💰 Financial Performance

Revenue Growth by Segment

Total income grew 12% YoY to INR 29,828 Cr in H1 FY26. Net Interest Income (NII) increased 15% to INR 10,608 Cr. Sanctions grew 34% YoY to INR 2.5 lakh Cr, while disbursements grew 27% to INR 1.15 lakh Cr. Distribution segment dominated disbursements at 69%, followed by conventional generation at 11% and renewables at 11%.

Geographic Revenue Split

Not specifically disclosed by region, but the portfolio is split by sector ownership: State sector constitutes 86% of the portfolio (INR 5,00,663 Cr) and the private sector constitutes 14% (INR 81,504 Cr) as of September 30, 2025.

Profitability Margins

Profit After Tax (PAT) for H1 FY26 was INR 8,877 Cr, a 19% YoY increase. Return on Managed Assets (RoMA) stood at 2.6% for 9M FY25 and 2.7% for FY24. Return on Average Total Assets (RoTA) improved to 2.9% in Q1 FY26 compared to 2.8% in FY25.

EBITDA Margin

Core profitability is measured via RoMA, which remained stable at 2.6% in 9M FY25. Net Interest Margin (NIM) remains stable but faces potential pressure from the increasing share of lower-yield renewable energy loans.

Capital Expenditure

As a financial institution, CAPEX is represented by loan disbursements, which reached a record INR 1,15,470 Cr in H1 FY26, a 27% increase YoY. Planned expansion is focused on the infrastructure and logistics sector, which now constitutes 10% of the loan book.

Credit Rating & Borrowing

REC maintains a quasi-sovereign credit rating. Average cost of borrowing was 7.15% for 9M FY25, compared to 7.13% in FY24. Total borrowings reached INR 5,07,000 Cr as of September 30, 2025.

⚙️ Operational Drivers

Raw Materials

Capital/Debt Funds (100% of operational input). The cost of these funds is 7.15%.

Import Sources

Global capital markets for foreign currency borrowings and domestic markets for bonds/NCDs. Foreign currency exposure includes USD and EUR.

Key Suppliers

Diversified lenders including domestic banks, international banks, and bondholders (e.g., tax-free bonds at 11% of mix, capital gains bonds).

Capacity Expansion

Current loan book (AUM) is INR 5,82,167 Cr as of September 30, 2025, growing 7% YoY. Growth would have been 16% if not for INR 49,000 Cr in prepayments. Target is to increase clean energy financing to 30% of the loan book by 2030.

Raw Material Costs

Interest expense is the primary cost. Total income (net of interest) was INR 17,265 Cr in FY24. Borrowing costs are stable at 7.15% due to diversified sourcing.

Manufacturing Efficiency

Operating expense ratio is highly efficient at 0.1% due to the wholesale nature of the lending business.

Logistics & Distribution

Not applicable.

📈 Strategic Growth

Expected Growth Rate

16%

Growth Strategy

Diversification into non-power infrastructure and logistics (now 10-12% of book), aggressive expansion in renewable energy (aiming for 30% share by 2030), and leading government schemes for DISCOMs. Sanctions growth of 34% indicates a strong pipeline for future disbursements.

Products & Services

Long-term and short-term loans, debt refinancing, and financial assistance for power generation, transmission, distribution, renewable energy, and infrastructure/logistics projects.

Brand Portfolio

REC Limited (formerly Rural Electrification Corporation), RECPDCL (REC Power Development and Consultancy Limited), REC Foundation.

New Products/Services

Infrastructure and logistics financing (forayed Q3FY23), now 12% of loan book. New focus on clean energy projects expected to contribute significantly to the 30% target by 2030.

Market Expansion

Expansion into non-power infrastructure sectors like roads, metros, and airports. Strategic focus on renewable energy projects where REC offers the lowest market rates.

Market Share & Ranking

REC and PFC each maintain a 20-25% market share in power sector financing.

Strategic Alliances

Partnership with PFC (Power Finance Corporation) which holds a 53% stake in REC. Both entities lead major government power sector reform schemes.

🌍 External Factors

Industry Trends

Shift from conventional thermal power (declined from 39% to 27-28% of book) to renewable energy and infrastructure. The industry is evolving toward green energy transition and integrated infrastructure financing.

Competitive Landscape

Primary competition from PFC and large public sector banks, though REC/PFC often act as lead lenders for large-scale power projects.

Competitive Moat

Moat is derived from GoI ownership and 'Maharatna' status, allowing for the lowest borrowing costs in the industry. This cost leadership is sustainable as long as GoI/PFC ownership remains high.

Macro Economic Sensitivity

Highly sensitive to interest rate cycles and Government of India (GoI) power sector policies. 86% of loans are to state-owned entities.

Consumer Behavior

Increased demand for green energy and infrastructure financing from state utilities and private developers.

Geopolitical Risks

Indirect exposure through global borrowing markets; however, quasi-sovereign status provides a buffer during global volatility.

⚖️ Regulatory & Governance

Industry Regulations

Subject to RBI guidelines for NBFC-IFCs. Currently reviewing draft RBI guidelines on project financing, which REC views as a refined replacement for earlier PPP guidelines.

Environmental Compliance

CSR spend of INR 294.01 Cr in FY25. Focus on ESG with a target of 30% clean energy portfolio by 2030.

Taxation Policy Impact

Standard corporate tax rates apply; profit after tax was INR 14,019 Cr in FY24.

Legal Contingencies

Most NPA accounts (GNPA 1.06%) are under resolution process or at advanced stages of resolution in NCLT/other tribunals. 16% of the private sector book is recognized as Stage III assets.

⚠️ Risk Analysis

Key Uncertainties

Sectoral concentration in power (88-90% of book) and customer concentration (Top 10 = 36%). Potential for 1-2% impact on credit costs if Stage II assets (2.77% of book) migrate to Stage III.

Geographic Concentration Risk

Concentrated in India, specifically with state power utilities across various states.

Third Party Dependencies

High dependency on the financial health of State Distribution Companies (DISCOMs), which represent 40% of the loan book.

Technology Obsolescence Risk

Low risk; focus is on cybersecurity. No data breaches reported in FY25.

Credit & Counterparty Risk

Gross NPA improved to 1.06% and Net NPA to 0.24% as of September 2025. Private sector exposure (14%) remains the primary source of credit impairment.