REC LtdQ4 FY24Finance

REC Ltd

Q4 FY24 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Yes

Order

Yes

Capex

Yes

3 of 5 growth signals are positive.

Revenue guidance

Category 3

→REC expects a 10% growth in disbursements for the current year, targeting around ₹85,000 to ₹90,000 crores.
→For the next year, management targets a 12% growth in disbursements.
→Over the next three to four years, consistent growth of around 12% annually is anticipated due to expanding opportunities in renewable energy and infrastructure sectors.
→India’s per capita power consumption is currently one-third of the global average, indicating significant future demand growth.
→Renewable energy and sustainable climate change initiatives, along with government infrastructure priorities (including allocation of ₹10,00,000 crores in the budget), will drive growth.
→The loan book is also expected to diversify, with private sector participation in new areas like hydrogen and ethanol, though this transition will take time (targeting 25-30% private participation by 2030).
→Overall, REC plans volume growth alongside diversification into non-power infrastructure sectors like metro projects, roads, airports, and hospitals.

Category 3

→Management expects loan book growth of around 10% for the current year and 12% growth next year, with potential for higher growth beyond that.
→Growth is driven by renewable energy, sustainable climate initiatives, and non-power infrastructure projects prioritized by the government.
→Asset Under Management (AUM) growth and improved credit quality support sustaining Net Interest Margins (NIM) around 3.5%.
→Though renewable projects have lower margins (~2%), higher-quality assets in generation and distribution projects maintain spreads at 2.5%-3%, keeping overall margins stable.
→Internal accruals contribute around ₹7,000 crore yearly, providing strong capital support and headroom.
→Resolution of stressed assets and provisioning write-backs positively impact profitability.
→Management believes they can maintain or modestly improve earnings with balanced growth in quality assets and volume.

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Yes

→The company is actively targeting large-scale green bond issuances, aiming for around ₹1,00,000 crore over the next 3-4 years.
→For the current year, they have already sanctioned ₹21,000 crore in green renewable energy projects and plan additional green bond issuances, including international ones (~₹50,000 crore).
→Foreign currency borrowing is ongoing, with an approved automatic route limit up to $750 million and annual approvals sought from RBI for higher limits; currently operating at about $11 million with room to raise about $5 million more.
→Capital gain bonds are also a rising source of funds, increasing steadily.
→Bank loans, bonds, and ECBs (External Commercial Borrowings) form the funding mix; flexibility to choose the lowest cost option between corporate bonds, bank term loans, and others is maintained.
→Roadshows for green bond issuance are planned, with 5-year tenors considered, not tax-free, mainly offshore.
→The company plans 10-12% loan book growth annually, reflecting ongoing fundraising aligned with project financing needs.

Yes

→The sanctioned project book is roughly ₹2,00,000 crores.
→Out of this, about ₹1,92,000 crores are already sanctioned.
→Private sector exposure within this book is approximately ₹20,000 crores, largely in renewable energy.
→The remaining project loans are largely government guaranteed.
→The green bond-related book currently stands around ₹25,000 crores.
→Sanctions done this year in green renewable energy space amount to ₹21,000 crores, expected to disburse over time.
→The overall pipeline reflects strong growth with visibility on both green bonds and conventional infrastructure projects.

Yes

→Targeting around ₹1,00,000 crore investment through green bonds in the next 3-4 years.
→Distribution sector reform scheme (RDSS) involves ₹3,00,000 crore investment over next 3-4 years; ₹97,000 crore as GoI grant, balance through state borrowings.
→Transmission sector requires about ₹1,00,000 crore for renewable energy evacuation.
→Generation capacity limited to 30,000 MW conventional, costing ₹8 crore per MW.
→Smart metering: Installing 25 crore prepaid smart meters nationwide; ₹1,50,000 crore business on OPEX mode with guaranteed payments for 8-10 years.
→Infrastructure diversification into metro, roadways, highways, airports, ports, and hospitals.
→Private sector renewable investments expected to rise to 25-30% over next 3-4 years.
→CAPEX projects continue with government guarantees; some private backed by assets.
→Resolution plans involve fresh CAPEX of around ₹1,500 crore for unit completion in operational assets.

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