REC 2023-24 Annual Report Analysis

Wed, 31 Jul

REC has announced its results for the year ended March 2024. Let us have a look at the detailed performance review of the company during the year 2023-24.

REC Income Statement Analysis

• Interest income during the year rose 20.3% on a year-on-year (YoY) basis.
• Interest expenses were up by 26.2% YoY during the same period.
• Operating expenses declined by 46.0% YoY during the year.
• The company's net interest income (NII) increased by 11.5% YoY during the fiscal. Consequently, net interest margins (NIM) witnessed a decline and stood at 3.3% in FY24 as against 3.5% in FY23.
• Other income increased by 3351.2% YoY during the year.
• Net profit for the year increased by 26.7% YoY.
• Net profit margins during the year increased to 29.8% in FY24 from 28.3% in FY23.

REC Income Statement – 2023-24

No. of Mths Year Ending		12 Mar-23*	12 Mar-24*	% Change
Interest Income	Rs m	394,783	475,048	20.3%
Other Income	Rs m	419	14,461	3351.2%
Interest Expense	Rs m	237,413	299,647	26.2%
Net Interest Income	Rs m	157,369	175,400	11.5%
Operating Expense	Rs m	18,569	10,022	-46.0%
Pre-provision Operating Profit	Rs m	139,219	179,839	29.2%
Provisions & Contingencies	Rs m	86	3,321	3770.0%
Profit before tax	Rs m	138,977	179,599	29.2%
Tax	Rs m	27,307	38,145	39.7%
Profit after tax	Rs m	111,670	141,455	26.7%
Minority Interest	Rs m	0	0	0.0%
Net Interest Margin	%	3.5	3.3
Net profit margin	%	28.3	29.8

Must See: These Segments are Witnessing Incredible Growth with Modi's Push

REC Balance Sheet Analysis

• The company's deposits during FY24 stood at Rs 0 m as compared to Rs 0 m in FY23, thereby witnessing an increase of 0.0%.
• Advances for the year stood at Rs 4,991.9 bn as compared to Rs 4,220.8 bn during FY23, a rise of 18.3%.
• Cost of deposits for REC rose 0.0% and stood at 0.0%, while yield on advances rose to 0.0%.
• The lender's investments fell to Rs 300.8 bn during the year from Rs 305.3 bn in FY23.
• Borrowing stood at Rs 363.0 bn, a growth of 89.8% as compared to previous year.
• Overall, the total assets and liabilities for FY24 stood at Rs 5,489.1 bn as against Rs 4,648.9 bn during FY23, thereby witnessing a rise of 18.1%.

REC Balance Sheet – as on March 2024

No. of Mths Year Ending		12 Mar-23*	12 Mar-24*	% Change
Networth	Rs m	581,205	693,503	19.3%
Advances	Rs m	4,220,839	4,991,921	18.3%
Deposits	Rs m	0	0	0.0%
Yield on advances	%	0.0	0.0
Cost of Deposits	%	0.0	0.0
Investments	Rs m	305,345	300,845	-1.5%
Borrowings	Rs m	191,227	363,018	89.8%
Total Assets	Rs m	4,648,926	5,489,085	18.1%

Current Valuations for REC

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 53.7, an improvement from the EPS of Rs 42.4 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 642.8, stands at 6.0 times its trailing twelve months earnings.
• The price to adjusted book value (P/ABV) ratio at current price levels stands at 2.4 times, while the price to income ratio stands at 1.8 times.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-23*	12 Mar-24*
Income per share (Unadj.)	Rs	149.9	180.4
Earnings per share (Unadj.)	Rs	42.4	53.7
Diluted earnings per share	Rs	42.4	53.7
Avg P/E ratio	Rs	2.5	6.0
Avg P/ABV ratio	Rs	0.9	2.4
Avg Market Cap	Rs	277,377	841,973
Dividends per share (Unadj.)	Rs	12.60	16.00

Ratio Analysis for REC

• Efficiency Ratios

  Credit/Deposit Ratio: The company's credit/deposit ratio improved and stood at 499,192,050.0x during FY24, from 422,083,910.0x during FY23. The credit/deposit ratio tells us how much money a company has raised in the form of deposits and has deployed as loans.

  Debt to Equity Ratio: The company's debt to equity ratio increased and stood at 0.52x during FY24, from 0.33x during FY23. The debt to equity ratio of a company tells us how much debt a company uses relative to its equity.

• Liquidity Ratios

  Capital Adequacy Ratio (CAR): REC's capital adequacy ratio (CAR) was at 25.8% as on 31 March 2024 as compared to 25.8% a year ago. This ratio helps measure the financial strength of the company or any finance company to meet their obligations using their assets and capital.

  A company that has a good CAR has enough capital to absorb potential losses. Thus, it has less risk of becoming insolvent and losing depositor's money.

  Provision Coverage Ratio (PCR): Apart from CAR, you also need to take a look at the company's PCR and LCR ratios. Provisioning coverage ratio (PCR) is the percentage of funds that a company sets aside for covering losses due to bad debts.

  So a high PCR ratio means asset quality issues are under control and the company is not vulnerable.

  Liquidity Coverage Ratio (LCR): The LCR is designed to ensure that companies hold a sufficient reserve of high-quality liquid assets to allow them to survive a period of significant liquidity stress lasting 30 calendar days.

• Profitability Ratios

  Return on Equity (ROE): The return on equity (ROE) ratio for the company improved and stood at 20.4% during FY24, from 19.2% during FY23. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

  Return on Assets (ROA): The return on asset (ROA) ratio of the company improved and stood at 2.58% during FY24, from 2.40% during FY23. The ROA measures how efficiently the company uses its assets to generate earnings.

  Return on Capital Employed (ROCE): The ROCE for the company improved and stood at 10.05% during FY24, from 9.14% during FY23. The ROCE measures the ability of a company to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

• NPA Ratios

  Gross NPA Ratio: The gross NPA ratio is the ratio of a company's gross NPAs to gross advances. REC's gross NPA ratio stood at 2.7% as of 31 March 2024 compared to 3.4% in the same period a year ago.

  A high gross NPA ratio is a bad thing as it indicates how much of a company's loans are in danger of not being repaid.

  Net NPA Ratio: In simple language, net NPAs are simply the total non-performing assets minus the provision left aside. It gives you the exact value of NPAs after the company has made provisions.

  The net NPA ratio of REC was 0.9% in financial year 2024. This compared with 1.0% a year ago.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-23*	12 Mar-24*
Credit/Deposit Ratio	x	422,083,910.0	499,192,050.0
Debt to Equity Ratio	x	0.3	0.5
Loans / Deposits	x	0.0	0.0
Capital Adequacy Ratio	%	25.8	25.8
Return on Equity	%	19.2	20.4
Return on Assets	%	2.4	2.6
Return on Capital Employed	%	9.1	10.0
% of Gross NPAs	%	3.4	2.7
% of Net NPAs	%	1.0	0.9
Yield on Advances	x	0.0	0.0
Yield on Investments	x	0.0	0.0

To see how REC has performed over the last 5 years, please visit here.

REC Share Price Performance

Over the last one year, REC share price has moved up from Rs 203.0 to Rs 642.8, registering a gain of Rs 439.9 or around 216.7%.

Overall, the S&P BSE SENSEX is up 22.8% over the year.

(To know more, you can check out historical annual results for REC here and quarterly results for REC here)