REC, PFC Trade 47% Below Graham Number at Under 6x Earnings

The latest FairStock Graham Number screen puts [REC Ltd](/stock/RECLTD) (NSE: RECLTD) and [Power Finance Corp](/stock/PFC) (NSE: PFC) 47.2% below their Graham Numbers. Both trade at under 6x earnings. The margin of safety is identical for the two power financiers. FairStock Scores sit at 76 for REC and 77 for PFC. Those are not euphoric numbers. They are arithmetic signals that the market may be pricing in more distress than the balance sheets currently show. The Graham Number is a conservative value formula: the square root of 22.5 multiplied by earnings per share and book value per share. For lenders this metric treats book value as a floor under a stressed liquidation scenario. A 47.2% discount means the stock price would need to rise almost 89% to touch the Graham Number. That's not a forecast. It's a measure of how far prices sit below a strict accounting anchor. Graham Number Margin of Safety for REC and PFC Why such a gap exists deserves attention. Indian power financing has long carried a discount because loan books are exposed to state distribution companies. Payment delays from discoms have historically pressured cash flows. The late-payment surcharge scheme introduced in 2022 improved payment discipline, but the market still prices these lenders as if the next bad cycle is close. That fear is what keeps P/E ratios under 6. Both [REC Ltd](/stock/RECLTD) and [Power Finance Corp](/stock/PFC) have reported net NPA ratios below 1% in recent filings. Gross NPA ratios remain manageable, though recoveries from old thermal projects remain slow. The loan growth story is tied to India's power sector capital expenditure. That includes transmission lines and renewable capacity additions. Distribution upgrades also feature in new sanctions. These are long-duration assets. The balance sheet reflects that. The parent-subsidiary structure creates another valuation wrinkle. [Power Finance Corp](/stock/PFC) owns a majority stake in [REC Ltd](/stock/RECLTD). Investors c...