.
BigGains !!
Change settings via the Web (Yahoo! ID required)
Change settings via email: Switch delivery to Daily Digest | Switch format to Traditional
Visit Your Group | Yahoo! Groups Terms of Use | Unsubscribe
__,_._,___
No comments:
Post a Comment