REC Ltd
Stock Snapshot
Price Performance
Vista Outlook
View Technicals Analysis →Basis of our Recommendation
REC Ltd is currently navigating a challenging environment characterized by muted loan growth and increased competitive intensity in the power financing sector. Management has indicated a cautious outlook, targeting a 9% loan growth for FY27/28, contingent on a revival in government capital expenditure and normalization of repayment rates. Despite a recent 5% QoQ growth in core net interest income, driven by a 15bps expansion in spreads, the overall loan book growth remains stagnant at 1%. Analysts note that while the renewable energy segment is expanding, the company faces execution risks due to a significant 43% YoY decline in disbursements. Vista's financial outlook reflects these challenges, with revenue expected to contract while profitability improves as margins expand. The current valuation appears fair, aligning with intrinsic value, but the expected upside remains limited at approximately 0.05%. Over the next 12-24 months, key opportunities include the potential for growth in the renewable energy sector and government infrastructure initiatives, while headwinds include competitive pricing pressures and execution risks in disbursement activities
Why We Like This Stock
- Management's strategic pivot towards renewable energy financing could drive future growth
- A strong capital position supports stability amid current market challenges
- Government infrastructure initiatives may provide a catalyst for loan growth recovery
Things To Watch Out For
- Muted loan growth and a significant decline in disbursements pose execution risks
- Increased competitive intensity is pressuring margins and profitability
- The reliance on one-off credit cost reversals raises concerns about sustainable performance
Key Parameters
Financial Snapshot
| Actuals | Forecast | ||||
|---|---|---|---|---|---|
| FY24 | FY25 | FY26 | FY27 | FY28 | |
| Revenue (Cr.) | 17,569 | 22,238 | 23,346 | 22,407 | 24,911 |
| Profit Before Tax (Cr.) | 17,964 | 20,119 | 20,784 | 20,423 | 22,753 |
| PBT Margin | 102.2% | 90.5% | 8902.6% | 91.1% | 91.3% |
| Net Profit (Cr.) | 14,633 | 16,019 | 17,027 | 16,828 | 18,748 |
| Earnings Per Share | 55.6 | 60.8 | 64.7 | 63.9 | 71.2 |
Analyst Recommendations
| Broker | Recommendation | Target Price | Date |
|---|---|---|---|
| CLSA | ▲ Outperform | 420 | 20-Aug-2026 |
| ICICI Securities | ► Add | 400 | 27-Jul-2026 |
| Morgan Stanley | ▲ Overweight | 430 | 27-Jul-2026 |
| Motilal Oswal | ▲ Buy | 435 | 27-Jul-2026 |
Company Overview
Show Company Profile
REC Limited, together with its subsidiaries, engages in the provision of financing services for power generation, transmission, and distribution projects in India. The company primarily offers long, medium, and short-terms loans; debt refinancing, equity financing, financing of equipment manufacturing for power sector and coal mines; policy for funding against regulatory assets, and revolving bill payment facility services; and provides letter of undertaking in lieu of bank guarantee, etc. It also acts as a nodal agency for the implementation of Pradhan Mantri Sahaj Bijli Har Ghar Yojana, Pradhan Mantri Surya Ghar Muft Bujli Yojana, Deen Dayal Upadhyaya Gram Jyoti Yojana, and National Electricity Fund. In addition, the company acts as the bid process coordinator for selection of transmission service provider through tariff based competitive bidding process for independent inter-state and intra-state transmission projects; provides project implementation and consultancy services in power sector; and operates National Feeder Monitoring System, a cloud-based IT and analytical platform, designed to monitor the reliability and quality of power. It serves central/state government power utilities, as well as private sector power utilities. REC Limited was formerly known as Rural Electrification Corporation Limited and changed its name to REC Limited in October 2018. The company was incorporated in 1969 and is based in Gurugram, India. REC Limited is a subsidiary of Power Finance Corporation Limited.