PTC India Limited (PTC) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. On behalf of the senior management team of PTC, I welcome you all to the conference call for the Q3 2020 and 9 months 2020 results of the company. With me, I'll just say who all are sitting with me: Dr. Rajib Mishra, who is the Director, Marketing & Business Development; Dr. Ajit Kumar, who is Director, Commercial & Operations; Mr. Pankaj Goel, who is the CFO; Mr. Rajiv Malhotra, who is the Executive Director and Chief Risk Officer; and Rajesh, who is the Chief Strategy Officer. So the top PTC management team is here to answer any query or questions regarding the results. We all know that last quarter was a very challenging time for the economy and such and it was more so for the power sector. We have seen that there was degrowth in the electricity demand and offtake also. And there were some positive signs also that we could see the resolution of the stressed assets started to have some small or early wins. Then certain led to -- certain power market developments also took -- have taken place and most prominent among them is the mandatory payment security requirements as derived by the government order, which came in the month of June end and effective from 1st August. So what we have observed, the impact of the move that utilities generally are in compliance and are making regular payment for the current cycle post August 2019. Other than that, we had also seen that when I made a statement that there were some electricity demand and offtake degrowth, these are backed by some of the figures, which show that in 2 -- in October '19, on the capacity side, PLF of asset -- thermal assets have gone down up to 49%. But there has been slight improvement since then, and in December, it has become 54%. Similarly, on the demand side also, we have seen that November '19 has seen a generation of about 95 billion units, which was 14% less than average monthly demand. But that now has also seen some traction. And December '19 figure show that this jumped to 102.17 billion units. So it's too early to predict that things are going to improve, but we can see the traction happening, which shows that demand offtake, depending on, obviously, the manufacturing and other indicators, should see slow return towards increase. One thing is there that when there has been degrowth and on the platform also, we have seen in the quarter also degrowth, 8% to 9% and even for 9 months also, 5% to 6% degrowth which we have seen, PTC has been able to maintain its growth. We -- obviously, our volumes grew by 2%. But even in the environment which I have narrated, PTC's operations have demonstrated sustained volumes in the short run and the resilience of its business model for the long run. With this introduction, I'm not getting into the figures etc., which you must have seen and the CFO is going to give the detail whatever he wants to explain on the financial results. And then after that, I'll ask Director Marketing also to make a -- to state a few words to you, and then we can leave it open for the question and answer. I hand over this thing to Pankaj Goel who is the CFO. Thank you.

Thank you, sir. Good evening, everybody. I will take you through the financial results of PTC India Limited for the quarter ended December '19 vis-a-vis the corresponding quarter of the last year. Volume has increased by 2% to 13.2 billion from 12.9 billion units. Total operational income has increased by 6% to INR 122.06 crore from INR 115 crores. EBITDA, excluding the Ind-AS contra entries, has increased by 4% (sic) [ 2% ] to 93.95% (sic) [ INR 93.95 crores ] from INR 90.2 crores. PBT has increased by 1% to -- has decreased, sorry. PBT has decreased by 1% to INR 78.59 crores from INR 79.4 crores. PAT has increased by 13.5% to INR 58.27 crores from INR 51.34 crores. Total comprehensive income has increased by 14% to INR 58.32 crores from INR 51.04 crores. Earnings per share stood at INR 1.97 in comparison to INR 1.74. Now I'll go through the 9 months ended December '19 vis-a-vis the corresponding period of the last year. Volume has increased by 5% to 54.3 billion units from 51.86 billion units. Total operational income has increased by 11% to INR 417.56 crores from INR 377.24 crores. EBITDA, excluding the Ind-AS contra entry, has increased by 14% (sic) [ 13% ] to INR 376 crores from INR 331 crores. PBT has increased by 7% to INR 336 crores from INR 314 crores. PAT has increased by 23% to INR 255.94 crores from INR 208.47 crores. Total comprehensive income has increased by 35% to INR 255.9 crores from INR 189.51 crores. And earnings per share for the 9 months stood at INR 8.65 in comparison to INR 7.04. Now I will go through the consolidated results for the quarter. Volume has decreased by 2% to 13.2 billion units from 13 billion units. PBT has decreased by 11% to INR 112.04 crores from INR 125 crores. PAT has decreased by 30% to INR 63 crores from INR 90 crores. Total comprehensive income has decreased by 20% to INR 62 crores from INR 79 crores. And earnings per share stood at INR 1.64 in comparison to INR 2.55. For the 9 months ended for the consolidated results vis-a-vis the corresponding period of the last year, volume has increased by 5% to 54 billion units from 52 billion units. PBT has decreased by 17% to INR 508 crores from INR 614 crores. PAT has decreased by 14% to INR 358 crores from INR 415 crores. Total comprehensive income has decreased by 5% to INR 357 crores from INR 375 crores. Earnings per share for 9 months stood at INR 10.88 in comparison to INR 12.29. Thank you very much. Dr. Mishra, your turn?

Just to give you some of the positives of what we have seen in the last quarter, other than what -- we all know that we grew by 2% in volume in spite of the fact that there was a degrowth of 10% to 12% during this quarter in most of the industrial states like Gujarat, Maharashtra, Tamil Nadu, there was less demand of power. But in spite of that, we could grew by 2% during the third quarter of the year. But other than that, 3 or 4, which are very strong positives for PTC, I would like to just mention about that. Mangdechhu, 720-megawatt hydro project in Bhutan, we started scheduling the full quantum. Of course, it was -- wet months were over in the third quarter, but we could schedule the entire quantum to all the beneficiaries in the Eastern and Assam. RKM Powergen, of course, it was not in the third quarter, but rather it was 1st February 2020, we have started the full quantum of supply to Telangana. With that, the entire quantum of 1,900 megawatt of stressed project is now being scheduled. The trading regulation, which was a point of concern for most of the investors in the company, we would -- we finally came to a conclusion and trading regulation by and large is in favor of the trading companies. And the business as such is not getting affected because of the new trading regulations. So these are a couple of things which I just wanted to share. But other than that, the 2 major consulting projects which we are currently doing, the AKVN Gwalior project -- that's Indore project. We could retain for next 3 years, and we have bagged it through a competitive bidding this time. The Paradip Port, which, of course, was not in quarter 3, but we could get a major order, which is more than INR 10 crores for PTC. So these are some of the major highlights, which we think it's worth mentioning. If any other queries you have, we can always take them.

And one more thing which I just wanted to point out before this thing, that we also have made certain amendments to our very general the dividend distribution policy, which were there in vogue. And obviously, we will be really putting up because it requires confirmation of minutes, et cetera, it takes some time. And as and when we get the confirmation, we will be putting it on the site. So we just wanted to keep you posted about that. Thank you. Now we are open for the question and answers.

[Operator Instructions] The first question is from the line of Kirthi Jain from Sundaram Mutual Fund. There seems to be no response. We'll move to the next. [Operator Instructions]

Hello? Hello?

Yes. Yes, Kirthi.

Yes, Sorry. Yes, my first question is with regard to the planned divestment of the noncore assets, the wind power assets and -- as well as the financial services business divestment, what is the progress we have made? And secondly, with regard to the new stressed power assets, when the scheduling will begin and when we will get the incremental volumes? These are the 2 questions from my side.

This is Rajiv Malhotra taking the first part of your question. And second, I'll pass on to my colleague, Dr. Mishra. So on the sale of that, yet -- we are not yet in a position to give you a definitive proposal for, say, there's a definitive development culminating in a possible stake sale as of this point in time. But I confirm to you that the processes are on.

Okay. Sir, like what is causing the hindrance actually? It's been like sometime we have -- you have announced those things on exchanges. What's causing hindrances in...

Sorry, you'll have to speak a little into the mic.

Hello? Sir, I was trying to ask, what is causing the hindrances in the divestments?

Okay. Since you seem to be perceiving hindrance, first, there's no hindrance there, one. The process takes the natural time. Yes, there are market conditions which, I think, as analyst you would be well aware of. So we certainly don't want to shortchange ourselves or our shareholders when we go to a definitive price. Now regarding the first question?

Regarding the second part of your question, this is Dr. Mishra. I'm Director here -- of Marketing here. So I'll explain what has happened on this for the pilot 2. Pilot 1, 1,900 megawatts. The entire thing is now being scheduled. Pilot 2, which is 2,500 megawatts, the nodal agency that is PFC Consulting has selected through a competitive process, PTC for as an aggregator. So now we are aggregator for that. The bidding process has already started. The 21 bids with a total capacity of 6,000 megawatts has been bid for this 2,500 megawatt pilot 2. The bids are already submitted, but the reverse auction is scheduled for tomorrow. So once the reverse auction is completed, we will be in a position to get the price of supply. Once the price is firmed up, the power will be -- we are already in discussion with the potential discoms who will be buyers. So once that process is done, we will enter into PPA placement. And then we have to go to state regulators for approval of this, which may take at most 2 to 3 months, once the process as far as the price discovery part is complete. So we can expect this power to schedule if everything goes well in the -- from the month of May onwards. Of course, we have many other technical issues related to it. That we, first of all, this, we should get medium-term open access for all the power, which we will tie up, then the matrix and the states procurement condition during that time. So there are many other conditions, which are linked to it. But if you ask me pure technical time, it will take 3 to 6 months from the date of discovery of the price.

Okay. Sir, with regard to -- just one last question. Sir, with regard to our plan of opening exchanges, where are we, sir? And in what time frame will we be able to open our exchanges?

During our last hearing on 21st, the IEX has sought some time to file the reply, which they will be filing maybe by tomorrow, and then a week's time to us subsequently hearing at CRP (sic) [ CERC ] will start.

Okay. So within 6 months, we should expect, sir? Or it will take more time?

We are hopeful.

[Operator Instructions] Next question is from the line of Mangesh Kulkarni from Almondz Global Securities.

Sir, after changes in this dividend distribution tax rates, are we seeking any interim dividend from PTC India Financial Services in the coming quarter?

See, we cannot be seeking -- I mean, that's a separate board and separate accounts, et cetera. So as on today, we leave it to the natural consequences on that. If you have been following PTC India Financial Services' results, et cetera, consultation is going on just now. So we have not [indiscernible] why should there be any -- the dividend distribution tax has just changed on this thing. And it will change -- start changing from 1st April, I think, 2020. So too early to make a comment on that, yes.

Okay. And sir, my next question is about like recently, government has also announced setting up of energy exchange like gas exchange and all these things. So are we any -- with our experience in the power sector and all these things, are we thinking of going in that direction also or we will focus on our power sector only?

At present, we are focusing on the power sector because there is so much things happening at the regulatory and the power market design -- new design, which are happening. So we are highly focused on the energy sector as such, but then the business development, there is a separate business development team, which keeps looking at such options. So they keep looking at them. Once in 6 months or 9 months we sit together, all the options we take -- I mean, then we sit together, out of 10, what we should do. So it is at that stage only.

Okay. And sir, there are talks about these changes in electricity act and all these things. So means, what kind of changes we are expecting? Like have you given any suggestions and all these things on this?

See, we have given suggestions. What we believe that first before the electricity act changes, et cetera, there is a tariff policy which has been pending for quite some time. And we expect that once the tariff policy comes out, then obviously, then the current will start flowing again into the amendments, et cetera. So as on -- see, I don't see anything happening like it's going to happen in the next 2 months or 3 months.

Okay. Okay. And sir, resolution front, any further resolutions expected from these various resolutions there, pipeline under the power plant, with whom we have PPAs, but they are stuck in the problem?

That in any case, if we have the PPAs, and their person is into difficulty, obviously, then it goes to NCLT and the RP is appointed. So our team -- marketing team is consulting with such types of people. And we are trying to always find an alternate solution.

Right. So any near-term resolutions are expected like this now RattanIndia is also -- Power Finance has come out with some resolution. So any further resolutions are expected in other power plants?

See, we don't have PPAs with these plants, but like there are certain plants with PPA and PSA and then if the resolution takes place, then obviously, we are actively engaged. Here, we are engaged from a distance basically. That we also keep watching, at the same time if there is an opportunity on account of bringing them into aggregator role like, as Dr. Rajib Mishra said, that for the 2,500 megawatts, which is the second phase pilot 2, the interest has been shown by more than 6,000 megawatts. So it gives an opportunity. Such type of schemes, if you see any [indiscernible], it gives opportunity for everyone, including stressed asset people also to come and participate. And if they are really competitive, see the whole thing depends upon how competitive the price is. If the prices are competitive, then it is easier to say that we will be able to say it's a power sale agreement and if the prices are not competitive, then their speaking time is going to take much more longer. So we have to wait for the financial numbers to be out and then we will see. And many of them may be stressed assets also.

[Operator Instructions] We have a follow-up question from the line of Kirthi Jain from Sundaram Mutual Fund.

Sir, with regard to cleansing of the book in the PTC Financial, how much like more -- like the NPAs will get resolved, and the book will become more cleaner? We expect over like next 3 months and by March end, how we expect the book to shape up?

See, it is a question, see, we have early -- risk management committee there, early warning signals, which are there. So all those things are being worked out. And during this year, that's what the concept was. The management is working with that endeavor, that to clean up and to come out of the stressed assets as much as possible and in the other sectors which they are managing, other sector -- other than the thermal assets and whatever other assets are there on some of the [Technical Difficulty] assets. As told to us that early signs, maybe in certain cases, but they are not something which puts them into a big problem area. But in any case, such type of questions can be best answered by the PFS management because they are also a listed company and they do these analyst calls. So they will be in a much better position to answer these and we also have part-time directors on there.

Okay.

Sir, do you have any further questions?

Sir, how we expect the current year growth? Sir, like we are envisaging 10% growth, but given the circumstances of lower power demand, how we expect the growth? And what is affecting the power growth, sir, in your view?

See, power growth, so like, as we have stated, the whole concept of industry, the way -- the market is also a part of the broader economic situation. So all of you are much more aware of the broader economic situation, which were in the last 6 months or so. But things looks to be changing. I mean today, RBI also have come out, and they are also saying that from H1 maybe -- H1 of next year is going to be still -- the growth will not be so much. But then obviously, post -- in H2, there will be a lot of growth happening. So -- and when we said also, that's what I said, that even if you see my 9 months, we have grown at 5%. And we believe that this year and the next year, the growth should be better than the 5%.

Okay. Okay. But sir, our margins are not, I mean, our EBITDA growth is not 5%, I mean, for the quarter, we see it's a little softer, which -- what impacted us, sir?

See, one of the reasons that in the short term, market is, as we have always said, always going to be volatile. And short term also constitutes of your exchanges, your DEEP platform and the banking transaction, et cetera. But if you see my margin, I mean, we just did analysis. See, margin, there are many times when we are charging a very small margin also. But with that, there is a financial thing, which are there that is the rebate and surcharges. So if you see that the overall margin because the rebates, et cetera, is a part of that, we have been able to maintain more than INR 0.07 in the quarter, in Q3 also, as well as -- so INR 0.07 -- more than INR 0.07 including rebates in margin. More than INR 0.07 in Q3 as well as 9 months also, which we have maintained that. And otherwise, if you see just [ sale matter/purchase ], obviously, it is INR 3.66 and INR 3.68, something like that be, which is flat. But -- and then you see the profitability also. If you see the PAT, in the last 12 months, we had done INR 262 crores in the stand-alone. And we have been able to do INR 257 crores, INR 258 crores approximately in the 9 months which we have done.

The next question is from the line of [ Piyush Dave ], individual investor.

My question is that at consolidated level, if we compare as on 31 December 2018 -- 2019 versus 2018, the consolidated level, we have our PAT has reduced by 10%. So what is the major reason of reducing this PAT because stand-alone, we are flat. So what is the reason of that?

So yes. As regard with PAT, if you are seeing for a consolidated level, basically, PTC India has done better. It has increased its PAT from INR 51 crores to INR 58 crores. PTC Financial also has increased from INR 41 crores to INR 43 crores. The shortfall is in the PTC Energy, where there is a loss of INR 37 crores. So actually, because of the increasing PTC Energy loss, our consolidated PAT has gone down.