REC Dividend News, Will They Give Bigger Amount This Year? | Cash Rewards, Net Zero NPA Plans

Summary

In an interview, Mr. Viv Kumar, DG of RECC, discusses the company's strategic shift towards a zero NPA policy, with net NPA reducing to 82% by Q1 of FY25. RECC is focusing on renewable energy, aiming for a 30% share of its asset management from green projects by 2030, targeting a loan book of 3 lakh CR. The company also plans to increase disbursements and maintain a net interest margin of 3.6-3.7%. Despite the rise in coal-based capacity, RECC's core remains in conventional power with a cautious approach to new sectors. The company is committed to high dividend payouts and has three main priorities: doubling asset management, focusing on renewable energy, and strengthening its conventional power business.

Takeaways

• 🌐 Mr. Viv Kumar from RECC discusses the company's zero NPA strategy and its focus on renewable energy.
• 📉 RECC has seen a significant reduction in net NPA, with a target to achieve zero NPA by the end of the current financial year.
• 💹 The company is actively resolving non-performing assets through various legal routes and expects to recover around 2,000 to 3,000 CR.
• 🔋 RECC's asset management has grown by 133% in FY23, with a renewable energy portfolio of about 42,000 CR, aiming for 3 lakh CR by 2030.
• 📈 The company's disbursements have increased substantially, with a target of more than 1.90 lakh CR for the current financial year.
• 🏗️ RECC is focusing on the entire value chain of renewable energy projects, including solar, wind, hybrid, and storage solutions.
• 💼 The company has a rigorous project appraisal process to ensure consistent revenue and cash flow to meet repayment obligations.
• 📉 RECC aims to reduce the cost of borrowing below 7% and maintain a net interest margin between 3.6% to 3.7%.
• 💰 The company is targeting a market share of 20% from the additional coal-based capacity required in India by 2032.
• 🌱 RECC plans to diversify into non-power sectors like logistics but remains cautious, focusing on projects with assured revenue and strong entities.
• 💵 RECC is committed to maintaining high dividend payouts, aiming to meet the government's mandated norms for dividend distribution.

Q & A

What is the current status of the zero NPA strategy implemented by RECC?

At the end of FI 24, RECC's net NPA had come down to 86%, and by the end of Q1 of FI 25, it further reduced to 82%. The company is hopeful to resolve all assets in the current financial year.

What strategies has RECC applied to achieve a zero NPA status?

RECC has been proactively resolving assets, inviting bids for operating assets, and focusing on value maximization. They have also made provisions and are expecting a recovery of about 2,000 to 3,000 CR in the current financial year.

What is the current focus of RECC regarding Renewables and what is the growth trajectory?

RECC's major growth is coming from green projects. Their asset management grew by 133% in FI23, and they aim to increase their renewable energy portfolio to about 60,000 CR by the end of FI 25, targeting a loan book of about 3 lakh CR from renewable energy by 2030.

How has RECC's disbursement increased in recent years?

In FI 23, RECC's disbursement was about 97,000 CR, which increased to 1,61,000 CR in FI 24. In Q1 of the current financial year, disbursement increased from 34,000 to 43,000 CR compared to Q1 of the last financial year.

How has RECC managed the NPA issue in the power sector, which has been a pain area for many financial institutions?

RECC has implemented a rigorous project appraisal process and ensured that the revenue cash flow of the projects they finance can meet repayment obligations. This has helped them to not add any new NPAs in the last nine quarters.

What is the current status of RECC's renewable energy portfolio and what are the future targets?

As of FI 24, RECC's total sanction for renewable energy projects was 136,000 CR. They are targeting more than 150,000 CR in sanctions for the current financial year, aiming to increase their renewable energy portfolio to about 60,000 CR by the end of FI 25.

What is the pipeline of renewable energy projects that RECC is currently financing?

RECC is financing the entire value chain of green projects, including solar, wind, hybrid projects, storage solutions, large Hydro projects, and manufacturing of solar modules and wind turbines. They also finance projects related to electric vehicle mobility and new technology areas like green hydrogen and green ammonia.

How does RECC plan to address the cost of borrowing which has remained over 7%?

RECC has made efforts to reduce the cost of borrowing from 7.28% in FI 23 to 7.13% in FI 24 and further to 7.05% in Q1 of the current financial year. They aim to bring the cost of borrowing below 7% by using a judicious mix of borrowing sources and innovative hedging techniques.

What is the target for RECC's net interest margin and how do they plan to maintain it?

RECC is hopeful to maintain their net interest margin between 3.6% to 3.7%. They plan to achieve this by reducing the cost of funds, focusing on asset quality, and ensuring good revenue cash flow from projects.

How does RECC plan to balance dividend payouts with profits while maintaining growth?

RECC is committed to maintaining a dividend payout ratio as per the government mandate of 5% of the net worth or 30% of the profits, whichever is higher. They aim to continue being one of the highest paying dividend companies.

What are the three top priorities for RECC as outlined by Mr. Viv Kumar?

The top priorities for RECC are to double their asset management to about 10 lakh CR by 2030, to give renewed focus on renewable energy projects with 30% of asset management coming from this sector, and to strengthen their core competency area of conventional generation, transmission, and distribution business.