How has been the historical performance of REC Ltd?

Revenue and Profit Growth

Over the seven-year period ending March 2025, REC Ltd’s net sales have shown a robust upward trend, increasing from ₹25,399 crores in 2019 to ₹56,367 crores in 2025. This represents a compound annual growth rate (CAGR) of approximately 14.5%, reflecting the company’s expanding operational scale and market presence. Operating profit before depreciation and interest (PBDIT) also rose significantly, reaching ₹54,273 crores in 2025 from ₹23,728 crores in 2019, underscoring strong operational efficiency.

Profit before tax (PBT) climbed steadily, more than doubling from ₹8,080 crores in 2019 to ₹20,117 crores in 2025. Correspondingly, profit after tax (PAT) improved from ₹5,731 crores to ₹15,884 crores over the same period, indicating effective cost management and tax planning. Earnings per share (EPS) followed suit, rising from ₹29.07 in 2019 to ₹60.32 in 2025, nearly doubling shareholder returns.

Margins and Expense Management

REC Ltd has maintained strong operating profit margins, consistently above 85% over the years, peaking at 100.8% in 2024 before settling at 96.2% in 2025. This exceptional margin profile is indicative of the company’s dominant market position and cost control measures. The PAT margin has also improved from 22.6% in 2019 to 28.2% in 2025, reflecting enhanced profitability and operational leverage.

Employee costs have risen moderately, in line with the company’s growth, reaching ₹268 crores in 2025 from ₹177 crores in 2019. Manufacturing expenses and other operating costs have fluctuated but remain well-managed relative to revenue expansion.

Balance Sheet Strength and Asset Quality

The company’s shareholder funds have grown substantially, from ₹35,396 crores in 2020 to ₹78,376 crores in 2025, supported by steady reserve accumulation. Book value per share has increased from ₹134 in 2020 to ₹296 in 2025, signalling enhanced net asset value for shareholders. Total assets have nearly doubled from ₹344,980 crores in 2020 to ₹611,633 crores in 2025, reflecting significant expansion in the company’s asset base.

REC Ltd’s debt levels have also increased, with total debt rising from ₹286,289 crores in 2020 to ₹496,243 crores in 2025. However, the company has no long-term borrowings, indicating reliance on short-term financing. Deferred tax liabilities have grown moderately, while current liabilities have increased in line with business scale.

Cash Flow and Liquidity

Cash flow from operating activities has been negative in recent years, with ₹-39,064 crores in 2025, reflecting working capital changes and business expansion. Investing activities have consistently absorbed cash, while financing activities have provided substantial inflows, supporting the company’s growth and liquidity needs. Despite negative closing cash balances in 2024 and 2025, the company’s overall liquidity is supported by its strong financing activities and asset base.

Summary and Investor Takeaway

REC Ltd’s historical performance reveals a company on a strong growth trajectory, with revenues and profits expanding steadily over the past seven years. The firm has demonstrated robust margin control and has built a solid equity base, enhancing shareholder value. While the increase in debt and negative operating cash flows warrant attention, these are consistent with the company’s expansion strategy and are balanced by strong financing inflows.

Investors seeking exposure to a large-cap NBFC with a proven track record of growth and profitability may find REC Ltd an attractive proposition. The company’s improving earnings per share and book value per share further reinforce its investment appeal. However, monitoring liquidity and debt management will be crucial for assessing future risk.

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