With India’s plans to add about 85-90 GW of thermal power capacity by 2031-32, REC Limited, a major state-run non-banking financial company in the power sector, has declared its intention to fund 50 percent of the capital requirements of the thermal power capacities coming within the said timeline.
PSU Watch had earlier reported that India’s thermal power capacity addition plans for 2031-32 will entail an investment of Rs 6.67 lakh crore. Ajoy Choudhury, Director (Finance) at REC, said that out of the total investment of Rs 6.67 lakh crore, funding will be restricted to about Rs 4-4.5 lakh crore. “We are targeting roughly 50 percent of this funding opportunity that will happen over a period of time by 2031-32,” he said.
“The share of coal in our loan book is currently at 28-30 percent. And it is going to continue at that level until 2031-32 even as we tap into the funding opportunities presented by additional thermal power capacity addition. And that is because the share of renewables in our loan book will go up. Renewable Energy currently constitutes only about 7-8 percent of our loan book. And it is expected to go up to 30 percent by 2030.”
If they are increasing both coal funding and renewables, this should help them increase their loanbook and also get the ‘Renewables and ESG’ tag helping IREDA get the PE multiples.
At the same time, government’s LTCG and removal of indexation benefits will aid ita capital gains tax bond funding. Since they have to now compete with many large private banks as well for deposits, it will be an easy source of cheap funds.
How do you look into the PE multiples and valuation? Does it have a IREDA rerating potential? What are the triggers or weaknesses we need to look into for coal based funding.
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