Why Is REC’s Q2 FY26 Performance a Benchmark for India’s Power Finance Growth?
About REC Ltd: REC Ltd. (formerly Rural Electrification Corporation) is a leading non-banking finance company under the Ministry of Power, providing financial assistance to state and private sector entities in power generation, transmission, and distribution. Over the years, it has evolved into a diversified infrastructure financier with exposure to renewables, logistics, and roads, while maintaining strong asset quality.
REC’s Q2 FY26 concall showcased its strongest-ever half-yearly performance, marked by record profit, loan book expansion, and healthy asset quality metrics. The company’s proactive diversification into non-power infrastructure and renewable segments underpins its long-term growth strategy.
Our advisory team frequently shares actionable Nifty Expiry Tip insights for traders tracking large-cap PSU lenders like REC and PFC, where derivative sentiment plays a key role in weekly market setups.
Q2 FY26 Financial Performance Summary
| Metric | Q2 FY26 | YoY Growth | QoQ Growth |
|---|---|---|---|
| PAT (₹ Cr) | 4,438 | +19% | +7% |
| Total Income (₹ Cr) | 14,920 | +12% | +5% |
| Loan Book (₹ Lakh Cr) | 5.82 | +7% | +3% |
| Gross NPA (%) | 1.06 | ↓ 24 bps | Stable |
| Net NPA (%) | 0.24 | ↓ 12 bps | Improved |
REC maintained its industry-leading asset quality with gross NPA falling to a historic low of 1.06%. Disbursements rose 27% YoY, driven by strong traction in renewable and distribution projects. Capital adequacy stood at a healthy 23.74%, providing ample room for future growth without near-term equity dilution.
Peer Comparison Among Infrastructure Financiers
| Company | CMP (₹) | P/B (x) | ROE (%) | NIM (%) |
|---|---|---|---|---|
| REC Ltd | 610 | 1.5 | 19.4 | 4.1 |
| PFC Ltd | 430 | 1.3 | 18.2 | 4.0 |
| IRFC Ltd | 155 | 2.1 | 16.9 | 3.7 |
REC trades at a modest premium to PFC, reflecting stronger diversification and better asset quality. The company’s profitability and credit profile remain best-in-class among PSU financials.
Valuation and Outlook
| Metric | Current | Historical Range | Interpretation |
|---|---|---|---|
| P/B | 1.5x | 0.9–1.6x | Near upper range; justified by earnings growth |
| ROE | 19.4% | 16–20% | Sustainable due to low credit cost |
| Dividend Yield | 5.2% | 4–6% | Attractive income play for long-term investors |
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The management maintained a long-term loan growth guidance of 11–12% annually, targeting a ₹10 lakh crore loan book by FY30. Renewables will form 30% of the total book, aligning with India’s 500 GW clean energy goal. Asset quality improvement and regular dividend payouts strengthen REC’s appeal for both income and growth investors.
Investment Verdict and Horizon
Short Term (1–3 months): Stable; potential for consolidation near ₹580–₹620 levels.
Medium Term (3–9 months): Positive bias with 10–12% upside as infra lending expands.
Long Term (9+ months): Compelling compounding story; suitable for steady dividend and growth portfolio allocation.
Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, notes REC as a PSU financial leader offering stability, dividends, and growth visibility. Its focus on renewables and infrastructure diversification adds resilience to future earnings.
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Related Queries on PSU Financial Stocks
- Is REC a better long-term PSU investment than PFC or IRFC?
- What is REC’s outlook for renewable energy financing?
- How safe is REC’s dividend yield for investors?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
