We believe the REC Issue comes at a reasonable price based on fundamental value, considering the high visibility of credit demand in the Power Finance sector, RECs strong positioning in the same and its reasonably strong financial performance. At the upper end of the price band of Rs105, the stock is available at 1.3x FY2009E Adjusted Book Value of Rs80.7 and 1.2x FY2010E Adjusted Book Value of Rs90.5. The valuations compare favorably with its closest peer, PFC, which is trading at 1.8x FY2009E Adjusted Book Value of Rs104 and 1.6x FY2010E Adjusted Book Value of Rs117 at the CMP of Rs185. We believe REC can command upto 1.5x 1-year Forward Adjusted Book Value, implying reasonable upside even at the upper end of the price band. Hence, we recommend subscribe to the issue.

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