Power Fin.Corpn.

Power Finance Corporation reported a robust H1 FY26, with consolidated profit after tax reaching ₹16,816 crores, a 17% increase year-on-year. The group loan asset book expanded by 10% year-on-year to ₹11,43,370 crores as of September 30, 2025, while the standalone loan asset book grew 14% to ₹5,61,210 crores. This growth was supported by strong disbursements of ₹86,000 crores in H1 FY26, marking a 30% increase from the previous half year, with 57% directed to the distribution segment and 30% to generation projects.

The company achieved its lowest net NPA ratio in a decade, standing at 0.37% for H1 FY26. Consolidated gross NPA improved to 1.45%, and standalone gross NPA declined by 84 basis points from 2.71% in H1 FY25 to 1.87% in H1 FY26. The Stage-3 NPA book is currently at ₹10,490 crores, backed by a healthy provisioning coverage of 80%. Out of 22 stressed projects, 11 projects worth ₹8,470 crores are under NCLT resolution, with 6 projects totaling ₹2,600 crores under liquidation, for which 100% provisioning is maintained.

PFC maintained its financial stability with a yield of 9.98% and a cost of funds at 7.43% for H1 FY26, resulting in a spread of 2.55% and a Net Interest Margin (NIM) of 3.62%, both within the guided range. The company's capital adequacy remains strong, with a Capital to Risk-weighted Assets Ratio (CRAR) of 21.62% and Tier 1 capital at 19.89% as of September 30, 2025, comfortably exceeding minimum regulatory requirements. An interim dividend of ₹3.65 per share was declared, contributing to a cumulative FY26 interim dividend of ₹7.35 per share.

PFC is actively expanding its market presence, including its first cross-border financing deal of ₹4,800 crores for the 600 MW Khorlochhu Hydro Power Project in Bhutan, to be financed in Rupee. The company also secured a 60 billion Yen loan agreement with JBIC for a bamboo-based bio-ethanol project in Assam and partnered with Export Finance Australia for USD180 million in clean energy projects. These initiatives underscore PFC's commitment to diversifying funding sources and accelerating India's clean energy transition, solidifying its position as the largest renewable sector financier in India with a renewable loan book of ₹84,680 crores as of September 30, 2025.

The company reported an exchange loss of approximately ₹1,100 crores in H1 FY26, primarily due to the Euro appreciating around 8% against the USD, affecting its unhedged portfolio and derivative book. Management acknowledged this impact but expressed confidence in a gradual reversal of these losses from quarter-to-quarter if the dollar strengthens against the Euro, citing the long-term maturity of Euro-denominated loans. PFC remains focused on actively managing its forex exposure to ensure resilient financial performance.

New RBI project financing directions, effective October 1, 2025, mandate 1% provisioning during the construction phase and 0.40% during the operational phase for new loan sanctions. PFC currently maintains approximately 1.01% provisioning on its Stage-1 and Stage-2 assets, which already exceeds the statutory requirement. Additionally, a draft RBI circular released on October 24, 2025, proposes new risk weight slabs of 50% and 75% for NBFC infrastructure exposures, applicable from April 1, 2026, which PFC is currently reviewing for its detailed implications across its portfolios.

PFC faces increasing competition from other financial institutions such as IRFC, HUDCO, NABARD, and NaBFID in the infrastructure lending market. While acknowledging this competitive landscape, management believes there is ample scope for growth and expects to maintain its spreads and margins. The company also noted an increase in prepayments, particularly from renewable projects, as borrowers seek better terms. Despite these challenges, PFC aims to manage its loan book to achieve its FY26 growth guidance of 10-11%.