PFC Highlights the Rising Role of Storage and Hybrid Projects in India’s Energy Transition; Strengthens Green Energy Push with Rs. 16,000 Crore Sanctions for Storage Projects

PFC Highlights the Rising Role of Storage and Hybrid Projects in India’s Energy Transition; Strengthens Green Energy Push with Rs. 16,000 Crore Sanctions for Storage Projects

- PFC Charts Strong Growth Path Amid Power Sector Transformation, Targets 10% Loan Book Expansion in FY27
- PFC reported its highest-ever net profit of Rs. 20,051 crore in FY26, registering a 16% year-on-year increase
- The company successfully resolved the Rs. 3,001 crore Sinnar Thermal Power Project under the NCLT route, recovering 42% of the principal amount
- Indian DISCOMs collectively reported a profit after tax of approximately Rs. 2,700 crore for the first time at the national level

The Electrical Post 

Power Finance Corporation (PFC) has outlined a strong growth trajectory for FY27, supported by robust financial performance, improving asset quality, accelerating renewable energy investments, and emerging opportunities across India’s evolving power sector. Speaking at the company’s Annual Investors Meet, Chairperson and Managing Director Parminder Chopra described FY26 as a year “where resilience met results,” highlighting how the company delivered record profitability despite global uncertainties and a challenging financial environment.

One of the most significant developments announced during the year is the proposed restructuring and merger of PFC and REC. The move follows the announcement made by the Finance Minister in the Union Budget on February 1, 2026. PFC currently holds a 52.63% stake in REC following its acquisition in 2019. According to the management, the merger is expected to create long-term value by improving scale, capital efficiency, decision-making speed, sector reach, and financing capability. The combined institution is envisioned as a single-window financing partner for India’s power sector and is expected to become operational by April 1, 2027, subject to regulatory approvals.

On a consolidated basis, PFC reported the largest NBFC loan book in India at around Rs. 11.64 lakh crore and maintained its leadership position in renewable energy financing with a renewable portfolio of approximately Rs. 1.65 lakh crore. Consolidated profit after tax stood at Rs. 33,625 crore, the highest among NBFCs, while net NPAs remained exceptionally low at around 0.13%, reflecting strong asset quality.

The standalone business also delivered record results. PFC reported its highest-ever net profit of Rs. 20,051 crore in FY26, registering a 16% year-on-year increase. Growth was supported by a 13% rise in net interest income and provision reversals of around Rs. 1,800 crore during the year. The company’s capital position remained strong with a Capital Adequacy Ratio of 23.44% and Tier-I capital of 21.93%, providing significant headroom for future growth. Net worth crossed the landmark Rs. 1 lakh crore mark, rising 13% over the previous year.

PFC continued rewarding shareholders through dividends. The Board proposed a final dividend of Rs. 3.95 per share, taking the total dividend for FY26 to Rs. 18.55 per share, subject to shareholder approval.

Financial indicators remained within the company’s expected range. Yield for FY26 stood at 9.96%, cost of funds at 7.50%, spread at 2.46%, and net interest margin at 3.55%. However, management indicated that FY27 yields may reflect the impact of a lower interest rate environment and increasing competition. During FY26, PFC consciously adopted competitive lending rates to support business growth amid declining interest rates. While lower domestic rates helped reduce funding costs, foreign exchange volatility exerted pressure on overall borrowing costs. For FY27, PFC expects spreads to remain in the range of 2.40% to 2.50%.

Asset quality witnessed further strengthening during the year. The company successfully resolved the Rs. 3,001 crore Sinnar Thermal Power Project under the NCLT route, recovering 42% of the principal amount. Since 80% provisioning had already been created on the asset, the resolution resulted in a provision write-back of nearly Rs. 670 crore. Another major resolution involved the TRN Energy loan of Rs. 1,139 crore, leading to a provision reversal of around Rs. 160 crore.

These resolutions contributed significantly to the improvement in PFC’s asset quality metrics. Net credit impaired assets declined to a new low of 0.15%, while gross credit impaired assets stood at 1.09%. Management noted that nearly 80% of the company’s NPA book has been resolved from its peak level. The Stage-3 portfolio now stands at Rs. 6,323 crore across 19 projects. Of these, 10 projects worth Rs. 5,469 crore are under NCLT proceedings, including six projects valued at Rs. 2,603 crore that are under liquidation. The remaining nine projects worth Rs. 854 crore are being resolved outside NCLT. Notably, one major project under this category is the Shiga Energy loan of Rs. 522 crore, where co-lender approval is awaited.

Provision coverage remains strong. PFC has already created 100% provision on 16 projects amounting to Rs. 4,680 crore, while overall coverage on Stage-3 assets stands at around 86%. Apart from project resolutions, another significant contributor to provision reversals was the improvement in the financial health of power distribution companies. Following the release of the 14th Annual Integrated Rating of Power Distribution Utilities in January 2026, ratings of 18 DISCOMs were upgraded. Based on this improvement, PFC reversed nearly Rs. 1,000 crore of provisions under the Expected Credit Loss framework.

Loan disbursements during FY26 reached Rs. 1,65,414 crore. Renewable energy financing remained a major focus area, particularly hybrid solar-wind projects that support firm and dispatchable green power. Lending in the distribution segment was primarily driven by short- and medium-term funding requirements, while the conventional generation segment witnessed refinancing opportunities, especially among government sector entities. As a result, PFC’s standalone loan book closed at approximately Rs. 5.8 lakh crore, representing 7% growth during the year.

Management acknowledged that the lower interest rate cycle initiated by the Reserve Bank of India from February 2025 created substantial prepayment pressure. The cumulative repo rate reduction of 125 basis points encouraged aggressive refinancing by banks, particularly for commissioned projects. Consequently, loan growth remained below the company’s original guidance. According to PFC, without these unexpected prepayments, loan growth would have remained within the guided range of 10–11%.

Looking ahead, PFC believes prepayment pressures are likely to moderate. The RBI has maintained the repo rate at 5.25% for two consecutive policy meetings and retained a neutral stance, suggesting that the rate-cut cycle may have ended. Based on this outlook, the company is targeting approximately 10% loan growth in FY27.

The broader power sector outlook remains highly encouraging and forms the foundation of PFC’s future growth strategy. India has emerged as the world’s third-largest renewable energy market by installed capacity. The country’s total installed generation capacity has crossed 530 GW, driven largely by renewable additions. During FY26 alone, India added approximately 55 GW of non-fossil fuel capacity, marking the highest annual increase ever recorded.

Electricity demand continues to expand rapidly. Peak power demand reached an all-time high of 256 GW in April 2026, underscoring the growing energy needs of the economy. However, rising demand is also shifting the focus from intermittent renewable energy toward firm and reliable green power solutions. As a result, hybrid renewable projects, battery energy storage systems, and pumped storage projects are becoming increasingly important components of India’s energy transition.

The trend is already visible in project tenders. During FY26, nearly 40% of tendered renewable energy capacity included storage components, while another 30% was linked to hybrid projects. Recognizing this shift early, PFC has begun financing energy storage infrastructure and has already sanctioned around Rs. 16,000 crore for battery storage and pumped storage projects. The company believes this provides an early-mover advantage in financing emerging technologies that will play a critical role in ensuring grid stability and round-the-clock renewable power supply.

The distribution segment is also showing notable signs of improvement. Aggregate Technical and Commercial (AT&C) losses have reduced to 15.04%, moving closer to the 12–15% target established under the Revamped Distribution Sector Scheme (RDSS). In a historic milestone, Indian DISCOMs collectively reported a profit after tax of approximately Rs. 2,700 crore for the first time at the national level. This turnaround reflects sustained reforms and operational improvements across the distribution sector.

For PFC, these developments create substantial lending opportunities. The company expects continued demand for short- and medium-term funding from distribution companies. Simultaneously, opportunities are emerging in thermal and nuclear generation expansion as India seeks to ensure energy security alongside renewable growth. Infrastructure financing is expected to provide an additional avenue for portfolio expansion.

On the liability side, PFC maintained a diversified and stable borrowing profile. Total outstanding borrowings stood at Rs. 4,88,500 crore as of March 31, 2026. The domestic-to-foreign borrowing mix remained at 80:20, while 65% of liabilities were fixed-rate borrowings, helping protect the balance sheet from interest rate volatility. Outstanding foreign currency borrowings amounted to approximately USD 10.3 billion, diversified across US dollar, Japanese yen, and euro markets. Around 97% of the foreign currency portfolio remains hedged through derivative structures designed to protect against exchange-rate fluctuations.

Management acknowledged that FY26 was one of the most volatile years for global currency markets, influenced by trade tariffs, delays in the India-US trade agreement, and geopolitical tensions in the Middle East. These developments led to rupee depreciation against major currencies and increased translation losses. Nevertheless, PFC emphasized that it continues to closely monitor global developments and undertake appropriate risk mitigation measures.

With a strong balance sheet, improving asset quality, leadership in renewable energy financing, and expanding opportunities across generation, distribution, storage, and infrastructure segments, PFC believes it is well-positioned to support India’s power sector transformation. The company’s FY27 strategy remains focused on sustainable growth, prudent risk management, operational excellence, and long-term value creation while capitalizing on the significant investment opportunities emerging from India’s energy transition and power sector expansion.
 

Published at : Sep 06, 2026 06:33 AM (IST)

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