Rural Electrification Corporation's (REC) first quarter net profit is seen rising 3.6 percent year-on-year to Rs 1,328.9 crore, according to average of estimates of analysts polled by CNBC-TV18. Profitability may be impacted by higher provisions. The state-run power project finance company will announce its earnings on August 7.
Net interest income (NII), the difference between interest earned and interest expended, may increase 16.8 percent to Rs 2,213 crore from Rs 1,895.8 crore during the same period. Compared to NII growth of 24 percent in Q4FY15, June quarter NII may slow down.
Key factors to watch out for would be allowance against loans (provisions) that spiked in Q4FY15 to Rs 473 crore from Rs 147 crore year-on-year and Rs 191 crore quarter-on-quarter due to accelerated provisioning. Accelerated provision in Q4 was Rs 255 crore.
Also sustainability of margin at 5 percent level would be watched. Loan growth is expected to be healthy at 15-20 percent.
Analysts expect asset quality to be stable during the quarter. In Q4FY15, gross non-performing assets in absolute term remained unchanged at Rs 1,335 crore and net NPA declined to Rs 970 crore from Rs 1,092 crore on sequential basis.
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