Capitaline

Results 05-Aug-22

Analysis

REC

Sanctions in Q1FY2023 crosses full year FY2022 sanctions, stable asset quality and margins

REC has reported 9% increase in the net profit to Rs 2447.26 crore for the quarter ended June 2022 (Q1FY2023). The Net Interest Income (NII) rose at moderate pace of 4% to Rs 4083.21 crore, driven by flat Net Interest Margin (NIM) and moderate loan growth. The loan book of the company rose at moderate pace of 2% end June 2022. The gross profit declined 3%. However, the provisions have declined and effective tax rate eased supporting 9% growth in the net profit in Q1FY2023.

Business highlights:

Outstanding loan portfolio rose 2% to Rs 387888 crore at end June 2022. Disbursements declined 18% yoy to Rs 12442 crore in Q1FY2023, as disbursements in the T&D (including RGGVY) dipped 59% to Rs 2916 crore, while generation segment disbursements also fell 46% at Rs 2033 crore. Further, short-term loans disbursements also declined 51% to Rs 1562 crore in Q1FY2023. However, the renewable energy segment disbursements have jumped 524% to Rs 5931 crore in Q1FY2022.

Sanctions zoomed 247% to Rs 59895 crore in Q1FY2023, driven by surge in generation loans sanction by 605% to Rs 35662 crore renewable energy 252% to Rs 9885 crore and short term loans to Rs 5350 crore, while the sanctions to T&D segment also fell 4% to Rs 8998 crore in Q1FY2023. The sanctions in Q1FY2023 have crossed the sanctions of Rs 54421 crore achieved in last full financial year FY2022.

With the decline in yield on loans, NIM declined 6 bps qoq and 1 bps yoy to 4.09% in quarter ended June 2022. Yield on loans declined 30 bps yoy to 10.07%, while cost of funds also fell 26 bps yoy to 6.73% in Q1FY2023.

Fund raising declined 45% to Rs 5598 crore in the quarter ended June 2022, of which capital gains bonds served Rs 2670 crore and banks Rs 2150 crore, while about Rs 778 crore were raised through foreign currency borrowings in Q1FY2023.

Outstanding borrowings rose by 1% from Rs 329906 crore at end June 2022. Institutional bonds declined 18% to Rs 146814 crore, while capital gains, Tax Free & Infra bonds were up 25% to Rs 39920 crore and foreign currency borrowing moved up 42% to Rs 68909 crore at end June 2022.

Total Assets increased by 2% from Rs 413667 crore at end June 2022 up from Rs 406223 crore at end June 2021.

Asset Quality

Gross NPA stood at Rs 17,125 crore at end June 2022, while Net NPAs were Rs 5466 crore at end June 2022. GNPA and NNPA ratio’s stood at 4.41% and 1.41% at end June 2022 compared with 4.45% and 1.45% a quarter ago and 4.80% and 1.61% at end June 2021.

Book value of the company stood at Rs 263.5 per share at end June 2022, while adjusted Book value (factoring in NNPA) stood at Rs 235.8 per share at end June 2022.

Quarterly Performance

Income from Operations was flat at Rs 9459.9 crore for the quarter ended June 2022. The interest expense declined 4% to Rs 5376.69 crore, pushing up the NII by 4% to Rs 4083.21 crore in quarter ended June 2022. Other income jumped 81% to Rs 8.61 crore. The total income increased 4% to Rs 4091.82 crore in the quarter ended June 2022.

The operating expenses moved up 69% to Rs 641.88 crore, while provisions declined 35% to Rs 504.50 crore in the quarter ended June 2022. The Profit before Tax rose 7% to Rs 2939.55 crore in the quarter ended June 2022. The effective tax rate declined 180 bps yoy to 16.7%. The Net Profit rose 9% to Rs 2447.26 crore in the quarter ended June 2022.

Financial Performance FY2022

For the year ended March 2022 (FY2022), REC reported 11% increase in Income from Operations at Rs 39132.49 crore, while interest expense increased 3% to Rs 22052.91 crore, leading to a 23% rise in NII to Rs 17079.58 crore. Other income moved up 334% to Rs 97.96 crore. The Staff cost moved up 10% to Rs 158.86 crore, while the other expenditure surged 86% to Rs 1102.51 crore. The Depreciation stood at Rs 17.96 crore in FY2022 compared with Rs 9.53 crore in FY2021. Provision for bad debts and standard assets jumped 44% to Rs 3473.31 crore in FY2022. Profit before Tax stood at Rs 12424.90 crore, indicating an increase of 16% on a yoy basis. An effective tax rate stood at 19.1% in FY2022 compared with 22.3% in FY2021. The net profit of the company increased 20% to Rs 10045.92 crore in FY2022.

REC: Results
Particulars	2206 (3)	2106 (3)	Var %	2203 (12)	2103 (12)	Var %
Income from Operations	9459.90	9506.36	0	39132.49	35387.89	11
Interest & Finance Expenses	5376.69	5588.56	-4	22052.91	21489.08	3
NII	4083.21	3917.80	4	17079.58	13898.81	23
Other Income	8.61	4.76	81	97.96	22.55	334
Total Income	4091.82	3922.56	4	17177.54	13921.36	23
Staff Cost	75.41	39.36	92	158.86	144.84	10
Other Expenditure	566.47	340.89	66	1102.51	591.24	86
Gross Profit	3449.94	3542.31	-3	15916.17	13185.28	21
Depreciation	5.89	2.81	110	17.96	9.53	88
Provisions and Write-off	504.50	781.44	-35	3473.31	2419.62	44
Profit before tax	2939.55	2758.06	7	12424.90	10756.13	16
Tax expense	492.29	511.46	-4	2378.98	2394.35	-1
PAT	2447.26	2246.60	9	10045.92	8361.78	20
EPS	49.6	45.5		50.87	42.34
Adj BV (Rs)	235.8	197.6		227.02	184.34
* Annualized on current equity of Rs 1974.92 crore. Face Value: Rs 10, Figures in Rs crore
Source: Capitaline Corporate Database

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