📌 At a Glance:
Power Finance Corporation (PFC) delivered a rock-solid FY25 with ₹29,265 crore in revenue and a hefty ₹7,916 crore net profit. Sounds great, right? But here’s the shocker: its fair value comes to just ₹105 using classic PSU math. At CMP ₹412.70, are we in a PSU bull market… or fantasyland?
⚙️ About the Company
Power Finance Corporation Ltd. is the backbone of India’s power sector financing. It lends to:
- State electricity boards
- Power generation & transmission projects
- Renewable energy ventures
- And basically any entity that plugs into a socket
PFC isn’t here to chase trends. It’s the government’s ATM for electrification — boring, safe, and wildly profitable.
👨💼 Key Management
- Chairman & MD: Parminder Chopra
- Government Holding: ~55.99%
- Dividend History: As consistent as load-shedding in 2004
📊 FY25 Financials
| Metric | FY25 Value (₹ Cr) |
|---|---|
| Revenue from Operations | 29,265.03 |
| Other Income | 204.20 |
| Profit Before Tax | 10,554.59 |
| Estimated Net Profit | 7,915.94 |
| EPS (660 Cr shares) | ₹11.99 |
PFC is not just profitable — it’s dumbfoundingly efficient. But here’s the twist…
🔍 Forward-Looking Valuation (FY26)
Assumptions:
- 10% PAT growth
- P/E Ratio: 8× (PSU NBFC average)
- Shares Outstanding: 660 crore
Fair Value = (₹7,915 Cr × 1.10 × 8) / 660 Cr = ₹105.55🎯 Fair Value Estimate: ₹105.55
📉 Downside from CMP ₹412.70 = –74.4%
Yup. Unless you’re running on “hopeium,” that price doesn’t add up.
🧠 EduInvesting Take
We love PFC. Truly.
- Insanely high interest income
- Decade-long record of payouts
- PSU-level loan recovery and sovereign backing
But ₹412/share? That’s like paying Starbucks prices for Amul Kool.
Here’s the honest truth:
PFC is a ₹100–₹120 stock in fair market conditions. Anything higher is riding on:
- 🐂 PSU bull frenzy
- 📢 Dividend announcements
- 📈 Retail investors mistaking momentum for margin
This isn’t a startup. It’s a financial bulldozer.
🚨 Risks & Red Flags
- Overvaluation: By 3–4x using earnings-based logic
- Political overhang: Being a PSU means serving social objectives > shareholder return sometimes
- Interest Rate Risk: As a lender, margins can compress if borrowing costs rise
- Stress book: Loans to SEBs (state electricity boards) are low-yield and high-risk
🟢 But Also… Strengths
- Stable business model
- Robust capital adequacy
- Dividend yield remains attractive (~5–6%)
- Government push for infra & RE = more loans
So if you hold this for dividend income? No problem.
But if you’re holding it like it’s going to ₹1000? You might want to plug in reality.
📊 Final Scorecard
| Parameter | Verdict |
|---|---|
| EPS (FY25) | ₹11.99 |
| CMP | ₹412.70 |
| Fair Value (FY26 est.) | ₹105.55 |
| Overvaluation | ~3.9× too high |
| Edu Score | ⭐⭐⭐☆ (3.2/5) |
| Best Use | Dividend + Safety play |
| NOT Ideal For | Growth investors |
💬 Verdict
PFC is a rock-solid PSU — but at ₹412, the rock is priced like a diamond.
If you’re chasing momentum, be ready to switch off the lights when it corrects.
If you’re in for the long term, collect your dividends and hope the hype cools off.
Either way, remember this: Power may be cheap. But sometimes, PFC isn’t.
