REC, PFC shares gain 5% on KSK Mahanadi resolution, ICICI Securities initiates with 'buy'

Given the recent correction, shares of the two have fallen 15 percent and 19 percent, respectively.

Shares of REC and Power Finance Corporation climbed as much as 5 percent in morning trade on January 14 after JSW Energy emerged as the winning bidder for KSK Mahanadi Power under the Insolvency and Bankruptcy Code. This news also brings relief to the creditors of KSK Mahanadi Power, which includes state-owned REC and PFC.

The bid was valued at Rs 15,985 crore. Following the development, JSW Energy’s stock surged 6 percent. KSK Mahanadi had liabilities amounting to Rs 32,243 crore, with Rs 29,400 crore owed to financial creditors.

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As per a November 11 disclosure, KSK Mahanadi had already distributed Rs 6,241 crore as per an NCLT directive, reducing the outstanding claims to Rs 26,001 crore. REC and PFC are among the largest lenders to KSK Mahanadi, with exposures of Rs 2,727 crore and Rs 3,428 crore, respectively.

In other news, ICICI Securities also initiated coverage on the companies with a 'buy' call and a target price of Rs 600 and Rs 550, respectively. The domestic brokerage emphasized a substantial Rs 43 lakh crore pipeline for power generation and transmission projects, positioning it as a major growth driver for financiers like PFC and REC. This pipeline offers significant lending prospects for both companies.

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ICICI Securities, in its analysis, also pointed to energy transition funding as a key growth catalyst for the sector. With India shifting towards renewable energy sources, the demand for financing in this area is expected to rise, presenting further opportunities for PFC and REC. It also added that government initiatives for distribution companies bode well as their improved repayment capacity would reduce the credit risk for power financiers.

At 11:20 am, shares of REC were trading at Rs 470, higher by 5.2 percent, while PFC shares rallied 6 percent to Rs 412. Given the recent correction, shares of the two have fallen 15 percent and 19 percent, respectively.

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