Title: Relation of REC Limited with Nifty.
Author: Rahul Mahendra Surve
Roll no.: 21230023039
Batch: F-3
Introduction:
REC Limited, formerly Rural Electrification Corporation Limited, of which Power Finance Corporation Limited (PFC) is a holding company, is under the ownership of the Ministry of Power, the Government of India.
REC is the 12th Maharatna Company functioning under the purview of the Ministry of Power. The company is listed on the National Stock Exchange and the Bombay Stock Exchange. Business operations in India are supported by a network of 22 Regional Offices, with its corporate headquarters at Gurugram and a registered office in New Delhi.
It finances and promotes power projects across India. The PSU provides loans to the country’s Central/State Sector Power Utilities, State Electricity Boards, Rural Electric Cooperatives, NGOs, and Private Power Developers. On 20 March 2019, PFC signed the agreement to acquire a 52.63% controlling stake in REC for ₹14,500 crores. On 28 March, PFC announced that it had completed making the payment for the acquisition and intended to merge REC with itself in 2020. However, REC has maintained that merging PFC-REC is no longer an option.
Objective: Calculation of Beta and its Significance.
Views and Reviews:
To facilitate the availability of electricity for accelerated growth and enrichment of the quality of life of rural and urban populations.
To act as a competitive, client-friendly, and development-oriented organization for financing and promoting projects covering power generation, power conservation, power transmission, and power distribution networks in the country.
In furtherance of the Mission, the main objectives to be achieved by the Corporation are:
- To promote and finance projects aimed at integrated system improvement, power generation, promotion of decentralized and non-conventional energy sources, energy conservation, renovation and maintenance, power distribution with a focus on pump-set energization, implementation of Revamped Distribution Sector Scheme, a government of
India scheme.
- To expand and diversify into other related areas and activities like financing of decentralized power generation projects, use of new and renewable energy sources, consultancy services, transmission, sub-transmission and distribution systems, renovation, modernization & maintenance, etc. for optimization of reliability of power supply to rural and urban areas including remote, hill, desert, tribal, riverine, and other difficult/remote areas.
- To mobilize funds from various sources including raising funds from domestic and international agencies and sanctioning loans to the State Electricity Boards, Power Utilities, State Governments, Rural Electric Cooperatives, Non-Government Organizations (NGOs), and private power developers.
By Shri Vivek Kumar Dewangan
Chairman and Managing Director
Data Collection:
Data is carried from the NSE India site.
Friday closing prices of Nifty50 are followed.
The weekly returns of REC Limited company are followed.
The weekly closing returns of Nifty50 are considered X variable, and the weekly closing returns of REC Limited Company are considered Y variable.
Data collection is done from 1st October 2022 to 30th September 2023.
Weekly returns of Nifty = X
Weekly returns of RECL Equity = Y
Linear Regression was carried out.
Data Analysis:
The Regression equation is RECL = 2.26 + 0.56Nifty50
The above equation shows the relationship between REC Limited’s weekly closing return and Nifty50 weekly closing return.
R-Square = 2.23%
There will be a 2.23% change in RECL due to Nifty50.
Beta= 0.56
P-Value= 0.31
F= 1.07
T-Stat= 1.04
Nifty rises by one rupee then Equity will rise by 56 paise. t-stat for b (co-efficient of Nifty) is
1.04 and the p-value is 0.00, meaning Nifty is statistically significant for Equity at a 31% level. Number of observations are 49. R squared is 0.02, which means that Nifty explains 2% of the change in Equity, which means 98% is the error due to variables not included in the model. F is 1.07 and the p-value is 0.31, which means the overall model is statistically significant at a 31% level.
Conclusions:
Beta is 0.56
Since Beta is 0.56, less than 1, it is advisable to invest for a long time as it is less volatile.
Reference:
https://recindia.nic.in/annual-report-2022-23
https://recindia.nic.in/corporate-profile
https://www.nseindia.com/reports-indices-historical-index-data
https://www.nseindia.com/get-quotes/equity?symbol=RECLTD