Fitch rates Power Finance BBB-

Fitch Ratings said it assigned a long-term foreign-currency issuer default rating of BBB- to Power Finance Corp. Ltd., along with a national long-term issuer rating of AAA(ind) and a national short-term rating of F1+(ind).

The outlook is stable.

The ratings are based on Fitch's assessment of the strategic importance of the company to the government of India and the support that is likely to be available should the company be in distress. Power Finance is the larger of the two government-owned finance companies operating exclusively to provide funds for the development of the power industry in India.

The ratings also are supported by Power Finance's strong business prospects and its currently high profitability and capital adequacy ratios, the agency said. The company reported average return on equity of 14.6% and net interest margins of 3.6% in fiscal year 2006. While reported capital adequacy ratios for the company are high, its key risk emanates from its exposure to a single industry with relatively weak borrower creditworthiness and the declining trend in profitability, Fitch added.

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