Capitaline

Analyst Meet / AGM 27-May-17

Analyst Meet

PTC India Financial Services

Expects to resolve 3-4 NPA accounts with exposure of Rs 300 crore in FY2018

PTC India Financial Services (PFS) conducted an analyst meet on 26 May 2017 to discuss the financial results of the company for the quarter ended March 2017. Ashok Haldia, MD&CEO addressed the call:
Highlights:

The company has posted strong 58% growth in sanctions to Rs 10297 crore, while disbursements moved up 18% to Rs 4179 crore in FY2017. The loan assets of the company grew 23% to Rs 10610 crore end March 2017 from Rs 8634 crore end March 2016.
The non-fund based commitment to be disbursed in coming quarters jumped more than six times to Rs 1732 crore end March 2017 from Rs 273 crore end March 2017, fueling the overall credit growth (fund+non-fund) by 39% to Rs 12342 crore end March 2017 over March 2016. The company expects to maintain overall credit growth above 30% in FY2018.
As per the company, the borrowers in the renewable energy sector initially prefer the non-fund exposure in terms of letter of credit with their plant suppliers providing sufficient credit period that helps them to reduce interest cost burden. This non-fund exposure is later getting converted into loans.
The renewable sector accounted for about 80% of the fresh sanctions and two-third of disbursements in FY2017. As per the company, the disbursement in the solar power sector happens only after power purchase agreement (PPA) is signed.
The share of renewable power segment has increased to 53% end March 2017 from 44% end March 2016. Within renewable power segment, wind power constitutes 55% and solar power at 45%.
The company has been focusing on calibrated diversification into non-power generation segment such as roads, ports, railways, transmission etc. The share of other segments in loan book stood at 22% end March 2017.
The realization of equity investments on books of the company has aided to the earnings of the company. The profit on sale of equity investment stood at Rs 142.61 crore in FY2017 compared with 206.93 crore in FY2016. Normalizing for equity investment gains, the PBT of the company has shown a growth of 20% for FY2017.
With the surge in non-fund based exposure contributing higher fee based income along with healthy growth in under-writing fees, the company has recorded strong 70% growth in fee income to Rs 85 crore in FY2017.
During the quarter, one loan account with an exposure of Rs 125 crore has been re-classified as non-performing asset, causing spike in GNPA ratio to 5.51% at end March 2017 from 4.78% end December 2017. The account is expected to be resolved in FY2018. Excluding this large slippage in Q4, the GNPA stood at 4.43% and NNPA at 2.6% end March 2017.
The company has about 9 accounts in the NPA category with the exposure of Rs 585 crore end March 2017. The company expects resolution of at least 3-4 accounts with the exposure of Rs 300 crore in FY2018.
The restructured advance book of the company stood at Rs 850 crore comprising of 5 accounts end March 2017.
On asset quality resolution front, the company expects pick up in resolution of stalled thermal projects with the implementation of coal linkage policy. The company is expecting new hydro power policy which would benefit the loan accounts in the hydro power sector as the policy would provide renewable power status to hydro power.
The company also expects the banking ordinance and bankruptcy code to help expedite bad asset resolution in FY2018. The company is planning to take action in case of two accounts under bankruptcy code which mandates account resolution within 180 days.
The company has taken possession of collaterals in case of 2 NPA accounts, while the court has ordered serious action against promoter in case of another NPA account.
The capital adequacy ratio (CAR) of the company was strong at 24.09% end March 2017. As per the company, it would decide about capital raising after CAR declines below 18%.
The rising exposure to renewable energy project is beneficial from capital conservation front, as these projects have very short completion period of 8-12 months and the lpost-completion oans carry lower risk weights of 50% against 100% for projects under implementation.
The fall in solar power tariff is on expected lines, while its expected to further decline as the price for solar module delivery for September 2018 stands lower at US$ 0.23 against current cost of US$ 0.30. As per the company, the falling solar tariff is a concern, but the project facilitation from the government has substantially reduced the costs for developers improving viability of the solar power projects.
The company has been showing consistent pressure on margins with the declining interest rates scenario. The Net Interest Margins (NIMs) of the company declined to 5.26% in FY2017 from 5.98%, while spreads have narrowed to 3.31% from 4.02%.
The interest income reversals of Rs 18 crore in Q4FY2017 (on slippages of one account of Rs 125 crore) and Rs 32 crore in FY2017 have also contributed to the decline in margins in FY2017.
As per the company, the margins would remain under pressure in FY2018, while the spreads of 3.3% to 3.5% are still better than the market average.
All bank borrowings of the company have shifted to MCLR based rates, which is expected to benefit cost of borrowings in FY2018.
On equity investment book front, in case of RS Wind with 50% capacity on steam, the company has initiated criminal action against promoter and also made full provision on the investments. In case of East Coast Energy, the project is 38% implemented. Delay in implementation has led to some provision for investment depreciation.

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