RECLTD Q2 FY25 earnings call.
A source-linked concall view: reported numbers, management language, guidance, commitments and risks that should carry forward.
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Revenue
Pending
verification pending
Revenue YoY
18%
reported change
EBITDA
Pending
latest reported figure
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record provenance
Actual signal trajectory
Where this quarter sits.
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What the record says.
REC Limited delivered a strong Q2 FY25 with H1 profit of INR 7,448 crore (+11% YoY), driven by robust 15% loan book growth to INR 5.46 lakh crore. Net interest margin held at 3.64% with spread of 2.96%. Asset quality improved materially with gross NPA declining to 2.53% from 3.42% in March 2023. The renewable book expanded 60% YoY to INR 47,820 crore, now comprising 9% of total loans. Management targets 15-20% AUM growth averaging 17% over the next 3-4 years, with loan book expected to double to INR 10 lakh crore by 2028-29. Key growth drivers include 20% market share targets in renewables (INR 3 lakh crore by 2030) and coal-based power (80 GW capacity addition by 2032). Risks include competitive intensity from banks in renewables, TANGEDCO trifurcation execution, and selective infrastructure lending decisions. NIM guidance of >3.6% is maintained with expectations of write-backs exceeding INR 1,500 crore from stressed asset resolutions (KSK Mahanadi, Hiranmaye, Sinnar).
Colored figures show movement against the previous available record.
Guidance to track
- CMD Vivek Dewangan guided that AUM growth will range between 15-20% across quarters, averaging 17% over the next 3-4 years. Conservative estimate is 15% leading to doubling of loan book to INR 10 lakh crore by 2030.
- Management targets 20% market share in renewable energy business, projecting more than INR 3 lakh crore in renewable portfolio by 2030, with INR 80,000+ crore of projects pending sanction in H2 FY25.
- Management committed to maintaining NIM above 3.6% (target range 3.5%-3.75%) citing favorable mix shift towards higher-yielding coal-based and renewable projects yielding 9.5%+ and 10.5%+ respectively.
- With Ministry of Power outlining 80 GW coal-based capacity requirement by 2032, REC targets 20% market share in this segment as a key growth driver.
Risks flagged
- Analyst raised whistleblower issues and CEO changes at Azure. Management clarified only financing commissioned projects with A-rated assets and DSCR of 1.3x, excluding any greenfield exposure. However, ongoing monitoring of developments was acknowledged.
- Analyst questioned guarantee structures post-trifurcation of TANGEDCO into generation, distribution, and renewable entities. Management confirmed all three entities are now functional with government guarantees maintained, and exposure limits are comfortable.
- Stage 1/2 provisions on private sector renewable and generation book declined from 100+ bps to 60 bps while the book is growing. Management attributed this to projects achieving COD (reducing provisions by 40bps) and improved PD assumptions, but this creates model risk if asset quality deteriorates.
- Management acknowledged improvement in Andhra Pradesh utility payments with good payments in October, expecting complete normalcy by December. However, the recovery was slower than anticipated and provisioning reversal of >INR 100 crore will only materialize in Q3/Q4.
Key quotes
- Even if we take a conservative estimate, even if we grow at the rate of 15%, our asset under management would be doubled to about ten lakh crore by the year two thousand thirty. But if we are able to sustain this 17% growth, perhaps we may be doubling the asset under management by the year two thousand twenty-eight, twenty-nine.
- In renewable energy projects, we have recently signed MOUs worth one lakh twelve thousand crore when we had participated in RE Invest Summit in Gandhinagar last year, we have signed MOUs worth one lakh two lakh eighty-five thousand crore.
- The advantage with respect to REC is that we can give longer ten-year loan. Our tenure of the loan can go up to 85% of the project life. So normally, the project life is about 20, 25 years, and tenure of loan can go up to 18 to 20 years, while banks typically give loans for a tenure of 10 to 12 years only.
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