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Rural Electrification Corporation – REC – Subscribe

February 19, 2008

Rural Electrification Corporation – REC is a public sector financial institution and a non-banking financial company (NBFC) providing fund and non-fund based services to clients engaged in various aspects of generation, transmission & distribution and related activities in power sector in India.

The company was founded with the sole objective of extending finance to and promoting power projects and related activities in India. The company occupies a key position in the government’s plans for the growth and development of the Indian power sector, especially in rural areas. It has played and will continue to play a key role in the implementation of government policies and programmes.

The state or centre owned enterprises dominate the power generation, distribution % transmission arena, India is witnessing increased participation by private players. REC employs a pro-active approach in its client relationships. For instance, REC helps its clients prepare a detailed five year plan addressing their anticipated financing needs. Gross NPAs and net NPAs of REC stood at 0.23% and 0.16% as on September 2006 respectively.

The cost of funds stood at 6.55% in the six month period ended September 30, 2007. Moreover, being an NBFC and a public sector undertaking, REC is exempt from the provisions of the Reserve Bank of India (RBI) Act relating to the maintenance of liquid assets and creation of reserve funds.

Financials: REC is a profit making company unlike Reliance Power which is a SHELL company with no CASH PROFITS insight. REC reported a PAT of Rs 522.9 crore for the first half of CFY2008. REC is expected to report an EPS or Rs 12.2 on fully diluted equity by annualizing the results of first half.

REC IPO Details:
Retail portion : Upto 45,665,100 shares
Price Band: Rs90 – Rs105
Fully Diluted Equity: Rs 858.66 crore

Investors can SUBSCRIBE to REC Public Issue at CUT-OFF. Please don’t apply on borrowed money because of the volatile markets. We also recommend IPO investors of PFC – Power Finance Corporation to Book Some profits and divert the money into REC.

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