Last time we elaborated on the marketing strategies of Power Finance Corporation. In this case study, we are going to know about PFC, market capitalization, the SWOT Analysis of Power Finance Corporation and will learn more about the threats and opportunities of PFC – post covid.
Power Finance Corporation Limited is a non-banking financial company and is a Government of India undertaking, established in 1986. It provides funds and non-fund based aid for the development of the Indian Power Sector.
Power Finance Corporation marketing activities have aided them in their endeavours. Digital marketing is a new way of marketing that includes social media channels, websites, SEO to market their products and services. It’s a skill that almost every marketing agency requires. Check out our Free MasterClass on Digital Marketing 101, delivered by Karan Shah, CEO and Founder of IIDE, if you want to learn more about today’s effective marketing.
To better understand the path behind Power Finance Corporation continuous growth via the SWOT Analysis of Power Finance Corporation, let’s first delve into the company, founding, financial status, products/services and competitors.
About Power Finance Corporation
(Chairman & MD – Mr Ravindra Singh Dhillon, Source: IIDE Creator’s Room)
Presently, PFC is the largest owned non-banking finance company and is also the financial backbone of the Indian Power Sector established in New Delhi, India. It consists of 16 subsidiaries and 2 joint ventures. On October 12, 2021, PFC was accorded with the status of “Maharatna” by Govt. of India.
PFC has been actively involved in providing finances to various power projects in the country as it is its core business activity. It also has a consulting business wherein it offers advisory support to the power sector companies. The company also has two subsidiaries, PFC Consulting and Rural Electrification Corporation Limited (REC). It also has a joint venture with Energy Efficiency Service Limited (EESL).
When issued, the IPO of the company was oversubscribed by 76 times which was one of the most successful IPOs of 2007. The share of Power Finance Corporation is listed on NSC and BSC.
|Chairman & MD||Ravindra Singh Dhillon|
|Origin||New Delhi, India|
|No. of Employees||484+|
|Company Type||Government Corporation|
|Market Cap||Rs 31,430 Crore (2021)|
|Annual Revenue||Rs 33,362.90 Crore (2020)|
|Net Income/ Profit||Rs 5,655.14 Crore (2020)|
Products & Services by Power Finance Corporation
- Rupee Term Loan
- Foreign Currency Loan
- Short Term Loan
- Financial Consulting
- Financial Products
- Investment Banking
- Loan Management
- Linkage Management
Competitors of Power Finance Corporation
- PTC India
- IFCI Ltd.
- MAS Financial Services Ltd.
- REC Ltd.
After understanding the core of the company, let us now proceed to the SWOT analysis of Power Finance Corporation.
SWOT Analysis of Power Finance Corporation
Power Finance Corporation maintains its dominant position within the market by crucially analyzing and reviewing the SWOT analysis of Power Finance Corporation. SWOT analysis is an immensely interactive process and requires effective coordination among various departments within the organization like – operations, marketing, finance, management information systems and strategic planning.
The major purpose of the SWOT Analysis of Power Finance Corporation is to spot the strategies that a firm can utilize to take benefit of external opportunities, counter threats, and repose on & protect its strengths, and eradicate weaknesses.
To better understand the SWOT analysis of Power Finance Corporation, refer to the infographic below:
So let us first start by looking at the strengths of Power Finance Corporation from the SWOT analysis of Power Finance Corporation
Strengths of Power Finance Corporation
Strengths are interval positive attributes or capabilities a person has control over and make full use of skills competencies knowledge.
- Managed Liquidity Profile: PFC is well established in the domestic market. PFC has maintained strong relationships with lenders with high creditworthiness, it can receive ongoing support from the domestic market even in times of economic crisis. After having several deductions in cash inflows the company is still not facing any challenge regarding liquid funds.
- High Dividend Provided: PFC is a company that is being loved by its investors because of the dividend that it shares with its customers. Sometimes PFC has provided a dividend yield of more than 10%. Investors who want to opt for less risk go for PFC.
- Public Sector Undertaking: PFC is a government undertaking company with a 56.8% stake in the government. The PFC has played a key role in providing support for the various finances. GOI plans to develop and revitalize the sector as a Covid-19 liquidity package DISCOMs; IPDS; UDAY, ITP etc. Therefore, the PFC is a sensitive arm of the government with the development of the Indian energy sector.
- Focuses on CSR Activities: PFC is a government undertaking company hence works more on social values and less on profit-making which helps the sector to grow efficiently with less borrowing rates. PFC also has donated Rs 200 crores to PM Cares Fund due to the Covid outbreak.
- Dominant Market Position: PFC is a monopoly in the market of providing funds for the power sector, hence there is no close competitor now as REC has been captured by PFC with almost 52% of the controlling stake.
Weaknesses of Power Finance Corporation
Weaknesses are negative aspects and attributes which have little control over. These are the areas where the business needs to improve to remain competitive.
- Government of India Undertaking: As PFC is a Government Of India undertaking, it has to regulate according to the government and the efficiency of the private sector is more than that of PSUs which indirectly results in a decrease in profits of the company and leads to more provisions. Private companies had shown 300% growth in the capital within the past 5 years but PFC had barely shown a 30-40% increase.
- A Decline in Net Profit: In the previous years, the company has seen a fall in net profit because of its high expenses and provisions as it has given Rs 200 crores to PM cares fund which is also shown as an expense in their balance sheet which directly leads to declining net profit.
- Pending Legal Paperwork: Two key policies including tariff policy and electricity amendment bill are under government consideration, application of which will benefit the users or customers of PFC but is still on hold.
- Low Lending Interest: The lending rate of PFC is barely 4.5% which in turn leads to lower income for the company.
Opportunities for Power Finance Corporation
Opportunities are uncontrollable external events a person can potentially leverage. These are favourable external factors that could give an organisation a competitive advantage.
- Privatisation: PFC is a Public Sector Undertaking which could be the major reason for its low growth rate. Therefore giving more stakes to the private sector would lead to an increase in profits and simultaneously will lead to a reduction in expenses.
- Equity: The recent debt to equity ratio of the company was a lot higher than a usual company almost around 12% which leads to more interest payments. So the company should focus and depend more on equity and less on debts.
- Interest Rate: The lending rates of PFC is comparatively lower than others, as it is good for welfare purposes but the company has to pay around 7 to 8 percent on their borrowings. So PFC should look into maintaining both the borrowing and lending rates.
- Provide Loans to Private Sector: The Asset Quality Snapshot of PFC includes the loan disbursement of 83% to the Government and 17% to the private sector that can be changed and some higher rate of interest could be charged.
- Strong Digital Presence: PFC is a public sector financing company that aids the power sector by providing funds and non-funds support. But to attract their investors and traders they can make their digital presence strong which will enhance the new investors to invest in their company and also lead to raising the demand of their stocks which simultaneously lead to an increase in the capital of the company through equity.
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Threats to Power Finance Corporation
These are the factors that have the potential to harm an organization. Threats are uncontrollable external factors that might overcome or damage the strength and opportunities.
- Submerge of PFC & REC: PFC is being run on the policies of RBI which does not allow any non-banking financial companies to provide loans of more than 25% but PFC and REC had given loans to the same project which is collectively more than 25%. So, the merger could put PFC into legal trouble.
- High-Interest Borrowings: The biggest threat to the company is its borrowing rate, while occupying REC, 30% of the amount was borrowed from other financial institutions at a higher rate which directly leads to the bad annual figures of the company.
- Currency Depreciation: Post Covid the INR has been depreciated continuously as compared to US dollars and the funds which have been provided to foreign companies, in turn, lead to a loss due to INR depreciation.
- High Debt: The company relies more on debentures and bonds due to which the interest payment is more than the interest received which is a big threat to the company as it will also affect their decision making.
This ends our detailed SWOT analysis of Power Finance Corporation. Let us conclude our learning below.
As we had gone through the SWOT Analysis of Power Finance Corporation, It is a company that helps in the growth of the power sector and has the strength to capture its market growth by working on its policies and framework. It has grown 100 times till date and can grow more by working on its weaknesses and efficiency. One of the aspects which is necessary today is a strong digital presence and strong digital marketing.
Many companies and startups are now focusing on digital platforms to boost their sales directly or indirectly. PFC can use the tools and techniques of digital marketing to attract new investors and increase the demand for PFC stocks.
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