Power Finance Corporation (PFC) shares dropped 8.25% to ₹385.30 on Monday following mixed Q1 FY27 results and a CLSA downgrade. The stock hit a day's low of ₹384.85, marking the lowest level seen by the stock in more than four months. According to reports from The Economic Times, the company reported a 2% year-on-year increase in consolidated net profit to ₹7,012 crore for the first quarter of FY27, while revenue from operations declined slightly to ₹28,527 crore compared to ₹28,539 crore in the corresponding quarter of the previous financial year.
CLSA slashed price targets for both PFC and REC following mixed Q1 results, with the brokerage citing moderated loan growth across both companies. As reported by NDTV Profit, PFC reported 4% year-on-year loan growth, while REC's loan book grew just 1% year-on-year. CLSA flagged that loan growth moderated for both companies, dragged by run-down in the Revamped Distribution Sector Scheme (RDSS) book, while growth in other segments remained modest. The brokerage noted that the smaller size of the RDSS book is a positive, with the scheme now accounting for just 3% of REC's loan book, reducing the impact of the run-down on overall growth going ahead.
Along with the Q1 results, PFC announced an interim dividend of ₹3.90 per share with a face value of ₹10 each for the ongoing financial year 2027. As reported by The Economic Times, the record date to determine the eligibility of shareholders set to receive the dividend has been fixed on August 27 (Thursday). This dividend declaration comes as part of the company's regular shareholder returns amid the current market challenges.
CLSA maintained an 'Outperform' rating on both PFC and REC despite cutting target prices, with PFC's target price reduced to ₹500 and REC's target price cut to ₹420. According to NDTV Profit, following the Q1 performance, CLSA cut its FY27 profit-after-tax estimates for both PFC and REC by 2%-3%. The brokerage noted that core margins were slightly lower sequentially for both companies, primarily due to moderation in lending yields. REC faced additional challenges with a sharp foreign exchange loss during the quarter, following the depreciation of the rupee, while asset quality remained benign for both lenders with no significant deterioration reported during the quarter.
Despite the recent decline, PFC shares have delivered positive returns of 87% over three years and more than 288% over five years, as reported by The Economic Times. The company currently has a market capitalisation of nearly ₹1.32 lakh crore. In the longer term, PFC shares have fallen 1.45% over one year, indicating the recent weakness is part of a temporary correction rather than a fundamental shift in the company's business prospects.
