| Date | Stock | Entry Price | Position |
|---|---|---|---|
| 21 May 2026 | REC Ltd | ₹337 | Lot 1 |
Why Now
REC has fallen from a 52-week high of ₹429 to ₹336 — roughly 22% off the high. At 5.4x earnings with a dividend yield of 5.38% and promoter holding at 52.6%, the setup fits the Mode 1 framework cleanly.
The stock is trading just above book value of ₹323. That’s not a screaming discount — but for a government-backed NBFC financing India’s power sector infrastructure, near book value with a 5%+ dividend yield is a reasonable entry zone.
Volumes have been quieter. The range is compressing. No major news catalyst driving the entry — just price and setup.
That’s enough.
The Business
REC Limited is a Maharatna PSU and a government-owned NBFC focused exclusively on financing the power sector — generation, transmission, distribution and renewable energy projects. It lends to state utilities, private developers and infrastructure projects.
The business model is straightforward — borrow cheap, lend to the power sector at a spread, collect interest. ROE is 20%. The government owns 52.6% and isn’t selling. The dividend is consistent.
This isn’t a growth story. It’s a yield and range story. The power sector financing cycle in India is long and government-backed. REC is positioned centrally within that financing cycle.
The Range
| Level | Price |
|---|---|
| 52-week high | ₹429 |
| 52-week low | ₹304 |
| Entry — Lot 1 | ₹337 |
| Down from high | ~22% |
| Book value | ₹323 |
| Averaging level | ₹313.80 — added 01 Sep 2026 |
| Exit | Merger at 88:100 swap ratio — April 2027 |
Over the last year, the stock has largely traded between ₹304–429. Entry at ₹337 sits in the lower third. The Mode 1 exit logic is superseded by the merger event — REC will be absorbed into PFC at 88 PFC shares for every 100 REC shares held.
The Risk
Two risks I’m accepting consciously:
Interest rate sensitivity is real. REC borrows to lend. If rates stay elevated or rise further, spreads compress and profitability takes a hit. This isn’t a risk I can eliminate — it’s a risk I’m watching.
Policy risk is the other one. Government decisions on power sector funding, loan waivers to state utilities, or changes to REC’s mandate can affect the business in ways that aren’t predictable. This is the nature of a PSU play — policy is both the tailwind and the risk.
Neither of these weakens the thesis materially today. But either could.
This thesis breaks if power sector capex slows materially, asset quality deteriorates significantly, or dividend payouts weaken without corresponding business strength.
What I’m Watching
- Interest rate direction — RBI policy stance
- Power sector capex cycle — any slowdown in project disbursements
- Asset quality — state utility loan repayments
- Dividend consistency — key part of the return thesis
- PFC-REC merger progress — NCLT, shareholder and regulatory approvals
Current Status
Lot 1 active at ₹337. Additional shares added 01 Sep 2026 at ₹313.80. Total 46 shares, avg cost ₹328.08.
Q4 FY26 results — quarterly profit down 22% YoY to ₹3,375 crore due to lower interest income. Not alarming — full year FY26 profit hit record high of ₹16,282 crore. Net NPA nearly zero at 0.12%. Loan book grew 17% YoY to ₹5.18 lakh crore. Total dividend for FY26 at ₹18.55 per share.
Q4 softness is interest income normalisation, not asset quality deterioration. Thesis intact.
PFC-REC merger approved June 28, 2026 at 88:100 swap ratio. Presidential approval received June 10. Effective date proposed April 2027. Still pending NCLT, shareholder and regulatory approvals. Comfortable holding through merger and becoming a PFC shareholder.
Q1 FY27 results — net profit ₹4,193 crore, up 24% QoQ. Interim dividend ₹4.25 per share declared, record date July 31. Loan book healthy. Asset quality intact. Merger on track. Thesis strongly intact.
This entry will be updated when something material changes — results, averaging, exit or thesis break. Not before.
Journal Timeline
| Date | Event | Status |
|---|---|---|
| 21 May 2026 | Initial entry — Lot 1 at ₹337 | Active |
| 28 Apr 2026 | Q4 FY26 results — Quarterly profit ₹3,375 crore, down 22% YoY on lower interest income. Full year FY26 record profit ₹16,282 crore. Net NPA 0.12%. Loan book +17% YoY. Total FY26 dividend ₹18.55 per share. Thesis intact. | Reviewed |
| 28 Jun 2026 | PFC-REC merger approved at 88:100 swap ratio. Presidential approval received June 10. Board approval June 28. Effective date proposed April 2027. Still pending NCLT, shareholder and regulatory approvals. Comfortable holding through merger and becoming a PFC shareholder. Thesis intact. | Reviewed |
| 31 Jul 2026 | Q1 FY27 results — Net profit ₹4,193 crore, up 24% QoQ. Interim dividend ₹4.25 per share declared, record date July 31. Loan book healthy. Asset quality intact. Merger on track for April 2027. Thesis strongly intact. | Reviewed |
| 01 Sep 2026 | Additional accumulation at ₹313.80. Stock near 52W low, merger timeline approaching, dividend yield improving at lower price. | Active |
| 06 Oct 2026 | Additional accumulation at ₹292.00. Approaching book value, merger on track for April 2027, dividend yield improving at lower price. | Active |
This timeline updates when something material changes — results, averaging, exit or thesis break. Not before.
Related Reading
- → How I Identify Range-Bound PSU Stocks — My Approach
- → The NoTradeZone Methodology — How I Think About Entries and Exits
- → IOC — Journal Entry — Entry Thesis April 2026
- → ITC — Journal Entry — Entry Thesis May 2026
About the Author
Jonathan — Endurance athlete. Investor by discipline. I document real trades in real time — entry prices, thesis, risks and honest updates. No tips. No calls. Just disciplined thinking, publicly archived.
All views expressed are personal. This is not investment advice. Please consult a SEBI registered advisor before making investment decisions.