REC and PFC stocks bounced back during mid-day trading on May 6, following reassurances from brokerage firm CLSA that the proposed RBI regulations would have minimal impact on the companies’ financial performance.
REC stock initially opened at Rs 530 on the NSE but experienced a downturn, dropping by approximately 10 percent to Rs 502 in early trade. However, it has since recovered and is currently trading at Rs 517.70, around 7 percent lower. Similarly, PFC shares started at Rs 454.85 per share before declining by about 12 percent to Rs 422.55 during early trading hours. The stock has now rebounded and is trading at Rs 439, approximately 8 percent lower.
CLSA analysts stated that the proposed regulations by RBI are expected to have limited impact on PFC and REC, primarily affecting capital adequacy ratios. The draft guideline proposes an increase in standard asset provisions to 5 percent over the next three years and sets a minimum exposure requirement for lenders in a consortium, along with restrictions on selling exposure until a project becomes operational.
According to CLSA’s report, both PFC and REC follow IndAs accounting standards, which differ from those of banks. Therefore, higher provisions are anticipated to affect only impairment reserves and are not expected to significantly impact profits as both companies are well-capitalized. RBI has requested feedback on the proposal by June 2024.
Over the past year, PFC shares have surged by around 225 percent, while REC shares have seen an increase of approximately 286 percent.
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