Discl: Invested from lower level with 4X returns within 2 years, apart from hefty dividend yield. May Be biased.Not a buy or sell recommendation. PSU stock carries risks and subject to Govt policy changes resulting in to volatility. Also, PSU stocks may not show qoq sequential growth. The quarterly performance may be lumpy.
investments required across infrastructure sectors in India (such as Power, Roads, Ports, etc.) totaling Rs 220-260 Lakh Crores between FY24 to FY30 as per the National Infrastructure Pipeline. Of this, the Renewable Energy investment is projected at ~Rs 30 Lakh Crore till 2030 unlocking an addressable debt market o
IF RBI withdraws or reduces the 5% rule, look for interesting moves in these, all power and infra financing names.
and Fin ministry may help in this matter as govt needs the financing to build the infra.
@hardik_shah1
It is more likely. It may be announced in forthcoming budget
So infrastructure funding has started showing growth.
This was crucial deliverable for them. If this pace continues then CMP looks cheap.
Seperate from what we were expecting but good news keeps coming
As I continue to compare the wild race of REC, PFC, and IREDA, here’s the latest scoop on IREDA: [IREDA share price: IREDA stock jumps 6% to record high after a large deal; more than double investors' money YTD]
It seems to me, In the last 6 months (3M,1M,weekly. on all timeframe), IREDA ran faster than PFC and REC. or did i miss something ?
So, what’s the deal here ? Has there been some major change speeding up IREDA? Is it the market’s typical irrational moves? Or is it just a Budget doparoll?
Still holding IREDA like a confused koala. 
Wherever there is future earning visibility , investors are chasing those stocks…And IREDA is a Navratna PSU, so there would not be any corporate governance issues, Govt backed , no issue in fund raising , NPA’ s are good… For the investor , you get regular dividends.
The stock may continue to be in demand with a bout of ups and downs.
However, when compared with REC, PFC, Hudco , there is a wide valuation gap…
REC , PFC don’t carry Renewable energy Tag , but IREDA do carry the tag.
Given an option and if I have to add to my existing holdings , i would rather add to REC, PFC and Hudco rather than IREDA.
I am holding all the three from lower level with 9-10 % Dividend yield - IREDA i was allotted in IPO. Had Partly booked profit and later added back on decline
Discl: Invested. May be biased . please do your own assessment before investing. PSU stocks could be volatile at times due to change in govt policy
We are at the euphoria stage of the market. You and I have discussed this in out convos. Recent price action is completely out of whack with fundamentals.
What is the future, I am no guru to predict.
As regards to REC/ IREDA / PFC, look at loan growth and NPA to determine relative valuation for long term.
for eg: PFC has recently loaned the Shapoorji group some 15k crores for repaying old loans. Does it make sense. Is it part of their mandate.
Similarly, REC has started funding infra projects. Do they have clear understanding of the relative pitfalls. Infra projects in India are almost always delayed. Have they priced the risk.
I hold REC bought at current prices having but am doing so taking into account 15-20% dips and long term holding. If your outlook is shorter, maybe time is to take out profits.
https://x.com/_Sandeep09/status/1803963490224476418?t=3u2iOgsxzpmRxSgHeQjCjA&s=19
PFC hasn’t sanctioned the loan to Shapoorji group till now. And probably won’t because of the social media backlash.
With India’s plans to add about 85-90 GW of thermal power capacity by 2031-32, REC Limited, a major state-run non-banking financial company in the power sector, has declared its intention to fund 50 percent of the capital requirements of the thermal power capacities coming within the said timeline.
PSU Watch had earlier reported that India’s thermal power capacity addition plans for 2031-32 will entail an investment of Rs 6.67 lakh crore. Ajoy Choudhury, Director (Finance) at REC, said that out of the total investment of Rs 6.67 lakh crore, funding will be restricted to about Rs 4-4.5 lakh crore. “We are targeting roughly 50 percent of this funding opportunity that will happen over a period of time by 2031-32,” he said.
“The share of coal in our loan book is currently at 28-30 percent. And it is going to continue at that level until 2031-32 even as we tap into the funding opportunities presented by additional thermal power capacity addition. And that is because the share of renewables in our loan book will go up. Renewable Energy currently constitutes only about 7-8 percent of our loan book. And it is expected to go up to 30 percent by 2030.”
If they are increasing both coal funding and renewables, this should help them increase their loanbook and also get the ‘Renewables and ESG’ tag helping IREDA get the PE multiples.
At the same time, government’s LTCG and removal of indexation benefits will aid ita capital gains tax bond funding. Since they have to now compete with many large private banks as well for deposits, it will be an easy source of cheap funds.
How do you look into the PE multiples and valuation? Does it have a IREDA rerating potential? What are the triggers or weaknesses we need to look into for coal based funding.
Most major borrowers for both PFC and REC continue to be major state distribution
companies.
Discoms’ operating metrics have improved but remain in loss despite Govt schemes like Revamped Distribution Sector Scheme (RDSS).
Is this a risk for Power Financiers like PFC and REC?
I understand that more and more loans are now guaranteed by state governments as
subsequent schemes by the centre has included conditions to provide cover for these
loans. But this is still just 45% currently.
Sources: UBS Report 28.08.2024
Source: @analystmohalla
(x.com)
Dividend yield stock to earnings yield stock to growth stock - then npas come, restructurings happen then back to dividend yield stock—— Journey of stock shall be full of ups and downs- shall be interesting to see full journey of any stock —- REC’s journey has been interesting so far- lets see what lies ahead - googly from RBI reg provisioning and to b fair its good for REC in the long term…
Agreed. Since REC follows Ind-As, my understanding is that they would only be required to create a “reserve” in balance sheet and the added provisioning requirements will have no impact on P&L (as they follow ECL provisioning norms).
Further since their Capital adequecy ratio is high - the reserve (which will be excluded from CAD and tier 1 caluclations) - again would have no impact.
If anything banks may completely vacate the space leaving the entire market for REC/PFC.
Hitting the pnl or not is one aspect. As we have seen reckless project financing in the past by power psu nbfcs, it atleast lets share holders know more granular info about stage of execution of loan book which otherwise is not disclosed. And if the loan is good, whats the fear about provisons, they shall get reversed later if collections happen as per schedule. Ofcourse earnings may b lumpy . I am ok with that as the benefit of that being addl disclosures on project finance loans ( especially skeptical about loans to pvt ppl) .
These updates showcase REC’s key role in financing India’s green energy transition and its commitment to decarbonization, alongside notable growth in its loan disbursements, particularly in the renewable energy sector.
Sources: https://www.bseindia.com/xml-data/corpfiling/AttachHis/9573e767-32c7-40f8-bf41-7b4baf8af945.pdf
