Morgan Stanley has initiated coverage on state-run power financiers Power Finance Corporation (PFC) and REC Limited, assigning ‘Overweight’ ratings to both with target prices of ₹508 and ₹485, respectively. The brokerage believes the duo presents an attractive low-risk, high-yield investment as India ramps up its infrastructure and clean energy transition.
According to the brokerage, both PFC and REC are poised to deliver 12% loan growth CAGR over FY25–28, supported by robust disbursements across renewable and thermal generation, distribution infrastructure, and transmission capacity expansions. Importantly, return on equity is forecast to remain strong at 17–19%, backed by healthy net interest margins, stable asset quality, and minimal slippages.
Valuation-wise, Morgan Stanley highlights that both stocks trade at 5–6x FY27 estimated earnings, offering a favorable entry point into a quasi-sovereign, high dividend yield financial play. With dividend yields ranging between 3.8% and 4.5%, and the companies showing signs of sustained deleveraging and improved ALM (asset-liability management), the brokerage calls the risk-reward profile compelling.
The note comes amid growing interest in infrastructure enablers, with both companies playing a pivotal role in funding India’s evolving power sector, including green energy initiatives and DISCOM (distribution company) restructuring. Morgan Stanley believes that PFC and REC’s deep sectoral understanding, long-tenure funding ability, and central backing offer consistency and predictability — rare qualities in current market volatility.
