Share to Grab – Rural Electrification Corporation

Rural Electrification Corporation

Company Overview:

  • Rural Electrification Corporation Limited (REC) is a leading public Infrastructure Finance Company in India’s power sector. The company finances and promotes rural electrification projects across India, operating through a network of 13 Project Offices and 5 Zonal Offices, headquartered in New Delhi. The company provides loans to Central/ State Sector Power Utilities, State Electricity Boards, Rural Electric Cooperatives, NGOs and Private Power Developers
  • REC is a Navratna Company functioning under the purview of the Ministry of Power – Government of India. The company is currently among the top 500 Global Financial Services brands by UK-based plc Brand Finance (Brand Finance @ Global Banking 500 for 2010). The company is also among the Forbes Global 2000 companies for 2010.

Business Operations:

  • REC’s business model spans across the value chain of power infrastructure financing including
  • Equipment finance,
  • Technical/ financial appraisal of project,
  • Project finance as well as short term or bridge loans for generation, intensive electrification, transmission, distribution, repair and maintenance,
  • Support functions like project monitoring, consultancy and advisory.
  • The company operates autonomously as a Central Public Sector Enterprise under the Ministry of Power, Government of India and also acts as nodal agency for expansive Government of India schemes for building electricity infrastructure.
  • Business operations in India are supported by a network of 19 offices headquartered in New Delhi.

Financial Performance:

  • REC had excellent results for Q1 FY13 with net profits up by 32% at Rs.880 crores. Net Interest Margin also saw a good improvement of 25% and now stand at 4.53. The cost of borrowing for REC was quite low at 8.1% since it raises about 80% of its borrowing from Tax free and Taxable bonds. The pace of disbursement was good with the Loan book going up by 25%.


  • REC finances all types of Power Generation projects including Thermal, Hydel, Renewable Energy, etc. without limit on size or location. The company aims to increase presence in emerging areas like decentralized distributed generation (DDG) projects, and new and renewable energy sources to reach remote and difficult terrains not connected by power grid network.
  • In Transmission & Distribution (T&D), REC is primarily engaged in ascertaining financial requirements of power utilities in the country in the T&D sector along with appraising T&D schemes for financing. REC has financed T&D schemes for system improvement, intensive electrification, pump-set energization and APDRP Programme. The company is also actively involved in physical as well as financial monitoring of T&D schemes.
  • REC also offers loan products for financing Renewable Energy projects. The company has tied up a line of credit for EUR 100 mn (approximately Rs. 6000 mn) with KfW under Indo-German Development Cooperation for financing renewable energy power projects at concessional rates of interest. Eligible projects include Solar, Wind, Small Hydro, Biomass Power, and Cogeneration Power & Hybrid Projects.

Asset Quality:

  • State Government PSU’s form 84% of the Loan book of REC, the gross NPA was at the low of 0.46%. Despite wide spread worries about the repayment from State Governments, the payments were received without any difficulty.


  • In terms of valuation, the stock trades at a low PE of 7 on FY12 earnings and 6.1 on FY13 earnings based on an EPS of Rs.35 for FY13
  • Q2 Results on Nov 02, 2012
    • We Bet The Share to Grab at 215 for Target 270 In a Time Frame of 6-9 Months