New Delhi: REC Limited reported a standalone net profit of Rs 4,149.46 crore for the quarter ended June 30, down 6.78 percent from Rs 4,451.02 crore a year earlier but up 23.41 percent from Rs 3,362.30 crore in the March quarter. On a consolidated basis, net profit was Rs 4,192.76 crore, down 6.11 percent year-on-year and up 24.23 percent sequentially.
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The largest swing item on the expense side was a net translation and transaction exchange loss of Rs 911.29 crore, against Rs 51.47 crore in the year-ago quarter and Rs 94.17 crore in the March quarter. That is an increase of Rs 859.82 crore year-on-year and Rs 817.12 crore sequentially, which was larger, in both cases, than the entire movement in profit before tax.
The year-on-year fall of Rs 437.58 crore in standalone profit before tax reconciles almost exactly to four items: the Rs 859.82 crore rise in exchange losses and a Rs 402.41 crore fall in total income on the negative side, against a Rs 345.92 crore larger impairment write-back, Rs 276.94 crore lower fair-value losses and Rs 186.68 crore lower finance costs on the positive side.
The exchange loss in the profit and loss account sits alongside a large positive movement in other comprehensive income. The effective portion of gains on hedging instruments in cash flow hedges was Rs 960.29 crore in the quarter, against a loss of Rs 3,650.11 crore a year earlier, and the cost of hedging reserve contributed Rs 3,322.62 crore. Total other comprehensive income swung to a positive Rs 3,247.19 crore from a negative Rs 2,464.16 crore.
Total comprehensive income, which captures both, rose to Rs 7,396.65 crore standalone from Rs 1,986.86 crore a year earlier and Rs 315.47 crore in the March quarter.
The 18.47 percent sequential rise in standalone profit before tax is not an operating improvement. It is largely the swing on the impairment line, which moved from a charge of Rs 572.14 crore in the March quarter to a write-back of Rs 962.52 crore, a favourable swing of Rs 1,534.66 crore, or nearly twice the Rs 812.23 crore increase in profit before tax.
Stripping the impairment line out entirely, profit before impairment was Rs 4,246.80 crore in Q1 FY27, against Rs 5,030.30 crore a year earlier and Rs 4,969.23 crore in the March quarter — falls of 15.58 percent and 14.54 percent, respectively. On that measure the reported sequential improvement reverses.
REC put net interest income at Rs 5,212 crore for the quarter against Rs 4,961 crore in the March quarter, growth of 5 percent. Net profit over the same two quarters grew 23 percent. The gap between the two is the provision release.
The other material sequential help was Corporate Social Responsibility (CSR) spending, which fell to Rs 5.73 crore from Rs 232.73 crore in the March quarter, a Rs 227 crore reduction that reflects the year-end concentration of CSR outgo rather than a change in commitment.
Interest income on loan assets, the company's principal revenue line, fell 2.69 percent year-on-year to Rs 13,888.18 crore, though it edged up 0.44 percent sequentially. Total revenue from operations fell 2.91 percent year-on-year to Rs 14,296.10 crore standalone.
REC attributed lower lending rates to an improvement in borrower credit quality. "The strengthening fundamentals of the Indian power sector have contributed to the improved financial position of power utilities, resulting in stronger overall credit profiles and consequently lower provisioning requirements," the company said, adding that it had passed the benefit on by rationalising lending rates, "resulting in yield of 9.55 percent in Q1-FY 2026-27."
Fees and commission income fell to Rs 109.13 crore from Rs 144.19 crore a year earlier, and was well below the Rs 254.51 crore booked in the March quarter. Finance costs fell 2.09 percent year-on-year, broadly tracking the fall in interest income rather than outpacing it.
The company reported a net interest margin of 3.34 percent for the quarter. Operating margin, defined in the filing as operating profit before tax over revenue from operations, fell to 36.19 percent standalone from 38.29 percent a year earlier, tracing a compression of 210 basis points. Net profit margin fell to 28.95 percent from 30.21 percent, down 126 basis points. Consolidated margins moved similarly, to 36.26 percent and 28.98 percent from 38.19 percent and 30.12 percent.
The effective tax rate fell to 20.35 percent standalone from 21.18 percent a year earlier and 23.53 percent in the March quarter, providing some support to the bottom line.
REC also reported an annualised earnings per share of Rs 63.04, arrived at by multiplying the quarter's Rs 15.76 by four. The financial results carried a footnote stating that earnings per share is not annualised for a three-month period.
The asset quality numbers are the clearest positive in the results. The gross credit impaired assets ratio fell to 0.23 percent as at June 30 from 1.05 percent a year earlier, an improvement of 82 basis points. The net credit impaired assets ratio more than halved, to 0.11 percent from 0.24 percent.
The provisioning detail, however, shows where the write-back came from. Total impairment loss allowance fell to Rs 5,763.94 crore as on June 30 from Rs 6,893.45 crore as on March 31 — a reduction of Rs 1,129.51 crore. The Stage 3 allowance was unchanged at Rs 707.98 crore. The entire reduction came from Stage 1 and Stage 2 assets, where coverage fell to 0.86 percent from 1.06 percent.
Partly offsetting this, the impairment allowance maintained against letters of comfort, letters of undertaking and undrawn commitments rose to Rs 483.03 crore from Rs 316.25 crore. Netting the two movements gives Rs 962.73 crore, within Rs 0.21 crore of the Rs 962.52 crore credit taken to the profit and loss account.
The company said interest and other income on credit-impaired loan assets "is not being recognised as a matter of prudence, pending the outcome of resolutions of such assets."
Loan assets rose to Rs 589,999.94 crore as on June 30 from Rs 583,659.36 crore as on March 31, growth of 1.09 percent for the quarter. Stage 3 assets were near-flat at Rs 1,383.46 crore against Rs 1,384.75 crore. REC described the book as the largest of any central public sector NBFC in India.
Net worth rose 15.25 percent year-on-year to Rs 91,836.22 crore standalone and 15.17 percent to Rs 92,643.52 crore consolidated. The debt-equity ratio improved to 5.52 from 6.38 standalone, and total debts to total assets eased to 0.78 from 0.80.
Capital adequacy stood at 23.06 percent against the RBI's regulatory minimum of 15 percent, but was down 92 basis points from 23.98 percent a year earlier.
REC raised Rs 12,495 crore during the quarter through four private placements of non-convertible debentures, all of which were fully utilised with no deviation from stated objects. Secured listed NCDs outstanding as on June 30 were secured 1.40 times, with security cover across listed and unlisted secured NCDs at 1.69 times. The company reported "no default as on June 30, 2026 in the repayment of debt securities, borrowings and subordinated liabilities."
REC's renewable energy portfolio stood at Rs 78,596 crore as on June 30, or 13.32 percent of the loan book, the company said. The infrastructure and logistics portfolio was Rs 59,289 crore, or just over 10 percent of loan assets.
Together the two account for about 23.4 percent of the book, leaving roughly Rs 4.52 lakh crore, or 76.6 percent, in conventional power and other lending.
REC Power Development and Consultancy Limited (RECPDCL) posted total revenue of Rs 139.74 crore and net profit after tax of Rs 43.30 crore for the quarter. That accounts for the entire Rs 43.30 crore gap between standalone and consolidated net profit, indicating no other material consolidation adjustment.
At group level, sale of services rose 54.53 percent year-on-year to Rs 125.08 crore, while cost of services rendered rose 36.12 percent to Rs 74.69 crore. The implied services margin improved to 40.29 percent from 32.21 percent. Sequentially, both lines fell sharply from the March quarter's Rs 180.57 crore and Rs 132.11 crore.
The subsidiary's net margin of about 31 percent is close to the group's, but at roughly 1 percent of consolidated profit its contribution does not move the group numbers.
The board declared a first interim dividend of Rs 4.25 per equity share of Rs 10 face value for FY 2026-27. The record date is Friday, July 31, and payment will be made on or before August 23.
Separately, the board fixed Friday, August 14 as the record date for the final dividend of Rs 1.55 per share for FY 2025-26, already recommended and subject to shareholder approval at the ensuing AGM. That dividend will be paid on or before September 24.
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On the paid-up capital of Rs 2,633.22 crore, the interim dividend implies an outgo of about Rs 1,119 crore and the final dividend about Rs 408 crore. The interim dividend represents roughly 27 percent of the quarter's standalone profit.
