REC Limited (RECLTD) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the REC Limited Q2 FY '25 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Shweta Daptardar from Elara Securities Private Limited. Thank you, and over to you, ma'am.

Thank you, Steve. Good morning, everyone. On behalf of Elara Securities, we welcome you all to Q2 FY '25 Earnings Conference Call of REC Limited. From the esteemed management today, we have with us Mr. Vivek Kumar Dewangan, IAS, Chairman and Managing Director; Mr. Vijay Kumar Singh, Director of Projects; Mr. Harsh Baweja, Director of Finance; Mr. Mohan Lal Kumawat, Executive Director of Finance; and other senior officials. We express our gratitude towards the management of REC Limited to provide us the opportunity to host this conference call. Without further ado, I now hand over the call to Mr. Vijay Kumar Singh, Director of Projects, for his opening remarks, post which we can open the floor for Q&A. Thank you, and over to you, sir.

Good morning, everyone. I'm Vijay Kumar Singh,, Director of Projects. So we have a very brief presentation for our Q2 results, half yearly results. We would like to make that quick presentation. And thereafter, our CMD will be giving overall overview of the sector. So please allow us to make this quick presentation to you. Over to my colleague for making the presentation, please.

Good morning, everyone. We'll take you ahead for the investor presentation. We believe investors got an access of the investor presentation on our website. We'll take you ahead with this presentation. We have divided this presentation into five areas, which is REC overview, operational performance, asset quality, borrowing profile and the financial highlights. Let's take REC overview first. We see that REC has a journey of more than five decades, where then we started our journey from 1969 to develop our infrastructure sectors in rural areas. And therein, we have grown ahead in leaps and bounds. And in the latest year 2024, we have been appointed as National Program Implementing Agency for PM Surya Ghar Muft Bijli Yojana. We also did our Maiden Yen Bond issuance of JPY 61.1 billion. And recently in September 2024, we did a USD bond issuance of $500 million, which were raised at the most competitive rates. REC has multiple key strengths. The first being Maharatna Company and a strategic player in the Indian power, infrastructure and logistics sector. We have a diversified asset base with robust access to diversified funding sources. We occupy a strategic position in the growth and development of the Power Sector and a major player in Renewable Energy segment and creation of India's Green Energy Corridor. We have a healthy asset quality with adequate provisioning coverage ratio. We have very strong fundamentals and profitable business with stable margins, leading to strong profitability. We have highest domestic credit ratings of AAA, which is awarded by all the four major rating agencies in India. We have the international ratings of Baa3 and BBB- from Moody’s & Fitch, respectively, which are at par with the Sovereign rating of India. We are the nodal agencies for all the major flagship schemes of India. The major being RDSS, Saubhagya, DDUGJY, the latest being Rooftop Solar, et cetera. We have a highly qualified and experienced management team with sector expertise. We are a government's trusted arm, wherein we are assisting in GOI in multiple schemes being RDSS, Saubhagya, Late Payment Surcharge Scheme, Consumer Services Ratings of DISCOMS on operational matters, Integrated Ratings of DISCOMS on financial matters, DDUGJY, NEF, Rooftop Solar program. We have been accorded by Coveted Maharatna Status in FY 2023, which is the best among all the ratings assigned to the Center Public Sector undertakings in India. We are amongst the top 14 PSUs, which have been accorded this Maharatna Status in India, out of a total 100 rated entities in India. Apart from Maharatna, the ratings are Navratna, Miniratna I, and Miniratna II. REC holds the highest rating of Maharatna. This Maharatna status gives us various business advantages, wherein we get greater operational and financial autonomy. It allows us strategic investments by incorporating JVs, subsidiaries, and M&A activities in India and abroad. We have access to accelerated growth and support government's vision for the power sector. If you come to Slide #8, you see that we have forayed into Infrastructure Sector for Nation's Accelerated Development, wherein we can -- we have diversified our loan portfolio with a mandate of up to 33% loans in the Infrastructure Sector and Logistics sector. In these sectors, we have sanctioned various projects in Metro, Ports, Waterways, Airport, Oil Refinery, Road & Highways, IT Infra/Fiber Optics, Steel Infra and Health Sector. If we come on the Slide #9 of the PPT, we have given the shareholder outlook. If you see the shareholding pattern of REC as at 30th September 2024, we are majorly owned by Power Finance Corporation, who holds 52.63% in REC, while the Foreign Portfolio Investors and FIIs hold 21.23% in REC. The insurance companies hold 3.93%, Individual, HUF, and NRIs hold 10.78% in REC, the Mutual Funds and AIFs hold 9.48%. The Corporates, Banks and Finance Institutions hold 1.71% and Others hold 0.24%. The top 10 shareholders as of September 30, 2024, are also given in the slide, wherein PFC hold 52.63%; Government of Singapore at 1.56%; HDFC Trustee is 1.47%; LIC 1.35%; Nippon Life 1.28%; Tata AIG 0.77%; NPS Trust of Aditya Birla Sunlife Pension Fund 0.77%; SBI PSU Fund 0.71%; SBI Life Insurance Company Limited 0.67%; Vanguard Total International Stock Index Fund at 0.66%. So these are the top 10 shareholders of REC as at 30th September 2024. And FIIs and FPIs have always been reposed faith in REC, and they have consistently hold more than 20% in REC stock since IPO in 2008. We have been a strong history of high dividend paying in REC. And in the same context, we have declared the second interim dividend of INR 4 per share in Q2 FY '25. This is in addition to the first interim dividend of INR 3.5 per share, which was declared in first quarter, making a total dividend payout of INR 7.5, which is 75% per share on the face value of INR 10. The earnings per share of REC for the half year is INR 28.28, that is an annualized basis of 56.56%, and the book value per share is at INR 276.82 as at 30th September 2024. We have received various Awards and Accolades in our long history. The latest being that we have been awarded the ‘Plaque’ under Financial Services Sector, Other than Banking and Insurance category at the ICAI Awards that Institute of Chartered Accountants of India Awards for Excellence in Financial Reporting for FY '22-'23. Apart from that, we have received various awards in various areas for Renewable Financing, Risk Management, Green Bond Sustainable Finance and Corporate Governance, et cetera. We come to the operational performance of REC for this quarter and half year ended 2025. In the first half of FY '25, we have sanctioned total projects worth INR 188,991 crores, wherein we have sanctioned the highest category of loans in renewable including large hydro of INR 60,391 crores, making the total sanction of 32% out of the total kitty. So we have captured -- we are still in the same trajectory of outpacing the last year sanctions. In the quarter 2 of this year, we have sanctioned projects of INR 76,200 crores wherein renewable sanctions stand at INR 20,737 crores. The disbursements during the half year stands at INR 90,955 crores, wherein the renewable disbursement stand at INR 11,297 crores, making the total disbursements of 12% out of the total portfolio. The disbursement in second quarter was INR 47,303 crores. And out of that, the renewables were INR 5,946 crores. This signifies an increase of 20% in the disbursements from the last half year of FY '24 in the current year, FY '25. And there's an increase in the renewable including large hydro of 93% in the disbursement in the current half year of FY '25. Our loan book during the half year has increased by a robust rate of nearly 15% Y-on-Y and our loan book as of 30th September 2024 stands at INR 546,117 crores, out of which state sector stands at 88% of the total book at INR 480,818 crores, and the private sector stands at 12% of INR 65,299 crores. The renewable stands at 9%. It has grown -- it has grown continuously from September 2023 at INR 29,833 crores to INR 47,820 crores as at 30th September 2024. Now renewable book stands at 9% of our total loan book. The generation book is at INR 150,937 crores. The transmission book is at INR 48,592 crores. The distribution book is at INR 219,990 crores. The Infrastructure and Logistics sectors in the core area is at INR 16,504 crores, and I&L, infrastructure and logistics sector electromagnetic components at INR 49,308 crores. The STL and MTL stands at INR 12,966 crores. So that is the total book of INR 546,117 crores. We have Pan-India presence across all the states in India, wherein we have lending across 28 states of INR 480,818 crores and private book of INR 65,299 crores, making the total loan book of INR 546,117 crores. On Slide 17 of the presentation, we have given the top 10 major borrowers of REC, which are all in the state sectors. The top being Tamil Nadu Generation and Distribution company, then Maharashtra State Electricity Distribution, Tamil Nadu Power Generation, Kaleshwaram Irrigation Project, Uttar Pradesh Power Corporation Limited, Telangana State Power Generation Corporation, Andhra Pradesh Southern Power Distribution Company, Telangana State Power Distribution Company, Jodhpur Vidyut Vitran Nigam Limited, and the Jaipur Vidyut Vitran Nigam Limited. We have a well-diversified asset portfolio with top 10 borrowers accounting for nearly 36% of the outstanding loans. And none of the top 10 borrowers account for more than 7% of the total loan book, and there are no NPAs in the top 10 accounts ever. If we come on the asset quality of REC, the asset quality has shown continuous improvement of -- wherein our gross NPA have reduced considerably from 3.42% in March '23, to 2.53% in September '24. Our net NPA have also reduced continuously from 1.01% in March '23 to 0.88% in September '24. The provision coverage ratio stands healthy at 65.12% as at close of September 2024. On Page 20 of the presentation, we have given the sector-wise breakup of our ECL provisioning, that expected credit loss provisioning of our loan portfolio. If you see out of the total loan outstanding of INR 546,117 crores, the total NPAs are at INR 13,824 crores, wherein we have made a provisioning of INR 9,003 crores, signifying a provision capital ratio of INR 65.12 crores (sic) [ 65.12%. ] Additionally, we have...

65.12%.

65.12%. Additionally, we have a provisioning of INR 3,705 crores on Stage 1 and Stage 2 assets. That's the standard assets, implying a total provisioning of 0.70% also on the standard assets. The credit impaired assets of REC are at various stages of resolution, wherein almost 13 projects are under NCLT, worth of INR 12,296 crores, wherein we have made a provision of 67%. And we are also pursuing four projects outside NCLT worth INR 1,528 crores with a provisioning of 50%. We now come to the borrowing profile of REC, wherein we have the highest long-term ratings from CRISIL, ICRA, CARE and India Ratings of AAA with the domestic credit ratings of Baa3 from Moody's; BBB- from Fitch Ratings, and BBB+ from Japan Credit Rating Agency, which are at par with the Sovereign Rating of India. Of the total outstanding borrowings of REC on Slide #24, we have total outstanding borrowings of INR 475,832 crores as at 30th September 2024, wherein our external commercial borrowings are at INR 148,792 crores. Apart from that, we have access to various other areas as well of borrowings, which are Institutional Bonds, including subordinated bonds of INR 202,776 crores. We have loans -- we have taken loans from banks, bank institutions of INR 71,508 crores. We have access to 54EC Capital Gains Tax Exemption Bonds of INR 43,753 crores. REC is only amongst the four agencies in India who can issue such kind of bonds. We have tax-free bonds of INR 8,999 crores, and we have borrowed a small amount of INR 4 crores of Infrastructure Bonds as well. So that is the total portfolio of INR 475,832 crores of our borrowings. During the current period of half year 2025, we have raised total quantum of INR 77,759 crores to fund our disbursements. And during the current quarter ended September '25, we have raised INR 30,928 crores. Out of this, INR 23,121 crores of -- in half year have been raised from FCNR (B) loans and INR 18,105 crores have been raised from foreign currency borrowings. We have also raised INR 29,378 crores of Institutional Bonds, INR 4,254 crores from Capital Gain Bonds, and we have also taken loans from banks and FI Institutions of INR 2,900 crores. Now we come to the financial highlights of REC for the half year ended 2024. We have recorded the highest ever half yearly profit of INR 7,448 crores during the half year ended 30th September 2024. Our total income stands at INR 26,633 crores versus INR 22,571 crores, which signifies an increase of 18% Y-on-Y. The net interest income stands at INR 9,723 crores versus INR 7,763 crores, that also signifies an increase of 25% Y-on-Y. The net profit for the half year stands at INR 7,448 crores, which is an increase of 11% year-on-year from INR 6,734 crores in the corresponding half year last year. The loan book has reached INR 546,000 crores as at end of September 2024, which is an increase of 15% Y-on-Y. The asset quality has improved with net credit impaired assets at 0.88% against 0.96% year-on-year. The net worth has also increased to INR 72,893 crores versus INR 63,117 crores, which was an increase of 15% year-on-year. We have a capital adequacy ratio of 25.31% including Tier 1 capital of 22.87% and Tier 2 ratio of 2.44%, which is well above the RBI requirement of 15%. During the half year ended 2024, the yield on loan assets stands at 10.08%. The cost of funds at 7.12%, implying the -- implying an interest spread of 2.96% and a net interest margin of 3.64%. The return on net worth is at 21.03%. The interest coverage ratio of 1.57x and the debt equity ratio of 6.47x. The stand-alone statement of profit and loss is also given on Slide #29, wherein we have given the quarterly and the half yearly presentation of the profit and loss. We have attained a profit after tax of INR 4,005 crore in the quarter ended 30 September 2024, against INR 3,773 crores and also the profit for the half year is at INR 7,448. The balance sheet position is also given on Slide #30, wherein we have given the item-wise distribution of the balance sheet position of assets and liabilities as of 30th September 2024. With this, we have concluded the presentation. And CMD sir have also joined, and now we can go ahead with the question-and-answer session.

I welcome all the participants today in this con call who are present today. As you have noted that our revenue from operations and income is increasing at the rate of 17% to 18%; and our asset under management has grown by 15.2% on a half yearly basis. We'd like to give guidance that our asset under management is likely to increase in the next 3 to 4 years at the rate of -- it will vary from 15% to 20%, depending on particular quarter, it can go to 15%, some quarter, it may go to 17% and some quarters, it may go to around 20%. But on an average, we hope to maintain this 17% growth in our asset under management. But even if you take a conservative estimate, even if you grow at the rate of 15%, our asset under management would be double to about INR 10 lakh crore by the year 2030. But if we are able to sustain this 17% growth, perhaps we may reach doubling the asset under management by the year 2029 -- '28-'29. One more significant thing you might have observed that our sanction to the renewable energy sector has increased by about 21% in the first half of the year. We have sanctioned project worth INR 60,391 crores in the first half, and disbursements have also gone up by 93% with respect to renewable energy sector. Going forward, as Ministry of Power has outlined the requirement of 80 gigawatt capacity of coal-based capacity in the next 6 to 7 years by the year 2032, we are targeting a 20% market share in this coal-based power plant business also. And distribution sector will remain our key focus area because revamped distribution sector scheme is being implemented. And thereafter, also since country's distribution network is quite old, 35-to 50-year old. So the continuous upgradation of distribution infrastructure will still be required. And with the increase in share of renewable energy in the total overall generation profile, the requirement of the storage solution, the evacuation through Green Energy Corridor will be still there. And we are targeting 20% market share in the renewable energy business, which may be -- definitely be more than INR 3 lakh crore by the year 2030. With this, now we are open for questions.

[Operator Instructions] The first question is from the line of Shreya Shivani from CLSA.

Congratulations on a good set of numbers. Two questions. First is on the liability -- funding side. So your cost of fund has inched up. Can you give some outlook for what's -- how it's going to be in the future? And which bonds I'm assuming one of those -- which bonds are the one which has caused the spike and how much price hike have we done for borrowers? And which segment, renewable, et cetera, which segment did we hike the prices? Second question is on some of these media articles had these news items about lending to some of these groups like say, Vadhavan Port was mentioned a couple of weeks back in the media articles. Sir, can you help us understand given Vadhavan Port is owned by JNPA. Will our loan have a government guarantee over there from an explicit government guarantee as a collateral over there? And also, there was a news article about lending to company called Azure in the renewable sector. I wanted to understand the thought process behind lending to that company, given that there have been whistleblower issues with them. The CEO changed within 2 years -- 2 months or so, stuff like that has happened in the past. And yes, those are my two questions.

Let me respond to those questions. The cost of fund is likely to come down by the year -- by Q4, as you might have observed that Reserve Bank of India although they are holding this rate but this likelihood that the rates may come down in Q4. And we had kept a diversified portfolio of our borrowing. You might have observed that our FCNR loan and this External Commercial Borrowing has increased about 31% of our total borrowing. That is -- there, our cost of fund is much less than 7% actually. And our 54EC bond is the cheapest source of fund available that gives us 5.25%. Going forward, we don't -- we are not planning to increase. We are not planning to increase the burden on the borrowers because our cost of fund will be able to contain. With regard to your queries about lending to non-power infrastructure and logistic sector. Let me clarify that we are -- our hands are full with our core sectors, proposal, conventional generation, transmission, distribution and with a renewed focus on energy transition from the renewable energy segment and entire green project. We have a huge pipeline of projects from these -- our core competency area. So we are not focusing on non-power infrastructure and logistic at this stage. And as I had already indicated that we -- with regard to renewable energy projects, we have recently signed MOUs worth INR 112,000 crores when we had participated in RE-INVEST Summit in Gandhinagar. And last year, we had signed MOUs worth INR 285,000 crores. So we have a huge pipeline of projects on renewable energy sectors. And convention, generation, transmission and distribution also, we have a huge pipeline of projects. We'll be selective in financing non-power infrastructure and logistics, only where the asset quality is good, revenue cash flows are ensured, only those sectors will be able to focus. With regard to Vadhavan Port, you might have learned that, that has already been approved by the Cabinet Committee of Economic Affairs. Government of India has already approved. This is being taken by the GNPA. And -- but the execution will take time actually for Vadhavan Port. This execution will commence from the year 2027 only. By that time, it's likely cash flows would become clearer, that point of time we'll take a call. But we do feel that there is absolutely no concern with regard to funding Vadhavan Port. I'll request our Director Project to respond on Azure and security feature for Vadhavan Port.

So, Vadhavan, just to add what CMD sir, just now informed is that, we are in close discussions with them. They have confirmed that the entire equity will come upfront. Now, you might be aware, there are two promoters. JMP is one and Mumbai Maritime Board is another promoter with 26% stake. Both of them will put 100% equity upfront. Now upfront equity inclusion and that too 100% definitely gives us a lot of comfort in terms of project development and subsequently as well. But then we are in discussion in negotiating this loan with them. With regard to your query on Azure, yes, we are very, very careful, and we are watching the developments in Azure. What we have done in Azure is that we have picked up only the commissioned projects, the commissioned project which have definitive and -- definitive revenues, which have -- the projects have secured a very good rating, if I'm correct, it is A- rated projects. So it is all towards refinancing of commissioned projects only. And we are definitely not considering at this point of time, any project, greenfield project. Because we are still not very sure that for greenfield, the equity would come quite smoothly. But commission assets, the equities improved, the projects are complicated, they are up and running, and they have very good rating, and therefore, we did that particular transaction.

Got it, sir. Very useful. Can you help us understand in the commission project of Azure? What would be the EBITDA cover?

I don't have that particular number. But in terms of our debt service coverage ratio, it was close to 1.3. So that's a lot of comfort.

The next question is from the line of Manish Agarwalla from PhillipCapital.

So taking the similar discussion forward, what's your take on telecom sector? Is company open to provide loan assistance to likes of MTNL or Voda? Your views will be very useful. And I have a few more.

Yes. At this point of time, we feel that we are not going to finance telecom sector. Because our hands -- I have already mentioned, our hands are full with conventional generation, transmission, distribution and with regard to renewable energy sector. Telecom sector, as of now, we are not considering to finance.

Okay, sir. That's useful. Second question was on repayment rates. So this quarter, the repayment rates were slightly high. Is there any prepayments you are witnessing? Or are there some short-term loans which we disposed earlier which are coming back? If you can comment on that?

Actually REC is into a financing business. And you can well expect that some of the prepayments will always come in. During the quarter itself, we have a prepayment of around INR 7,000 crores, which has impacted our loan book also. But that is a continuous feature, and it will keep on coming in the year and in the quarter, next quarters also.

So there's nothing called refinancing by other entities, correct?

No, it is nothing like that. It is nothing like that. It is just -- we have cash surplus with the borrowing agency and they have prepaid the amount to us.

Okay. And sir, finally on Lanco. So I understand the status quo is maintained. There is no money received. So if you can update on that? And also on the related point, so we have been -- our coverage on Stage 3 is coming down. So your take on that, why are we bringing down the coverage on Stage 3? That's it from my side.

Lanco Amarkantak is the NCLT has passed the orders, but there were some operational creditors. They have approached about the distribution of this profit. That matter is pending. So that's why some amount has been kept. Once this matter is disposed off, the remaining amount would also get disbursed to all the lenders. Second question was ...

On coverage, Stage 3 coverage ratio.

Yes, state coverage. I'd like to clarify that of late, this Andhra Pradesh utility is...

No, no. That is not the question. I'll just reply. What you said that as you know that most of the project, which are coming in the renewable sector are coming from the private sector. So in our previous investor conferences, we have already mentioned that by the year 2030, our private sector share will increase to 13%. So it is going in line with that of what we have already said to our investors that with the new infrastructure projects as well as renewable projects, the private sector share will keep on increasing. This time now, it has -- from 10%, it has reached to 12%.

No, no, sir. My question was if I may come again. Your provision coverage on Stage 3 is declining and you are reversing the provisions. So my question was, why are we doing that?

Actually, there was some amount was received and against which we have reversed some ECL provisions. So that is why our NPA has changed. And as soon as we get the full amount, the full settlement is there, the gross NPA will also come down.

The next question is from the line of Alok Srivastava from UBS.

Sir, on the previous participant's question, could you mention which asset is this, where this provision reversal has happened?

It is regarding the KSK Mahanadi project, which is under advanced stage of resolution, bids have already been received some amount out of the TRN we have received, that the amount, which we have received out of the tier amount, we have reversed ECL provision for that. That our management considers that the value as of now, which has been bidded by the prospective investors is much more than what we have already made a provision under ECL. So whatever was the safer side, we have reversed to that extent. And for that, the money has already been received.

In fact, NCLT allowed distribution of the money lying in TRA to the lenders. That's how we got some receipt. And the resolution of KSK Mahanadi is in advanced stage. We have got very good bids, and our recovery is going to be more than 100% with regard to KSK Mahanadi.

Sure, sir. And sir, we have been reading that on Hiranmaye project, DVC has emerged as the highest bidder. So sir, what is our exposure there? And do we expect any write-back on that one?

Yes. Yes, we are expecting a recovery of more than 80% from the Hiranmaye asset. And we had made provisioning about 50%. So we'll get some write-backs. Our total write-back that we are expecting from three assets KSK Mahanadi, Hiranmaye, and Sinnar project in Nasik, our total write-backs are expected to be about INR 1,500 crores.

Okay, sir. Okay. And sir, one more question I had about an TANGEDCO, which is also your biggest borrower. There, this trifurcation is going on between the generation, distribution and the renewable entity. So sir, is there enough clarity now that where the guarantees will sit and your exposures, are they all guaranteed over there. Is there any risk post the trifurcation that happens?

Thank you so much, Alok, for asking this very pertinent question. The trifurcation of TANGEDCO has already happened. And the three companies have become functional. And I'll request Director Projects to [ comment ] that our exposure is now well within the limit and we have got sufficient space for all the three utilities.

So what was happening that -- especially in the case of Tamil Nadu, the generation company and the distribution company work together called TANGEDCO. You might notice that in a state like UP, we have 5 DISCOMs. In Tamil Nadu, we had only 1 DISCOM. And then that DISCOM was also clubbed with GenCO, Generation Company. And therefore, we were experiencing a great difficulty in terms of our exposure limits. Now since this trifurcation has happened, the entire loan, in fact, earlier also, it was for a specific purpose, specific scheme for generation, transmission and distribution. So likewise, the loan separation has happened with respect to the scheme that we had sanctioned. So now we have separate loan amount, which is in generation, transmission and distribution. Whatever loan was guaranteed by the government continues to remain guaranteed by the government even after the trifurcation. Now the biggest relief that we have got is that we are no way close to the exposure limit for any of the utilities with respect to generation, transmission and distribution.

Okay. Got it, sir. So sir, here, there is a possibility that there could be a rating upgrade of some of these entities and you can have write-backs also at a later point? Because if I'm not wrong, TANGEDCO had a C- rating?

Overall rating, there will obviously be impact, and they'll be rerated again. All these three utilities will be rerated again. And you may note that distribution utility rating is dependent on the ranking being done by the Ministry of Power. I'm sure their rating will go up and similarly for GenCO also. Some of the assets that they have recently paid to their lender, we were not the lender for those projects. We'll also improve the overall financials of the generation company. So our understanding is that all the three companies will have improved rating going forward.

Once the improved rating is there -- once the improved rating is there, and you have rightly mentioned that, that will impact our ECL provisioning also that will also be, to some extent, develop.

The next question is from the line of Suraj Das from Sundaram Asset Managers.

Am I audible?

Yes, yes, Suraj. Go ahead.

Congratulations on a good set of result. Sir, on your Slide 20, where you gave your loan portfolio and ECL provision. If I see the longer-term trained on that thing. Just wanted to understand two things. One, sir, on the private sector side, in the generation and renewables, your PCR coverage on Stage 1 and 2 is continuously coming down. So for example, in March '23, it was something like more than 100 basis points, which is now 60 basis points. Similarly, on renewable, it is something like 230, 240 basis points. Now it has come down to 60 basis points. So just wanted to understand what is the rationale behind this. Is this -- I mean, and at the same time, you are growing the renewable book also. So is it because your ECL PD assumptions are lower, because you don't have any significant delinquency over the past few years? Or is it a conscious choice?

Sir, can you please repeat the question? I'm not able to hear you perfectly, sir?

Yes. Sir, I'll repeat it. So if I see the Stage 1 and Stage 2 provision for the private sector in generation and renewables segment, it is now 60 and 62 basis points, respectively, this quarter. This number, let us say, in March '23, 4, 5 quarters back, it was something like 100 and 230 basis points. So this number is continuously coming down. So just wanted to understand what is the rationale behind this? Because we are also growing the renewable book. And you are also reducing the Stage 1 and 2 provision on both the segments. So what is the rationale, sir?

So I think you might have seen that our renewable book is growing quarter-on-quarter, year-on-year basis. Now there are some projects, which are under construction, have not achieved COD. There are projects, which have achieved COD and there are some refinancing projects also, which we mentioned during the earlier answers. So during the construction stage, the provisioning remains high, which is close to 1% as per the ECL methodology. And once the project achieves the COD, the ECL provision comes down by 40 bps. So as the projects continue to achieve COD, this provisioning will also come down. But then, if there's addition of under construction project, there will be change in this particular provisioning. So all will depend on the mix of the under construction and commissioned project, which will get reflected in overall provisioning in the renewable energy sector.

Number two, the PD of these all -- some of the projects of renewable sector have also been improved, so which has resulted in lesser ECL provisioning, sir.

Understood, sir. Very clear. And the second question, similarly on the infrastructure sector, both core and E&M, your provision on the Stage 1 and 2 is only 8 basis points. So should not it be higher sales because, I mean, at least 40, 50 basis points would be the initial provision to begin with or when the...

Actually, what happens that, in case of infrastructure project, most of our funding is to the government sector.