Rural Electrification Corporation (REC) has reported 16% increase in the net profit to Rs 1274.56 crore for the quarter ended December 2018 (Q3FY2019). The Net Interest Income (NII) increased 13% to Rs 2534.55 crore, driven by improved Net Interest Margin (NIM). The loan book growth has accelerated to 20% end December 2018. The gross profit growth surged to 36%. Further, the provisions for restructured advances as well as taxes were higher in Q3FY2019.

Business highlights:

Outstanding loan portfolio continues rise at a strong pace of 20% to Rs 269170 crore at end December 2018. Disbursements surged 53% yoy to Rs 19727 crore in Q3FY2019, as disbursements in the T&D (including RGGVY) jumped 189% to Rs 13277 crore, while generation segment disbursements declined 11% at Rs 4826 crore and short-term loans disbursements also fell 60% to Rs 890 crore in Q3FY2019.

Sanctions declined 26% to Rs 28588 crore in Q3FY2019, driven by fall in generation loans sanction by 42% to Rs 14832 crore, while the sanctions to T&D segment also declined 19% to Rs 8010 crore in Q3FY2019.

With the increase in yield on loans, NIM improved 24 bps qoq to 4.25% in quarter ended December 2018. Yield on loans moved up 32 bps yoy to 11.05%, while cost of funds increased 29 bps yoy to 7.65% in Q3FY2019.

Fund raising jumped 100% to Rs 30190 crore in the quarter ended December 2018, of which Rs 9849 crore raised through institutional bonds and Rs 11700 crore from bank term loans. Capital gains bonds served Rs 1554 crore, while about Rs 7087 crore were raised through foreign currency borrowings in Q3FY2019.

Outstanding borrowings increased by 25% from Rs 227192 crore at end December 2018. Institutional bonds increased 9% to Rs 132389 crore, capital gains, Tax Free & Infra bonds were up 8% to Rs 36689 crore and foreign currency borrowing moved up 25% to Rs 31086 crore at end December 2018. Bank loans increased more than seven fold to Rs 14200 crore end December 2018.

Total Assets increased by 22% from Rs 279466 crore at end December 2018 up from Rs 228490 crore at end December 2017.

Asset Quality

Gross NPA stood at Rs 20,387 crore at end December 2018, while Net NPAs were Rs 10666 crore at end December 2018. GNPA and NNPA ratio's stood at 7.57% and 3.96% at end December 2018 compared with 7.92% and 4.28% a quarter ago.

Book value of the company stood at Rs 179.1 per share at end December 2018, while adjusted Book value (factoring in NNPA) stood at Rs 125.1 per share at end December 2018.

Quarterly Performance

Income from Operations increased 19% to Rs 6623.95 crore for the quarter ended December 2018. The interest expense moved up 24% to Rs 4089.4 crore, pushing up the NII by 13% to Rs 2534.55 crore in quarter ended December 2018. Other income zoomed 576% to Rs 633.53 crore. The total income increased 35% to Rs 3168.08 crore in the quarter ended December 2018.

The operating expenses moved up 11% to Rs 97.12 crore, while provisions jumped 65% to Rs 1239.09 crore in the quarter ended December 2018. The Profit before Tax rose 22% to Rs 1829.91 crore in the quarter ended December 2018. The effective tax rate increased 317 bps yoy to 30.3%. The Net Profit increased 16% to Rs 1274.56 crore in the quarter ended December 2018.

YTD Financial Performance

For the nine-months ended December 2018 (9MFY2019), REC reported 17% increase in Income from Operations at Rs 19003.06 crore, while interest expense increased 13% to Rs 11488.16 crore, leading to a 23% rise in NII to Rs 7514.9 crore. Other income moved up 218% to Rs 1872.6 crore. The staff cost declined 20% to Rs 111.22 crore, while the other expenditure surged 1462% to Rs 1565.85 crore. The Depreciation stood at Rs 5.14 crore in 9MFY2019 compared with Rs 4.00 crore in 9MFY2018,while Provision for bad debts and standard assets jumped 44% to Rs 1239.09 crore in 9MFY2019. Profit before Tax stood at Rs 6466.20 crore, indicating an increase of 16% on a yoy basis. The Tax expense during the period under review stood at Rs 1958.61 crore, resulting in a PAT of Rs 4507.59 crore in 9MFY2019, showing a growth of 18% over 9MFY2018.

Rural Electrification Corporation: Financial Results