PFS and PEL will be divested in the near term: Deepak Amitabh, CMD, PTC India

Deepak Amitabh, chairman and managing director, PTC India, speaks about the results of Q4FY20, cost of finance, COVID and its impact on power demand among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: There is a nice jump in the revenue of PTC India in March quarter but profit has declined by 35%. What are the highlights of the quarter?

A: First of all, I would like to inform that PTC India posts a standalone result that is associated with the trading business and you are talking about the consolidated business, which also includes the result of two of our subsidiaries. So, I will like to talk about PTC India’s standalone trading business first. PTC India has proved its resilient business model last year when there was a slowdown in the Indian economy. We have reported a 13% growth in volumes in the last quarter (Q4FY20) and it grew by 6% on a year-on-year basis. Our profitability index or the operating margin has increased by 11% in the quarter and it stands at Rs 118 crore. It has increased by 9% on a year-on-year basis, which is Rs 518 crore. Our PAT (profit after taxes) has increased by 22% and this is why our board of directors has recommended a dividend of Rs 5.50 per share. So, PTC India’s business has grown on both matrix – profitability and operational matrixes – have done well. There are a short-term contract and the one that is more than a year, i.e. medium and long term and as I have always said that we intended to have more than 50% contribution from the long and medium-term. This is the first time this year when we have penetrated and our growth has shifted more towards a long term and medium term. I would also like to highlight 4-5 things about the year. Have a look at Thermal, Renewable, and Hydro. In the case of renewable, we have operationalized wind power of around 1000 megawatt (MW). The PPA was signed earlier and 1000 MW has become operational now in the long term. Similarly, the pilot 1 of the stressed asset of 1,900 MW that was allocated to us has turned operational last year, i.e. its full profit will start coming from this year. In the case of the hydro, we had Mangdechhu power project of Bhutan of 720 MW and it has been operationalized completely. 

The fourth good news is that in the last quarter, we have received the government of India’s power project of 2,500 MW under the pilot scheme, which is similar to the 1,900 MW project. The aggregator has chosen us as the trader of the project, however, it has faced a slowdown for 2-3 months due to COVID but the work on the full scale has been resumed. We expect that we will be able to sign a PPA-PSA this year and operationalise it to the level that we can. 

Q: We have seen that the cost of finance has declined in the quarter. Do you think that the trend will continue in future as well?

A: In standalone, working capital is required when there is a mismatch. We haven’t taken any equity in PTC since 2007-08, i.e. haven’t raised any equity for the last 13 years but have provided dividend annually and then add it to our net worth. At times, we have to take temporary loans of 10 days or a month to manage the working capital.

As far as the consolidated numbers are concerned then we have two subsidiaries in it. 

PTC Energy Limited (PEL), generating company, where we have 100% shareholding. 
PTC Financial Services (PFS), which is an NBFC in the infrastructure sector and is a listed company. Its results were announced a few days back, which was explained by its MD.

These two companies felt headwinds this time. The headwinds were not directly related to these companies but it was related to the entire sector and macroeconomic situation, which had an impact on these two companies. But the government of India has done some good things like the announcement of the financial package of Rs 90,000 crore. By combining the short-term and long-term, it seems that the worse for the sector is over and its benefits will be seen in the coming years. This is why we posted good results in consolidated and standalone has faced the impact of consolidated. 

Q: We are heading towards Unlock 1.0 after a complete shutdown of two months across the country due to COVID. So, let us know about the growth in the power demand and what is your outlook towards it?

A: There was a complete lockdown in April and the month we saw its impact on almost everything from power demand to PTC’s volume. I will be able to talk about it in detail only after the financial results of June quarter is declared in July. It occurred in April but we are seeing in May and June that as the lockdown is being relaxed more and more industries have started operating except in one or two states, where things are not picking up. But, I think that it will pick up in those states by next month. So, we are moving towards the demand that was seen in the pre-COVID era because electricity is an essential service and it was not so that there was an end in demand but a large part of commercial demand shifted from commercial to domestic demand. However, industrial demand was completely off for a while. However, there was 

The day when Prime Minister Narendra Modi asked people to switch off the lights for nine-minutes in the night, we came to know about the domestic demand in the ecosystem – which nobody knew earlier – as we had to do plus/minus of almost 30,000 MW of power. This was successfully managed – the increase and decline of 30,000 MW – by the Indian government and the power grids in every state. 

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Q: If I would like to know about the company’s situation from the fund/ capital raising point of view then what is the requirement of the capital and what is the debt situation of the company and how it will be reduced? Do you have plans to sell some non-core asset shortly?

A: We had strategic interest when we started investments in two of our subsidiaries in 2007-08 but gradually it turned into a financial interest for us. For the purpose, we, the management, have started looking forward towards the ways to divest them as they, PTC Financial and PTC Energy, need additional capital and we have given that we were supposed to give to them. Many people, who have money, are interested in them but it was delayed by 2-3 months due to the complete lockdown that was implemented due to the COVID. But, it, the process is gaining a pace once again, and in the near-term, we will look forward if we get good value for the assets. But the decision to divest them will be made by the management, group of directors, board and shareholders. PTC has never thought of raising funds and it is not required yet.