RECLTD Q1 FY25 earnings call.
A source-linked concall view: reported numbers, management language, guidance, commitments and risks that should carry forward.
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REC Limited delivered a strong Q1 FY25 with 17% AUM growth reaching INR 5.3 lakh crore, driven by 28% disbursement growth to INR 43,652 crore. Sanctions surged 24% to INR 1.13 lakh crore, with renewable energy sanctions up 59% and infrastructure logistics up 122%. Net interest income grew 30% YoY to INR 4,713 crore, NIM expanded to 3.64% (vs 3.28% YoY), and PAT rose 16% to INR 3,442 crore. Gross NPA improved to 2.61% from 3.28%, while net NPA declined to 0.82%. Management targets 15-20% AUM growth and aims to double AUM to INR 10 lakh crore by 2028-29. Renewable portfolio is expected to grow from 8% to 30% of AUM by 2030. Risks include RBI's proposed project finance provisioning norms, Andhra Pradesh account performance, and execution speed on large hydro projects with 6-8 year commissioning timelines.
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Guidance to track
- Management expects to maintain growth trajectory of 15-20% YoY, targeting to double AUM to INR 10 lakh crore by 2028-29 (ahead of earlier 2030 estimate).
- Q1 disbursement of INR 43,652 crore (28% growth) positions the company to cross INR 1.9 lakh crore for full FY25, with 40% from T&D and 20% from renewables.
- Net interest margin improved to 3.64% from 3.28% YoY. Management commits to maintaining NIM above 3.6% for next 4-5 years.
- Renewable energy currently at 8% of AUM (~INR 39,000 crore) is targeted to grow to 30% (INR 3 lakh crore) by 2030, targeting 20% market share of 308 GW capacity addition opportunity.
- Resolution of stressed assets (KSK Mahanadi, Hiranmaye, Sinnar) expected to yield more than INR 2,000 crore write-back. Madurai (INR 560 crore) and Nadai resolved in July 2024.
Risks flagged
- RBI proposed higher provisioning for under-construction delayed projects. NBFCs submitted comments by June 15 deadline. Final guidelines awaited; could increase cost of lending for delayed projects.
- AP state discom loans moved from SMA1 to SMA2 in Q1. Management expects normalization in 3-4 months given budget support announcement. Resolution timing remains uncertain.
- INR 32,450 crore large hydro projects sanctioned but typically take 6-8 years for commissioning. Disbursement timing could disappoint near-term expectations.
- KSK Mahanadi, Hiranmaye, and Sinnar bidding process underway with final bids due August. Delays in NCLT approval could postpone expected INR 2,000+ crore write-back beyond FY25.
Key quotes
- If we maintain this 17% growth in the next four years, we'll be able to double our asset under management to about INR 1,000,000 crore by the year 2028-29 itself.
- We hope that all these INR 2,000 crore write-back will get in the current financial year itself. After that, it will be only standard asset provisioning to be there. Nothing else.
- We have been able to reduce our average cost of funds by 18 basis points. From last Q1, it was 7.23%. Now our average cost of funds is about 7.05%.
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