Any current/future new fundraising through debt or equity?

REC Limited plans to improve its CRAR (Capital to Risk-weighted Assets Ratio) and debt-equity ratios to reduce the cost of borrowing and support business expansion. The company may need to raise funds to invest in the National Financial Institution for Infrastructure as announced in the budget. Dividend payouts were slightly lower recently to maintain better capital ratios, suggesting a focus on strengthening the balance sheet ahead of fundraising or expansion. No specific mention of immediate equity or debt fundraising is made, but the emphasis on improving financial ratios and exploring expa

Any current/future capex/capital investment/strategic investment?

REC Limited is focusing on expanding its business and improving financial ratios like CRAR and debt-equity to reduce borrowing costs. There may be investments related to the newly announced Development Financial Institution (DFI) for infrastructure as per the budget. The company is considering investments in the National Financial Institution for Infrastructure beyond its regular lending operations. Dividend policy adjustments (e.g., moderating dividend payout to 30%) are partly to facilitate capital retention for growth and investments. Strategic focus areas include energy transition (renewab

Future growth expectations in sales/revenue/volumes?

REC expects better growth in the upcoming year compared to the previous year. Disbursements are expected to grow at a normal pace of around 10% over the base year 2019-2020. There is a significant focus on the energy transition sector, including renewables, associated transmission, and emerging areas like electric vehicle charging and irrigation projects. Reduction in interest rates from April 1, 2021, to remain competitive is expected to help improve turnover and disbursements. Growth in electricity demand is anticipated, supported by government schemes, such as the revamped distribution sche

Future growth expectations in earnings/operating earnings/profits/EPS?

Profits expected to remain in the same range as the exceptional FY2021, with possible slight variations depending on interest rate movements (Sanjay Malhotra, Pg 16). High return on net worth achieved (22%) may not sustain at the same level but overall profit levels should be maintained (Pg 16). Disbursement and loan book growth expected to be around 10% over the base year 2019-2020 under normal conditions (Pg 12). Growth opportunities in renewable energy, energy efficiency, e-vehicles, and new segments like lift irrigation and hydro-mechanical projects expected to support business expansion (

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REC LtdQ1 FY22Finance

REC Ltd Q1 FY22 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹355P/E: 5.6Market Cap: ₹91.1K CrSector: Finance

Management growth scorecard

Revenue

N/A

Margin

N/A

Fundraise

N/A

Order

N/A

Capex

N/A

0 of 0 growth signals are positive — mixed outlook.

Full analysis

Revenue guidance

→REC expects better growth in the upcoming year compared to the previous year.
→Disbursements are expected to grow at a normal pace of around 10% over the base year 2019-2020.
→There is a significant focus on the energy transition sector, including renewables, associated transmission, and emerging areas like electric vehicle charging and irrigation projects.
→Reduction in interest rates from April 1, 2021, to remain competitive is expected to help improve turnover and disbursements.
→Growth in electricity demand is anticipated, supported by government schemes, such as the revamped distribution scheme with grants of over ₹1 lakh crore.
→The company is optimistic about maintaining or exceeding current profit levels with growth in loan book and disbursement volumes.
→New business segments like hydro-mechanical and civil works in irrigation projects are opening additional growth avenues.

Margin guidance

→Profits expected to remain in the same range as the exceptional FY2021, with possible slight variations depending on interest rate movements (Sanjay Malhotra, Pg 16).
→High return on net worth achieved (22%) may not sustain at the same level but overall profit levels should be maintained (Pg 16).
→Disbursement and loan book growth expected to be around 10% over the base year 2019-2020 under normal conditions (Pg 12).
→Growth opportunities in renewable energy, energy efficiency, e-vehicles, and new segments like lift irrigation and hydro-mechanical projects expected to support business expansion (Pg 4).
→After an exceptional year driven by Atmanirbhar liquidity infusion, the company expects to maintain or slightly exceed current profit levels (Pg 4, 16).
→Resolutions of stressed assets and recoveries expected to support profitability going forward (Pg 9, 11).

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Fundraise plans

→REC Limited plans to improve its CRAR (Capital to Risk-weighted Assets Ratio) and debt-equity ratios to reduce the cost of borrowing and support business expansion.
→The company may need to raise funds to invest in the National Financial Institution for Infrastructure as announced in the budget.
→Dividend payouts were slightly lower recently to maintain better capital ratios, suggesting a focus on strengthening the balance sheet ahead of fundraising or expansion.
→No specific mention of immediate equity or debt fundraising is made, but the emphasis on improving financial ratios and exploring expansion opportunities implies potential future fundraising.
→Overall, REC is positioning for growth by maintaining strong capital adequacy and gearing ratios, which may involve raising funds through debt or equity as needed.

Order book

- REC Limited has a large order book as mentioned by Sanjay Malhotra on page 16. - The company is confident about maintaining profits and growth due to this large order book. - Order book growth contributes positively to the outlook, supporting loan disbursements and business expansion. - On page 13, the mention of an outlook expecting normal 10% growth over the base year (2019-2020) indicates steady new business additions. - The company is also expanding into new sectors like renewables, irrigation, and vehicle charging, which may contribute to future order inflow. In summary, REC Limited has a substantial existing order book that supports confident growth projections and is actively pursuing new opportunities in sectors like renewable energy and infrastructure.

Capex plans

→REC Limited is focusing on expanding its business and improving financial ratios like CRAR and debt-equity to reduce borrowing costs.
→There may be investments related to the newly announced Development Financial Institution (DFI) for infrastructure as per the budget.
→The company is considering investments in the National Financial Institution for Infrastructure beyond its regular lending operations.
→Dividend policy adjustments (e.g., moderating dividend payout to 30%) are partly to facilitate capital retention for growth and investments.
→Strategic focus areas include energy transition (renewables, transmission), irrigation, and emerging sectors like vehicle charging infrastructure.
→They are actively involved in resolving stressed assets to strengthen the balance sheet and support future investment capacity.

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