Competitive Advantage of PTC Financial Services

I was looking at PTC Financial services and I am having a tough time figuring out what is the competitive advantage of PFS.

Has anyone here looked at PFS in details. Can you please share your thoughts about the company?

I see that there are no replies so I’ll go ahead.

Firstly, being a Govt of India enterprise it has access to tax free bonds, which gives it a lower cost of debt.

Secondly, and this is its “moat” - it makes loans to sectors which banks RUN away from and no NBFC addresses.

“We have given virtually veto power to our risk department and of four-five proposals which come for our consideration, one passes the muster. Because the market is so large, we can be choosy. We have done the reverse thing – we choose the client whom we should go and in fact we market our products to good clients and that is how we are getting whoâs who of the world partnering with us.” in an interview

In lenders the main source of a competitive advantage is the fact that they can lend to an under served or unpenetrated sector OR they have a low cost of funds (banks with high CASA)…

So Shriram can lend to CV financiers and make a lot of money, SKS to rural areas. For another company to lend in this region they need significant expertise in the region and it will take them time to come up with an effective business model.

Therefore, I would say PTC Financials DOES have a significant competitive advantage which should endure for a long time, though it is not impenetrable like an ITC I believe it will sustain as India is so severely capital starved lending to renewable energy is not really anybody’s priority.

I believe this is reflected in the margins and ROA of PFS:-

He’s been doing an ROA of around 3.8ish% (which puts in the ballpark of Bajaj Finance)

and spreads of around 4.5%

Therefore, I am extremely bullish on PTC Finanicals as it ticks all the boxes for me:-

his loan book is going to grow at a CAGR of 35%


ROA of 3.8

strong NIMs

25% Tier 1 capital

… trading at 2x FY16 BV (so a 50% discount to players like Bajaj Finance, while posting slightly better numbers)

As you may have guessed I am incredibly bullish.

Therefore it is safe to assume I have a vested interest, so please do your own research before buying this.

I’m also probably very biased, so I look forward to hearing contrasting view points.

Thank you Yash, appreciate your inputs.

Looks like I have some more research to do about PTC Finance.

I am attaching the technical view point on PFS recently given by a friend for your reference