Thanks Sundeepp. PTC India delivered good set of numbers. Based on concall looking at following drivers in coming 3 - 6 months -
AP HC is expected to give final decision on renewable PPAs. If its favorable then PTC Energy divestment can close quickly.
If AP HC decision goes against renewable energy companies then it will be a set back for PTC as well though the case will go to SC where it will take a few more years.
Pran Urga is likely to start operation before March 2022 and PTC India has not clarified if it will be a trader on their exchange though more than likely. PTC will have few years to build the new exchange and then divest its 25% stake. In interim it can generate good ROE as well.
PTC was chosen as aggregator for Pilot 1 & 2 schemes and at least 1000 MW of capacity is to be signed for medium term. It will take the short term / medium & long term sale ratio to 50:50 which will increase margin.
PTC India has formally suspended PFS divestment. As thermal is now <10% of portfolio hope PFS NPA would not increase and it can deliver steady performance. As its capital adequacy is ~25% new equity is not required for next ~2 years.
Overall if PTC India can continue its performance and generate 300 -400 cr/annum standalone profits then shareholders can get at least 5% dividend yield at current price while business can continue to gain momentum.
PTC India results seem to be good. On Standalone basis the total electricity volume has gone up by ~21% & compared to Q1, short term volumes have reduced by 2% to 55%. Standalone operating margin has increased from 127 cr. to 179 cr. Standalone PAT has grown to 112 cr.
For standalone business medium and long term sale as % of total sale will be a key point to monitor.
On consolidated basis, PEL and PFS have done well. PEL matters as its 100% subsidiary and NP will come to PTC whereas PFS profit will ensure growth without need of additional capital (dilution of PTC stake).
If anyone is attending concall will be important to seek details on AP HC case on renewable tariff, additional medium term deals signed by PTC (some deals signed and tweeted by PTC), divestment timeline for PEL, whether PTC can shift their power trades to Pranurja, timeline for Pranurja going live and reason for significant jump in operating expenses for H1 (~40 cr. increase).
Yesterdays concall addressed most queries except increase in operating expenses for which I suppose will write to IR team.
PTC Energy sale to SJVN is ON and expected to be concluded by April (so conservatively we can consider 2022 ). SJVN deal as per media reports values PEL at ~2,000 cr. enterprise value thus at 70:30 D:E and few years of operation, we can assume at least 600 cr. inflow to PTC which probably will go towards WC as companys dividend policy is to pay 50% out of standalone profits only. Though sale of PEL will remove uncertainty on generation and confirm that management will not venture into unrelated expansion like past years.
Pran Urja Exchange (HEX) is likely to go live by March end. Company avoided to clarify if it can shift its power to HEX from IEX till start of new exchange. This is most important point as it will help company generate (22% of exchange fees) as equity return for itself and most importantly valuation of HEX will depend on volume traded on exchange.
Management indicated that power trading sector has great tailwinds and PTC India is confident of managing the upcoming changes like MBED very well.
PTC India currently holds about ~22.5% of new exchange and timeline for stake reduction is not announced to my knowledge.
(Thinking aloud) why would PTC go through so much pain of setting up an exchange for 5% stake ?
Management was guarded and did not elaborate on its plan for exchange during last call. It will be very good if any one has idea on whats going on new exchange - timeline, products to be introduced and most importantly, can PTC move its volume ?
Most of us think PTC is a dud(PSU) and IEX is the next-gen thing, but let’s get the history, IEX was also Promoted /started by PTC, Why did they divest the stake? I am not sure.
Ptc won’t be able to trade power on HEX (Pranurja) if it holds more than 5 percent stake in it. The two options I see are - either sell stake and trade on HEX or keep the stake and trade on IEX.
Management should evaluate and do whatever is best for the shareholders
On Zee Business, management recently gave tentative timeline for setting up exchange as end of this financial year but they didn’t disclose any details on the product mix
Thanks for sharing. This order pertains to payment of dues at HC directed tariff only.
Hopefully in next hearing HC will rule that state government can’t alter a signed power purchase contract and has to pay the agreed tariff. Also (hope) HC will order state govt. to pay past dues asap with interest.
The impact of corporate governance issue at PTC Finance level, is something to watch. Todays’ PTCs disclosure is vague and dosent provide much confidence.
My personal view is that letter from independent directors of PTC Finance has number of issues relating to corporate governance but not much on fund mismanagement. The concern is about future NPAs due to sanctioning of loans on terms which are different from ones approved by Board.
As the issue is open now, PFS and PTC, as government entities, will have to take strong action. Closely tracking actions and timeline as I hope PTC reacts with urgency (though the independent directors letter shows that the mail was marked to PTC CEO by 15th December and he did not take any action on matters raised).
Was reading more about the business and I find that standalone, its doing very good and seems that will continue. But I dont understand the reason behind spoiling the return ratios for shareholders with these subsidiaries. Though divesting PEL is still on the cards, from Nov 2021 concall it seems that PFS idea has been put a pause.
PFS is only adding a small 65% income to consolidated statements but comes along with 800 cr interest cost for last year. I dont understand why they need this businses
PTC India Finance independent directors appointment has been done. So hopefully in coming days there should be Q3 results for PFS and in turn for PTC India.
AP High Court result is favorable for PTC Energy as well. Its bad that there has been no update from PTC management on PTC Energy sale.
PTC has made a press release according to which HPX is expected to commence operations within the next 60 days. Includes other business updates as well.
). SJVN deal as per media reports values PEL at ~2,000 cr. enterprise value thus at 70:30 D:E and few years of operation, we can assume at least 600 cr. inflow to PTC which probably will go towards WC as companys dividend policy is to pay 50% out of standalone profits only. Though sale of PEL will remove uncertainty on generation and confirm that management will not venture into unrelated expansion like past years.
