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Rural Electrification Corporation Ltd.

BSE: 532955 Sector: Financials
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OPEN 146.45
VOLUME 388586
52-Week high 223.80
52-Week low 114.85
P/E 5.15
Mkt Cap.(Rs cr) 28,794
Buy Price 145.80
Buy Qty 159.00
Sell Price 0.00
Sell Qty 0.00
OPEN 146.45
CLOSE 147.05
VOLUME 388586
52-Week high 223.80
52-Week low 114.85
P/E 5.15
Mkt Cap.(Rs cr) 28,794
Buy Price 145.80
Buy Qty 159.00
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 47th Annual Report of your Company.REC has completed yet another year of excellent all-round performance as a leading publicfinancial institution of India. Your Company continues its growth story with a consistenttrack record of funding almost all needs to the entire Power Infrastructure space in thecountry. The Indian economy continued to be a bright spot on the global economic scenarioin financial year 2015-16. The Government is taking more and more initiatives tokick-start and sustain the growth momentum in business and industry. However the IndianCorporate Sector will take some more time to get back on a high growth trajectory as itis still recovering from the prolonged slowdown of past years.

The global economic recovery on the whole has shown signs of improvement but it may betoo early to believe that the crisis period is over. Among the developed economies US isthe only country which has attracted the interest of Investors. European economy is stillreeling under pressure. To stave off spectre of subdued growth Japan resorted toquantitative easing and China is facing the second year of declining economic activity.The commodity cycle which is an important indicator of economic activity has not pickedup across the world. The industrialized nations have glut of stocks especially Steel Coaland Ore. Owing to sluggish growth of major economies and huge inventories the prices ofthese commodities have hit rock bottom. The existing meek external demand in these marketshas posed challenges before emerging and developing economies.

‘ As far as India is concerned the economy has for the second year in a rowbucked the global trends and given a clear indication of consistent improvement in growthduring the financial year 2015-16. As per Central Statistical Office data the Indianeconomy grew at 7.6% in 2015-16 due to rebound in farm output improvement in electricitygeneration and mining production. However it is also expected that the growth in theongoing financial year 2016-17 may not surpass that of financial year 2015-16 owing tothe adverse effect of global slowdown which may persist for some time more.

The country at present is relatively better placed in terms of Current Account Deficit(CAD) and Balance of Payments (BoP). The levels of foreign reserves have been at anall-time high. A major reason for this has been a better and more robust fiscalconsolidation low crude prices though slightly higher than the previous year because ofhigh levels of shale gas production maintained by the US. One of the reasons of rise inforeign reserves has been the lower levels of import due to sluggish growth inmanufacturing sector. With supplementation of Iran's crude production the rise of crudeprice is expected to be limited. The oil prices at moderate levels have also helped tokeep the inflation from rising. Other important determinants viz. signs of recovery inkey economic indicators stability in exchange rates and softening of inflation haveresulted in reduction of interest rates by 150 basis points since January 2015.


The role of a growing Power Sector is a key factor in the country's economic growth. Inthe state of sluggish manufacturing sector growth in the country and sinking commoditycycle across the globe the performance of the Power Sector stands out during the Fiscal2016. The Installed Generation capacity of the country at the end of Fiscal 2016 stands at302 GW. A record 23976 MW of Conventional power was added to the installed capacity inthe year 2015-16. The last two years saw an addition of 46543 MW of Conventional powerwhich accounted for 53% of the targeted capacity addition during XII plan period . Alsothe Renewable Energy has seen an unprecedented growth in the last two years. The solarcapacity rose by 4132 MW in the last two years and 3423 MW of wind power was added inlast fiscal itself. The share of renewable energy has grown to around 43 Gigawatts whichitself is an indication of major shift imminent in the fuel mix for generation sources inthe country.

Till the year 2014 Power sector was passing through tough time due to majorbottlenecks viz. slippages of long-term coal linkages to the identified projects failureto achieve planned targets from captive coal mine blocks inability to ramp up indigenouscoal and gas production rising imported fuel prices land acquisition R & R andenvironmental issues etc.

A slew of proactive efforts and initiatives have been taken by the Government of India(GoI) in the last two years viz. allocation of coal mines through a transparent auctionroute domestic supply of gas to the gas-based stranded projects and private sectorprojects operating at less than 30% PLF through subsidized mode efforts to takeover sickunits under operation of State utilities steps for augmenting indigenous coal productionfacilitating developers for getting speedy clearances and fuel linkages augmentingexisting indigenous manufacturing capacity and encouraging latest technologyinterventions.

Today the coal fired power plants have coal stocks of around 15 days which were nothaving stocks of more than 3 days. Further with the increase in coal production thequantum of imported coal has come down resulting in reduced effective coal prices andsaving of valuable foreign currency outflow. The initiatives to supply 100% crushed andwashed coal would add to efficiency of plant operations. Rationalization of coalallocation and shifting of coal linkages from inefficient to efficient plants and qualityinspection of coal quality based on Gross Calorific Value (GCV) would help in efficientoperation of plants and also mitigate carbon emissions to a large extent.

The inter-regional transfer capacity of the integrated National Grid at present is59550 MW (as on June 30 2016) and planned to be 68050 MW by the end of the XII plan.This will facilitate surplus power from a region to flow to another region facing powerdeficits thus allowing an optimal utilization of the national generating capacity. Arecord high of 28114 cKm were added to the transmission capacity in the Fiscal 2016.

Distribution of power being the weakest link in the power value chain needs to bestrengthened to pace up with rise in generation and transmission capacities on one handand bring down the existing inefficiencies which has led the DISCOMs/Utilities in aterminal spin of losses and debt. To turnaround the State DISCOMs and ensure their longterm viability GoI has implemented Ujwal DISCOM Assurance Yojana (UDAY) a flagshipscheme aimed at financial turnaround and revival of DISCOMs/State Utilities enabling themto become creditworthy once again and start their capex cycle. The important initiativesin this area are - improving operational efficiencies of DISCOMS reduction of cost ofpower reduction in interest cost of DISCOMs and bringing financial discipline in DISCOMsthrough alignment with State finances.

Further the flagship schemes of Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) andIntegrated Power Development Scheme (IPDS) are already under implementation in rural andurban areas respectively to strengthen the Distribution System availability of powersupply and improve reach thereby boosting the farm sector output and economic activity inrural areas. The extensive coverage of these schemes across the country would help inGovernment of India's resolve of providing 24X7 Power For All by the year 2019.

With the increasing stress on deploying clean energy in wake of ecological andenvironmental hazards from fossil fuels the share of green energy is bound to increasetherefore substantially diluting the reliance on depleting fossil fuel resources. Acapacity addition target of 100 GW by harnessing solar energy has been planned by 2022under National Solar Mission. The target principally comprises of 40 GW roof top and 60 GWthrough large and medium scale grid connected solar power projects comprising of SolarParks Government establishments of Defence Railways etc. the establishment of a GreenEnergy Transmission Corridor development of Solar City projects replacement ofconventional pumps with Solar Pumps Green Power Fund allocation etc.

Other notable measures are Demand Side Management initiatives like National Mission forEnhanced Energy Efficiency (NMEEE); Perform Achieve and Trade (PAT) scheme; and EnergyConservation Building Code (ECBC) etc. Large scale substitution of existing lighting loadswith energy efficient LED bulbs have been taken up under the ambitious programme UnnatJyoti by Affordable LEDs for All (UJALA) scheme {earlier known as Domestic EfficientLighting Program (DELP) scheme}. Under the said scheme Energy Efficiency ServicesLimited a joint venture company of REC is providing LED bulbs to domestic consumers atlow cost. This initiative is part of the Government's efforts to spread the message ofenergy efficiency in the country. So far around 9 crore LED bulbs have been sold acrossthe country under this scheme.


Your Company continued to register growth on key fronts of Sanctions LoanDisbursements Operating Income and Profits. The loans sanctioned during the financialyear 2015-16 were X 65471.10 crore as compared to RS.61421.37 crore during the previousfinancial year 2014-15 excluding sanctions under DDUGJY-RE component and DDG. Theaggregate disbursement achieved during the financial year 2015-16 was RS.46025.83 croreas against RS.42818.46 crore in the previous year. Further an amount of RS.5023.99crore (subsidy of RS.4541.44 crore under RE component of DDUGJY subsidy of RS.63.54crore under DDG and loan component of RS.419.01 crore) under DDUGJY has been disbursed.

On standalone basis the total operating income of the Company for the financial year2015-16 increased by 17% to RS.23638.35 crore from RS.20229.53 crore in the previousyear. The Profit After Ta Rs.increased by 7% to RS.5627.66 crore in financial year2015-16 from RS.5259.87 crore in the previous year. The Loan Asset Book of your Companyas on March 31 2016 has increased by a healthy 12% to reach a historic high ofRS.201278 crore from RS.179647 crore in the previous year. The Company achieved arecovery rate of 96.61% for the financial year 2015-16. Your Company's Non-PerformingAssets (NPAs) continue to be at low levels. As on March 31 2016 the Gross NPA of theCompany was RS.4243.57 crore (including loans classified as NPAs due torestructuring/non-achievement of DCCO amounting to Rs. 811.33 crore). The percentage ofNPA as a percentage of Gross Loan Assets stood at 2.11% as on March 31 2016 as comparedto 0.74% as on March 31 2015. The net NPA as on March 31 2016 was 3230.30 crore whichis 1.60% of Gross Loan Assets. Further no doubtful loans have been rescheduled by theCompany during the financial year 2015-16.

The Company mobilized RS.31254.92 crore from the market during the year 2015-16. Thisincluded RS.1000 crore by way of Ta Rs.Free Secured Redeemable Non-Convertible BondsRS.6476.70 crore by way of Capital Gain Tax Exemption Bonds RS.15526 crore by way ofnon-priority sector bonds RS.8046.60 crore (i.e. US$ 1220 million) from ExternalCommercial Borrowings (ECB) and RS.205.62 crore by way of Official Development Assistance(ODA) loan from Kreditanstat fur Wiederaufbau (KfW) Germany and Japan InternationalCooperation Agency (JICA) Japan. Further an amount of RS.20771.78 crore was also raisedthrough Commercial Paper (CP). At the close of the financial year 2015-16 the totalresources of your Company stood at RS.206352.97 crore.

The domestic debt instruments of REC continued to enjoy "AAA" rating - thehighest rating assigned by CRISIL CARE India Ratings & Research and ICRA-CreditRating Agencies. The Company enjoys international credit rating equivalent to sovereignrating of India from International Credit Rating Agencies Moody's and Fitch which is"Baa3" and "BBB-" respectively. The overall weighted averageannualized interest rate of borrowing for the funds raised during the financial year2015-16 was 7.30% p.a. and for the borrowings outstanding as on March 31 2016 was 8.21%p.a. As a result your Company was able to deliver debt financing at competitive rates.


In addition to interim dividend of RS.12.00 per share paid in February 2016 the Boardof Directors of your Company has recommended a final dividend of RS.5.10 per share for thefinancial year 2015-16 which is subject to approval of the Shareholders in the ensuingAnnual General Meeting. The total dividend for the financial year 2015-16 will work out toRS.17.10 per share representing 171% of the paid-up share capital of the Company asagainst RS.10.70 per share representing 107% of the paid-up share capital of the Companyin the previous year. The total dividend pay-out for the financial year 2015-16 willamount to RS.1688.55 crore (excluding dividend distribution ta Rs.of RS.341.71 crore).


The Company has been providing funding assistance for power generation transmission& distribution projects besides for Village Electrification Programme. Your Companycontinued to play an active role in creation of new infrastructure and improvement of theexisting ones under the transmission and distribution network in the country under itsT&D portfolio. In line with the Government of India's objective to provide power forall by creation of infrastructure and also to reduce the AT&C losses your Company hasbeen financing schemes for expansion and strengthening of the transmission network andmore importantly modernizing the distribution system.


During the financial year 2015-16 your Company sanctioned 19 Nos. ofGeneration/R&M loans including 14 Nos. of additional loan assistance with totalfinancial outlay of Rs. 27828.44 crore including consortium financing with otherfinancial institutions and has disbursed Rs. 12819.53 crore against the ongoinggeneration projects.


During the financial year 2015-16 your Company sanctioned 579 Nos. of Transmission andDistribution schemes involving a total loan assistance of Rs. 23627.61 crore. Thisincludes primary power evacuation schemes associated with generating plants systemimprovement schemes including Restructured Accelerated Power Development and ReformsProgramme (R-APDRP) projects feeder segregation schemes bulk loan schemes intensiveelectrification schemes and pumpset energization schemes. The total disbursement underT&D schemes during the year was Rs. 22565.50 crore.


During the financial year 2015-16 your Company sanctioned loan assistance of Rs.2965.72 crore to 11 new grid-connected Renewable Energy projects with installedgeneration capacity aggregating to 688 MW which included 9 Solar photo-voltaic projectsaggregating to 662 MW; 1 Biomass project of 6 MW and 1 Wind project of 20 MW. The totalcost of these projects aggregates Rs. 4444.78 crore. Further during the financial year2015-16 total disbursement under renewable energy was Rs. 304.07 crore.


The Government of India approved the scheme "Deendayal Upadhyaya Gram JyotiYojana" vide Office Memorandum dated December 3 2014. REC is the Nodal agency forDDUGJY scheme. The main objectives of DDUGJY scheme are to provide access to all ruralhouseholds and reduction of AT&C losses as per trajectory (DISCOM-wise) finalized inconsultation with States by the Ministry of Power so as to achieve continuous powersupply for non-agricultural consumers and adequate power supply for agricultural consumersthrough defined project components. For this purpose Rajiv Gandhi Grameen VidyutikaranYojana (RGGVY) scheme and its targets for XII & XIII plans have been subsumed inDDUGJY.

DDUGJY envisages 60% of the project cost from Government of India as grant to Statesother than special category States (85% for the Special Category States i.e. all NorthEastern States including Sikkim and J&K Himachal Pradesh Uttarakhand) with a minimum10% (5% for Special Category States) contribution from State Government/State Powerutility through their own sources and the balance 30% (10% for Special Category States)may be arranged through loan by the State Government/State Power utility. Additional grantupto 15% (5% in case of Special Category States) by conversion of 50% of loan componentwill be provided by Government of India on achievement of prescribed milestones such astimely completion of projects reduction in AT&C losses and upfront release of revenuesubsidy based on metered consumption if any by State Government.

Out of the approved layout of Rs. 44033 crore under DDUGJY scheme Government of Indiashall provide a budgetary support of Rs. 33453 crore. The Scheme of RGGVY as approved byCCEA for continuation in XII and XIII plans got subsumed in DDUGJY as a separate ruralelectrification component for which CCEA has already approved the scheme cost of Rs.39275 crore including a budgetary support of Rs. 35447 crore. This outlay has beencarried forward to the new scheme of DDUGJY in addition to the outlay indicated above.

In the 69th Independence Day address to the nation on August 15 2015Hon'ble Prime Minister resolved that the 18452 remaining Un-electrified villages in thecountry would be electrified within a period of 1000 days with the help of States andLocal bodies. These 18452 villages are located in distant difficult hilly terrain andinaccessible areas with inclement weather facing Right of Way issues or areas plagued byinsurgency etc. Ministry of Power has therefore undertaken on Mission Mode to electrifythese 18452 villages through REC - the Nodal agency for implementation of DDUGJY - andStates/DISCOMs. REC developed an innovative monitoring mechanism by dividing theelctrification works into 12 milestones; deployed young Electrical Engineers viz. 'GramVidyut Abhiyantas (GVAs)' at block level in these villages and developed 'GARV App' MobileWeb Portal ( ) for online monitoring of the progress of villageelectrification. In financial year 2015-16 a total of 7108 villages (125%) wereelectrified against the target of 5686 villages and till date the total achievement ismore than 10000 villages.


The Government of India approved the "Integrated Power Development Scheme"vide Office Memorandum dated December 3 2014 which primarily aims at improvement insub-distribution and distribution networks of urban areas comprising (i) Strengthening ofsub-transmission and distribution networks (ii) Metering of DistributionTransformers/Feeders/Consumers and (iii) IT enablement of distribution sector andstrengthening of distribution network for completion of the targets laid down underR-APDRP for XII and XIII plans by carrying forward the approved outlay for R-APDRP to IPDSprogramme as a separate component. For this purpose the earlier scheme of R-APDRP and itstargets have been subsumed in IPDS. The financing pattern of the scheme is similar as thatapplicable for DDUGJY scheme and as stated above.


The DISCOMs in the country have accumulated losses of approximately Rs. 3.8 lakh croreand outstanding debt of approximately Rs. 4.3 lakh crore upto 2014-15 (at interest ratesupto 14 - 15%) as against outstanding debt of Rs. 2.4 lakh crore in 2011-12. In additionto heavy debt and interest burden default on bank loans by financially stressed DISCOMshave the potential to seriously impact the banking sector and economy at large.

GoI in financial year 2015-16 announced Ujwal DISCOM Assurance Yojana (UDAY) which aimsat financial turnaround and revival of Power Distribution Companies (DISCOMs) forsustainable permanent solution to the problem. Through launch of this scheme DISCOMs areprovided with the opportunity to breakeven in the next 2-3 years through four keyinitiatives:

(i) Improving operational efficiencies of DISCOMs

(ii) Reduction of cost of power

(iii) Reduction in interest cost of DISCOMs

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

UDAY is another decisive step in furtherance of landmark strides made in the powersector over the last two yea Rs. The UDAY scheme assures vibrant and efficient DISCOMsthrough permanent resolution of past as well as potential future issues of the sector.


The Company has two wholly-owned subsidiaries to focus on additional business inconsultancy in the areas of distribution transmission etc. namely:

(i) REC Power Distribution Company Limited; and

(ii) REC Transmission Projects Company Limited

During the financial year 2015-16 REC Power Distribution Company Limited (RECPDCL) hasnot only excelled in its core consultancy businesses viz. Preparation of Detailed ProjectReports (DPRs) Third Part Inspections (TPI) Material Inspection & Project ManagementConsultancy (PMC) services but also set quality benchmark in the areas of ProjectImplementation under R-APDRP Part-A and execution of turnkey works relating to theconstruction of toilets (using conventional and prefab technologies) in schools acrossIndia under CSR initiatives of REC towards Swachh Vidyalaya Abhiyan. Works executed byRECPDCL have been widely appreciated at various platforms in general and its valuedcustomers in particular.

During the financial year 2015-16 RECPDCL's total revenue has increased by 73% to Rs.151.54 crore as compared to the previous year's revenue of Rs. 87.79 crore. The ProfitBefore Tax (PBT) has increased by 6% to Rs. 55.44 crore as compared to Rs. 52.52 crore inthe previous year. Further the Profit After Tax (PAT) has also increased by 4% toRS.36.17 crore from RS.34.77 crore during the previous year. For the financial year2015-16 the Board of Directors of RECPDCL have recommended a dividend of Rs. 2170.56/-per equity share on the face value of Rs. 10/- each which is subject to the approval ofshareholders of RECPDCL in their ensuing Annual General Meeting.

The other subsidiary company viz. REC Transmission Projects Company Limited (RECTPCL)acts as "Bid Process Coordinator" for selection of Transmission Service Providerfor independent transmission projects allocated by MoP from time to time through TariffBased Competitive Bidding Process notified for inter-state transmission projects. In orderto initiate development of each independent inter-state transmission project allocated bythe MoP RECTPCL incorporates project specific Special Purpose Vehicles (SPVs) as itswholly owned subsidiary companies. The wholly-owned subsidiaries of RECTPCL are alsowholly-owned subsidiaries of REC as per Section 2(87) of the Companies Act 2013. Afterselection of the successful bidder through Tariff Based Competitive Bidding Process therespective project specific SPV along with all its assets and liabilities is transferredto the successful bidder.

As on March 31 2016 RECTPCL had the following project specific SPVs as wholly ownedsubsidiaries of RECTPCL/REC:

i. Nellore Transmission Limited*

ii. Baira Siul Sarna Transmission Limited*

iii. NRSS XXXVI Transmission Limited

iv. North Karanpura Transco Limited #

v. Khargone Transmission Limited

vi. Dinchang Transmission Limited

vii. NER II Transmission Limited

* The Office of Registrar of Companies (RoC) NCT of Delhi and Haryana has approved theapplications for striking off the name of "Nellore Transmission Limited" and"Baira Siul Sarna Transmission Limited" from the Register of Companies u/s 560of the Companies Act 1956 vide certificate(s) dated May 25 2016 and July 16 2016respectively; and both the companies have been dissolved.

# The subsidiary company viz. "North Karanpura Transco Limited" wastransferred alongwith all its assets & liabilities to the successful biddder i.e. M/sAdani Transmission Limited on July 8 2016. As such the said company has ceased to be asubsidiary of RECTPCL/REC from that date.

During the financial year 2015-16 RECTPCL has generated an income of Rs. 44.15 crore.The Profit Before Ta Rs.and Profit After Tax for the year was Rs. 42.42 crore and Rs.28.80 crore respectively. The Net worth of RECTPCL as on March 31 2016 was Rs. 123.40crore against initial capital of Rs. 0.05 crore injected by REC in year 2007. For thefinancial year 2015-16 the Board of Directors of RECTPCL ha recommended a dividend of Rs.1730/- per equity share on the face value of Rs. 10/- each which is subject to theapproval of shareholders of RECTPCL in their ensuing Annual General Meeting.

REC along with three other PSUs namely Power Grid Corporation of India Limited NTPCLimited and Power Finance Corporation Limited had formed a Joint Venture Company namelyEnergy Efficiency Services Limited (EESL) on December 10 2009. EESL is formed to create& sustain market access of energy efficient technologies particularly in the publicfacilities like municipalities buildings agriculture industry etc. and to implementseveral schemes of Bureau of Energy Efficiency. EESL is also leading the market relatedactivities of National Mission for Enhanced Energy Efficiency (NMEEE) one of the 8national missions under National Action Plan on Climate Change. Currently EESL isimplementing Municipal Street Lighting projects with various Municipal Corporations AgDSMprojects for replacement of inefficient agricultural pump-sets in agriculture sectorUnnat Jyoti by Affordable LEDs for all i.e. UJALA scheme (formerly Domestic EfficientLighting Programme i.e. DELP scheme) in domestic residential sector in ESCO mode withvarious utilities and CSR projects of various companies. As on date REC holds 31.7% ofthe paid up equity share capital of EESL.

During the financial year 2015-16 based on the unaudited financials EESL's totalrevenue was Rs. 714.40 crore compared to the previous year's revenue of Rs. 71.11 crore.The Profit Before Tax (PBT) for the year was Rs. 49.60 crore as compared to Rs. 13.57crore in the previous year. Further the Profit After Tax (PAT) of EESL for the financialyear 2015-16 has also increased to Rs. 32.89 crore from Rs. 9.06 crore during the previousyear.


Central Institute for Rural Electrification (CIRE) was established under the aegis ofREC at Hyderabad in 1979 to cater the training and development needs of engineers andmanagers of Power Sector. The programmes by CIRE are conducted with state of-the-arttechnologies in areas of Power Generation Transmission Distribution and Renewable Energysources. CIRE is designated as a nodal agency by Ministry of Power (MoP) forimplementation of National Training Programmes (NTP) for employees of C&D categoryunder the Human Resources Development component of DDUGJY programme. During the financialyear 2015-16 in addition to coordinating and monitoring the National Training Programmesfor employees of C&D category sponsored by Ministry of Power CIRE has conducted 128programmes on various themes and trained 2471 personnel with 14353 man-days of training.Further CIRE has been conferred with the "Education Leadership Award" by ABPNews during the year in recognition of 'Leadership Development Innovation and IndustryInterface' of the Institute.


As a measure of capacity building including up-gradation of employees' skill sets andto ensure high delivery of performance Training and HRD continued to receive priorityduring the financial year 2015-16. Training and Human Resource Policy of the Company aimsat sharpening business skills and competence required for better employee performance andprovides all possible opportunities and support to the employees to improve theirperformance and productivity. During the year under review training was provided topromote better understanding of professional requirements as well as to sensitizeemployees to socio-economic environment in which the Company operates; and also to helpemployees gain on spiritual health and attitudinal front. Further employees were alsoencouraged to participate in various quizzes paper presentations and simulationcompetitions conducted by reputed institutions.


On the IT front an Integrated ERP system has been in operation in the Company since2009 covering major business functions of the Company which is continuously beingimproved by adding new features. Benefits of the ERP system have also been extended to theBorrowers as a part of better service. Both the Primary Data Centre (PDC) and DisasterRecovery Center (DRC) of REC are ISO/IEC 27001:2013 Certified and comply with the NationalCyber Security Policy of Government of India as notified by Ministry of Electronics andInformation Technology (MeitY). In addition to the same number of information securityaudits are conducted through CERT-in certified auditor internal auditor on a continuousbasis.

REC has implemented Video Conferencing solution across all its offices throughout thecountry. Corporate office of REC has become Wi-Fi enabled and all field offices of theCompany are also being made Wi-Fi enabled. REC has also accomplished implementation ofHR-ERP Employee Self Service (ESS) Portal over Internet during the year. Further allprocurement of goods and services of value above Rs. 2 lakh is now being done through thee-Procurement system. The said system is capable of conducting e-Reverse Auction as perCVC guidelines. REC has also deployed a number of in-house developed systems viz. AnnualProperty Return Bill Payment and Tracking System Visitor Management System FileMovement System etc. In addition thereto a number of IT initiatives of the Government ofIndia are being promoted in the Company like MyGov e-Governance Digital India etc.


Corporate Governance at REC is managing the business in an ethical and responsiblemanner for sustainable value creation for various Stakeholders within the prevalentregulatory framework. The Company believes in adopting the best practices that arefollowed in the area of Corporate Governance across the globe. As a listed Public SectorEnterprise your Company has been complying with the requirements of Corporate Governanceas stipulated in the Companies Act SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015 DPE Guidelines and other applicable statutory provisions.Further the matter pertaining to appointment of one Independent Woman Director on theBoard is under consideration of the appointing authority i.e. Ministry of Power.


As per directions of Ministry of Power Government of India REC has organized variouscleanliness programs i.e. "Swachhta Abhiyan" (National Cleanliness Campaign)from September 25 2015 to October 112015 and "Swachh Bharat Abhiyan" from June22 2015 to June 26 2015 at SCOPE and all other offices of the Company. All employees ofREC participated with great enthusiasm and zeal & undertook special cleanliness driveof their respective office premises toilets stairs lifts & other surrounding areas.Old and unwanted records have been weeded out as per Record Retention Schedule. In thisprocess approximately 5000 kg of waste official papers magazines periodicals draftreports etc. were disposed off. Printing of logo of ''Swachh Bharat Mission" on allfile covers envelops and letter heads of the Company still continues in REC for creatingawareness about cleanliness.


Corporate Social Responsibility and Sustainable Development (CSR & SD) initiativeswere pursued actively. Accordingly CSR budget of Rs. 128.00 crore (i.e. @ 2% of averagenet profit of previous three financial years as per the Companies Act 2013) wasallocated for the financial year 2015-16. During the year the Company has undertakenvarious CSR initiatives in the fields of skill development programmes educationenvironmental sustainability promotion of health care including for old age and personswith disabilities drinking water and sanitation facilities including participation inSwachh Vidyalaya Abhiyan solar smart micro grid lights in select un-electrified/poorlyelectrified villages etc. During the financial year 2015-16 financial assistanceaggregating to Rs. 163.17 crore was sanctioned for various projects under Corporate SocialResponsibility and expenditure of RS.128.20 crore was incurred including amount providedfor in the books of accounts.


The performance of your Company in terms of Memorandum of Understanding (MoU) signedwith the Ministry of Power Government of India for the financial year 2014-15 has beenrated as "Excellent". This is the 22nd year in succession that REChas received "Excellent" rating sincethe year 1993-94 when the first MoU wassigned with the Government. For the financial year 2015-16 also the Company is poised toreceive "Excellent" rating. During the year your Company received "FastestGrowing Navratna PSU" award from India Today.


The Company constantly reviews its policies/procedures from time to time to suitablyalign with market requirements and also with its corporate objectives and applicablestatutory requirements. During the year the Company has adopted/amended various policiesand guidelines such as Integrated Rating Methodology for Renewable Energy projectsIntegrated Rating Guidelines for Coal Mines Financing (State Sector) Long Term InvestmentPolicy Guidelines on Project Financing Framework for Flexible Structuring Guidelines onRefinancing of Project Loans Guidelines on Regulatory Compliance regarding StressedAssets and Policy for CSR assistance under Skill Development.

Despite growing competition in the market the Company has been able to maintainhealthy spreads balancing its objectives of business growth and profitability during theyear


Your Company offers a wide range of products to target customer segments to satisfytheir specific financial needs. REC strives to strengthen its core financing activitiesand explore new business areas in the allied fields also viz. Power equipment financingenergy efficiency related activities equity financing coal mining financing etc.

Your Company is planning to enhance its presence in the Green Energy financing such asSolar Biomass and Wind Power which shall help in mitigating the problem of powerscarcity carbon emissions and fuel supply. In order to provide boost to renewablesprojects particularly solar & wind energy your Company has rationalized its lendingpolicy to enable finance for larger renewable projects. While providing finance on betterterms to these projects your Company has increased the tenure of loans upto 15 yearsbrought changes in interest rate policy. To take care of risk assessment in differenttechnologies your Company has introduced integrated rating mechanism.

Your Company is committed to future growth and will strive to maintain the beststandards of Corporate Governance with emphasis on authority and freedom of managementcoupled with transparency accountability and professionalism in their working with aimof enhancing long term economic value and healthy returns to all the Stakeholders ofsociety.


Demand and consumption trends will be the key in defining the future of the powersector in the near future. 96% of the planned capacity for XII plan has been added in thefirst four years itself. The XIII plan capacity addition programme is yet to be firmed up.However investments in Generation are expected to grow exponentially once the sustainedgrowth in manufacturing sector starts. With the increasing stress on deploying cleanenergy in wake of ecological and environmental hazards from fossil fuels the share ofgreen energy is bound to increase substantially. Capacity addition of green energy hasbeen further enhanced by planning to add 175000 MW by the year 2022. Huge investmentpotential is seen in Transmission and especially Distribution sector in immediate future.Subject to good monsoons demand is also expected to rise due to farm sector needs andrural economy growth. The Distribution sector is in flux and shall undergo a sea change asthe primary aim of all major schemes namely DDUGJY IPDS NEF UDAY and UJALA is to bringefficiency in the ailing sector. Demand Side Management (DSM) is bound to play a vitalrole in Distribution sector in the years to come.

As a Nodal agency for monitoring and channelizing funds under the DDUGJY programme RECcontinues to take up the socioeconomic responsibility of rural electrification.

Considering the low levels of per capita energy consumption compared to the Worldaverage significant growth projections for the Indian economy over the long term andGovernment efforts to inch closer to developed economy it is felt that the powerinfrastructure sector will be a significant beneficiary. The long-term outlook for powerdemand is therefore expected to remain strong. The power sector is thus poised to remainvibrant and attract significant investments in the future.


I take this opportunity to express my sincere gratitude for the immense support andguidance received by your Company from the Hon'ble Minister of State for Power(Independent Charge) the Secretary (Power) Special Secretary MoP Additional SecretaryMoP Joint Secretaries MoP and other officials in the Ministry of Power. I am alsograteful to the officials in the Ministry of Finance Ministry of Human ResourceDevelopment NITI Aayog Ministry of New and Renewable Energy Ministry of RuralDevelopment and Reserve Bank of India for their continued support and guidance. I alsothank the Comptroller & Auditor General of India the Statutory Auditors of theCompany Secretarial Auditors and other professionals associated with the Company fortheir valued contribution. I also express my sincere gratitude to our lenders andinvestors for having reposed their trust in us.

I would also like to express my heartfelt thanks to my esteemed colleagues on the Boardand to all employees of REC for their devoted commitment towards taking the Companyforward on the path of growth.

I convey my special thanks to all Stakeholders of the Company for their continuedsupport and goodwill. I am confident that with your continued support as well as with thededication and hard-work of Team REC your Company will continue to excel on allparameters in the times to come.

With best wishes
(Rajeev Sharma)
Chairman & Managing Director
August 11 2016