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Informist, Wednesday, Oct. 15, 2025

By Priyasmita Dutta

NEW DELHI – State-owned REC Ltd. is expected to report a healthy profit in the September quarter owing to steady business growth and resilient asset quality. A strong growth in its net interest income is expected to support the bottom line, brokerages tracking the power sector financier said. 

Although REC is expected to see healthy loan disbursements during the September quarter, power sector financiers are expected to see subdued loan growth due to accelerated repayments by state utilities, which will likely lower the growth of assets under management, analysts said. "Additionally, credit costs should stay low, aided by provision writebacks from ongoing stressed asset resolutions in Q2FY26 (Jul-Sept)," Emkay Global Financial Services Ltd. said in a pre-earnings report. 

REC's net profit is expected to rise 8.8% on year to INR 43.56 billion, according to the average of estimates from four brokerages. However, sequentially, the net profit is expected to fall 2%. The estimates for net profit range from INR 42.04 billion by ICICI Securities Ltd. to INR 44.25 billion by Motilal Oswal Financial Services Ltd.

The net interest income during the September quarter is expected to rise 12% on year to INR 55.71 billion, as per the average of estimates from four brokerages. Sequentially, it is seen up 0.1%. Estimates for net interest income range from INR 53.39 billion by Emkay Global to INR 57.83 billion by Elara Securities (India) Pvt. Ltd.

The brokerages have divergent views on the provisioning requirement or expected write-back in the September quarter. REC has been restructuring its assets and has been seeing write-backs over the last year. The lender will detail its earnings for the September quarter on Friday.

The power financier will likely write back INR 739 million in the reporting quarter, as against the write-back of INR 6.17 billion in the trailing quarter and the write-back of INR 1.4 billion in the corresponding quarter a year ago, according to Emkay. The sequential fall in profit will be due to the lower write-back, the brokerage said. ICICI Securities and Motilal Oswal Financial Services have starkly different views, expecting REC to make provisions of INR 3.17 billion and INR 1.36 billion, respectively.

REC expects total write back of at least INR 7 billion–INR 8 billion from the resolution of assets that are in advanced stages of discussion by the end of 2025-26 (Apr-Mar), Chairman and Managing Director Jitendra Srivastava had said at a post-earnings analyst call in July. "And most of the assets have already been sold, and we have already made 100% provisions against those... so whatever turns against these will be an income for us," Srivastava had said. 

"While overall margins may see slight moderation due to the growing share of renewable energy in the portfolio, asset quality is expected to remain strong," Emkay said. The 'Maharatna' company's total loan book is expected to grow 9% on year to INR 5.98 trillion at the end of September, Emkay said.

As of Jun. 30, the company's loan book was INR 5.85 trillion, up 10% on year. The power financier is aiming to double its loan book to INR 10 trillion by 2030. REC, formerly called the Rural Electrification Corp., is a non-banking financial company under the power ministry lending to state electricity boards, state-owned power utilities, rural electric cooperatives, and independent power producers.

In the June quarter, REC's disbursements were up 36% on year to INR 595.08 billion. REC's net profit had risen 29% on year and 5.1% on quarter to INR 44.51 billion in Apr-Jun. Since the company announced its June quarter results, REC's stock has fallen 5.4% to INR 375.80 Wednesday on the National Stock Exchange. 

For the September quarter, key developments to look out for will be the management's commentary on margins and guidance on growth in disbursements, Motilal Oswal Financial Services said. The lender has been diversifying its fundraising portfolio to lower its cost of borrowing and maintain its interest margin. Its net interest margin was 3.74% in the June quarter, up 10 basis points from a year ago. Emkay sees REC's margins staying broadly unchanged both on year and sequentially at 3.7% in the September quarter. 

Of the six brokerage reports on REC available with Informist, all have a 'buy' rating on the power sector financier with an average target price of INR 582 per share. 

The following are the Jul-Sept earnings estimates for REC from four brokerages in descending order of the estimate of net profit in INR million:

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Edited by Saji George Titus

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