KKN Gurugram Desk | Power Finance Corporation Limited (PFC), a state-owned financial institution dedicated to India‘s power sector, has become the center of attention in stock market circles. On Thursday, May 22, 2025, PFC shares witnessed a slight dip of over 1%, trading at ₹405.80 during the day. However, global brokerage firms and domestic analysts remain bullish, with some projecting an upside potential of up to 62%.

The most aggressive target has come from Macquarie, which has set a price target of ₹660 per share, indicating a potential rally from current levels. This sharp forecast is anchored in PFC’s robust Q4 FY25 results, long-term loan growth prospects, and attractive valuation metrics.

 What is PFC and Why Is It Important?

Power Finance Corporation (PFC) is one of India’s largest non-banking financial companies (NBFCs), playing a critical role in financing infrastructure for the electricity generation, transmission, and distribution sectors. It provides long-term and short-term loans to state electricity boards (SEBs), private power producers, and other government-owned utilities.

PFC operates under the Ministry of Power and is pivotal in enabling India’s energy infrastructure expansion, especially under schemes like:

• Revamped Distribution Sector Scheme (RDSS)

• Renewable energy transition projects

• Smart metering and grid modernization

Given its strategic role and consistent profitability, PFC remains a preferred stock in many public-sector-focused investment portfolios.

 Analyst Recommendations: Buy Across the Board

Despite the recent dip in share price, all 12 analysts covering PFC have maintained a ‘Buy’ recommendation. Their confidence stems from the company’s:

• Better-than-expected Q4 earnings

• Sustainable net interest margins (NIMs)

• Conservative guidance, which many believe PFC will exceed

• Sound asset quality and healthy provisioning buffers

Key Brokerage Targets:

 Q4 FY25 Results: Strong Growth Surprises Analysts

PFC’s Q4 FY25 earnings were a positive surprise across key performance metrics, including:

• Loan book expansion

• Net interest income (NII) growth

• Profit before tax (PBT) and net profit

• Low gross non-performing asset (GNPA) ratios

Macquarie noted that PFC “positively surprised the market” with strong financials, keeping it well on track to meet or exceed its FY26 loan book growth guidance of 10–11%, compared to the broader market expectation of 13%.

“Despite conservative growth guidance, execution has been consistent. This makes PFC a solid pick for investors seeking steady compounding,” says an Emkay Global analyst.

 Recent Stock Performance: Why the Dip?

In the last one month, PFC shares have declined by around 6%, which analysts attribute to:

• Profit booking after a strong rally earlier in FY25

• Sector-wide rebalancing amid volatile crude oil prices

• Short-term uncertainty around rate hikes and inflation

However, this temporary correction has made the stock even more attractive in valuation terms. Analysts say the current price offers a great entry point for long-term investors, especially considering the high dividend yield and strong fundamentals.

 Valuation and Margins: Why Analysts See Upside

At the current price of ₹405.80, PFC trades at:

• A Price-to-Book (P/B) ratio below 1

• Dividend yield of over 5.5%

• Return on Equity (RoE) above 15%

Emkay Global’s updated note stated:

“The valuation is compelling. PFC is pricing in loan growth moderation, but not the structural improvement in its cost of borrowing and operating efficiency. With margins stable and loan growth steady, the rerating potential remains intact.”

 Sectoral Trends Supporting PFC’s Growth

India’s power and energy sector is undergoing a massive transformation, driven by:

• Renewables: Ambitious targets of 500 GW of non-fossil capacity by 2030

• Transmission: Infrastructure upgrades for solar and wind power

• Distribution: Government-backed reforms to reduce DISCOM losses

• Electrification of rural areas and e-mobility support

As a key financier in all these areas, PFC stands to benefit directly from increased capital demand in the energy space. The company is also playing a role in energy storage and green hydrogen projects, further diversifying its loan book.

 Government Backing and PSU Stability

Being a government-owned enterprise, PFC enjoys:

• Access to cheaper borrowing from sovereign-rated institutions

• Policy-driven business stability

• High credibility among institutional investors

While some investors remain cautious of PSU stocks due to bureaucratic delays or policy shifts, PFC has historically outperformed on operational metrics compared to other public sector NBFCs.

 Should You Buy PFC Stock Now?

For retail investors wondering whether this is the right time to invest in PFC, here’s what to consider:

 Why You Should Consider Buying:

• Strong Q4 financials with double-digit loan growth

• Consistent dividend payouts (5–6% yield)

• Strategic role in India’s energy transition

• Trading at undervalued levels with high upside potential

• Positive sentiment from all major brokerages

 Points to Watch Out For:

• Rising interest rates may impact net interest margins

• Political influence due to PSU status

• Any unexpected delay in power sector reforms

If you’re a long-term investor looking for a high dividend, low-risk, value-driven PSU stock, PFC could be a strong addition to your portfolio.

 Near-Term Triggers to Watch

• Government budget allocations to energy projects in July 2025

• Further policy announcements on green energy financing

• PFC’s AGM in Q2 FY26 for dividend updates and growth outlook

• Potential rating upgrade from agencies based on FY25 performance