PTC India Limited (PTC) Earnings Call Transcript & Summary

Ladies and gentlemen, good evening, and welcome to the PTC India Q3 and 9 Months FY '25 Earnings Conference Call. Representing the company and to answer your queries, we have with us on the call the senior management team led by Dr. Manoj Kumar Jhawar, Director, C&O and CMD, additional charge. I would now like to hand the conference over to Dr. Manoj Kumar Jhawar of PTC India Limited. Thank you, and over to you, sir.

Good afternoon, everyone. I welcome you all to the earnings call of the company post our Q2 -- Q3 FY '25 results. I'm joined by the entire management team to take you along the earning details of the company. I have with me Mr. Harish Saran, who is Director Marketing; Mr. Pankaj Goel, who is ED and CFO; Mr. Rajiv Malhotra, who is ED and Chief Risk Officer; Mr. Bikram Singh, who is ED Marketing; and Shri Anand Kumar, who is VP, Investor Relations. This post earnings call gives us an opportunity to share insights into our company's vision, performance and strategic direction and to engage with those who are integral to our growth and success, which is our investors, partners and stakeholders. The third quarter happens to be a fulfilling one with volume support coming from all the segments of the trading. The volume growth quarter-on-quarter basis has been 29% totaling to 19.24 billion units and for the 9-month period ending December '24, it grew by 12% to 63.74 billion units. With a 23% growth in trading income to INR 60.89 crores, the total operational income, including consultancy business, was INR 182.12 crores for the third quarter. The PAT for the third quarter was INR 110.59 crores, adding INR 3.73 crores to standalone EPS of the company. On supply power to Bangladesh, we continue to supply power to the Bangladesh Power Development Board and our receivables are well within the manageable lines and as per the contractual structures. Our commercial and operations team are in regular connection with DPDB officials for smooth supply of energy and receipt of our dues. The definitive agreement for the sale of PTC Energy Limited with ONGC Green Limited was signed on 30th September '24 and our team is in the process of completing the conditions precedent for the transition. We expect this to close very shortly and the timeline for completion of the transaction has been extended to 28th February '25 on mutual agreement. The business outlook, I expect power demand to remain firm and grow at 6% to 8% per annum. The demand can further rise in summer due to expected heat waves and coupled with adverse weather conditions. The government focus on renewable energy draft REIA guidelines to include many more traders, battery energy storage systems, pump storage systems, [indiscernible] et cetera is expected to lead the supply basket in coming years. The Government of India envisaged a requirement of 74 gigawatt capacity in storage solutions for better integration of renewable energy into the grid. The weather notification and guidance for PSP-based plants will facilitate the adoption of energy from the sourcing calibrated and organized manner. We take pleasure in informing all of you that all the qualifications either in the standalone accounts or in consolidated accounts of PTC Group have been dropped by our auditors due to [indiscernible]. Out Board has also approved the policies, which were required for compliance under the business responsibility and sustainability reporting. The same shall be uploaded on our website very soon. Now I will request our ED and CFO, Mr. Pankaj Goel to give the financial highlights of the company for the quarter. Post this, we will have question-and-answer session. Once again, thank you very much for your continued support of the company and thank you very much for joining the call.

Thank you, CMD, sir. Good evening to all of you. So as CMD has informed that there is a good news that all the qualification at the group level, which we have during the last quarters, so that has been dropped by the auditors and now we have a total team results basically at a group level. So now I'll go through the financial results for the quarter ended and 9 months ended December '24. So first, I will go through the quarter ended results for December '24 quarter. So volume has increased by 29% to 19.2 billion units from 14.9 billion units. The volume has mainly increased due to a higher short-term trade. The total operational income has increased by 66% to INR 182 crore from INR 109 crores. The operational income has increased mainly due to higher surcharge income and volume traded. Profit before tax has increased by 74% to INR 148 crores from INR 85 crores. PAT has also moved in the same direction, increased by 76% to INR 111 crore from INR 63 crores. The total comprehensive income stood at INR 111 crore compared to a loss of INR 4 crores. So in the last quarter, the December '23 quarter, there was a total comprehensive income was a loss because as you are aware that last year, there was damage to Teesta project due to flesh flood in Sikkim arising out of a cloud burst. The company took a reduction of INR 67.49 crore in the carrying value of its investment and Sikkim in the corresponding quarter ended December '23. So the earnings per share for the quarter stood at INR 3.74 as compared to INR 2.12 in the corresponding quarter. Now I'll go through the 9 months ended results on a standalone basis, volume has increased by 12% to 63.7 million units from 56.8 million units. Total operational income has increased by 34% to INR 567 crores from INR 422 crores. Profit before tax has increased by 21% to INR 448 crores from INR 371 crores. As earlier mentioned, PBT has increased due to higher-volume and the higher surcharge income. Profit after tax has increased by 17% to INR 333 crores from INR 286 crores. Total other comprehensive income has increased by 53% to INR 334 crores from INR 218 crores. Earnings per share for the 9 months ended stood at INR 11.26 as compared to INR 9.66 in the corresponding quarter. Now I'll go through the consolidated results for the quarter and 9 months ended December '24. For the quarter, volume has increased by 29% to 19.3 billion units from 15 billion units. Profit before tax has increased by 72% to INR 226 crores from INR 131 crores. Increase in consolidated PBT is on account of that higher profit before tax of PTC and of PTC Financial Services also. And secondly, in the last quarter, we have also informed that now because the PTC Energy assets has been held-for-sale as per Ind-As accounting, so in the consolidating accounts, we don't have to charge the depreciation. So because of non-charging of depreciation on [indiscernible] assets, the same has been classified as held-for-sale and depreciation has been added back into the profit before tax. So profit after tax has increased by 87% to INR 181 crores from INR 97 crores. Total other comprehensive net income has increased by 517% to INR 181 crores from INR 29 crores. Earning per share for the quarter stood at INR 5.32 as compared to INR 2.68. I'll go through the 9-month ended consolidated results. Volume has increased by 12% to 64 million units from 57.3 million units. Profit before tax has increased by 31% to INR 778 crores from INR 594 crores. Profit after tax has also increased in the same direction by 37% to INR 604 crores from INR 442 crores. Total other comprehensive income has increased by 62% to INR 604 crores from INR 373 crore. Earnings per share for the 9 months ended stood at INR 18.54 in comparison to INR 13.2 in the corresponding quarter December '23. Thank you very much.

[Operator Instructions] The first question is from Narendra Khuthia from RoboCapital.

Sir, my question is regarding HPX, right? So it's been about almost 2 years since the letter regarding market coupling was released. So where are we on that front? Could you throw some light on when can we expect market coupling to happen and what kind of discussions are going on?

Regarding market coupling, basically it is a call for the regulators and the government to take. We have been advocating for this. We have been having regular sort of meetings with the concerned officials. The pilot has been completed by the CEA. Now those results are under discussion at various levels. We will keep on advocating for this coupling based on the sound technical logic as well as the commercial logic but we cannot really prescribe the timeline for the same.

Okay. Okay. All right, sir. And what was the revenue and PBT for HPX for the 9 months as well as Q3 FY '25?

Yes. So for December '24 quarter, the revenue from operation from HPX as a whole was INR 6.23 crores and profit before tax was INR 1.36 crores and profit after tax was INR 1.28 crores. And for 9 months ended, the total revenue was INR 30.27 crores and the profit before tax was INR 10.12 crore, profit after tax was INR 8.39 crores.

Okay, sir. And if the market coupling -- until and unless the market coupling doesn't happen, so our numbers in the HPX business would remain around about at the same levels, right?

Actually, I mean, in a sense, we are really constrained by the fact that in the absence of market coupling, all the volumes in the collective segments are likely to remain engaged with the leading exchange only and that is the global experience. So yes, that is one of the reasons we are pushing our case for market coupling and allowing more players to be in the exchange segment so that basically it may lead to better meta services through more competition.

[Operator Instructions] We'll take the text question from Bharanidhar Vijayakumar from Avendus Spark. And the question is what is the margin per unit in 9 months FY '25 separately in short-term trades, medium-term and long-term trades? What are these margins for 9 months FY '24?

Yes. So for short-term trades for quarter December, our margin was 0.75 paisa per unit in comparison to 2.75 paisa, in medium-term trade, it is 2.15 paisa per unit. In long-term trade, it is 7.7 paisa per unit. And for 9 months ended, the short-term trade margin was 0.84 paisa per unit. For medium term, it is 2.06 paisa per unit. And for long-term trade, it is around 7.5 paisa per unit.

We'll take the next question from Gopi Krishna MK, a private investor.

Congratulations for the very good numbers. I want to ask you one question. What is the difference between surcharge and the rebate in the presentation? Because surcharge is more and rebate is less and how much this surcharge can go?

You see actually you have to understand the spectrum of a power trading contract. It is like this that if there is a client who has got certain obligation to make certain payment by certain debt and then if he is preceding payment before he is making a payment before the due date, then he is entitled to receive rebate. And if he is making a payment after that due date, then he is liable to pay the surcharge. Now what happens that what applies to a customer also applies to us. So as a trader, we are in the middle of this section where on the one side, there is a buyer and on the other side, there is a seller. So with the help of our treasury, we take advantages of the situation wherein we can make some earnings through the surcharge at the same time also make some earnings through the rebate. But this situation remains very, very fluid and dynamic with liquidity position of our client comes heavily dependent on them. So it cannot really be predicted but this is a offering to our clients that we can -- if you are facing some short-term liquidity issues, so we can pitch in on your behalf and take a later debt in the set-up the contact with us. So in the process we earn the surcharge as well as rebate.

Okay. Sir, second question I want to ask you, what about the long-term contracts? How do you think that you will be able to secure more long-term contracts because the margins in long-term contracts are much higher, and do you buy power from Bhutan because Bhutan is having a lot of hydroelectric power, will they have excess and they export to India?

Two things. Number one, for the domestic sector, currently traders are not allowed to participate in any long-term trade. So it has to be basically a direct transaction between buyer and seller. So that is by design of law, that is by design of the guidelines of the central government. So on the domestic sector, it is unlikely that unless and until this policy environment is changed, we will be able to gather more long-term context. To your second question, yes, we are aware of the possibilities of sale of power to Bhutan and we do provide them power as per the requirement that we have necessary approvals and infrastructure.

Okay. So the third question I want to ask you, your share prices have gone below book value. Do you have any plans to go for a buyback of shares if you receive the money from ONGC or you can recommend to the Board, my suggestion? Of course, you cannot take addition right now.

Yes, you have taken -- your suggestion is duly noted. Of course, whenever we receive this money from PA deal, so options will be presented before the Board and as per the decision of the Board, further action will be taken.

The next question is from [ Suyash Bhave ] from [ Wealth Cardial. ]

Yes. So I have a question on the ONGC deal. Would it be possible to disclose the reasons for the holdup and the reasons why the deal is not yet have been gone through?

Particularly, as per the context, there were lot many commercial precedents, which were required to be fulfilled. And this is a process in which I think we have to move step-by-step, a lot of legal work is required to be done, a lot of administrative work is required to be done. But I assure that currently there are no roadblocks and we are expecting this deal to be closed very early. I again repeat that the timeline for completion of this deal has been extended till 28th February that in this month with mutual consent. We are expecting to complete within this time.

All right. All right. Sir, in one of the previous calls, we had talked about some receivables situation with respect to the state of J&K. Has that resolved? Any status update on that?

Yes, that has significantly resolved. And currently it is very, very well within the manageable limits. Earlier the dues had increased to as I guess around INR 1,200 crores possibly more than that. But currently the debtor situation in respect of state of J&K is very, very manageable. It is currently less than INR 700 crores. So that is normal.

Yes, regarding Bangladesh, can you give some maybe similar numbers as in the amounts outstanding and what kind of money are we receiving and numbers around that.

Yes. So as far as Bangladesh is concerned, the last quarter, our outstanding was around INR 859 crores. But at the end of this quarter, our outstanding was only INR 693 crores, so there is around INR 200 crore of it approximately Bangladesh outside.

Okay. Okay. Sir, one last question I have. It is regarding Sikkim Urja and our stake in the Teesta dam. Would we be required to contribute any money towards its repairs or reconstruction and how do you see that panning out?

And #1, no, we do not intend to invest any more funds into that project, it is very clear. And #2, I mean revival of that project depends on a lot of things, a lot of clearances would be required, many engineering and design related issues would be required. Those issues have to be taken care of by the developer who is in control of it.

The next question is from [ Vipulkumar Shah ] from [ Sumangal ] Investments.

So my question is, are dues to Bangladesh covered by any sovereign guarantee from Bangladesh government?

Yes, sir.

Okay. And second question regarding core margin, so why the margin has come down substantially for 3 months and 9 months?

Margins are actually generally in line with what we have been having but the entire business volume, as I told earlier, since there are no new long-term trading opportunities are arising because of regulatory affairs. So margin, we are trying to earn more and more margin from short-term and medium-term trades. Obviously, the short-term and medium-term trades can be a lower margin. So overall, while we increase the volumes, there is a pressure on the margins.

And where are we in the journey to divest PTC Financials?

Right now, earlier this matter was taken up and considered by the Board of PTC and this process was earlier restarted but later on put on hold. So once we complete this PEL deal, maybe that question will again be considered by the Board. But right now, as I told you, it was put on hold.

So right now, we're not -- we have no plans to divest PTC Financials.

As of now, no but yes, once we conclude this PEL deal, this question will again be taken up.

Okay. And sir, lastly, regarding the power exchange you were talking about coupling. So how that coupling mechanism works, if you can explain briefly and how it will advantage around?

So what I would recommend and suggest is that there is a stamp paper by CERC on the market coupling. So maybe if you can provide your email address, my staff will be able to send you that stamp paper and that will explain in detail as to what is excess to be achieved by market coupling and how this should be done. If you have any further queries in that regard, we can provide you more inputs based on your questions.

The next text question is from Rahul. K from Florin Tree. What is the reason for a high net surcharge income book this quarter? Also, what is the situation at Teesta currently and when can we expect ramp up in generation?

Regarding Teesta, I think I have just answered that question in response to another query. And regarding surcharge, as I told you that the raising income, surcharge income and rebate income. All these 3 things basically are derived on the basis of cash funds available with PTC. Sometimes if you do not have any opportunity towards rebate or surcharge, you would want to park your funds in treasury. Sometimes when you have opportunities on the surcharge, you want to avail those opportunities, or many opportunities to earn rebate, then you will again want to cash-in on those opportunities. So it is difficult to, I mean, predict in any manner as to which income in which quarter will go up. But collectively, this is a trend we are likely to earn total sum of treasury income plus rebate income plus surcharge income like this. These 3 things are interchange.

The next text question is from Paresh Sandani from Joshua Investments, and his questions are as follows. What is leading to higher surcharge income? What is leading to higher volumes? Are we included to trade in renewables? And if yes, what was its contribution in last quarter? I request you to please consider a liberal dividend from energy divestment.

So #1, regarding Teesta, we have already answered. Regarding your suggestion for higher dividend, it is duly noted but again, this matter will be considered by the Board. And regarding green trading, yes, we do a lot of green trading also and for that on the exchange, there is a separate segment itself, which is called Green Day Ahead market, Green Term Ahead market. Besides that also from renewable energy sources, I can do very, very little capacity is available for trading in the merchant market, all those contracts, generally, there's is a back-to-back arrangement between buyer and the seller but as and when any opportunity for trading in the green and renewables sources arises we do entertain those opportunities.

The next text question is from Amit Kumar from Determine Invest, and he says, thank you, team. What is the recoverability potential of surcharges earned by the company this year? I'm new to the power sector but given our experience in gas sector, these generally go into litigation and are not resolved for many years. How many of these surcharges remain as recoverable presently?

There are 2 components to this. One must understand the power markets. In the power market, the medium-term and the long-term dues are always guaranteed by the PRAAPTI portal. So received including surcharge is not a challenge unless and until there is some underlying litigation. But that litigation can happen in any business deal anytime with anyone. So I'm not mentioning it to debt but for the medium-term and the long-term trades, the surcharge income as well as the trading margin, there is very-high probability of recoverability because of the proxy mechanism. Regarding the short-term trades, we do like to keep our exposure within limits as pursued by our risk department and our relationship with our buyers or sellers. So whatever is being shown as a recoverable, in our opinion and in our auditor's opinion, is recoverable.

[Operator Instructions] We'll take the next question from Rajiv Agrawal from Sterling Capital.

So my question is regarding the system of rebates. So you get rebate from the producer or you get rebate from the discount?

We get rebate from the producer for making early payment.

Okay. So from DISCOM, you only receive the surcharge, right?

No, no. Yes, from the DISCOM side, we will receive the surcharge and from the generator side we will receive the rebates.

We'll take the next text question from Vivek Nayak, an individual investor, and he says in last quarterly con-call, the ONGC deal was supposed to be finalized by 15th December 2024. Let us know the reason for the delay and expected date by which the deal would be completed?

The delays have occurred mainly because a lot of legal work was required to be done and it could not be completed within the expected timeline at that point of time. The current revised timeline for completion of the deal within, which we are hoping really to close the deal is 28th Feb.

[Operator Instructions] We'll take the next text question from Siddharth Shah from Vikram Advisory Services Private Limited. I'm sorry, sir, the questioner has left the queue. We'll take the next text question from Naveen Goyal from Club Millionaire PMS, and he says, do you expect the surcharge income to continue at the rate seen in last two quarters? Do we expect the dividends payouts to continue at least 50% of profits and a special dividend from the [ die ] investments?

You see this is really a forward-looking statement. I should not be making that comment here. As I told you earlier, the rebate income plus surcharge income plus treasury income together, all 3 taken together there is a sense of stability.

The next question is from Nisha Shah, an individual investor and she says NHPC, Adani and many more to planned buy PTC India, we think of it. That's the question.

I'm sorry, I could not get the question. Can you repeat again please.

Sir, she said NHPC, Adani and many more to planned buy PTC India, we think of it. Are you planning to buy?

Actually, I cannot comment on the like corporate plans of other people. And if they want to buy the equity, there are only 2 sources, which is either market or promoters, about our promoters also I cannot comment. Our free equity, they wish to buy as per their business plan, it is their call.

We'll take the next question from Vikram Shah from Vikram Securities.

My question was obviously, I joined in a bit late, sorry, so I couldn't for some reason join in. Obviously, the first question is about the ONGC monies. Will it happen this financial year because it's been going on for 3 quarters now almost? And the second question is, sir, going forward, the consulting business, how accretive do you see -- or where do you see your focus on the consulting business over the next 3 years?

Okay. The first thing regarding disclosure of PEL ONGC deal, as I told earlier also, the revised date for completion PEL deal is 28th Feb. So we are hoping to conclude it by then. Regarding second question about your consulting business, there are a couple of issues I would like to really highlight. Consulting business depends a lot on many other things also. Just for example, we used to do a lot of consulting for U.S. Aid projects. Currently, U.S. Aid has put a bar on many things. So consulting depends on those things but we definitely have plans to grow this sector and in coming quarters we hope we get some good news.

Vikram has rejoined the queue, I'll just unmute him.

Yes. Hello, sorry. Again, I lost connection, sir. I'll [Audio Gap] ONGC later. And again, sir, regarding the promoters, like there's all these news articles about NHPC and all these people wanting to sell 17%. What are your comments on that?

Actually, we have no official confirmation from our promoters to us as to they wish to sell this equity, #1. #2, it is their own business plan. So I'll not comment on that.

All right. And sir, regarding coupling, there is always a perceived threat to the business because of government allowing coupling. So what is your view on that, sir?

It is not a threat for us, it is an opportunity for us. If coupling happens, then our HPX business is expected to grow significantly because it will help our exchange HPX.

We only have a 20% stake in HPX, right, as opposed to...

Yes, 22% stake we have in HPX, that is a significant stake, that is #1. I think the value of that exchange investment is likely to go off if coupling happens, that depends on coupling. So that is a positive development for us, not a threat.

The next question is from Amitabh Sonthalia from SKS Capital.

I wanted to ask about the impairment charges reversal this quarter compared to last quarter, which is the main reason, which has given us the PBT increase year-on-year. And I just wanted to understand what is the broad business trends we are seeing in the next -- in the coming quarters?

So you are asking this impairment for PTC Financial Services or PTC India?

The consolidated -- I was looking at the consolidated P&L for which you have INR 18.6 crores of impairment charges.

Yes. Yes. Yes. So that is why because the results are consolidated with PTC Financials. So this reversal is on account of PTC Financial Services results. Basically, they have earlier made a provision against the IRFS loan towards the unsustainable debt also but in this quarter they have received some money out of the provision they have earlier made. So that is because they have to make a reversal of the provision in this quarter.

And just some color on the various business segments. I joined the call a bit late. If you can just give us some current trends in the various businesses that we are operating in.

Okay. So broadly speaking in the trading sector, I would like to again emphasize that in domestic markets, trader is not allowed to participate in the long-term deals. So it has to be a direct deal between buyer and seller. So on the long-term segment, domestically, it is not possible to grow that segment. Regarding medium-term and the short-term, the electricity generation in the country is growing at about 7% per annum debt. So likewise, the trading is also increasing in that proportion but a lot and lot volume of trading is migrating towards short-term trades. So inherently in the short-term trades, the risk is lower but so are the margins. So we have to, I mean, devise strategies and engage with our customers as to how we can customize our offerings so that we can mitigate some effects of the pressure on margin. And at the same time, we grow volume in medium-term and short-term segments. Regarding PFS, of course, the numbers are there but that is all I can say because that is listed entity itself and those positions better and should get us to the PFS management. The PLD is happening -- is likely to happen in this month itself, 28th Feb is new deadline for the completion [indiscernible]. HPX is likely to grow when there is a market coupling but besides that in other segments, where the exchange is currently doing well are TAM market and ADSS market. So till such time the coupling have gone, the exchange is basically focusing on those segments.

We'll take the next text question from Karthic Babu from Capstocks and Securities. And the question is what is the net debt level in standalone business?

So as far as the debt is concerned that we don't take -- there is any no long-term debt is there. Only we take the working capital loan from the bank from time-to-time. So as on 31st December, there was a very miniscule type of a debt was there, so I'll just tell you. It's about INR 48 crore of bank [indiscernible] but our net position was INR 516 crores.

The next text question is from Rupesh Sankhe from Elara Capital. And the question is what is cash-in hand and receivables as of December '24, also payable amount?

Yes. The net cash in hand was around INR 516 crore, as on the last day of the quarter, December '24 and the gross cash was around INR 564 crore. As far as the debt level is concerned, so debt was around the -- they were asking debtors or debt.

Debt.

So debt is INR 48 crores.

The next question is from Vivek Nayak, an Individual Investor. And the question is with respect to PTC Financials, are the audit issues or fees paid to consultant, et cetera resolved by now?

All the qualifications appearing in the PFS annual account have been dropped by the auditor based on the actions taken by the management. Yes.

The next text question is from Paresh Shah, an Individual Investor. And the question is when we are getting ONGC money and are you planning for dividend as 25 years?

The deal closure date, again I will repeat is 28th Feb this month, that is when we expect to close the deal. Regarding dividend or [indiscernible] redeployment of this capital in other businesses, the call will be taken by the board.

The next text question is from Vikram Shah from Vikram Securities. And the question is, are we starting the PTC Financial disinvestment anytime this calendar year? And are we stating a dividend policy of 50% ballpark?

See currently, we already have a dividend policy, which we pay the dividend, which is more than 50%. That is -- our policies is very long period. So that is part number one. Part number two regarding disinvestment of the PFS, again, when this deal of PEL is completed, I believe this question will be taken up for the consideration on the Board of PTC.

The next question is from Krishna Nambudiri, a Retail Investor.

And my question is regarding the trade with Bangladesh. And what is the status now? Are we getting the money and what is the receivable as of date?

Receivables have, CFO sir will tell you but currently it is controllable, and it is now lesser than the peak debt.

So Bangladesh receivable, as on the last day of the quarter is INR 693 crore, as against September quarter, it's INR 859 crore. So it has reduced by around INR 200 crore in this quarter.

And we are still supplying to Bangladesh?

Yes.

Yes, yes. We are supplying.

Thank you. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to the management from PTC India Limited for closing comments. Over to you, sir.

Thank you very much investors for having faith in the company. We hope that we remain long-term partners in sustainable growth of this business. Good evening.

Thank you, members of the management. Ladies and gentlemen, on behalf of PTC India Limited, that concludes today's session. Thank you for your participation. You may now click on the Exit Meeting to disconnect. Thank you.