Release Date: May 14, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- REC Ltd (BOM:532955, Financial) recorded its highest ever annual profit of 15,713 crores, marking a 12% year-on-year growth.
- The company's net worth increased by 13% to approximately 78,000 crores.
- REC Ltd's total income grew by 20%, reaching around 56,000 crores.
- The net interest margin improved to 3.63%, an increase of 6 basis points from the previous year.
- The company maintains a strong capital adequacy ratio of 26%, well above the RBI requirement, providing a cushion for future growth.
Negative Points
- REC Ltd faced prepayments of 34,000 crores, which impacted the potential growth of its loan book.
- There are ongoing issues with the signing of Power Purchase Agreements (PPAs) in the renewable energy sector, which could affect future project funding.
- The company has 12 projects under NPA, with some requiring resolution through the National Company Law Tribunal (NCLT).
- There is concern about the elevated provision coverage ratio for private renewable projects, indicating potential stress in this segment.
- The declining interest rate environment poses a challenge, as banks may aggressively seek to refinance projects funded by REC Ltd.
Q & A Highlights
Q: What is REC Ltd's outlook on disbursement growth for FY 2026, considering the elevated repayment rates?
A: REC Ltd expects disbursements to reach around ₹210,000 crore during the year, provided market conditions remain favorable. Prepayments are anticipated to continue at a similar rate, with approximately ₹100,000 crore generally due annually. The company received prepayments of around ₹34,000 crore this year, primarily from the RBPF scheme, which allows for surplus funds to be repaid and re-disbursed. (Respondent: Unidentified_6)
Q: Can you provide an update on the renewable energy projects, particularly regarding the signing of PPAs and any stress in the private renewable book?
A: REC Ltd only funds projects with signed PPAs, so the lack of PPA signing does not pose a risk to the company. While there are delays in PPA signings, they are expected to be resolved over time. Regarding the private renewable book, there has been an increase in provision coverage due to some rating downgrades, but no new NPAs have occurred. (Respondent: Unidentified_7 and Unidentified_6)
Q: What are REC Ltd's strategies to address the potential pressure from declining interest rates and competition from banks?
A: REC Ltd plans to incentivize early project completion and offer refinancing options post-COD. The company is also streamlining business processes to enhance ease of doing business. Despite the declining rate environment, REC Ltd's unique sector expertise and competitive rates are expected to retain business. (Respondent: Unidentified_3 and Unidentified_6)
Q: How does REC Ltd plan to achieve its target of a net zero NPA by the end of FY 2026?
A: REC Ltd aims to resolve the remaining 12 NPA projects by the end of FY 2026. The company has filed IBC cases for six projects and expects significant recoveries from these resolutions. (Respondent: Unidentified_6)
Q: What is the expected borrowing for FY 2026, and how will it be divided between domestic and foreign sources?
A: REC Ltd plans to borrow ₹170,000 crore in FY 2026. The company evaluates funding sources based on cost-effectiveness at the time of requirement, choosing between domestic and foreign options, including ECBs, based on the most favorable rates. (Respondent: Unidentified_6)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
