Multi Baggers

Aditya Birla Money

5.30 AM Jan 1st 1970

PTC India Fin

BSE ID : 533344 NSE ID : PFS

RECOMMENDED PRICE 14.25

PEAK FROM RECO 73.15 413.33%

CURRENT PRICE 30.90 Resource id #15

Net Profit after tax for the current quarter increased 914.3% YoY (155.8% QoQ) to Rs 579.0 mn from Rs 57.1 mn for Q3FY11 and Rs 226.4 mn for Q2FY12.

PTC India Financial Services

Key Highlights

Net Profit after tax for the current quarter increased 914.3% YoY (155.8% QoQ) to `579.0 mn from `57.1 mn for Q3FY11 and `226.4 mn for Q2FY12. During the current quarter, PFS has concluded the sale of its stake in Ind Barath Powergencom Limited and has realized a gain of `478.6 mn (total gain of `607.3 mn recognized in nine months ended 31st December 2011) which aided growth in net profit. If excluded for gain on sale of investment and tax thereon, PAT amounts to `171.1 mn for Q3 FY12 compared to `57.1 mn in Q3FY11 and `116.3 mn in Q2 FY12 (growth of 199.6% YoY and 47.1% QoQ).

Outstanding loan book as on Q3FY12 was `10.65 bn as against `9.87 bn on Q2FY12 and `6.00 bn as on Q3FY11, registering a YoY growth of 77.5% (7.9% QoQ). The total effective debt sanctions as at the end of Q3FY12 aggregated to `49.79 bn compared to `33.34 bn at the end of FY11, recording growth of 49%. Post Q3FY12 till date, the company has further sanctioned loans of `12.63 bn to 9 power projects which included both conventional and renewable projects. The management has indicated that there is increasing number of proposals for mezzanine/short-term funding and for renewable projects, which may result in to quicker disbursement going forward.

Pursuant to the stake sale in Ind-Barath Powergencom Ltd during the quarter equity investment book stood at ~4.2 bn as against ~4.65 bn at the end of Q2FY12. Post Q2FY12, the Company has executed necessary agreements for divesting its part stake in Indian Energy Exchange Limited and is awaiting the FIPB approval for the same. The company plans to take its equity investment book to ~5 bn by the end of the current fiscal.

NIM during the quarter stood at ~8.1% (excluding interest on fixed deposits) as against 5.8% for Q2FY12 and 6.9% for Q3FY12. The expansion in NIMs was largely on the back of lower cost of borrowing through ECBs and deployment of IPO proceeds during the quarter. The overall yield on assets during the quarter increased by ~66 bps as against a decline of 47 bps in the cost of funds. Consequently, the spread during the quarter increased by 113 bps sequentially. The company has further headroom to raise funds upto $55 mn through ECB in the coming quarters. The management expects share of bank borrowing to come down going forward to ~20.0% by FY14E, while NCDs, ECBs and infrastructure bonds are likely to constitute around 40.0%, 30.0% and 10.0% respectively.

Asset quality continued to remain strong with Nil NPA as of Q3FY12. The management is confident to keep asset quality under check going forward. The management do not foresee any restructuring in any of the projects in which the company has an exposure.

Outlook & Valuation:

We believe there is value in the company considering its equity investment book and zero exposure to distribution companies. However, environmental clearance, fuel security and linkages, long term PPA�s and overall timely execution are critical to the success of projects and therefore its Equity and debt investments. We have reduced our target multiple for loan financing book to 0.7x for FY13E considering various concerns that is currently prevailing in the power sector. Added to this, we have also applied a discount of 10.0% to our earlier valuation of the company�s equity investment book taking into consideration the inherent risk in private equity type model and the current apprehensions in the sector. Consequently, our revised target price stands at `22.0, implying an upside potential of 56.3% from current levels.

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