State-run power financiers REC Ltd. and Power Finance Corporation Ltd. (PFC) are experiencing their strongest weekly performance in at least eight months, driven by three consecutive days of gains that concluded on Friday, January 2, 2025.

Weekly Performance Highlights

Both power sector stocks demonstrated robust momentum during the trading week, with significant gains marking a notable turnaround from their 2024 performance.

This performance represents the second consecutive weekly advance for both companies, indicating sustained positive momentum in the power financing sector.

Current Trading Levels

On Friday's trading session, both stocks continued their upward trajectory with substantial intraday gains.

Recovery from 2024 Declines

The current gains come as both companies recover from significant declines experienced in 2024. REC shares fell close to 30% during 2024, marking the company's worst annual performance since 2011. Similarly, PFC shares declined nearly 20% last year, representing their poorest yearly showing since 2015.

Both stocks had previously reached record high levels in July 2024, with REC touching ₹654.00 and PFC reaching ₹580.00. From these peak levels, REC shares declined by more than half, while PFC also experienced substantial corrections from its July highs.

Analyst Sentiment Remains Positive

Despite the significant declines experienced in 2024, analyst sentiment toward both companies remains overwhelmingly positive. The analyst coverage reflects strong confidence in the long-term prospects of both power financiers.

Both stocks maintain near-consensus buy ratings from analysts, with 12 out of 13 analysts recommending a "buy" rating for each company, while the remaining analyst maintains a "hold" recommendation.

Market Context

The strong performance of REC and PFC reflects renewed investor interest in the power financing sector. Both companies play crucial roles in India's power sector development, with REC focusing on rural electrification projects and PFC providing comprehensive financing solutions for power generation, transmission, and distribution projects across the country. The current rally suggests market confidence in the sector's growth prospects and the companies' ability to capitalize on India's expanding power infrastructure requirements.

REC 's power development unit has announced the establishment of three new fully owned transmission subsidiaries. These subsidiaries have been specifically created to handle transmission projects at the state level, marking a significant expansion of the company's operational structure in the power sector.

Strategic Expansion Through Subsidiaries

The formation of these three transmission subsidiaries represents a strategic approach by REC to organize its power development activities. By creating dedicated entities for transmission projects, the company is positioning itself to better manage and execute state-level infrastructure initiatives.

Transmission Infrastructure Focus

The new subsidiaries will concentrate exclusively on transmission projects, allowing REC to develop specialized capabilities in this critical area of power infrastructure. This focused approach enables the company to dedicate resources and expertise specifically to transmission development activities across different states.

Organizational Structure Enhancement

Through the creation of these fully owned subsidiaries, REC is enhancing its organizational structure to better serve state-level transmission requirements. This subsidiary model provides the company with greater operational flexibility and the ability to tailor its services to specific regional needs and project requirements.