RECLTD Q2 FY27 Results Analysis: PAT Falls 23%, Loan Growth Misses Target

RECLTD's Q2 FY27 numbers came in soft, with revenue of Rs. 14,736.77 Cr (-2.37% YoY) and PAT growth of -23.38% YoY. Here's a quick read of what worked, what to watch, and what management said.

Quarter Snapshot

REC delivered a margin-led earnings decline: PAT fell 23.38% YoY as NIM compressed to 3.22%, below the management's own 3.50-3.75% band, and loan growth of 5.90% YoY missed the 11-12% target. Asset quality and capital strengthened on every axis — GNPA 0.22%, Stage-II down 80%, CRAR 24.04% — while the REC-PFC merger advanced with RBI and exchange no-objections obtained. The quarter missed prior guidance on both NIM and loan growth, with H2 NIM recovery dependent on a cost-of-funds turn that looks difficult.

Key Investment Insights

Key Positives

• Gross loan book grew 5.90% YoY to Rs.6,16,537.35 crore and 4.50% QoQ
• Renewables loan book grew 27% YoY to Rs.86,660 crore
• Q2 disbursements of Rs.53,541 crore; H1 disbursements Rs.79,207 crore
• GNPA improved to 0.22% and NNPA to 0.11%; Stage-II assets down 80% YoY to Rs.3,235 crore
• CRAR improved to 24.04% (CET-1 20.91%); net worth up 14% YoY to Rs.94,324.91 crore
• 2nd interim dividend of Rs.3.50/share declared; H1 payout Rs.2,040.75 crore (27.06% of H1 PAT)
• REC-PFC merger advanced: RBI no-objection Oct 15, 2026 and BSE/NSE no-objection Oct 19, 2026
• H1 credit cost was a net reversal (−0.196%); Q2 annualized credit cost 0.25%

Risk Factors

• PAT fell 23.38% YoY to Rs.3,391.18 crore; normalized PAT down 20.39% YoY
• NII declined 5.71% YoY to Rs.5,134.43 crore; NIM at 3.22% is below the 3.50-3.75% guidance band
• Loan growth of 5.90% YoY missed management's 11-12% target
• Finance costs rose 8.85% QoQ vs interest income +3.32% QoQ; cost of funds drifted from 7.17% to 7.34%
• FX loss of Rs.262.94 crore vs Rs.79.45 crore YoY
• Audit committee composition pending appointment of requisite independent directors by GoI