REC firm ahead of Q3 earnings, interim dividend

Shares of PSU power financer Rural Electrification Corp. (REC) are trading in the green, up 1.9% at Rs. 191.40, in an otherwise flat broader market. NSE volume of 5 lakh shares in first 90 minutes of trade fares well, in relation to last 2 weeks’ average of 18 lakh shares. REC is scheduled to announce its results for quarter and nine months ended 31^st December 2013 today. Also, it may declare an interim dividend, record date for which is fixed at 21^st February 2014 (ex-date 20^th February). For FY13, company paid a dividend of 50% or Rs. 5 per share.

Going by what peer Power Finance Corp. (PFC) did to ease out the strain on Government’s fiscal imbalances for FY14, REC is also likely to announce a hefty interim dividend. PFC declared an interim dividend of Rs. 8.80 per share, after its healthy Q3FY14 results, wherein revenue increased 4% QoQ to Rs. 5,539 crore while PAT inched higher by 20% QoQ to Rs. 1,534 crore. PFC’s dividend outgo of Rs. 1,359 crore (including distribution tax) will be comfortably met from cash and equivalents of Rs. 2,545 crore, as of 31^st December 2013 and make the Government richer by close to Rs. 1,087 crore (dividend of Rs. 856 crore and tax of Rs. 231 crore).

REC is sitting on cash and equivalents of Rs.1,300 crore, as of 30^th September 2013. Aggregating the quarter cash profit of over Rs. 1,100 crore, it will have surplus of Rs. 2,400 crore or so, at its disposal. Thus, with equity of Rs. 987.46 crore (FV Rs. 10 each), REC can also pay-out dividend of close to Rs. 10 per share, which will benefit the Government holding 66.80% in REC.

Market is expecting some ‘good news’ in the form of dividends from REC, in addition to improved financial performance. Hence traders are keeping the counter active and buzzing.