CLSA upgrades REC, PFC ratings to ‘High perform’ stating strong loan growth, ROE, dividend yield

Global brokerage firm CLSA has upgraded its ratings on Rural Electrification Corporation (REC) and Power Finance Corporation (PFC) to ‘High Perform’ from ‘Outperform’, citing robust loan growth, strong return on equity (ROE), and attractive dividend yields.

The brokerage firm has also set a target price of Rs 525 for both REC and PFC, adjusting from their previous targets of Rs 590 and Rs 540, respectively.

CLSA emphasized that asset quality concerns remain minimal, given that lenders are maintaining tight control over project approvals and agreements during the ongoing capex cycle.


Despite concerns over process-related slowdowns and sanction delays, CLSA remains optimistic about the mid-teen loan growth outlook over FY26-27 for both companies.

REC: High perform| Target price: Rs 525

CLSA highlighted that REC's loan growth over the past 5-7 quarters has been strong, ranging between 15%-21%. The note pointed out that while there have been some process-related slowdowns, the existing sanction pool alone could drive double-digit to mid-teen loan growth over FY26-27.

Additionally, CLSA emphasized REC's strong asset quality, noting that there has been no slippage over the past 2-3 years, and the company maintains strict control over project approvals and agreements. Furthermore, CLSA believes that REC's best-in-class loan growth, ROE, and dividend yield set it apart from peers in the sector.

REC shares were trading nearly 1% higher at Rs 363.90 on the BSE around 11 am.

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PFC: High perform| Target price: Rs 525

For PFC, CLSA underscored that 59% of the past 2.75 years' sanctioned loans remain undisbursed, which provides a solid pipeline to support double-digit to mid-teen loan growth in FY26-27.

The brokerage firm noted that among lenders, PFC continues to lead in loan growth, ROE, and dividend yield, making it an attractive pick in the current market environment.

Moreover, CLSA reassured investors that asset quality concerns should remain limited, as PFC and other lenders are prioritizing project approvals and agreements during this phase of capital expenditure.

The shares of PFC were also trading 1% higher at Rs 367.75 on the BSE.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)