Shares of Power Finance Corporation and REC Ltd fell by up to 6% on August 10, 2026, after global brokerage CLSA lowered its price targets. The firm cited mixed first-quarter results and moderating loan growth as the primary reasons for its caution. Investors are now monitoring how these power-sector lenders manage shrinking margins and the ongoing merger process.
Shares of Power Finance Corporation (PFC) and REC Ltd saw a sharp decline, falling up to 6% on August 10, 2026, following a downward revision in target prices by global brokerage CLSA. While the brokerage maintained its 'outperform' rating on both entities, the decision to lower price targets highlights growing caution regarding their near-term financial trajectory.
The market reaction follows the release of their first-quarter results for the financial year 2027, which displayed signs of uneven performance. PFC reported a consolidated net profit of Rs 8,998 crore, which was nearly flat compared to the Rs 8,981 crore reported in the same period a year ago. Revenue from operations also saw a slight decline, standing at Rs 28,526.86 crore, compared to Rs 28,539.04 crore in the previous year.
CLSA pointed to a clear moderation in loan growth as a central concern for both lenders. In the June quarter, PFC recorded 4% year-on-year loan growth, while REC’s growth was more subdued at 1%. The brokerage noted that a significant contributor to this slowdown is the reduction in the Revolving Bill Payment Facility (RBPF) scheme, which previously accounted for a larger portion of their loan books. The RBPF book now represents only 3% of REC’s total loans, indicating that the companies are losing a previously reliable source of loan expansion.
Beyond loan growth, the analysis highlighted potential margin pressure. Core margins experienced a slight quarter-on-quarter compression, largely driven by lower lending yields. Additionally, REC reported a notable foreign exchange loss, which the brokerage attributed to the depreciation of the rupee. In response to these headwinds, CLSA trimmed its Profit After Tax (PAT) estimates for both PFC and REC by 2-3% for the current financial year.
Investors should also consider the broader structural changes currently underway. Both companies are in the process of a merger, with the board having approved the scheme of absorption of REC into PFC in June 2026. This structural transition adds a layer of operational complexity, as the management teams focus on integrating their business models and asset portfolios.
Moving forward, the primary monitorables for investors will be the stability of net interest margins and the companies' ability to replace the shrinking RBPF scheme with other credit avenues. Additionally, the integration progress of the ongoing merger will be a critical factor for long-term stakeholders to track as the combined entity navigates these sector-wide pressures.