1:4 Bonus, Rs 19/sh Dividend In 15 Months; NBFC PSU Falls Below Rs 440 After Big Announcement; BUY OR SELL?

Power Finance Corporation is a Maharatna PSU and is the backbone of offering financial services to India's power sector. On May 6th, PFC shares dropped by 12.40% on BSE, tracking selloffs in broader PSU indices. But PFC emerged as the top bear due to RBI tightening its bolt-on financing projects under the construction phase.

Despite the latest fall, PFC has a buy rating from analysts. The latest to recommend BUY on PFC is CLSA which raised its target price to Rs 550 per share with a positive outlook on PFC stock. Whether experts' stance changes in the coming days as they gauge the pros and cons of the new norm announced by RBI and its impact on NBFC stocks including PFC -- will be keenly watched.

To strengthen the extant regulatory framework governing project finance and to harmonise the instructions across all regulated entities, RBI released a draft of the 'Prudential Framework' that applies to the financing of project loans.

RBI said, given the complexities involved in project finance, the revised guidelines seek to provide an enabling framework for the regulated entities for financing project loans while addressing the underlying risks. The Comments on the draft Direction are invited from the public/stakeholders by June 15, 2024.

PFC Share Price:

PFC stock ended at Rs 437.55 apiece, down by 8.93% on BSE with a market cap of Rs 1,44,395.95 crore. During the trading hours of May 6th, PFC dropped by as much as 12.4% to hit an intraday low of Rs 420.85 apiece. PFC shares pulled back from Rs 450 levels, which was near its 52-week high of Rs 485.30 apiece.

Nonetheless, PFC shares are still a multi-bagger with gains of 243% from its 52-week low of Rs 127.44 apiece. Also, despite the latest fall, PFC shares are up by 11% YTD. While in a year, the stock zoomed by 220.24%.

PFC is among the dividend king stocks under the PSU basket.

Since last year, PFC shares have rewarded its investors with not just triple-digit returns but with hefty dividend payout, yield, and bonus shares.

In 2024 alone, in two months, PFC has paid two interim dividends of Rs 3 per share for which it turned ex-dividend in March, and Rs 3.50 per share in February. Meanwhile, in 2023 alone, PFC paid dividends up to Rs 12.5 per share.

While also last year, the company paid bonus shares of 1:4 for which it turned ex-bonus on September 21, 2023. This would be the second bonus issue by PFC. The first bonus share was 1:1 paid in August 2016.

On the current market price, it has a dividend yield of 3.33%, one of the highest in PSUs.

PFC Next Big Event:

PFC shares will be in focus ahead of their quarterly and year-ended results for the March 31, 2024, fiscal.

In its regulatory filing, PFC said, "This is to inform that the Board of Directors of Power Finance Corporation Ltd. in its meeting scheduled to be held on 15th May 2024, will interalia, be considering the Audited Financial Results (Standalone & Consolidated) for the quarter and year ended 3 1% March 2024."

BUY OR SELL PFC shares?

Apart from CLSA's buy rating with a target price of Rs 550 on PFC, another brokerage Elara Capital has also suggested buying for an even higher target price of Rs 569.

Also, as per Trendlyne data, The consensus recommendation from 5 analysts for Power Finance Corporation Ltd. is BUY. The 1-year average target price on PFC is Rs 492, hinting at a 12% upside.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.