Rural Electrification Corporation Limited Q3 Results

Analysts Meet

February 14, 2017

MANAGEMENT: DR. P.V. RAMESH CHAIRMAN AND MANAGING

DIRECTOR
DR. A.K. VERMA JOINT SECRETARY - MINISTRY OF
POWER & GOVERNMENT NOMINEE DIRECTOR
MR. AJEET KUMAR AGARWAL DIRECTOR FINANCE
MR. S.K. GUPTA DIRECTOR - TECHNICAL

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Moderator: Good evening, friends. I welcome you all to the Analysts Meet today to announce the Q3 Results
of the Rural Electrification Corporation. At the outset, I thank you all for taking time out and
making it here for this meet. REC as we all know enjoys a strategic position in the power sector
of the country. It extends financial assistance to all the segments of the power sector, be it in the
area of generation, transmission or distribution. With the thrust now on the renewable energy
sector, our focus is now increasingly on this segment. We have a pan-India presence with 22
offices spread across the country.

Before I begin, I introduce my Senior Management Team which is seated on the dais. At the
head of the table is Dr. P.V. Ramesh who is the CMD of our Corporation. To his left is Dr. A.K.
Verma, who is the Joint Secretary - Ministry of Power and the Government Nominee Director
on our Board. To his right, to the right of the CMD is Shri. Ajeet Kumar Agarwal who is our
Director, Finance. And to his right is Mr. S.K. Gupta, who is the Director Technical of our
Company. Other distinguished Board Members are also with us, and we thank them for being
here with us.

I would now request CMD REC, Dr. P.V. Ramesh to make his opening remarks.

P.V. Ramesh: Friends, a very good afternoon. Thank you very much for accepting our invitation to be here
with us today. We greatly appreciate your presence. We would use this opportunity to clarify, to
explain, to answer and also to present ourselves and what we are. You know more about us
perhaps than I myself. I have been here in this job for the last five weeks, but nevertheless. We
have already presented, we had the Board Meeting today and the Board Meeting has reviewed
the quarter performance and also the performance during the past nine months and has decided
to declare an interim dividend of Rs. 7 per share.

And though we call ourselves Rural Electrification Corporation, as my colleague has mentioned
we are the total power sector financing and development enterprise. We are present pan-India
across the value chain and across the spectrum of investors, the public, private and all utilities
and the PPP project arena.

So, just to give you a brief touch upon. We have circulated the details, the printed presentation
format, so I would not repeat what is already there. But just a way of summary, I just would like
to say that our loan book now is about Rs. 201,000 crores odd, same as it was in December 2015.
But one has to reckon the fact that Rs. 31,137 crores was prepaid this year, during the first nine
months under the Uday Scheme, and we have been able to offset that prepayment by stepping
up our disbursements and our disbursements compared to last 2016 nine months performance
was of Rs. 37,000 crores and compared to Rs. 34,000 crores of the earlier year for the same
period. But, we have sanctioned Rs. 67,391 crores, which his 37% growth compared to the
earlier year for the same period.

Now, our profit after tax for this quarter is of the order of 28% and overall in the nine months
period it is 10%. And our loan quality is consistently improving, our gross NPAs at the end of

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December stood at 2.3% and this was 2.45% at the end of the earlier quarter. And our book value
per share is Rs. 169.90 at 31st December.

Now, what do we see ourselves? I mean, having said this in a perspective of performance in the
quarterly, now we are also the nodal agency executing important Government of India programs
including Deen Dayal Upadhyay Gram JyotiYojana, the Ujwal DISCOM Assurance Yojana
(UDAY) and Power for All. So, we are trusted by the Government of India to coordinate the
execution of the most important initiatives of Government of India, and that gives us a strategic
positioning in terms of working with the power utilities, public, private sector and specially the
DISCOMs.

Now, as all of you know, under the Uday and the Gram JyotiYojana, they are complimentary,
they are sequential. So we see a big opportunity in terms of modernizing the DISCOMs, I mean,
one pillar is the financial restructuring as you know the others being the technological
restructuring and the governance reform. And we are best positioned to drive that process by
virtue of our having financed several projects with them, our close proximity and also our pan-
India presence in terms of transferring best practices.

We are also looking forward to a major investment in the renewable sector; the Government has
the ambitious target of 175 gigawatts in the next five years, and also creating an evacuation
infrastructure and a green corridor across the country. And also, there is major investment that
is likely to emerge in modernizing the antiquated thermal power stations to the tune of 25,000
megawatts. There is also a massive investment that is taking place in transmission
modernization, both interstate and intrastate. And we believe that our role in extending power to
5.15 crores households, which is a task that has been mandated to us by the Government, it
would add to the demand by about 25 gigawatts. In our assessment the power sector is going
through a transformational movement and there is a huge opportunity for a massive growth. We
continue to maintain high profitability, our resource mobilization cost is still low, and we are
able to maintain a fairly profitable momentum. And we continue to do that with all the vigor in
the coming days and we look forward to your corporation and support.

I thank you all for coming. And wish you all the best.

Moderator: Thank you, sir. A copy of the highlights of our performance for Q3 has already been provided
to you, which I am sure you would have studied by now. The floor is now open for a question-
and-answer session.

Participant: Sir, can you give some highlights on the UDAY scheme, how it is happening, what was our
exposure to the loans in the UDAY scheme and what is happening on the UDAY side? And how
much has been there still in the books, how much is refinanced. Can you give some highlights
of that?

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P.V. Ramesh: I would request the Joint Secretary Mr. Verma to respond, he coordinates this. But with specific
reference to the REC part of it, I will answer, and he will give you a national perspective.

A.K. Verma: UDAY, 21, means 20 states and 1 UT has already adopted UDAY. Around Rs. 1.9 lakhs crores
of debt has been liquidated through states taking over that. And most of the states have decided
their targets, means all the operational targets, half yearly, semi-yearly targets we have asked
them. We have created a portal for UDAY that everybody is putting their data there and we are
monitoring as well as certain operational improvement activities they were supposed to take up;
they have already started doing that. Three, four more states are in line, their draft MoU is with
us, we are scrutinizing it.

We have a UDAY Cell in the REC, as CMD sir has already explained that Government has
created a Cell there which is full of professionals, analyzing the details getting from all the
utilities. We have found that most of the states are doing well; their interest burden has gone
down very noticeably. Most of the states have approached their regulator for the annual tariff
evaluation, I mean, sometimes it goes up, sometimes it goes down also, but majorly everybody
has gone up only. All those activities that they are supposed to take up they have taken up.

A few states could not meet the targets that they have envisaged in their MoU, but that may be
because somebody has started late, somebody has started a little early, all states may not be in
the same state of preparation, so that six to eight months more has to be given. Ultimately it is
not more than a year that UDAY was born, I mean UDAY was born on 20th of November and
the first MoU we did with Jharkhand on 5th of January 2016. And after that many states have
joined and they have joined at different stage of timing.

So, we are finding that many of the states are doing quite well, even Bihar, just to share with
you, they have reduced their power purchase cost, they have started doing their feeder metering,
their urban feeder metering is 100%, their cost optimization has started. In Haryana the Dakshin
Haryana Bijli Vitran Nigam, means the DISCOM which is known as Dakshin Haryana Bijli
Vitran Nigam, that has gone for almost a turnaround, they made a profit of Rs. 78 crores in the
first half yearly. Punjab is doing okay, they have 100% feeder segregation, and they have gone
for feeder metering both in the rural and urban area. Their power purchase cost has slightly
increased but their AT&C losses are on downward trend.

Rajasthan had a big problem, as everybody knows, but then they have started doing quite well,
their ACS-ARR Gap has reduced. Of course, they are still shorter than the target that they
envisaged, but they have reduced, power purchase cost has also come down. Their AT&C losses
are coming down; they have taken a very special drive for improving the power supply as well
as improving the entire network.

There is a Mukhyamantri Vidyut SudharYojana, they have appointed a feeder in charge and
along with every feeder a team is sent to improve the technical details, joint, conductors, feeder
balancing and things like that. And not only that, they are asking even all the collectors, all the

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MLAs, the CM has herself taken the interest to adopt a village, to make it debt free. So, a kind
of a campaign has started throughout the country.

Down south, Tamil Nadu has joined quite recently, apart from their political problems. I am sure
they had a big plan to improve themselves. All the western states are doing better in the sector,
Karnataka's DICOM has a loss of, I think AT&C loss of this DISCOM was 17%, and they have
reduced down to 16%. Jharkhand has reduced its loss from 35% to 34%. So, every state is doing
quite well.

Participant: REC, what is the status, how much loans we have exposure, what is the rate of interest there and
how much has been?

P.V. Ramesh: I think that is a question good and also a fair question. You know, we had prepayment of about
Rs. 31,137 crores. Now, this was an amount which would have been paid over a period of time
that was prepaid. But this does not mean that we incurred a loss, I mean, that is what I wanted
to make very clear, only thing was that there was no penalty that normally we impose on
prepayment. So, we got back this money and then we reinvested because of our lending program,
there has been a massive step up in the lending program, we reduced our borrowings so that we
optimize our liquidity situation. And so in that sense there was a misconception among some
that this had sudden impact on our books of accounts, that is not the case. The second is, some
quarters there was a misinterpretation that REC was buying DISCOM bonds. Now, as the Joint
secretary has said, what it entailed, the UDAY essentially entailed a financial restructuring by
which the state government's take over 75% of the debt at a low cost, so that the debt burden on
the DISCOMs is reduced. So they have given greater latitude in terms of better operational
efficiency and management. So, we are in the business of lending, not in business of investing.
So, we have not invested in the UDAY bonds. So the REC has had no exposure. But, again, Joint
Secretary has said that the UDAY unit, the coordinating unit, the nodal unit is located in REC,
that gives us a strategic advantage in terms of working with the DISCOMs across the country.

Now, there are three major components, the financial restructuring has been done, is being done,
and is in a very advance stage. There are a lot of changes that are taking place in the states. If
you go and see, as Joint Secretary has recounted this UDAY has generated a phenomenal amount
of awareness of the need for modernizing the distribution network, for reducing AT&C losses,
for being commercially viable and above all, for being efficient. So, those measures are being
done, there are lot of investments that is being made by Government of India and in modernizing
the grids. State governments themselves have initiated the process, we are working with the state
governments in identifying what is the viability gap financing that would be required so that
from our side we could provide lending for that. But this is a very massive ambitious program
because that is where the biggest bottlenecks had been in the past in the distribution network.

Participant: Sir, second question will be broader. What is the vision in REC in next five years? Because
power sector has been a problem for some time now and how do you see your book panning out,
margins? So, just vision of yours basically?

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P.V. Ramesh: The Joint Secretary is posing a question saying can you please elaborate what the problems are
as you said in the power sector.

Participant: So, basically lot of TPPs or IPPs are in problem, we have seen a lot of NPAs for a lot of IPPs,
not in PSUs per say but other sector also we have seen. And there is no growth also, if you can
see for new projection also.

A.K. Verma: I think the vision of REC, the CMD sir will explain. But so far as the problem of PPA is
concerned, I have some views that I will share with you. One is that, of course, at present our
total generation is more than what we need, so there is some kind of trouble, I mean particularly
for those plants where the cost is very high, you will find that the PPAs are not coming. But in
the last two years, we have added 45,000 megawatt of power capacity. I mean, never in the
history of India we have added so fast additional capacities. And therefore, the growth is much
higher there. Demand, as we expected in our EPS, 17 or 18, did not come to that extent. So, there
is some kind of mismatch at present between demand and supply, and that is the reason.

The second thing is, we had been in an era of power scarcity and therefore a long-term PPA of
25 years was in practice. Whereas if you go internationally, you will find the seven year PPAs
to be a long-term PPA. What we call in India medium-term PPA is internationally a long-term
PPA, because they never foresee this kind of situation. Here we were earlier in the scarcity
syndrome, now we have some kind of surplus situation. But again, the market will readjust and
we do not need to intervene and everywhere we have to improvise and contrive something, it
will readjust because there are other aspects also coming up. Like, many of our plants which are
quite old, inefficient and which are polluting, and probably because of the pollution norms that
the country has adopted, we will have to demolish them, we will have to pack down them and
we have to go for the technology which gives you a more efficient power production, say UMPP
kind of thing. The NTPC alone is thinking of 11,000 megawatts to be replaced by that. So, I
think if this process starts we need more and more power again. And therefore I think that this
is a very temporary phenomenon and it will adjust itself.

So far as the vision of REC is concerned, I will request CMD sir to do.

P.V. Ramesh: Now, we believe in REC that these are very exciting times for an institution like REC which is,
as I said earlier, is a power sector total services financing and development enterprise. Now, as
the Joint Secretary said on the generation side, the big opportunity is in the renewable and there
is a major step up that is envisioned by the government. And so the whole range of renewable
and their evacuation infrastructure, and potentially the storage technology as it becomes more
advanced and I think there will be transformational opportunities that would emerge in terms of
the renewable ecosystem. The other is, modernizing the antiquated thermal power stations; there
we have a big opportunity for investment. The third is in modernizing the transmission system,
both the intrastate, interstate, private sector as well as the state utilities which necessarily will
have to create the more robust, more efficient, smart transmission system.

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Then the distribution network, we have already discussed, the efforts are being made in
converting the distribution into a smart system, smart metering. And this coupled with pushing
power to every village, every habitation and every household and metering them. Now, this
alone would require about Rs. 10.5 lakhs crores investment, just the distribution network
modernization. So there is a whole host of new opportunities that exist. And this is coupled with
the fact that we are already working with both the private and public sector across the country,
we are closely integrated with the state utilities because we have offices across the country, they
work very closely, so that gives us a greater proximity for working with them. Number three is
that we still are very competitive in terms of we raise capital among the similarly placed financial
institution at the lowest possible rate. We are quite competitive in terms of lending; our lending
terms have been flexible. We are creating new instruments and products for financing the new
emerging requirements. So, both on the supply side and the demand side and we are working
very closely, we have started the process. We have two subsidiaries which basically provide the
management support services, DPR preparation, project management consultancy services, and
bid processing, advisory services. So, together we are working, actually we have already signed
MoUs with two states and we are in the process of negotiating similar MoUs with all the state
governments which basically provide an umbrella agreement for over a five-year horizon as to
what we need to do in that state in five years, what are the problems and what are the possible
solutions, what are the investment gaps, what are the policy drivers that would fundamentally
transform the power sector management in that state. So, we not only work as a mere financier
but we value add services and financing plus, plus in terms of technology transfer, knowledge
transfer, handholding, technical assistance. So a whole range of services opportunities is what
we are offering to the states. So this is sort of a holistic solution.

So that is our vision, we will continue to drive the modernization of the states; we will support
the state governments, the federal central government in implementing the flagship programs.
We would like to see at the end of five years a country which is power surplus that the
consumption levels have doubled in the demand side, that every household has 24/7 quality
reliable power. So that is the vision with which we will move forward.

Participant: If I refer your page number 34, your profit has increased by Rs. 400 crores YoY basis and the
other income has increased by Rs. 300 crores. So, it looks like that increase in the profit is
because of the other income. Can you explain that?

Ajeet Agarwal: Yes, to that our other income has grown by Rs. 300 crores. This is coming from the fact that we
have invested in the Tier-I bonds of the banks where the annual interest income is to the tune of
Rs. 170 crores, because Rs. 1500 crores have been invested at average rate of 11% plus. In the
last year we had a foreign exchange loss, so it also has a component of interest swaps on the
foreign exchange element which is in plus today. But adding to it, if you would see that as a
matter of prudence, one of the project we reversed the income, though it is not qualified as NPA
as of today, RKM Power Gen. had it not been done our profit would have been still higher by
Rs. 250 crores. So, we as REC is taking all precautions as a matter of financial prudence,

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whatever is desirable are being done. Other income is as per the institute guidelines and we have
been providing for it.

Participant: My second question is that, in your opening speech what you said that you are putting more
efforts on renewable energy. What I see in some other company they have spent this Q3 quarter's
80% whatever money they want to invest in renewable energy. So what is our stand, or what we
have done in this Q3, what is the amount we invested in renewable energy? And this question is
basically because, if you see two, three days back, the solar power has come down to Rs. 2.89
and government is planning to raise 10 GW and now they are planning in five years 100 GW.
So, from that angle every quarter you have to increase investment in renewable energy.

P.V. Ramesh: As far as the REC is concerned, we have already taken a note of these developments taking place
in the renewable segment. And we have a dedicated cell in the Company to take this forward. If
you look at the total disbursement, the sanctions that we had in the last five years, during this
year itself it has surpassed the cumulative sanctions and disbursements figures of last five years
and there is a complete focus of REC management to see that we take a larger chunk of
renewable energy projects in our kitty. And this year we have a target of at least Rs. 3000 crores
to Rs. 4000 crores of additional disbursement, and the sanctions pipeline are also very robust as
of today. And we continue to follow the same trend in the next year itself. And this is a real focus
area for us in REC today.

Participant: And this year's Budget, government said that power should go to each and every village. So you
are in transmission as well as in distribution, so I think you are doing well in distribution and
metering and other things. And why we should do this? Basically the power is surplus and
nobody is ready to purchase at Rs. 2 also. So if we go to the end, then at least we will consume
more power and we will get better returns.

A.K. Verma: Your point is well taken. See, in our country almost 6,000 villages are such which have not got
the electrification till now. So you know the Prime Minister has already given a deadline that we
have to finish it within 1,000 days from 15th August 2015. And therefore we take it by 1st May
2018; we will reach every village before that. And you see after that we have already reached
around 12,000 villages, so the speed is quite good. And REC is a nodal agency; they are looking
after this scheme. So, this scheme is going on very well.

Second point is, just electrification of the village is not important, what is important is the last
mile connectivity to every household. And that is most important, that task is little huge in the
sense that 5.5 crores household in this country are still needing it, this is just an estimate, it is
not an actual survey kind of thing, so do not dispute the data, it is just an estimate. But even if
we reach this we are not going to use up all the production, because normally these households
are small household located in far flung areas, so their consumption will not be as high per
household as it is in the urban area. But nonetheless, you rightly pointed out that we have surplus
energy, we must use it, and for that purpose we are improving the health of our distribution
companies, DISCOMs. Once their health is good, those areas where 24/7 power supply is not

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available because of the losses and all and some kind of perverse incentive is working that
because there are losses so we should not supply more hours, I mean such kind of unmet demand
will be met once UDAY is giving the results.

So on both the accounts, on extending the grid to the last village, on extending the access to the
last household. And at the same time, improving the robustness of the delivery mechanism that
is the distribution company through UDAY, we are aiming at. We have sufficient fund for that
purpose. DDUGJY is one of the largest investments; Rs. 75,000 crores is being invested in the
DDUGJY. So, sufficient fund is there. But as rightly pointed out by CMD sir that probably we
will need to improve and modernize the grid also, not only in the rural, even in the urban area,
throughout the country. Our delivery system, first we are extending the delivery system, and
then we will need to modernize this also. And therefore, there would be a great opportunity for
the REC to indulge with that. So that is on the distribution side, rest of the things CMD sir can
take up.

P.V. Ramesh: Just to supplement what Dr. Verma has said is that, if these 5.5 crores households, even they
consume the minimum of electricity, let's say 500 kilowatt hour per capita, it would require 25
gigawatts of power, that is sort of the demand. And then by extending the network, the other
spinoff, ancillaries that you would create, the savings on the environment, savings on the fossil
fuels, I think this is a phenomenal impact on the economy. And apart from the fact that the
growth momentum which is picking up should really with greater industrialization, greater
demand for services should really transform. In my view, the power has a transformational
impact on both intra-family dynamics as well as social dynamics. So we have seen that happen
in the villages which have the access to power, the children study longer hours, they study better,
and then there is a demand for small household micro enterprises, the whole economy
transforms. So, I think this is a momentum that we need to really drive from all directions.

Participant: Sir, your performance is excellent, you announced your book value also, but your market price
is not good. So what is your comment on that?

P.V. Ramesh: No, I think that is a perception obviously, I mean I am sure we will take your help, this also
shows there is a huge scope for appreciation and that is why we are underpriced. The market has
not recognized our value or not adequately appreciated. And exactly because, I mean, even I
myself till I came in around here, I was given this assignment; I was thinking REC is something
working in villages, doing some rural electrification projects. But it is a completely different
beast altogether, it is a Rs. 2 lakh crores financial institution involved pan-India, potentially
international and across the value chain and involved in both private and public sector, 16% of
our investment portfolio is with the private sector. So, it is a quite value creating enterprise. So
I think you have a big role to play in realizing our true value.

Management: Sir, just a few questions. Firstly, out of Rs. 30,000 crores this is what we have received and what
is our total exposure to the Uday loans? I want to know that the total amount which REC has
given to the various DISCOMs which are under UDAY.

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P.V. Ramesh: Let me just put this in a perspective. Our total exposure is about Rs. 78,000 crores.

Participant: For UDAY?

P.V. Ramesh: Yes, for UDAY totally. I mean, UDAY in the sense, these are the loans that have been given to
the DISCOMs, the DISCOM outstanding debt. Now, 25% of that is with the DISCOM, there is
still a time for them to be restructured, 75% is what the governments have to take over. The
states like Telangana, Tamil Nadu, they have come onboard recently. As Joint Secretary said,
two more states are yet to come onboard. The northeast is on a different parameter altogether,
Orissa, Delhi that is a private sector enterprise in the distribution network. So what we have got
is Rs. 31,137 crores, we are expecting another Rs. 12,000 crores from the Tamil Nadu, Telangana
and a part from Madhya Pradesh.

Participant: So, over the next year how much of prepayments are we expecting?

P.V. Ramesh: For about Rs. 12,000 crores.

Participant: From all the states?

P.V. Ramesh: From all the states.

Participant: And just one more thing sir, out of the Rs. 30,000 crores which we have received, can you just
give a broad outlook on how much has been utilized to repay the old loans and how much has
been disbursed?

P.V. Ramesh: No, I mean it is cash management, we have to service our outstanding debt and then we will
have to lend to the projects that are approved ongoing. So, our intention is to zero liquidity.

Participant: And in the T&D space our outstanding book is around 53% in T&D space, right. So out of this
how much would be transmission and how much would be distribution, a broader outlook on
that?

Ajeet Agarwal: Transmission would be 20% and distribution would be 33%.

Participant: Of the outstanding book?

P.V. Ramesh: Yes. So, our transmission segment is picking pace now.

Participant: Yes, but absolute amount?

P.V. Ramesh: Absolute numbers

Ajeet Agarwal: It is given in the presentation, if you look at the disbursement figure we can.

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Participant: Sir, in the outstanding loan book 53% is together given for T&D space?

Ajeet Agarwal: That is 53% we have given. The 33% is on the distribution segment and 20% on the transmission
segment.

Participant: And on the distribution side most of this would be working capital loans, because DISCOMs by
itself

Ajeet Agarwal: No, most of those are CAPEX loans, we do not resort to the working capital loans on a very
large scale and we have internal limits fixed up that we will not be advancing on an incremental
lending to a certain percentage of it.

Participant: And sir, just last question. So on the yield side, how much are we getting on the renewable
energy loans which we are giving? So what is an average yield which we are receiving on those
loans?

Ajeet Agarwal: About 10.5%.

Participant: So, on an average for our book it is around 11% to 12%, but for REC it is 10.5%?

Ajeet Agarwal: That is right.

Participant: Sir, you have taken a super human task of electrifying the whole of India, which includes power
generation, power transmission, power distribution and as well as the last mile connectivity at
the most cost effective structure of formula or constant. It is superhuman, both REC and Power
Finance Corporation are doing this, it is remarkable. However, the points which are bothering
quite a few investors, essentially your presentation says gross NPA is now 2.32% and net NPA
again is lower than 1.68%. How do you see these two parameters going forward? That is the first
question.

The second question I think Mr. Verma will be able to help us. The UDAY scheme normally,
generally is perceived as a transfer of the liability from the DISCOMs to the state governments.
State governments already in India are hugely over burdened with debt, we are sitting in Mumbai
and our Government of Maharashtra is carrying a Rs. 350,000 crores of debt for which our
Finance Minister of State says, he is worried every day because they have to generate Rs. 30,000
crores as interest payment. But we are transferring from the DISCOMs to the states. Perfectly
fine, we get a levy of lowering the cost of finance as well as the time period of the UDAY bonds;
maybe it is 10 years if I am not wrong or seven years.

Management: Mostly 10 years to 15 years.

Participant: So, over that period I think we will be able to meet this liability. The question which bothers us
that we have treated the effect but the cause, does it still remain? Like that are DISCOMs going

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five years down the line will generate again these kinds of T&D losses or essentially power theft
in India is very, very common. You come from Delhi; in Delhi we see pictures in the media, in
the print as well as on TV of power theft which is open at every corner. Our main objective
should be to eliminate the cause so that the effect never occurs or never reoccurs. So, we have
to put a point where the theft is not controlled but it is stopped.

P.V. Ramesh: So, your second question first and the first question second, and I request Mr. Verma to take it
please.

A.K. Verma: You are right that the financial liability of utility is being transferred to the state. Yes its a fact,
because they own those utilities, so de-facto it is their debt, UDAY is just making de jure, nothing
else. So, that is fine. And you rightly pointed out that it is giving some time space, it is also
giving some reduction in the interest burden. This is the only financial part. UDAY is not limited
to financial restructuring, UDAY is financial restructuring plus, plus, plus many things. Another
thing is the price of power; you see 85% to 90% of the cost of supply for a distribution company
is the cost of power. So, unless we reduce the cost of power no utility will be very, very
sustainable. So, there is a very heavy dose of reforms on the coal reforms you say, a lot of coal
swapping, coal rationalization kind of things are happening, the modern technology of the
generation like UMPP and all. So, efficient plants are to run, you can swap your coal from
inefficient plant to the efficient plant. The colliery and the plant connectivity through the
rationalization which reduces the cost of transportation, large scale things, the coal washing and
everything. So these things are happening. And just to share with you that NTPC has been able
to do it within three months, they could reduce the cost of supply by 32 paisa per unit, so that is
one aspect.

The other aspect is the operational efficiency enhancement which you said that the theft should
be reduced, fine, I mean that is most important thing, because our AT&C losses are 21% - 22%
nationally and we want to reduce down to 15% as envisaged in UDAY. For that purpose, a lot
of activities are to be taken, one is that those who are free riders they should be made registered
consumer. The problems with the many distribution companies are that their billing efficiency,
their collection efficiency is not as efficient as it should be. There are people who intentionally
stealing, there are some line losses which are technical losses. So, on all fronts activities are
being done like feeder metering, like even a smart metering is envisaged in that and we have
already done certain preparation and we are rolling it out. Similarly, specific measures for
campaign to reduce or prevent or stop the theft and many states have started. You must be
reading in the newspaper like 'Maro Gam Jagmag Gam', Haryana has started. They supply more
in those areas where the AT&C losses are reducing based on the revenue.

So, some kinds of incentive regime are locally designed by the utilities and being implemented.
They are also enforcing it also; I mean the states have taken up enforcement measures also. Of
course, one cannot go overboard in enforcing in the sense that you cannot put everybody behind
the bar, but then they are trying that also so that they can create adequate deterrent in the system.
They are also extending their facility of say bill collection, now a days the digital collections

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and all; they are also accepting the charges of the digital collection also on the utility part. We
are extending the grid, means access to the last villages or to the last family, all actions are going
on. Similarly, in the urban area IPDS is doing a lot of things, the entire energy auditing is being
IT enabled so that there is no human interface and you get only the data which can be
maneuvered and things like that. So feeder separation activity is going on so that you can have
24/7 supply to the domestic consumers whereas you can lessen adequately in the agriculture
supply.

So, a lot of activities are going on. And they are giving you the dividends. Only thing is we are
impatient to get it in a single day, single month, no it is not possible. So we have to be a little
more generous and concentrate towards this issue. And there would be some ups and downs
also, I mean every state is not doing the same way, every month we are not getting the similar
kind of results, sometimes up, sometimes down. But on an average we are getting it, very heavy
monitoring is going on. It is a technology driven monitoring, one. It is monitoring at our level,
the minister takes the monitoring, there is a monitoring committee which is inter-ministerial
committee, headed by a secretary in the Government of India, and the state governments chief
secretary is doing the monitoring. I told you the story about Rajasthan where the Chief Minister
herself is taking the campaign for this purpose. So things are going on.

So, not only the financial restructuring but the cost of power is also being reduced. And large
scale operational efficiency measures are being taken up. And there is a very good amount of
investment from two schemes that the Government of India is financing, the DDUGJY and the
IPDS. And at the same time, the Power Finance Corporation and REC, they are coming up and
they are very, very liberal, they are very cooperative with the utility to meet their all demands.

Participant: Also sir, EESL has distributed virtually

P.V. Ramesh: Yes, that is another point. EESL will reduce your monthly bill kind of thing. But then this has
nothing to do with the chori and all those things. But then, the total use of energy will be more
and more efficient in that case. So, they are going for the LED bulbs, they are going for the
energy efficient agriculture pumps and things like that.

Participant: Sir, just to add to what you have said. In this very premises Coal India came with an IPO
presentation. The then CMD said that one washery to install costs $15 million and the payback
period is seven to nine months. Life of a washery is 25 years. A normal mined coal costs Coal
India Rs. 700 a ton which is retained at Rs. 1100. But a washed coal cost goes up to Rs. 1100
but we can sell it at Rs. 2400. And 80% of coal comes from top 20 pithead mines. If we could
install the washeries at all the pithead mines then we do not need to mine 1 billion tons of coal
a year, because when we wash coal the calorific value virtually doubles. But we have been very
slow and slack on washery installation on a war footing, should have been undertaken by Coal
India. Maybe there are other compulsions like labor and as a consequence of washery the dirt,
dust, stone, sand, whatever comes, how to manage that waste.

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P.V. Ramesh: I think the laws in our country is taking care of that. Now no coal reaches to the thermal plant
whose ash content is more than 34%. So, washing is becoming more compulsion in many cases.
But washeries are not coming up in the same number, you rightly pointed out that it should be a
much faster growth and it is not that fast.

Participant: And the time when Mr. P. Chidambaram was the Finance Minister

P.V. Ramesh: There are many other issues, we cannot compare.

A.K. Verma: Let us stay focused on REC. Because these are important issues, no doubt, and they have a
bearing on what we do.

Participant: No, we are importing coal worth $16 billion a year.

A.K. Verma: No, that is an important issue but let's first talk about the NPAs which you had expressed concern
and many of the people, we want to clarify that.

P.V. Ramesh: As you must have seen our results, there has been a focused approach of the REC management
to see how we can revive the existing NPAs. If we just have a look at the kind of NPAs we have,
you will find that more than 95% of the asset is already created on ground, they have become
NPAs for the fact that the PLF factor has been low and they have not been able to service the
loan as per the requirement and that has to be classified. So, considering the fact that assets are
on the ground, REC in consultation all the joint lenders are actively pursuing the cases and
participating in the JLF formats and trying to see what options are available to us, whether we
can go for 5/25, we can go for SDR, we can go for S4A and last mile equity. So, you must have
seen in one of the projects has again been restated as standard asset that is Alaknanda, this has
been the result of the focused approach of REC management. Likewise, we have been working
very closely with other lenders and hope the results would be out in a very short period of time.
So this is our complete focus as far as the trend is concerned in such a large loan book one or
two slippages here and there could be possible. But all our efforts are being put to see that it is
not there. And wherever it has slipped into the category of NPAs, are revived at the early as
possible in consultation with the entire joint lender forum. And we would be extending an extra
arm to them and say if case of any restructuring is required seeing the overall scenario the cash
flow vis--vis the 5/25, S4A or otherwise a restructuring and sometimes a hair cut in the interest
which is already an NPA. So we are open to all kinds of options and hope that with these kinds
of the resolutions would be seen in the near future.

Participant: Sir, what is our provision coverage ratio at the moment?

P.V. Ramesh: It is almost 1 plus. If you look at the kind of NPAs, though we have not given this statement
here, against Rs. 4,600 crores approx. Gross NPA, our total cover in terms of provision u/s 36(1)
(viia) and other provisions against loan assets should be around. 5,000 crores plus.

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Participant: Sir, going forward this March ending quarter, or maybe the next two quarters, do you see the
gross NPA coming below 2% and net NPA below 1%? Will it be an empirical assessment but a
fair one?

Ajeet Agarwal: No, it is a difficult call since the forward-looking statements we are not supposed to make,
anyhow we can discuss one-to-one with you. And it all depends how we fare well in what kind
loan book. If you look at the kind of percentage you have been talking of, had the UDAY funds
not been received by us we would have been still 2% lower, the base would have been much
larger. There has not been an incremental NPA been added; only the fact that our base has come
down substantially, if you take a base that is still less than 2%.

Participant: Sir, at present CPs are being financed aggressively, almost Rs. 18,000 crores is there. So can
you share some plan, how you propose and how will it shape up by year end? And going forward
what will be the strategy? Because long-term funds are not coming through infrastructure bonds
or other thing within the Budget.

Ajeet Agarwal: The commercial papers which you seen, as of today we just highlight the fact, only Rs. 2,000
crores are remaining which is due to be repaid on 28th of February. Why we resorted to the
commercial papers as a short-term instrument, for the fact that the UDAY funds were in pipeline
to be received by us. And since we are having a dedicated cell for UDAY so we were in a close
coordination with all the DISCOMs who were supposed to repay the money with us. So, what
we have created a liability in terms of the commercial paper matching almost to the receipts of
it, so it has been nullified kind of thing, so idealling cost and the negative carry cost has been
reduced to the minimum. And the Rs. 2,000 crores of the CPs has been raised just in the last
week because the markets have shown a very firmer yields on 50 basis points. So we are of the
opinion that let the market settle down in the next ten to 15 days and we definitely intend to
borrow long now. All our funds have been profitably deployed in the system back. So the
commercial paper was a strategically move by us so that there is no long-term carry on these
bonds, we will get all the settlements of the UDAY funds. So we do not intend to carry any
commercial paper beyond 31st of March.

Participant: And what about infra bonds and other means of raising debt?

Ajeet Agarwal: No, infra bond in any case is a dispersion given by the Income Tax Act which is not there this
time. So we have been banking on other kinds of institutional bonds which we have been raising
traditionally in the market. The 54 EC bonds are in any case with us, it has been extended by the
Union Budget this time also, though we were anticipating some tax-free bonds to come in which
has not been there. So we will definitely be falling the similar kind of method. And we are also
very keenly looking into the external commercial borrowing as of today, as the rates in the
domestic market have started firming up.

P.V. Ramesh: We are also looking at the green bond market and the social impact bond market, because we
are in the business of renewable in a very big way. And so that market is a niche market, you

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know better about that. And also the social impact bonds which we have not made big use of
here in India, but given the fact that much of our rural energy work, household electrification,
village electrification, the impact it has on the social impact, so that is another area that we are
exploring. So the different markets and segments that one is looking at.

Participant: Secondly, in DDUGJY, sir said approximately Rs. 75,000 crores is the potential. You have
covered Rs. 24,000 crore in T&D which include some amount of DDUGJY. So can you share
what is the amount under DDUGJY and how are you proposed to take it up your share going
forward?

A.K. Verma: The funding pattern under DDUGJY, there are two components in the DDUGJY. One is the RE
component which was earlier sanctioned as RGGVY we have subsumed in that. There 90%
comes as a government grant from Government of India, 10% is the share of the utility which
goes as loan from REC at times. So that is one aspect. The other aspect is the new projects.
Under the new projects the funding pattern is 60% goes from the Government of India as grant
and 10% is utilities share, and 30% is the counterpart loan either from the REC or from the PFC,
I think both are sharing and mostly REC is there in the rural sector. So that 30% would be there,
out of Rs. 45,000 crores 30% would be RECs' I think it is Rs. 15,000 crores around.

Participant: Are you talking of the disbursement figure in this which you have given?

A.K. Verma: No, sanctions.

Participant: Sanctions does not have the DDUGJY figures with the grant component.

A.K. Verma: No, it is not. There are two things actually, which in a way is partly right. Because the grand part
which the Government of India is financing to the tune of 60% is not reflected in the books
because that is a grant, we are only a pass-through mechanism. Of the remaining 40%, 10% is
state governments/ DISCOM contribution, 30% is being financed by REC in most of the cases
that gets reflected on our books of account.

P.V. Ramesh: And that also will be disbursed as the work progresses, because nobody will take money in
advance in keeping the kitty. Yes, it is Pari-Passu with the execution.

Participant: It is only the disbursement part, the counterparty funding which we resolved to, this part of the
sanctions and not the grant component.

A.K. Verma: Yes, the grant is not reflected here. This is REC core functioning.

Participant: Good evening sir. I have one question on the loan growth first. Is there any guidance you can
give considering the UDAY repayments? I think earlier you said it might be like single-digit
obviously, but would you be able to give some guidance on the loan growth this year and the
next year if possible?

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P.V. Ramesh: We will have to see, we see a very robust demand rising as we move forward. And as I explained
that in the power sector there is a big demand and we will have to see. I do not want to be a
forecaster.

I thank the Joint Sectary to Government of India, Dr. Verma who is also our Director who has
to rush back to Delhi. And I thank him for sparing time to be with us. He has to catch a flight.
So thank you very much, Dr. Verma.

Participant: Okay sir. Sir, the second question was on the RKM Power Gen. Obviously, you have reversed
the accrued interest and you have also increased the provisions this time. So, what has changed
in one quarter because I remember last when we had an analyst call it was stated that this may
not become an NPA. So has anything changed drastically which has led to such action?

Ajeet Agarwal: Not exactly, the things have not undergone a change. It is a matter of financial prudence. If you
look at our accounts, one of the restructured assets provisioning on account of the Sonbadhra
project which we have provided for has already commissioned and we have reversed the
provision of Rs. 179 crores. So, taking a cue from that and since the project this account is
already being a sub-judice matter, so we though this is the right time and based on the financial
prudence we have made an ad-hoc provision. So our balance sheet did not get any surprises in
the times to come. So, that is the thing. And just to add to it, all the restructured provisioning on
the state sector projects, all the four projects which we have provided in the past since have been
commissioned within well in time. So whatever provisioning we have done which is outstanding
in our books, approximately Rs. 400 crores, would be written back in maximum period of 2
years from now.

Participant: So it is just a matter of prudence and nothing else?

Ajeet Agarwal: Yes, it is financial prudence only, nothing has undergone a change.

Participant: Sir, if it is possible to just give some highlight on this project because there is substantial amount
of exposure everywhere for this. Because earlier it was discussed that there were some deposit
issues and I think there was lot of optimism shown, is it intact in that sense and we do not expect
this to turn into NPL, is it something which might be important?

Ajeet Agarwal: No, as of today PFC is the lead financer of RKM Power Gen and they have almost doubled the
exposure which we have today. And since we have been participating in the joint lenders forum,
all efforts are being made by the lenders to see that does not slip into the category of NPA. The
project is likely to be commissioned very soon, though there are some issues on the PPA
segment. The idea would be for the lenders in case the project gets commissioned on time. So
there are other options available to us in terms of 5/25. So lenders are very keenly watching the
developments and will take all the possible measures within our reach as per the permitted RBI
norms to see the assets remain standard as far as possible.

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Participant: Just one question on the UDAY, you said around Rs. 78,000 crores, of that 75% should be
prepaid over a period of time. So, that amount to like, you have done already Rs. 31,000 crores,
so another Rs. 27,000 crores - Rs. 28,000 crores is left. Is that correct?

P.V. Ramesh: No, you see some of the states like Karnataka, Maharashtra, Gujarat, they have not undertaken
the financial restructuring because they believe that it is a small amount, outstanding, and the
DISCOMs must service the debt. And number two is, DISCOMs have the viability and the
means to service the debt. So that money has not come back. We said the total amount that was
outstanding was Rs. 78,000 crores of which Rs. 31,000 crores has come back, another Rs. 12,000
crores has to come, that is all.

Participant: And of this Rs. 12,000 crores how much is Tamil Nadu?

P.V. Ramesh: Tamil Nadu should be around Rs. 7,000 crores.

Participant: Sir, with respect to yields, as the situation is improving with respect to the UDAY scheme. So
how are we seeing the yields panning out over the next one, one and a half years? So are maybe
the states which are seeing improvement, if any, they are coming and asking for the lower rates
since things are improving the value chain. Do we expect yields as well as margins to come off
over a period of time?

P.V. Ramesh: So, if you look at the yields and the margins, I think we have been fairing pretty well as of today,
the NIMs are at 4.54% and the spreads is 3.27%. And you must have seen the lending rates are
to be adjusted with the cost of borrowing which is prevalent in the market. And as we have been
raising the cost of resources at the most competitive rates as compared to our peers, so that gives
us a more headway room so as to adjust our lending rates. Yes, initially six months back there
was some pressure from the bankers point of view when they were flooded with the funds. But
the way the things have started forming in the domestic market, so over a period of last 15 days
we have not experienced that kind of pressure on us on adjusting our lending rates. And going
forward, we do not see that there will be many demands of the interest rate cut scenario which
is a market driven kind of things. As the things are poised in the future to come and if the interest
rates continue to behave in the similar fashion as they are as of today, I think we should be
comfortably placed to keep a margin of 3% plus on a spread basis.

Participant: And on the restructured pool of assets which are there of Rs. 10,000 crores odd, so any assets
maybe which are worrying apart from, so RKM we had done the provisioning but on the private
side this Rs. 10,000 crores of assets which are there, anything which could come in over next
two, three years quarter or so wherein developments are not so positive and we might need to
create any provisioning?

P.V. Ramesh: No, we are actually looking at all the stressed assets very, very closely and we share everybody's
concern, these are investments that not only as an organization but also as a citizen of this
country. We are looking at each one of them closely in close partnership with our co-lenders and

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to find a way of resolving them. So, the idea is to see that they do not lapse back into NPAs
under no circumstance. Number two is that they are distressed at the earliest possible time. We
will have a clear roadmap in this quarter. So I would be able to answer this question with greater
confidence, say a couple of months down the line.

Participant: Because people were highlighting in terms of Lanco as well wherein the payments are not on
time since October. So maybe by March or so maybe you may need to create any provisioning
or something on that front. So, are any such assets which are there with us as well or maybe with
respect to Lanco in particular?

P.V. Ramesh: No, we would not want to get into specifics now because it is important, the questions that you
raised are very important. But we are working on them and then we will find a resolution at the
earliest.

Participant: Sir, just wanted to understand the nature of the growth in the short-term lending book, I think it
has seen a very sharp growth over last one year from less than Rs. 1,000 crores to over Rs. 4,000
crores. So what kind of lending is this nature of lending in the tenure yields on this book? Just
some broad color on this.

Ajeet Agarwal: The short-term lending is a kind of bridge financing we have been extending to the state utilities.
As we just mentioned that we do not intend to do it on the regular basis the short-term lending,
but definitely up to 5% to 10% of the incremental lending could be done as an STL which is
ranging from one to three years and the yields are quite better off and most of these loans are
against the government guarantees and also on the assets being created or assets being mortgaged
to us. And we prefer to have a discount of 25 basis points if the government guarantee is given.
So, most of these STLs are government guarantee backed.

Participant: And sir, second thing. Sir, just wanted to know what is the overall incremental yield on your
book on the new loans that you are booking now?

P.V. Ramesh: The incremental lending should be in the range of 11.5%, because the product mix of the private
sector vis--vis the state sector, though we have been extending some rebates to the state sector
but not to the private sector, should be in the range of 11.5%.

Participant: And sir the last one is, you mentioned investments in Tier-I bonds of the PSU banks. Sir, is there
a limit that you are looking at on this book?

P.V. Ramesh: Not exactly, there is a limit that we have to look at it. And whenever a good bank approaches us
because in the past the kind of yields which we have got from the kind of Indian Bank and the
Vijaya Bank is 11%. So definitely this is one of the options we look at it. But definitely for the
bank who has a better results.

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Participant: And sir last one if I can, sir you are booking interest income on all your restructured loan
accounts, right?

P.V. Ramesh: Yes, restructured. We have to book income; we have to make provisions as per the RBI
requirements.

Participant: And sir, last one if possible. What is the exposure to 5/25 SDR, if you have any?

P.V. Ramesh: In the recent past, yes we have done some projects totaling to around Rs. 2,000 crores of
exposure of we have in our books for three to four projects like Hindustan Power, the Jhabua
Power rand the Alaknanda. These are the projects where 5/25 has been resorted to and our total
exposure should be in the range of Rs. 2,000 crores with all the projects put together.

Participant: Sir, where do you expect the book to be may be a year down the line, the exposure to private
sector which is currently 16%, so with more of renewable power investments do you see this
growing, or what can be a reasonable guidance by FY18 probably?

Ajeet Agarwal: Maybe another 5%.

Participant: So you are saying around 20% - 21%?

Ajeet Agarwal: Yes. It may be higher if there is other viable projects, the transmissions, the interstate, the
evacuation infrastructure, green corridor you have the investments.

Participant: Sir, but that would mean very high proportion of the disbursements to the private sector in the
coming years? Because the asset quality, obviously with the state the asset quality concerns are
corporately lesser than compared to private part. So, we can take 20% - 21%...

Ajeet Agarwal: We need to look at the overall ecosystem. I mean, if the renewable as they come on stream is
increasingly driven by the private sector. But we continue to work with the state governments
on the solar parks. So it is difficult to quantify and say this is what it would be. But broadly it
would reflect the overall ecosystem.

Participant: Sir, you mentioned Rs. 31,000 crores and Rs. 12,000 crores to prepaid and expected repayment.
Could you clarify the timing of that, how much was in FY16 and what do you expect in 4Q?

Ajeet Agarwal: See, the entire thing has come in the past nine months. So this is the financial year 2016 - 2017.
Now the remaining Rs. 12,000 crores ideally should be expected this year, however considering
that we are already towards the end of February, there is a budgetary cycle on in the state
governments, they have the last month of the year, state governments borrow for their own
domestic disbursements for their own states requirement, whether they would take upon this
burden or not is not clear, we have been in contact with the state governments, they themselves

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have not decided on what needs to be done. So if it does not come in this quarter it would come
next financial year first quarter.

Participant: And I guess one positive in the quarter was the upgrade from UP SEB for Rs. 4,600 crores?

P.V. Ramesh: Yes, that is from UP.

Participant: Could you just clarify a little on what happened there and what is utilization of that project now?

P.V. Ramesh: The project was in the state of UP which is a thermal power project where the REC happens to
be the sole lender with an exposure of Rs. 4,300 crores. The project got delayed and we had to
provide the restructured provisions, and the project was delayed by two years and it was ranging
between two to four years. And with the continuous monitoring from the RECs project
management side and also with the close touch with the UP Government, the project got
completed within less than four years which is the extended COD period. The project is already
generating power. So a provisioning of 5% was made out in terms of the outstanding we have,
around Rs. 180 crores at that point of time. So, the RBI provides two years from the date of
provisioning or one year from the date of the commissioning, whichever is later the provisions
can be done back. So on that dispensation this provision of Rs. 179 crores has been reversed
back in our books in this quarter.

Participant: Sir, what is the utilization level in that project now?

P.V. Ramesh: Utilization level, I think both the units are performing now; they are generating power and
supplying to UP.

Participant: And just one last thing, so in restructuring you would have some visibility on what kind of
restructuring upgrades you could see in the next few quarters or next few years, if possible you
could some color on that?

P.V. Ramesh: As I just mentioned, all the four state sector projects which we have provided for totaling around
Rs. 13,000 crores out of which Rs. 4,300 crores has been reversed back. All this Rs. 10,000
crores is due for reversal in our books. All these projects have been commissioned and the private
sector RKM, I think the phase I has since commissioned, so it is likely to be reversed back. So
most of the private sector projects which was falling in the restructured provisioning, we hope
that they will be all commissioned within a four-year period. And wherever there is a delay we
are exploring the possibilities of change in promoter. So two, three projects are under
consideration for a change of promoter which provides another two years time to complete that.
So, hopefully we see that all the restructured assets that are in our books are not slipping in to
the category of NPAs as of today, but are a continuous monitoring process we do.

Participant: So the public sector ones which you said could see upgrade is about Rs. 10,000 crores?

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P.V. Ramesh: Yes.

Participant: And the private sector, I did not get if you gave a number on that.

P.V. Ramesh: The private sector, yes one of the projects RKM Phase-I I think has been completed. So on a
quarter-to-quarter basis we go on reviewing which projects are getting commissioned. And
wherever the projects are getting commissioned less than four years time, so we will reverse
those provisions so that visibility would be known to you on a quarter-to-quarter basis.

Participant: Sir, we have a dispensation of not migrating to 120 DPD till March 2017. So, when would be
that phase that we migrate 120 DPD and then subsequently to 90? Will March 2017 will still
remain on 180 DPD NPA recognition. So will be on 1st April next year would be at 120?

P.V. Ramesh: Yes, as of today, we have a dispensation till March 2017 to have 180 days of these NPA
provisioning norms. We have also taken up the issue, the Reserve Bank of India highlighting the
issue in the state sector projects and saying at least from the state sector project the dispensation
may continue another three years. So we have not received any response as of today, though we
had a meeting yesterday with them, we took the advantage of being in Bombay. And we hope
that we would be pursuing with the RBI, but by 31st of March some clarity should be there. So,
hopefully for the state sector we might get and the private sector are in any case intended to
follow this 90 days period.

Participant: So, if we consider just like in PSBs case they are 150 right now and be at 120 at March 2017. If
we do at 150, 120, what would be the NPA as a percentage?

P.V. Ramesh: No, NPAs will not be there. The 90 days period is in any case there then you have another 90
days period, here basically you have 180 days and then. So the NPAs will not be there. It is not
going to result in NPAs for that matter.

Participant: So 180 DPD NPAs and 120 to 90 will be more or less similar, there would not be any exclusion?

P.V. Ramesh: More or same, yes.

Anyone else? May I just request Director Technical to say a few words?

S.K. Gupta: Thank you, sir. At the outset, what my Chairman said I would reiterate, I would start with
reiterating that these are exciting times, interesting times for the power sector. As REC we are
everywhere and so many the entire ecosystem evolving, if we see in post-independence India
this is a scenario where the next year will see the 100% access the power to all villages, we are
embarking on a program to connect each household. There is a huge drive for power for all. We
have finalized with each state, each state we have dealt with and we know what are their
requirement of generation, their transmission, the new requirement for infrastructure. And we
see and look forward to a huge robust growth for REC in these entire arena. Besides, there are

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 Rural Electrification Corporation Limited
February 14, 2017

huge focus with all those information technology, communication, internet and convergence of
this technology, there is a huge focus on automation, on controls. There is a lot of buzz about
smart cities and basically smart grid, smart distribution system, smart power delivery. These
things will drive this entire business, there is a lot of emphasis on this energy efficiency, energy
conservation and a lot of energy efficiency projects as someone mentioned about these LEDs. It
is not only about LED, it is about all power appliances, all power projects.

Second thing, if we see that our per capita consumption, almost Rs. 1,050 per kilowatt hours
only is now all set to have a quantum leap. We had been relishing under almost double-digit
shortages in peak shortage and energy shortage, now there is a paradigm where we have surplus
power. We have some pockets of depression where some connectivity and all those issues are
there. All the regions of the country are interconnected. A huge transmission work, huge green
corridor from one part to another where all these renewable power is coming, they are getting
connected. And this huge connection will unleash a lot of power from one power surplus area to
any power deficit areas.

Smart transmission systems, smart generation, smart distribution, this is a whole paradigm. IPDs
scheme is taking care of urban renewal, their more focus is making our grid more smart, more
intelligent, more self-healing and in the rural areas. This is all, of course, it cannot be achieved
over night and all these UDAY schemes which look for total rejuvenation of the power
distribution sector within a period of one to two to three years phase wise will look for a huge
demand and huge creation of infrastructure in this area, REC is well set. Moreover, besides two
powerful subsidiary companies, we are providing all value-added services in to all areas to our
distribution sectors; at least 80% of our business presently is from them. So, with all these factors
we look for a very interesting, very exciting times for power sector and we are all there to cash
on these opportunities.

Renewable, of course, is a focus area where we will be taking a quantum leap forward. We are
not looking for any incremental. And whatever little, there is a little slowdown we see in the new
thermal power generation, this space we are filling by quantum leap into renewable space, we
are looking for inorganic growth and not only in renewable, even in other transmission sector,
even in this generation wherein we are looking for this takeout or refinancing market. This all
conjures a very good image where we see that REC growing year after year. Thank you very
much.

Moderator: On that note, we conclude our interaction. On behalf of REC, I once again thank you for
participating in this absolutely insightful interaction. I would request all of you to join us for
high-tea, please. Thank you.

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