PFC enters club of 50 most valued firms; REC m-cap crosses Rs 1 trn

With an m-cap of Rs 1.26 trillion, PFC became the 50th most-valued listed firm, while the m-cap of REC hit Rs 1 trillion for the first time ever

Shares of state-owend power finance companies were on a roll in Monday's trade. Power Finance Corporation (PFC) (Rs 386.30) and REC (Rs 393.05) scaled new highs and rallied up to 6 per cent on the BSE on a healthy business outlook.

In the past one month, the stock price of PFC has surged 47 per cent, while of REC soared 29 per cent. In comparison, the S&P BSE Sensex was up 5 per cent.

Further since April, thus far in financial year, REC skyrocketed 240 per cent, while PFC zoomed 155 per cent, against a 16 per cent rally in the benchmark index.

A sharp rally in these stocks have led to PFC joining the top 50 most valuebale companies in terms of market capitalsation (m-cap).

Currently, with m-cap of Rs 1.26 trillion, PFC stood at 50th position in overall ranking. Meanwhile, the m-cap of REC hit first time Rs 1 trillion today. REC m-cap touched Rs 1.03 trillion, BSE data shows.

REC is a NBFC categorized as an Infrastructure Finance Company (IFC) with the Reserve Bank of India (RBI) and the company is engaged in the business of providing finance to power, logistics and infrastructure sectors.

PFC holds 52.63 per cent of the paid-up equity share capital of the REC, while the remaining 47.37 per cent was held by the public.

The product portfolio of PFC includes financial products and services like rupee term loans, short-term loans, equipment lease financing and transitional financing services, etc, for various power projects in the generation, transmission and distribution sector.

PFC’s clients mainly include central power utilities, state power utilities, private power sector utilities (including independent power producers), joint sector power utilities, and power equipment manufacturers.

PFC is a critical vehicle for government to drive policy/ scheme implementation in the power sector. 

It has been the nodal agency for various government schemes (e.g., UMPP, RDSS/ IPDS/ (RAPDRP subsumed in it), Liquidity Infusion Scheme (LIS) and Late Payment Surcharge Scheme (LPS) and as a bid process coordinator through its wholly-owned subsidiary PFC Consulting Limited for the ITP scheme.

The government has been placing immense focus on increasing the country’s green energy share. India has committed to achieving net zero by 2070, and the Government has set targets to propel new opportunities further.

The "Make in India" initiative and the Production-Linked Incentive scheme are expected to further boost demand. Projections indicate a 7.18 per cent Compound Annual Growth Rate (CAGR) in India's electricity consumption until 2027.

To address this growing demand, additional capacity would be needed.

The government plans to double the installed capacity, with addition of around 500 GW of capacity by 2032, with 87 per cent from non-fossil fuel sources and 13 per cent from fossil fuels, requiring an estimated investment of approximately Rs 31 trillion, PFC said in its FY23 annual report.

Meanwhile, last week, in an exchange filing, REC said that the company has crossed disbursement of Rs 1 trillion (Rs 100,000 crore) for the first time in a year. In the corresponding period of 8 months of financial year 2022-23 (FY23) the disbursement was Rs 46,075 crore.

Further, in another exchange filing, REC said that its board has approved a revision in the market borrowing programme of the company under different debt segments with interchangeability amongst various instruments including bonds/debentures, term loans, external commercial borrowings, commercial papers etc. on private/ public placement basis from Rs 1.2 trillion to Rs 1.5 trillion for FY24.

Care Ratings expects REC's strategic importance to the GoI and its role in the development of the power sector to continue as earlier.

The ratings on the borrowing programme of REC factor in the ultimate sovereign ownership and economic interest, and hence, there is an expectation of continued strong support from the GoI given its strategic importance.

Going forward, the continued sovereign ownership (indirectly through PFC) and support from the GoI in maintaining a comfortable capital structure and asset quality will remain the key rating sensitivities, it said.