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Informist, Thursday, Feb. 6, 2025

By Priyasmita Dutta

NEW DELHI – A robust rise in REC Ltd's revenue from operations and net interest income led the company to post a healthy profit of INR 40.29 billion for the December quarter, over 23% higher on year. The power sector financier's total revenue from operations during the quarter was INR 141.57 billion, over 18% higher on year. Net interest income during the quarter was INR 49.30 billion, up nearly 19% on year. In Jul-Sept as well, its net profit of INR 40.05 billion was primarily driven by net interest income. Sequentially, the company's profit rose only 0.6%. 

The state-owned company's healthy interest income comes against the backdrop of its senior management making an effort to diversify the fund-raising portfolio to mitigate the impact of a high interest rate scenario. For the very same reason, REC has been tapping foreign markets--particularly the Tokyo market--to raise funds while also using special securities like the Central Board of Direct Taxes approved zero-coupon bonds. 

In Oct-Dec, REC raised INR 233.09 billion through foreign currency borrowings out of the total borrowing of INR 372.62 billion during the same time. Through zero-coupon bonds, it mobilised INR 27.12 billion in Oct-Dec, also making the special security make a comeback into the corporate bond market after a 13-year hiatus. REC's Director-Finance Harsh Baweja had said earlier in the year that the financier aims to borrow about INR 1.6 trillion in the current fiscal, out of which, it aims to borrow 35% through offshore borrowing. 

The cost of borrowing for REC in Oct-Dec was flat sequentially at 7.18%, but 10 basis points lower than the corresponding quarter a year ago, the company said in its investor presentation. In FY24, the power sector financier's cost of borrowing was 7.13%, 15 bps lower than the previous year. 

The net interest margin of REC at the end of December quarter was also flat sequentially at 3.66%, but 5 bps higher on year. In FY24, the net interest margin was 3.57%, up 19 bps from the previous year.

The healthy interest income and revenue from operations during the quarter was on account of steady disbursements. In Oct-Dec, disbursements were up nearly 18% on year at INR 546.92 billion. Sanctions during the same period, however, were sharply down by nearly 36% at INR 848.08 billion. 

As of Dec. 31, the company's loan book was up 14% on year at INR 5.66 trillion. The power financier is aiming to double its loan book to INR 10 trillion rupees by 2030.

REC's total income in the reporting quarter was INR 141.73 billion, up over 18% on year. Sequentially, it was up 4.24%. Shares of the company turned positive after the financial results for Oct-Dec were released, and closed at INR 434.15 on the National Stock Exchange, down 1.4% from the previous close. REC, formerly called Rural Electrification Corp. Ltd., is a non-banking financial company under the power ministry, and it lends to state electricity boards, state-owned power utilities, rural electric cooperatives, and independent power producers.

In the first nine months of FY25, REC's total income was INR 408.05 billion against INR 345.71 billion a year ago. Net profit during the same period was INR 114.77 billion, nearly 15% higher on year. Thursday, the Maharatna company also declared a third interim dividend of INR 4.30 per share.

On asset quality, the power sector financier wrote back INR 890.3 million during Oct-Dec. In line with the company's aim to achieve zero net new non-performing assets by the end of 2025, the net bad loans of the state-owned financier were 0.74% as of Dec. 31, against 0.88% a quarter ago while gross bad loans were at 1.95% against 2.53%. REC's provision coverage ratio was 61.88% as on December end.

The non-banking financial company's board on Thursday also announced the formation of a joint venture between REC Power Development and Consultancy Ltd.--a wholly owned subsidiary of REC--and Mahagenco Renewable Energy Ltd. This JV will have the shareholding ratio of 50:50 and is for the joint development of renewable energy and other power projects.  End

Edited by Akul Nishant Akhoury

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