PTC India Financial Services Ltd - Stock Valuation and Financial Performance

PTC India Financial Services was incorporated on September 8, 2006 as a public limited company, in the name of “PTC India Financial Services Limited” under the Companies Act with the RoC. The certificate for commencement of business was issued by the RoC on March 30, 2007. The company is not a government company within the meaning of Section 617 of the Companies Act. PTC holds 77.60% of the company’s equity share capital and GS Strategic Investments (an affiliate of The Goldman Sachs Group, Inc.) and Macquarie India Holdings (an affiliate of The Macquarie Group) each hold 11.20% of the company’s equity share capital.

The company is an Indian non-banking financial institution promoted by PTC India (PTC) to make principal investments in, and provide financing solutions for, companies with projects across the energy value chain. They believe they are one of the few financial institutions in India that provide both equity and debt financing, including short-term and long-term debt, as well as structured debt financing. With a focus on infrastructure development, they offer an integrated suite of services including provision financing to, and make investments in, private sector Indian companies in the power sector, including for power generation, equipment supply and fuel source projects. They are currently focused primarily on power generation projects in India. They also provide fee-based syndication and advisory services as well as carbon credit financing against certified emissions reduction (CER).

They are regulated by the Reserve Bank of India (RBI) as a systemically important non-deposit taking, Non Banking Financial Company (NBFC), and have been classified by the RBI as an Infrastructure Finance Company, or IFC, in August 2010. The IFC status enhances their ability to raise funds on a cost-competitive basis and enables them to assume higher debt exposure in infrastructure projects. They are a subsidiary of and promoted by PTC, which is the market leader for power trading solutions in India, according to the Central Electricity Regulatory Commission monthly report on short term transactions of electricity (December 2010). PTC purchases power primarily for sale to power utilities and also provides comprehensive solutions for the power sector in India. As of December 31, 2010, PTC had a portfolio of power purchase agreements aggregating to approximately 14,185 MW and memorandum of understandings for an additional approximately 13,243 MW. PTC is a GoI initiated company promoted by National Thermal Power Corporation (NTPC), Power Grid Corporation of India, Power Finance Corporation (PFC) and NHPC. They benefit from the power sector expertise, network and relationships of PTC and its affiliates, which provide them with early access to business opportunities.

Products and services:

Equity Investments - The focus of equity investment is for projects in brown field as well as green field, backed by promoters with proven track record, good growth prospects and clearly defined exit routes. Their investment horizon tends to focus on the short to medium term. They also provide the last mile equity to power projects as and when required depending upon the project viability, its progress and their investment guidelines.

Lending - PFS offers debt assistance to projects subject to exposure limits stated earlier. PFS structure the debt assistance taking into consideration factors like needs of the borrowing entity, the market conditions, regulatory requirements, risks and rewards from the projects. PFS provides debt assistance to projects in the entire energy value chain i.e. power projects, fuel sources, related infrastructure like gas pipelines, LNG terminals, ports, equipment manufacturers like transformers, conductors, insulators, cables etc; which are technically and economically viable.

Fee Based Services - PFS aspires to leverage its wide experience base in executing small and large offerings and the capacity to play the role of an advisor and arranger for power projects. With a core team of in-house power sector professionals, PFS strives to help its clients to become more competitive, effective and successful. PFS expects to build a formidable presence in the area of Finance Advisory and Funds Syndication in coming future.

Carbon Financing - PTC India Financial Services (PFS), a subsidiary of PTC India undertakes carbon financing transactions through structured finance instruments tailor made to meet requirements of the projects. PFS envisages a significant growth in emission reduction activities in India and, hence, sees diversified opportunities in the Carbon Finance Business. In the next three years PFS proposes to build a portfolio of more than 3 million carbon credits.

Milestones:

2006-07

• The company was incorporated.

2007-08

• The company commenced business.
• The company made first investment in India’s first power exchange i.e. Indian Energy Exchange.
• The company got investment from strategic investors i.e. GS Strategic Investments and Macquarie India Holdings.

2008-09

• The company commenced debt financing business.

2009-10

• The company commenced financing of future generation of carbon credits.
• The company commenced 6 MW wind power project in the State of Karnataka.

2010-11

• The company received the status of an “Infrastructure Finance Company” from RBI.
• The company entered into an agreement with Deutsche Investitions-Und Entwicklungsgesellschaft mbH (DEG), Germany for availing external commercial borrowings in the nature of a term loan for an amount of $26 million.
• The company commenced fee based services by receiving a mandate from Greta Energy appointing the company as the lead financial institution, lenders’ agent and security agent for a 15 MW coal based project; and
• The company received short term borrowing rating of ‘A1+’, (indicating high credit quality and lowest credit risk for short term) which is the highest rating granted by ICRA.

Accreditations:

• August 2010 - Re-affirmation by Brickwork Ratings India of BWR AA rating (indicating high credit quality in terms of timely servicing of debt obligations) earlier assigned to their previous two issues of NCDs aggregating to Rs 1,000 million each with a tenor of five years to be made by the company and their proposed unsecured NCD issue of Rs 2,000 million.
• August 2010 - Reaffirmation of A1+ rating (indicating high credit quality and lowest credit risk for short term) earlier assigned by ICRA to the Commercial Paper Programme of Rs 1,000 million to be made by the company. The said rating is valid till August 19, 2011.
• June 2010 - Long-term rating of LA+ assigned by ICRA with positive outlook to the issue of NCDs aggregating to Rs 1 billion to be made by the company and an A1+ rating (indicating high credit quality and lowest credit risk for short term) to the Commercial Paper (CP) Programme aggregating to Rs 1 billion to be made by the company. ICRA also reaffirmed LA+ ratings assigned earlier to the two separate issues of NCDs of Rs 1 billion each made earlier by the company and revised the outlook on ratings for Previous NCD issues from ‘stable’ to ‘positive’. The long term sanctioned bank lines were also enhanced from Rs 3 billion to Rs 4.25 billion and outlook on ratings for the same was revised from ‘stable’ to ‘positive’.