Don't be lured by PFC, REC valuations

Investors should gauge if they meet the promise on loan upgrades before taking new positions

At a time when the Street was giving up hopes on India’s exclusive power financiers Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), the bailout plan for distressed state electricity boards (SEBs) and some traction from renewable power projects lent a helping hand to both. This is also reflecting in their September quarter (Q2) numbers. Yet, these are only temporary rescue measures.

The long-term pipeline for both does not look as strong as a few years ago, thanks to the slump in the sector. In the near term, protecting asset quality and reducing loan losses is crucial. To do