Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PTC India Financial Services Ltd (BOM:533344, Financial) reported a significant improvement in Q1 FY25 compared to the preceding year, indicating a return to the growth path.
- The company achieved a disbursement of INR566 crores in Q1 FY25, which is almost equivalent to the total disbursement of the previous financial year.
- The portfolio increased to INR5,577 crores, showing a positive trend in asset growth.
- Profit before tax (PBT) increased to INR59 crores in Q1 FY25 from INR19 crores in the previous quarter, driven by a reduction in ECL provisioning.
- The company maintained its yields on portfolios despite an increase in the cost of funds due to a downward revision of its credit rating.
Negative Points
- Total income for Q1 FY25 was INR160 crores, showing a marginal decline compared to the previous quarter.
- The company experienced a significant repayment of around INR1,400 crores in the last quarter, which impacted the overall income.
- There was an increase in the cost of funds due to a downward revision of the company's credit rating on June 12.
- The company has a high dependency on bank funding, with nearly 97% of funds coming from banks, indicating a need for diversification.
- The company is still dealing with legacy issues and stressed assets, which require significant resolution efforts and could impact future performance.
Q & A Highlights
Q: How do you see the sector mix transforming in the next couple of years, especially in FY25? And also, if you can share a broader outlook on the sector's performance?
A: In the past, we heavily focused on thermal energy, but now we are shifting more towards renewables, with thermal accounting for only 6% of our overall portfolio. We also plan to diversify into other infrastructure sectors like roads, wastewater plants, and sewage treatment plants. The government is investing heavily in infrastructure, and we see significant opportunities in renewables, transmission, and waste management.
Q: What made you take this assignment as the new MD, and what are your strategies for building the existing team and bringing back investor confidence?
A: Most of the heavy lifting has already been done by my colleagues. Our primary focus will be on unleashing the energy of our people and winning back the trust and credibility of regulators, rating agencies, and financial institutions. Our portfolio quality is good, and we intend to get back to the growth path.
Q: What kind of recovery are we expecting in the current financial year, and what are our sanction and disbursement targets for FY25?
A: We do not want to give specific figures at this point. However, we aim to ensure that our net NPAs do not increase significantly as our loan book grows. We expect a significant reduction in our stressed assets over the next nine months.
Q: What would the NIM guidance for FY25 look like?
A: There will be a decline in NIM as our debt-to-equity ratio increases. Our focus will be on projects with better quality, even if the yields are relatively lower.
Q: What is the comfortable level of debt to equity according to you for FY25?
A: Our current debt-to-equity ratio is 1.4 times, which is more than comfortable. We have sufficient cushion for additional business, and we aim to maintain this comfort level for our investors.
Q: What is your strategy for growth, given that the company has been declining its loan book by 20% to 30% in the last five years?
A: Our strategy is still being worked out, but it involves ensuring that past issues do not recur, rebuilding trust with regulators and rating agencies, and focusing on growth quarter-on-quarter. We aim to stop the degrowth witnessed in the past and get back to a growth trajectory.
Q: What is the current outstanding sanction book?
A: Our loan book is INR5,600 crores, with new sanctions of INR525 crores this quarter. We have another INR300 crores to INR400 crores to be disbursed.
Q: What is your leverage target, and what is your comfortable ticket size for projects?
A: We aim to double our debt/equity ratio in the next 18 to 24 months. We will focus on smaller projects to ensure that no fresh disbursement is more than 5% of our AUM at any point in time. This approach will help us manage risk and maintain profitability.
Q: Are we properly equipped in terms of manpower capability and risk management systems to analyze and grow?
A: Our portfolio quality is good, and we have some of the best talent in the country. We got derailed due to extraneous issues, but once those are resolved, we are confident that growth will return.
Q: Is there sufficient space for a third player in the market, given the aggressive growth targets of PFC and REC?
A: Yes, there is sufficient space. We will focus on smaller, distributed projects that larger players may not prioritize. The infrastructure sector in India has immense potential, and there is room for multiple players.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
