In a significant move to support India’s power and infrastructure sectors, REC Ltd. (Rural Electrification Corporation Ltd.) has entered into a memorandum of understanding (MoU) with Punjab National Bank (PNB) to explore opportunities for funding projects under a consortium arrangement.
According to a statement from REC, the two entities, REC and PNB, plan to collaborate on co-financing loans amounting to ₹55,000 crore over the next three years. This partnership aims to provide substantial financial support to projects in the power sector and the infrastructure & logistics sector.
REC, a Maharatna Non-Banking Financial Company (NBFC), has diversified its portfolio in FY23 to encompass infrastructure and logistics projects. At the company’s annual general meeting in May, Vivek Kumar Dewangan, Chairman, and Managing Director of REC, highlighted the power ministry’s approval for the company to finance up to 33% of its outstanding loan book in this sector.
Dewangan stated, “During the first year itself, we have sanctioned more than ₹85,700 crore towards various projects spanning from metro, ports, airports, oil refineries, highways, steel infrastructure to healthcare, educational institutions, and also in sectors of IT infrastructure/fiber optics, etc. This constitutes about 32% of the overall sanctions of the company in the last financial year.”
REC traditionally provides long-term loans and financial products for the power-infrastructure sector, covering areas such as generation, transmission, distribution, renewable energy, and emerging technologies like electric vehicles, battery storage, and green hydrogen. More recently, REC has expanded its focus to the non-power infrastructure sector, with its loan book currently standing at over ₹4.54 trillion.
As India undergoes an energy transition, REC is gearing up to increase its loans for green projects. The NBFC aims to expand its loan portfolio for green initiatives to ₹3 trillion by 2030. Dewangan emphasized REC’s commitment to renewable energy initiatives encompassing solar, wind, hybrid, and e-mobility projects, as well as emerging areas like green hydrogen, green ammonia projects, round-the-clock projects, and ethanol manufacturing.
In April, REC successfully raised $1.15 billion, securing loans with a 5-year tenor benchmarked to Overnight SOFR (Secured Overnight Financing Rate), the benchmark rate for USD-denominated loans. The proceeds from this facility will also be directed towards funding power, infrastructure, and logistics sector projects in line with the guidelines of the Reserve Bank of India for External Commercial Borrowings (ECB).
On the stock market, REC shares on the BSE closed at ₹267.30 per share, marking a 1.15% decrease from the previous close. PNB shares on the BSE closed at ₹79.34, down 1.11% from their previous closing price.
This strategic partnership between REC Ltd. and Punjab National Bank signifies a strong commitment to supporting the growth and development of India’s vital power and infrastructure sectors, ultimately contributing to the nation’s progress and economic stability.