Posted on February 12, 2025, by Niftynews
Power Finance Corporation (PFC), the state-owned financial services giant, has recently reported its third-quarter results for the financial year 2024-25. The company showed a strong performance in certain areas, but its loan growth remained below expectations. Despite the weaker loan growth, PFC rewarded its investors with an attractive dividend declaration. In this article, we’ll dive into the financial performance of PFC for Q3, its loan growth figures, and the dividend announced.
PFC Q3 FY25 Financial Performance
PFC reported a consolidated net profit of ₹4,155 crore for the October-December 2024 quarter, reflecting a 23% increase from the ₹3,377 crore net profit reported during the same period in 2023. This surge in net profit was largely driven by strong net interest income (NII) and a reduction in its non-performing assets (NPA).
Net Interest Income (NII), which is the difference between the interest earned on loans and the interest paid on deposits, saw a robust 13% growth, reaching ₹4,694 crore in Q3 FY25. This is an improvement from ₹4,158 crore in the same quarter of the previous year.
One of the key highlights of PFC’s performance in Q3 was the improvement in its gross and net NPAs. The gross NPA ratio stood at 2.68%, which was slightly better than the 2.71% recorded in the previous quarter (Q2 FY25). Similarly, net NPA improved marginally to 0.71%, compared to 0.72% in Q2. This suggests that the company has been able to better manage its asset quality, even amid a challenging economic environment.
Weak Loan Growth Despite Strong Profit Numbers
While PFC’s net profit and net interest income figures showed significant improvement, the company’s loan growth continued to be a matter of concern. For the October-December quarter of FY25, the company posted a loan growth of only 10%, which is well below its full-year target of 14% for FY25. This weaker-than-expected loan growth is something that market participants will likely keep a close eye on, as it signals potential challenges in the company’s core business of financing power sector projects.
The loan growth is particularly important for a financial services firm like PFC, as it directly impacts future revenue generation. Given that PFC is a key lender to India’s power sector, slower growth in loans could impact its future profitability and financial stability. Investors will likely look for improvements in loan book expansion in the coming quarters, especially given the company’s large exposure to infrastructure and energy projects.
Dividend Announcement to Reward Shareholders
Despite the weaker-than-expected loan growth, PFC decided to reward its shareholders with a third interim dividend of ₹3.50 per equity share for the financial year 2024-25. The record date for this dividend is set to be February 28, 2025, and the payment will be made by March 3, 2025.
This dividend is seen as a positive sign, showing that PFC remains committed to providing value to its investors despite the challenges it faced in terms of loan growth. Dividends are typically a reflection of a company’s financial health and its ability to generate consistent cash flows. By declaring this dividend, PFC aims to maintain shareholder confidence, especially after its somewhat disappointing loan growth numbers.
PFC’s Stock Performance Post Q3 Results
Following the announcement of the Q3 results, shares of Power Finance Corporation Ltd. saw a modest 0.45% rise, trading at ₹377.20. However, the company’s stock has been on a downward trajectory in 2025, having fallen by 16% year-to-date as of early February. The weak loan growth is one of the key factors that have contributed to this decline in stock value. While the dividend announcement provided a brief boost, the overall sentiment toward the stock remains subdued.
In the long run, market sentiment towards PFC shares will likely depend on the company’s ability to meet its loan growth targets and manage its asset quality. The market will also be keeping an eye on whether PFC can address its loan growth challenges and expand its lending portfolio at a more robust pace in the coming quarters.
Outlook for the Future
Looking ahead, Power Finance Corporation will need to tackle several key challenges to ensure sustainable growth in the future. While the company has shown solid profitability numbers in Q3 FY25, the loan growth shortfall could affect its ability to generate additional revenues. It will be crucial for PFC to boost its loan book in the coming quarters to meet its 14% growth target for the year. This will likely require increased demand for financing in the power sector and a robust pipeline of new infrastructure projects.
Furthermore, global economic conditions, government policy changes, and industry dynamics in the power sector will all play a role in shaping PFC’s growth trajectory. Given the importance of the power sector to India’s overall economic development, PFC remains a crucial player in the financing landscape. However, its ability to expand its loan book and maintain asset quality will be critical to its future performance.
Conclusion
In conclusion, PFC Q3 FY25 results were a mixed bag, with impressive profit growth but weaker-than-expected loan growth. The company’s net profit and net interest income showed strong progress, while the loan growth continued to lag behind expectations. Despite the challenges, PFC has chosen to reward its shareholders with a third interim dividend of ₹3.50 per equity share, which will provide some relief to investors. Moving forward, loan growth and asset quality management will remain key areas to watch for PFC as it seeks to maintain its position as a leading lender to the power sector.
Key Takeaways:
- PFC Q3 FY25 net profit rises 23% to ₹4,155 crore.
- Loan growth of 10% falls short of the 14% target for FY25.
- Dividend of ₹3.50 per share declared, with the record date of February 28, 2025.
- PFC’s stock performance remains weak, down 16% YTD in 2025.
