REC and PFC Trade at Half Their Graham Value

REC and PFC: When the Numbers Are This Loud, You Listen There's a version of value investing that requires patience, narrative, and a certain tolerance for ambiguity. Then there's the version where the spreadsheet just stares back at you. [REC Ltd](/stock/RECLTD) and [Power Finance Corporation](/stock/PFC) are firmly in the second category right now. Both PSU lenders are trading at roughly half their Graham Number fair values — ₹335 against ₹662 for REC, and ₹376 against ₹783 for PFC — producing a 47.2% margin of safety that is difficult to dismiss as noise. The Graham Number, for those unfamiliar, is a back-of-envelope ceiling price derived from a stock's earnings per share and book value per share. Benjamin Graham designed it as a conservative upper limit, not a price target. When a stock trades at half that ceiling, it's not a subtle signal. P/E ratios below 6 for both companies compound the point. India's broader Nifty 50 trades north of 20x earnings. These two are at a fraction of that. FairStock's proprietary scoring model puts REC at 76 and PFC at 77, both comfortably above the Financial Institution sector average of 66.2 across six screened companies. High scores paired with deep discounts to intrinsic value don't appear together often. When they do, the data deserves a closer read. What's Driving the Discount in PSU Lenders REC and PFC aren't obscure micro-caps with governance question marks. They are government-backed infrastructure financiers with mandates tied directly to India's power sector build-out. REC's loan book has grown steadily on the back of renewable energy disbursements, and PFC's exposure to state distribution companies (DISCOMs) and generation assets gives it a near-captive pipeline. Both reported strong earnings in FY24, with net interest margins holding up despite a rising rate environment that squeezed many private sector NBFCs. So why the discount? A few things. PSU financials carry a structural valuation penalty in Indian market...