Stock Pick: Rural Electrification Corporation
This Navratna is an NBFC which provides financial assistance to power entities
This Navratna is an NBFC which provides financial assistance to power entities in the areas of generation, transmission and distribution. It is a good dividend paying PSU stock, which tends to pay dividends twice in a year, This should be a draw for investors seeking dividend income.
The threat for REC is from the implementation of the UDAY (Ujwal DISCOM Assurance Yojana) scheme, which could result in the reduction in loan that power distribution companies seek to cover their losses as overall efficiencies improve in the performance of the distribution companies. This could result in institutions borrowing from banks instead of the REC.