REC Ltd Reports Strong H1 FY'27 Results

REC Ltd announced a half-yearly net profit of INR 7,541 crore and a record loan book of INR 6.17 lakh crore.

Reader Takeaway: Record loan growth and improved asset quality are key, while margin pressure and merger timelines warrant monitoring.

What just happened

REC Ltd delivered a robust performance for the first half of FY'27, characterized by significant growth in its loan assets and a notable improvement in credit quality. The company recorded a total income of INR 29,068 crore. Net Interest Income (NII) stood at INR 10,116 crore, supported by a healthy Net Interest Margin (NIM) of 3.22%.

Why this matters

Investors now have confirmation that the company's asset quality is trending in the right direction. Net credit-impaired assets dropped to 0.11% from 0.24% in the same period last year. Furthermore, the significant reduction in Stage 2 assets—falling from INR 12,350 crore in Q1 to INR 3,235 crore—indicates a stronger balance sheet. This trajectory reinforces the company's position as a primary financier for India's power sector.

Management Outlook

Management has provided a clear growth path, targeting 10% to 12% loan book growth for FY'27. With the prepayment issues from the previous year largely subsided, the company feels confident in its ability to deploy capital effectively, setting a disbursement target of over INR 2 lakh crore for the full year. Regarding the proposed merger with PFC, management reiterated that the process remains subject to Cabinet approval and will maintain government control.

Risks to watch

Despite the positive results, management flagged potential margin pressure due to increased market competition and the prevailing interest rate environment. Shareholders should also monitor foreign exchange volatility, as the company continues to refine its hedging strategies. The dependency on central government approvals for the PFC merger remains a long-term structural factor to watch.

What to track next

Watch for updates on the disbursement pace against the INR 2 lakh crore target and any official news regarding the timeline of the Cabinet approval for the merger.