Good volumes, realisations drove Q3 performance: PTC India

Excluding the surcharge, operating income as measured by Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) rose 99 percent he said. Amitabh said the company’s earnings were benefiting from healthy realizations overall. He said he expected a resolution on the dispute with Jaypee Power soon.

Brokerage house Antique has maintained its ‘buy’ rating on the stock with a target price of Rs 84. “We expect volume growth to continue given the fact that due to coal constraints in the short term there may be higher regional deficits and with elections round the corner higher demand will lead to firming of interstate power trading,” the Antique note to clients said.

“The stock may be re-rated in the near-term as clarity emerges on the financial restructuring package, renewing our confidence that the payment of outstanding dues from Tamil Nadu (INR2.6bn) and improvement in demand will lead to higher volumes for PTC,” the note said.

Below is the edited transcript of Deepak Amitabh interview on CNBC-TV18

Q: On a reported basis the receipt of the surcharge seems to have impacted the results not just topline, but even bottomline and your margins are almost 4 percent this quarter. Could you tell us if this is only a surcharge impact?

A: During the quarter there is a 40 percent increase in volumes to 8,236 million units and profit before tax (PBT) has also increased to Rs 133 crore as compared to Rs 29.81 crore in the previous quarter. This is mainly on account of a realisation of surcharge of about Rs 138 crore from Uttar Pradesh Power Corporation (UPPCL) out of which the net realizable to PTC account has been about Rs 73 crore. Because of this, the PBT has increased by almost 350 percent and profit after tax (PAT) also has increased by 315 percent, but we have done an analysis that even if we set aside this thing still there is almost 99 percent increase in EBITDA in this quarter.

Q: If you exclude the surcharge what are the other factors that led to this 99 percent increase in EBITDA?

A: Because there has been an increase in volume of more than 40 percent. Other than that the realisation has been very good from all their states. We used to get a good amount of rebate income, so there is an increase there also and other than that the company is focused on increasing its presence in multiple business segments like long-term, medium-term, short-term sales to utilities as well as to the retail that is direct to the business customers.

So we have seen the increase through exchanges also during these 9 months, which has touched almost 6 billion units now and we have also seen the retail, that is direct to business segment contributed more than 1,750 million units in the 9 months, so there is an increase on all the sides.

Also, we have seen in segment analysis, which we have done, there has been increase in short-term and long-term sales, sales through exchanges, sales to the industrial customers that is retail business, so overall it had been a very good quarter as well as very good 9 months.

Q: Just wanted to focus on your volumes which you mentioned were higher by quite a bit. Which are the factors which have led to this 40 percent jump? Is it largely on account of long-term power purchase agreements (PPA) which are now getting converted or are we starting to see some pre-election demand sync in as well?

A: As we have said earlier that we had done long-term PPAs over a period of time and many of these units are getting commissioned on a year-on-year basis, so that is also one of the reasons that our volumes had been growing steadily and other than that almost 1.5 years back we started this retail segment, because we know that these direct consumers the supply is going to increase over a period of time.

Thus, because of this tactical shift also we are continuously seeing increase in volumes for last couple of years and the profitability too.

Q: Now that the southern grid connectivity is in place by how much are you expecting the overall volumes to increase going ahead? Will the anticipated correction in short-term rates have any impact on the business of the company?

A: PTC has been always a volume player. Margin is a function of volumes also. We have lot of flexibility because our volumes keep increasing. One good thing which is happening when the connectivity has started and it is going to be ramped up from the southern region, this will increase the trading volumes.

Q: The big highlight of the last quarter has been the recovery from UP Power Corporation. You also have other outstandings from Tamil Nadu discom. Could you highlight by when we can expect the situation to improve even further? How many more discoms? Which ones will pay this quarter or next quarter?

A: As we have mentioned that there were some technical issues which are being sorted out and we believe that it should get settled between the two organisations either through a direct process or maybe appointing an arbitrator if we decide to do so mutually to get back this money and also as we have demonstrated that even if people who have made delayed payments have also been paying surcharges.

Q: Also wanted to take an update on the pending case at Central Electricity Regulatory Commission (CERC) with Jaypee Power’s Karcham Wangtoo Plant. Has the dispute contract been resolved?

A: Yes, both of the sides have agreed and therefore we have filed before the CERC to determine the capital cost of the plant which has already got commissioned and the process is on and we hope that by the end of this financial year the issues should be determined so that from the next financial year we are able to supply on a long-term basis.

Q: What is the current outstanding receivables position on the books of the company now?

A: There is nothing of any concern. The figures keep changing on a day to day basis. Today at least I can say that there is no amount where we have any difficulty in realisation.