Analyst Concall
Don't see depreciating rupee hit foreign fund-raising - REC
This story was originally published at 10:43 IST on 10 February 2025
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--REC: See Revamped Distribution Sector Scheme loans pick up in next few yrs
--REC CMD: Hope to maintain 15-17% growth in loan boak over next few years
--CONTEXT: Comments by REC management in post-earnings analyst concall
--REC CMD: Hope loan book to grow 15-17% on year in Jan-Mar
--REC CMD: Hope to maintain NIM at 3.65-3.70% going forward
--REC CMD: Foreign fund-raise hedged, don't see impact of rupee depreciation
By Priyasmita Dutta and Ashna George
NEW DELHI – With most of its foreign borrowings hedged, REC Ltd. does not see depreciation in the rupee as a spoke to its offshore fund-raising plan, Chairman and Managing Director Vivek Dewangan said on Monday. His comments come at a time when the Indian currency has been weakening amid a globally strengthening dollar and strong foreign fund outflows. The rupee has depreciated over 2.7% against the dollar so far this year.
"I assure you that 99% of our forex loans are hedged so there's not much concern," Dewangan said in a post-earnings analyst conference call.
The power sector financier has been diversifying its borrowing portfolio over the last couple of years 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 such as the Central Board of Direct Taxes-approved zero-coupon bonds.
"Our treasury team keeps reviewing the hedging margin and on that basis, we are regularly reviewing our portfolio and in case if any action needs to be taken, that will be done in time," REC's Director Finance Harsh Baweja said. "Rupee depreciation is a recent phenomena, so we are working on that and whatever is the best action, will be taken immediately," he added. Shares of the company were at INR 425.10 at 1025 IST, up 3.7% from the previous close.
The Maharatna company detailed its Oct-Dec financial results on Thursday, in which it reported a healthy profit of INR 40.29 billion, over 23% higher on year. Its diversified borrowing portfolio has aided healthy net interest income in the last few quarters, one of the key drivers of the company's bottom line. The net interest income for the December quarter was INR 49.30 billion, up nearly 19% on year.
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 period. Harsh Baweja had said earlier in the year that the financier aims to borrow about INR 1.6 trillion in the current fiscal year, and 35% of that through offshore borrowing.
The net interest margin of REC at the end of December quarter was flat sequentially at 3.66%, but 5 bps higher on year. Dewangan said the company aims to maintain NIM at 3.65-3.70% going forward, beginning from Jan-Mar.
Regarding operations, the company's top boss said that while the loan book grew 14% on year to INR 5.66 trillion as of December end, the company is hopefull that from the current quarter, the loan book will grow 15-17% on year. "We already have a number of projects in the pipeline and see healthy offtake in projects," Dewangan said. In Oct-Dec, disbursements were up nearly 18% on year at INR 546.92 billion.
Within total disbursements, lending to distribution companies in Oct-Dec was INR 326.62 billion. Dewangan said the the company envisages lending under the Revamped Distribution Sector Scheme to go up over the next few years. The government had approved the Revamped Distribution Sector Scheme in 2021 to help distribution companies improve their operational efficiencies and financial sustainability. REC disbursed INR 3.02 billion under this scheme in Oct-Dec and INR 13.38 billion in the first nine months of FY25. End
US$1 = INR 87.71
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Avishek Dutta
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