REC Ltd (NSE: RECLTD) Q2 2025 Earnings Call dated Oct. 28, 2024
Corporate Participants:
Vijay Kumar Singh — Director of Projects
Unidentified Speaker
Vivek Kumar Dewangan — Chairman and Managing Director
Analysts:
Shweta Daptardar — Analyst
Shreya Shivani — Analyst
Manish Agarwalla — Analyst
Alok Srivastava — Analyst
Suraj Das — Analyst
Shreepal Doshi — Analyst
Preethi RS — Analyst
Sanket Chheda — Analyst
Nikhil Nigania — Analyst
Jigar Jani — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the REC Limited Q2 FY ’25 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions]
I now hand the conference over to Ms. Shweta Daptardar from Elara Securities Private Limited. Thank you, and over to you, ma’am.
Shweta Daptardar — Analyst
Thank you, Steve. Good morning, everyone. On behalf of Elara Securities, we welcome you all to Q2 FY ’25 earnings conference call of REC Limited.
From the esteemed management today, we have with us Mr. Vivek Kumar Dewangan, IAS, Chairman and Managing Director; Mr. Vijay Kumar Singh, Director of Projects; Mr. Harsh Baweja, Director of Finance; Mr. Mohan Lal Kumawat, Executive Director of Finance; and other senior officials.
We express our gratitude towards the management of REC Limited to provide us the opportunity to host this conference call.
Without further ado, I now hand over the call to Mr. Vijay Kumar Singh, Director of Projects for his opening remarks, post which we can open the floor for Q&A. Thank you, and over to you, sir.
Vijay Kumar Singh — Director of Projects
Good morning, everyone. I am Vijay Kumar Singh, Director of Projects. So we have a very brief presentation for our Q2 results, half yearly results. We would like to make that quick presentation. And thereafter, our CMD will be giving overall overview of the sector.
So please allow us to make this quick presentation to you. Over to my colleague for making the presentation, please.
Unidentified Speaker
Good morning, everyone. We’ll take you ahead for the investor presentation. We believe investors got an access of the investor presentation on our website, will take you ahead with this presentation. We have divided this presentation into five areas, which is REC overview, operational performance, asset quality, borrowing profile and the financial highlights.
Let’s take REC overview first. We see that REC has a journey of more than five decades, wherein we started our journey in 1969 to develop power infrastructure sectors in rural areas and therein we have — they have grown ahead in laps and bounds. And in the latest year 2024, we have been appointed as National Program Implementing Agency for PM Surya Ghar Muft Bijli Yojana. We also did our maiden yen bond issuance of JPY61.1 billion. And recently in September 2024, we did a USD bond issuance of $500 million, which were raised at the post competitive rates. REC has multiple key strengths, the first being Maharatna Company and a strategic player in the Indian power infrastructure and logistics sector. We have a diversified asset base with robust access to diversified funding sources. We occupy a strategic position in the growth and development of the power sector and a major player in renewable energy segment and creation of India’s green energy corridor. We have a healthy asset quality with adequate provisioning coverage ratio. We have very strong fundamentals and profitable business with stable margins leading to strong profitability.
We have highest domestic credit ratings of AAA, which is awarded by all the four major rating agencies in India. We have the international ratings of Baa3 and BBB minus from Moody’s and Fitch, respectively, which are at par with the sovereign rating of India. We are the nodal agencies for all the major flagship schemes of India, the major being RDSS, Saubhagya, DDUGJY, the latest being Rooftop Solar, etc. We have a highly qualified and experienced management team with sector expertise. We are a government’s trusted arm wherein we are assisting in GOI in multiple schemes, being RDSS, Saubhagya, Late Payment Surcharge Scheme, Consumer Service Ratings of DISCOMs on operational matters, Integrated Ratings of DISCOMs on financial matters, DDUGJY, NEF, Rooftop Solar program.
We have been accorded the coveted Maharatna status in FY 2023, which is the best among all the ratings assigned to the central public sector undertakings in India. We are among the top 14 PSUs which have been accorded this Maharatna status in India out of a total 100 rating — rated entities in India. Apart from Maharatna, the ratings are Navratna, Miniratna I and Miniratna II. REC holds the highest rating of Maharatna. This Maharatna status gives us various business advantages wherein we get greater operational and financial autonomy. It allows us strategic investments by incorporating JVs, subsidiaries, and M&A activities in India and abroad. We have — we can — we give — we have access to accelerated growth and support government’s vision for the power success.
If we come to Slide number 8, you see that we have forayed into infrastructure sector for nation’s accelerated development wherein we can — we have diversified our loan portfolio with a mandate of up to 33% loan in the infrastructure sector and logistics sector. In these sectors, we have — we have sanctioned various projects in metro, ports, water base, airport, oil refinery, road and highways, IT infra, fiber optics, steel infra and health sector.
If we come on to Slide number 9 of the PPT, we have given the shareholder outlook. If you see the shareholding pattern of REC as at 30th September 2024, we are majorly owned by a power finance corporation, who hold 52.63% in REC, while the foreign portfolio investors and FII hold 21.23% in REC, the insurance companies hold 3.93%, individual HUF/NRIs hold 10.78% in REC, the mutual funds and AIFs hold 9.48%, the corporates, banks and financial institutions hold 1.71%, and others hold 0.24%. The top 10 shareholders of — as at September 30, 2024 are also given in the slide, wherein PFC hold 52.63%, government of Singapore at 1.56%, HDFC Trustee is 1.47%, LIC, 1.35%, Nippon Life, 1.28%, Tata AIG, 0.77%, NPS Trust of Aditya Birla Sun Life Pension Fund, 0.77%, SBI PSU Fund, 0.71%, SBI Life Insurance Company Limited, 0.67%, Vanguard Total International Stock Index Fund at 0.66%. So these are the top10 shareholders of REC as at 30th September 2024. And FIIs and FPIs have always been reposed faith in REC and they have consistently sold more than 20% in REC stock since IPO in 2008.
We have been a strong history of high dividend paying in REC. And in the same context, we have declared the second interim dividend of INR4 per share in Q2 FY ’25. This is in addition to the first interim dividend of INR3.5 per share, which was declared in first quarter, making a total dividend payout of INR7.5, which is 75% per share on the face value of INR10. The earnings per share of REC for the half year is INR28.28, that is on annualized basis of 56.56% and the book value per share is at INR276.82 as at 30th September 2024. We have received various awards and accolades in our long history. The latest being that we have been awarded the Plaque under Financial Services Sector Other than Banking and Insurance category at the ICAI Awards, that’s Institute of Chartered Accountants of India Awards for Excellence in Financial Reporting for FY ’22-’23. Apart from that, we have received various awards in various areas for renewable financing, risk management, green bond sustainable finance and corporate governance, etc.
We come to the operational performance of REC for this quarter and half year ended 2025. In the first half of FY ’25, we have sanctioned total projects worth INR1,88,991 crores, wherein we have sanctioned the highest category of loans in renewables, including large hydro of INR60,391 crores, making the total sanctions of 32% out of the total kitty. So we have captured — we are still in the same trajectory of outpassing the last year sanction. In the quarter two of this year, we have sanctioned projects of INR76,200 crores, wherein renewable sanctions stand at INR20,737 crores. The disbursements during the half year stands at INR90,955 crores, wherein the renewable disbursements stand at INR11,297 crores, making the total disbursements of 12% out of the total portfolio.
The disbursements until second quarter was INR47,303 crores, and out of that, the renewables were INR5,946 crores. This signifies an increase of 20% in the disbursements from the last half year of FY ’24 in the current year FY ’25. And there is an increase in the renewable including large hydro of 93% in the disbursements in the current half year of FY ’25. Our loan book during the half year has increased by a robust rate of nearly 15% Y-on-Y and our loan book as at 30th September 2024 stands at INR5,46,117 crores, out of which, state sector stands at 88% of the total book at INR4,80,818 crores and the private sector stands at 12% of INR65,299 crores. The renewable stands at 9%. It has grown — it has grown continuously from September 2023 at INR29,833 crores to INR47,820 crores as at 30th September 2024.
Now renewable book stands at 9% of our total loan book, the generation book is at INR1,50,937 crores, the transmission book is at INR48,592 crores, the distribution book is at INR2,19,990 crores, the infrastructure and logistics sectors in the core area is at INR16,504 crores, and I&L, infrastructure and logistics sector, electromagnetic components at INR49,308 crores. The STL and MTL stands at INR12,966 crores. So that is the total book of INR5,46,117 crores. We have pan-India presence across all the states in India, wherein we are lending across 28 states in — of INR4,80,818 crores and private book of INR65,299 crores, making the total loan book of INR5,46,117 crores.
On Slide 17 of the presentation, we have given the top 10 major borrowers of REC, which are all in the state sector. The top being Tamil Nadu Generation and Distribution Company, then Maharashtra State Electricity Distribution, Tamil Nadu Power Generation, Kaleshwaram Irrigation Projects, Uttar Pradesh Power Corporation Limited, Telangana State Power Generation Corporation, Andhra Pradesh South Power Distribution Company, Telangana State Power Distribution Company, Jodhpur Vidyut Vitran Nigam Limited, and the Jaipur Vidyut Vitran Nigam Limited. We have a well diversified asset portfolio with top 10 borrowers accounting for nearly 36% of the outstanding loan, and none of the top 10 borrowers account for more than 7% of the total loan book, and there are no NPAs in the top 10 accounts ever.
If we come on the asset quality of REC, the asset quality has shown continuous improvement of wherein our gross NPA have reduced considerably from 3.42% in March ’23 to 2.53% in September ’24. Our net NPA have also reduced continuously from 1.01% in March ’23 to 0.88% in September ’24. The provision coverage ratio stands healthy at 65.12% as at close of September 2024.
On Page 20 of the presentation, we have given the sector-wise breakup of our ECL provisioning, that expected credit loss provisioning of our loan portfolio. If you see out of the total loan outstanding of INR5,46,117 crores, the total NPAs are at INR13,824 crores, where we have made a provisioning of INR9,003 crores, signifying a provision coverage ratio of INR65.12 crores [Phonetic]. Additionally, we have…
Unidentified Speaker
65.12%.
Unidentified Speaker
65.12%. Additionally, we have provisioning of INR3,705 crores on Stage 1 and Stage 2 assets, that’s the standard assets, implying a total provisioning of 0.70% also on the standard assets. The credit impaired assets of REC are at various stages of resolution, wherein almost 13 projects are under NCLT worth of INR12,296 crores, wherein we have made a provision of 67%. And we are also pursuing four projects outside NCLT worth INR1,528 crores with a provisioning of 50%.
We now come to the borrowing profile of REC, wherein we have the highest long-term ratings from CRISIL, ICRA, CARE and India Ratings of AAA and the domestic credit ratings of Baa3 from Moody’s, BBB minus from Fitch Ratings and BBB plus from Japan Credit Rating Agency, which are at par with the sovereign rating of India. Of the total outstanding borrowings of REC on Slide number 24, we have total outstanding borrowings of INR4,75,832 crores as at 30th September 2024, wherein our external commercial borrowings are at INR1,48,792 crores.
Apart from that, we have access to various other areas as well of borrowing, which are institutional bonds, including subordinated bonds of INR2,02,776 crores. We have loans — we have taken loans from banks and institutions of INR71,508 crores. We have access to 54EC capital gain tax exemption bonds of INR43,753 crores. REC is only amongst the four agencies in India who can issue such kind of bonds. We have tax-free bonds of INR8,999 crores, and we have borrowed small amount of INR4 crores from infrastructure bonds as well. So that is the total portfolio of INR4,75,832 crores of our borrowings.
During the current period of half year 2025, we have raised total quantum of INR77,759 crores to fund our disbursements. And during the current quarter ended September ’25, we have raised INR30,928 crores. Out of this, INR23,121 crores of — in half year have been raised from FCNR (B) loans and INR18,105 crores have been raised from foreign currency borrowings. We have also raised INR29,378 crores from institutional bonds, INR4,254 crores from capital gain bonds, and we have also taken loans from banks and FI institutions of INR2,900 crores.
Now we come to the financial highlights of REC for the half year ended 2024. We have recorded the highest ever half yearly profit of INR7,448 crores during the half year ended 30th September 2024. Our total stand — total income stands at INR26,633 crores versus INR22,571 crores, which signifies an increase of 18% Y-on-Y. The net interest income stands at INR9,723 crores versus INR7,763 crores, that also signifies an increase of 25% Y-on-Y. The net profit — the net profit for the half year stands at INR7,448 crores, which is an increase of 11% year-on-year from INR6,734 crores in the corresponding half year last year. The loan book has reached INR5,46,000 crores as at end of September 2024, which is an increase of 15% Y-on-Y.
The asset quality has improved with net credit impaired assets at 0.88% against 0.96% year-on-year. The net worth has also increased to INR72,893 crores versus INR63,117 crores, which is an increase of 15% year-on-year. We have a capital adequacy ratio of 25.31%, including Tier 1 capital of 22.87% and Tier 2 ratio of 2.44%, which is well above the RBI requirement of 15%. During the half year ended 2024, the yield on loan assets stands at 10.08%, the cost of funds at 7.12%, implying the credit — implying an interest spread of 2.96% and the net interest margin of 3.64%. The return on net worth is at 21.03%. The interest coverage ratio of 1.57 times and the debt equity ratio of 6.47 times.
The standalone statement of profit and loss is also given on Slide number 29, wherein we have given the quarterly and half year presentation of the profit and loss. We have attained a profit after-tax of INR4,005 crores in the quarter ended 20 — 30th September 2024 against INR3,773 crores, and also the profit for the half year is at INR7,448 crores. The balance sheet position is also given on Slide number 30, wherein we have given the item-wise distribution of the balance sheet position of assets and liabilities as of 30th September 2024.
With this, we have concluded the presentation, and CMD sir has also joined and now we can go ahead with a question-and-answer session. Thank you.
Vivek Kumar Dewangan — Chairman and Managing Director
I welcome all the participants today in this con call who are present today. As you have noted that our revenue from operation and income is increasing to — at the rate of 17% to 18%, and our asset under management has grown by 15.2% on half yearly basis. We’d like to give guidance that our asset under management in a — is likely to increase in next three years to four years at the rate of — it will vary from 15% to 20% depending on particular quarter, it can go to 15%, some quarter it may go to 17%, some quarters may go to around 20%. But on an average, we hope to maintain this 17% growth in our asset under management. But even if you take a conservative estimate, even if we grow at the rate of 15%, our asset under management would be doubled to about INR10 lakh crores by the year 2030.
But if we are able to sustain this 17% growth, perhaps we may reach doubling the asset under management by the year 2029 — 2028, 2029 itself. One more significant thing you might have observed that our sanction to the renewable energy sector has increased by about 21% in the first half of the year. We have sanctioned projects worth INR60,391 crores in the first half, and disbursements have also gone up by 93% with respect to renewable energy sector. Going forward, our Ministry of Power has outlined the requirement of 80 gigawatt capacity of coal-based capacity in the next six years to seven years by the year 2032. We are targeting a 20% market share in this coal-based power plants business also. And distribution sector will remain our key focus area because revamped distribution sector scheme is being implemented.
And thereafter also since continuous distribution network is quite old, 35-year-old to 50-year-old, the continuous upgradation of distribution infrastructure will still be required. And with the increase in share of renewable energy in the total overall generation profile, the requirement of the storage solution, the evacuation through green energy corridors will be still there. And we are targeting 20% market share in the renewable energy business, which may be definitely be more than INR3 lakh crores by the year 2030.
With this now we are open for questions.
Questions and Answers:
Operator
Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Shreya Shivani from CLSA. Please go ahead.
Shreya Shivani
Thank you for the opportunity and congratulations on a good set of numbers. Two questions. First is on the liability — funding side. So your cost of fund has inched up. Can you give some outlook for what’s — how it’s going to be in the future, and which bonds — I’m assuming one of those — which bonds are the one which has caused the spike? And how much price hike have we done for borrowers and which segment, traditional — renewable, etc., which segment did we hike the prices?
Second question is on some of these media articles had these news items about lending to some of these groups like, say, Vadhavan Port was mentioned couple of weeks back in the media article. So can you help us understand given Vadhavan Port is owned by JNPA, will our loan have a government guarantee over there from an explicit government guarantee as a collateral over there? And also there was a news article about lending to a company called Azure in the renewable sector. I wanted to understand the thought process behind lending to that company, given that there have been whistle blower issues with them, the CEO changed within two years — two months or so, stuff like that has happened in the past. And yeah, those are my two questions. Thank you.
Vivek Kumar Dewangan
Let me respond to those questions. The cost of fund is likely to come down by the year — by Q4, as you might have observed that Reserve Bank of India, although they are holding this rate, but this likelihood that the rates may come down in Q4. And we have kept a diversified portfolio of our borrowing. You might have observed that our FCNR loan and this excellent commercial borrowing has increased about 31% of our total borrowing that is there. Our cost of fund is much less than 7% actually. And our 54EC bond is the cheapest source of fund available that gives us 5.25%. Going forward, we don’t — we are not planning to increase. We are not planning to increase the burden on the borrowers because our cost of funds will be able to contain.
With regard to your queries about lending to non-power infrastructure and logistics sector, let me clarify that we are — our hands are full with our four sector proposal, conventional generation, transmission, distribution and with renewed focus on energy transition from the renewable energy segment and entire green project. We have a huge pipeline of projects from these core competency area. So we are not focusing on non-power infrastructure and logistics at this stage. As I had already indicated that we are — with regard to renewable energy projects, we have recently signed MOUs worth INR1,12,000 crores when we had participated in RE-INVEST Summit in Gandhinagar. And last year, we have signed MOUs worth INR2,85,000 crores. We have a huge pipeline of projects from renewable energy sectors and conventional generation, transmission, distribution also, we have a huge pipeline of projects. Will be selective in financing non-power infrastructure, logistics. Only where the asset quality is good, revenue cash flows are ensured, only those sectors we’ll be able to focus.
With regard to Vadhavan Port, you might have observed that, that has already been approved by the Cabinet Committee of Economic Affairs. Government of India has already approved. This is being taken by JNPA. And we would — but this execution will take time actually for Vadhavan Port. This execution will commence from the year 2027 only. By that time, it’s likely cash flows would become clearer. That point of time, we’ll take a call. But we do feel that there is absolutely no concern with regard to funding Vadhavan Port from that customer point of view. I’ll request our Director to respond on Azure and this security feature for Vadhavan Port.
Vijay Kumar Singh
Correct. So, Vadhavan, just to add what CMD sir just now informed is that we are in close discussions with them. They have confirmed that the entire equity will come upfront. Now you might be aware, there are two promoters, JNPA is one and Mumbai Maritime Board is another promoter with 26% stake. Both of them will put 100% equity upfront. Now upfront equity inclusion and debt, 100% [Phonetic] definitely gives us a lot of comfort in terms of project development and subsequently as well. But then we are in discussion and negotiating this loan with them. With regard to your query on Azure, yes, we are very, very careful and we are watching the developments in Azure.
What we have done in Azure is that we have picked up only the commissioned projects, the commissioned projects which have definitive and — definitive revenues, which have — the projects have secured very good rating. If I’m correct, it is A minus rated projects. So it is all towards refinancing of commissioned projects only. And we are definitely not considering at this point of time any project — greenfield project because we are still not very sure that for greenfield, the equity would come quite smoothly. But commissioned asset, the equity is in full, the projects are completed, they are up and running and they have very good rating, and therefore, we did that particular transaction.
Shreya Shivani
Got it, sir. Very useful. Can you help us understand in the commissioned projects of Azure, what would be the EBITDA cover?
Vijay Kumar Singh
I don’t have that particular number, but in terms of our debt service coverage ratio, it was close to 1.3 [Phonetic]. So this was a lot of combined [Phonetic].
Shreya Shivani
Okay, okay, sir. Thank you very much. Very useful.
Operator
Thank you. The next question is from the line of Manish Agarwalla [Phonetic] from PhillipCapital. Please go ahead.
Manish Agarwalla
Yeah, thanks for the opportunity. So taking the similar discussions forward, what’s your take on telecom sector if company open to provide loan assistance to likes of MTNL or Voda? Your views will be very useful, and I have few more.
Vivek Kumar Dewangan
Yeah, at this point of time we feel that we are not going to finance telecom sector, because our hands are — as already mentioned, our hands are full with conventional generation, transmission, distribution and with regard to renewable energy sector. Telecom sector as of now, we are not considering to finance.
Manish Agarwalla
Okay, sir. That’s useful. Second question was on repayment rates. So this quarter the repayment rates were slightly high. Is there any prepayments we are witnessing or are these some short-term loan which were disbursed earlier which are coming back, if you can comment on that?
Vivek Kumar Dewangan
Actually, REC is into a financing business and you can then expect that some of the prepayments will always come in. In the quarter itself, we have a prepayment of around INR7,000 crore, which has impacted our loan book also. But that is a continuous feature and it will keep on coming in the year and in the quarter of next quarters also.
Manish Agarwalla
So there is nothing called refinancing by other entities, correct?
Vivek Kumar Dewangan
No, it is nothing like that, it is nothing like that. It is just we have cash surplus with the borrowing agency and they have prepaid the amount to us.
Manish Agarwalla
Okay. And sir, finally on Lanco. So I understand the status quo is maintained. There is no money received. So if you can update on that? And also similar — on the related point, so we have been — our coverage on Stage 3 is coming down. So your take on that, why are we bringing down the coverage on Stage 3? That’s it from my side. Thank you, sir.
Vivek Kumar Dewangan
Lanco Amarkantak is, the NCLT has passed the order, but there were some operational creditors, they have [Technical Issues] about the distribution of this process. That matter is pending. So that’s why some amount has been kept. Once this matter is disposed of, the remaining amount would also get disbursed to all the lenders. Your second question…
Manish Agarwalla
On coverage sir, Stage 3 coverage ratio.
Vivek Kumar Dewangan
Yeah, state coverage. I’d like to clarify that of late, this Andhra Pradesh utility…
Unidentified Speaker
No, no, sir, that is not the question. I’ll just reply, what you’ve said that, as you know that most of the objects which are coming in the renewable sector are coming from the private sector. So in our previous, this investor conferences, we have already mentioned that by the year 2030, our private sector share will increase to 30%. So it is going in line with that of what we have already said to our investors that with the new infrastructure projects as well as renewable projects, the private sector share will keep on increasing. This time now it has — from 10%, it has reached to 12%.
Manish Agarwalla
No, no, sir. My question was — if I may come again? Your provision coverage on Stage 3 is declining, you are — and you are reversing the provisions. So my question was why are we doing that?
Unidentified Speaker
Actually, there was some amount was received and against which we have reversed some ECL provisions. So that is why our NPA has changed. And as soon as we get the full amount and the full settlement is there, the gross NPA will also come down.
Manish Agarwalla
Got it, sir. That’s helpful. Thank you.
Operator
Thank you. The next question is from the line of Alok Srivastava from UBS. Please go ahead.
Alok Srivastava
Yeah, hi, morning, sir. Sir, on the previous participant’s question, could you mention which asset is this, where this provision reversal has happened?
Unidentified Speaker
It is regarding the KSK Mahanadi project, which is under advanced stage of resolution, bids have already been received, some amount out of the TR we have received. That, the amount which we have received out of the TR amount, we have reversed ECL provision for that, that our management considers that the value as of now, which has been bidded by the prospective investors is much more than what we have already made a provision under ECL. So whatever was the safer side, we have reversed to that extent, and for that, the money has already been received.
Vivek Kumar Dewangan
In fact, NCLT allowed distribution of the money lying in TRA to the lenders. That’s how we got some receipt and the resolution of KSK Mahanadi is in advanced stage. We have got very good bids. And our recovery is going to be more than 100% with regard to KSK Mahanadi.
Alok Srivastava
Sure, sir. And sir, we have been reading that on Hiranmaye project, DVC has emerged as the highest bidder. So sir, what is our exposure there? And do we expect any write-back on that one?
Vivek Kumar Dewangan
Yes, yes. We are expecting a recovery of more than 80% from the Hiranmaye asset. And we had made provisioning about 50%. So we’ll get some write-backs. Our total write-back that we are expecting from three assets, KSK Mahanadi, Hiranmaye and Sinnar project in Nasik, our total write-backs are expected to be about INR1,500 crores.
Alok Srivastava
Okay, sir. Okay. And sir, one more question I had about TANGEDCO which is also your biggest borrower. There this trifurcation is going on between the generation, distribution and the renewable entity. So sir, is there enough clarity now that where the guarantees will sit and your exposures, are they all guaranteed over there? Is there any risk post the trifurcation that happens?
Vivek Kumar Dewangan
Thank you so much, Alok for asking this very pertinent question. The trifurcation of TANGEDCO has already happened. And the three companies become functional. And I’ll request that project to — say that our exposure is now well within the limit, and we have got sufficient spaces for all the three utilities.
Vijay Kumar Singh
So what was happening that in — especially in the case of Tamil Nadu, the generation company and the distribution company work together called TANGEDCO. You might notice that in a state like UP, we have five DISCOMs. In Tamil Nadu, we had only one DISCOM. And then that DISCOM was also clubbed with Genco, generation company. And therefore, we were experiencing a great difficulty in terms of our exposure limits. Now since this trifurcation has happened, the entire loan, in fact, earlier also, it was for a specific purpose, specific scheme for generation, transmission and distribution.
So likewise, the loan separation has happened with respect to the scheme that we had sanctioned, so now we have separate loan amount, which is in generation, transmission and distribution. Whatever loan was guaranteed by the government continues to remain guaranteed by the government even after the trifurcation. Now the biggest relief that we have got is that we are no way close to the exposure limit for any of the utilities with respect to generation, transmission and distribution.
Alok Srivastava
Okay. Got it, sir. So sir, here, there is a possibility that there could be a rating upgrade of some of these entities and you can have write-backs also at a later point because if I’m not wrong TANGEDCO had a C minus rating?
Vijay Kumar Singh
Overall rating, there will obviously be impact, and they’ll be rerated again. All these three utilities will be rerated again. And you may note that distribution utility rating is dependent on the ranking being done by the Ministry of Power. I’m sure their rating will go up and similarly for Genco also. Some of the assets that they have recently paid to their lender, we were not the lender for those projects, will also improve the overall financials of the generation company. So our understanding is that all the three companies will have improved rating going forward.
Vivek Kumar Dewangan
Once the improved rating is there, once the improved rating is there, and you have rightly mentioned that, that will impact our ECL provisioning also, that will also be to some extent reverse.
Alok Srivastava
Sure, sir. Okay. Thanks a lot, sir. All the best.
Operator
Thank you. The next question is from the line of Suraj Das from Sundaram Asset Managers. Please go ahead.
Suraj Das
Am I audible?
Vijay Kumar Singh
Yes, yes, Suraj. You go ahead.
Suraj Das
Yeah. Hi, sir, good morning, and congratulations on a good set of result. Sir, on your Slide 20, where you gave your loan portfolio and ECL provisioning. If I see the longer-term trend on that thing, just wanted to understand two things. One, sir, on the private sector side, in the generation and renewables, your PCR coverage on Stage 1 and Stage 2 is continuously coming down. So for example, in March ’23, it was something like more than 100 basis points, which is now 60 basis points. Similarly, on renewable, it is something like 230 basis points, 240 basis points. Now it has come down to 60 basis points. So just wanted to understand what is the rationale behind this? Is this — I mean — and at the same time, you are growing the renewable book also. So is it because your ECL PD assumptions are lower because you don’t have any significant delinquency over the past few years or is it a conscious choice?
Vivek Kumar Dewangan
Sir, can you please repeat the question? I’m not able to hear you perfectly, sir?
Suraj Das
Yeah. Sir, I’ll repeat it. So if I see the Stage 1 and Stage 2 provision for the private sector in generation and renewables segment, it is now 60 basis points and 62 basis points, respectively, this quarter. This number, let us say, in March ’23, four quarters, five quarters back, it was something like 100 basis points and 230 basis points. So this number is continuously coming down. So just wanted to understand what is the rationale behind this because we are also growing the renewable book. And you are also reducing the Stage 1 and Stage 2 provision on both the segments. So what is the rationale, sir?
Vijay Kumar Singh
So I think you might have seen that our renewable book is growing quarter-on-quarter, year-on-year basis. Now there are some projects which are under construction have not achieved COD. There are projects which have achieved COD and there are some refinancing projects also, which we mentioned during the earlier answers. So during the construction phase, the provisioning remains high, which is close to 1% as per the ECL methodology. And once the project achieves the COD, the ECL provision comes down by 40 bps. So as the projects continue to achieve COD, this provisioning will also come down. But then if there’s addition of under-construction project, there will be change in this particular provisioning. So all will depend on the mix of the under-construction and commission project, which will get reflected in overall provisioning in the renewable energy sector.
Vivek Kumar Dewangan
Number two, the PD of these all — some of the projects of renewable sector have also been improved, so which has resulted in lesser ECL provisioning, sir.
Suraj Das
Understood, sir. Very clear. And sir, second question, similarly on the infrastructure sector, both core and E&M, your provision on the Stage 1 and Stage 2 is only eight basis points. So should not be it higher sales because, I mean, at least 40 basis points, 50 basis points would be the initial provision to begin with or…
Vivek Kumar Dewangan
Actually what happens that in case of infrastructure project, most of our funding is to the government sector. So for that…
Suraj Das
No, no, I’m talking about the private sector only.
Vivek Kumar Dewangan
And out of this, the maximum are against the state government guarantee. So our — as per our ECL approved policy, the weightage of the PD and LGD is lesser than in case of the project is secured by the government guarantee. So that may be the reason what you are mentioning here why it is, in case of I&L [Phonetic], it is less.
Suraj Das
Okay. Sure. No, so for private sector also, you have government guarantee, is that what you were implying?
Vivek Kumar Dewangan
No, no, no. That is not the case, sir. Private sector is on the basis of the outstanding figure is there, sir. And…
Vijay Kumar Singh
So private sector is only close to INR1,250 crores out of our total infrastructure and logistics lending. And there, of course, the provision will be higher. What you see is the average and just all our lending in infrastructure and logistics, majority or I would say 90% of the loan that we have advanced in the state sector are guaranteed by the government, state government. And therefore, their provisioning is much lower. What you see 0.08% is towards private and state, and state put together by government guarantee — only private.
Vivek Kumar Dewangan
So as regards the private sector, it is absolutely on the ECL model for which we have the PD, which is done by our third-party agency, ICRA.
Suraj Das
Sure, sir. Got it. And last question is, sir, if I see the first half, your disbursement has been something like INR90,000 crores. What is the disbursement that you are expecting in the second half?
Vivek Kumar Dewangan
Yes. This year — last year, you might have noticed that our total disbursement was INR1,61,000 [Phonetic] crores. This year, our disbursement may go up to INR1,90,000 crores. Another INR1 lakh crore disbursement will happen in H2.s
Suraj Das
Sure, sir. Thank you. All the best.
Operator
Thank you. The next question is from the line of Shreepal Doshi from Equirus. Please go ahead.
Shreepal Doshi
Hi, sir. Thank you, and congrats on a decent quarter. So my first question was on sanction pipeline. So what is the cumulative sanction pipeline in the renewable energy and in the infrastructure project segment?
Vivek Kumar Dewangan
Let me first cover this renewable sector. Last year, our total sanction was INR1,36,000 crores. And this year, we have sanctioned more than INR60,000 crores. Another projects of more than INR80,000 crores is there, which we’ll be considering for sanction in the H2. With regard to infrastructure and logistics, as I had clarified that we are going slow on infrastructure and logistics sector because our hands are full with conventional generation, transmission and distribution, as well as the renewable energy sector. We’ll finance only those infrastructure and logistics sector where revenue cash flows are assured, asset quality is good, entity is good. So last year, we had sanctioned — in first year when — the year 2022, 2023, when government has allowed us to diversify into non-power infrastructure and logistics, that year, we had signed projects worth INR85,000 crores. But last year, it came down to INR40,000 crores. And this year will be to the same at the rate of INR40,000 crores to INR50,000 crores only in this current financial year.
Shreepal Doshi
Got it. Got it, sir. That’s helpful. Sir, the other question was, last quarter, we had highlighted about this account in Andhra Pradesh, which was seeing some issue. So as — so is the cash flow now back to normalcy or have you seen any improvement there?
Vivek Kumar Dewangan
Yeah, a lot of improvement has happened with regard to repayment coming from the — and overdues from Andhra Pradesh utilities. In fact, their distribution companies, their overdues have come to — they have become…
Vijay Kumar Singh
They have made some — they have made some good amount of payments in the month of October itself. So things are coming on track.
Vivek Kumar Dewangan
And by November and — or by December, all this will become — all the deals will start getting paid.
Shreepal Doshi
Okay. Okay. So we’ll see complete normalcy for that account or even on provisioning side by December? Hello?
Operator
Ladies and gentlemen, sorry to interrupt. The management line has been disconnected. Please wait while we reconnect them back. Thank you. [Technical Issues] Ladies and gentlemen, thank you for patiently holding. The management line has been connected. Mr. Shreepal, please go ahead with your question.
Shreepal Doshi
Hi, sir. So I was just asking that since that account has started repaying, and by December, you expect complete repayment for the dues. So will we see the reversals on the provision side as well for the — for this account by December?
Vivek Kumar Dewangan
Naturally, there will be reversal of more than INR100 crores.
Shreepal Doshi
Got it. Got it, sir. And then just one last question, which was like on the growth side. So while repayment rates are a little higher, so despite that, our growth guidance on loan book side will remain in the range of 15% to 17% or there could be some downside as well because of the higher repayment?
Vijay Kumar Singh
No, it is — now in Q3, Q4, it is going to be about 17%. 17% to 18%, it may go up to 20% also.
Shreepal Doshi
Okay, got it, sir, got it. Thank you so much for answering my questions, and good luck for the next quarter.
Vijay Kumar Singh
Thank you.
Operator
Thank you. The next question is from the line of Preethi from UTI Mutual Funds. Please go ahead.
Preethi RS
Hi, good morning, team. Sir, my question is on the market share comment that you made. So could you help us understand the current market size and how is the split right now between NBFCs, banks and bonds? And follow-up to that is, do you expect the competitive intensity for the sector go up given the healthy asset qualities and also the structural — structural power sector value chain that we see — the structural trends that you’ve seen in the power sector value chain? Yeah, that’s my question. Thanks.
Vivek Kumar Dewangan
Yeah. The question pertain to market share, let me first answer that. In power sector, conventional generation, transmission and distribution, as you might have noticed that out of our loan with most operators in this conventional generation, transmission and distribution, only 9% is there in the renewable sector. Infrastructure and logistics is about 11%. About 80% is conventional, transmission and distribution and generation sector. The market share of REC and PFC is about 20%, remaining 60% is by the other financial institutions. The same market share will be able to hold on to the renewable energy space also. That’s what — the total debt requirement for achieving 500 gigawatt of installed capacity from non-fossil fuel sources, right, we already achieved 200 gigawatt, another 300 gigawatt capacity will come.
Renewable energy installation of 300 gigawatt additional capacity, which will be installed, roughly INR15 lakh crore will be required, then associated transmission line in the — in the form of green energy corridor and storage solution is also required. The total requirement would be about INR15 lakh crores, INR20 lakh crores actually. So we are targeting a humble pie of 20% of that INR15 lakh crores. It’s more as we are making conservative estimates. It’s at least INR3 lakh crores will come from our renewable energy portfolio, but it may go up if the transition takes faster, and it might go up to more than 20% also. But minimum 20% we’ll be able to capture renewable energy sector business. With regard to power sector overall, you might have seen that power demand has been increasing at the rate of 8% to 9% in the last two years.
And this trend is going to continue as India is trying to become a developed country by year 2047, next 23 years, 24 years, the power demand will keep increasing. As you might have noticed that per capita consumption of electricity, India is only one-third of the world average. When we are aspiring to become a developed country, per capita consumption of electricity is bound to grow and should be more than the world average like the — developed countries, the U.S.A. and other countries, the per capita consumption, it should be about 11 times to 12 times out of world average. But we have followed a sustainable path, right.
Per capita emission of carbon dioxide is also one-third of the world average. But in our pursuit to become developed country, our per capita consumption of electricity is bound to grow, and it will be reaching about four times to five times of the world average. But per capita emission of carbon dioxide will not grow to that extent, and we’ll be able to — instead of one-third of the world average, that perhaps we’ll be able to come at the level of world average only with regard to the emission of carbon dioxide. Any other questions, Preethi?
Preethi RS
Yes. My question was on the competitive intensity from banks or the debt market.
Vivek Kumar Dewangan
Yeah, competition from banks will be there, particularly renewable energy sector because a lot of financial institutions are there. But even then, we’ll be able to hold on because the advantage with respect to REC is that we can give longer tenure loan. Our tenure of the loan can go up to 85% of the project life. So normally, the project life is about 20 years, 25 years and tenure of loan can go up to 18 years to 20 years, while banks typically give loans for a tenure 10 years to 12 years only. And that’s — we can take larger exposure in a single project, 30% our Tier 1 capital is about INR20,000 crores. We can sole lending also, we can do up to the INR20,000 crores. That is the inherent advantage which is there with REC as compared to other banks.
Preethi RS
Sure. Thank you for the response. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Sanket Chheda from DAM Capital. Please go ahead.
Sanket Chheda
Yes. [Technical Issues] Good quarter. Just to check on the recovery spend, now KSK Mahanadi, we already know and I think the template what be over and above [Technical Issues]. That’s first. And second on Hiranmaye and Sinnar, while we say more than 50%, but [Technical Issues] on the recoveries? Can it be more than 70%, 80% the way we have seen this change in KSK Mahanadi? So yeah.
Vivek Kumar Dewangan
Yeah, for KSK Mahanadi, let me first clarify. The NCLT has already allowed disbursements of the funds lying in the Trust & Retention Account to all the lenders. About INR12,000 crores is only going Trust & Retention [Phonetic], about INR6,500 [Phonetic] crores has already allowed us to distribute among the lenders. And the bids for which KSK Mahanadi, which is going, where the recovery is going to be more than 100% with regard to outstanding admitted claims, 100%, more than 100% we are getting actually. And Sinnar also, Sinnar, our exposure is INR3,231 crores, and we had made provisioning of 80%. The admitted claim is INR5,262 crores — sorry, total admitted claim in Sinnar is INR15,909 [Phonetic] crores.
Vijay Kumar Singh
Sinnar, we are expecting a recovery of around 55% [Phonetic], which is more than the ECL already provided. And as regards this Hiranmaye is concerned, we are expecting a recovery of around 82%, and we have made a provision of 50%. So more than the ECL provisioning will be [Technical Issues].
Vivek Kumar Dewangan
As I’ve mentioned, the overall reversal that we are expecting is more than INR1,500 crores from these three assets.
Sanket Chheda
Okay. Sure, sir. And there was a less accretion in AUM this quarter. I understand it was, say, due to higher repayment from LIS/LPL [Phonetic] than in the same quarter last year. But from here on, the accretion to AUM should be normalized, right? And while we guide for 15%, 20%, is 17%, 18% the right number to go with as far as expectation is concerned?
Vijay Kumar Singh
Yeah, Sanket, this I already replied. I mentioned that the range would be 15% to 20%, some quarter, it will be 15%, some quarter, it will be 17%, some quarter, it will be 20%. Average on an average, we are expecting that growth in AUM would be around 17% to 18%.
Sanket Chheda
Perfect, sir. Yeah.
Operator
Thank you. The next question is from the line of Nikhil Nigania from Bernstein. Please go ahead.
Nikhil Nigania
Hi. Thank you. Just one question. This is regarding the rooftop solar scheme, which REC is to be part of. I wanted to understand what is the role REC will play? And what is the loan security mechanism for such loans?
Vivek Kumar Dewangan
Nikhil, REC has been designated, has been given the task of National Program Implementation Agency. Our main job is to coordinate with the various stakeholders like consumers, distribution companies, vendors and the banks. We are not into retail financing. The retail financing for the rooftop solar is being earned by the public sector banks at the rate of 7% interest rate, they are giving the loan. We are not targeting to finance this retail business of rooftop solar. However, if some aggregators, vendors or PSUs are there who are going to implement this rooftop solar on large scale, there we are going to finance those aggregated vendors.
Operator
Thank you. The next question is from the line of Jigar Jani from B&K Securities. Please go ahead.
Jigar Jani
Yeah. Hi, thanks for taking my question. Just one on the margins, given — assuming that the interest rates do not happen, interest rate cuts do not happen very soon, how confident are we of maintaining the current margin of about 3.6% [Phonetic]? Is there a range that we should kind of maintain over the rest of the year?
Vijay Kumar Singh
Yes, Jigar, let’s assure you that we’ll be able to hold on the net interest margin of more than 3.6%. Yeah, the range is 3.5% to 3.75%, but it is definitely going to be more than 3.6%, because we are getting more of coal-based thermal capacity addition that is going to happen, there, our margins are quite good. And in fact, renewable also, our margins is more than 9.5% rate — average interest rate, which is going to renewable is 9.5%. While in respect of this conventional generation, it is more than 10.5%. We’ll be able to hold on to our — this net interest margin of more than 3.6%.
Jigar Jani
Right, sir. And just lastly on — there was one special loan disbursement of about INR8,000 crores this quarter. Could you just tell like what is that special loan?
Vijay Kumar Singh
Of course, some of the agencies actually need this special loan for a long-term tenure or not long-term rather medium term for five years to seven years. These loans are advanced to very few utilities for multiple purposes. Like Punjab, for example, is not available capex loan for very small scheme, they have taken a special loan, but that could be deployed for the capex purposes only. And they are taking only for six years, seven years, eight years. So such loans constitute a special loan for us.
Jigar Jani
So these are not short term, right, like RBPF or…
Vijay Kumar Singh
Yes, these are not short term. These are relatively medium term loans.
Jigar Jani
Okay. Understood. Thank you so much, and Happy Diwali to the team. Thank you.
Operator
Thank you. Ladies and gentlemen, that was the last question for today’s conference call. I would now like to hand the conference over to the management for their closing comments.
Vivek Kumar Dewangan
I would like to thank all the participants for asking very pertinent questions. And hopefully, we have been able to address all the questions. And let me assure all of you that we’ll be able to sustain the growth rate of minimum 17% in the next three years to four years to come. And our asset under management is definitely going to be more than INR10 lakh crores. It is likely to be earlier than 2030. That’s what I can assure you. Thank you so much, and Happy Diwali to all of you.
Operator
[Operator Closing Remarks]
Vivek Kumar Dewangan
Thank you.