Power Finance Corporation Ltd
About company
1. The company is engaged in financing (providing loans) to power generation firms. A specialized power
financier and track record has funded 23% of the total installed capacity in the country. PFC has vast
domain (power sector) expertise.
2. The Indian government has already envisaged plans to add 79,000 MW of power generation capacity
by 2012 with planned expenditure of about $200 billion to cover the demand-supply mismatch.
Likewise, the addition of new generation capacity would require an equivalent amount towards allied
activities in the transmission and distribution segments, which put together indicates a huge
requirement of funds.
3. The PFC has 20% market share and its loans sanctioned to the power sector grew by 45% on average
in the last 5 years. For nine months ended December 2008, its disbursements have grown by around
45 per cent, much faster than seen in the past (CAGR of 16 per cent in the last five years), which is
indicative of robust loan sanctions done earlier and faster project implementation by power companies.
With a jump of more than 120 per cent in sanctions in FY08, the disbursements would be healthy
going forward into FY10.
Important note - Still Indian Markets are directionless and indecisive due to which any further market correction may bring some more pressure on all researched stocks mentioned in following subsections.
The market volatility situation is for short term duration and in long term the markets will recover as Indian companies are having good fundamentals and good growth prospects.
Taking into consideration current market situation it is advisable to buy stocks in steps rather than buying in bulk in single trade.
(Researched date - Feb 2009)
Future Growth
PFC has been designated as the nodal agency for implementation of various power schemes as well as Ultra Mega Power Projects (each costing around Rs 16,000 crore); this enables the company to undertake all activities necessary to obtain the appropriate clearances required to establish the UMPPs for a fee. Four UMPPs have already been awarded to successful bidders, and another nine are yet to be announced. With PFC being closely associated with the passage of these projects, there is also the possibility to lend to these projects.
Returns
CMP - Rs.137
Buying price - Near Rs.100
Returns Expected - above Rs.150
Investment Period - 2 to 3 years
Taking into consideration Rs.137 as buying price following are the returns
64% Target acheived in month of 19 May 2009. It went high till Rs.226 (Updated - May 2009)
Finance Sector
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