Power Finance Corp: Should it Be in Your Portfolio in 2025?

The Power Finance Corporation (PFC) is one of India’s leading financial institutions that offers financial assistance to the power sector. As an NBFC (Non-Banking Financial Company), it funds power projects, thereby supporting energy generation in the country.

PFC is one of the most reputable dividend-paying companies in the stock market and has built a huge number of investors over the years.

But is it a good investment for 2025? This article examines its financial performance, recent developments, and pros and cons to help you decide if PFC deserves a place in your portfolio.

Recent Financial Performance of PFC

​Power Finance Corporation has demonstrated strong financial performance in recent periods.

In the third quarter ending December 31, 2024, PFC reported a consolidated net profit of ₹7,759.56 crore, marking a 23% increase from ₹6,294.44 crore in the same period of the previous year. Revenue from operations rose by 14% year-on-year to ₹26,798.04 crore.

The company’s net interest income (NII) grew by 12.9% to ₹4,694 crore during this quarter. Asset quality remained stable, with gross non-performing assets (GNPA) slightly improving to 2.68% from 2.71% in the previous quarter, and net NPA (NNPA) at 0.71%.

Additionally, PFC declared a third interim dividend of ₹3.50 per equity share for FY25. ​

Recent Developments of PFC

​In recent developments, Power Finance Corporation has undertaken significant initiatives impacting its financial strategy and shareholder value:​

1. Fundraising Initiatives

PFC has approved a substantial fundraising plan for the fiscal year 2025-26, aiming to raise up to ₹1 lakh crore through various financial instruments, including bonds, term loans, and commercial papers, across domestic and international markets.

This strategic initiative is designed to enhance PFC’s liquidity and support its financing activities within India’s power sector.

With PFC serving as a constituent of the Nifty Financial Services Index – FINNIFTY, these initiatives are expected to enhance its financial flexibility, thereby potentially influencing the overall performance of the financial sector.

2. Dividend Declarations

​In its recent board meeting, Power Finance Corporation declared a fourth interim dividend of ₹3.50 per equity share for the fiscal year 2024-25, with a record date set for March 19, 2025, and payment expected by April 11, 2025.

This brings the total dividend for FY25 to ₹12.75 per share, reflecting a dividend yield of approximately 3.45%.

Following this announcement, the Power Finance share price experienced a slight uptick, trading at ₹395 on the BSE around 1:20 PM on the day of the declaration. ​

Pros and Cons of Investing in PFC

PFC requires a balanced assessment of its advantages and potential drawbacks. Here’s an analysis of the key pros and cons:​

Pros:

• Attractive Valuation: PFC’s stock is trading at approximately 1.17 times its book value, indicating a potentially undervalued position relative to its assets. ​
• Impressive Dividend Yield: The company offers a dividend yield of around 3.46%, providing traders with a steady income stream. ​
• Consistent Dividend Payout: PFC has maintained a healthy dividend payout ratio of 22.4%, reflecting its commitment to returning profits to shareholders.

Cons:

• Modest Sales Growth: Over the past five years, PFC has experienced a sales growth of 11.1%, which may be considered modest compared to industry peers. ​
• High Debt Levels: PFC’s debt-to-equity ratio stands at 8.52, indicating a substantial reliance on debt financing. While common in financial institutions, high leverage necessitates careful management to mitigate associated risks. ​

So, despite concerns over high debt and modest sales growth, PFC’s attractive valuation, consistent dividend yield, and strong ROE make it a compelling consideration for traders seeking stable returns in the financial sector.​

Conclusion

​Power Finance Corporation (PFC) has been a key player in India’s power sector, offering consistent dividends and a strong market presence. However, recent performance also indicates challenges, with the stock underperforming its sector and trading below key moving averages. Investors should weigh these factors and consider their individual financial goals and risk tolerance before including PFC in their 2025 portfolio.​