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Anil Gupta of ICRA discusses the implications of RBI's proposal for tighter project finance rules, focusing on provision requirements for projects seeking DCCO extension. The impact on lender balance sheets, credit flow, and specific sectors like REC and PFC is examined.
Pawan Parakh of Renaissance Investment Managersbelieves the power sector is entering a big secular cycle with increasing demand and potential earnings in generation, transmission, distribution, and financial sectors. However, he is generally underweight on metals due to global news flows. Parakh mentions the frothiness in railway stocks and the power sector, highlighting the expensive utilities but the potential in power financiers like REC.
“It is like earlier you had only two options – REC & PFC – and now you have a third option. So, if somebody is adding a fresh position in power financiers, he has out of the three to choose instead of two. Otherwise, all three of them will be similar and we would like to go with the existing ones.”
“Both REC and PFC continue to be under-owned by the investors vis-à-vis banks and other financial stocks. So, both will continue to do well and that could be a re-rating. Plus they have a healthy dividend payout also. REC and PFC's payout policy of 30% distributing that will remain healthy.”
REC Limited signed an MoU with PFC as per the DPE Performance Evaluation System for FYs 2023-24 and 2024-25 for CPSEs on Friday.