Company Update : Rural Electrification Corp Ltd By Motilal Oswal Financial Services Ltd
AUM growth weak; standard asset provisions up QoQ
Earnings beat driven by one-off in interest income
* RECL’s 4QFY25 PAT grew ~5% YoY to INR42.4b (~21% beat). FY25 PAT grew ~12% YoY to INR157b. 4Q NII grew ~37% YoY to ~INR61.7b (~18% beat). Other income declined ~8% YoY to ~INR2.4b.
* Opex declined ~23% YoY to ~INR2.4b and cost-income ratio stood at ~3.1% (PQ: 5% and PY: ~5.6%). The decline in opex was driven by lower CSR and other expenses during the quarter. PPoP grew ~39% YoY to INR61.6b.
* Yields (calc.) rose ~50bp QoQ to ~10.5%, while CoB declined ~20bp QoQ to ~7.1%, resulting in spreads (calc.) increasing ~70bp QoQ to ~3.4%. Reported NIM for FY25 was largely stable at ~3.63% (9MFY25: 3.64%).
* Standard asset (Stage 1 and 2) provisions rose ~22bp QoQ to 0.95%. These were primarily higher standard asset provisions on few utilities exposures, which saw a rating downgrade during the quarter.
* Provisions stood at INR7.8b (vs. est. INR7b). This translated into annualized credit costs of 15bp (PY: -2bp and PQ: -15bp).
* REC declared a final dividend of ~INR2.6/share. FY25 total dividend stood at INR18/share.
Disbursements grew ~16% YoY; weak AUM growth
* AUM stood at INR5.67t, up 11% YoY and flat QoQ. Loan growth was weak because of higher rundowns, which stood at ~31% (PQ: 26% and PY: 22%). Disbursements grew ~16% YoY to INR455b.
* Sanctions stood at ~INR654b. Share of renewable in the sanction mix was ~40% and share of infrastructure in the sanction mix was only ~1%.
Improvement in asset quality; standard asset provisioning rose QoQ
* GS3 improved ~60bp QoQ to ~1.35%, while NS3 improved ~35bp QoQ ~0.4%. PCR on Stage 3 rose ~10pp QoQ to ~72%. Standard asset (Stage 1 and 2) provisions rose ~22bp QoQ to 0.95%.
* The company has ~12 projects (PQ: 14 projects) that are classified as NPAs. Resolutions in ~11 NPA projects (PCR: 77%) are being pursued under NCLT, and 1 NPA project (PCR: 50%) outside NCLT.
* CRAR stood at ~26% as of Mar’25.
Valuation and view
* RECL reported a mixed quarter, marked by in-line disbursements, but AUM growth was weak due to higher repayments during the quarter. Asset quality continues to improve, supported by the resolution of stressed assets, while NIMs remained largely stable sequentially. The company also made higher standard asset provisions on few utilities exposures, which saw a rating downgrade during the quarter.
* Key monitorables: 1) management’s outlook on loan growth, 2) progress on assets that are in advanced stages of resolution, 3) the NIM trajectory, given the product mix and competitive intensity, and 4) the proportion of sanctions for infrastructure and private players. We will revisit our estimates after the earnings call.
For More Research Reports : Click Here
For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412
