PTC India Financial Services Limited (PFS.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q1 FY '26 Results Conference Call hosted by PTC India Financial Services Limited. [Operator Instructions] Please note that this call is being recorded. With this, I now hand the conference over to Ms. Priya Chaudhary from PTC Financials. Thank you, and over to you, ma'am.

Thank you. Good morning, everyone. I'm Priya Chaudhary. I'm Head, Investor Relations at PTC India Financials. I would like to welcome all on today's call for a discussion on Q1 FY '26 quarter results of PFS. The past quarter has been marked by significant progress in our key focus areas. There has been visible results on the steps taken towards resolving the legacy issue with 38% of our gross Stage 3 resolved in Q1 FY '26. Now on the remaining draw Stage 3, another 30% is in advanced stages of resolution. Our Whole-time Director, Operations, Business Head, SME and CIO were onboarded in the last quarter. You will hear from our Director, Operations, Mr. Sanjeev Kumar during the course of the call on the business update. While we witnessed disbursement momentum, but AUM did moderate due to scheduled repayments and prepayments. The company remains focused on strengthening the portfolio with a balanced approach, prioritizing sustainable growth, operational efficiencies and customer-centric solutions. As we navigate through a very exciting phase in our organizational journey, we remain committed to delivering consistent value to our stakeholders while upholding transparency and accountability. I would now like to introduce the top management present in today's call, Mr. R. Balaji, MD and CEO; Mr. Dilip Srivastava, Director, Finance and CFO; and Mr. Sanjeev Kumar, Director, Operations. With this, I will now like to hand over the call to our MD and CEO, Mr. R. Balaji, for his opening remarks and update on the company's performance. Over to you, Balaji.

Thank you, Priya. Good morning, all. So we are happy to have you all as a part of our Q1 investor call. Dilip will take you in detail through the financials and Sanjeev will share with you the operational highlights. I would just like to give some overarching remarks. One, firstly, PFS continues on its transformation journey. The transformation consists of 2 parts, internal and external. And we have had some good positives on both the fronts and in some areas, we could have done better. As far the internal transformation is concerned, one of the things which has been a strong positive for the organization in this quarter has been the strengthening of the top management leadership. If you all recollect, we have said earlier that our emphasis is on shifting from individual capability towards building institutional capability. As a part of that, we have got Sanjeev, who joined us as Director, Operations. Apart from coming at the leadership level, he comes with immense experience in the infrastructure space. He is joining us from India Infrastructure Finance Company and he's got close to 30 years of experience in financial services, split between institutions like ICICI, State Bank, India Infrastructure and also National Highways Authorities. So with that, if you look into it, we have got a strong leadership pipeline. Two, one of the areas which we have spoken about earlier was building a more granular book. So apart from intensifying our core traditional areas of infrastructure lending, albeit with slightly smaller ticket sizes of INR 120 crores to INR 150 crores, we were also stating earlier that we'll also start looking at certain other newer segments with INR 40 crores to INR 60 crores, INR 70 crores of loan cases. So as a part of that, Avijit Kishore has joined us as Business Head of SME. So he's also joining -- he joined towards the end of May. And today, the world is becoming more and more driven by technology and digital. So we have added a new CIO who joined us in early May, Sidhartha Dutta. He comes with immense experience in financial services. He was earlier a CIO for a small finance bank. In initial part of his career, he spent some 10, 12 years staff in SAP, working on the financial services packages. So with this, the leadership team is more or less ready. Now the going forward would be how do we augment the team capacity at the junior level, especially in the area of credit and risk so that our ability to process higher quantum of cases is manifested. Now as far as the overall business is concerned, one area where we did significant work and the results came through was in the area of resolution of stressed assets. All of you might recollect that in our call on May 10, we had stated that 3 cases, that is NSL, Vento and ILFS, we expected these 3 to be resolved by September. And another is Danu by -- in the second half of the year. We are happy to state that all the 3 cases have more or less achieved closure in the first quarter itself. NSL, the NCLT gave its verdict. And we got the entire amount, INR 125 crores back. The winning bidder has paid it towards a successful resolution, applicant has paid it back to us. That's a big positive. More importantly, while we got the entire principal back, that's an opportunity for getting some small additional money based on certain other securities extended by the erstwhile promoter group. As far as Vento is concerned, we went through a change of management, we had a 2-stage process wherein people were invited to bid. Subsequently, people who qualified and were above a certain threshold were invited for an auction process, which was in electronically. And the winning bid has come. So we have got INR 115 crores. While the winner has paid the performance guarantee of INR 20 crores, the remaining would come in the course of next few weeks. So by the end of August, even this Vento would have come. So actually, if you look into it, our gross NPAs and net NPAs of around 10% and 4% includes Vento as NPA. So in September, it could go away. Third is ILFS. The company had met its performance obligations and in March, it got investment grade rating from 2 credit rating agencies. Consequently, post the approval of the RBI, the permission was obtained to upgrade it to standard. This was orchestrated by the lead bank, Punjab National Bank. And accordingly, we have now taken since the intimation was received although after the end of June, but before the publication of the results in accordance with accounting standards, it has been upgraded to standard. So all these assets have been resolved. More importantly, some of the old assets which were written off, we got certain recoveries. Dilip would share about the same. This is as far as recoveries are concerned. Two, in terms of internal transformation, I spoke about leadership augmentation, senior leaders joining. We also taken certain steps towards developing the capabilities of our employees. My senior leaders and middle management leaders went through assessment centers. So once the action area has been identified, it will augment their ability to contribute better to the organization in the forthcoming future. The one area where we could have done better was in the area of disbursements, total business done. But here, I would like to say there is 2 parts. The total disbursement which we gave in the first quarter is INR 138 crores. Compared to the fourth quarter, which was only INR 50 crores, it was a significant increase. And we had stated earlier that in the full year, our target is INR 4,000 crores. So compared to that, there has been under delivery. But what we have done is in the -- we evaluated significant number of proposals around INR 1,200 crores, INR 1,300 crores of proposals in the first quarter were evaluated. And many of these -- quite a few of these cases were approved in the second quarter in July. We hope to catch up whatever shortfall we had in the first quarter by September. So in August and in the second quarter, July, August, September, we'll be able to ensure that we are more or less in line. But more than the quantum of the proposals, what has been heartening is the fact that almost -- not almost, the entire disbursement has been to private sector entities. So that's something which is very, very important because in this first quarter, our disbursement of INR 138 crores was entirely to private sector entities. If you contrast it with last financial year FY '25, only INR 296 crores was disbursed to private sector entities in the entire financial year. So actually, what we did in the entire financial year in private sector entities nearly 40 -- more than 40%, close to 45% of that we achieved it in the first quarter. And this disbursement to private sector entities is close to nearly 1.6, 1.7x of what we disbursed in financial year '24. There the disbursement to private sector entities were INR 80 crores, INR 90 crores. So our trust towards getting business in the open market focusing on relatively smaller cases so as to reduce the concentration risk continues and until the momentum is clearly stabilized because we are coming from an adverse history, now that team is generating more business proposals, evaluation is on. My systems are getting strengthened. It will take a couple of more quarters to stabilize, but we are confident that we'll be able to get where we ought to go in the next couple of months. That's what I have got. Now Dilip would share some of the financial results and then Sanjeev will speak about operations.

Thank you, Mr. Balaji, and good morning to all of you, all the investors. So as we have already circulated the investor presentation as well. So our total income during the quarter -- Q1 of this financial year has been INR 142 crores against the Q4 of previous year of INR 155 crores. So there is a decline in the total income on account of that -- our AUM has been reduced and which Mr. Balaji has already explained. And the PAT, it's INR 137 crores. It's an improvement from the previous quarter. It's from INR 58 crores to INR 137 crores. Our gross Stage 3 there is a lot of improvement right from 15% gross Stage 3, it has reduced to the 10.22%. And net Stage 3 from 6.56%, it has reduced to the 4.13% in the current quarter. Our cost of borrowing has also reduced from 9.69% to 9.67%, and we have been taking up with all the lenders, existing lenders as well as we have been taking up with the other lender as well to improve our borrowing and reduce the cost of borrowings. Out total net NPA actually that has been increased on account of that earlier case that -- this Danu, in case of Danu there was a High Court stay, now it has been removed. So it has been -- now it has been saved to the NPA, although we have already done the proper provisioning against that. And our return on assets, it has improved on an annual basis from 4.02% to 9.77%. So overall financial performance in terms of probability and other parameters, there are a lot of improvement. And now I'll request our Director, Operations to brief about the proposals and other business prospects. Mr. Sanjeev?

Thank you, Dilip. Good morning all. I'm happy to be the part of my first investors call at PTC Financial as Director, Operations of the company. I'm pleased to share a quarter update with you on business growth and initiatives in recent past. There was a continued progress in strengthening our credit pipeline during the current quarter. As part of our focused effort to deepen origination and build a robust pipeline, there has been a steady increase in the number of quality proposals under evaluation. During the quarter, we conducted detailed due diligence across diversified infrastructure segments. During the quarter, company has undertaken multiple initiatives to strengthen its asset side performance and institutional capabilities. Our efforts are being directed to boosting execution speed, responsiveness and overall delivery capacity. The team is being augmented with enhanced capabilities to activate ventures across the infrastructure value chain covering both energy and nonenergy sectors. In this regard, SME vertical has been set up with the onboarding of a dedicated head SME. He is very experienced in this area and has started delivering. And the team buildup is currently underway to progressively scale the book with a focus on granular and diversified lending. Our origination efforts remain broad-based with sectoral interest spanning renewable, roads and conventional thermal sector also, along with growing inquiries in segments such as water treatment, solar parks and structured corporate banking proposals. In line with our calibrated approach, we continue to consciously moderate our average ticket size to ensure prudent exposure per borrower. Aligned with our current book size, the granular approach supports better diversification and risk-adjusted returns. In this effort, the average ticket disbursement ticket size has been around INR 35 crores in Q1 FY '26. The next quarter, as we scale up our book in a measured manner, this disciplined approach to sanction and disbursement will remain a key focus area. The recovery efforts on stressed assets have also been encouraging as already shared by Balaji and Dilip also. And we believe these will support sustainable growth going forward. We'll be able to resolve our remaining Stage 3 assets also in coming quarter. During the month of July, already, we have sanctioned something around INR 600 crores of loans, loan proposals and proposals amounting to maybe a little more than INR 1,000 crores are already in pipeline at different stages of sanction and due diligence processes for that may be covered in the month of August in the first half itself, we hope for that. And efforts are being made to accelerate the disbursement of the sanction limits also. So it's -- we'll be able to actually ramp up our disbursement and enhancement of our books also. And in coming 1 month, the difference will be seen very soon. So fresh sanctions in new segments will continue to drive portfolio diversification and enhance yield. The company is also deepening client partnership with increased emphasis on group level borrowing. Repeat clients are actually coming back again to PFS and sector-specific structuring and servicing capabilities are being ramped up to actually cater the different segments of customer base. That is the efforts are being taken to actually enhance our book size in next quarter. With this, I hand over to Priya.

Thank you. Now we can open the session to Q&A.

[Operator Instructions] The first question comes from the line of Vishal Mehta from Oaklane Capital.

Congratulations on a terrific performance on the resolution part. I just wanted to reconfirm, you said that we will be ending at about INR 4,000 crores of disbursement as we were guiding. And in Q2, we will kind of cover up what we've lost in terms of the ground for the disbursement in Q1. Is that right?

That's correct. Mr. Balaji will like to actually take this up.

The plan for the full year is around INR 4,000 crores of disbursement. And at this point of time, we are confident that we'll be able to achieve it. First quarter has been below expectations, below the plan. And like what I reiterated in the opening remarks, we'll be able to cover -- make up for the shortfall by September as per our plan is concerned.

Great, sir. That's very encouraging. And sir, one more thing, if you could just explain, we have much larger peers that are also in this business. How are we differentiating ourselves in terms of what are the key parameters where we differentiate ourselves in whatever we are offering versus them? And how will that help us grow better?

Sanjeev would answer that.

Yes. See, there are so many bigger players are already there in the market, but you'll understand that the market is so big that we have got sufficient of our targeted customers also there in offering. Our offering would be differentiated in terms of speed by which we'll deliver the sanctions and disbursement and different segments in the structured finance as well as niche segments where other bigger players may not be very interested. So these are the focus area where we'll have yield also, we'll have NIM also looking at our cost of fund. And apart from that, we are focusing on a smaller ticket size business, which is out of favor by this bigger size infrastructure finance companies. So we are differentiating ourselves from others in terms of area of delivery, speed of delivery and the structuring and servicing capacity what we'll be offering, there being a very close-knit team we have. So this way, we hope that we'll be there very soon in the market in a big way. And everything is there in place where we have got sufficient business to choose, there is no lack of business. We will definitely deliver on to that.

Just a follow-up on that. You said that we will focus on speed of delivery. Could you just give us a flavor of what would be our turnaround time in terms of a loan from the proposal to the disbursement stage? And how would that compare to maybe say larger players?

See, largest players having a larger ticket size loans, right from the inquiry to first disbursement, their turnaround time is something around 3.5 months, whereas we are delivering in 1 month and 1.5 months' time, though our ticket size is lower, and we are expecting that to improve in that area even more. Our target is to -- from right from inquiry to disbursement should be finished within 30 days' time.

The next question comes from the line of [ Channa Madhu ], an individual investor.

I increased my holding from 1,20,000 shares to 1,35,000 shares after listening [ to Chinese gung-ho ] example for this company growth fortune. You already mentioned in last quarter con call that you have the plan to raise INR 300 crores to INR 500 crores by issuing preferential shares. Why not you issue preferential shares at an early stage to a strong private player and in that [indiscernible] the Board, enhance the credibility of the company among the investors and vendors.

Thanks for your query. So basically, things like this goes through multiple stages. What we had communicated last time was what we are also factoring in our budget. And we are internally dialogue both the management and the Board is seized of this issue. At this point of time, the primary thing for us is to ensure that we get the business on good track. That's what we are doing. The quality has been improved, improved sourcing leading to more business disbursements. This is also something that's happening. I would just want to caution you that such activity we planned it for the course of this year. As and when the time is right, we will take the necessary decision take the approval of the Board once and subsequently the shareholder approval. Having said that, you can rest assure that the entire management, both Dilip, Sanjeev are here, even I'm there, all of us and the rest of the PFS employees are working actively to ensure that there is significant value creation for all the stakeholders by ensuring we build a sustainable and a world-class financial organization.

One more thing that I'm very disappointed with the loan book size, in last 2 quarters' con call, you had assured that 7% to 9% growth in the loan book size and in third quarter, you assured 15% growth in the loan book size, but that is not visible in the achievement.

You're right. Like in the -- you're perfectly right. On May 10, in our investor call, I said henceforth, we are looking at a 7% to 9% quarter-on-quarter growth. We still hold on to that guidance. The only thing which we would like to ask from each of you is a little bit of patience because we are a small organization, the number of cases that we do on a quarterly basis keeps on changing because the numbers are not very large. And while we got a strong sourcing pipeline, some of the proposals got deferred to quarter 2. And like what we said in the introductory remarks, whatever disbursement target which we have taken for the year, we'll be achieving that. And more importantly, the shortfall for quarter 1 will be met in -- covered up in quarter 2. So that's something we are confident of. Soon we hope to get back on to track. Now I'm sure you and the rest would appreciate that we have put significant effort and outcomes are shown in the resolution of the stressed assets. Now with the entire management team in place and more importantly, the people have got significant experience from the financial services and infrastructure lending, the team's bandwidth to seize the market opportunity has enhanced significantly. So we are confident of getting to what we said we would do. In the next few quarters, you'll be able to see how we are able to deliver on what we have committed.

[Operator Instructions] The next question comes from the line of Gaurav, an individual investor.

I would like to know [indiscernible] there is a delay in fund raising on the company's part. So I just want to know what is the response among all the bankers and investors who want to lend into PFS? What is the challenge that PFS is facing in using -- use fresh funds?

We have been taking up with all the existing lenders, right, as well as we have been approaching to the other lenders as well who are not our existing lenders and over and above, we have started taking up with the overseas lenders as well considering the cost and tenure, all those things that those things are under discussion. And as of now, we have a sufficient liquidity in the system, right? And close to INR 1,500 crores, we have a liquidity. And you know that main issue for the -- it was one of the 3 aspects that was there as a corporate governance as well as AUM size. Corporate governance has already been cleared, right? So now that audited financials of the previous year as well as this quarter results has also been shared with the lenders. So we have been taking up with the lenders, and we are expecting in this quarter that we'll be having sanctions in our hand. So as far as disbursement is concerned, we have a sufficient liquidity in the system. So that arrangement of the additional facilities will not be a challenge for us.

So are there any fresh sanctions in pipeline that we can say that or is in in-principle approval or final approval from the bankers?

Yes, sir. As of now, we don't have a copy of sanction letters, but these are the very advanced stage. We have been discussing. We have been meeting with the senior team of the bankers and things are in a positive direction. We are expecting that we will be getting some sanctions this quarter.

Okay. Okay. So if I may know what is the cost of borrowing that we are targeting for these incoming sanctions? So [indiscernible] currently.

As I already explained that our existing cost of borrowing, there is an improvement from the previous quarter. So average cost of borrowing 9.69% has been reduced to the 9.67%. And further, we have been taking up with the existing lenders to reduce the spread, right, so that our cost of borrowing is reduced. And we are also -- we have been working to diversify our source of borrowings, right? As I explained that we have started to taking up for the -- although that with the external commercial borrowing as well, we are in the discussion, right? So although it's not right time, but we have started the discussion so that we can diversify the source of borrowings, right? And as I explained that in this quarter, I mean, that some sanctions would come in our hand.

Sir, I want to know one thing. What is the future expected cost of borrowing from these incremental borrowings that we are trying to borrow from the market?