Buy stocks of PTC India Fin; target of Rs 22

“Outstanding loan book as on Q4FY12 was Rs12.66 bn as against Rs10.65 bn on Q3FY12 and Rs6.8 bn as on Q4FY11, registering a YoY growth of 86.2% (18.9% QoQ). The Company has sanctioned loans aggregating to Rs14.37 bn during Q4 FY12 and Rs35.17 bn during entire FY 2012 compared to Rs16.78 bn in entire FY11. Post FY12 till date, PFS has further sanctioned loans aggregating to Rs9.17 bn to 6 power projects. The management expects to maintain growth in sanctions of FY'12 in FY'13 as the company has loan applications in waiting of around Rs20 bn while loan enquiries around Rs25 bn taking total loan pipeline to be around Rs45 bn. The company is also looking for diversification within the power sector to reduce risks in the business and is looking towards renewable sector mostly wind energy. NIM during the quarter stood at ~8.8% (excluding interest on fixed deposits) as against 8.1% for Q3FY12 and 5.4% for Q4FY11. The expansion in NIMs was largely on the back of lower cost of borrowing through ECBs and deployment of IPO proceeds during the quarter. The company has further headroom to raise funds upto $50 mn through ECB in the coming quarters. During Q4 FY12, the company has raised Rs1596.0 mn by way of long term tax saving secured Infrastructure Bonds. The management expects share of bank borrowing to come down going forward to ~20.0% by FY14E, while NCDs, ECBs and infrastructure bonds are likely to constitute around 40.0%, 30.0% and 10.0% respectively.”

“We believe there is value in the company considering its equity investment book and zero exposure to distribution companies. However, environmental clearance, fuel security and linkages, long term PPA’s and overall timely execution are critical to the success of projects and therefore its Equity and debt investments. We have maintained our target multiple for loan financing book at 0.7x for FY13E and continue to value the company’s equity investment book at 10% discount to its fair value considering inherent risk in private equity type model and the current apprehensions in the sector. We maintain our target price at Rs22.0, implying an upside potential of 56.3% from current levels,” says Aditya Birla Money research report.