REC Sees No Impact Of Draft RBI Norms; Shares Snap Two-Day Drop
The impact of the guidelines will be on tier 1 capital only. However, 80% of current projects are already commissioned, the company said.
Shares of REC Ltd. snapped their two-day fall and rose on Wednesday after the company said that the new RBI draft guideline will not impact the company's profitability, book value, or net worth.
The impact of the guidelines will be on tier 1 capital only. However, 80% of current projects are already commissioned, the company said in an investor call.
The stock had fallen over 10% in the last two sessions when the RBI's draft guidelines mentioned that 5% general provision should be made on all existing and fresh project loans, which are in the "construction phase", meaning before commercial operations commence.
The guidelines are unlikely to have an impact on borrowing costs for borrowers in renewable projects and borrowers of non-renewable projects are unlikely to be subjected to higher rates as they have plenty of supply borrowers, it said.
Metro projects supported by the state government will not attract the draft proposed regulation, according to the company. However, in case of an impact, the capability will pass on the rates.
An impairment reserve is not required since its provisioning is more than required by IRAC norms, it said.
Shares of the company rose as much as 6.37%, the highest level since May 6, before paring gains to trade 5.2% higher at 10:49 a.m. This compares to a 0.4% decline in the NSE Nifty 50.
The stock has risen 29.37% year-to-date an 276.86% in the last 12 months. Total traded volume so far in the day stood at 1.09 times its 30-day average. The relative strength index was at 64.68.
Of the six analysts tracking the company, five maintain a 'buy' rating, and one recommends a 'hold', according to Bloomberg data. The average 12-month analysts' price target implies an upside of 11%.
Shares of PFC had also fallen nearly 12% in their two day fall, but also rose on Wednesday to as much as 5.44%, its highest level since May 6.
It pared gains to trade 5.3% lower at Rs 443.85, this compares to a 0.12% decline in the NSE Nifty 50.
The stock has risen 15.94% year-to-date an 204.2% in the last 12 months. Total traded volume so far in the day stood at 1.01 times its 30-day average. The relative strength index was at 57.45.
Six analysts tracking the company have a 'buy' rating, according to Bloomberg data. The average 12-month analysts' price target implies an upside of 20.9%.
