Hopeful of maintaining profit from tolling segment: PTC

PTC India is heavily banking on its tolling business to maintain profitability. Speaking to CNBC-TV18, Deepak Amitabh, CMD of the company said during the quarter, the results have been extremely healthy with tolling contributing to the revenue for the first time. The company's tolling business came into operation this financial year.

Also Read: Nifty may hit 5400; dollar rise could hit carry trade: Citi
Amitabh said the short-term market prices for the tolling business are very volatile. Since southern region is not well-connected with rest of India, the prices are on the higher side in that region. "We believe we will maintain a healthy set of profit in coming couple of years," he said about the tolling business.
PTC India reported 23 percent growth in profit at Rs 37 crore versus Rs 30.1 crore in the year ago period.
Meanwhile, the company is hopeful of recovering all its outstanding dues from Tamil Nadu and Uttar Pradesh this year. Below is the verbatim transcript of Deepak Amitabh's interview on CNBC-TV18 Q: You have seen a good jump in your tolling volumes and your overall power traded volumes. This has made your revenues see a healthy 50 percent jump, could you just give us an indication of what the quarterly run rate could look like going ahead and how much more of an improvement are you expecting to see?
A: PTC's volume model depends upon short-term market as well as long-term market. Last couple of years, we have seen that the long-term projects have been coming into operation and that is why there is improvement in volumes and profitability. We are sure to maintain the growth pattern in the next financial year as well. Earlier, we use to be in 10s then moved to 20s and from this year onwards, we should be moving into 30s billion units.
During the quarter, we have seen that the results have been extremely healthy and tolling has contributed – this is the first financial year in which the tolling came into operation and out of the 28.5 billion units, close to 1 billion unit has come from the tolling. Q: How have you done in terms of your total realisations this quarter? What would be the trajectory going forward? What is the average realisation that we could expect in the next one-two quarters?
A: As on March 31, 2013, we have a cash balance of more than Rs 350 crore, which was less than Rs 50 crore one year back. So, we have seen more than Rs 308 crore accrual in the cash balance during the year. Also, if we take out some of the old outstandings, which are getting collected now, however, average collection period means that the gap between the debtor days and sundry days has come to less than 1 percent and so, our working capital need has almost become nil now.
We proposed to carry on the same trend during the current financial year also. During this calendar year, all the old outstanding which are there, Tamil Nadu should happen faster and followed by Uttar Pradesh (UP), we should be at the same position, which we have always maintained right from 2002 to 2010. It is always cash surplus and with almost zero working capital and zero debt company.
_PAGEBREAK_ Q: What about your tolling business, this quarter you maintained your margins at 0.80 paisa per unit and there are some analysts who expected it to improve going ahead which would eventually contribute to your overall margin picture as well? From that business itself, what kind of incremental contribution are you expecting?
A: As of today, we are selling in a short-term market. Short-term market prices are very volatile. Currently, because of non-connectivity of southern region to the rest of the India, the prices are on the higher side in the southern region. Therefore, we should not be over optimistic in these things but from tolling, we believe that we will maintain a healthy set of profit in coming couple of years. Q: With regards to the SEB problem, in terms of the outstanding dues from Tamil Nadu as well as UP, where does it stand? How have things changed after most of the SEBs agreed to restructuring? What are the timelines of dues or repayments that we could expect for PTC India because in the previous quarter you had around Rs 350 crore outstanding from the Tamil Nadu SEB which was expected to restart first half FY14, has anything changed now that they have agreed in terms of restructuring?
A: During last financial year, we received more than Rs 375 crore cash from TNEB and also Rs 513 crore from UP, which has added to our cash balance increasing to Rs 350 crore from Rs 45 crore earlier. Tamil Nadu has also agreed and that is the reason it has been paying. We believe that in next two-three months, Tamil Nadu receivable should come down to zero.
UP also is on a fast track now and the restructuring process in couple of months – when things get competed, I am sure bankers will start funding them back and we will be able to receive. That is why during this calendar year, the total outstanding should become zero. Q: You had signed a one-year contract with the Andhra Pradesh SEB as well for the sell of the 200 megawatt (MW) which was due for a renewal. Currently, the short-term rates are higher in southern India, do you think the contract could be renegotiated at a price higher than the Rs 5.75 per unit that was talked about earlier?
A: I do not know the exact sell price because the contract has been renewed. But, we always have to take into consideration that we have seen - the experience of power sector has been that if you go for excessive charging of prices, you get caught into the receivables building up over a period of time. So, we always believe to have an optimal mix of profitability and collectability. Q: Will the prices be firmer than what they are right now? How will the rates progress from here?
A: Not only us, everyone in the southern region is getting a reasonable amount of profit and we see that continuing for another one year. Q: What about the working capital, if in case you do assume that UP and TNSEB will clear those dues in the next couple of months? To what extent do you expect your working capital to improve? What sort of cash flows can we see for the company going forward?
A: Working capital requirement will be almost going back to the nil position. This means as a trading entity, you supply power so you have to make payment to the people who supply and then collect the money. The ideal thing will be to get the money faster than making the payment. Then it becomes a negative working cycle, which may not be possible in the current scenario. So you can keep it, if your collection is perfect and your payment has to be perfect then it almost boils down to zero working capital requirement.