1. At a Glance
A PSU that finances everything from power plants to ports and is now flirting with roads and metros? REC Ltd is basically LIC’s cousin with better ROE and way less drama.
2. Introduction with Hook
Imagine a bank and a power grid had a baby — and that baby was handed a ₹6 lakh crore toy gun and told to go play. That’s REC for you.
- Market Cap: ₹1.05 lakh crore
- Net Profit FY25: ₹15,884 Cr
- OPM: LOL, it’s over 90% (read: elite PSU privilege mode ON)
REC is no longer just a power finance mule. It’s now moonlighting as an infra lender — from metro rails to steel corridors, without breaking a financial sweat.
3. Business Model (WTF Do They Even Do?)
REC (formerly Rural Electrification Corporation) is a lender to the entire power sector chain — generation, transmission, distribution — and now infrastructure.
Key verticals:
- Loans to thermal, solar, hydro projects
- State discom refinancing (basically, bailing out power losers)
- Infra Lending: Metro projects, roads, ports
- Short-term loans for working capital (read: diesel, coal, tantrums)
Revenue is purely interest income. REC = Giant power-themed NBFC with Giga margins and God-tier credit ratings.
4. Financials Overview
| Metric | FY25 |
|---|---|
| Revenue | ₹56,367 Cr |
| Operating Profit | ₹54,206 Cr |
| Net Profit | ₹15,884 Cr |
| EPS | ₹60.32 |
| Dividend Yield | ~4% |
| OPM | 96% |
| ROE | 21.5% |
| Book Value | ₹298 |
TL;DR: REC doesn’t make power, it makes interest. Loads of it.
5. Valuation
- Current Price: ₹401
- PE Ratio: 6.65
- ROE: 21.5%
- Fair Value Estimate (Multiple Methods):
| Method | FV Range |
|---|---|
| PE-based (12x FY25 EPS) | ₹720–₹760 |
| PBV-based (2x BV) | ₹580–₹620 |
| DDM-based (9% CoE) | ₹500–₹570 |
Fair Value Range: ₹500–₹730
It’s still trading at PSU clearance sale prices. Thanks, Mr. Market.
6. What’s Cooking – News, Triggers, Drama
- Infra Foray: Lending to roads, ports, and steel infrastructure via new subsidiaries.
- SEBI Slap: Fined ₹5.54 lakh for board composition issues. Fixed it in April.
- Subsidy Baby Boom: Added two new subsidiaries in Maharashtra — power transmission projects.
- Dividend Consistency: 30% payout ratio maintained. PSU shareholders = pampered.
7. Balance Sheet
| Item | FY25 |
|---|---|
| Equity Capital | ₹2,633 Cr |
| Reserves | ₹75,743 Cr |
| Borrowings | ₹4,96,243 Cr |
| Total Liabilities | ₹6,14,502 Cr |
| Total Assets | ₹6,14,502 Cr |
Key Points
- Borrowings up ₹50K Cr YoY — still manageable given profit strength
- Extremely low fixed assets — this is a pure lending play
- Leverage? High. But that’s the business model
8. Cash Flow – Sab Number Game Hai
| Segment | FY25 |
|---|---|
| CFO | ₹(39,064) Cr |
| CFI | ₹(1,302) Cr |
| CFF | ₹40,034 Cr |
| Net Change | ₹(332) Cr |
Interpretation:
- Negative cash from ops is misleading — standard for lenders
- Finance inflows manage debt rollovers
- As long as credit quality holds, sab changa si
9. Ratios – Sexy or Stressy?
| Ratio | Value |
|---|---|
| ROE | 21.5% |
| ROCE | 10% |
| P/E | 6.65 |
| P/BV | 1.35 |
| Interest Coverage | Meh… low |
| Dividend Yield | 3.99% |
Judgment:
ROE = Power move
P/E = Deep value
Interest coverage? PSU ke liye chalta hai
10. P&L Breakdown – Show Me the Money
| Year | Revenue | Net Profit | EPS | Dividend |
|---|---|---|---|---|
| FY21 | ₹35,557 Cr | ₹8,378 Cr | ₹31.82 | 30% payout |
| FY22 | ₹39,276 Cr | ₹10,036 Cr | ₹38.11 | 30% payout |
| FY23 | ₹39,486 Cr | ₹11,167 Cr | ₹42.41 | 30% payout |
| FY24 | ₹47,517 Cr | ₹14,145 Cr | ₹53.72 | 30% payout |
| FY25 | ₹56,367 Cr | ₹15,884 Cr | ₹60.32 | 30% payout |
This PSU doesn’t skip leg day. Strong, consistent and obedient to dividends.
11. Peer Comparison
| Company | CMP | P/E | ROE | Dividend Yield |
|---|---|---|---|---|
| REC Ltd | ₹401 | 6.65 | 21.5% | 3.99% |
| PFC | ₹424 | 6.09 | 21.0% | 3.73% |
| IRFC | ₹135 | 27.11 | 12.8% | 1.19% |
| HUDCO | ₹229 | 16.94 | 15.6% | 1.81% |
REC and PFC — the PSU twins trading at 1/3rd the valuation of peers like IRFC. One word: undervalued.
12. Miscellaneous – Shareholding, Promoters
| Shareholder Type | % Holding (Mar 2025) |
|---|---|
| Promoters (Govt) | 52.63% |
| FIIs | 20.48% |
| DIIs | 14.79% |
| Public | 12.05% |
- 10.8 lakh shareholders. Retail bhakts multiplying faster than infra loans
- FII holding stable post FY24 — institutional trust maintained
- PSU + Stable payout + Low debt default = Love from long-term investors
13. EduInvesting Verdict™
REC is the PSU equivalent of that nerd in class who quietly topped every subject but got ignored at farewell.
With 20%+ ROE, 4% dividend yield, and infra exposure baked in — it’s quietly becoming a national infra bank in disguise.
At current valuations, it’s trading like it’s 2015. But its balance sheet is screaming 2025.
Verdict:
Powering India’s infra dreams while silently compounding wealth. PSU toh hai, but not your average babu-stock.
Metadata
– Written by EduInvesting Analyst | 18 July 2025
– Tags: REC Ltd, Power Finance, PSU Lender, Infra NBFC, Dividend Stocks, Value Stocks, EduInvesting Roast
