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Total Income: INR26,633 crores, up 18% year-on-year.
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Net Interest Income: INR9,723 crores, up 25% year-on-year.
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Net Profit: INR7,448 crores, up 11% year-on-year.
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Loan Book: INR546,117 crores, up 15% year-on-year.
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Gross NPA: Reduced to 2.53% from 3.42% in March '23.
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Net NPA: Reduced to 0.88% from 1.01% in March '23.
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Provision Coverage Ratio: 65.12%.
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Borrowings: INR475,832 crores as of 30th September 2024.
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Capital Adequacy Ratio: 25.31%.
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Yield on Loan Assets: 10.08%.
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Cost of Funds: 7.12%.
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Interest Spread: 2.96%.
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Net Interest Margin: 3.64%.
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Return on Net Worth: 21.03%.
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Dividend Payout: Total of INR7.5 per share for the half year.
Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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REC Ltd (BOM:532955) reported the highest ever half-yearly profit of INR7,448 crores, marking an 11% increase year-on-year.
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The company's loan book increased by 15% year-on-year, reaching INR546,117 crores as of September 30, 2024.
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REC Ltd (BOM:532955) has a strong asset quality with gross NPAs reduced to 2.53% and net NPAs to 0.88%.
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The company has a diversified asset base and robust access to funding sources, with a strategic position in the Indian power sector.
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REC Ltd (BOM:532955) has been awarded the highest domestic credit rating of AAA by all four major rating agencies in India.
Negative Points
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The cost of funds has increased, impacting the company's financials, although it is expected to stabilize by Q4.
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There are concerns regarding lending to certain groups, such as Azure, due to past whistleblower issues and management changes.
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The repayment rates were slightly high this quarter, affecting the loan book growth.
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The company's exposure to the private sector is expected to increase, which may pose higher risks.
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There is competitive pressure from banks, particularly in the renewable energy sector, which could impact REC Ltd (BOM:532955)'s market share.
Q & A Highlights
Q: Can you provide an outlook on the cost of funds and any price hikes for borrowers? A: Vijay Singh, Executive Director, Director - Technical (Projects): The cost of funds is expected to decrease by Q4 as RBI rates may come down. We have a diversified borrowing portfolio, with FCNR loans and external commercial borrowings comprising 31% of our total borrowing, keeping our cost of funds below 7%. We are not planning to increase the burden on borrowers.
Q: Is REC considering financing the telecom sector, and what is the status of repayments? A: Vivek Dewangan, Chairman and Managing Director: We are not considering financing the telecom sector as our focus remains on conventional generation, transmission, distribution, and renewable energy. Regarding repayments, we experienced INR7,000 crores in prepayments this quarter, which is a continuous feature.