PTC India Ltd

NSE:PTC

Earnings Call Analysis

PTC India Reports Growth Amid Profit Declines and Strategic Changes

In the latest earnings call, PTC India highlighted a 13% rise in volume to 24 billion units, with operational income increasing 19% to INR 197 crores, attributed to better trading margins. Despite the income growth, profit before tax dropped 6%, and profit after tax saw a 13% decrease due to the absence of a previous year's INR 41.7 crore dividend. The consolidated profit increased by 16% to INR 234 crores. Looking ahead, PTC anticipates maintaining a core margin of INR 3.60 per unit and outlines a hopeful outlook for its Bangladesh power supply operations, amid strategic divestments set to finalize soon.

Strong Volume Growth Signals Positive Business Activity

PTC India reported an impressive 13% increase in electricity volume for Q2, reaching 24 billion units, up from 21.3 billion units in the previous quarter. This upward trend in volume growth reflects the company's ongoing operational success and its ability to meet market demand effectively. For the half-year period, total volume increased by 6% to 44.5 billion units compared to 41.9 billion units in the previous year.

Operational Income Gains But Profit Margins Decline

Total operational income surged by 19%, reaching INR 197 crores, up from INR 166 crores. This increase can be attributed mainly to better trading margins and higher surcharge income. However, the profit before tax decreased by 6% to INR 157 crores due to the absence of dividend income from a subsidiary in the corresponding quarter, leading profit after tax to drop by 13% to INR 117 crores.

Positive Indicators in Consolidated Performance

When looking at the consolidated results, profit before tax climbed 12% to INR 306 crores from INR 272 crores, while profit after tax saw a more robust increase of 16%, reaching INR 234 crores. The improvement in profits is largely fueled by enhanced trading margins and effective management of depreciation expenses.

Sustained Margins Despite Market Challenges

The company maintained a stable core margin of INR 3.60 per unit for Q2 and INR 3.55 per unit for the half year. Such consistency in margins is crucial for maintaining financial health amid fluctuating commodity prices and operational challenges.

Ongoing Strategic Developments in International Operations

Concerns surrounding the supply of electricity to Bangladesh appear to be alleviating, with receivables starting to decrease. Despite the initial operational hurdles due to changes in the Bangladesh administration, management is optimistic that the situation is stabilizing. This is a positive sign for investors as it indicates the potential for recovering outstanding debts.

Divestment Plans and Future Strategies

PTC India is working towards completing the divestment of PTC Energy Limited to ONGC Green Limited, with expectations to finalize this transaction by mid-December. Furthermore, the board intends to reevaluate the potential divestment of PTC India Financial Services after the completion of the current transaction, which signals a focused approach towards boosting core business operations.

Earnings Per Share Dynamics

Earnings per share (EPS) for the standalone results has shown a decline, settling at INR 3.94 for the quarter compared to INR 4.50 a year prior. The half-year EPS stands at INR 7.53, a minor decrease from INR 7.54 in the same period last year. This slight decline reflects the company's challenge in maintaining profitability momentum.

Outlook for H2 and Dividend Considerations

Despite the profit decline, management does not foresee any significant headwinds for the second half of the financial year. They noted that the lack of interim dividend distribution is not indicative of poor H2 performance, as the company aims to maintain shareholder confidence and long-term growth.

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the PTC India Limited Q2 FY '25 Earnings Conference Call. The management team at PTC India is led by Dr. Manoj Kumar Jhawar, Chairman and Managing Director, Additional Charge, and Director, Commercial and Operations, PTC. Dr. Jhawar is accompanied by Mr. Harish Saran, Executive Director, PTC; Mr. Pankaj Goel, ED and CFO, PTC; and Mr. Rajiv Malhotra, ED and CRO. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Dr. Manoj Kumar Jhawar for opening remarks. Thank you, and over to you.

[Manoj Jhawar, executive]

Good evening, everyone, and welcome you all to the earnings call of the company post our Q2 financial year '24, '25 results. I'm joined by the entire management team to take you along the earnings detail of the company. Mr. Harish Saran, Executive Director, who looks after the Business Development Consulting business. Sri Pankaj Goel, ED and CFO, handles the finance functions; and Mr. Rajiv Malhotra, ED and Chief Risk Officer, handles Legal Risk and Corporate Affairs related functions.

I am also having with me Mr. Bikram Singh, who is Executive Vice President of the Marketing Department; and Mr. Anand Kumar, who handles the Investor Relations and Public Outreach functions.

This post-earnings call gives us an opportunity to share insights into our company's vision, performance and strategic direction and to engage with those who are integral to our growth and success, our investors, partners and stakeholders.

The Q2 quarter of every financial year for PTC continues to be an action-packed quarter for the company. The volume growth in this quarter has been 13%, which is around 24 billion units and overall growth up to this 6-monthly period has been 6%. The consolidated profit this quarter has grown up by 16%, whereas on a stand-alone basis, there has been some decline in the profit after tax. This is because we had earlier received around INR 40 crores dividend from a subsidiary, which this year, we have not received because that subsidiary wishes to invest that in business to grow their business further.

The core margin has been maintained at INR 3.55 per unit for the half year and INR 3.60 per unit for Q2. On the supply power to Bangladesh, which has been an area of concern, and we have been listening very -- news about that. I wish to inform all the investing community that we continue to supply power to BPDB and our receivables have started decreasing. The change in guard at Bangladesh did have an impact on smooth supply of energy and [ receipt ] of power, but our commercial and operations teams have been managing this very effectively.

We are now very hopeful that there would not be any adverse issues relating to ongoing context our supply of power to Bangladesh. The definitive agreement for sale of PTC Energy Limited has been signed with ONGC Green Limited and our team in this process of completing the...

[Operator]

Sir, we can hear you.

[Manoj Jhawar, executive]

Okay. All right. So then -- I'm sorry for the interruption. The definitive agreement for sale of PTC Energy Limited has been signed with ONGC Green Limited, and our team is in the process of completing the conditions precedent for carrying out the transaction. We expect this to close within the available timeframe for definitive agreement.

I hope all the investors will have received dividend distributed by the company. The concerns raised by proxy advisers and subsequent nonapproval of account -- non adoption of account by the shareholders are being addressed, and we will go to the shareholders for their approval of the account at the earliest possible opportunity.

Now I will request our ED and CFO, Sri Pankaj Goel, to give the financial highlights of the company for the quarter. Post this, we will have question-and-answer session. Once again, thank you for your continued support for the company. I wish you all a very Happy New Year and [ seasons ] greetings.

[Pankaj Goel, executive]

Thank you, CMD sir. Good evening to all of you. Now I'll go through the financial highlights of PTC India Limited for quarter and half year ended September '24 on stand-alone and consolidated basis. First, I will go through the quarterly and half yearly results on a stand-alone basis vis-a-vis the previous corresponding and half year.

So as far as the quarter is concerned, volume has increased by 13% to 24 billion units from 21.3 billion units. Total operational income has increased by 19% to INR 197 crores from INR 166 crores. So the increase in the operational income is mainly due to our increase in trading margin and higher surcharge income in this quarter.

Profit before tax has decreased by 6% in spite of increase in the total operational income by 6% to INR 157 crores from INR 166 crores, as already explained by CMD sir, that this is because of the dividend income of INR 41.7 crores from PFS in the corresponding quarter ended September '23. Profit after tax has decreased by 13% to INR 117 crores from INR 133 crores.

Total other comprehensive income has also decreased by 13% to INR 116 crores from INR 133 crores. Earnings per share for the quarter stood at INR 3.94 as compared to the previous corresponding quarter at INR 4.5. Now I'll go through the half year ended results on a stand-alone basis. Volume has increased by 6% to 44.5 billion units from 41.9 billion units. Total operational income has increased by 23% to INR 385 crores from INR 313 crores.

Profit before tax has increased by 5% to INR 300 crores from INR 286 crores. Profit after tax is almost remained at the same level of INR 223 crores. Total other comprehensive income is also at the same level of INR 223 crores. Earnings per share for the half year ended stood at INR 7.53 in comparison to INR 7.54 during the last half year.

Now I'll go through the consolidated results for the quarter. Volume has increased by 13% to 24.3 billion units from 21.6 billion units. Profit before tax has increased by 12% to INR 306 crores from INR 272 crores. The profit is increasing -- profit is because -- mainly because of the increase in trading margin and higher surcharge income and also non-charging or depreciation of PL fixed assets as a CMR classified as for sale as per the Indian accounting standards.

Profit after tax has increased by 16% to INR 234 crores from INR 202 crores. Total other comprehensive income has increased by 15% to INR 233 crores from INR 202 crores. Earnings per share for the quarter stood at INR 7.34 in comparison to INR 6.13.

Now I'll go through the half yearly consolidated results. Volume has increased by 6% to 44.9 billion units from 42.3 billion units. Profit before tax has increased by 19% to INR 552 crores from INR 463 crores. Profit after tax has increased by 23% to INR 423 crores from INR 345 crores. Total other comprehensive income has increased by 23% to INR 423 crores from INR 344 crores. Earnings per share for the half year ended stood at INR 13.21 as comparison to INR 10.5. Thank you.

[Operator]

Sir, do you want me to start the question-and-answer session?

[Manoj Jhawar, executive]

Yes, we can start.

[Operator]

[Operator Instructions] We'll take a first question from [indiscernible] an Individual Investor.

[Unknown Analyst]

I'm a serious investor in the PTC India company and holding 8,000 shares in your company. I invested in this company on the hope of you are concentrating on purely core business. So after announcing the divestment of it PTC India financial service, I hope that -- I got hope that you will concentrate in the core business.

But since 4 years that PTC India Financial Service divestment is lagging behind. So I think you are not serious in the divestment of PTC India Financial. Just you're -- announced that announcement just to increase the market value artificially in both of the listed companies. This is my question, sir.

[Manoj Jhawar, executive]

Your concern is understood. Please let me make it very clear that a call to divest in PFS as and when that is taken, the market would be taken into the confidence. As of now, the PTC Board had earlier considered this divestment, but at a later stage that entire exercise was put on hold.

One reason I can tell you is we are currently, I mean, in the midst of the transaction relating to PEL. Post that, this matter will be again considered by the PTC Board, but I assure you that there is no -- absolute no intention as to, I mean, increase the share price just on the basis of a notion that we make an announcement and we don't follow it.

[Unknown Analyst]

So please take it serious and do it early, sir.

[Manoj Jhawar, executive]

Yes, sir. Yes, sir, your concern is, I mean, taken note of.

[Operator]

[Operator Instructions]

[Manoj Jhawar, executive]

Meanwhile the second question comes, I would like to thank our previous investor who asked this question are having faith in the company kindly remain invested. We really need good investors who are with us for the long term.

[Operator]

We have a question from Subhankar Ojha from SKS Capital.

[Subhankar Ojha, analyst]

So with respect to the divestment of PEL, what is the timeframe that you have in terms of -- where are we in terms of approvals? And when do we expect to close this divestment?

[Manoj Jhawar, executive]

Sir, we expect to close this transaction by mid of the next month. We are in the process of completing certain condition precedents. If we are able to complete those condition precedents, we have time until December of -- mid-December.

[Subhankar Ojha, analyst]

And is there any thought on the usage of that fund?

[Manoj Jhawar, executive]

Sir, I mean, we would like to -- of course, in parallel, we are working and the strategic call regarding investments would be taken by the Board of the Directors at an appropriate time.

[Subhankar Ojha, analyst]

All right. And also, can you give a breakup of the receivables, which is I mean, your H1. Can you give anything which is beyond...

[Manoj Jhawar, executive]

CFO would like to respond to the query.

[Pankaj Goel, executive]

So the total debtors for the half year is INR 6,609 crores and our main debtors out of this is including basically the -- if you see that we are also holding the creditors, so our net exposure per se, our net exposure is around INR 2,400 crores, so we subtract the creditor out of it. And the exposure is in J&K is around INR 900 crores.

[Subhankar Ojha, analyst]

Okay. And with respect to your exposure to Bangladesh what is the receivable now and what was it 6 months back?

[Pankaj Goel, executive]

Basically, there is no exposure as on date as far as the Bangladesh is concerned. So whatever amount is receivable, that is also payable to our generator. As on 30th December, typically, our debtors to Bangladesh was around INR 850 crores. But after that, we have received some payment from Bangladesh.

[Subhankar Ojha, analyst]

So you're saying from INR 850 crores as of today, it is 0.

[Pankaj Goel, executive]

No, no.

[Manoj Jhawar, executive]

It is not an open exposure [indiscernible] this is back-to-back contracts. So whatever we receive from the Bangladesh, we shall be paying to the generators. So if we have not received the money, then we have not paid the money to the generator. But the silver-lining in this entire episode is this, the outstandings have substantially come down in the past 1 month. Payments have been accelerated from Bangladesh side. So we don't see any problem going forward.

[Operator]

[Operator Instructions] The next question is from [ Suyash Bhave ] from Wealth Guardian.

[Unknown Analyst]

Can we get a breakup of the total CBT or international volumes for quarter 2.

[Pankaj Goel, executive]

Our cross border volume for quarter was including Bangladesh was 3,700 million units for the quarter. And for half year, it is around 4,700 units.

[Unknown Analyst]

So 4,700 is for H1. Half year?

[Pankaj Goel, executive]

Absolutely right.

[Unknown Analyst]

Okay. Okay. Sir, and any update on HPX performance and volumes.

[Manoj Jhawar, executive]

Actually, I mean, HPX is -- every investor in that company would know, HPX is not having a great presence in the day ahead market, but it continues to do well in other segments of the market except the day ahead and [indiscernible] market. So for same market and for ADSs, it has been able to gather a substantial market share. But since the exchange business is basically revolving around the DAM. And unless and until there is some policy announcement relating to market coupling, et cetera it is difficult to bring volumes to on the DAM segment on HPX. So that situation continues.

[Unknown Analyst]

Okay, sir. Understood. I appreciate that. Would it be possible to share revenue numbers, revenue and profit numbers for HPX for Q2?

[Pankaj Goel, executive]

Yes. So the venue for Q2 for the quarter as it's around INR 5.77 crores, and the profit as a whole for HPX was around profit before tax was INR 80 lakhs because there was some negative taxation and all that profit after tax is INR 1 crore.

[Operator]

We have few text questions. The first question is from [ Abhimanyu Laxman ] from Family Office. Congratulations on a good quarterly outcome. I have a follow-up question on PEL divestment. Can you please elaborate or give us an idea of the range of conditions for closure of the transaction, ONGC?

[Manoj Jhawar, executive]

The nature of discussions with the ONGC, I would not, I mean like to go into that detail, but we are hoping to conclude that transaction by mid of the next month, that much I would like to share here.

[Operator]

The second next question is from [ Lipika Kundu ] an Individual. Respected Chairman sir, in spite of having good earnings in H1 why interim dividend has not been considered this time. Does it mean that H2 earnings will not be that good?

[Manoj Jhawar, executive]

No, we do not see any headwinds as to our H2 performance is concerned. But the only thing is for this quarter, as we have already said that the PAT has been a little bit subdued because we did not receive any dividend from our subsidiary. So earlier also in the previous year also, there has not been any practice of PTC to declare the interim dividends.

I think we are -- there is nothing surprising about not declaring the interim dividend. But after considering all factors, we will not disappoint the shareholders.

[Operator]

Next text question is from [indiscernible] an Individual Investor. What is the time line you will take to complete the divestment of PTC India Financial Services from here onwards?

[Manoj Jhawar, executive]

I think I have already answered that question. Currently, I mean, earlier there was a discussion and then that decision regarding divestment was put on hold. Currently, we are even dealing with the divestment of PEL. So after the Board will take a call at an appropriate time. Divestment for the sake of divestment, I would like to, I mean, just apply the investing community, divestment by the sake of divestment is not the right thing to do there has to be a timing to it.

And we believe that PFS has potential to grow. So I mean, decision for divestment has to be timed properly if it has to be there. So those aspects will be considered by the PTC Board.

[Operator]

[Operator Instructions]

[Manoj Jhawar, executive]

If there are no further questions, we can close the call.

[Operator]

Sir, we have 1 text question. I'll just read that. We have a question from [ Suyash Bhave ] from Wealth Guardian. Regarding the approval of accounts, what is the process forward. Will it be done in an AGM? Or would it be next AGM? What would be the outlook on that?

[Manoj Jhawar, executive]

Actually, -- you see, the reason for non adoption of the account most likely was some advice given by the proxy advisory services. So we are first in the process of remedying the issues and the concerns which were raised by the proxy advisory services firms. And the accounting -- being accounting is a quarterly process. So this quarter was too little a time for us to really remedy those problems.

First, we would like to remedy those problems, then only go to shareholders to say and appraise them about the progress which we have made and then we will seek the approval of the shareholders for adoption on the accounts. It may take a quarter or so.

[Operator]

Ladies and gentlemen, that was the last question for today. I would like to hand the conference over to Dr. Manoj Kumar Jhawar for closing comments. Over to you, sir.

[Manoj Jhawar, executive]

Thank you very much, shareholders. I think all the meaningful questions have been asked, and I think we have been as candidly able to answer your queries. What I can share with you here -- thank you very much for remaining invested with us.

Thank you for posing confidence in our company. Our company is doing everything possible to assure the concerns raised by investing community. We are working very hard on that. And hopefully, in the coming days, our company will realize the progress which we have made. Thank you.

[Operator]

Thank you, sir. Ladies and gentlemen, on behalf of PTC India, that concludes today's session. Thank you for your participation. You may now exit the meeting.