PNB and REC Sign MoU to Finance Infrastructure Projects Worth ₹55,000 Crore

Punjab National Bank and Rural Electrification Corporation have entered into a partnership to co-finance the power sector and infrastructure & logistics projects. This ambitious venture is potentially valued at a staggering ₹55,000 crore. Following this news, PNB's shares opened 1% higher at ₹80.10 on the National Stock Exchange. Meanwhile, the stock price of REC has risen by 6%, and at the time of writing, REC shares are trading at ₹284.60.

The MoU

The Memorandum of Understanding (MoU) signed between PNB and REC signifies their intention to jointly explore funding possibilities for the projects under a consortium arrangement. Over the next three years, these two financial giants aim to co-finance loans amounting to ₹55,000 crore.

This collaborative effort between REC and PNB aims to fuel projects in the power, infrastructure, and logistics sectors. REC, which operates under the Ministry of Power, specializes in providing long-term loans and financial solutions for the power infrastructure sector, encompassing aspects such as generation, transmission, distribution, and renewable energy, with a substantial loan book exceeding ₹4,54,393 crore, REC has expanded its portfolio to support infrastructure and logistics projects, further contributing to India's development.

Financial Performance

In Q1FY24, Punjab National Bank reported an astounding 307% rise in net profit, soaring to ₹1,255.41 crore compared to ₹308.44 crore in the previous year's quarter. Simultaneously, the bank's Net Interest Income surged by an impressive 26% year-on-year, reaching ₹9,504.3 crore for the June quarter.

In Q1FY24, REC reported a substantial 21% year-on-year increase in net profit, reaching ₹2,968.05 crore. For the same period, revenue from operations grew 16.7% year-on-year, totaling ₹11,087.56 crore.

Diversification and Green Initiatives

In alignment with the Ministry of Power's vision, REC diversified its portfolio towards infrastructure and logistics in FY23. This diversification allowed REC to finance up to 33% of its outstanding loan book in this sector, resulting in a positive impact. The company's Chairman and Managing Director, Vivek Kumar Dewangan, highlighted REC's involvement in various projects spanning metro, ports, airports, oil refineries, highways, steel infrastructure, healthcare, educational institutions, IT infrastructure, fiber optics, and more. These projects constituted approximately 32% of the total projects," he mentioned.
 

As part of its commitment to sustainability, the company also plans to expand its loan portfolio for green projects to ₹3 trillion by 2030. REC is determined to become a leader in renewable energy, including solar, wind, hybrid, e-mobility, green hydrogen, green ammonia projects, round-the-clock projects, and ethanol manufacturing.

Financial Expansion

In April, REC successfully raised $1.15 billion through loans with a 5-year tenure, benchmarked to the Overnight SOFR (Secured Overnight Financing Rate), a USD-denominated benchmark rate. The funds raised will support power, infrastructure, and logistics sector projects in accordance with the Reserve Bank of India's ECB guidelines.

Market Performance

At the time of writing, REC's stock price is on an upward trend. On Wednesday, the stock is up by 6%. Over the past month, the stock has delivered a remarkable 16% return to its investors. If we review the last six months, REC's stock has witnessed an astonishing increase of 148%. On a year-to-date (YTD) basis, the stock has provided its investors with an impressive return of 135%. These numbers clearly demonstrate that REC has been performing exceptionally well, with its stock value steadily increasing.