PTC: maintain Buy :: Motilal Oswal

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PTC India Ltd. is the pioneer in power trading in India, and over the years has become
a Power Solutions company. It was set up in April 1999 with a mandate to catalyze
the development of large power projects by acting as a single buyer for PPAs with
independent power producers on one hand and by entering multi-partite PPAs with
users and SEBs under long-term arrangements on the other. The GoI has identified
PTC as its nodal agency for trading power with neighboring countries. For FY10 PTC
India has market share of 44% in ST Volumes.
Key investment arguments
Change in business mix towards long-term contracts extends volume and margin
visibility and PTC to benefit from CERC regulation of no cap on long term volume.
Addressable market of PTC to rise due to open access to intra-state transmission,
easing of inter-state grid constraints, commissioning of new merchant power plants,
etc
PTC Financial Services (PFS) and PTC Energy (PEL) witnessing business traction. PFS
has book size of Rs15.1b as on Q1FY11 and sanctioned debt and equity of Rs19.5b
and Rs5b respectively.
Recent development
PTC Ashmore fund launched and expected to close with fund size of USD300m by
Q3FY11.
PTC has got in-principle approval from board for IPO in current financial year
Valuation and view:
PTC has cash and cash equivalent of Rs11b, and has investment of Rs7b into
subsidiaries/project SPVs (PFS Rs4.5b, PEL Rs410m, Athena Rs690m, Teesta Energy
Rs1.25b, Krishna Godavari Rs195m).We expect PTC to report net profit of Rs1.24b in
FY11E (up 32%) and Rs1.64b in FY12E (up 33%). We maintain Buy.