REC Ltd — Q3 FY25 earnings call

Call held 10 Feb 2025

Management summary

REC Limited demonstrated strong operational performance in Q3 FY25 with record disbursements and steady growth across key metrics. The company is on track for significant provision reversals from asset resolutions and maintains confidence in achieving 15-17% loan growth going forward.

Highlights

  • Highest ever 9-month disbursements of Rs. 1,45,647 crores (19% YoY growth)

  • 9-month net profit of Rs. 11,477 crores (15% YoY growth)

  • Loan book reached Rs. 5.66 lakh crores (14% YoY growth)

  • Net NPA improved to 0.74% from 0.82%

  • Expected provision reversals of Rs. 2,200 crores from 4 operating asset resolutions

  • Third interim dividend of Rs. 4.30 per share declared

  • Renewable energy disbursements grew 79% in 9 months

Key financials

3 periods

Headline

  • Loan Book
    ₹5.66L Cr
    YoY +14%

Q3

  • PAT
    ₹4,029 Cr
    YoY +23%

9M

  • Net Profit
    ₹11,477 Cr
    YoY +15%
  • Total Income
    ₹40,805 Cr
    YoY +18%
  • Net Interest Income
    ₹14,191 Cr
    YoY +24%
  • Disbursements
    ₹1.46L Cr
    YoY +19%

What they filed

Q1 FY27: revenue down 2.0%, net profit down 6.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue13,682 14,272 15,334 14,737 15,153 +11%15,051 +5%14,564 −5%14,435 −2%
EBITDA13,585 14,009 14,250 14,521 14,677 +8%— — —
Net profit4,038 4,076 4,310 4,466 4,415 +9%4,052 −1%3,375 −22%4,193 −6%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Loan Growth

  • Asset growth Loan Growth · Q4 FY25 and going forward · High confidence 15% to 17%
    we hope that in Q4, this loan asset will grow between 15% to 17%. And we are quite confident that we'll be able to sustain growth of 15% to 17% in the years to come

    — Vivek Kumar Dewangan

Long-term Target

  • Asset Under Management Long-term Target · By end of 2030 · High confidence Rs. 10 lakh crores
    we are targeting that our asset under management will grow to about INR10 lakh crores by the end of 2030

    — Vivek Kumar Dewangan

Margins

  • NIMs Margins · Going forward · High confidence More than 3.65% to about 3.7%
    we hope to maintain the NIMs of more than 3.65% to about 3.7%

    — Vivek Kumar Dewangan

Asset Quality

  • Provision reversals Asset Quality · By December 2025 · High confidence Rs. 2,200 crores
    by December 2025, all this reversal will happen

    — Vivek Kumar Dewangan

Risks & concerns

  • PPA signing delays affecting RE growth

    medium

    Delays in PPA signing by SECI, NTPC, NHPC affecting project funding timelines but not increasing risks

    Delay is affecting funding timeline but not posing risk as we only fund post-ppa signing

  • Thermal project pricing pressure

    medium

    Some state utilities seeking aggressive pricing for thermal projects but management sees this as isolated cases

    Evaluating feasibility, may not be viable, expect this to be one-off transaction

  • Forex exposure due to rupee depreciation

    low

    Foreign loan outstanding of Rs. 1,59,000 crores with 99% hedging coverage

    99% of forex loans are hedged, treasury team actively monitoring

Q&A highlights

2 direct
Prepayment trends and RBPF scheme impact Direct
A lot of repayments have happened in respect of revolving bill payment facility... some renewable energy projects, some prepayments have happened because you know the nature of renewable energy projects

Explains elevated repayment rates and confirms RBPF scheme as major contributor to distribution sector prepayments

Asked by Shreya Shivani from CLSA

Conventional thermal pricing pressure Partial
we are targeting minimum 20% of this opportunity... we are evaluating this aspect actually... may not be feasible

Management acknowledges pricing pressure in thermal projects like Mahagenco's sub-9% rate requirement but confident about overall opportunity

Asked by Avinash Singh from Emkay Global

Asset resolution timeline and amounts Direct
In all these operating 4 assets, our reversal of provisioning would be about INR2,200 crores... most of the assets, these are the operating assets, resolution are likely but NCLT order may take some time

Provides specific details on expected provision reversals from 4 key asset resolutions

Asked by Multiple analysts

1 min read 4 chapters

Detailed narrative

Strong Operational Performance

REC delivered exceptional 9-month performance with highest ever disbursements of Rs. 1,45,647 crores (19% YoY growth) and net profit of Rs. 11,477 crores (15% YoY growth). The loan book reached Rs. 5.66 lakh crores with 14% growth. Renewable energy disbursements surged 79% demonstrating strong execution in clean energy transition.

Asset Quality Improvement and Resolution Pipeline

Net NPA improved to 0.74% from 0.82% with gross NPA at 1.95%. Management expects Rs. 2,200 crores in provision reversals from 4 operating asset resolutions including KSK Mahanadi (Rs. 908 cr), Sinnar Thermal (Rs. 761 cr), Hiranmaye (Rs. 440 cr), and Bhadreshwar (Rs. 43 cr). NCLT approvals pending but recovery prospects strong.

Growth Strategy and Market Position

Management targets 15-17% loan growth for Q4 and beyond, aiming for Rs. 10 lakh crores AUM by 2030. Strong pipeline in renewable energy, thermal generation (80-94 GW opportunity), and infrastructure sectors. RDSS and rooftop solar programs gaining momentum as implementing agency.

Dividend Policy and Financial Strength

Declared third interim dividend of Rs. 4.30/share, bringing total interim dividend to Rs. 11.80/share. Capital adequacy ratio at comfortable 25.33% vs 15% requirement. NIMs improved to 3.64% with guidance to maintain 3.65-3.7% going forward.

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