Synopsis:
REC Ltd, a prominent player in the power sector as a non-banking financial company (NBFC), is showing a promising 35% upside potential according to ICICI Securities. With strong results from Q1 FY26, enhanced asset quality, and consistent profitability, it stands out as a great investment choice.
With a market capitalization of Rs 1,04,987 crores, the shares of REC Ltd are currently trading at Rs 399 per share, down by 38 percent from its 52-week high of Rs 648.30 per share. Over the past five years, the stock has delivered an impressive return of 430 percent.
ICICI Securities on REC
Leading brokerage house ICICI Securities has assigned a Buy call on the stock with a target price of Rs 540 per share, signalling an upside potential of 35 percent from its current market price.
The brokerage stated that the company reported a healthy performance in Q1 FY26, showcasing a loan book growth of 3 percent quarter-over-quarter and 10 percent year-over-year, even in a typically slow quarter.
A standout moment was the restructuring of a troubled account, TRN Energy, under the RBI’s 2019 Resolution Framework, which involved a partial write-off of a loan amounting to Rs 1,500 crore. This move resulted in a credit cost reversal of Rs 270 crore, significantly reducing overall provisions.
Consequently, the calculated credit cost dipped into negative territory at -43bps, which supported the company’s profit after tax (PAT) growth to Rs 4,450 crore, reflecting a 5 percent increase quarter-over-quarter and a remarkable 29 percent year-over-year, alongside a strong return on equity (RoE) of 22.6 percent.
It also added that the company’s asset quality is on an upward trend, with the Stage-3 provision coverage ratio (PCR) improving to 77 percent from 72 percent in the previous quarter, and expected credit loss (ECL) provisions easing to 1.67 percent of total loans.
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Despite a slight dip in net interest income (NII) due to one-off income in Q4FY25, margins and spreads have remained robust. REC’s proactive approach to resolving issues, now focused on NCLT-bound assets worth Rs 6,150 crore, provides further clarity on potential recoveries.
According to ICICI Securities, with consistent loan growth, enhancing asset quality, and strong profitability, REC is well-positioned to maintain RoEs above 20 percent in both FY26 and FY27.
REC Limited provides financial support for India’s power sector, including generation, transmission, and distribution projects. It offers long, medium, and short-term loans, refinancing options, and funds for equipment manufacturing and coal mining for power use.
The company also manages payments, regulatory asset funding, and acts as a guarantor through letters of undertaking. Additionally, it implements key government schemes like Saubhagya and PM Surya Ghar, oversees competitive bidding for power transmission projects, and offers consultancy and digital monitoring services to improve power reliability. Its clients include both public and private power utilities.
Written by Satyajeet Mukherjee
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