Industry profile:  NBFC, or non-banking Finance Company, plays a pivotal role in economies like India. As per definition, they are companies providing certain banking services. As per RBI Definition

A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.

In India, they are regulated under RBI within the framework of the [[Reserve Bank of India Act, 1934]] (Chapter III-B) and the directions issued by it. As a result, there are significant restrictions on NBFC about Collecting deposits and doing business. There are eight consequential types of NBFCs in India.

  1. Asset finance company. The company does business in financing physical assets supporting productive or economic work. Simply put, they are companies sponsoring tractors, Vehicle for agriculture lathe machines, cranes, generator sets, earthmoving and material handling equipment, moving on own power, and general-purpose industrial machines.
  2. Investment company: The company like mutual Fund, Holding companies in some cases, or Private equity Companies.
  3. Loan Company: The company has the business of giving loans other than an Asset finance company. Like Personal loans, Housing Finance companies.
  4. Infrastructure Finance Companies: Companies Financing Infrastructure. Again, RBI kept Strict regulations on them. Infrastructure finance companies deploy a minimum of three-fourths of their assets in infrastructure loans. The net owned funds are more than 300 crores, have a minimum crediting rating of ‘A,’ and the Capital to Risk-Weighted Assets Ratio is 15%. The best example is IDFC. Though now they are owned by one bank, they are one Infrastructure finance company. Other is India Infrastructure Finance Company Limited ( IIFCL), Infrastructure Finance corporation of India (IFCI), and Power Finance Corporation (PFC )
  5. Infrastructure Debt Fund Non-Banking Finance Company aka IDF – NBFC: If you are unaware of it, yes, they exist. India Infra Fund is the best example managed by IDFC. IDF-NBFC is a company registered as NBFC to facilitate the flow of long-term debt into infrastructure projects. IDF-NBFC raises resources through Multiple-Currency bonds of minimum 5-year maturity. Only Infrastructure Finance Companies (IFC) can sponsor IDF-NBFCs.
  6. NBFC FACTORS: One another significant type of NBFC in India. Factoring is the type of working capital financing. SBI Factor and Canara factor are some examples.
  7. Gold Loan NBFC: You can’t ignore this type in India. Over the years, gold loan NBFCs witnessed an upsurge in the Indian financial market, owing mainly to the recent period of appreciation in the gold price and consequent increase in the demand for the gold loan by all sections of society, especially the poor and middle-class to make ends meet. Though many NBFCs are offering gold loans in India, about 95 percent of the gold loan business is handled by three Kerala-based companies, Muthoot Finance, Manapuram Finance, and Muthoot Fincorp. Growth of gold loan NBFCs eventuating from various factors, including Asset Under Management (AUM), number of branches, and also the number of customers, etc.
  8. Residuary Non-Banking Finance Company: All famous for Sahara case as it is a company and has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner and not being an Investment, Asset Financing, Loan Company. So you can do so much business. Nowadays, there are not many of them, and they may be restricted from existing. They were the main accused in many Frauds.

Company Profile:  Rural Electrification Corporation Limited is a public Infrastructure Finance Company in India’s power sector. The company finances and promotes rural electrification projects across India and finances Central/ State Sector Power Utilities, State Electricity Boards, Rural Electric Cooperatives, NGOs, and Private Power Developers as sole lender, Co lender, and consortium. It also provides consultancy, project monitoring, and financial/ technical appraisal support for projects in the role of nodal agency for Government of India schemes or projects. In addition, it engages in ascertaining the financial requirements of power utilities in the country in the T&D sector and appraising T&D methods for financing.

REC also offers loan products for financing Renewable Energy projects. The company has tied up a line of credit for €100M (approximately ₹6000M) with KfW under Indo-German Development Cooperation to finance renewable energy power projects at concessional interest rates. Eligible projects include solar, wind, small hydro, biomass power, and cogeneration power & hybrid projects.

Shareholding Pattern: BSE Data

Financials and ratio  :  [table id=95 /]

Future Prospects:  For growth, Electricity is significant. Rural India is one considerable potential for infrastructure development, so a company like REC is essential. As a stock, the company is beautiful, with attractive ROE, Dividend yield.