PTC India

Stock Opportunities
1

Hii,

This is my first post on this forum… I might have put in wrong section…

PTC India is a stock i am looking at with my thesis of getting atlest 3 times return in 2 to 3 years due to gross under valuation and market sentiments…

Current price at Rs. 42

2 to 3 yrs view of Rs. 120

5 yrs view of Rs. 200

IPO came at abt 16 Rs. in 2004 and listed at abt Rs. 30 during that times…

52 week high and low is 118 and 38 respectively…

Life time high of Rs. 201 and low of Rs. 27

Optimistic view

I dont have much research to post but on gross basis at todays market cap of 1200 crores…

Cash and bank balance of abt 700 crores…

60% in stake in PTC Financial services of abt 350 crores…

Yearly profit of abt 140 crores and eps of 5 Rs and dividend paying…

Other subsideries PTC Energy trading in coal…

Investment in power exchange and coming up with new PE Fund

Pessimistic view

Abt 1100 crores dues pending from electricity boards of Tamil nadu and UP…

Where can things go wrong…

Captial protection is must in this times of uncertainity…Being a PSU and with history of abt 10 years there is no default in payments…Even in the current scenario company is sure of recovering dues by Q1 FY13 with interest of 15% p.a…On a personal note i am sure that there would be no defaults but late payments that is affecting there working capital requirments and affecting balance sheet…

What are the right things…

More power for long term is being added every year from this year onwards…i am not sure but looking at growth of 20 to 25 % from next year for atleast 3 to 5 yrs and an average growth of 15 % atlest for next 10 yrs…

Zero debt and no heavy money requirements in future…

Comapny has covered whole chain from financing to supplying coal to trading with little to risk to itself…this is the best thing about the company…

Trading with different neighbouring countries is gonna be very big thing where we have just started…

Few research reports…

http://indiaer.blogspot.com/2011/12/ptc-india-tp-inr125-buy-motilal-oswal.html

Seniors and other members can please post there views and correct me with the scenario i am not looking at and advise on investment in this stock…

2
The conference call on 21stJan'14 and was addressed by Mr. Deepak Amitabh Chairman

Key highlights by Capital Mkt

During Q3 FY'14, a total of 8236 MU of power volumes were traded by PTC India, which was up by 40% y.o.y. This comprises of about 5137 MU of short term trading, 1156 MU of cross border, 1171 MU of long term, 342 MU of Medium term and 428 MU of Long term PPA's.

The company has received all its dues including surcharge from UP SEB and nothing is outstanding from there. However, about Rs 260 crore is still outstanding from TN SEB which is still not received by the company. PTC India has gone into arbitration as to why the TN SEB is not responding to its replies of recovery. Management is hoping to recover it in this calendar year.

About 11GW of long term volume is what the company has firmly tied up with and is working on actively to convert them into power sale agreement. As on date about 7 GW of long term PSA have already been executed.

PTC India has also commenced supply of about 250 MW power to Bangladesh from Dec'13 onwards. Thus Bangladesh is yet another country that is added to list of cross border power transfer apart from Bhutan and Nepal.

Average blended margins for the company works out to around 3.9-4 paisa per unit.

Other income comprises of dividend and interest income from surplus funds.

With regards to recent actions of tariff cut by some of the SEBs, management has indicated that this may be due to elections round the corner and hence it's difficult to comment. Only after elections, long term picture can be found out as regards the intention of SEBs.

Cash and cash equivalent of about Rs 781 crore as on Dec'13 is with the company. Since the company is signing more and more PSA which are long term in nature, the working capital requirement of the company will also increase going forward. Hence management has indicated that it would use the surplus funds in a conservative way keeping in mind the dividend of the shareholders.

Management expects to end the year with a decent volume growth. Already about 28 billion units of volume has been traded and the year FY'14 should see total volume of more than 35 billion units.

Overall, with long term PPA's and PSA's getting firmed up, management is confident of a sustainable volume growth in future.

3

Ravjit/Hemant,

Do you guys track it or own it? I have taken a small position and it seems we may have good upside down the line if power sector reforms happen.

Regards,

Raj

4

I think stock will see an upgrade because of reforms but I have it more as a trading call… Since better companies are available with better growth for next 3-4 yrs

5

Thanks Navtej for your views. At a high level I feel this is a good play on recovery as no economy can recover without recovery of power sector. I have started digging deeper and finding interesting facts. I have taken a position(5% of my portfolio) and would increase more if conviction gets better in next couple of weeks.

Below is the link of one interesting interview from the CMD.

Power trading can be risky without adequate net worth: Deepak Amitabh

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the link is below:

http://www.smartinvestor.in/market/interviews-251154-interviewsdet-Power_trading_can_be_risky_without_adequate_net_worth_Deepak_Amitabh.htm#.U7rELBArrj8

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Basics of Power Trading: Primer for those interested

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@raj

PTC from this level can still be used as trading bet as Navtej has pointed out. As in the link mentioned above the directors talk about decreasing competition which is positive, power trading should increase with new government, better financial health of SEB and power trading with neighboring countries could also come in more in coming years. it is still good bet for a year or 2…

I have exited way before as i feel valuepickr portfolio and some other stocks are good business than PTC…

9

Thanks Rajvit for your views.

10

Hi,

I too am a shareholder of PTC. I think profits are gonna go up only in future because of some much generation capacity coming up, PSAs and PPAs getting signed up and India will remain a power deficient country for long. Also PFS, subsidiary ofPTC, is doing good.in June Qtr, their profits gotshot up. Only thing is seea bit hurting is if electricity rates go up, margins from PSA/PPA can go down, what do u all think?

Thanks

Ashish

11

There is a talk of future prospects and if they will be comparablewithother companies. I am invested in this company (rs 69 or so) for some time. Recently I went to check if I can sell this one. This is what I found…

1). At Rs 81 CMP the market cap is Rs 2400 Cr

2). it has 60% stake in PTC financials services whose market cap is Rs 2470 Cr. That means PTC India’s stake is Rs 1440 Cr. PTC financials does not look very expensive so should hold the valuation.

3). PTC India has Rs 500 Cr cash on books.

4). PTC India made Rs 251 Cr NP and 234 Cr FCF in 2014. And one can assume that they will maintain it if things remain same or improve from here on.

5). So you are really paying Rs 500 Cr for FCF of Rs 234 Cr. Not such a bad deal. Decent margin of safety.

6). As this is asset light business the balance sheet looks very liquid.

7). They are investing in new power projects and signing many agreements to purchase and sell power. This should prove accretive and should help going forward.

8). On the other hand their customers are state electricity boards which isrepulsive and comewithall sorts of risks. But then good valuation should cover this to large extent.

12

There is a talk of future prospects and if they will be comparablewithother companies. I am invested in this company (rs 69 or so) for some time. Recently I went to check if I can sell this one. This is what I found…

1). At Rs 81 CMP the market cap is Rs 2400 Cr

2). it has 60% stake in PTC financials services whose market cap is Rs 2470 Cr. That means PTC India’s stake is Rs 1440 Cr. PTC financials does not look very expensive so should hold the valuation.

3). PTC India has Rs 500 Cr cash on books.

4). PTC India made Rs 251 Cr NP and 234 Cr FCF in 2014. And one can assume that they will maintain it if things remain same or improve from here on.

5). So you are really paying Rs 500 Cr for FCF of Rs 234 Cr. Not such a bad deal. Decent margin of safety.

6). As this is asset light business the balance sheet looks very liquid.

7). They are investing in new power projects and signing many agreements to purchase and sell power. This should prove accretive and should help going forward.

8). On the other hand their customers are state electricity boards which isrepulsive and comewithall sorts of risks. But then good valuation should cover this to large extent.

13

May be you forgot to count the debt of Rs 4500 Cr in the books of PTC

14

On a stand alone basis PTC India has Rs 2.48 Cr long term and Rs 1204 Cr current liabilities. On its own it doesn’t look that bad. But the consolidated balance sheet shows Rs 4500+ long term debt.

The debt is mostly on subsidiary books and can be seen in consolidated balance sheet of PTC India. We should look carefully at balance sheets of both PTC subsidiaries and see what we find. Hope to find some time in next couple of days to do it.

I need to decide if I stay put or add more or sell this stock. It is smaller portion of my portfolio and totally neglected for the last couple of years. Further analysis and insights will help take a call.

1 Like
15

girish D

Consolidated balance sheet will show higher LT Debt bcos of debt in the financial arm ptc fin services. So optically debt may seem big. Same is the case with one of the stocks I am invested in viz. tube investments where consolidated debt appears high due to debt of Chola Inv and fin.

16

Is this the active thread for PTC India? I see many threads for this company on Forum.