PTC India Financial Services...Sleeping Lion

Company: PTC India Financial Services Limited (BSE code: 533344)

Industry: Financial Services 

Recommendation: Buy at CMP of 40 range. Allocate nor more than 10% of your portfolio

Investment Horizon: Strict Holding for at least 3 years (This may not generate the immediate return in the short term)

About the Company:

PFS has been promoted by PTC India Ltd (PTC) registered with RBI as a NBFC. It is a systemically important non-deposit taking NBFC classified as “Infrastructure Finance Company (IFC)” by RBI and is listed on the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited. PFS, being an IFC, is engaged in the business of making investments in, and providing financing solutions to companies with projects in the power sector and related areas across the entire energy value chain.

It is a Subsidiary Company of PTC india Ltd

The business model and commitment of PFS is to partner in infrastructure development and support the Power Sector by catering to the financial requirements

PFS strongly believes in partnering and forging strong relationship with credible stake holders to provide complete financial services for all links in the energy value chain.

PFS is structured as a ‘one-stop shop’ for financing of power projects over the project life cycle. The USP of PFS lies in its ability to undertake risk analysis of power projects and add value by mitigating those while structuring the financial product in an expeditious timeframe following a highly professional approach.

To provide investment and Financing of Power and Related Infrastructure

• Debt financing
• Equity financing
• Structured products
• Fee based services – Underwriting, Loan syndication, advisory
  

For Greenfield and brownfield projects, providing capital for expansion activities, Investing in projects across energy value chain

Eligible Projects in energy value chain: Projects in Power Generation, Transmission and Distribution, Lighting, Energy Meters, Switchgears, Switchboards, Transformers, Cables, Fuel Supply, Fuel transportation, Cogeneration plants in various manufacturing entities, Oil and Gas Sector comprising of Gas fields, Refining of Crude Oil, Gasification, Re-gasification, Liquefactions plant, Gas Pipelines, Development of Coal mine, Ports, Energy conservation and other sectors related to infrastructure within the entire energy value chain which may be approved by the BOD.

Eligible projects in specified infrastructure sector: PFS may consider financing of Infrastructure projects other than eligible projects in the energy value chain in the following peripheral areas:-

• Roads
• Ports – Green field & brownfield ports.
• Infra Logistics Services – Development of Container terminal, Road or Railway line connecting port & hinterland, Railway Sidings, Private Railway Fright Terminals (PFTs) etc.

Pros and Notable Points:

• PFS is highly valued by project developers and is considered by them as a most preferred financial partner.
• Knowledge driven management with a deep understanding of Indian power sector
• PFS becomes the first institution in India, to sign IFC’s Master Cooperation Agreement
• Promoter PTC india ltd is holding 65%.
• CRISIL has given a very high rating for both short term and long term (A1+)
• Diversified business operations, also focusing on renewable space. Lot of State governments are proactive in adopting renewable energy as an alternative use. Demand for renewable energy in the coming years grows at a compoundable rate. The country is talking of 1,00,000 megawatt through solar energy by 2022. By that time India will become the largest solar producer in the world – said by RM Malla PTC
• There are NIL NPAs in renewable sector
  
• Available at an attractive valuation of P/E of 7.4
• The Stock is down from 52 week high of 50.75

 Cons:

• Concentrated Business and Industry risk (Power sector)
•  Interest rate risk (from RBI side) 
• Quality of receivables is testable

Financial Highlights:

• PFS is one of the promoters of India's first power exchange viz. Indian Energy Exchange and currently holds 5% equity after phased divestment of 21% stake in the exchange. The exchange holds more than 90% market share.
• Equity Investments worth 194.5 Crores were made in East coast energy private limited and R S India wind energy private limited with a total capacity of 1420 MW
• Approx. 14% equity in stage I of 2*660 MW thermal power project in Andhra Pradesh. The project is under construction.
• 37% equity in a 99.45 MW wind power project in Maharashtra. Phase I of 41.25 MW has been commissioned and Phase II is under development
• As on 30th September 2016, PFS has sanctioned approx Rs 18,200 Crore in form of Long term and short term debt assistance to various power projects
• Board has recommended dividend of Rs.1.5 per equity share which represents the dividend yield approximately 5%
• Revenue has grown at a CAGR of 65% in last 5 years
• Net profit also has grown at a CAGR of 60% in last 5 years and the maintains the Return on equity at 18% in last 3 years

Narration	2012	2013	2014	2015	2016	2017
Sales	307.18	286.29	546.16	801.91	1,186.93	1,350.78
Expenses	32.28	20.56	36.01	135.13	121.07	175.12
Operating Profit	274.90	265.73	510.15	666.78	1,065.86	1,175.66
OPM	89.49	92.82	93.41	83.15	89.80	87.04
Net profit	154.04	104.16	207.72	160.88	391.10	345.33
EPS	2.74	1.85	3.70	2.86	6.96	5.38
Price to earning	5.98	7.65	4.15	19.92	5.45	7.37
Price	16.38	14.17	15.33	57.01	37.95	39.65

Management:

• Shree Deepak Amitabh – Chairman
• Dr Ashok Haldia – MD and CEO (Chartered Accountant)
• Dr Pawan Singh
• Shri Ved Kumar Jain
• Shri Ajith Kumar
• Mrs Pravin Tripathi
• Shri Arun Kumar
• Shri K Biswal

Rating:

• Technical Rating: 52
• Fundamental Rating: 83
• Overall rating: 68

  

Valuations:

With the investment horizon given, considering all the inputs of estimates the valuations are at Rs.245

(The valuations are calculated on the basis of financial inputs but investors are required to invest based on the business potential and business risks too) 

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