REC Ltd (RECLTD) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator (Equirus Securities): Ladies and gentlemen, good day, and welcome to REC Limited Q2 and H1 FY '27 earnings conference call hosted by Equirus Securities. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Shripal Doshi from Equirus Securities. Thank you, and over to you, sir.
Shripal Doshi (Equirus Securities): Thank you, Danish. Good afternoon, everyone. We welcome you all to the earnings conference call of REC Limited to discuss the Q2 and H1 FY '27 performance of the company. To discuss the company's performance, we we are pleased to welcome Mr. Jitendra Srivastava, Chairman and Managing Director; Mr. T. S. C. Bosh, Director, Projects; Mr. Rajesh Kumar, Director, Finance; and Mr. Mohan Lal Kumawat, Executive Director, Finance. On behalf of Equirus, we would like to thank the senior management of REC Limited for giving us the opportunity to host this call. I would now like to invite Mr. Supreet Supreet Pandya, DGM, Finance, to take us through the presentation. This will be followed by the opening remarks from Mr. Jitendra Srivastava, CMD REC. After which, we will open the floor for question and answer. Over to you, Supreet.
Supreet Pandya (REC Ltd): Thank you, Shripal, and thank you, Equirus team. Good afternoon, everyone. REC welcome you all to this Q1 Q2 FY '27 and H1 post-earnings call. Just for kind information of all, the investor presentation has been uploaded on stock exchanges and also on the website of REC in compliance of SEBI norms. I shall now take you through to an investor presentation for the quarter, which has been broadly divided into six areas, which is: REC overview, financial highlights, operational performance, asset quality, shareholders outlook, and what we are doing in ESG at REC. As you're aware that REC has a successful track record of more than 5.5 decades now, where it has grown leaps and bounds and has rewarded its shareholders time and again with dividends, bonus shares, and it currently boasts of its strong financial financials with stable asset quality. As a pioneer of new initiatives, most recently in 2026, REC has successfully launched its India's first pilot issuance of tokenized corporate bonds under the SEBI regulatory regulatory Sandbox Framework. We have multiple strengths as a company, of which some are that we are the highest domestic-rated company in India with AAA rating. Internationally, we are rated at par with the sovereign ratings of India, where we are rated Baa3 by Moody's,
Supreet Pandya (REC Ltd): with a stable outlook. We maintain a very robust asset quality with healthy provision coverage ratio. We are one of the strategic leaders in India's power infrastructure and logistics sector, and are also nodal agency for major Government of India power sector reforms. The most recent being the Rooftop Solar Scheme, the RDSS scheme, and the India Energy Stack. We are also a major player in the renewable energy and creation of India's green energy corridor. We have a diversified portfolio of on our business side, where we are funding across entire infrastructure and power sector value chain. Power sector value chain including renewable energy, conventional generation, transmission, distribution, infrastructure, and also logistics. We have the capability available to appraise, fund, and monitor the newer technology, such as battery storage, pumped storage, green hydrogen, nuclear, and all the new emerging technologies. We have won various awards and accolades across all the areas, including corporate governance, financial reporting, risk measurement, and planning. And I'm glad to inform you that most recently REC has been awarded as the NBFC of the Year at the 3rd Bharat NBFC and Fintech Summit Awards 2026. Coming on to the financial highlights, for the for the half-year FY'27, the loan book of REC has reached its all-time high of 6.17 lakh crore, which is a growth of 6% from the last year at the same time. The net worth has increased to 94,325 crores, a growth of 14% Y-o-Y. While While maintaining such high loan book, the net credit-impaired assets have sequentially gone down by 50% to 0.11%, which was about 0.24% last year same time. The total income of REC for the half-year has has reached to 29,068 crores, and the net interest income of roughly 10,116 crores. The net profit for the half-year has reached to 7,541 crores. The Capital Adequacy Ratio, which gives an indication of the future growth potential of any company, we are comfortably placed at 24.04% against the RBI requirement of 15%. Coming on to the broad areas of revenue and profits, the interest income of REC for the half-year was 28,398 crores, while the finance cost was about 18,280- 282 crores, giving a profit before tax of 9,483 crores and resultant PAT of 7,541 crores. The key ratios of REC for the half-year was the yield on loan assets was 9.57%, which was stable as compared to where we were in in the Q1 of 9.55%. The cost of funds was 7.19% in the half-year, and the resultant spread being 2.38%. The NIMs have re- remained stable at 3.22%, and the ROE is at 16.89%. The interest coverage ratio is comfortably placed at 1.52x, and the debt equity at 5.6x. Coming on to the operational performance of REC for the half-year and Q2, in quarter 2 FY'27, REC has disbursed 56,457 crores, which is 67% growth over the 30th of June quarter, the Q1 quarter of FY'27. That's a growth growth of 67%. We have disbursement made across all the categories, and this version remains to be strong. During the half- During the Q2, roughly 11% of our disbursement went into conventional generation, 17% into renewable energy, and distribution contributed 22% and of the disbursements that we made in the Q2 FY'27. On the outstanding loan assets, we continue to maintain strong AUM growth in Q2, which has risen by 6% from 31st of March 2026. And in fact, 30th of June if we compare, this growth is 5% from as of 30th of September 2026. This growth has come across all the areas. If we compare with 31st of March and 30th of September, the conventional generation book has grown by 4%, the renewable has grown by 15%, and the infra and logistics, which is the area where we have recently diversified about 3 years back, is now constituting 10% of our portfolio and has grown by roughly 6% from the March quarter.
Supreet Pandya (REC Ltd): political issues and the crude related issues, and the monsoon area as well. On the outstanding borrowing front, the borrowings of REC has reached to 5.27 lakh crores, which is a growth of 4% from 31st of March 2026. Now, I'll come on the asset quality. REC remains committed to continuously resolve its bad assets, which are very, very insignificant now. In the current quarter also, we resolved one project worth roughly 4 crores. And as a result, our gross credit-impaired assets have come down to 0.22%. And the net credit-impaired assets have come down to 0.11%, which is significantly low as compared to the asset size on which we are operating right now. We continue to maintain a provision coverage ratio of roughly 51% on the NPA assets that we have right now. Let me tell you all, whatever NPA are there as of now are all in the state sector. And there have been no new NPA from last 19 quarters of REC operations. On the stage 1 assets, we maintain a provision of 0.85%, and these stage 1 constitutes about 99.26% of our total loan portfolio. The stage 2 assets have come down by almost four times, from 12,350 crores of, as at 30th of June, and has come down to 3,235 crores. And we are maintaining a provision of 4.5% on these stage 2 assets, as well. These all these all provisioning are giving us a is a is giving us a comfort on the balance sheet. In addition to these provisions, we continue to maintain statutory reserves under 45-IC of the RBI Act and as required under the Income Tax Act, which is about 18,736 crores and 1,200 crores, respectively. Coming on to the shareholders' outlook, we have continuously rewarded our shareholders with dividends. Last year, we paid a dividend of ₹18.55 over the face value of ₹10. In the current year also, we have declared a total dividend of ₹7.75, which includes ₹3.5 dividend, which has been declared for the quarter 2. Now, let me tell you all this dividend is all in addition to the various bonus issue shares that we have given in the past. And we continuously monitor maintain the 30% dividend payout ratio as mandated by the Government of India. The shareholding pattern of REC is also being given in the presentation. And I I wish to inform you that the shareholding of foreign institutional investors in REC has gone up from 15.76% as of 30th of June to 16.78%, which gives an idea that we remain to be the one of the few few companies in the in India right now where FIIs have continuously improved their shareholding. The earning per share for the half-year has improved to 57.27, and the book value per share is currently at 358.21. So, we, as per the current market share market share of REC, we are currently at a discount to the book value of 358. I'll quickly take you through to the ESG initiatives of REC. We are making continuous efforts towards ESG goals. Most recently, REC has started its ESG compliant started incentivizing its ESG compliant renewable borrowers. In fact, I'm happy to inform you that we have been ranked 1st amongst 505 Indian financial sector companies in NSE ESG rating. REC's renewable energy portfolio has continuously grown by more than 3x in the last 5 years and has reached to 86,660 crores as at 30th of September 2026. This renewable energy portfolio is across all the diversified areas where solar constitute 35%, pumped storage projects constitute 14%, the hybrid 18%, and also hydro 13%. The ESG ratings has also been displayed on the website of REC. And if you need to ask any questions beyond this call as well, we have given our Investor Relations email IDs and also social media networks as well, where you can reach out to the Investor cell of REC at any point of time. This is what the presentation is all about. Maybe, I will request Chairman, sir, to give his opening remarks and then we can open the floor for the Q&A.
Jitendra Srivastava (REC Ltd): Thank you, Suprit. Very good morning to all of you and to my wonderful directors on the board. We stand here today, talking to all the investors and shareholders of REC. And I would like to say that this quarter has been very good for REC. Quarter 2 and the
Jitendra Srivastava (REC Ltd): half of the year have shown remarkable improvements over last year. And today, I'm very happy to say that we have a very high disbursement of close to 90,000 crores, out of which almost 80,000 crores is just in the power sector. This is the highest disbursement amongst all our peers for the first half of this year. And while doing this huge disbursements, we have maintained our asset quality. Like I said, asset quality continues to be a very high priority area for us. We have brought down our overall net NPA by almost 50%. Last year, it was close to 0.24%. As on end of this quarter, it is at 0.11%. That's almost a 50% drop in our net NPAs. Even if you look at our stage two assets, our stage two assets have come down by a factor of 80%. It was close to 12,500 crores. It has come down to roughly 3,300 crores. So, I'm sure all of you will appreciate that REC continues and will continue to pay a lot of attention on the asset quality of all our investments and all our borrowers. Apart from this, I'm very happy to say that our renewable sector growth has shown tremendous improvement. Our RE portfolio loan book stands at close to 86,000 crores, which is 27% increase over last years. Our infrastructure loan book also has increased to almost 62,000 crores, and currently infrastructure accounts for almost 10% of our loan book. Power continues to be and will remain our mainstay and I'm very happy to say that the power sector itself is poised for a manifold growth over the next four or five years. If we look at certain projections by the NITI Aayog, the NITI Aayog predicts that India will need close to $5 trillion, that is roughly 500 lakh crores investment in the next 15-20 years. Assuming that like we fondly say that one out of every four light bulbs that glow in India are financed by REC, which is indicative of our roughly 25% market share, if we go by that, we are looking at funding opportunities close to the tune of over 100 lakh crores over the next few years. Government of India continues its attention to the power sector. Recently government of India has announced a 185 lakh crore project for strengthening the transmission sector of the country. The RDSS is continues to play out. The roof top solar scheme is growing leaps and bounds and I'm very happy to say that REC being the nodal imple- prod- project implementation agency for the rooftop solar scheme, we have achieved almost 55 lakh applications, installations and our applications have touched almost 95 lakhs against the target of 1 lakh cr- 1 lakh 1 crore installations, which we have targeted by the end of this year. Our contribution in the RDSS continues to increase and we work very closely with the states and we are very happy that the states that we are hand-holding for the revamped distribution sector scheme are showing tremendous improvements in AT&C losses and they are turning more profitable day by day. I would also like to mention that while we are paying attention to business, while we are paying attention to government programs, we take a lot of pride in our ESG commitments and our ability to handle risks. I'm very happy to say that our ESG ranking is the first among all 505 financial institutions in the country as per NSE ratings. And this year, we are committed to bi- trying to become the first carbon neutral organization. We are trying to ensure that our Scope 1 and Scope 2 emissions are brought down to zero. And we are very hopeful that in this financial year, we will become the first carbon neutral financial organization in the country. Apart
Jitendra Srivastava (REC Ltd): this in risk, we have the ISO 31000 2018 certification, which further underscores our commitment and the importance we play to we pay to risk management. And we are very hopeful that our systems will keep on evolving to serve our investors and to serve our borrowers better. As far as further growth is concerned, I'm sure that's a question which is agitating the minds of everybody. As on date, we have already disbursed close to 90,000 crores, and we have set a target of over 2 lakh crores for our disbursements. And already we have shown a 6% increase. We are very confident of touching double digit growth, and we are hopeful that we should be able to show around 12% to 13% growth by the end of this year. All of you will appreciate that the environment right now is full of competition, and I am sure you are also aware that the power sector as such has derisked significantly. We are very proud that we are passing on whatever derisking is happening in the sector, we are passing it on to our borrowers and consequently, due to the competition as well as the derisking of the sector, our net interest margins have come down slightly. However, we still maintain the highest, among the highest net interest margins in the sector and we are very confident that our NIMs will not go down further too much. So, combined with a high growth of over 10%, 10% to 12%, and sustainable NIMs of over 3 3.2%, we are fairly confident that this year again, we will deliver wonderful growth and we will continue to create value for our investors and our shareholders. With this, I would now like to throw the field open to our callers and we our team stands ready to answer any queries which all of you might have. Thank you one and all.
Moderator (Equirus Securities): Thank you so much, sir, for the wonderful opening remarks. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question, may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Our first question comes from the line of Avinash Singh with MK Global Financial Services Limited. Please go ahead.
Avinash Singh (Emkay Global Financial Services Limited): Hi, good afternoon. Two questions. First, if you can help not sure if you already explained, but if you help understand this NIM compression, what has led to this kind of you know, a sharp increase in borrowing cost. Is there a kind of a increased hedge cost being part of your you know, cost of fund, that kind of? And how sort of you know, going forward how this NIM trajectory will look like? So, that's one. The second, more on the medium to long term, I mean of course, the CEA or the other planning bodies, they keep making certain projections of or other I would say really optimistic scenario of the coal-based thermal power plant that India needs over the by 2032 or 2035. But in reality, I mean, even when this you know, whole capacity requirement being now projected to be higher, maybe 120 125 GW over the next 7 8 years, but in reality I mean, the state, particularly the state utilities, which are your typically I would say, the target borrowers, have not shown any significant progress, particularly with the new thermal power plant. So, in that backdrop, how do you see your you know, conventional thermal AUM and disbursement to be growing over the next 2-3 years? Because these numbers, I mean, plan- planning is one part, but if any capacity has to come by 2032 say, the considering 5-6 years of you know, gestation period, these things should have already have been in motion, but that's not happening. So, how do you see, I mean, this conventional thermal power AUM and loan growth over the next 3-4 years? Thanks.
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