In a notable development, REC Limited, a prominent Maharatna Central Public Sector Enterprise under the Ministry of Power, has received approval from the Reserve Bank of India to establish a subsidiary in Gujarat International Finance Tec-City (GIFT City). This strategic decision, formalized with a ‘No Objection Certificate’ dated May 3, 2024, signifies REC’s entry into the rapidly growing international financial services hub of GIFT City, situated in Gandhinagar, Gujarat.
Diversifying Horizons, Exploring New Avenues
As a leading non-banking financial company (NBFC), REC Limited has been proactively diversifying its portfolio and exploring new avenues for growth. The establishment of a subsidiary in GIFT City aligns with this vision, enabling REC to tap into the lucrative international financial market and expand its footprint globally.
The planned subsidiary will operate as a finance company in GIFT City, offering a variety of financial services such as lending and investment. This expansion strategy not only opens up new business avenues for REC but also consolidates its standing as a significant player in India’s financial industry.
REC’s Remarkable Journey and Evolving Mandate
REC’s journey began in 1969 with a humble mission to energize agricultural pump-sets for irrigation purposes, reducing the dependency of agriculture on monsoons. Over the past five decades, the company has undergone a remarkable transformation, evolving and expanding its financing mandate to encompass the entire power infrastructure sector.
Today, REC’s financing portfolio encompasses generation, transmission, distribution, renewable energy, and cutting-edge technologies such as electric vehicles, battery storage, and green hydrogen. In recent years, the company has further diversified into non-power infrastructure sectors, including roads and expressways, metro rail, airports, IT communication, social and commercial infrastructure, ports, and electro-mechanical works across various industries.
As of December 31, 2023, REC boasted an impressive loan book of ₹4.97 lakh crore, with 90% of loans extended to the state sector. The company’s net worth stood at a staggering ₹64,787 crore, and it ranked 8th among all profit-making Central Public Sector Enterprises (CPSEs) in the Public Enterprises Survey for FY2021-22.
Strategic Role and Impactful Initiatives
REC has been instrumental in implementing key government schemes in the power sector, acting as the central agency for programs like Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGAYA), Deen Dayal Upadhaya Gram Jyoti Yojana (DDUGJY), and the National Electricity Fund (NEF) Scheme. These efforts have greatly improved the distribution system at the grassroots level, accomplished full electrification of villages, and enabled household electrification nationwide.
Additionally, REC has been designated as the nodal agency for certain states under the Revamped Distribution Sector Scheme (RDSS), further solidifying its strategic role in the nation’s power sector.
Robust Financial Performance and Global Recognition
REC’s financial performance has been robust, with the company enjoying the highest domestic rating of “AAA” for long-term borrowing from reputed rating agencies like IRRPL, CRISIL, and ICRA. On the international front, REC holds a “Baa3” rating from Moody’s and “BBB-” from Fitch, both at par with sovereign ratings.
To fund its business operations, REC relies on market borrowings of various maturities, including bonds, term loans, and foreign borrowings. This diversified funding strategy ensures a steady flow of capital to support the company’s growth and expansion plans.
Positive Impact on GIFT City and India’s Financial Landscape
REC’s expansion into GIFT City is expected to have a positive impact on the growing financial hub, contributing to its vibrant ecosystem and attracting more businesses to the region. By tapping into the international market through its GIFT City subsidiary, REC can diversify its funding sources, access global capital, and explore new avenues for growth.
Shri Vivek Kumar Dewangan, the Chairman and Managing Director of REC Limited, expressed his confidence in the company’s ability to utilize the advantages of GIFT City’s favorable environment and top-notch infrastructure. He commented that GIFT City offers an excellent environment for international lending operations, backed by outstanding infrastructure. We are optimistic that REC will capitalize on these benefits to establish a strong presence in the global market.” He also highlighted the strategic significance of this step, stating, “Our presence in GIFT City will not only create new business prospects for REC but will also significantly contribute to the growth of the country’s energy sector. We are eager to leverage this strategic move to advance REC’s goal of promoting growth in India’s power and infrastructure sectors while expanding our global footprint.”
With its strong financial backing, diversified portfolio, strategic initiatives, and global recognition, REC Limited’s expansion into GIFT City is poised to bolster India’s position as a global financial hub while driving growth in the country’s crucial energy and infrastructure sectors. This move not only strengthens REC’s position but also contributes to the overall economic development and financial prowess of the nation.