PTC Financial - A Temporary Pause in the Structural Story

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  • Update Report
  • 4-Jun-2015

We recommended PTC Financial at the price of Rs. 34 per share in July’14 (click to read the first report) PTC Financial based on its strong growth prospects in the energy sector. Post that, the new Government announced its mega plans to increase investments in renewable space.

Based on that, we further recommended accumulating at Rs. 55 levels with time horizon of two years (click to read the second report) - PTC Financials: Renewed Opportunity.

Recently, the company reported weak set of results for Q4FY14 on account of slower growth and deterioration in asset quality. Detailed analysis of the issue suggests that these may be one-off in nature and company will return to normal profitability from next quarter. The sharp fall in stock price could be used as an opportunity to BUY by investors who missed buying earlier. The existing shareholders can continue to HOLD the stock or add some more of it.

Asset Quality Deterioration Confined to Four Problem Accounts
The company reported provisions of Rs. 110 crores for the full year FY15 as against Rs. 22 crores in FY14. This was largely due to four problem accounts - RS India, Konaseema Gas, I-Comm and Shalivana Wind. Below is the detailed explanation on the same.


Even if we were to assume that the entire exposure to these four projects is written off, it results in additional provisioning of Rs. 140 crores. This can be more than off-set by the potential gains that PTC Financial can realize in its investment book and P&L could remain unaffected. Additionally, there are four more projects with exposure of Rs. 200 crores that have been restructured as per RBI’s new dispensation. While they do not pose immediate asset quality risk, we remain vigilant about the same.

Growth to Resume from Q1FY16, albeit at a Slower Pace than previously Envisaged
The company missed its loan book guidance of Rs. 7,500 crores and could only manage to build a loan book of Rs. 6,400 crores. This was largely due to Rs. 700 crores of pre-payments that happened in Q4FY15. While there are reports of competition intensifying in the space, we believe that PTC Financial’s small size and early mover advantage will ensure 25-30% loan book growth for the next few years (earlier thought to be doing higher that this). We also expect some policy announcements from the government to give a boost to investments in the renewable space.

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DISCLOSURES by RESEARCH ANALYST UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014 is as under:
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