Capitaline

Analyst Meet / AGM 12-Feb-19

Conference Call

PTC India Financial Services

Expects to reduce net NPA ratio below 3% by March 2019, resolve most of stressed assets by March 2020

PTC India Financial Services (PFS) conducted a conference call on 12 February 2019 to discuss the financial results of the company for the quarter ended December 2018. Dr. Pawan Singh, MD&CEO addressed the call:
Highlights:

The total revenue of the company increased 13% to Rs 336.31 crore, while net profit increased 32% to Rs 41.73 crore in Q3FY2019.
The company witnessed pressure on cost of funds with tight liquidity conditions, which increased 40 bps in Q3FY2019. However, the company has passed on the higher cost of funds to the customers, while showing improvement in yield on assets.
The company has raised lending rates by 75 bps in last few months. With the focus on improving margins, the company has been targeting high yield assets, resolution of bad loans and passing on higher cost of funds, while the company has also shifted from reference rate base lending to base rate based lending.
Net Interest Margin (NIM) and stood at 2.88% and Spread at 1.25% for 9M FY2019. Yield on loan assets stood at 9.68%, whereas Cost of borrowed funds is at 8.43% in 9M FY2019.
The loan assets of the company increased 15% to Rs 13390 crore end December 2018 over December 2017. The company has disbursed loans of Rs 697 crore, while there repayment of Rs 500 crore in Q3FY2019.
The total outstanding credit - aggregate of loan assets and non-fund based commitment against sanctioned loans increased 9% to Rs 14465 crore end December 2018. The non-fund based commitment stood at Rs 1075 crore end December 2018.
The gross NPAs declined to Rs 918.54 crore end December 2018 compared to Rs 928.44 crore end September 2018. Net NPA also declined to Rs 425.27 crore end December 2018 from Rs 447.41 crore end September 2018. The company expects further improvement in asset quality in Q4FY2019.
Gross NPA ratio has declined to 6.85% from 6.95% in Q2FY 2019 and Net NPA reduced to 3.29% from 3.47% in Q2FY2019. The company expects to reduce GNPA ratio below 5% and NNPA ratio below 3% by end March 2019.
The overall stressed asset of the company stands at around Rs 1700 crore end December 2018.
Of the stressed assets, the company has resolved 2 assets i.e. Prayagraj and SKS with the exposure of Rs 700 crore and payments are expected to be received by mid March 2019. Actual recovery is expected to be Rs 290 crore for these two projects, while balance is provisions.
The company has also resolved another Rs 150 crore of assets with sale of Rs 90 crore assets to ARCs and payment in balance exposure (Rs 10 crore).
Further, the exposure to RKM of Rs 150 crore is in advance stage of resolution under existing promoter. The debt is expected to be restructured with no significant hair cut
The company also expects to resolve its rest of stressed assets in FY2020. The balance stressed stands at around Rs 750 crore with provisions of 50%. The company expects additional provisions of Rs 100 crore and post tax provisions of Rs 66 crore, in worst case scenario.
The standard asset provision rate stands at 0.5%.The company do not expects significant credit cost ahead.
The exposure to renewable energy stands at 60% of loan book at Rs 8000 crore with no stress and Rs 7500 crore is operational projects.
The share of thermal assets with the company has declined sharply to 17% of loan end December 2018 from 30% two years ago. With the resolution of Rs 700 crore of thermal assets, the company expects the share of thermal assets to decline to single digit in Q4FY2019 and dip to 5-6% by March 2020.
The exposure of the company to IL&FS group stands at Rs 190 crore to Tamil Nadu coal based power project, which is servicing debt on time and has PPA for entire 1200 MW capacity with cash flows.
With sustainable efforts for resolution of stress assets, the company is expecting for reduction in stress assets substantially in coming quarters thereby visualizing positive impact on NIM, interest spread and return on assets (ROA).
The RoA stood at 1.5% for 9MFY2019, while the company aims for 2% RoA.
Within the loan book out of Rs 2880 crore exposure to other sector, Rs 1000 crore is towards transmission, Rs 400 crore roads, Rs 1300 crore distribution and Rs 70 crore ports. Of the cumulative sanctions of Rs 6500 crore to other sector, the sanctions to transmission were Rs 1800 crore, road Rs 2100 crore, distribution Rs 2000 crore, port Rs 100 crore and other corporate Rs 200 crore.
The company has been consciously focusing on low risk high yield projects. The company has sanctioned some assets with higher yields of 11.5-12% and disbursement to these asset is expected to support margins.
The company has been diversifying its loan book to other infra sector. In 9MFY2019, the disbursements to the road sector stood at Rs 1260 crore, renewable energy Rs 1697 crore, transmission Rs 400 crore etc.
About 55% of outstanding sanction are towards renewable energy sector, while the company has sanctioned Rs 2700 crore to holding companies and Rs 4300 crore to other infrastructure sector.

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