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

Ladies and gentlemen, good morning, and welcome to the Q3 FY '26 Investor Conference Call hosted by PTC India Financial Services Limited. [Operator Instructions] I now hand the conference over to Ms. Priya Chaudhary from PTC Financial. Thank you, and over to you, Priya.

Thank you. Good morning, everyone, and welcome to Q3 FY '26 Investor Call for a discussion on third quarter financial results of PTC India Financial Services Limited. I'm Priya Chaudhary, Head, Investor Relations at PFS. Now the last quarter marked a clear inflection point for the organization. With the Board and Board committees reconstituted, together with a strengthened management team, this has translated into sharper execution and a significant improvement in the business momentum. Some of the key Q3 FY '26 highlights include disbursements at INR 609 crores. This is a 13-quarter high for the organization. Q3 FY '26 was higher than H1 FY '26 disbursements at INR 464 crores. Additionally, 9 months FY '26 disbursements of INR 1,073 crores exceeds the total disbursement in the whole of last financial year at INR 916 crores. Our loan sanctions for this quarter stood at INR 1,188 crores. This marks loan sanctions of over INR 1,000 crores plus in 2 consecutive quarters. 100% of the disbursements were to private sector space. The focus continued on granular approach and expansion in the sunrise and emerging sectors. The focus also continued on the asset quality with no further slippages and this is since financial year 2018, the disbursements that we've done since. While the AUM did moderate due to prepayments, however, our underlying portfolio quality, liquidity position and growth visibility remains strong, and this augurs well for the organization going forward. I will now introduce the senior management team present in today's call, Mr. R. Balaji, MD and CEO; Mr. Sanjeev Kumar, Director, Operations; Mr. Dilip Srivastava, Director, Finance and CFO; and Mr. Kalur Srinivas, President, Treasury. With this, I will now like to hand over the call to our MD and CEO, Mr. R. Balaji for his opening remarks and to provide an update on the company.

Thank you, Priya, and a very good morning to all of you. So last quarter, like what Priya said, marked an inflection point. Our business is showing renewed momentum. Both sanctions and disbursements are good. Sanjeev will take about it later. But what is more heartening is the fact that we have diversified our engagement and deepened it into all parts of the infrastructure space. Last quarter, we did business in new segments of infrastructure, which we had either though not done earlier, like in oil and gas, related to data centers and a couple of other areas. This, with our focused approach on getting more customers is showing visible signs of momentum, and we expect this momentum to carry on forward. Close to 18 months back, we had 3 or 4 issues. One was the governance issues, the legacy issues, which we have successfully resolved it. Then we had also addressed the quality front, so the NPAs have come down significantly. And today, our net NPA is only at INR 47 crores. Third one is increasing the business traction. And if you look into it, what we have disbursed in the first 9 months is close to 20% more than what we disbursed in last year, and we expect it to double down on disbursements in the fourth quarter. The one pressing area for which we'll be working forward in the next few months is garnering more liabilities to ensure that our growth aspirations and the growth momentum is sustained. That's what we would like to do. I'll be taking your questions later. I'll leave it to Sanjeev to take you through the business summary.

Thank you, Balaji, and good morning, everyone. I'm pleased to share an update on Q3 FY '26 performance, ongoing scale-up initiatives and the way forward. Importantly, our progress and strategic direction remains fully aligned with what has been consistently communicated over the past 2 investor calls. Q3 FY '26 recorded the highest-ever quarterly disbursement in the last 13 quarters at INR 609 crores. Q3 disbursements exceeded cumulative disbursement of the half year FY '26, which was at INR 464 crores and cumulative disbursement for 9-month FY 2026 is INR 1,073 crores, have already surpassed the total disbursement done in the FY '25, which was INR 916 crores. This reflects a clear acceleration in the execution momentum. As highlighted in earlier calls, our priority has been on rebuilding the foundation, driving growth with prudence, discipline and strategic clarity. While we have earlier guided the disbursements of around INR 1,000 crores for Q3 FY '26, the quarter closed at INR 609 crores, which is consistent with our calibrated approach to execution readiness and credit discipline. At the same time, origination momentum remains very strong. We have sanctioned over INR 1,000 crores in 2 consecutive quarters and have built up a robust pipeline at the various stages of approval and sanction aligned with FY '26 disbursements targets. With the Board and Board committees now fully constituted, we remain well positioned to achieve the INR 2,500 crores disbursement targets for FY '26, as we have communicated earlier too. Both sanctions and disbursements are on a clear upward trajectory. Q3 FY '26 disbursement are at the 13-quarter high and exceeds the half year of FY '26 at a cumulative level, underscores improving execution velocity. We expect this momentum to continue through Q4, supported by a strong and visible pipeline. Our scale-up efforts are being undertaken in a measured and a risk-calibrated manner. A key focus area has been quality lending with deliberate reduction in average ticket size to build up more diversified, lower volatility portfolio and mitigate concentration risk over time. Consistent with our strategy, we continue to have focus on high quality with good margin proposals, a key highlight that more than 50% of our new sanctions and disbursements are in the A or better rated entities, reinforcing the steady ramp-up in line with our medium-term positioning articulated in previous quarters also. Sector diversification remains another important pillar of our growth strategy. We are expanding our presence across renewable energy, EVs, CBG and other sunshine sector, sectors like the data center and its value chain while also targeting sectors, which are not very popular with existing bigger lenders, but have high potential. CBG data center connectivity, oil and natural gases are the area where we have sanctioned loans in this quarter. We are also building momentum in Structured Financing segment. During Q3, we saw a meaningful conversion of SME and FI pipelines also into disbursements. With the trend expected to be continued in Q4, we are strengthening our SME division with specialized skill sets and going forward, plan to co-create structured financing solution by leveraging our data bank of over 400 existing borrowers relationship. The benefits of this diversification are expected to become increasingly visible in Q1 and Q2 of FY '26 also. On the asset quality front, performance remains encouraging with no fresh slippage and continued progress on the regulation of the only remaining NPA account, that is Danu. In summary, FY '26 is unfolding exactly on outlined over past 2 quarters, a year of caution, yet constructive growth, strong sanction momentum, a robust pipeline, calibrated scale-up, diversification into SME and new age infrastructure segments, a sharper private sector focus and sustained improvement in asset quality, together positions us well on -- to deliver long-term for stakeholders, while keeping credit discipline firmly at the core of everything what we do. This concludes the business update. Thank you. So now I'd like to transfer the call to Dilip Srivastava, who will take us through the financial performance of the quarter.

Thank you. Good morning to all of you. So from the investor presentation, you have seen that this quarter as well, we are -- we have a qualification-free limited audit report, limited review audit report. And we have a positive PAT during the quarter of INR 49 crores for the -- and for 9 months, it's INR 274 crores for the 9 months ended for the current year. Return on assets, for this quarter, it's 3.73%, and for the 9 months, it is 6.73%. We have maintained a robust capital adequacy ratio of 71% against the requirement of 15% and net worth of the company has also improved from INR 2,978 crores in the previous quarter to INR 3,034 crores in the current quarter. So financial performance is in the positive direction. And over to Priya. Right?

We will now open the floor to the Q&A session, please.

[Operator Instructions] We take the first question from the line of Simran Sankla from Pransh Group.

Yes. So my question is, what is the latest update on the NPA resolution of Danu Wind Parks.

Yes. Latest on Danu Wind Park, we are taking all-out approach for resolution of this account. We are going in several paths, including contacting to ARCs to bid for that. And we have already gone ahead to file a case into NCLT. Apart from that, the developer is also in our contract to actually -- for a onetime resolution. Certain offer has been given by them but because of certain discussions and certain, you can say, factors involved into that, I'm not able to -- I'm not in a position to actually disclose what exactly is happening on that front. But we are working on 3 method of solving this issue. And we expect that by the first month of FY '27, we'll have a clear visibility of the fund from where it is going to come and how it is going to resolve. And I'm very sure that in Q1 itself, it will be resolved. That's the status as of now.

We take the next question from the line of [ Jay Suratwala ] from Aryan Ventures.

Now I'm asking as we can see that our 9-month disbursements are INR 1,073 crores, but why it is not showing in our sales data or revenue data? And when we can expect a decent revenue growth, which on the balance sheet, what is the time line regarding this?

See, these disbursements are already been shown in the revenue data also. Disbursement has taken in the last month of the last quarter, Q9 in December. So interest would be coming and booked in the -- will start from the month of January. So you'll see the result of that disbursement, which have been done in the last quarter in Q4. And at the same time, the balance sheet has -- sorry, the AUM has not gone much up because of the prepayment of certain loans. So we'll see the growth on part of revenue also as soon as these loans will start yielding interest, and we have been sanctioning the loan at a very high pace, and we expect the sanction and disbursement will almost be double in next quarter. Revenue will come definitely and will show in the next quarter as well as the subsequent quarters.

Just to add on to what Sanjeev is saying. Revenue is a function of the AUM and also the yield which we are getting on our portfolio. And like what Sanjeev has said, because of prepayments, the AUM has come down. Now we are more or less close to the bottom in terms of prepayments and customers who had to prepay because of the rate expectations are significantly higher. They have prepaid. Going forward, we envisage a robust AUM growth, which will lead to the growth in AUM, leading to increased revenue and profitability. That's what we are envisaging it. So like what Sanjeev has said in the fourth quarter, we'll be doing good disbursement. So compared to the end of third quarter, by the end of the fourth quarter, we should be able to see around 15%, 10% growth in AUM.

Great. Great. And what we can expect 3 years down the line, the growth rate of this AUM growth?

We are at a small -- very small base. Remember that a few years back, this company's AUM was significantly higher. So one of the things -- what we would see is, for example, last quarter, we disbursed close to INR 609 crores. Going forward the next year or so, we could look at an average of INR 1,000 crores per quarter as far as the disbursement is concerned, and you can work out the numbers. And after that, the disbursement should keep on growing at 20%, 25% year-on-year basis. So then you can work out the numbers by yourself.

[Operator Instructions] We take the next question from the line of Nishita from Sapphire Capital.

So I had 2 questions. One was on the NIM. We are seeing a downtrend in the NIM. So at what rate, at what NIM margin, what is the sustainable NIM margin? And are we going to see more downturn? Or is it going to stabilize at the current 3.8% range?

I think that's a very, very interesting question because the entire industry is witnessing heightened competition. And what we can just say is, for example, our endeavor would be to stabilize our portfolio yield at around 10.5% or so. So that would be the intent going forward. We'll be managing our portfolio accordingly. So for a 10.5% portfolio that would translate possibly per NIM of 3.5% to 4%. So that's what would be the -- the bottom would be 3.5%, but we would vary between 3.5% to 4% of our NIMs.

Okay, understood. And in FY '26, like do we see us at -- like in Q4, do we see the NIM in the range of 4%? Or is it going to stay at 3.8% only?

Let's do this. We have not done the math, et cetera, but it will be more or less similar, plus minus a few basis points difference would be there. So 3.5% to 4%, it will be more or less in the range, 3.5% to 3.8%.

Okay. Okay. Understood. And my next question is just a clarification. You mentioned that we expect disbursement to double down in Q4 FY '26. So is that on a Q-on-Q basis? Or a year-on-year basis. So are we expecting it to double down from the current INR 609 crores of disbursement?

Yes. This is Sanjeev again. We expect it's on a Q-on-Q basis, double from this quarter. Year-on-year basis, we have already achieved a significant growth. Last year was not such a great year as far as the disbursement is concerned. So we are expecting Q4 to be almost double than Q3. That is our endeavor.

We take the next question from the line of Vishal Mehta from Oaklane Capital.

Hi sir, am I audible?

Yes, go ahead, please.

Sir, I had 2 questions. One is when we're looking at the disbursement guidance, we are saying that next quarter would be anywhere between INR 1,200 crores to INR 1,500 crores because our annual disbursement target is about INR 2,500 crores. So 1 question is that when we are -- what gives us the confidence that after doing only INR 1,000 crores in 9 months, we expect almost a similar amount or a higher amount in the fourth quarter itself? That is the first question. And also Balaji sir, you guided for a 10% to 15% AUM growth. My question was that if we are planning to disburse about INR 1,200-odd crores, then the disbursement growth -- the AUM growth should be higher considering that we'll be adding about INR 1,200 crores, and most of the prepayment repayments are done, then the growth would be much higher is what the question was.

So on the first part regarding what gives us the confidence to do INR 1,000 crores plus of disbursements in the fourth quarter. Please look into it in 3 phases. The first phase sanctions; second phase is the disbursements and third phase is the pipeline. Now that's a time lag between sanctions to disbursement. If you look into it, in the second quarter itself, we had sanctioned more than INR 1,000 crores. And again, in the third quarter also, we have sanctioned more than INR 1,000 crores. So some of the things what we sanctioned in second quarter translated into some disbursements in the third quarter. And what we have sanctioned in second and third quarter, some of the sanctions would translate into disbursements in the fourth quarter. So we are quite -- so therefore, from already what we have sanctioned and not yet disbursed, we expect a pipeline of INR 400 crores to INR 500 crores coming in and fresh sanctions and disbursements will be there. Therefore, we will be coming through around INR 1,000-plus crores of disbursements. Sanjeev had said that our endeavors to close to nearly double what we had disbursed in the third quarter. So that comes from INR 1,200 crores. So INR 1,000 crore to INR 1,200 crores, we are looking into it. Beyond that, it would be a bonus per se. Coming back to your second question, right, if you're looking at this disbursement, then why -- is not the AUM growth would be higher. I had guided for, say, in the fourth quarter less, at least a 15% increase in AUM because as you know, there are some prepayments, sometimes happen while we are near, end of the prepayment cycle in terms of the customers who would be prepaying. One or two customers might prepay and therefore, we do not want other. So we have set a few commitments earlier as far as on AUM. We made a few statements, and we've not been able to meet up to those things. So we want to ensure that if we are seeing a 15% growth in AUM -- percent growth AUM figures, what we are saying. So on a steady-state basis, if we get INR 1,000 crore disbursement plus regular repayments, even some prepayments, we expect a 15% growth in the AUM.

Great, sir. That's pretty helpful. And also, sir, I had 1 more question. We've changed our strategy to focus more on private players, while it gives us more confidence and quality in terms of the lending, but it slows down the growth rate. So is there an apprehension to look at public sector entities primarily for the quality aspect? Or is there any other -- I mean, could you just throw some more light on why not -- I mean why keep PSU lending to 0?

We are not keeping it to 0, okay? And lending to state utilities, it's an integral part. And if you look into it, we had said that in the medium term, that is in FY '27, we wanted to come to 1/3 of our book. Now the reason why we are going after private sector in a significantly more focused manner compared to the utilities is primarily because the state utility expectations is a larger quantum of loans and two, they are much more rate competitive. So we need to balance our margin expectations, vis-a-vis the quantum that we can address. Once our liability side gets streamlined, and we start getting more and more sanctions, we'll be able to participate with greater rigor as far as the state utilities is concerned. So like state utilities and private are like 2 legs of any human being. So we'll be going in tandem with both. Yes, there'll be 2/3 would be on the private and 1/3 on the public. That's what we focus upon.

Great, sir. On that point, sir, any clarity on how -- what is our strategy for liabilities? I mean, we said that we want to focus a little more on liabilities. Could you just throw some light on that?

See liabilities, like the unfortunate incidents, what happened in September of '26, right, pushed our resourcing mobilization by 2 or 3 months. Like in this Board was completely reconstituted and new directors have come on board. Now with increased disbursements and a fully functional Board, we'll be engaging with -- we're engaging already with quite a few banks. In the fourth quarter, we expect to see a couple of sanctions coming through.

[Operator Instructions] We take the next question from the line of Rakesh Srivastav, who is an individual investor.

I would like to know why the PFS is not declaring dividend from the last 2 years. I'm a retired person. I have invested some money in PFS shares from the last 6 years, I keep invested. So why the PFS is not declaring dividend from last year, there was also a profit. This year till Q3, there is a good profit. There is growth. Then why PFS is not declaring the dividend?

So thanks, Rakeshji. So going forward, we would be doing it because see 1 of the things is while we are coming out of a sticky and a tough issue, the emphasis was on conserving resources because the market also was volatile. Now that we are back onto the growth, shortly, you should be seeing what we are doing as far as dividends are concerned. So thanks for being patient with this. Hopefully, there'll be good news at the end of the annual results.

We take the next question from the line of Amey Chheda from Banyan Capital Advisors.

So sir, this 15% AUM growth is sequential, right, Q-on-Q?

Yes, that's right.

Okay. And sir, how much liquidity do we have right now? I think we had INR 1,500-odd crores as on September, right?

It is similar to the same amount, INR 1,400 crores is what we reported.

Okay. And sir, the next question is, since the Board is reconstituted now, like you mentioned, and are we planning the capital raise this year? Or will it get spilled over to the next financial year?

Already, we are in January. So even when we go through the process, it will get to the early part of next year. It will not happen this year. So there will be some news -- as soon as we got some concrete news, we'll be getting back to you on that.

We take the next question from the line of Vishal Biraia from Bandhan AMC.

Congratulations on the improvement in disbursements. My question pertains to the credit rating. So could you take us through as to what are the next steps for you to achieve that? And when is the rating review due for both CRISIL and ICRA?

Yes. The second part of the question is easier. I think ICRA would be due in February and CRISIL would be in August. That's the annual review. But nevertheless, if there is any significant change in the perception of the organization, there will be a rating change could also happen immediately. Coming back to what are the next steps as far as the rating change is concerned, the key thing is we have resolved quite a few things in terms of business traction, portfolio quality, stable management systems and processes. The 1 thing that we need to resolve going forward, which is important not only from a rating perspective, but from a sustained operations of the company is raising of additional liabilities or resources. Till now, we've got a huge capital buffer, and that's the reason we are a bit slow on it because you got INR 1,500 crores of excess liquidity at this point of time. So in the fourth quarter, we'll be placing the full throttle on that. And once this comes, post the annual results, we expect to see some positive movement as far as the ratings are concerned.

Okay. And in terms of the liabilities, could you, I mean, give a perspective as to what is the -- I mean, the bulk of our borrowings are MCLR linked and the banks have not declined -- reduced the MCLR as yet. So what are the incremental steps? Because what happens is it keeps us -- I mean there is a disadvantage on that front.

I think that's a fair point. So only 1 thing is we'll have to keep on increasing our engagement with banks to at least look at while the MCLR does not reduce, at least the spread reduces. In fact, one of our lenders had reduced the spread for us in the third quarter. Going forward, that would be the thing. And going forward, we at least expect a better transmission because as we all know, the rates have come down by 125 basis points, but the MCLR has not got translated by more than 30 to 45 basis points across various banks. So going forward, we expect some more transmission. Therefore, we expect a moderation of these yields. The only solution for this is going forward is we need to start diversifying beyond banks as far as liability sourcing is concerned. So in the early part of next year, we start making inroads into the bond market, albeit in the smaller quantum. So once as we build up a thing, we'll be having a more diversified liability profile, we'll be able to manage the rates in a much better manner.

So then -- I mean, as the banks reduce the MCLR over the next few months, so then should we expect a meaningful improvement in the cost of funds, say, in the next 2 quarters?