PTC INDIA
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Date: Feb 20, 2024, (Price: ₹ 197.25)
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PTC India Limited: Empowering the Energy Landscape
With a legacy of excellence and a forward-looking approach, PTC India and its subsidiary companies remain at the forefront of driving innovation and sustainability in the power and financial sectors. Armed with robust infrastructure, steadfast partnerships, and a commitment to customer-centric solutions, PTC India is poised to continue its journey of empowering the nation's energy landscape for years to come.
Incorporated in 1999 with the noble vision of supporting the implementation of the government's mega power policy, PTC India stands as a stalwart in the power trading arena. Backed by esteemed promoters such as NHPC Ltd, NTPC Ltd, Power Finance Corporation Ltd, and Power Grid Corporation of India Ltd, PTC India embodies reliability and excellence in the energy sector.
Pioneering Power Trading: Bolstered by a Category I license issued by the Central Electricity Regulatory Commission under the Electricity Act 2003, PTC India holds the distinction of being the largest player in the power trading market. With a commanding share of over 35% in fiscal 2023, PTC India facilitated the trading of approximately 71 billion units of power, demonstrating its unparalleled prowess in the industry.
Diversified Group Companies:
1. PTC India Financial Services Limited (PFS): PFS, a listed subsidiary of PTC India, was incorporated in 2006 with a mission to provide robust financial solutions in the infrastructure sector. PTC holds a significant 64.99% stake in PFS, underscoring its commitment to financial empowerment. Despite the challenges posed by fiscal 2023, PFS recorded commendable financial performance, with total income reaching INR 797.08 Crores. With a focus on prudent financial management, PFS remains poised for sustained growth under the astute leadership of its Statutory Auditor, M/s. Lodha & Co., Chartered Accountants.
2. PTC Energy Limited (PEL): As a wholly owned subsidiary of PTC India, PEL epitomizes the Company's commitment to renewable energy initiatives. Established in 2008, PEL has emerged as a key player in the renewable energy sector, recording revenue from operations amounting to INR 296.77 Crores in fiscal 2023. Despite the dynamic market landscape, PEL continues to navigate challenges with resilience, as evidenced by its prudent financial performance and strategic direction under the guidance of its Statutory Auditor, M/s. S.P. Chopra & Co., Chartered Accountants.
Business Segments: PTC India Limited is a dynamic player in the energy sector, offering integrated energy services through its subsidiaries. Its core business segments include Power Trading, Renewable Energy, Advisory Services, and Investment services.
Revenue Split:
- Power Trading: Accounted for 94% of revenue in FY21, showcasing the company's dominance in this segment.
- Investment: Contributed 6% to revenue in FY21, reflecting the company's diversified revenue streams.
Business Mix:
- Short Term (Bilateral): 18%
- Short Term (Power Exchange): 37%
- Medium Term: 4%
- Long Term: 41%
Geographical Split:
- India: 96% of revenue in FY21, demonstrating a strong domestic presence.
- Outside India: 4% of revenue in FY21, indicating a growing international footprint.
Market Leadership: PTC India Limited is a market leader with over 40% market share in power trading, facilitating the trading of 80 BUs of power in FY21. It supplies power to 27 States/UTs and has over 500 industrial retail customers.
First in Trading Market: The company pioneered the Electricity Trading concept in India and was the first to start trading in 2002. It co-promoted India's first electricity exchange (IEX) and engages in Cross Border Trade with Nepal, Bhutan & Bangladesh.
Agreements and Project Completion:
- Successfully bid for a medium-term tender for procurement of 142 MW hydro power by New Delhi Municipal Council in FY21.
- Commissioned the 720 MW Mangdechhu Hydroelectric Project in Bhutan in FY21.
Corporate Guarantee and Stake Sale:
- Executed a Corporate Guarantee for Rs. 100 Cr. in favor of working capital lenders of its subsidiary company.
- Sold its stake in Chenab Valley Power Projects Private Limited to NHPC Ltd. for Rs. 4.19 Cr.
Acquisition and Investments:
- In the process of acquiring the Energy Consulting Business of IL&FS Energy Development Company.
- Holds investments of Rs. 569 Cr. in various companies in the Energy and Power industry.
Exchange Platform and Future Focus:
- Filed a petition for obtaining a license for running and operating an electronic exchange platform.
- Operationalizing the Phase-II of the pilot scheme for stressed assets’ resolution in FY22.
- Expanding its technology vertical and developing solutions for the evolving energy market.
- Setting up the third power exchange in the country, Pranurja Solutions Limited, where it holds a 25% equity stake.
With a legacy of innovation, market leadership, and a forward-looking approach, PTC India Limited continues to play a pivotal role in shaping the future of the energy landscape in India and beyond.
Performance Analysis
In the fiscal year 2022-23, PTC India Limited maintained its leadership position in the domestic power trading market despite various market changes. The company's consistent performance was upheld by continuous customer interactions and the provision of innovative solutions, solidifying its status as a front-runner in the industry.
PTC achieved a trading volume of 70,610 MUs during the fiscal year, compared to the previous year's volume of 87,515 MUs. The decline in trading volume can be attributed to various factors, including a reorientation of the business model and a strategic decision to cede low-margin power exchange volumes to mitigate negative impacts on the cost of funds.
Specifically, PTC achieved short-term trading volumes of 37,697 MUs, down from 51,934 MUs in the previous year. This reduction reflects the company's strategic realignment. Long and medium-term trading volumes totaled 32,913 MUs, slightly lower than the previous year's volume of 35,581 MUs, primarily due to the maturity of Pilot Scheme-1 under medium-term contracts.
Despite these changes, PTC maintained its leadership position in terms of overall trading volumes in the power trading market. The company's short-term bilateral trade volumes saw growth, reaching 8,198 MUs compared to 7,300 MUs in the previous year, representing a 12.3% increase. However, power exchange volumes decreased to 29,499 MUs from 44,634 MUs in the previous year.
PTC continued to play a significant role in portfolio management for utilities, assisting government-owned utilities with power sale/purchase arrangements through bilateral and power exchange platforms. The company's involvement in day-to-day demand-supply assessment, price forecasting, and market assessment further solidified its position as a holistic solutions provider in the power sector.
The outlook for your company appears promising, with a focus on consolidating its core trading business while exploring opportunities in new and renewable energy. Here are some key points regarding the outlook and associated risks:
Outlook:
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Expansion into New Business Models: Your company aims to diversify its business by including newer models, particularly in the field of renewable energy. This expansion aligns with the growing demand for sustainable energy solutions and presents opportunities for growth in emerging sectors.
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Value-added Services: As part of its strategy to become an integrated energy solutions provider, your company plans to expand its portfolio of value-added services. This may include energy portfolio management, advisory services, and operations and maintenance for various energy infrastructure projects.
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Focus on Technology: Recognizing the importance of technology in the evolving energy market, your company intends to expand its technology vertical and develop innovative solutions. Collaboration with global technology companies and foraying into emerging areas like Green Hydrogen and Battery Energy Storage Systems demonstrate a forward-thinking approach.
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Hindustan Power Exchange: As a sponsor of Hindustan Power Exchange, your company aims to offer a credible alternative in the power exchange segment. This initiative underscores your company's commitment to fostering competition and innovation in the energy trading sector.
Risks and Concerns:
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Risk Management Policy: Your company has a structured and disciplined approach to managing risks, as outlined in its Risk Management Policy. This includes the use of risk reports and matrices to aid decision-making processes and ensure alignment with business objectives.
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Proactive Risk Evaluation: Your company is committed to promoting a proactive approach to evaluating, resolving, and reporting risks associated with its businesses. By staying vigilant and addressing risks in a timely manner, your company aims to ensure sustainable business growth.
Overall, while there are inherent risks associated with operating in the energy sector, your company's proactive risk management practices and strategic initiatives position it well to capitalize on opportunities and navigate challenges effectively.
New Initiatives : Future Growth Drivers
The establishment of the Innovation and Data Analytics Lab is indeed a significant initiative for your company. Here are some potential benefits and impacts of leveraging data analytics:
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Informed Decision-Making: Data analytics can provide your company with valuable insights into market trends, customer preferences, and operational efficiencies. By making data-driven decisions, your company can mitigate risks and capitalize on opportunities more effectively.
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Identifying Patterns and Trends: Through data analytics, your company can uncover hidden patterns and trends in the market that may not be apparent through manual analysis. This can help in predicting future market behavior and adjusting business strategies accordingly.
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Real-time Analysis: Real-time data analytics allows your company to monitor market changes and respond promptly to emerging trends or market shifts. This agility can be crucial in the dynamic energy trading industry, enabling your company to stay competitive and adapt to changing market conditions swiftly.
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Competitive Advantage: Companies that effectively leverage data analytics often gain a competitive edge by optimizing their operations, improving decision-making processes, and enhancing customer experiences. By investing in data analytics capabilities, your company can position itself as an industry leader and differentiate itself from competitors.
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Enhanced Trading Decisions: With access to advanced data analytics tools, your company can make more accurate and timely trading decisions. By analyzing market data, demand-supply dynamics, and pricing trends, your company can optimize its trading strategies and maximize profitability.
Overall, the adoption of data analytics and data sciences has the potential to revolutionize your company's operations and drive sustainable growth in the highly competitive energy trading market. By harnessing the power of data-driven insights, your company can unlock new opportunities, mitigate risks, and achieve its strategic objectives more effectively.
Key Financial Ratios
Here are the key ratios for your company as of March 31, 2023, compared to the previous year:
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Return on Investment (FDR & Mutual Fund):
- March 31, 2023: 6.11%
- March 31, 2022: 3.09%
- Remarks: The treasury yield improved due to an increase in the RBI repo rate, resulting in a better return on investment.
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Debt Equity Ratio:
- March 31, 2023: 0.05
- March 31, 2022: 0.31
- Remarks: The decrease in the Debt Equity Ratio is attributed to the utilization of realization from Trade receivables, mainly in repayment of working capital loans to banks.
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Return on Net Worth:
- March 31, 2023: 9.19%
- March 31, 2022: 11.15%
- Remarks: The decrease in Return on Equity Ratio is mainly due to the decrease in surcharge income, resulting in a decrease in profit after tax on an annualized basis.
These ratios provide insights into the financial performance and management efficiency of your company, helping stakeholders assess its profitability, leverage, and returns on investment.
The financial performance of your company, along with its subsidiaries and associates, for the financial years ended on March 31, 2023, and March 31, 2022, is summarized below:
Standalone:
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Total Income:
- March 31, 2023: INR 14,909.57 Crores
- March 31, 2022: INR 15,637.62 Crores
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Profit / (Loss) before Interest, Depreciation & Tax (PBITDA) excluding OCI:
- March 31, 2023: INR 514.22 Crores
- March 31, 2022: INR 612.45 Crores
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Finance Charges:
- March 31, 2023: INR 28.92 Crores
- March 31, 2022: INR 37.33 Crores
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Depreciation:
- March 31, 2023: INR 3.86 Crores
- March 31, 2022: INR 3.74 Crores
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Provision for Income Tax (including for earlier years):
- March 31, 2023: INR 111.7 Crores
- March 31, 2022: INR 146.57 Crores
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Net Profit / (Loss) after tax (after minority interest):
- March 31, 2023: INR 369.74 Crores
- March 31, 2022: INR 424.81 Crores
Consolidated:
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Total Income:
- March 31, 2023: INR 16,002.51 Crores
- March 31, 2022: INR 16,879.77 Crores
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Profit / (Loss) before Interest, Depreciation & Tax (PBITDA) excluding OCI:
- March 31, 2023: INR 1,381.52 Crores
- March 31, 2022: INR 1,597.55 Crores
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Finance Charges:
- March 31, 2023: INR 599.62 Crores
- March 31, 2022: INR 751.47 Crores
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Depreciation:
- March 31, 2023: INR 101.53 Crores
- March 31, 2022: INR 101.32 Crores
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Provision for Income Tax (including for earlier years):
- March 31, 2023: INR 173.22 Crores
- March 31, 2022: INR 193.09 Crores
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Net Profit / (Loss) after tax (after minority interest):
- March 31, 2023: INR 445.60 Crores
- March 31, 2022: INR 506.16 Crores
The detailed allocation of profits, reserves, and dividends is also provided for both standalone and consolidated financial statements. Additionally, information regarding other comprehensive income and total comprehensive income is included.
Strengths:
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Leadership Position in Domestic Power Trading Market: PTC India maintains its stronghold as the largest player in the Indian power trading market, commanding a market share of over 35% of the total volume traded in fiscal 2023. This dominant position is expected to persist in the medium term, despite increasing competition, owing to the company's extensive market experience and expertise.
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Long Track Record of Operations and Strong Customer Relationships: PTC India has a rich history of operations, being the pioneer in power trading in India since 2001. Over the years, it has cultivated robust relationships with various stakeholders in the industry. Long- and medium-term trades, which yield higher margins, constitute a significant portion of its volume, showcasing its strategic positioning. Additionally, the company's efficient client servicing and management practices contribute to maintaining its market leadership.
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Healthy Financial Risk Profile: PTC India boasts a sound financial risk profile, characterized by a comfortable capital structure and robust cash accrual. It benefits from rebates from generation companies for timely payments and charges surcharges from distribution companies for delayed payments, bolstering its financial position. With a net working capital cycle ranging from 16 to 31 days, the company exhibits efficient working capital management. Moreover, it operates without long-term debt on a standalone basis and maintains a substantial cash reserve, ensuring financial stability. The receipt of pending instalments and improved cash balances under the new Electricity Rules further enhances its financial resilience.
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Strategic Divestment Plan: PTC India's decision to divest its stake in its subsidiary, PEL, reflects its commitment to optimizing its business portfolio and unlocking value for stakeholders. The approval of ONGC's bid for the acquisition of 100% stake in PEL signifies a strategic move towards streamlining operations. CRISIL Ratings closely monitors such developments, ensuring alignment with the company's strategic objectives. Additionally, while no additional investments are foreseen in subsidiaries at present, PTC India remains poised to provide need-based support to ensure their stability in case of distress.
Overall, PTC India's leadership position, extensive industry experience, robust financial profile, and strategic divestment plans underscore its resilience and readiness to navigate challenges while capitalizing on growth opportunities in the dynamic energy market landscape.
Weaknesses:
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Susceptibility to Counterparty Risk and Open Positions: PTC India faces inherent risks associated with counterparty credit profiles, particularly from state power utilities (SPUs). Despite efforts to mitigate this risk by diversifying sales across multiple buyers and implementing payment security measures, the exposure remains significant. While the seasonal reversal of buy-and-sell positions of SPUs provides a natural hedge, the large scale of operations does not eliminate the risk of default entirely. Although the net working capital cycle has shown improvement over the years, prolonged delays in payment by customers remain a key sensitivity factor that could impact the company's financial stability.
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Exposure to Risks in the Wind Energy Industry: PTC India's wind energy segment, operated under its subsidiary PEL, faces inherent risks inherent in the wind energy industry. These risks include wind speed variability, uncertainty in long-term wind patterns, and technology risks associated with wind power generation. Compared to the more established trading business, the wind energy segment's business risk profile is relatively weaker, making it susceptible to fluctuations and uncertainties in the renewable energy market.
These weaknesses underscore the challenges faced by PTC India in managing counterparty risks and navigating the uncertainties inherent in the wind energy sector. Proactive risk management strategies and measures to diversify revenue streams may help mitigate these vulnerabilities and strengthen the company's overall risk profile.
Indian Power Sector
The power sector in India plays a critical role in driving economic progress and ensuring the well-being of the population. However, it faces challenges in maintaining widespread access to high-quality electricity due to the diverse range of power generation sources and the complex regulatory framework involving both central and state governments.
During the fiscal year 2022-23, several policy initiatives were introduced to enhance the financial sustainability of the electricity sector and ensure uninterrupted power supply. These initiatives include the Electricity Rules (Late Payment Surcharge and Related Matters), 2022, the Electricity (Amendment) Bill, 2022, and the CERC (Connectivity and General Network Access to the Inter-State Transmission System) (GNA) Regulations. These regulations aim to address various issues such as payment security, renewable energy obligations, and transmission infrastructure.
Despite these efforts, the power sector continues to face challenges such as energy deficits and peak power deficits. However, there has been significant progress in promoting renewable energy sources, with the total renewable capacity reaching 179.32 GW as of May 31, 2023.
In this evolving market scenario, PTC India has adapted its strategies to meet changing demand patterns, particularly in the short-term procurement segment. As an aggregator, PTC has signed Medium Term PPAs and PSAs under Pilot Scheme -2, demonstrating its commitment to supporting the growth of renewable energy and ensuring a reliable power supply.
While power exchanges experienced a decrease in volumes due to geopolitical tensions affecting the global fuel supply chain, PTC continued to contribute significant volumes in a calibrated manner to avoid market distortions. The real-time markets and term-ahead markets remain active segments, with PTC playing a significant role as a market participant.
Overall, the power sector in India is undergoing significant transformation, driven by policy reforms and market dynamics. PTC India's proactive approach and participation in various market segments position it well to navigate challenges and capitalize on emerging opportunities in the sector.
