PTC India Limited recently participated in a conference call with Dr Pawan Singh, Director (Finance) & CFO of PTC India Financial Services (PFS). The company’s loan (assets) growth is expected to continue with renewable segment as the major contributor. On the liability side, a shift to the MCLR regime on bank borrowing is expected to result in lower cost of funds ahead, thereby providing impetus to margins. Post slippage seen in Q1FY17, asset quality is expected to remain stable with a near term recovery as the accounts that slipped in the previous quarter have been recovered. As of June 30, 2016, the capital adequacy ratio remains at a healthy ~21% aided by lower risk weighted assets.
With large growth opportunities in renewable energy project financing and PFS niche position, RoA, RoE still remain healthy and are expected at 3.0%, 15.3% in FY18E, respectively, aided by double digit PAT growth. Margins are expected to stabilise at 5.0-5.3%, with benefit from shifting to MCLR pouring in. Going ahead, we do not see any sharp asset quality deterioration at least in the near term. Therefore,they revise target multiple at 1.15x FY18E ABV (earlier 1.1x) at | 33.8. Consequently,revise their target price from | 37 to | 39 per share. They maintain HOLD rating on the stock.