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Informist, Thursday, Mar. 12, 2026

 

--REC official: Will borrow "at max" total INR 900 bln in FY26

--REC aide: Will seek board OK for INR 1.5 tln loans FY27 vs INR 1.7 tln FY26

--REC official: Board may meet Mar last week to approve FY27 borrowing plan

--REC official: May borrow only INR 750 bln-INR 800 bln in FY27

--REC official: Want to trim FY27 borrowing on strong capital, mkt volatility

 

By Priyasmita Dutta

 

NEW DELHI – Power sector lender REC Ltd. is likely to peg its borrowing in 2026-27 (Apr-Mar) at INR 1.50 trillion, down INR 200 billion from INR 1.70 trillion approved for the current financial year, a senior company official said Thursday. The non-banking financial company is planning to trim its borrowing owing to a healthy capital base and market rate volatility, the official told Informist on condition of anonymity. The company is also planning to proceed slowly with external commercial borrowings in FY27, given the geopolitical situation, the official said.

 

The REC board will likely meet in the last week of March to approve the borrowing target for the next financial year, the official said, adding that the actual borrowing for the year will be much lower than the approved amount. "We will take approval for about INR 1.50 trillion, but may keep (the) borrowing for the year limited to INR 750 billion–INR 800 billion," the official said. Even for FY26, REC has so far raised only around INR 800 billion of the board-approved INR 1.70 trillion. "It all depends on the coupon rate," the official said. "The borrowing during a financial year typically never exceeds INR 1 trillion," the official added.

 

REC can borrow another INR 100 billion in FY26, if the market conditions permit, the official said. "We may end up borrowing INR 900 billion at max in FY26," the official said.

 

Thursday, REC raised INR 30 billion through five-year bonds at 7.19%. The company, however, scrapped the INR 30 billion two-year bond issuance as the coupon rate was high. "We were getting a similar rate as the five-year bond, and we do not want to raise funds at that level," the official said. "We would have raised the funds if the yield was around 7.05-7.10%," the official added. The current two-year borrowing rate for an AAA-rated public sector undertaking is around 7.15-18%. 

 

REC, among the largest borrowers in the corporate bond market, has been rated 'AAA' for nearly two decades and enjoys some of the lowest interest rates in the market. REC's capital adequacy ratio for the first nine months of FY26 was 24.26%, slightly lower than 25.33% in the corresponding period last year. 

 

REC, formerly known as Rural Electrification Corp., is a non-banking financial company under the power ministry, and lends to state electricity boards, state-owned power utilities, rural electric cooperatives, and independent power producers. Thursday, the company's shares closed at INR 343.50 on the National Stock Exchange, up 3.1% from Wednesday.

 

REC typically borrows through a combination of domestic and offshore borrowing. At the end of December, 55% of REC's outstanding borrowing was through domestic bonds, 15% through term loans, 27% through external commercial borrowing, and 2% through foreign currency non-resident (banks) loans. 

 

According to the official, REC will focus on the domestic market in FY27 amid heightened geopolitical uncertainty. "As an example, if the West Asia issue persists, and the Indian market exhibits lesser volatility than the US markets, then we should look inwards," the official said. 

 

REC's cost of funds at the end of December was 7.30%, 15 basis points higher than a year ago. Its net profit in the first nine months of FY26 was INR 129.20 billion, up 13% on year. 

 

The official also said that the proposed merger of Power Finance Corp. Ltd. and REC, which has received in-principle approval, may also prompt a rethink of the borrowing plan, since it will be for the merged entity. "We do not know yet what the regulatory framework for the merged entity will be... until the merger happens, REC will continue with its board-approved borrowing plan," the official said. 

 

The proposed merger follows Finance Minister Nirmala Sitharaman's FY27 Budget announcement to restructure PFC and REC to achieve greater scale for public-sector NBFCs. The move is aimed at streamlining the two NBFCs to achieve scale and improve their efficiency, Sitharaman told the media in a post-Budget press conference. PFC had acquired a 52.63% stake in REC from the government in FY19 for INR 145 billion as part of the government's divestment initiative.  End

 

Edited by Saji George Titus

 

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