With sanctions totalling Rs1.14trn and application for a further Rs157bn (under UDAY limit relaxation) by Chhattisgarh, Jharkhand and Uttar Pradesh, the total applications under the PFC/REC Aatmanirbhar Scheme to infuse liquidity into discoms touch Rs1.3trn. Of this, Rs311.4bn has already been disbursed to several states. UDAY limit relaxation has allowed states to borrow more and, apart from the mentioned states, others including Maharashtra, Himachal Pradesh, etc. have also availed of the benefit. Given that SEBs are comfortable with the conditions, further disbursals, including the second tranche, are expected in the next 3-4 months. This will significantly help ease the sector's receivables concerns (overdues reached Rs1.22trn in Aug'20) in the next few months, particularly of the CPSEs. NTPC and Coal India remain our top picks in the sector.
- Loan sanctions nearing Rs1.3trn for the scheme; Rs311.4bn disbursed: Till 28th Oct'20, the PFC/REC Aatmanirbhar scheme to infuse liquidity into discoms has received interest totaling Rs1.3trn, of which Rs1.14trn has already been sanctioned and Rs157bn under UDAY limit relaxation are in process. Rs311.4bn has been disbursed till date.
- Tamil Nadu approves guarantee and budgetary support for repayment: Tamil Nadu government has approved guarantee and budgetary support for repayment of Rs302.3bn loan to be taken under the scheme (already sanctioned). The state's finance department has issued orders for unconditional and irrevocable government guarantee and commitment letters for the proposed loan. This is the biggest loan application by a state, about one-fourth of the total scheme size. Given that SEBs are comfortable with the conditions, we expect the time lag for second tranche to be less than 3-4 months. GoI has already relaxed the working capital limits of states to go beyond 25% of past year's revenues, as prescribed under UDAY. Under UDAY limit relaxation, the latest sanction received is by Maharashtra for an additional Rs46.6bn (which may double to Rs93.1bn after PFC sanctions) and several states have shown their interest to avail of this benefit.
- Disbursement to ease concerns about overdues: We believe further disbursements under the package will channelise liquidity into the value chain by clearing dues of CPSUs and IPPs, easing systemic stress further. As per the Praapti portal, discom overdues reached Rs1.22trn in Aug'20, with overdue to NTPC at Rs194bn. Further, as per the coal ministry, outstanding dues payable by power companies to CIL reached Rs221.3bn in Sep'20. Thus, CPSUs will be among the largest beneficiaries.