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Prefer PTC over PFS IPO
BUY CMP: INR81 Target Price: INR116 Potential Return: 44%
PFS IPO details
PTC Financial Services Limited (PFS) is raising INR3.3-3.6bn through an IPO route.
The total issue (156.7m shares) comprises fresh issue of 127.5m and offer for sale by
MIHL (Macquarie India Holding Limited) of 29.2m shares.
The price band is INR26-28, representing market capitalisation of INR14.6-15.7bn
post the issue.
Post the IPO, PTC will hold 60% in PFS vs. present holding of 77.6%. MIHL’s holding will
come down from 11.2% presently to 3.5% due to dilution and stake sale.
Net proceeds will be used to augment the capital base to meet the future capital
requirements arising out of growth in the business.
About PFS
PFS is an Infrastructure Financial Company.
At present, PTC owns 77.6% in PFS, while the rest is held by Macquarie India Holding
Limited and GS Strategic Investment Limited in equal proportion.
IFCs are allowed to have higher exposure for lending and investment to a single borrower
or a group of borrower.
The company can now raise ECBs up to 50% of the net worth through automatic route.
PFS can also raise tax free infrastructure bond.
IFC enables the company to raise debt at a lower cost.
PFS has approved equity commitments of INR5,641m in ten companies. Out of which, PFS
has entered into definitive agreement for investment in eight companies for an aggregate
amount of INR4,827m. As of December 31, 2010, PFS has invested an aggregate amount
of INR4,186m.
PFS valuation
Post the equity, we have valued PFS in two parts:
— PFS will have an equity investment of INR5.6 in power projects by FY12e. Power
projects command valuation in the range of 1.4-2x depending upon the return on
equity. We have valued this part at 1.5x FY12 investment and the value comes to
INR8.4bn.
— Loan book by FY12 (post the current money infusion) would be INR5.2bn. The
current equity loan book for leverage stands at INR2bn. At a PB of 1.3x this portion
is valued at INR6.7bn.
These two parts total to INR15.1bn.
Value per share for PFS comes to INR27 and the price band stands at INR26-28.
PTC valuation
Our earlier valuation: We had valued PFS at INR8.6bn earlier. Value to PTC (at
77.6% holding) stood at INR6.69bn representing INR23 per share.
Current valuation: Post 25% holding, company discount comes to INR23 per share.
If we assume INR23 to our SoTP for PTC, our target price arrives at INR116.
Hence, we recommend to BUY PTC than subscribing to the PFS IPO.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Prefer PTC over PFS IPO
BUY CMP: INR81 Target Price: INR116 Potential Return: 44%
PFS IPO details
PTC Financial Services Limited (PFS) is raising INR3.3-3.6bn through an IPO route.
The total issue (156.7m shares) comprises fresh issue of 127.5m and offer for sale by
MIHL (Macquarie India Holding Limited) of 29.2m shares.
The price band is INR26-28, representing market capitalisation of INR14.6-15.7bn
post the issue.
Post the IPO, PTC will hold 60% in PFS vs. present holding of 77.6%. MIHL’s holding will
come down from 11.2% presently to 3.5% due to dilution and stake sale.
Net proceeds will be used to augment the capital base to meet the future capital
requirements arising out of growth in the business.
About PFS
PFS is an Infrastructure Financial Company.
At present, PTC owns 77.6% in PFS, while the rest is held by Macquarie India Holding
Limited and GS Strategic Investment Limited in equal proportion.
IFCs are allowed to have higher exposure for lending and investment to a single borrower
or a group of borrower.
The company can now raise ECBs up to 50% of the net worth through automatic route.
PFS can also raise tax free infrastructure bond.
IFC enables the company to raise debt at a lower cost.
PFS has approved equity commitments of INR5,641m in ten companies. Out of which, PFS
has entered into definitive agreement for investment in eight companies for an aggregate
amount of INR4,827m. As of December 31, 2010, PFS has invested an aggregate amount
of INR4,186m.
PFS valuation
Post the equity, we have valued PFS in two parts:
— PFS will have an equity investment of INR5.6 in power projects by FY12e. Power
projects command valuation in the range of 1.4-2x depending upon the return on
equity. We have valued this part at 1.5x FY12 investment and the value comes to
INR8.4bn.
— Loan book by FY12 (post the current money infusion) would be INR5.2bn. The
current equity loan book for leverage stands at INR2bn. At a PB of 1.3x this portion
is valued at INR6.7bn.
These two parts total to INR15.1bn.
Value per share for PFS comes to INR27 and the price band stands at INR26-28.
PTC valuation
Our earlier valuation: We had valued PFS at INR8.6bn earlier. Value to PTC (at
77.6% holding) stood at INR6.69bn representing INR23 per share.
Current valuation: Post 25% holding, company discount comes to INR23 per share.
If we assume INR23 to our SoTP for PTC, our target price arrives at INR116.
Hence, we recommend to BUY PTC than subscribing to the PFS IPO.
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