Axis Securities Sees ~32% Upside in a PSU Power Financing Company!!

Power Stock Spotlight: Axis Securities Sees ~32% Upside in a PSU Power Financing Company

Axis Securities has spotlighted a prominent public sector undertaking (PSU) that finances India’s power sector projects, upgrading it to a Buy call with a target implying ~32% upside. Let's unpack the reasoning behind this bullish outlook.

The Context: Restructuring in the Power Sector

• AA recent landmark resolution saw JSW Energy successfully bid to acquire KSK Mahanadi Power—a debt-laden insolvent entity valued around ₹15,985 crore.- TTwo leading power financiers—REC Limited and Power Finance Corporation (PFC)—emerged as major creditors to KSK Mahanadi (owing ₹2,727 crore and ₹3,428 crore, respectively), positioning them to recover a portion of their dues post-resolution. 

Why Axis Securities Is Bullish

1. *Market-Leading Power Financing
   RREC and PFC currently control about 20% of the Indian power financing market, providing them broad exposure to infrastructure expansion

2. *Strong Financial Health Post-Stress Resolution
   BBoth companies have significantly cleaned up their balance sheets, with improving asset quality and minimal loan slippages recently. 

3. Renewables Boom
   IIndia is charting a rapid transition to renewables, with average additions of 16–17 GW annually over the past three years and a projected capacity of 900 GW by FY 2032. TThis opens even more financing opportunities for REC and PFC.

4. Earnings Momentum

• *REC posted revenue growth of 17.13% in Q2 FY 24‑25 (₹11,701 cr → ₹13,706 cr), while net profit rose from ₹3,790 cr to ₹4,038 cr.

• *PFC grew revenue 14.95% (₹22,403 cr → ₹25,754 cr) and net profit from ₹6,628 cr to ₹7,214 cr over the same period. 

Valuation & Upside Targets

• HHDFC Securities had earlier recommended REC with a target of ₹600 share, hinting at ~25% upside.

• PPFC was given a target of ₹550 per share, implying ~32% upside—consistent with Axis’s view

Bottom Line: Why Investors Should Note This PSU Play

If you're tracking opportunities in the power infrastructure financing segment, this state-backed stock offers:

• A robust long-term growth trajectory tied to India’s vast capacity expansion plans in both conventional and renewable energy.

• Potential capital gains of up to ~32%, supported by strong financials and improving credit metrics.

• A cushioned risk profile via PSU ownership, regulated business model, and improving balance sheet strength.

Consider These Points Before Investing

• Government intervention: REC and PFC operate in a highly regulated environment—policy changes can significantly impact performance.

• Insolvency recovery risks: The recovery from KSK Mahanadi scenarios depends on successful resolution and realistic recoverables.

• Sector cyclicality: Although renewables are surging, conventional energy dynamics, interest rates, and fiscal policies still affect loan growth.

Summary Table

Company	Recent Growth	Target Upside	Key Strengths
REC Limited	Revenue +17%, Profit +6.5% (Q2 FY25)	~25%	Market share leadership, strong asset quality
Power Finance Corp (PFC)	Revenue +14.9%, Profit +8.8% (Q2 FY25)	~32%	Large exposure to clean energy, improving fundamentals

Final Thought

REC and PFC represent a compelling play in financing India’s energy transition—with solid fundamentals and robust sectoral tailwinds. If they fit your investment thesis and risk comfort, these PSU stocks could offer attractive risk‑reward over a 12–18 month horizon.