Why Power Finance Corp Share Price is Rising

Despite reaching their historic highs, many midcap stocks continue to seize the attention of investors, showcasing a robust performance that surpasses their large-cap counterparts this year.

While the Nifty 50 and S&P BSE Sensex, India's key benchmark indices, have recorded gains of 9% and 8%, respectively, so far this year, the BSE Midcap index has surged impressively by 32.3%.

This upward trajectory in midcap stocks is largely attributed to their substantial gains from the ongoing recovery in India's capital expenditure.

Within the stocks that are part of the BSE Midcap index, Power Finance Corporation (PFC) stands out as a notable performer, delivering remarkable returns exceeding 160% in 2023.

Moreover, it has experienced a noteworthy surge of over 30% in the past month alone.

Here's why.

Why PFC Share Price is Rising

#1 Index Composition Refinement Impact

The recent upswing in Power Finance Corporation (PFC) shares is due to its incorporation into the S&P BSE 100 index. This is as per the reconstitution results declared by Asia Index Private on 17 November 2023.

This decision, effective from the market opening on Monday, 18 December, involves the exclusion of Tata Elxsi, Adani Power, Voltas, Bandhan Bank, Mphasis, Crompton Greaves Consumer Electricals, and ACC from the index.

TVS Motor Company, Power Finance Corporation, Hindustan Aeronautics, Persistent Systems, Dabur India, APL Apollo Tubes, IDFC First Bank, Yes Bank, and UPL will start trading on 18 December as a part of the reconstituted index.

This PFC's inclusion in the S&P BSE 100 index is noteworthy, signalling the company's robust standing and importance in the market.

This incorporation into major indices is often interpreted as an acknowledgement of a company's performance and future potential.

#2 Airport Financing Expansion

In a strategic move, PFC entered the airport financing sector by approving its inaugural loan for a greenfield airport project in Andhra Pradesh.

This initiative aligns with PFC's broader diversification strategy, aiming to extend its loan portfolio beyond the power sector.

The company has been actively exploring opportunities in diverse infrastructure sectors, including e-mobility, metro rail, irrigation, and utility-scale energy storage.

The PFC board of directors gave the green light to loans totalling Rs 150 billion (bn) for various projects, with a notable focus on airport financing.

The company is also contemplating extending financial support to other airport projects across India.

PFC's venture into the airport financing domain signifies a positive development, considering the anticipated rapid growth of the industry in the upcoming years.

This growth is expected to be propelled by increasing demand for passenger services and the government's commitment to infrastructure development. These factors have further contributed to a positive market rally.

#3 Robust Q2 Results

For the September 2023 quarter, the total income of the company witnessed a significant upswing of 15%, reaching Rs 224 bn in the quarter.

This was a testament to the company's robust financial health and its capability to generate substantial revenue.

The company reported a substantial 27% rise in its consolidated net profit, amounting to Rs 66.3 bn in the July-September quarter compared to the corresponding period last year.

In terms of asset management, the consolidated Loan Asset Book of PFC reached an impressive figure of Rs 9.2 trillion (tn). This marked a noteworthy 20% surge compared to the previous year, showcasing the company's efficient asset management and growth trajectory.

PFC also demonstrated its proficient risk management with a decrease in non-performing assets (NPAs). The consolidated net NPA stood at 0.9%, indicating a significant reduction in bad loans.

This further highlights the company's effective risk mitigation strategies and strong financial management.

Adding to the list of achievements, PFC declared an interim dividend of Rs 4.5 per share, a move that is likely to satisfy its shareholders. These robust financial indicators are key contributors to the recent surge in the company's share price.

What Next?

The government's initiation of the Late Payment Surcharge Rule, addressing defaults and delays in payments by distribution companies, ensures the timely settlement of outstanding dues and current bills. This proactive measure is poised to contribute to the well-being of PFC.

Additionally, the anticipated growth in generation capacity in the coming years presents a favourable landscape for power companies, spanning conventional, solar, green, and wind energy sectors.

The government's emphasis on renewable energy, coupled with global funds' clean mandate, further enhances the attractiveness of these companies, providing aid to power companies. This combined momentum generates a positive outlook for the company.

How Shares of PFC Have Performed Recently

PFC share price is up 5% in the past five days, while over the month gone by, the shares are trading higher by 31%.

Over the past 1 year, shares of the company have gained 218%.

PFC shares touched their 52-week high of Rs 328.7 on 21 November 2023 and its 52-week low of Rs 97.7 on 24 November 2023.

About Power Finance Corporation

Power Finance Corporation Limited (PFC) is a leading non-banking financial institution (NBFI) in India, engaged in financing power projects.

Founded in 1986, PFC has played a crucial role in the development of India's power sector, providing financial assistance to a wide range of power projects, including generation, transmission, and distribution.

PFC offers financial products and services to support various power projects, including, rupee term loans and project term loans.

To know more, check out Power Finance Corporation company fact sheetquarterly results.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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