REC Q4 FY26 profit falls 22%: dividend outlook details

What triggered the move in REC shares

REC Ltd shares slipped after the state-run power sector financier reported a weaker March quarter. On the BSE, the stock fell over 4% to an intraday low of INR 359 after the results. The decline followed a 22% year-on-year drop in consolidated profit and a fall in income for Q4 FY26.

The company released its financial results for the quarter ended March 31, 2026, after market hours on Tuesday. While the quarterly print disappointed, REC also reported its highest-ever annual net profit for FY26. Broker commentary remained mixed, with some downgrades in the broader market narrative, while Motilal Oswal reiterated a positive stance on valuation.

Q4 FY26 headline numbers: profit down, income softer

For Q4 FY26, REC reported consolidated net profit of INR 3,375.08 crore, down 21.69% year-on-year from INR 4,309.98 crore in Q4 FY25. Sequentially, profit fell 16.71% from INR 4,052.44 crore in Q3 FY26. The company and reports attributed the pressure mainly to lower interest income and higher expenses during the quarter.

Income also declined. Total income fell 4.98% year-on-year to INR 14,583.39 crore from INR 15,348.37 crore. Another disclosure in the same coverage pegged revenue from operations at INR 14,564 crore versus INR 15,334 crore a year earlier, indicating broadly similar quarter-on-quarter softness across reported income lines.

Interest income and expenses: key drivers in the quarter

Interest income for Q4 FY26 was reported at INR 14,119.11 crore, down from INR 14,947.26 crore in Q4 FY25. On a sequential basis, interest income was INR 14,560 crore in Q3 FY26 versus INR 14,119.11 crore in Q4 FY26.

Costs moved higher. Expenses rose to INR 10,168.85 crore in January to March FY26, compared with INR 9,858.48 crore in the year-ago quarter. The combination of softer interest income and higher expenses narrowed quarterly profitability.

Full-year FY26: record profit despite a weak Q4

For FY26, REC reported consolidated net profit of INR 16,308.17 crore, up from INR 15,884.23 crore in FY25. Total income for FY26 increased to INR 59,628.35 crore from INR 55,105.20 crore in the previous financial year. Interest income for FY26 was cited at INR 57,860.49 crore.

REC also said it recorded its highest-ever annual net profit despite a challenging macro environment and geopolitical uncertainty. The contrast between a softer Q4 and a stronger full-year outcome was a central feature of the results narrative.

Loan book and renewables: growth, but mixed signals

REC said it registered loan book growth of around INR 17,000 crore during the year, taking the loan book to an all-time high of INR 584,000 crore as on March 31, 2026. The renewable sector loan book rose 30% to INR 75,347 crore.

Operational metrics for FY26 were also reported higher. Total sanctions increased 21% year-on-year to INR 409,097 crore from INR 337,179 crore. Disbursements rose 10% year-on-year to INR 211,189 crore.

Asset quality and spreads: improvement noted

Motilal Oswal highlighted improvement in asset quality, with gross NPA (GNPA) declining to 0.2% during the quarter under review. In a separate results note in the same coverage set, net Stage-3 loans were cited at 0.12%.

The brokerage also pointed to moving parts in the earnings profile: a decline in yields was offset by lower funding costs, helping keep spreads stable. Even so, it flagged weak loan growth and margin pressure as key monitorables.

Dividend updates and other disclosures

REC announced a final dividend of INR 1.55 per equity share for FY 2025-26, subject to shareholder approval at the upcoming AGM. Another report in the same content bundle cited a dividend of INR 18.55 per share declared for the full year, indicating that the INR 1.55 per share refers to the final tranche, while the larger figure reflects total dividend for the year.

Separately, REC was reported to have faced penalties totalling INR 10.86 lakh from NSE and BSE for non-compliance with board composition rules in Q3 FY26, attributed to delayed government appointments.

Brokerage view: Motilal Oswal stays positive on valuation

Motilal Oswal reiterated a ‘Buy’ call on REC and raised its target price to INR 440 per share. The brokerage said the target implied an upside of more than 17% from the prior NSE close of INR 375.80.

It also noted REC traded at about 1x FY27E P/ABV, which it described as attractive. At the same time, it cut PAT estimates by 9% for FY27 and 11% for FY28 to account for lower margins and higher credit costs.

Key numbers at a glance

Market impact: price action and return profile

The immediate market reaction was negative, reflecting the earnings miss and margin commentary. The stock was cited at around INR 375.65 in one snapshot after results, with a separate reference showing a drop of 0.66% following the announcement. Another intraday datapoint showed the fall extending to over 4% and touching INR 359 on the BSE.

A return table in the coverage showed REC down 3.21% over one day, down 5.11% over one week, and up 14.23% over one month. Longer-term returns in the same table were 175.26% over three years and 279.35% over five years, while the one-year return was -15.49%.

Why the quarter matters: what investors are watching

The Q4 print put attention on the balance between growth and profitability. Income softness, higher expenses, and commentary around weak disbursements and loan growth are likely to keep focus on margins and growth conversion in coming quarters.

At the same time, the FY26 record profit and improving asset quality metrics provide a counterweight to the quarterly decline. Investors will also track follow-through on sanctions and disbursement momentum, renewable financing growth, and any management commentary around yields, funding costs, and credit costs.

Conclusion

REC’s Q4 FY26 results showed a clear quarterly slowdown, with profit and income declining year-on-year, even as asset quality improved. The company ended FY26 with record annual profit, an all-time-high loan book, and higher sanctions and disbursements. Next catalysts include the AGM decision on the final dividend and management commentary on margin and growth trends for FY27.