Investing in the stock market can be a rewarding endeavor, especially when you choose the right stocks. One such potential investment is REC Ltd.
(Rural Electrification Corporation Limited), a prominent player in the Indian financial services sector.
To understand the performance of an investment in REC Ltd. over the past five years, let’s delve into the financial details and stock performance of the company.
Stock Performance Overview
To analyze the performance of REC Ltd., let’s first look at its stock price over the past five years:
- June 7, 2019: ₹178.13 per share
- June 4, 2024: ₹459.00 per share
Calculating the return on investment (ROI) will give us an insight into the growth of the stock.
Formula for ROI:
This indicates a 157.72% return on investment over five years.
REC Ltd. has consistently rewarded its shareholders with attractive dividend payouts. Over the past five years, the company has declared the following dividends:
- FY 2023-24: Total dividend of ₹16 per share (160%)
- FY 2022-23: Total dividend of ₹12.60 per share (126%)
- FY 2021-22: Total dividend of ₹15.30 per share (153%)
- FY 2020-21: Total dividend of ₹12.71 per share (127.10%)
- FY 2019-20: Total dividend of ₹11 per share (110%)
Investment Growth Calculation
If you had invested ₹10,000 in REC Ltd. on June 7, 2019, the number of shares you could have purchased is:
Thus, an initial investment of ₹10,000 would have grown to approximately ₹25,704 over five years.
Additionally, the investor would have received dividends during this period, further enhancing their returns. Assuming all dividends were reinvested, the total dividend income would be approximately ₹6,840 (calculated based on the dividend payouts mentioned above).
Therefore, the initial investment of ₹10,000 would have grown to approximately ₹32,544 (₹25,704 + ₹6,840) as of June 4, 2024, representing a remarkable return of 225.44% over the five-year period.
REC Ltd. Investment Calculator
Investment Results
Related: If You Had Invested ₹10,000 in DLF Ltd. (DLF) 5 Years Ago, Here’s How Much You Would Have Today
Detailed Financial Analysis
To better understand this growth, let’s delve into the financial performance of REC Ltd. over the past five years, analyzing key financial statements and ratios.
Balance Sheet Analysis
Equities and Liabilities (₹ Cr.)
| Year | Equity Share Capital | Reserves and Surplus | Total Shareholders’ Funds | Non-Current Liabilities | Current Liabilities | Total Capital and Liabilities |
|---|---|---|---|---|---|---|
| 2024 | 2,633.22 | 66,149.93 | 68,783.15 | 442.70 | 478,214.54 | 547,440.39 |
| 2023 | 2,633.22 | 54,454.75 | 57,087.97 | 243,931.80 | 163,265.66 | 464,877.13 |
| 2022 | 1,974.92 | 48,452.28 | 50,427.20 | 252,140.64 | 107,286.37 | 410,412.61 |
| 2021 | 1,974.92 | 40,893.05 | 42,867.97 | 244,510.04 | 112,296.78 | 400,233.19 |
| 2020 | 1,974.92 | 33,101.64 | 35,076.56 | 224,978.99 | 86,432.04 | 346,487.59 |
Assets (₹ Cr.)
| Year | Non-Current Assets | Current Assets | Total Assets |
|---|---|---|---|
| 2024 | 3,522.74 | 543,917.65 | 547,440.39 |
| 2023 | 4,285.67 | 460,591.46 | 464,877.13 |
| 2022 | 3,994.43 | 406,418.18 | 410,412.61 |
| 2021 | 3,281.95 | 396,951.24 | 400,233.19 |
| 2020 | 2,990.46 | 343,497.13 | 346,487.59 |
Key observations:
- Equity Share Capital has remained stable, indicating no significant changes in the number of shares issued.
- Reserves and Surplus have grown consistently, reflecting the company’s retained earnings and profitability.
- Total Shareholders’ Funds have shown steady growth, enhancing the company’s financial stability.
- A significant increase in Current Liabilities in 2024, primarily due to short-term borrowings, needs careful evaluation regarding liquidity and debt management.
- Total Assets have increased, with current assets forming a major part, indicating improved liquidity and operational capacity.
Profit and Loss Statement Analysis
| Year | Total Income From Operations (₹ Cr.) | Net Profit (₹ Cr.) | Basic EPS (₹) |
|---|---|---|---|
| 2024 | 47,146.30 | 14,019.21 | 53.11 |
| 2023 | 39,208.06 | 11,054.64 | 41.86 |
| 2022 | 39,132.49 | 10,045.92 | 50.87 |
| 2021 | 35,387.89 | 8,361.78 | 42.34 |
| 2020 | 29,791.06 | 4,886.16 | 24.74 |
Key observations:
- Total Income has steadily increased, indicating strong revenue growth.
- Net Profit has also shown significant growth, doubling from 2020 to 2024.
- Earnings Per Share (EPS) have improved consistently, reflecting the company’s profitability per share.
Cash Flow Analysis
| Year | Net Cash from Operating Activities (₹ Cr.) | Net Cash from Investing Activities (₹ Cr.) | Net Cash from Financing Activities (₹ Cr.) |
|---|---|---|---|
| 2024 | -57,885.22 | -1,875.19 | 59,587.82 |
| 2023 | -37,481.66 | -803.87 | 38,110.54 |
| 2022 | -3,962.66 | -210.32 | 3,158.89 |
| 2021 | -43,520.42 | 863.83 | 42,119.05 |
| 2020 | -32,763.69 | 179.70 | 33,919.08 |
Key observations:
- Net Cash from Operating Activities shows negative values, indicating high cash outflows, possibly due to substantial working capital requirements or loan disbursements.
- Net Cash from Investing Activities generally reflects outflows, suggesting investments in assets or business expansion.
- Net Cash from Financing Activities displays significant inflows, indicative of borrowings to support business operations and growth.
Conclusion
Investing ₹10,000 in REC Ltd. five years ago would have grown to approximately ₹32,544 including divident, yielding a return of about 157.72%.
This impressive performance is backed by strong financial growth, with significant increases in revenue, net profit, and shareholders’ equity.
However, it’s also important to consider the company’s liquidity and debt management, as evidenced by the substantial short-term borrowings and negative operating cash flows.
Despite these challenges, REC Ltd. has demonstrated resilience and robust growth, making it a potentially lucrative investment in the Indian financial sector.
By carefully analyzing financial statements and key ratios, investors can make informed decisions and capitalize on growth opportunities, as illustrated by the performance of REC Ltd. over the past five years.