PFC and REC Shares Fall 3% After Morgan Stanley Downgrade

Shares of Power Finance Corporation (PFC) and REC Limited (REC) fell on Thursday following a significant downgrade from Morgan Stanley. The brokerage downgraded both stocks to Equal-Weight from their previous ratings, marking a shift in sentiment toward India's major lending institutions in the power sector. Alongside the rating changes, Morgan Stanley cut target prices for both companies, signaling reduced confidence in near-term valuations. According to the announcement, the downgrade was driven by concerns over slower loan growth trajectories. The brokerage also revised its earnings estimates downward for fiscal years 2028 and 2029, indicating expectations for moderated financial performance in the medium term. Both stocks were already trading under pressure at the time of the downgrade announcement, reflecting broader market concerns.

The downgrade comes at a particularly sensitive time for both companies, as they are navigating the proposed merger between PFC and REC. Consolidation activity in the Indian power finance sector carries implications for growth strategies, operational synergies, and lending capacity. Market participants have been monitoring how regulatory approvals and merger timelines might affect shareholder value. Morgan Stanley's cautious stance suggests the brokerage believes growth headwinds may persist despite potential merger benefits. For traders and investors, the downgrade signals a need to reassess positions in these power sector lending plays, particularly if slower loan growth becomes structural rather than cyclical. The rating change reflects broader analyst scrutiny of India's power financing landscape amid evolving economic conditions and lending environment shifts.

Source: Markets-Economic Times