Shares of REC Ltd., along with peers like PFC and IREDA, rebounded on Wednesday, breaking a two-day losing streak.
The management also said that most of the company's loans are supported by state government guarantees and that the RBI guidelines do not apply to such loans.
However, REC may withdraw from some of the more competitive projects.
The REC MD further said that the draft regulations may gradually reduce the company's Tier-I capital over three years.
On the other hand, the company aims to double its assets under management to $125 billion by 2030.
Shares of REC Ltd., along with peers like PFC and IREDA, rebounded on Wednesday, breaking a two-day losing streak.
The stock jumped as much as 6% on May 8 after management explained that the Reserve Bank of India's new guidelines, which mandate additional provision for under-construction projects, would not affect the company.
The management also said that most of the company's loans are supported by state government guarantees and that the RBI guidelines do not apply to such loans.
On the conference call with analysts, Managing Director Vivek Kumar Dewangan said that the lender would pass on any increase in the cost of capital to the borrowers.
However, REC may withdraw from some of the more competitive projects.
He also highlighted that REC has not lent over ₹50,000 crore to any one project.
It also noted that REC is a non-banking finance company (NBFC) that follows the accounting standards prescribed by the central bank. Therefore, the financial statements will factor in the impact, if any.
Shares of REC, PFC, and IREDA fell over the last two days after the RBI highlighted that 5%
of provisions should be made on all existing and fresh project loans, which are in the "construction phase" and have yet to begin commercial operations.
If the guidelines are finalised, lenders will have to set aside more money from their profits to cover the risk of a default or delay in repayments. The regulator has sought comments on these draft guidelines by June 15.
The REC MD further said that the draft regulations may gradually reduce the company's Tier-I capital over three years.
Tier 1 capital is a significant measure of a lender's financial health. It includes shareholders' equity and reserves set aside from profits.
Dewangan also said that some banks may withdraw from the competitive environment within the project financing segment.
On the other hand, the company aims to double its assets under management to $125 billion by 2030.
It's possible to achieve it
a year earlier
in 2029, they added
.
