PTC India Limited (PTC) Earnings Call Transcript & Summary

Thank you very much. On behalf of PTC's senior management, I welcome you all to the conference call for the Q2 of FY '21. Along with me today are my 2 Whole Time directors: Dr. Rajib Mishra, who is the Director, Marketing and Business Development; and Dr. Ajit Kumar, who is Director, Operations and Commercial. We also have Mr. Rajiv Malhotra, who is the Executive Director and CRO; and Mr. Pankaj Goel, who is the CFO. And Anand Kumar is also there, who represents the corporate communication team of PTC. It has been just -- in the beginning, I'm going to talk about the stand-alone results of PTC. So a very satisfying quarter and especially in the backdrop of Q1 where there was uncertainty. Business environment was also very dampened, and it was -- Q1 was very tough for everyone, not only in India but the whole world because of the pandemic, which was there. However, our Q2 business volumes are higher mainly on account of increased supply from hydro and renewable sources and the increased supply [ could find ] corresponding growth in the demand, which has been -- growth of demand has been higher due to a spillover from the first quarter, that is pent-up demand coming back after the gradual lockdown of commercial and industrial activity. We have also seen good amount of liquidity infusion coming into the distribution companies: a, under the Atmanirbhar Bharat scheme; and supported by a softer monetary policy by RBI, which has also helped the industry in managing the liquidity and keeping operations on track. The longer-term effort for reform and obviously improving financial fundamentals have remained on the anvil, and we believe that it is a matter of time before they are implemented. We expect that fiscal interventions in the short run is going to help bolstering demand going forward as generally, there is a time lag between the intervention and the actual demand creation. We remain confident that all policy efforts, including development of industrial infrastructure, will keep the demand robust going forward. The reforms in the sector will be key events to watch for, particularly the market design and intervention tools. As we have maintained [ that stance ], we remain cautiously optimistic, and we'll continue to take [ share from ] consolidating our leadership position. For us, the period has been a time of focusing on the fundamentals, the simple building blocks of our core business, and the respective processes for divestment of our stake in the subsidiaries remain on course. Now what we have seen with easing liquidity and renewal of demand, our operating cycle has started towards normalcy, and this reflects in the volume and the contribution breakup from the major business segments. Both in the quarter and the half year, our volume mix shows that short-term volumes have remained between 44% to 45%, and the long- and medium-term [ trades ] now gives us more than the aspirational 50%. We have seen the margins in the short term, and we have no doubt they have been and they will continue to always remain under pressure. So sometimes, it can get slightly more, sometimes less. So short term is very volatile. As we have stated from 2004 onwards, the volatility continues. However, the margin including the secondary income, that is rebate and surcharge, has been healthy, and we have been able to maintain that [ 7 plus year or so ]. Similarly, on the -- as we had stated earlier that PTC, while doing its capital allocation, that we are going to be focused on our main PTC business. And we are not going to give -- we should not be giving further financial support to the 2 subsidiaries. So we're continuing with that. And we are also, as we had explained, that we have begun the [ subsidiary ] divestment process. And as I have stated earlier, we are hopeful of achieving the desired results by the end of the financial year. And as and when we have been communicating even to the stock exchanges also whenever any substantial thing happens, and we'll continue with the same practice. So this is, in nutshell, is our second quarter performance. And we have also been able to do quite well in the exchanges, the real-time market where it started, where we have been able to do -- keep capturing the maximum market share coming out of that transaction also. And the green [indiscernible] market is also catching up slowly and slowly, so we are present there also. So in nutshell, this has been our second quarter performance. And obviously, I'll turn the mic now to Pankaj Goel, who is our CFO, to give his briefing about the numbers. Thank you.

Thank you, sir. Good evening to all. Now I will go through the quarter and half year September '20 results of PTC India Limited. The -- for the quarter, volume has increased by 20% to 26.2 billion units from 21.8 billion units. Total operational income has increased by 32% to INR 224 crores from INR 170 crores. Profit before tax has also increased by 34% to INR [ 216 ] crores from INR 162 crores. Profit after tax has also increased by 23% to INR 166 crores from INR 135 crores [ vis-à-vis ] the corresponding quarter. Likewise, the total other comprehensive income has increased by 23% to INR 166 crores from INR 135 crores. Earnings per share for the quarter stood at 5.61 rupees compared to 4.56 rupees. Now I'll go to the half year results for stand-alone. Volume has increased by 10% to 45.1 billion units from 41.1 billion units. Total operational income has increased by 15% to INR 340 crores from INR 296 crores. Profit before tax has increased by 19% to INR 308 crores from INR 258 crores. Profit after tax has increased by 18% to INR 234 crores from INR 198 crores. Total other comprehensive income has increased by 18% to INR 234 crores from INR 198 crores. Earnings per share for the half year stood at 7.9 rupees as compared to 6.68 rupees in the corresponding half year. Now I'll go through the consolidated results for the quarter. The volume has increased by 20% to 26.4 billion units from 22.1 billion units. Profit before tax has increased by 3% to INR 266 crores from INR 257 crores. Profit after tax has slightly decreased by 4% to INR 194 crores from INR 201 crores. Total other comprehensive income has decreased by 3% to INR 194 crores from INR 200 crores. Earnings per share for the quarter stood at 6.17 rupees compared to [ 6.28 ] rupees in corresponding quarter. Now I'll go through the half yearly consolidated business. Volume has increased by 9% to 45.5 billion from 41.6 billion units. Profit before tax has increased by 3% to INR 407 crores from INR 397 crores. PAT remains flat at around INR 294 crores. Total other comprehensive income also remained flat at INR 293 crores. Earnings per share for the half year stood at 9.3 rupees in comparison to [ 9.4 ] rupees for the corresponding half year. Thank you.

Thank you very much. We have given our basic -- our CFO has given the basic number and I have given my basic [indiscernible]. So we can keep the floor open for question-and-answer.

[Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital.

Two questions. So first is on, sir, is there any time line for divestment or something which you can update, which has happened in the quarter? We believe that this can be completed by Q4 either of the PTC Energy or PTC Financial?

Both the processes are going on, and they are at a good stage. That's the reason we said that we should be able to come to this thing by the end of the financial year because you know these things take time. So even if the share purchase agreement has to be brushed aside, both -- there are so many legal entities, which are involved. So it takes time. And that's the reason I said that we are at advanced stage. And by March 31, we will certainly be hearing for us. When I say by 31st, if it will happen earlier, we'll come back to you sooner.

Okay, sir. And secondly, on PTC Energy, is there any development on the tariff side? Has the -- where is the process right now when do you expect it to get resolved?

The issue has hit -- that COVID has hit not only Delhi or Bombay, but also Andhra Pradesh high court, et cetera. So -- and it's not only PTC. PTC Energy is having 188 megawatt only. There are people like [ReNew and Benco], et cetera, who are having thousands and thousands of megawatts. So everyone is trying to push through the things. And we believe that now things normalizing, the court should be taking up the matter. But nothing concrete has happened, which we can say that we like to say just now because it's a judicial process.

Understood, sir. And sir, last, what's your market share on [indiscernible] for the month of -- for the volume [indiscernible] date?

What exactly you are asking? The real-time market share?

Market share in [indiscernible]

[indiscernible]

We have maintained the same market share, what we have in the exchanges. It is around 35% to 40%. But if you ask me specifically on each day, each day, it varies because some day, the clearance is much more. So we have reached a level of 52%, 53% also on some day. But on average, if we see since June, it's around 35% to 40%.

The next question is from the line of Sarvesh Gupta from Maximal Capital.

Sir, first question on the transaction time line. I think for PTC India Financial Services, there was an exchange notification on 11th of September that you have received nonbinding interest. And I think in the last con call, it was also mentioned that when the due diligence is already over to expedite the process. Now given that we are already 2 months away from receiving of nonbinding interest, shouldn't it be assumed that there is not much of an interest to take the transaction forward by the prospective buyers because 2 months is a long enough time line for moving from nonbinding to binding stage?

That may be your personal call. I will not like to comment there. But we believe that you are drawing a conclusion that there is no interest, I mean, that I would not like to comment upon that because that's your personal conclusion. But the things are going on. And between the nonbinding, even if we have done the due diligence, the parties who are involved, they are also doing their own due diligence, legal, financial, all those commercial, so many due diligence, which are there. And then that, therefore, followed by the management meeting, et cetera, the share purchase agreement because binding offer will come when everything gets frozen. [I decide again] about FPA et cetera, because what is that FPA will determine the prices also. So you -- I mean I will not like to comment because the nature of transaction, which may be there, is a listed company transaction, which we are talking about.

Okay, sir. So that's my first question. Secondly, I think this quarter, we saw very healthy growth in the volumes. So in the long term, I -- my assumption was that we should be growing in line with the market growth of maybe power consumption. So if you can explain what led to this higher increase in the volume for this quarter and what should we expect as the sustainable future in terms of the growth rates in volume that we can achieve.

As I had said in the beginning that the growth in business volume during the quarter has been led by the demand spillover from the first quarter. And secondly, the pent-up demand arising out of the gradual unlockdown of the commercial activity from various segments, including industries, commercial, domestic, agriculture, et cetera, to have contributed substantially to the same. Now, and thirdly, this has -- the demand side and supply side also because there were a good hydro, most of the hydro comes in the quarter 2. Traditionally, also, you see for last 14-, 15-year data because we have been listed for that much year that Q2 generally gives them one of the highest volumes also because supply is also there.

So I understand seasonality and the pent-up demand from Q1, but I am looking at volume growth Y-o-Y. Last quarter to this quarter, [we were] up 20%.

Yes. I'm coming to that. This obviously -- this was because of the pent-up demand and the unlocking, which happened during the quarter. So obviously, this was an exceptional thing. So we believe that as we have maintained in the last year the growth, which may be related more to overall consumption year-on-year, we'll be able to maintain that.

Okay. Okay. That is one. Secondly, if you can give us some comment on the -- your payable and receivable. I think this quarter, we have again sort of -- again, we were hoping that it can come down because of various government schemes and the package and all that. But I think our receivables have actually gone up by INR 1,200 odd crores, and our payables are also up by almost INR 2,000 crores. So if you can comment on what is happening on these 2 fronts.

Yes. I'm asking the CFO to react on these numbers.

Yes, you are right to the [indiscernible] results comparing it with March '20 results. As Chairman has also explained the seasonality nature of the trading. So in March quarter -- from December to March quarter, our hydro season is low and other -- this thing is also low. So because the outstanding debtor in that period relates to February or March, because in that period, the supply was low and all that, so debtors remain low. But if you really want to compare the September '20 data, then it has to be compared with September '19, what was it September '19 because in September '19, there was no hydro season at all. So I'll give you just a snapshot. In September '19 to September '20 if you compare. So there was an increase of only INR 500 crores to INR 600 crores in debtors. And that is because that we have the now the [indiscernible ] project, which is going on. So in September '19, that has supplied some only for 1 month. But for this quarter, the supply come for 3 months. And there are other new supplies, which have been started between the period of September '19 to September '20. So if you compare or take into account this sector, so debtors are very well under control. And as you can see that we always compare our net debtor and creditor. So our working capital has also gone down to that direction.

The next question is from the line of Gaurav Jhanwar from Systematix Shares.

I just have one question like as compared with the previous participants. Do you think that this kind of volume growth would be sustainable going forward? And sir, my second question on PTC Energy. So what was the revenue impact in the current quarter of PTC Energy?

Yes. About the -- this thing. The first question, which you asked, which I answered last -- last time that if you see year-on-year, the way [indiscernible] FY '20 from FY '19, we should be able to maintain the similar type of pattern. Now about PTC Energy Ltd., Rajib Mishra he's the Managing Director of PTC Energy Ltd. He's going to answer the question about this thing. But just to give you a breakdown, this year, the whole wind industry has really -- there has been a real shortfall because of wind pattern itself. So about [ 20% ], [ 30% ], [ 40% ] shortfall in the generation because of wind factor itself, which is unprecedented. So we hope that the worst is over for the wind industry. Now I'll ask Rajib Mishra to give the figures.

Yes, you asked a very pertinent question. There are 2 aspects of the seasonality. One is wind, the other is monsoon. If you have a good monsoon, hydro generation will be better, and so is the case with our generation growth for the volume growth in PTC. We have seen -- because our portfolio, we have a lot of hydro potential, hydro generation, including a new 720-megawatt Mangdechhu, which has come into operation for full -- this financial year and monsoon year this year. Secondly, [indiscernible] 2 of the PPAs, which are operational, could supply the full quantum during this monsoon. And the monsoon in the country this year was extraordinarily good. Whereas the we wind this year was almost 30% to 35% lesser compared to previous years. So that has reflected clearly a fall of around 30% of energy during this quarter in the wind generation. And this is also endorsed by the global report and the industry report that the wind this year is around 35% less compared to the previous year. As far as the number is concerned -- PTC Energy number is concerned, last year, the PAT was INR 70 crores for this quarter. And this year, it is INR 20.5 crores. So this is almost 70% fall from the previous year.

[indiscernible] I'll ask the CFO to give the revenue numbers [indiscernible]

The revenue from operations for PTC Energy for the quarter was INR 90 crores in comparison to INR 129 crores for the last quarter. And for the half year, it is INR 168 crores in comparison to INR 216 crores for the last half year.

The next question is from the line of Basil Varghese, individual investor.

So actually, it's been 3 years since PTC India has been fairly priced at 1 21 per share, and it's been down to 32, 3 months ago. So what's the company planning to do to safeguard the capital of the [ investment ]?

Sorry, I can't get the question.

Actually, the price of PTC India is falling. The share price is falling. So what is the company planning to safeguard the interest of the investors to reduce the capital erosion?

Yes. Anand?

This is Anand. The market price is a function of so many variables, wherein management may have a different -- limited say in terms of guiding and giving a guidance on the numbers. As part of management representations and the financial numbers we are reporting, we are a strong growing company. I think as an investor, you will be appreciative of the fact that increasingly, we have been trying to strengthen the shareholders' reward, trying to capture in how the profit can be shared with them. Since price cannot be controlled by the management, we'll refrain, and we cannot answer this question.

Sir, we are really thankful for all the dividend the company is giving. But on the percentage of what dividend is issued to the investors, the share has not been growing. And do you think there is something happening in the market or people are not noticing the growth of PTC India?

See, we have a corporate communication. They are continuously interacting with analysts like you all. And whatever the -- because of COVID this time, otherwise people generally were going out, explaining the [indiscernible] meeting for [ PTC ] this has been slightly reduced, but we defined the pathway. And as a management, we are continuously struggling on the projected path. That's what I can say. Our capital allocation, capital reallocation, everything we are now doing, whatever we have announced, we are working out on that way. I can't comment beyond that about the market price, et cetera, because you are the person who can go take the decision.

The next question is from the line of [ Channamallu Hargodi ] from [Maurya] Academy.

My question is related to divestment process, sir. For many times, you said that the entire bid process will complete in this financial year only, but can we expect approximate time line for the beginning of binding the process and the open offer price announcement, sir?

I will not be able to give comments. As I have said, we are already in November. So it's only -- financial year gets over in 4 months. So when you have the patient, you will have to be slightly more patient. That's all I can say. If there is any substantial thing, which we'll have to announce to the world, we'll certainly announce to the world. Rajiv Malhotra, you want to say something here?

So Rajiv Malhotra here. Just supplementing what Chairman has just responded to you, beyond what we have already communicated to the stock exchanges and in public domain, you will appreciate that it's only at a particular point on a substantive development that we can go because when a process like this is on, we are bound by confidentiality agreements and all that which comes with it after most the companies are listed. So understand that, and you will be able to appreciate the position we are communicating at this time. Thanks. That's all I needed to add, sir.

The next question is a follow-up question from the line of Sarvesh Gupta from Maximal Capital.

Just one question, which I forgot earlier, was on the dividend thing. I think this was the first year when we have also announced the interim dividend. But going forward, I mean, how are you thinking about it? Is it like an aberration or -- because earlier, we used to give only one dividend every year. And this time, we have received an interim one as well.

See, we believe that our detailed dividend policy came only in February of this year and the guidance can only with the dividend policy, which we have taken. So we are going there. Whatever policy has been adopted by the Board we will be in line with that.

Okay. And given that we have some borrowings also in the balance sheet, how are we thinking between the dividend tender borrowing? Any thoughts around that?

See, borrowing -- if you are seeing my consolidated balance sheet, if you are seeing, obviously I have a listed company of [ NBFC ] and the [indiscernible] company, [ their loans ] also [ commented ] on my balance sheet. But a stand-alone, stand-alone balance sheet, we don't take any long-term loans. And even if they are -- even if there are some working capital, this thing is some temporary, this thing is done. So that's the usual process, which we have been doing since the 20 -- last 20 years of our inception. [indiscernible] stand-alone balance sheet. That's what I'm saying.

The next question is from the line of Ashwini Agarwal from Ashmore Investment Management.

I had a question on the PTC Energy side, the decline that we have seen in the profitability, how much of it is led by the wind volumes coming down? And how much of it is because of the PPA being unilaterally rescinded by the AP government?

First, it has not been rescinded, the PPAs. And we are going -- we are sure that we'll keep getting the 4 84 or whatever the numbers are there, number one. Number two, see, whenever we took up these generating assets, PTC Energy, [and MD is there] he will explain in detail if required. Then there was an O&M expense also. So in the construct, which was there that initially 2, 3 years, the O&M was not charged. Now it's just a chance that the worst wind year has coincided with the year that the O&M expenditure has started. So it's a double whammy. That's why I think this should be the worst year of PTC Energy Ltd. And we believe that next year onwards, it should be much better.

The numbers, if you are interested, we have -- the generation loss was around 22% year-on-year compared to the previous year for the first 6 months. And this is unprecedented in the last 4 years, and we have changed to the industry report as well as our peer generation company. And they have also launched similar kind of generation. And as Chairman has explained, that the effect of the tariff of Andhra Pradesh we are not taking into account because this is a PPA, which is sacrosanct. And we feel that this -- at any point of time in the future, once it is resolved, we will receive that.

So this -- you're booking the revenues at 4 84, which is a PPA rate?

Yes, yes.

The next question is from the line of D.D. Sharma From Risk Capital Advisory.

Yes. Sir, I just wanted to give a suggestion because someone earlier asked the question how to improve the evaluation of the stock. You can go for buyback also because you see nowadays, PSU companies are also going for buyback to improve the shareholders' value.

All those things, we are -- there are certain things, which I can't disclose, but there are certain issues, which are being discussed and debated amongst management and the Board also. So I can't comment anything further than that.

The next question is from the line of [ Thanima Nath ], individual investor.

Sir, a question just with regard to as you explained in the last con call [indiscernible] you have given us a time line [indiscernible] in 3, 4 months time. And now that you are giving time lines that have been extended [indiscernible].

See, I always have maintained by the end of the year. And in -- when we say year, we always go by financial year. And as I said last conference -- last time, when did -- when was that, August? This August quarter? [Foreign Language]

Are there any chances [indiscernible]

It's not clear. Can you speak a little louder?

I'm saying [indiscernible] are there any chances the time line of March [indiscernible]

[Foreign Language] But in normal circumstances, and I have made a statement, that should be the [thing].

[Operator Instructions] The next question is from the line of [Rajendra Shah] Rajendra J Shah & Associates.

Regarding as we are going for the divestment of [PFS], like that's why are we thinking for the [PEL] not sure? To come out and to have a concentrate onto the PTC as a core business, sir. What is your idea?

Yes. You are correct. Rajendra, right, we are looking at both. Yes.

So ultimately, afterwards, there will be a compulsion for us to have an investment, whatever we receive, into the growth of the PTC or underline? Can you be able to elaborate on that?

[indiscernible]

Certainly, your suggestion [indiscernible] we are noting it down. But as I said, our focus, when we took a decision that we'll concentrate on our trading business with the main core business, and we have started the process. Now obviously, process takes time. So until the time process is not completed, the top management time is also spent there. So -- but once that gets over, we will certainly be fully, fully -- I mean we are dedicated only to this. That's the whole purpose.

So the PTC core business only?

Yes, yes.

[Operator Instructions] The next question is a follow-up question from the line of Basil Varghese, individual investor.

Sir, what about the money, which is after the divestment? Will some of the money will be given back to the investors or all the money will be used to build the core business?

As we have said, as my corporate communication, Anand, had intervened at that point of time that the whole objective is the shareholders, this thing also is at our top of our mind. And it's too early to comment [Foreign Language] we keep taking care of them.