RECLTD Q2 FY26 earnings call.

Guidance to track

• Management reiterated confidence in achieving 11-12% loan book growth in FY2026, even after accounting for INR 49,000 crore of prepayments received in H1 including Kaleshwaram prepayment.
• REC targets INR 10 lakh crore loan book by 2030 with renewables expected to contribute 30% (INR 3 lakh crore), aligned with India's projected INR 46 lakh crore power sector investment requirement over next 4-5 years.
• Net worth expected to grow from INR 82,739 crore to approximately INR 1,40,000 crore supporting NIM maintenance at 3.5%-3.75% and spread of 2.75%-3.5% even as renewable share increases to 25% of loan book.
• Management expects all 11 NCLT assets (including Hiranmay and Sasan) to be resolved by Q4 FY2026, with Hiranmay final hearing outcome expected in Q3.

Risks flagged

• Government is developing a debt restructuring package for DISCOMs with consultations at advanced stage. Six states (including UP, Karnataka) account for bulk of debt. Management declined to comment on whether spreads would be compressed or if debt would transfer to state governments.
• Despite 52% reduction, stage two assets still stand at INR 16,112 crore comprising TSW-RIDC (INR 9,700 crore), Thistha Urja (INR 3,300 crore), TRN (INR 1,000 crore), and Odu Power (INR 1,200 crore). While management characterized these as contained and regularly paying, the concentration in TSW-RIDC remains significant.
• Analyst questioned whether accelerated privatization of state DISCOMs (referencing UP's two of six DISCOMs tender process) could threaten REC's INR 10 lakh crore AUM target since private operators may prefer cheaper financing from banks. Management dismissed concerns, citing competitive package offering beyond just interest rates.
• Management revealed INR 0.08-0.10 paisa per unit hedging cost increase due to enhanced EKI limits taken for protection against USD/INR volatility. With 99% of INR 1,05,500 crore foreign borrowings hedged, analysts questioned if 3-4% rupee depreciation could trigger further hedging cost increases. Management characterized extreme moves as 'apocalypse' scenarios not worth planning for.

Key quotes

• We are looking at almost INR 46 lakh crore will be required over the next four or five years towards the entire power sector. Even assuming that out of every four bulbs glowing in India, one is financed by REC, which is an indicator of roughly 20%-25% market share. Even if we maintain it, we are looking at roughly INR 10 lakh crore over the next five years.
• These pre-payments that have been received are those pre-payments which have primarily come from our borrowers returning the payment due to internal accruals. We honestly don't foresee too many prepayments coming in the remaining two quarters. If we continue to maintain our disbursements, I don't see any reason why we should not touch 11%-12% by the end of this financial year.
• Privatization is a thing which is going to happen or may happen, may not happen. What are the pitfalls? We are presuming privatization will be good. There could be pitfalls there. A lot of issues are there. Let things unfold. Let us not put the cart before the horse.