REC Limited has announced its audited financial results for the quarter and financial year ended March 31, 2026, reporting a decline in fourth-quarter profitability alongside annual growth. The Maharatna company's Board of Directors, which met on April 28, 2026, also recommended a final dividend of ₹1.55 per equity share.

Fourth Quarter Performance

For the three months ended March 31, 2026, REC reported standalone total income from operations of ₹14,386.01 crore, compared to ₹15,159.44 crore in the corresponding quarter of the previous year. The standalone net profit after tax for Q4 FY26 stood at ₹3,362.30 crore, representing a decline from ₹4,236.20 crore recorded in Q4 FY25. On a consolidated basis, net profit after tax for the quarter was ₹3,375.08 crore.

Annual Financial Results

For the full financial year ended March 31, 2026, REC achieved standalone total income of ₹59,139.96 crore, an increase from ₹55,911.12 crore in FY25. The annual standalone net profit after tax grew to ₹16,282.26 crore from ₹15,713.21 crore in the previous year. Consolidated net profit for FY26 reached ₹16,308.17 crore compared to ₹15,884.23 crore in FY25.

The company's net worth stood at ₹84,290.41 crore as of March 31, 2026, while outstanding debt capital was ₹5,05,777.41 crore. The debt-equity ratio was reported at 6.00 for the year ended March 31, 2026.

Dividend Declaration

The Board of Directors recommended a final dividend of ₹1.55 per equity share on a face value of ₹10 each, subject to shareholder approval at the upcoming Annual General Meeting. Including the proposed final dividend, the total dividend per share for the financial year 2025-26 amounts to ₹18.55 per equity share.

Regulatory Compliance

The audited financial results were reviewed by the Audit Committee and approved by the Board in their meeting held on April 28, 2026. These results have been audited by the Joint Statutory Auditors of the company. The company has filed newspaper clippings regarding the audited financial results with stock exchanges under Regulation 30 & 47 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, published in Business Standard (English and Hindi editions) dated April 29, 2026.

REC Limited received an Overweight rating from Morgan Stanley with a target price of ₹455, despite reporting a challenging fourth quarter performance that missed analyst expectations significantly.

Weak Q4 Financial Performance

The company's Q4 results showed substantial pressure across key financial metrics. The most notable decline was in profitability, with Profit After Tax (PAT) dropping 21% on a year-over-year basis. This performance resulted in an earnings miss of 17-22% compared to analyst estimates.

Key Performance Drivers

The weak quarterly performance was primarily driven by three critical factors. Higher provisioning requirements significantly impacted the bottom line, while weaker pre-provision operating profit (PPOP) indicated operational challenges. Additionally, the company experienced muted growth across its core business metrics.

Asset Under Management (AUM) growth remained subdued at just 3% year-over-year, reflecting the challenging operating environment. Disbursements showed a sequential decline of 9% quarter-over-quarter, indicating reduced lending activity. The Net Interest Margin of 3.55% came in below analyst estimates, putting pressure on profitability.

Morgan Stanley's Investment Rationale

Despite the challenging quarterly performance, Morgan Stanley maintains its positive outlook on REC Limited. The brokerage firm highlights that the underlying asset quality remains healthy, suggesting that the current challenges may be temporary in nature.

Valuation Attractiveness

Morgan Stanley's continued Overweight rating is supported by attractive valuation metrics. The company is currently trading at approximately 6x FY27 Price-to-Earnings ratio and 1x Price-to-Book Value ratio, which the brokerage considers compelling given the company's long-term prospects in the power financing sector.

The target price of ₹455 reflects Morgan Stanley's confidence in REC Limited's ability to navigate through the current challenges and capitalize on opportunities in India's power sector financing landscape.