Moody’s Investors Service estimates that though the Rs 90,000 loan for discoms carry low risk because of the state guarantees, it will increase the leverage of PFC and REC if they are booked as on-balance-sheet loans. The agency expects PFC’s tangible common equity/tangible managed asset (TCE ratio) to fall by about 90 basis points if added to its balance sheet. “This will weigh on PFC’s capital adequacy and leverage, which is already moderate because of the acquisition of REC,” analysts at Moody’s said.
Power sector lenders PFC and its subsidiary REC will use the loan amount allotted to state-run power distribution companies (discoms) to directly pay power generators (gencos) which owe money from these entities.
