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Top India power financier looks for safer bets, like electric vehicles

[NEW DELHI] India's Power Finance Corp Ltd is looking for new sectors to fund as it wants to hedge the risks associated with lending to the nation's ailing utilities, according to people familiar with the matter.

The country's top lender to electricity projects is exploring new areas including railway electrification, electric vehicles and charging infrastructure, as well as gas import terminals or coal mines that serve a power plant, said the people, who asked not to be identified as the plan is still under discussion.

The move is triggered by higher risks of default in India's power sector amid mounting losses at distribution companies, fuel shortages and project delays, according to the people. The business is also affected by weaker growth in generation capacity, especially at thermal and hydroelectric projects, the people said.

Power Finance couldn't immediately comment when contacted on Tuesday.

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India's distributors are saddled with huge debts from selling power below cost or from poor billing and collection. The financial mess impedes their ability to purchase enough electricity or pay generators on time, which in turn affect the debt repayment of those companies.

More than 70 per cent of the loans by Power Finance are to generators, and about 10 per cent of its 3.2 trillion rupees (S$61.9 billion) assets are "in stress," the state-owned company said in a presentation for the quarter ended June 30. Bad loan ratio increased to a net 4.65 per cent from 4.53 per cent a year earlier.

In March, Power Finance acquired a controlling stake in rival REC Ltd., bringing their combined exposure to the country's power industry to more than 6 trillion rupees, the highest among all lenders. Having such a large exposure to a sector fraught with risks does not make sense, the people said.

The company will engage experts to help it navigate the new sectors and will mostly provide loans in partnership with other banks that better understand those markets, one of the people said.

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