Keynote Capitals-PTC India Financial Services - IPO Note

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 IPO of PTC India Financial Services Ltd.

Issue Highlights

Price Band                                                    :     Rs26-28 per share                                                                            

Minimum Bid Lot Size                                  :     250 Equity Shares

Maximum Bid Lot Size                                  :     7000 Equity Shares

IPO Open During                                           :     March 16-18, 2011

Book Running Lead Managers                      :     SBI Cap., JM Fin., ICICI Sec., Almondz Global, Avendus Cap.

To List On                                                     :     NSE & BSE

IPO Grading                                                  :     4 / 5 (CARE), 4 / 5 (ICRA), 3 / 5 CRISIL

PE                                                                 :     44.06x (based on base price)*

                                                                     :     47.45x (based on cap price)*

Market Cap Post-Listing                                :     Rs1574Cr or $347.81mn (based on the cap price)

Market Cap of Free Float                               :     Rs629.53Cr or $139.12mn (based on the cap price)

*Based on FY10 EPS

IPO of 156.7mn equity shares of Rs10 each, aggregating to Rs438.76Cr or $96.96mn (at the cap price) consisting of a fresh issue of 127.5mn shares (at the cap price) aggregating to Rs357Cr and an offer for sale of up to 29.2mn shares aggregating to Rs81.76Cr by Macquarie India Holdings Ltd.

Executive Summery

Ø  PTC India Financial Services Ltd. (PFS) was incorporated in September 2006 as an Indian non-banking financial institution promoted by PTC India to make principal investments and provide financing solutions for companies with projects across the energy value chain.

Ø  PFS is currently focused on power generation projects in India and also provide fee based syndication and advisory services as well as carbon credit financing against certified emissions reduction (CER).

Ø  As of December 31, 2010, PTC had a portfolio of power purchase agreements aggregating to approximately 14,185MW and memoranda of understandings for an additional approximately 13,243MW.

Ø  PFS is a one stop solution provider offering a comprehensive range of financial products and services that add value throughout the life cycle of projects across all areas of the energy value chain. This has enabled PFS to establish as a preferred financing provider for power projects.

Ø  Power sector knowledge and experience enables PFS to identify investment opportunities with high potential and effectively manage risks associated with such opportunities. Its exclusive focus on the power sector has enabled the company to develop strong relationships and become a preferred financing provider for power projects.

Ø  PFS's status as an NBFC and IFC provide it with greater flexibility than some of its competitors, particularly banks, and enable the company to quickly and efficiently capitalize upon financing opportunities that arise.

Ø  The business of PFS has grown rapidly in recent years, providing it with a robust balance sheet that provides a foundation for future growth.

Our View

Power is a priority sector in India and therefore gained significant attention from the Indian government. We believe the shortage of the power for the Indian people is ever increasing and requires huge funding from the financial institutions. Therefore, we believe PFS has an opportunity to tap the market and to remain on a robust growth curve. Considering the better financials of the company, which includes Net Interest Margin of 7.52% as of December 31, 2010 and the leverage from promoters' expertise in the power sector, we advise the investors to consider subscription for the IPO.