© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to the REC Limited Q4 FY '20 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kunal Shah from ICICI Securities. Thank you, and over to you, sir.
Yes. Sure. Thank you, Ayesha, and good evening all of you. This is Kunal Shah from ICICI Securities. We have with us Mr. Sanjeev Kumar Gupta, Chairman and Managing Director and Director, Technical; Mr. Ajoy Choudhary, Director, Finance; Mr. V.K. Singh, Executive Director, Technical; and Mr. Sanjay Bansal, Executive Director, Finance, from REC to discuss the developments in the power sector, to review the FY '20 earnings, and also to let us know what is the status on the resolution of this stress effects, as well as the progress on special long-term COVID transitional loans to DISCOM. So over to you, sir.
Mr. Kunal, Mr. Lakshmanan is also there. He is Executive Director, looking after the stressed segment, the stress effects as such. So he is also there along with [Technical Difficulty] Our CMD is starting with the con call, please. So he'll be giving a brief overview of the REC assets.
Thank you very much, and welcome to this conference. It's my privilege to be before you and interacting with you on REC and its results. Just at the outset, before we discuss the salient point of our financial results, I would just like to give an overview of this power sector in the context of REC, how various events have influenced our operations and how we have adapted and coped up with the situations going forward. As you know that Indian power sector over the last few years, 5, 7 years have undergone a massive transformation, while we have a very adequate generation capacity, installed capacity of 370 gigawatts and our peak load is close to 180 gigawatts. And particularly in last 3 to 4 years, if you can see that in the country, we have this energy shortage or the peak shortage less than 1%. So as far as availability of power is concerned in this country, this is a change scenario where power is available. Generation segment and the transmission segment have fared reasonably well. But for -- of course, there have been issues of some distressed assets in the private sector that we will discuss. Distribution sector has seen a massive intervention from central government also. Power being a concurrent subject, central government keeps hand in hand with the state governments because most of the -- almost still the 90% power distribution in the country is still in the hands of state enterprises that is [Technical Difficulty] And over the years, we can see there has been a massive aid grant by centrally sponsored schemes to particularly improve the power distribution system, which is normally considered as a weak element, it is basically a [ fall from ], which is basically a cash box of the power sector. And various schemes to improve this infrastructure and the operational performance of this sector in the urban areas, in the rural areas, those have been there. And I'm very, very happy to tell you that apart from our universe of being a power infra investor at this company, we are nodal agency for various government program. We fit in the Government of India scheme of things to oversee implementation of these government programs. So while on one point of time we take pride in beating almost 20% to 20% of power infra investment requirement of the country, we do, on the other side, have been very socially responsible to partner with Government of India to assure that particularly this access of power to all the villages, the rural areas of the country, almost more than 600,000 villages and also to take this power to each household. As of today, we can see, as of today, 2019, all villages of the country is trans-electrified. All household of the country is trans-electrified. Of course, electrification is ever-evolving process. So basically, still, as of now, we can see from the record from our state government, we do have still some 4.5 lakh household is still to be electrified, and that is a work in progress, keeps on going. I mean to say that now we have all the power generating infrastructure, power transmission infrastructure in place, and the distribution infrastructure and access to the power is available. India, as a country, inspires to develop forward. You can very well see our per capita electric consumption is still today, to be precise, this comes out to be 1,182-kilowatt hour as against the world average of 27-kilowatt hour.So with that view, each and every one of you can appreciate that we have to go miles away. We have just started. And things are quite well in place, and it's still -- this work is going on to further modernize these systems because we are one of the largest power generating nation. And going forward, to assure this reliable, quality, affordable power to the country, this is a requirement that all those grids and grids have to be modernized, and there has to be adequate investment in the distribution infrastructure in the transmission sector. On the generation front, as the global energy transitions are occurring, basically, this conventional power is getting a shift to renewable power. India is one of the largest -- the fastest-growing country as far as [Technical Difficulty] distributions are concerned, particularly solar -- solar and wind.And in the -- with that perspective, REC is also -- has aligned with all business with reference to these developments, particularly this '19, '20, as we will see and we will deliberate our results have been quite good. I will say that they're excellent but for the [Technical Difficulty] because of the global pandemic and the events, which have, like all others, have influenced us also. And with this perspective, we have seen that even for coping up that this particular events, which influenced our operations, in that sense, that it affected basically a very, very critical element of power value chain, that is distribution. There was a -- at the end of the financial year, there was a national lockdown, which continued for another 1, 1.5 months. Then there was a moratorium on the payment by our RBI. So definitely the recovery from the consumer to the DISCOMs was affected. DISCOMs are supposed to pay because -- pay to the transmission and the generator companies, these independent generators and RE gen, renewable energy generators. When this value chain was disturbed, because on one side, the supply side, the demand trends low because industrial and commercial activities did not -- was not there because of this thing. Second thing, it was only a domestic demand. And because of the tariff structure in this country, you can see that DISCOM's total receivables per day used cut back. But again, in this thing also, government has intervened. There have been adequate efforts to introduce this liquidity into the system so that all elements of this value chain function smoothly. This government has inclusive INR 90,000 crores funds liquidity into the sector so that all the DISCOMs which were influenced because of nonrecovery from the consumer or low recovery from the consumer, they could pay to this -- all these renewable energy generator, to IPPs, to their transmission companies and because ultimately, it is a chain. So this thing is going on.I am again, pleased to inform you that our REC company happens to be one of the agency, which has been entrusted with this task. We are very well going on in this thing and adequate progress has been made. We have no liquidity problem as of now. And as for the targets entrusted to us, we will fulfill this responsibility. Of course, I would say that with reference to COVID, how the things have changed, as far as REC is concerned, whether it is COVID or no COVID, for -- as far as our operations, there has not been much influence because we are a IT-enabled, technologically advanced company. We did take no time to ensuring the seamless operations even during COVID comes, and there was a national lockdown and lockdown in various, this thing. All our operations, we can -- we are capable and we adopted to work every -- each one of us from our home or from anywhere. So basically, and whether it is all our banking operations, all our disbursements, all normal meetings, all interactions, everything went on very, very smoothly, and there is no issue. Still now, while we work from our offices, our -- we still are making safeguards to protect our workforce like that. But as far as our operations are concerned, they are seamlessly open and moving on unabated without any hindrance or obstruction. Going forward with the business, I see again with a hope, I see again with an opportunity. Apart from this, you see this INR 90,000 crores liquidity, where 50% of these funds will flow through REC. Second, we have started thinking almost not now, for the last 2, 3 years of late that even our power business, some of the business we have targeted, started looking at other avenues also. And I'm happy to share with you that we are now having -- we have begun with this, our share in financing other infrastructure also. You can see this electrical and electromechanical infrastructure for large distribution [Technical Difficulty] which are directly state-owned projects where in our funding goes to some...
Sorry to interrupt. Sir, we are unable to hear you clearly, there's some disturbance in the line.
Am I audible now, clearly?
Yes, sir. Now, it's better. You can go ahead.
Yes. Sorry. So I was just mentioning that this is one area where in this, we have taken it as a major diversification initiative. And even in the last year, we had financed a good number of projects to the state of Telangana and to Andhra Pradesh. And going forward, we'll be looking to the state of Chhattisgarh and Madhya Pradesh. So, I mean, we have taken initiative where we are having very, very good assets, totally guaranteed by the state government, the repayment through state projects, and also the security of our assets. So basically, this is one area we have begun. And at the same time, I think I can give you a statistic that last year and last few years, we have financed close to INR 41,000 crores of these major projects of state-owned irrigation departments. Again, it's the government account, but fully state government guaranteed. So this was one area.Moreover, in the area of this, we have our -- this obligation towards clean power, towards green power to reduce greenhouse gas emissions, in line with our country's obligation in the Paris Protocol wherein we are embarked on a massive program for 175-megawatt power -- gigawatt of this renewable power this country is doing. REC has taken a massive initiative to take a large share, in particularly taking this renewable energy going forward. And 2020, '21, we'll see that we will pick up a good number of projects. Our focus has been always for good developers. And you see, even in 2021, we have almost sanctioned close to INR 6,000 crores of renewable projects and for developers have been our -- good developers with global standing like SoftBank, like MG, like Greenko, and even the noted Indian vendors like Adani, [indiscernible] So thing is that REC has taken these exposures to very, very good. And we are very, very sensitive to have this, I mean, quality assets adding to our portfolio. At the same time, we are playing an important role now. We have started financing this green mobility, particularly all these electrical buses. We have started -- we have financed and we have begun with a project of some INR 350 crores now to finance these electrical transportations. And particularly in this area, going forward, there will be a number of projects. We have made a policy. And accordingly, this is also one area which is going to be our niche area going forward. And not only that, we will be covering the entire ecosystem, including these all -- these storage systems, this charging infrastructure, all that. And I hope that particularly maybe even 8% to 10% of our new business in REC we will like and it should be from new diversification and these sources going forward, not we speak of major trust on renewable projects. So apart from this, all our normal business of generation, transmission, distribution, renewable, smart grids, normal business from the power conventional sector would always be there.We definitely -- we had some distressed accounts, and our team has worked tirelessly, relentlessly to resolve certain accounts, and we have -- they have met with all this success. Maybe when we discuss in detail, they will be giving the final figure. And by far, as you have seen our result, we have been able to maintain those distressed asset levels to bare minimum, almost we have been able to arrest them to almost industry's lowest level. Apart from this, I would just take this opportunity to just narrate certain -- our achievement of this -- our financial results for this year 31st March, 2020, I will [Technical Difficulty] You can see that disbursement strength was all-time high of INR 75,667 crores. It was 5% higher than last year. Our loan book has grown by 15%, reaching INR 3.22 lakh crores as of 31st March, 2020. Our total income has increased by 18% to INR 29,855 crores. Net interest income increased by 15% to INR 10,425 crores. The interest spread has increased by 2 bps to 3.26%, this thing.As I mentioned, COVID-19 lockdown did not impact the operations as the company leveraged its IT capabilities to undertake disbursements and services borrowing obligations.There was a opt-in moratorium policy allowed by the company to its borrowers in view of our RBI advisories. But I would inform you that particularly principal and interest dues of only INR 5,171 crores have been deferred on account of this moratorium.And in spite of moratorium allowed by the company, company has already recovered more than 78% of the total recoveries due for March 2020 amounting to INR 9,500 crores. Our company has access for diverse source of borrowing, including corporate bonds, 54 EC bonds, term loans from banks, external commercial borrowings. More than INR 20,000 crores has been raised post 31st March, including INR 14,000 crores from domestic markets and INR 6,000 crores in international markets, including USD 500 million raised through USD bond, wherein REC became the first Indian company to successfully raise such bonds during COVID-19 pandemic on May 12, 2020. In addition, it also raised USD 300 million from New Development Bank for a tenure of 10 years at most competitive rates. Out of that, USD 240 million is already hedged.REC has comfortable liquidity position as of now with in-hand balance of INR 14,500 crores and already tied up term loans from different banks of INR 6,000 crores. This will enable REC comfortably to meet its committed liabilities and the disbursement for a month. Capital adequacy ratio at 16.06% as on 31st March, 2020. The company has also raised INR 2,000 crores post year-end to cushion its regulatory capital by around 90 bps. But the situation has been under close watch by the management to take prompt action in the best interest of the company and by stakeholders in an optimized manner. In financial year '19, '20, the USD and Indian rupees depreciated at 2.92% till February 2020, but in March 2020, depreciated by 5.35%, thus in entire year it depreciated by 8.30%. Month of March 2020, has been impacted adversely due to pandemic COVID-19. However, since March 2020 to June 2020, the USD-INR is stable in the range of INR 75.50 to INR 76.Before the implementation of Ind AS before 1/4/2018, the ForEx gain/loss what used to be amortized over the tenure of the loan on unhedged loans and hedged loans were not to be restated since they were hedged and the liability fixed. In case the same policy was adopted, the profit before tax would have been higher by INR 1,145 crores. Further in case of reverse swap of INR 5,147 crores, the all-in-all cost is coming to 5.55% as against domestic bonds cost of 8.82% with average breaking point of US-INR of INR 99 mark-to-market losses, against that are only notional. The net Stage III assets as on March 31, 2020, stand at INR 10,704 crores, which is 3.32% of loan book. The provision coverage ratio against that stands at approximately 50%. So this was regarding the salient points of our financial results, which are already in the public domain and some associated comments, which I wanted to mention before this diverse body of investors. Now I would welcome you for these questions. My -- I have my team, headed by our Director, Finance. And they are quite eager and quite keen to answer all your queries on any subject you feel like. You're welcome.
[Operator Instructions] The first question is from the line of Sankalp Jain from SBI Life.
Sankalp Jain here from SBI Mutual Fund. My first question is that, what percentage of total FX borrowings would be hedged?
We have percentage of -- our -- 60% of our borrowings are hedged, external commercial borrowings. The 40% are unhedged.
Okay. And will that be a particular tenure over which or under which we kind of hedge or do no hedge?
No, there is no particular tenure, but large -- generally, long tenure borrowings are unhedged and the short tenures are all hedged. As per the RBI guidelines, it's only up to 5 years that the borrowings are -- the foreign currency borrowings are required to be hedged. So up to that, to 100% we have hedged. In spite of that requirement of only 70%, we have hedged up to 100%. Beyond that also, as per the policy which we are having in respect of the asset liability management and the risk management policy which we are having, we are hedging other borrowings also which are more than 5 years. Today itself, we hedged a foreign currency borrowing of 10 years, 80% of that, the INR 300 million which we had raised, that we have hedged today itself. So we keep on seeing the market level, and depending upon the opportune time, we just keep on hedging the -- whatever the foreign currency borrowings exclusive at the end.
Okay. My second question is that, how the annual borrowing plan get impacted due to special discount package of close to INR 90,000 crores?
As of now, we are keeping our annual borrowing program at the same level, because in the initial months, we expect that the CapEx programs will be somewhat impacted and our disbursement will be slow against such CapEx program. And this INR 90,000 crores out of this INR 45,000 crores will be share of REC, we will make up for it. But going forward, we will see and review the position. In our view, there won't be so much of incremental increase in our borrowing program this year. It will remain at the same level.
All right. And finally, have we received any kind of special line of finance from the government to -- especially for this discount package, say, from LIC, EPFO or NSFF?
Not so far. We have one -- so we have written to them for allowing us some excess of such funds. But by far, there has not been any such thing.
But the only thing is that exposure has been -- they are considering -- RBI is considering to increase the exposure of the REC and PFC, they are considering not to consider as a group. To that extent, exposure might go up. We are in constant touch with LIC, EPFO and NSFF funds, and there might be some assistance from them in so far as lending to REC and PFC.
Okay. Okay. And then the private gencos kind of also benefit from the scheme because it might not be easy for them to get a state guarantee to get funds released from REC, PFC?
Private gencos would indirectly benefit because basically the liquidity package primarily mandates the use of these funds by the DISCOM and the team also envisages that these loans would be directly disbursed to the IPP and the CPSUs. So whatever are the IPP dues which are lying with the DISCOMs, as of 31st March, 2020, most of it we are expecting would get benefited by this scheme.
All right. All right. And just last question from my side. How do you see the share of power and nonpower in the loan book changing in the long term?
You see that I just told you that ultimately, you see that when you save power, normally I also said that even our diversification and that diversification means we have changed from -- sector from power to, say, other irrigation infrastructure sector. But in that infrastructure sector also, we have ring fenced our rule only to that power components and these electromechanical components, this thing. Those elements don't directly belong to power utilities. It is for other infrastructure segment, but we have all aligned that it is all aligned with power. You get that?
All right. Yes, sir.
The next question is from the line of [ Sugrav Trivedi ] from SBI Life.
I have a couple of questions related to disbursement and your borrowing plan. So you mentioned INR 1.1 lakh crores would be your total borrowing plan for the year. Out of that, how much would be through bonds? And what will be the timing, in first half, second half, if you could give some indication?
Generally, our borrowing mix is that domestic bonds constitute close to 60% of our borrowing. So we don't see any change in that. And around INR 50,000 crores, USD 2 billion will be from overseas market. Apart from that, 54 EC bonds and the domestic loans and external commercial borrowing loans will constitute another 20%, 25%. So that mix that we already have will continue as a service.
So if INR 60,000 crores is roughly what you're targeting for raising through domestic bonds, then will the second half be very heavy, because in Q1 only around INR 13,000 crores have been raised through bonds. That will be roughly around 20% of your total borrowing requirements.
See, we will have to -- going forward, we'll have to see how the market behaves. So we have a sanction from the banks to the extent of around INR [ 20,000 ] crores. So it depends on how the market behaves. We might as well lower our borrowings from the bond market if we find it not to our liking. But we believe that, given the kind of liquidity that's available in the -- available today, we should be able to raise around INR 60,000 crores from the bond market this year.
Okay. Now on the disbursement side, this entire INR 45,000 crores DISCOM relief will be disbursed this year itself? Or some of it might go to next year because there is some reform-related disbursements also for the second phase?
I think this INR 45,000 crore, which is our share in this INR 90,000 crore liquidity injection, we'll be able to disburse this amount even in this year only, within another -- yes, this financial year.
Okay. Okay. So that means that, since your borrowing is increasing by 20%, so your advances this year could be in the range of INR 90,000 crores, which is 20% -- sorry, the disbursements will be around INR 90,000 crores, 20% over last year, out of which INR 45,000 crores you are saying would be for the DISCOM relief. So for the CapEx projects, it will be only INR 45,000 crores this year, is it?
You see that basically, particularly, these are little uncertain times as far as disbursements are concerned, our -- that pipeline for our cash capital project, it is all full, and we have a huge undisbursed commitment. But going forward, as we have seen in this particular quarter, and we see that the CapEx progress is very, very slow this time because of this -- this absence of the labor and all those things. And I think the entire country is suffering as far as this part is concerned to -- for these capital expenditure projects. So going forward, we hope that situation improves and we find no reason why it should not improve. And accordingly, our CapEx will also progress because it is all in line, our all projects and everything is lined up. So we are just estimating that this slowdown in our CapEx will be substantially made good by this INR 45,000 crores liquidity and we may have our targets for having this disbursement. And it must so happen, we may exceed that also provided the situation is improved in the days to come.As far as disbursement program is concerned, it is intact. It has only slowed down and interrupted because of this COVID situation. INR 45,000 crores injection which we are doing, it is there. It is basically making good, this disbursement, which would arise would have made through our CapEx program, that will be, I think, ensured in this financial year, particularly for these 2 quarters from this. Because CapEx, we are anticipating to be slow in, at least, these first 2 quarters of the year.
Okay. And just one last thing from my side. You mentioned that going ahead, renewables and nonpower new sources of disbursements could form a significant portion of your overall disbursements. So over a period of time, will private sector share go up because these renewable and other sources will be primarily to the private sector?
Normally, you see that as far as this renewable part is concerned, we will definitely do much better this year as far as the renewable part is concerned. I think, the disbursement last year, we had close to INR 5,800 crores, and our sanctions were to the tune of some INR 7,500 crores. You can see that were our sanctions last year, for the entire year. This year, we have already -- I think, we are completing our sanctions close to INR 9,000 crores. So going forward, definitely, we anticipate to increase this share at least 2 to 3x. So this year, and I say -- it is all in power, this renewable. So I will not say it is power or nonpower. Only thing is that from conventional to renewable segment because of the normal focus of the country and trust in the thing, we'll be taking our higher share into this price.
No, sir, I wanted to know the renewable disbursements will mostly be to the private sector, right, not government sector?
It is not sent. So, mostly it will be to the private sector, but there are pretty good number of projects even in the state sector also.
The next question is from the line of Gaurav Kochar from Mirae Asset.
A couple of questions from my side. Firstly, since the repricing of loans happens once in 3 years, and with the funding costs also coming down for us on an incremental basis, what is the outlook on FY '21 margins?
FY '21 should be a much better year. We don't expect that currency to depreciate further, and we have a very healthy loan book with incremental disbursements to the tune of almost INR 75,000 crores, INR 80,000 crores. So that should give us a fair increase in our margins. And we expect a much better return on our network this year.
Sir, what percentage of your book would be coming for repricing in this year?
Around 20% of our book will be repriced this year.
Okay. Okay. And since -- given that this will happen after 3 years, there could be some material swings in terms of the delta. The revision could be, say, anywhere between 30 to 40 bps, if that is right, on the yield front?
No. I don't think so. Our card rate has so far not revised. Going forward, we will see how this thing -- how...
Is this repricing linked to something external? Or it is your own NCL, something like an NCL as an internal calculated rate?
Internal card rates.
Okay, okay. Sure, sure. And sir, on the hedging bit, you mentioned that we hedge around 60% of the borrowings -- of the external borrowings. Sir, in FY '20, we've seen that the currency has depreciated at least in 3 quarters and as a result, we've had some unhedged losses. So I mean, just in context of this, had we been better off with the hedge? Or had we hedged it 100%, what would have been the MTM on that and -- versus the current loss? Just to get a sense on whether we're better off hedging entirely or keeping some bit open for currency nonfluctuation, just to get a sense on that?
If we had hedged our portfolio 100%, then obviously, the hedging -- the exchange currency loss would have been lower. But you see, it is not the hedging or not hedging, the issue -- the difference this year has come because now, under the Ind AS scheme, we have to account for the entire currency loss in a single year. Earlier, we were able to amortize over the tenure of the loan. So if you see -- and apart from the currency loss, there's also the derivative valuation, the valuation on the Ind AS. Now it mandates that whatever price that we will get upon unwinding, we don't have any intents of unwinding our derivative position. It is the kind of insurance that we have taken against currency. But because of the forward movement and the NPV that they calculate, the banks and all, they value at a much lower rate than what we are covered with. So that's why these are certain notional losses that they have come about. Yes. And all our hedged loans are held up to maturity. They are held up to maturity. So we are hedging till 1 year or 3 years, but still maturity we are doing our hedging. So the impact has come because, see, we are now having to account for in the same period under the new accounting standard.
Sure. I understand, sir. But just in the context of remaining unhedged, had we been better off -- had we hedged 100% currency in this year versus what we are currently? Just wanted some comments about that.
Yes. Probably this year, the losses would have been a little lower, but end of the loan, it would not have made much difference.
Sure, sure, sure.
Once the -- the hedging cost is also substantial. If you see over the -- over a period of 10 years, the depreciation in rupee is around 3.5%, and about 3.5%, 4% is the cost of hedging. So over a long tenure, it doesn't really make so much of difference. Sometimes in between period, some difference will get impacted. But overall, it doesn't make so much of difference.
Right, right. Sure, sir. In terms of the business mix, currently, we would be anywhere close to 83.17 or 82.18, government and private. Going forward, as a strategy, would you like to maintain this mix? Or probably you would hedge somewhere in favor of nongovernment book?
It is going to be the same, at least for this year.
Okay. Okay. Sure. Sure. And coming to asset quality, sir, what is the impact on the ongoing projects with this COVID thing because of some labor issues, because of supply chain disruptions? Do you see some of the projects getting delayed or getting stressed?
You see that as far as these projects are concerned, of course, there will be delay and that delay will be controlled in the sense because RBI has also acknowledged this thing. Because once we have a lockdown, and these projects are such projects, which -- these are all labor-intensive projects, these are there. And because of this relocation, dislocation of these labors and all that, entire, this capital-intensive infra projects have suffered. But I think some kind of like RBI has given moratorium. In certain cases, maybe I think in terms of COD or, I mean, the date of commissioning of this project, we are hoping that going forward, there will be some relaxation on this -- their commissioning date or like that, accounting for this kind of unavoidable disruptions.
Sure. Sure. And do you foresee any sort of NPA coming from -- on account of this? Or do you say, I mean, deferring the date would probably solve?
Can you please repeat the question?
Yes. Do you see any NPLs coming out of this because of this lockdown extension or anything of that sort that you see here maybe in this year?
No [indiscernible] impacts.
No major casualties?
No major casualties as such.
3 Or 4 Projects Have Been identified which could get to start, but then like we are closely monitoring and working with them and we hope they will not get into any issue.
Sure. If you can quantify, what would be that -- the total quantum of that 4 accounts?
So we have roughly 4 to 5 thermal operating assets, in which our total exposure is close to INR 6,000 crores to INR 7,000 crores. But these are those assets which have adequate PPA is there, adequate tie-ups are there. And they are operating very optimally as of now. And we do not really see any risk coming in these particular projects.
Only issue could be the delay in payment by the DISCOMs, but that I think [indiscernible] liquidity package that is helping the DISCOMs. So we are hoping that this cash flow will flow back to the DISCOMs, which will help them handle their cash flow issue.
[Operator Instructions] The next question is from the line of Ateet Bansal from Nippon Mutual Fund.
Yes, sir. Just wanted to check, sir, we have quite large plans for disbursement this year. So we've already raised, I think, INR 2,000 crores as Tier 2 bonds. Is that understanding correct, in the first quarter?
Yes, yes, that's right.
And do we have any plans to raise further equity to shore up our capital adequacy, given we have aggressive plans of disbursements because our debt equity ratios are also at 8x as of March. So given the aggressive disbursement plans, we could have a higher number over there?
We believe that going forward, the returns will be good. This year has been impacted by this ForEx loss. So the internal accruals will be sufficient to take care of the debt equity ratio to some extent. And of course, we are rigorously pursuing the resolution of stressed assets. And once we are able to make some impact there, definitely our debt equity ratio and the CRAR will definitely improve.
The next question is from the line of Anand Laddha from HDFC Mutual Fund.
Hello, am I audible sir?
Yes, yes, sure.
Sir, just wanted to understand on the resolution of NPA. In terms of any large exposure, like these are in advanced stages of few exposures, which were supposed to get resolved in coming quarters, so if you can give some color in the next 2 to 3 quarters, what sort of resolution one can expect to happen?
Overall, like, our NPA stands at -- the gross NPA stands at INR 21,256 crores and we have net NPAs after provisioning of INR 10,704 crores as of 31st March, 2020. So roughly, like, our NPAs are covered by provisioning to the extent of 50%. And in the last year or so, and like close to 13 projects have been either completely resolved or the resolution has been approved and it is under implementation. These 13 projects account for INR 10,221 crores. So to give a breakup of this, out of this 5 projects, which have been completely resolved, that accounts for close to INR 2,400 crores, in which 3 projects, Lanco Anpara, Prakash Industries and Everest Power, we've got 100% recovery. And a couple of other projects, RattanIndia and Lanco Teesta, we have got a recovery in the region of 60%, 65%. And going forward, which have been approved and are under implementation, that accounts for close to INR 6,000 crores. These are 5 projects in which Essar Power transmission, we have resolved, where there is a 100% recovery because we are expecting that the asset would be upgraded very shortly where we have close to INR 1,100 crores of exposure. And then like FACOR Power, this has been resolved under the IBC process where Vedanta is successful bidder. So they are in the process of taking over the assets where we are expecting a 75% recovery, and we're expecting close to INR 350 crores of recovery in those assets. And Hiranmaye Energy, that again, like has been approved where there is a 70% recovery. And Ind Barath Utkal and R.K.M Powergen have also been restructured. So there also like the recovery is close to 60%. And apart from this, INR 1,840 crores worth of 3 projects accounting for that, they are under liquidation where the bids have been received, and it's in the process of NCLT approval. We are hoping that, that should be done over the course of next 3 to 4 months. So this is like roughly like 50% of the NPA accounts, they are either resolved or they in the advanced stages of recovery. And apart from that, like we are pursuing close to INR 4,923 crores worth of 5 projects where we are working outside the NCLT process in terms of restructuring. So in that, like, we have projects like Gati, DAS Energy, and RattanIndia Nasik and [indiscernible] TRN Power. These are also like -- they are close to resolution, and in all these projects we don't foresee any haircut except in RattanIndia Nasik, where there could be a haircut. In rest of the other projects, we see close to 100% recovery. And apart from that, there are balance projects, there are 12 projects, which are under IBC. Out of which 9 have been admitted under IBC, and they are in various stages of expression of interest and bids are being received or approval stage. And another 3 projects which have been recently filed with NCLT, which are pending admission. So that is the overview for these specifics.
Perfect, sir. Sir, thanks for giving such a detailed breakup. Sir, there are few exposures if you can quantify where they are in terms of resolution process like KSK Mahanadi, which has been admitted to NCLT. If you can clarify like where they are in terms of the resolution process, IPCL Haldia and Essar Mahan?
IPCL Haldia, like, we have approved the resolution plan. It's in the rating process. We are working with the rating agencies, where as per the IBC, 2 ratings are required. So we are working with the rating agencies for the rating. So once it is done, I think we'll move forward on the documentation. And KSK Mahanadi, the RP has been appointed, and they are in the process of going with the expression of interest. And third project which you asked?
Essar Mahan.
Essar Mahan. Yes, like, that recently like we have filed with NCLT. I believe lender ICICI is there. So they have filed on behalf of the lenders consortium. And parallelly, I think, there are a couple of other people -- companies which are interested in this asset. So in the lenders forum, we are discussing with them as well and we are also exploring settlement under -- debt settlement under Section 230 of the Companies Act also. So like, actively, we are pursuing both the courses. So that is where we stand today.
Okay. Sir if I had to look at our provision, coverage is approximately 50%-odd. Do we anticipate any more provision requirement in FY '21 for these existing assets?
No. In fact, we regularly review our -- all our stressed assets. And this year also, if you see we have increased our provision coverage in some of the assets. So the assessment that we have made is in consultation with the
[Technical Difficulty]
So I was explaining about the provision coverage. So as of now, we think that our provision coverage is adequate. Going forward, we'll continuously review and see what has to be done.
Okay. Sir, based on the bid we have or the resolution plan we have for different assets, do we expect some more provisioning need on those assets, sir?
No. In fact, some the projects like Essar transmission, we are expecting write-backs. This will become this thing. So as of now, we don't see any project where additional provision has been will work, but it is a continuous process, as I said. And we will continue to review the position, take opinions from external specialists and, if required, we'll definitely make additional provisions.
Perfect. Sir, just wanted to understand on this NPA...
Just to supplement. In fact, like most of the resolutions, as we had explained before, the recoveries are either 100% or it is in the region of 60%, 65% and 70%. Whereas, if you see our overall provisioning is at 50%. So to that extent, we are expecting quite a few of these assets during the current year. There could be write-backs in terms of provisioning. And every quarter, we do a detailed review in terms of the expected credit loss mechanism based on the different parameters, like each asset is evaluated, and if need be, like, we alter the provision.
Perfect. And sir, if you can say, on this NPA book of INR 21,000-odd crore, are we accruing any interest? Or the fact that as and when these assets get resolved, we will start getting interest -- we will start getting accruing interest income on these exposures?
No, no, we are accounting for the revenue being received on a cash basis, on receipt basis. But in some of the projects, we are receiving revenue. For example, as I said, Essar Power transmission, we are receiving 100%. But because of the RBI provisioning, which states for a cooling-off period, so it has not been upgraded. Similarly, in case of KSK Mahanadi, Essar Power -- not Essar Power, KSK Mahanadi and some of the...
There are a couple of other projects, such as DAS Energy is there, Gati is there. These assets are regularly servicing their interest, and there is a very marginal deficit in the interest. So -- but accounting is on cash basis, we don't recognize on a accrual basis.
Okay. Sir, as and when these assets get resolved, do we expect our margin to improve further from the current level, sir?
Yes, yes, definitely. That will happen.
And sir, lastly, on the special DISCOMs package of INR 90,000 crore, which the government has given, is there any methodology in terms of how much spread we can expect to earn on those lending, sir?
I think we should have a competitive spread because overall, like the borrowing mix we have in cost of funds and the rate at which we are lending, this special transition plan has 2, 3 components. One where we are lending against the government receivables, which has certain concessional rate, but that is covered by 100% state government guarantee. So that gives us a better leverage in terms of risk-weighted asset. And the other window is under the working capital limits, which are available within UDAY. So that we are lending at a normal card rate. And there are certain other stages where they need a relaxation in the UDAY limits for which the union ministry is going to be cabinet. So overall, we expect the margin to remain healthy.
Okay. Is it fair to assume the spread will remain in the range of 200-plus basis for this incremental new lending also?
Sorry?
Is it fair to assume spread of 200 basis plus for this new DISCOM range lending?
No. This is a special package, and it's government guaranteed. So we expect a spread of around 150 basis points to 200 basis points.
The next question is from the line of Vikas Garg from Invesco Mutual Fund.
Just 2 of them. One is on the SEB package of INR 45,000 crores. And how much has been disbursed already to SEBs from your side? That is one. And second question is, sir, if you can throw some light on the SEBs financial health now. So when there was an announcement by the FM regarding the INR 94,000 crores of receivables at the SEB level, for which a INR 90,000 crores package was announced through PFC and REC. That was made somewhere in the second week of May. And since then the lockdowns have been further extended till at least May end and even now there's a partial lockdown. So how is the situation at the SEB level now from your assessment? And is there any possibility of increasing this financial package from INR 90,000 crores current number?
Your first question was on the disbursement under the special package. So we have sanctioned INR 2,500 crores as the first loan under this package, which we are expecting the disbursement could happen over the next few days. And another INR 15,000 crores worth of loans, they are under sanction, which we are expecting [Foreign Language] should be done before 30th of June. And out of that INR 15,000, the first tranche, close to INR 7,500 crores, we are expecting disbursement could happen before 30th of June. So that is the present status. And overall...
Sir, sorry, I just missed the first number, which you said that something -- what number has been disbursed already?
No, no, a loan of INR 2,500 crores has been sanctioned, which we are expecting disbursement could happen over the next few days. And another INR 15,000 crores worth of loans are under sanctions. And out of that, 50% is the first tranche disbursement, INR 7,500 crores. That is expected to happen before 30th of June. And overall, we have got an expression of interest in terms of the DISCOMs' intention to take loan is close to INR 93,000 crores, both REC and PFC put together. So the original package size was anticipated at INR 90,000 crores, so we are having interest from DISCOMs and space, which was also approximately in that region. So as of now, we don't anticipate this package going up. So we'll have to wait and see for further responses, but as we stand today, we don't anticipate this going up significantly. And the third thing in terms of the SEBs financial position. Yes, April and May, the DISCOMs had -- the collection efficiency of the DISCOMs went down by 25% to 30%, and overall the revenues dipped by 40% to 30% in different states. But from June onwards, we are seeing the revenues coming back to close to normal level. They're probably close to 80%, 85%. And maybe going forward in the Q2, we are expecting the revenues of DISCOMs to stabilize.
Okay. So since the recoveries have not been made from the shortfall, which happened in the month of April and May, where the revenue would have fallen short, but to almost 40%. So whether -- in the month of June, whether recoveries have been happening on that or that 80%, which you said is the June collection shortfall, which is as of now even there.
It's a mix of both. At our level, it might be very difficult to exactly comment on this point. But as we understand on a qualitative basis, there is a mix of both recovery. And some of the state electricity regulators and governments, they have given some relief to the industries and to domestic consumers in terms of installments also. So the recovery could happen over the next 3 to 4 months.
And sir, just one follow-up question on the first part. So as of now, nothing has been disbursed for the SEBs under that special package, though the sanctions are there. While you have already raised the bonds of around INR 13,000 crores in Q1 and through some other means as well that you have raised. So is it good to understand that the borrowing that you have done so far is for your normal business routine aspects? And when you start disbursing for the SEB package, then you have to hit the market again for the incremental borrowing?
It's a combination, not that all the funds have been really great. Certain things have been tied up where we can draw as and when we need. And these borrowings, which have already been raised, it is meeting our regular disbursement as well as the disbursements which are lined up, which is to the tune of close to INR 8,000 crores to INR 10,000 crores over the next 10, 15 days. And apart from that, our own repayment commitments are also there. So it's a combination of these 3. So that is being actively managed as the situation emerges.
Right. And sir, by when, in this -- while in the earlier response, it was indicated that the entire INR 45,000 crore will get disbursed in this financial year itself. But will it be, sir, safe to assume that it would be quite front-ended, and possibly over the next 2, 3 months, the entire package may be disbursed because we have already received an intent of INR 93,000 crores combined for PFC and REC?
It might not happen in next 2 to 3 months because the policy has 2 tranches. So first tranche will go make like as we get the application. Because each state has to do their own internal processes approval from their own competent authorities, which could be the finance department or the state cabinet. And there is one more element where the union cabinet approval is required for UDAY limit relaxation also. So some portion of this release is tied up to these factors also. So maybe like close to INR 60,000 crores is claims, where these encumbrances are not there. So we are expecting maybe like the first tranche could get disbursed within Q2. Q1 is coming to an end, where we are expecting close to INR 10,000 crores and maybe another INR 15,000 crores to INR 20,000 crores could happen in Q2, and the rest could spill over to Q3 and maybe some into early Q4.
Okay. And sir, just one last question, if I can slip in. It's on the asset quality of the loans which are kind of made to the government agencies, the state government agencies either DISCOMs or Gencos or whatsoever. And we have had 0% NPAs over there. Now sir, some of those loans are guaranteed by the state government and some of them -- or, in fact, I would say, majority of them are not guaranteed. So just 2 things over there, sir. So from your risk assessment perspective, does it really matter to you whether the state government guarantee is there for those loans? Because anyway, we have 0% NPA? So you -- I mean, just from a spread perspective, we should be different -- indifferent, whether the state guarantee is there or not there? So that's first question. And secondly -- and second question is, do you see any asset quality issues, cropping up in that state agency exposures because we -- some bit of evident problems are being seen at all the levels. And will it be just kind of a very difficult situation to continue to maintain that we have 0% NPA on the state-sponsored agencies.
See, basically, like for state-sector borrowing also, we have a detailed appraisal procedure and we follow certain prudential norms and our own policies. So normally, like in normal case, when we do the lending, we follow those provisions. So in such cases, like we don't insist on the state government guarantee. But whereas the -- this is a special package where we are relaxing certain norms and we are going beyond the normal limits. So state government guarantee is being taken as a part of this policy as an additional security. And second, with state government security, we have a significant advantage in terms of our capital adequacy, in terms of the risk-weighted assets. So that is a significant advantage. So we have a combination in terms of state sector lending where we take state government guarantee and where we don't take.
Okay. And sir, on the situation of 0% NPA as of now, which is on state agency papers, is it expected to be similar going forward as well?
We expect to have 0% slippages on the state sector projects.
We expect the same going forward.
Question is from the line of Saket Yadav from India Capital.
Sir, just wanted to understand on Stage 3 assets. As you've mentioned earlier, that there are 4 accounts of about INR 6,000 crores where they may -- which are tracking closely, but at the same time, there are also about INR 10,000 crores worth of projects, which may see an upgrade. So is it fair to expect that over the next, say, 3 quarters, the gross NPAs from INR 21,250 crores should actually come down rather than increase even despite the whole COVID-related problems?
See, asset upgrade, I'll -- it goes by the RBI policy. Where we have resolved or settled where it is OTS, then immediately it gets squared off. In the case of restructuring, there is a monitoring period after which the asset is upgraded. So a couple of assets we expect could be upgraded in this financial year, which could be in the region of INR 2,000 crores. But the rest of the assets could have a slightly longer monitoring period in terms of a 10% recovery, which the RBI circular mandates. On the stage 3 assets, so stage 3 are all NPA, so that is part of the INR 10,000 crores.
Right. And then sir, these 4 assets, which you mentioned, which you guys are monitoring closely, those are all private assets, and they're not problematic as of now is the understanding, right? You're just monitoring them closely, if any issues come up.
See the INR 6,000 crores accounts, which we are closely monitoring, as of now, they don't have a stress. But given the current scenario, we are concerned that these are accounts which should be closely monitored. So we are closely working with the borrowers and tracking these assets.
Understood. Sir, just one more thing. On the tax rate bit, this quarter, the tax rate actually seem high on the PBT bit. From next quarter onwards, I understand we'll be transitioning to the new tax norms, so our tax rate should be around 22%, 23%. Is that understanding correct?
Yes, our tax amount should go down going forward. This year, of course, there was an impact of deferred tax such as just write-back because we have made provisions and on that we had created deferred tax assets. But because of the decrease in rate, we had to reduce our deferred tax assets as well. So going forward, definitely, the reduction in the tax rate will give us the benefit of reduced tax amount.
Sir, roughly, like what the applicable rate would be, if one was to just get a sense? In the past, we were around 29%, so just wanted to understand now what will be the normal rate going forward for us.
It should be between 20% to 22%.
Understood. Understood. Sir, just 1 final question from my side. Just can you also help us understand the slippage that we have seen this quarter on the stage 3 asset. I think, till last quarter, we were about at INR 19,500 crores. And this quarter, we have gone to about INR 21,200 crores. So the slippage which happened, was it before the moratorium was applicable and hence, it slipped? Or what led to the slippage? If you can just...
That is basically like because of certain payment issues with the DISCOM, where it is before the state regulator. But we are hopeful that these claims are legitimate, and we are also working with the DISCOM. So hopefully, like, once the payment issue with the DISCOM is settled with that thermal generator, we are hopeful that the asset could be resolved very quickly.
The next question is from the line of [indiscernible].
Can you hear me.
Yes, sir, you are audible.
I was wondering how your relationship with PFC, given their ownership of you has changed anything in strategy or your operations?
I think the relationship is as how it has started out last year in 2019. We are working as a stand-alone company. Of course, we are a -- they are -- PFC is a holding company, and we are a subsidiary company. Except that there is no other change. One PFC nominee Director is on the Board of REC. That had been the only change. And management control is through the Ministry of Power, Government of India.
Do you think this affects competition in the sector at all?
If you see our results and our performance, we don't think so. We have not found any such thing in our operations, in our experience.
Historically, before the tie-up, could you compete more with PFC?
Pardon, please. Pardon?
Did you compete more with PFC historically before the tie-up with PFC?
Prior to the tie-up?
Right. Yes, before PFC bought its stake in REC.
You're talking about merger. Are you?
No, just before PFC took a stake in REC, was there more competition with PFC?
Yes, we were very independent company at that time, that competition was there. After that it is going on as it is. Nothing has changed in that.
Yes, just to add that there's so much business in the power sector that competition in any way is not very -- determines our course of action. We are able to get sanctions. Both the companies are able to manage sanctions and disbursements. So there is a bit of competition, as our Chairman has said. But it was -- as it was before, now also there is some bit of competition. But the business is huge.
Great. Well my other questions have been asked and answered.
The next question is from the line of Bhavik Dave from Nippon India Mutual Fund.
One question is regarding the dividend payment that we will make in FY '21. Will the number be similar? Or because of this COVID issue and RBI not very comfortable with financial entities, giving out dividends to their shareholders, will that affect REC as well?
No, we don't think it will affect. In fact, we're going forward, we expect better results because this was a one-off case of exchange ForEx loss. And there were a lot of notional derivative losses that came in this year. So we don't think -- we think our business will be good, and our margins will be better as well.
And sir, one data point. On the card rate that you have, what was the card rate maybe last revised card rate that you had for DISCOMs and private sector? At what yields are we lending?
Card rate, it is different for different categories...
But broadly, range?
Our yield base, this year, it has been 10.59% at a spread of 3.24%.
Correct. And lastly, sir, you mentioned that you expect a reasonable amount of recoveries of INR 20,000-odd crores. INR 10,000 crores of -- INR 2,000 crores can get upgraded and the remaining INR 8,000 crores can get restructured. So what proportion of this INR 20,000-odd crores, where you see 100% kind of recovery amidst that explanation that you gave on one of the previous participants, so which are the accounts where you expect 100% recovery?
These figures make an approximately, we can say, 40% of the accounts. I think we should be expecting close to 100%.
And that quantum will be rupees crores?
You can say close to INR 7,000 crores, INR 8,000 crores.
Okay. And most of these will be restructured, right? So [indiscernible] upgraded?
Yes, most of it will be restructured. Yes, that is right.
Correct. And the INR 2,000 crore restructure -- sorry, upgrade, there you'll not have to take any additional provision because you'll already be at 50%, 60% provisioning on those?
Yes, there's no additional provisioning. In fact, those accounts have already like cleared off all their dues and they are in surplus.
Okay. And the INR 6,000 crore that you mentioned are under stress are still stage 2, right? And there, you're monitoring them closely before they slip into NPAs.
Yes, that is right. That INR 6,000 crores, they are in stage 2 assets, where we are, as a partner for regular risk management policy, we keep monitoring those accounts.
And which -- how many accounts and which will be these accounts? Is there any sizable reasonable accounts?
These are all private sector generating institutions accounts and is largely Lanco Anpara, for example, like, [indiscernible] Everest Power, so these are the assets.
The next question is from the line of Ravi Agarwal from UTI Asset Management.
Hello, am I audible?
Yes, sir.
This is Ravi Agarwal from UTI Asset Management. So sir, your target is INR 45,000 crores to be disbursed in this year. So my understanding is that there are 2 tranches, and there is a condition which is supposed to be completed before a disbursement of tranche 2. So how do -- what do you think about this, that whether the SEBs and the electricity board will be able to meet the conditions for disbursement of the tranche 1. There are the conditions about the meters to be put in the smart metering, the billing efficiencies and all those things, so isn't it quite a less time to complete all these formalities and give a...
Like just to clarify, actually, like tranche 1 conditions, all the SEBs of the distribution companies, whom we are in touch with, they are quite comfortable in meeting the Stage 1 disbursement -- free disbursement condition. The smart metering, they have to submit a plan. They don't have to actually prepare smart metering. They don't have to complete it. So they'll have to give an action plan which is credible. Stage 2, they'll have to submit -- the main requirement is the loss reduction plan, which they'll have to submit. So that also like they're in the process of preparing that. So between stage 1 and stage 2, that is tranche 1 and tranche 2, we expect to normally have a 2- to 3-month gap. In the meanwhile, I think they should be able to be, in consultation with MOP, satisfy the stage 2 -- tranche 2 conditions as well. So we really don't foresee any hold up into these conditions.
All right. So what I understood is that there would be some -- they have to show that this all work has been done and not just the promising things that, yes, I mean, we are doing this, and we will be doing that. Because that was the case with UDAY bonds also. So there were also some similar conditions about the preconditions -- predisbursement conditions, which were supposed to be met, but they were never done completed in that manner. So basically, this is again the case happening. So this is my understanding. Now I mean, how much are you expecting to be borrowed in the coming 3 months in the coming quarter from the domestic bond market?
Around INR 10,000 crores to INR 15,000 crores, we will take from the domestic bond market during this quarter.
And what has been the total borrowing for the first quarter from the domestic bond market, sir?
Around INR 18,000 crores, we have borrowed from the domestic bond market so far. And yes, that's about it.
INR 18,000 crores?
Yes, INR 18,000 crores.
All right. Well another question is just mere repetition of what already has been answered. So just a consolidated number, what is the total amount of number, which is in the NCLT process and which has been dealt outside the NCLT process, just the broad number?
Like close to INR 10,750 crores, that is under NCLT process, INR 10,750 crores. And the rest, INR 11,000-odd crores is outside the NCLT process.
Okay. And my last question would be around this, what is the moratorium -- how much is moratorium availed? And what is the current status of the entire moratorium part of this loan book?
In the first quarter, the moratorium was availed for INR 5,170 crores. In the next quarter, we expect around INR 6,000 crores to INR 7,000 crores of moratorium will be availed out of our total recoveries of around INR 10,000 crores.
I could not get the last part, sir, I'm sorry?
In the first quarter, there was a total amount of INR 5,171 crores of dues, which was around 30% of the total dues, where moratorium was allowed. And in the second quarter, we expect that this amount will be around INR 7,000 crores, that will be around 70% of the dues for the second quarter.
The next question is from the line of [indiscernible].
I just wanted to follow-up on the FX questions. I noticed that other comprehensive income loss had a few items related to the rupee and was hoping you could explain them?
See the ForEx loss has been to the tune of INR 2,300 crores this year. But as I said that, now with the new accounting standards, we have to account for the entire ForEx loss for the same period. So that has impacted our bottom line. So -- but overall, there are certain derivative valuation also, which are somewhat notional in nature. So that -- those derivative valuation has also impacted adversely. So...
But separately, the other comprehensive income and losses that include an effective portion of cash flow hedges, any cost of hedging reserve?
Yes. Other comprehensive losses includes INR 575 crores, that is because of the derivative transactions, which are notional in nature. Yes, we are already hedged and these derivative valuations are below the cover that we have already taken. So that OCI includes INR 575 crores of that amount. We have adopted the hedge accounting and under that accounting, this INR 575 crores is coming. Apart from that OCI include some investment-related profit and gains, those are minor. But largely, this is an amount, INR 575 crores of lower valuation of derivatives.
Okay. So that's related to the hedge accounting, but then the item to be in your result release, the net translation transaction exchange loss, that part is not related to hedge accounting?
Yes, yes, yes. That's right.
Okay. And the part that is hedge accounting, can you split how much of your hedging follows hedge accounting versus is not hedge accounting?
See roughly 60% of our total foreign currency borrowing is hedged. So we have to check the effectiveness of hedge at every quarter -- at the end of every quarter. So in case of those hedges, whereby the options are undertaken which are not efficient hedging -- effective hedging, there we take it as a foreign currency loss. Otherwise, it is taking other comprehensive income. So whatever the effective hedges are there, that is taken into the other comprehensive income because that is only notional loss which we are having. Otherwise, they are hedged up to the maturity. And as such, we don't have to incur any loss in respect of that because our liability, in any case, is covered. So for that purpose itself it is settled into the other comprehensive income and not shown above the line.
Okay. And is that offset by maybe the derivatives fair value being higher? Or what is the offset to the losses on the other comprehensive income line?
Actually by the -- these MTM losses, which are there, which are shown in the other comprehensive income, so they are virtually by the end when the external commercial borrowing, whatever the hedges are there, they reach up to the maturity. They will be 0. So as said, they will keep on reducing as the loan approaches the maturity figure. So that is the reason it is shown under the other comprehensive income because it is not going to affect the profitability as such. It's only notional loss, which we are having.
The last question from the line of Vikas Garg from Invesco Mutual Fund.
Sir, just a follow-up question of the earlier question, which was asked by some gentleman. What I gather is that there's a collection of close to INR 15,000 crores to INR 16,000 crores on a quarterly basis. And then there were some 30% and then 70% moratorium in the quarter that you said. How would be the run rate of your repayments of the debt on a quarterly basis, sir? As just putting it in a perspective of the INR 15,000 crore of collection, which happens on a quarterly basis, against that how much would be the run rate for the debt repayments?
Yes, our -- we have around INR 15,000 crores to INR 16,000 crores of recoveries every quarter. So almost -- this will -- the -- our borrowing liabilities are slightly higher than this. So our average, if you see the average maturity of our assets, it is around 6.24 years and the average maturity of our borrowing is 3.99 years. So the borrowing liability is slightly higher as compared to the -- our receivables.
Correct. So just putting both the things together, sir, and also the earlier response that INR 13,000 crores to INR 14,000 crores of bonds have been raised so far in the Q1. So it looks like that most of these bonds, which would have been raised, would have been actually utilized to build the cash flow mismatch because of the moratorium that has been taken by the underlying borrower. And possibly, when the disbursement on the SEB loans start under the special package, that will be the incremental borrowing that would be done in the next few days. Or let's say INR 10,000 crores is in June, and possibly INR 15,000 crores in the month of July, as you were kind of indicating.
Moratorium, people have taken only to the extent of 30% of our recoveries. So to that extent, our cash flows have been all right. So that plus this borrowing actually like takes care of our disbursements plus our repayment commitments. And still, we have certain credit lines, which have been tied up, and it can be drawn as and when we actually lead the business end.
The last question is from the line of Rahul Marathe from ICICI Prudential Pension Fund.
So this was regarding the ForEx impact, which we saw in Q4. Sir, if you could just tell us what would have been the profitability, had this dollar appreciation would have not occurred?
[Foreign Language] If this dollar appreciation has not happened in the month of March, we would have made an additional profit of around INR 1,200 crores.
Okay. And also a follow-up on that only. So you are saying as per Ind AS, we have to record all the losses or profits on our ForEx positions in P&L, so where does the offsetting hedge position takes place? Does it go directly in balance sheet?
Yes, it goes into the balance sheet. Actually, now what Ind AS says is that you price entire currency, external foreign currency borrowings at the current rate and then value the derivatives separately. So when we value the entire currency and the value of derivative separately, what happens is the derivatives valuation is somewhat lower than the cover that we have taken. Earlier, what we are doing was that we were valuing the unhedged currency as a current rate and the hedged currency at the hedge rate. But now the derivative valuation has come up where derivative is separately valued and the valuation comes from the banks, which they've taken, where the valuation is lower than the cover that we have taken. And so therefore, there is an element of notional loss, which actually, going forward, as we approach the tenure of the loan, it will be squared off. Not a big loss.
So will we see reversals going forward?
Yes, as we approach, over a period of time.
So I just wanted to know whether this INR 1,200 crores of higher profitability, which we would have had, not for this depreciation, will we see reversals over a period of time? That we will recognize this INR 1,200 crores till the maturity of our loans.
There will be reversals, and in this particular quarter itself you'll see the reversals.
Okay. In Q1 itself?
The dollars have not appreciated to that extent. It is in the range of INR 75.5 to INR 76. So in this particular quarter itself, there'll be reversal both on account of MTM as well as the derivative valuation.
I would now like to hand the conference over to the management for closing comments.
Sure. Thank you very much. It has been really wonderful interactions with each and every one of you. We have all noted your all points and appreciate your -- all the questions, which I hope that our team members and experts have been successfully able to deliver to your satisfaction. And thank you very much.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.