REC Sets Sights On Foreign Markets To Boost Revenues

REC Sets Sights On Foreign Markets To Boost Revenues

Rural Electrification Corp ( REC) is looking at overseas business, starting with neighbouring countries, to supplement revenue from its traditional business of lending to rural power projects, chairman PV Ramesh told ET in an interview.

The state-run company will soon debut in Africa and SAARC countries with consultancy and project management services and gradually get into project financing as part of its diversification plan, he said.

“We have a completely new strategy for overseas markets. We are in advanced state of discussion to participate in hydropower projects in Nepal and Bhutan. We are talking to ministry of external affairs and Exim Bank to explore other opportunities in the neighbourhood and Africa,” he said.

REC is the nodal agency for the government’s scheme for revival of debt-laden state electricity distribution companies, namely UDAY (Ujwal Discom Assurance Yojana). It implements India’s flagship programme to electrify rural areas under the Deendayal Upadhyaya Gram Jyoti Yojana and now also the ‘Saubhagya’ scheme, which aims to provide last-mile connectivity to rural households.

“We are trying to deepen our involvement substantially in current businesses and also looking to grow horizontally. We want to work with new clients, explore investment opportunities with state governments and work with state urban development departments on smart city programmes. These are new initiatives and show our intention to expand beyond what we have been doing traditionally,” Ramesh said.

While REC is in advanced talks with Bhutan and Nepal for financing the hydropower projects, it is setting up a team to enter new areas.

“Initially we will start in a modest way by offering consultancy and project management services in overseas markets but we hope to expand to financing opportunities. We are setting up a team,” he said.

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The company reported a 30% year-on-year decline in net profit to Rs 1,215 crore in the three months ended September due to prepayments from state discoms and low yields. Ramesh said the company is out of the stagnation caused due to early prepayment by states under UDAY and expects growth momentum to pick up. Brokerages said REC is not booking any interest income on a large private sector project and this has further weighed on margins.

“REC has not sprung any negative surprise with respect to stress in state utility projects. However, a key monitorable is its private sector exposure, though, in our view, significant recognition is unlikely over near term. Also, with UDAY scheme already being effected, we see better growth visibility for FY18-19,” brokerage Edelweiss said in a result note. Read more

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