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Rural Electrification Corporation Ltd.

BSE: 532955 Sector: Financials
BSE 15:52 | 22 Mar 126.50 -3.50






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OPEN 130.55
VOLUME 391494
52-Week high 223.80
52-Week low 121.60
P/E 4.87
Mkt Cap.(Rs cr) 24,983
Buy Price 126.50
Buy Qty 20.00
Sell Price 0.00
Sell Qty 0.00
OPEN 130.55
CLOSE 130.00
VOLUME 391494
52-Week high 223.80
52-Week low 121.60
P/E 4.87
Mkt Cap.(Rs cr) 24,983
Buy Price 126.50
Buy Qty 20.00
Sell Price 0.00
Sell Qty 0.00

Rural Electrification Corporation Ltd. (RECLTD) - Chairman Speech

Company chairman speech

Dear Stakeholders

It is my privilege to present to you the 48th Annual Report of REC. YourCompany continues to be the leading public financial institution of India funding thepower infrastructure development across the nation. This year too REC performedexceptionally well and demonstrated consistent growth on all parameters. Despite thechallenging times and ever-changing dynamics of the power sector REC is well-placed andwell-poised for meeting the challenges and harnessing the emerging business opportunitiesin the short-term as well as the longer-term.

On the global economic front there are optimistic signs in terms of investmentmanufacturing and trade. As per IMF estimates the world growth is on an upwardtrajectory from 3.1% in 2016 to 3.5% in 2017 to 3.6% projected for 2018. The reasonsbehind this upward growth momentum are stronger economic activity expectations of a morerobust demand reduced deflationary pressures and optimistic financial markets. Howeverstronger recovery is held back due to structural problems like low productivity growthhigh- income inequality and signs of protectionism. As of now the world needs strongerinternational economic collaboration and renewed multilateral efforts to achieve sustainedglobal economic integration.

The Indian economy continues to maintain robust growth and remains a bright spot in theglobal development landscape. In the last three years India has witnessed severalreforms positive policy actions substantial trade gain and a range of supply-sidemeasures. As per IMF estimates Indian economy is likely to grow by 7.2% in financial year2017-18 and 7.7% in financial year 2018-19. However strain on the balance sheets offinancial and corporate sector sluggish private investment and weak external demandcontinue to pose challenges to the economy. Nevertheless country is making significantstrides in supporting sustainable longer-term growth. The introduction of Goods andServices Tax (GST) has been a historic reform which is likely to raise India'smedium-term growth above 8 per cent. Though the banking and financial sector has beensubdued with rising NPAs the Government has been supportive with a series of policymeasures to address the challenges.

Global energy outlook is demonstrating a transition to green energy with increasedfocus on energy efficiency. The world energy mix is rapidly shifting towards cleaner andlower carbon fuels such as solar power wind power and hydro power. The governments allover the world are making it a key focus area to promote the use of renewable energy inorder to meet climate change needs as well as to provide affordable reliable and cleanerenergy to their citizens.power Sector Scenario

Power is one of the most important drivers of economic growth. The Indian Power Sectorhas seen a transformational growth in the last three years on account of a series ofreform and policy measures implemented by the government coupled with surge ininvestment rising consumption and unwavering focus on village and householdelectrification. Decisive steps have been taken by the government across the power valuechain which have resulted in surplus power increased fiscal discipline and greaterefficiency in utilities sufficient coal availability and unprecedented growth in theclean energy market. As on March 31 2017 the installed power generating capacity in thecountry was 326.8 GW. The transmission capacity in the country also saw a high growthwith the length of total transmission lines at the end of Fiscal 2017 standing at 3.67lakh cKm.

From a scenario characterised by shortages and lack of quality supply India hassurplus power available in real time at affordable rates on the power exchange. Furtherthe distribution scenario in the country is improving rapidly with the benefits of reformprogrammes like Ujwal DISCOM Assurance Yojana (UDAY) starting to show results. On therenewable energy front the country's orientation to become a low carbon economy is alsoevident with costs of solar and wind power falling to record lows. As the power sectorreforms continue India has moved up several notches from 99th to 26thrank in terms of World Bank's global electricity accessibility ranking.

The financial year 2016-17 saw an addition of 24761 MW in the generation capacity ofwhich 58% came from renewable energy; 31% came from thermal energy and the balance fromother sources. For the first time in financial year 2016-17 the capacity addition inrenewable energy segment outstripped that of the capacity addition in conventional energysegment. The actual electric energy generation during 2017 fiscal was 1160 BUs against1107 BUs in the previous fiscal. The aggregate Power Supply Deficit for 2017 fiscaldropped to 0.7% and Peak Power Deficit also reduced to 1.6% showing improvement in thepower supply situation. The National Grid in the country is now one of the largestoperating synchronous grids in the world. India's National Grid is also synchronouslyinterconnected to Bhutan and Nepal and asynchronously linked to Bangladesh.

These achievements would not have been possible without the policy and reforminitiatives taken by the Government. The Government has taken several measures forimproving the thermal sector such as streamlining the process of coal block allocationimprovement in coal availability and supply quality checks of coal at mine-end andplant-end beneficiation of coal at coal washeries and redefining of coal linkages toname a few. On the hydro power front some of the steps taken by the Government were toexempt hydro projects from competitive bidding till 2022 allowing flexibility todevelopers in depreciation rates and time-of-day tariff and allowing distributionlicensees to extend long term PPAs by additional 15 years beyond the normally allowed 35years. Furthermore Renewable Energy has become a key focus area of the power sector. TheGovernment has set a target of adding 175 GW of renewable energy capacity by 2022 and toincrease the share of renewable energy to 40% of the total installed capacity by year2030.

Further to facilitate integration of such large scale renewable power into the gridmultiple green corridors are being established in the country and new ICT technologiesi.e. SCADA/ automation smart & intelligent grid are being adopted across generationtransmission and distribution for ensuring seamless flow of power with reliabilitysecurity and efficiency. Besides new technologies in the areas of large battery storageelectrical mobility and charging infrastructure in the country will open new vistas inclean technology and climate control.

In a nutshell the power sector has seen significant reforms in the past few years andthe sector is brimming with emerging opportunities. REC is prepared to harness theseemerging opportunities for the best interests of all its stakeholders.

Performance Highlights

Your Company continues to register growth on key fronts of sanctions disbursements andprofits. During the financial year 2016-17 the Company sanctioned a total loan assistanceof ' 83870.82 crore as compared to ' 65471.10 crore in the last financial year.Further during the financial year 2016-17 the Company disbursed a total loan amount of '58038.61 crore as against ' 46025.83 crore in the last financial year. In addition tothat ' 8037.54 crore of Government of India grant has been disbursed to the States underDDUGJY during the financial year 2016-17.

The Operating Income of the Company on standalone basis for financial year 2016-17 was' 23350.79 crore as against ' 23638.35 crore in the last financial year. Net Profit forthe financial year 2016-17 was ' 6245.76 crore as against ' 5627.66 crore in the lastfinancial year. Further REC's Net Worth as on March 31 2017 was ' 33325.59 crore whichwas 16% higher than the Net Worth of ' 28617.76 crore as on March 31 2016.

The Loan Asset Book of your Company as on March 31 2017 was ' 201928.67 crore ascompared to ' 201278.29 crore as on March 31 2016. The Non-Performing Assets of RECcontinue to be at low levels. As on March 31 2017 the Gross NPAs of the Company were '4872.68 crore which were 2.41% of the Gross Loan Assets and Net NPAs as on March 312017 were ' 3237.34 crore which were 1.62% of the Net Loan Assets. Further no doubtfulloans have been rescheduled by the Company during the financial year 2016-17. The Companyachieved a recovery rate of 97.56% for the financial year 2016-17.

During the year under review the Company mobilized ' 28495.18 crore from the marketwhich included ' 7662.92 crore by way of Capital Gain Tax Exemption Bonds ' 18600 croreby way of Institutional Bonds and ' 2232.26 crore (i.e. USD 330 million) from ExternalCommercial Borrowings. Further an amount of ' 19916.85 crore was also raised throughCommercial Papers.

The domestic debt instruments of the Company continued to enjoy "AAA" ratingi.e. the highest rating assigned by CRISIL CARE India Ratings & Research and ICRA.The Company enjoys international credit rating equivalent to sovereign rating of Indiafrom international credit rating agencies Moody's and Fitch which is "Baa3" and"BBB-" respectively. The overall weighted average annualized interest rate ofborrowing for the funds raised during financial year 2016-17 was 6.79% p.a. and for theborrowings outstanding on March 31 2017 it was 8.02% p.a. As a result your Company wasable to deliver debt financing at competitive rates.


In addition to interim dividend of ' 7.00 per share paid in March 2017 the Board ofDirectors of your Company have recommended final dividend of ' 2.65 per share for thefinancial year 2016-17 which is subject to approval of the Shareholders in the ensuingannual general meeting. The total dividend for the financial year 2016-17 will work out to' 9.65 per share representing 96.5% of the increased paid-up share capital base afterBonus Issue by the Company as against ' 17.10 per share representing 171% of the paid- upshare capital of the Company in the previous year. The decrease in the percentage ofdividend from previous year is due to issue of Bonus Equity Shares by the Company in theratio of 1:1 during the financial year 2016-17. The total dividend pay-out for thefinancial year 2016-17 will amount to ' 1905.80 crore excluding dividend distributiontax.

Financing Power Projects

The Company has been providing funding assistance for power generation projects inboth conventional energy and renewable energy spaces. Your Company also plays an activerole in creation and improvement of the infrastructure for Transmission & Distributionnetwork in the country. Further as the Nodal agency of DDUGJY scheme of the Government ofIndia your Company also contributes to the socio-economic responsibility of villageelectrification and household electrification.

Financing Generation projects

During the financial year 2016-17 your Company sanctioned 22 nos. of Generation/R&M loans including 6 nos. of additional loan assistance with total financial outlayof ' 28208.93 crore including consortium financing with other financial institutions.Further the Company disbursed an amount of ' 21697.61 crore during the year under reviewtowards generation projects.

Financing Transmission and Distribution Projects

During the financial year 2016-17 your Company sanctioned 924 nos. of T & Dschemes involving a total loan assistance of ' 40953.12 crore. This included primarypower evacuation schemes associated with generating plants system improvement schemesschemes for procurement & installation of equipment/materials like meterstransformers conductors tower material cables etc. Government approved schemes likeDDUGJY and IPDS and infrastructure schemes for providing electricity access to variouscategories of consumers including agriculture. The total disbursement under T & Dschemes during the year under review was ' 26270.30 crore.

Financing Renewable Energy and Other Projects

During the financial year 2016-17 your Company sanctioned loan assistance of '2089.77 crore to 16 new grid-connected Renewable Energy projects with installedgeneration capacity aggregating to 367 MW which included 11 solar photo-voltaic projectsaggregating to 280 MW; 4 small hydro power projects of 61 MW and 1 wind energy project of26 MW. The total cost of these projects aggregates to ' 3035.53 crore. Further duringthe financial year 2016-17 the total disbursement towards renewable energy projects was '1617.68 crore. Your Company is poised for a major leap in financing renewable projects inthe times ahead.

Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY)

REC is the Nodal agency for implementation of "Deen Dayal Upadhyaya Gram JyotiYojana" (DDUGJY scheme) which is an integrated scheme for strengthening all aspectsof the rural power distribution system. It is a flagship programme of the Government ofIndia supplementing overall rural development and facilitating towards "24x7 Powerfor All" in the country through defined project components. All erstwhile RE schemes(including Rajiv Gandhi Grameen Vidyutikaran Yojana i.e. RGGVY) have been subsumed inDDUGJY.

The Hon'ble Prime Minister had announced on August 15 2015 that all remaining 18452Un-Electrified (UE) villages in the country would be electrified within 1000 days. TheMinistry of Power has taken up the electrification of all UE villages on Mission mode andassigned the responsibility for coordinating and monitoring the implementation of DDUGJYto REC. The Company has deployed 'Gram Vidyut Abhiyantas' (GVAs) i.e. young electricalengineers in the field for milestone based monitoring of village electrification works anddeveloped 'GARV App' an online application for transparent and accountable monitoring.

In addition to village electrification the emphasis has been laid on householdelectrification. To achieve this updated GARV App was launched in December 2016 formonitoring the household electrification in all 5.97 lakh villages in the country.Further in the portal a feature named SAMVAD has been provided to facilitate thegeneral public to raise their queries and interact with the officials of DISCOMs thusestablishing transparency and accountability.

Ujwal DISCOM Assurance yojana (UDAY)

The Government of India had announced the "Ujwal DISCOM Assurance Yojana"(UDAY scheme) in financial year 2015-16 which aims at financial turnaround revival andrevitalisation of Power Distribution Companies (DISCOMs) and also ensures a sustainablepermanent solution to the problem of DISCOMs which were reeling under debt of ' 4.3 lakhcrore and accumulated losses of ' 3.8 lakh crore.

REC is acting as the nodal agency for UDAY scheme. Through the UDAY scheme DISCOMs areprovided with the opportunity to break even in 2-3 years through the followinginitiatives:

a) Improving operational efficiencies of DISCOMs

b) Reduction of cost of power

c) Reduction in interest cost of DISCOMs

d) Enforcing financial discipline on DISCOMs through alignment with State Finances.

e) Reducing the technical and commercial losses

f) Reducing the gap between cost of supply and the revenue realised.

For the UDAY scheme REC has developed a state-of-the-art web portal and an online Appfor monitoring the performance of State DISCOMs. 26 States and 1 Union Territory havejoined the scheme and out of these 16 States have participated for financialrestructuring while 10 States and 1 Union Territory have participated only for operationalimprovements. Bonds to the tune of ' 2.32 lakh crore have been issued by the States andDISCOMs. The States have taken over the DiScOM debt to the tune of ' 2.09 lakh crore.

It is pertinent to mention that after the implementation of UDAY scheme significantpositive results have started to emerge for the DISCOMs. The average AT&C losses andgap between ACS and ARR of UDAY States have shown a declining trend. In addition to thesebenefits lower interest burden is also contributing towards better bottom line forDISCOMs.

Subsidiary Companies and Joint Ventures

The Company has two wholly-owned subsidiaries to provide value-added services to theclients including the business of consultancy in the areas of transmission distributionbid process transaction advisory services project management project implementationquality assurance etc. The subsidiaries include:

s REC Transmission Projects Company Limited (RECTPCL); and s REC Power DistributionCompany Limited (RECPDCL).

RECTPCL acts as the "Bid Process Coordinator" for selection of TransmissionService Provider (s) through Tariff Based Competitive Bidding (TBCB) process forindependent inter-state and intra-state transmission projects assigned by the Ministry ofPower Government of India and the State Governments from time to time. In order toinitiate development of each of such independent transmission project RECTPCLincorporates project-specific Special Purpose Vehicle (SPV) as its wholly-ownedsubsidiary which is also a wholly- owned subsidiary of REC. Further such SPVs aresubsequently transferred along with all assets and liabilities to the successful bidder(s) selected through TBCB process. In addition to acting as Bid Process Coordinatorduring the financial year 2016-17 RECTPCL also bagged several assignments for projectmanagement consultancy third party quality assurance inspection bid process managementand project management & implementation agency. During the financial year 2016-17RECTPCL generated an income of ' 52.38 crore its Profit After Tax was ' 34.46 crore andits Net Worth as on March 31 2017 was ' 157.86 crore.

RECPDCL's core business includes preparation of Detailed Project Report Third PartyInspection Material Inspection & Project Management Consultancy services ProjectImplementation and Enhancement of Energy Efficiency mission. RECPDCL has been engaged asLead Implementing Agency for managing BEE's Partial Risk Guarantee Fund for EnergyEfficiency; and has signed a MoU with EESL for installation of LED street lights acrossIndia. Further RECPDCL is monitoring the village electrification under DDUGJY During thefinancial year 2016-17 RECPDCL generated a total revenue of ' 191.57 crore its ProfitAfter Tax was ' 40.33 crore and its Net Worth as on March 31 2017 was ' 157.84 crore.

REC along with three other PSUs Power Grid Corporation of India Limited NTPC andPFC had formed a Joint Venture Company by the name Energy Efficiency Services Limited(EESL) on December 10 2009. As on date REC holds 31.71% of the paid-up equity sharecapital of EESL. EESL has been formed to create and sustain market access to energyefficient technologies particularly in the public facilities like municipalitiesbuildings agriculture industry etc. and to implement several schemes of Bureau of EnergyEfficiency. EESL is also leading the market related activities of National Mission forEnhanced Energy Efficiency (NMEEE) one of the eight national missions under NationalAction Plan on Climate Change. During the financial year 2016-17 based on the standaloneaudited financials EESL's revenue from operations was ' 1150.86 crore and its ProfitAfter Tax was ' 51.86 crore.

Central Institute for Rural Electrification (CIRE)

Central Institute for Rural Electrification (CIRE) was established at Hyderabad in1979 to cater to the training and development needs of engineers and managers of PowerSector. CIRE conducts training programmes on Power Generation Transmission DistributionRenewable Energy and other industry relevant subjects. CIRE is the Nodal agency forcoordination and implementation of National Training Programmes for employees of C&Dcategory under DDUGJY sponsored by the Ministry of Power Government of India.

During the financial year 2016-17 in addition to coordinating and monitoring theNational Training Programmes for employees of C&D category CIRE has conducted 132programmes on various subjects and trained 2701 personnel with 16314 man days oftraining. CIRE has been conferred with "Education Leadership Award" by reputedBusiness School and ABP News National Educational Awards consecutively for the last 3years in recognition of its 'Leadership Development Innovation and Industry Interface'.

Measures have been initiated to strengthen CIRE with the faculty and managerialcapacity required to strengthen the capacity of the state power utilities and otherclients.

Human Resources Management

The Company gives utmost importance to capacity-building and well-being of itsemployees. In this direction Training and Human Resource Policy of the Company aims tostrengthen the business skills and competence of the employees for better performance andproductivity. Besides the training provided on professional skills employees are alsosensitized about the socioeconomic environment in which the Company operates. Furthertrainings and workshops directed towards spiritual health and attitudinal development ofemployees are also regularly conducted. The employees are also encouraged to participatein sports & recreational events and intercorporate competitions to enhance theirmotivation level.

A comprehensive review of the human resources needs of the Company for the next 15years is being undertaken to ensure that REC is equipped with the human resourcesrequired to meet the challenges and to harness the opportunities presented by the future.REC proposes to infuse the necessary human resources with the skills and competenciesrequired for the future to replace the retiring talent. It is pertinent to mention thatREC will continue to be lean and efficient with top of the notch human resources.

Information Technology Initiatives

On the IT front an Integrated Business ERP system has been in operation in the Companysince 2009 which is continuously being improved by adding new features. Benefits of theERP system have been extended to the Borrowers as a part of better service. The ERP systemis hosted at Data Centre of REC and both the Primary Data Centre and Disaster RecoveryCentre of REC are ISO/ IEC 27001:2013 certified. The ERP system is being upgraded andmodernised in sync with the changing requirements of the Company.

Further REC has implemented a full-fledged state-of-the-art Video Conferencingsolution across all its offices in India. The Corporate Office at New Delhi and all fieldoffices of the Company are Wi-Fi enabled.

Recent IT initiatives include revamping of the corporate website to make it moreuser-friendly informative and responsive. Besides that REC has also developed andimplemented a number of in-house applications for effective monitoring of its activities.GARV app has been very effective in monitoring the implementation of Deen Dayal UpadhyayaGram Jyoti Yojana (DDUGJY).

Currently the process is under progress for making REC paperless by introducingcustomised E-office application. A comprehensive review of the business processes arebeing conducted to create a comprehensive application that would incorporate ERPE-office HR Management and other applications.

Corporate Governance

You are aware that REC is committed to the highest standards of Corporate Governanceand therefore all measures are being taken to conduct the business in an ethical andresponsible manner with the sole objective of sustainable value creation for allStakeholders within the prevalent regulatory framework. The Company has been adopting andadapting the best practices that are followed in the area of Corporate Governance acrossthe globe. As a listed Public-Sector Enterprise your Company has been complying with therequirements of Corporate Governance as stipulated in the Companies Act SEBi (ListingObligations & Disclosure Requirements) Regulations 2015 DPE Guidelines and otherapplicable laws.

Corporate Social Responsibility and Sustainable Development

REC has been actively pursuing various initiatives to promote sustainable inclusivedevelopment as part of its Corporate Social Responsibility (CSR). For the financial year2016-17 the Company had allocated a CSR budget of ' 146.57 crore i.e. @ 2% of theaverage net profits for the preceding three financial years as per the requirement of theCompanies Act 2013. During the year under review the Company undertook various CSRprojects across the country in the fields of skill development education environmentalsustainability health care drinking water and sanitation facilities includingcontribution to the Swachh Bharat Kosh etc. For the financial year 2016-17 the totalfinancial assistance sanctioned by REC towards CSR activities was ' 181.23 crore and thetotal amount disbursed towards CSR activities was ' 69.80 crore.

During the year under review REC organized various cleanliness programmes i.e."Swachh Bharat Pakhwada" "Swachh Bharat Mission" (Swachta Pakhwada)and "Swachhta Abhiyan" (National Cleanliness Campaign). All employees of RECparticipated in these programmes with great enthusiasm and undertook special cleanlinessdrive for their respective office premises & other surrounding areas. Old and unwantedrecords are periodically weeded out and awareness about cleanliness is promoted.

MoU Rating and Awards

REC's performance has been rated "Excellent" based on the outcomes achievedwith reference to the key performance indicators (KPIs) enshrined in the Memorandum ofUnderstanding (MoU) signed with the Ministry of Power Government of India for financialyear 2015-16. REC has received "Excellent" rating consistently over 23 years;and the Company is poised to receive "Excellent" rating for the financial year2016-17. The Company's performance has also been recognized and awarded at various forums.During the year under review REC received the CBIP Award 2017 for "Best PowerFinancing Company"; Gold Trophy for "SCOPE Meritorious award for the BestPublic-Sector Financing Institution / Insurance Company" for year 2014-15; and"SCOPE Award for Excellence and Outstanding Contribution to the Public-SectorManagement" for year 2014-15 from the Hon'ble President of India in April 2017.

Other Initiatives

The Company constantly reviews its policies and procedures from time to time tosuitably align with its long-term corporate objectives dynamic market requirements andapplicable statutory requirements. During the year under review REC adopted/ revisitedits policies and guidelines on sole lending limits for private sector renewable energyprojects policy on interest rates for non-conventional generation projects policy fordeployment of short term surplus funds policy for premature repayment & pre-paymentof loans and CSR & Sustainability Policy to name a few.

The REC management actively encourages a culture of innovation and collaborativeefforts within the organization. The Company has launched "REC InnovationCentre" an in-house idea generation and communication portal to target the immensepotential of the ideas and suggestions of its employees for business development brandbuilding and functional improvements.

Despite the growing competition in the market the Company has been able to balance itscorporate objectives of growth and profitability while also taking care of the interestsof all its stakeholders.

Future Strategy

Your Company offers a wide range of products to finance the needs of the Power Sectoracross the value-chain throughout the country. While REC has a strong foothold in itsexisting area of operations the Company is also poised to enter into new areas ofbusiness. Accordingly we are exploring avenues for diversification such as financingpower equipment manufacturing debt syndication fee- based project appraisal for otherfinancial institutions line of credit for large Renewable Energy projects and formanufacturers of electric vehicles storage and charging infrastructure and so on. Aholistic Strategic Planning activity is currently underway in the organization to chalkout the strategy and action plan for the future. The Strategic Planning covers assessmentof business environment and emerging trends risks and opportunities across the powersector value chain and allied sectors key policy developments and their implications forthe sector's dynamics and business opportunities etc. The activity also covers BusinessProcess Re-engineering and operational improvements in various functional areas. The aimof this exercise is to maximize the returns to the Stakeholders of the Company on asustainable basis.

Amongst the power sector components Renewable Energy will be a key focus area for yourCompany over the next few years in keeping with the Government of India's ambitiousthrust on developing this segment. The Renewable Energy portfolio of your Company has beengrowing in terms of both quantity and quality. Further the Company has been regularlyadapting itself to the

changing needs of this sector by making its in-house lending policies moremarket-friendly and by facilitating its borrowers to set-up more green energy projectsacross the country.

Your Company is committed to long term value creation & sustainability and willcontinue to strive towards best standards of Corporate Governance with emphasis onauthority and freedom of management coupled with transparency accountability andprofessionalism.

The Path Ahead

Indian economy has emerged as an engine for global growth with key focus of theGovernment on structural reforms and fiscal consolidation. Implementation of GST newbankruptcy code financial inclusion through Jan-Dhan Yojana liberalized regime forforeign direct investment measures to curb black money and encouragement to digitizationand increased public investment in infrastructure together are providing stronger impetusto growth. In this background the path ahead for India's power sector holds greatpromise.

As per the CEA estimates the electrical energy requirement is expected to grow by 37%in a span of five years to 1566 BUs by the financial year 2021-22. The Government ofIndia and the state governments are committed to securing universal affordableaccessible 24x7 quality power for all. Further the government's flagship programmeslike DDUGJY IPDS and UDAY have catalysed the process for unprecedented investment inthe distribution infrastructure that is likely to result in improved distributionefficiency reduce supply-demand dissonance decrease technical and commercial lossesimprove revenue realisation and establish technologically sophisticated smart distributionnetwork.

Further the thrust on renewable energy is likely to increase the penetration ofelectricity in the country thereby driving the demand upwards. The government iscommitted to add 175 GW of renewable energy over a period of five years between 2017 and2022. It's clear that the current and the emerging power ecosystem holds great promise forthe future of REC. Above all emerging technologies like power storage devices electricvehicles energy saving devices smart transmission and distribution systems etc. areopening new vistas for business expansion. Further REC is exploring investmentopportunities in the power sector development of neighbouring countries and potentiallyin other emerging economies.

However it is pertinent to mention that the power sector is facing challenges in theform of rising NPAs absence of big ticket power projects tough competition from bankschallenges pertaining to interest rate regime and slow growth of manufacturing sector ingeneral. Power sector projects also face issues relating to equity constraints ofpromoters PPA challenges longer time horizon and dynamic policy environment. Thereforethe Company is making consistent and serious efforts to raise resources at low cost andensure deployment of its resources in avenues offering the best returns.

With likelihood of enormous capital expenditure and development of equally hugeoperational infrastructure REC is looking at an optimistic business scenario in the nearfuture as well as the longer-term. The Government's proactive push to address and resolvethe sector's bottlenecks is strengthening this promising outlook. REC is well equipped tomeet the market's demands and is well poised to play a vibrant role in the economicdevelopment of the country.


I take this opportunity to express my sincere gratitude to the Hon'ble Minister ofState (Independent Charge) for Power Coal New & Renewable Energy and Mines theSecretary Additional Secretary Joint Secretaries and other Officials of the Ministry ofPower for their support and guidance to the Company. I would also like to thank theofficials in the NITI Aayog Ministry of Finance Ministry of Corporate AffairsDepartment of Public Enterprises Reserve Bank of India Securities and Exchange Board ofIndia Stock Exchanges and Depositories for their cooperation. Further I am also gratefulto the Comptroller & Auditor General of India Statutory Auditors SecretarialAuditors Registrars and other professionals associated with the Company for their valuedcontribution.

I wish to express my gratitude to our investors lenders and borrowers for reposingtheir trust in REC. Further I am grateful to my esteemed colleagues on the Board and toall employees of the organization for their untiring efforts in taking the Companyforward on the path of growth. I also record deep appreciation for all our clientsespecially the state governments power utilities and the private entrepreneurs.

Last but not the least I convey my heartfelt thanks to all Stakeholders of theCompany for their continued support and goodwill. I am confident that with yourcooperation and with the dedicated efforts of Team REC we will grow from strength tostrength and touch new heights of sustainable growth in the times ahead.

With warm wishes
p V Ramesh
August 21 2017 Chairman & Managing Director