REC's profit falls 6.11% YoY as operating margin narrows again
Costs rose far faster than revenue year on year, while lower interest and tax rates supported the sequential profit rebound.
Filed 24 Jul 2026, 17:26 IST · after market close · REC Ltd (RECLTD)
Key takeaways
- Consolidated net profit fell 6.11% year on year to Rs 4,192.76 cr as expenses grew 106.24% while revenue declined 2.05%.
- Operating margin narrowed 1.63 percentage points year on year to 96.90%, but recovered 5.35 percentage points sequentially as expenses fell 63.70%.
- The initial 1.81% stock gain was within REC's usual post-results move, against a median absolute move of 2.08% across its last eight results.
Price around the results
Year-on-year profit pressure despite lower interest
Consolidated revenue declined 2.05% year on year, while operating profit fell 3.67% and profit before tax dropped 7.03%. Interest expense fell 2.09%, but that was not enough to offset the revenue decline and the 106.24% rise in expenses. Other income contributed only 0.66% of pre-tax profit, so reported earnings were not materially supported by non-core income.
Cost spike narrows operating margin
Expenses grew far faster than revenue year on year, reducing operating margin by 1.63 percentage points to 96.90%. The lower tax rate, down 0.77 percentage points, softened the hit to net profit, but earnings still declined 6.11% and EPS fell 6.13%. Compared with 60 Financial Services peers that had reported, REC's operating margin was 34.22 percentage points above the sector median of 62.68%.
Sequential recovery interrupts the margin slide
Revenue was nearly flat sequentially, down 0.89%, but expenses fell 63.70%, lifting operating profit 4.92% and operating margin by 5.35 percentage points. The tax rate also fell 3.13 percentage points, helping net profit rise 24.23% and EPS increase 25.45%. This reverses the margin decline from 98.53% in Q1FY26 through 91.55% in Q4FY26, though the latest margin remains below the year-ago level.
Initial stock response stayed within REC's results pattern
REC gained 1.81% at the first close after the results, with a relative gain of 0.85% against the market. That reaction was close to the stock's recent pattern: it rose after three of its last eight results and fell after five, with a median absolute move of 2.08%. By the fifth session, REC was up 1.80% from the results anchor but had underperformed the market by 2.44%.
Q1FY27 at a glance
Consolidated figures as filed with NSE — cross-checked against an independent source.
| Line item | Q1FY27 | Q4FY26 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹14,435 cr | ₹14,564 cr | -0.89% | -2.05% |
| Other income | ₹35 cr | ₹20 cr | +76.65% | -60.05% |
| Expenses | ₹447 cr | ₹1,231 cr | -63.70% | +106.24% |
| Operating profit | ₹13,988 cr | ₹13,333 cr | +4.92% | -3.67% |
| Operating margin (%) | 96.90% | 91.55% | — | — |
| Interest | ₹8,748 cr | ₹8,931 cr | -2.05% | -2.09% |
| Depreciation | ₹7 cr | ₹7 cr | -1.45% | +1.34% |
| Profit before tax | ₹5,268 cr | ₹4,415 cr | +19.34% | -7.03% |
| Tax | ₹1,076 cr | ₹1,039 cr | +3.47% | -10.42% |
| Net profit | ₹4,193 cr | ₹3,375 cr | +24.23% | -6.11% |
| EPS (₹) | ₹15.92 | ₹12.69 | +25.45% | -6.13% |
Operating margin of 96.90% compares with a Financial Services sector median of 62.68% across 60 peers that have reported Q1FY27.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | +1.81% | +0.85% |
| Next session | +1.89% | — |
| 5 sessions | +1.80% | -2.44% |
Volume on the results session was 1.75× its 20-day average.
What to watch
- Whether operating margin holds above the Q4FY26 level of 91.55%.
- Whether expenses moderate from the 106.24% year-on-year increase.
- Whether revenue growth recovers from the current -2.05% year-on-year change.