PTC Financial IPO Analysis – Expensive – Investors, Traders – Apply

March 16, 2011   ·   0 Comments

www.stockssavvy.comPTC India Financial Services Ltd (PFS) is an Indian non-banking financial  institution promoted by PTC India Limited (PTC) to make principal investments in, and provide financing solutions for, companies with projects across the energy value chain. It is one of the few financial institutions in India that provide both equity and debt financing, including short-term and long-term debt, as well as structured debt financing. With a focus on infrastructure development, it offers an integrated suite of services including provision financing to, and make investments in, private sector Indian companies in the power  sector, including for power generation, equipment supply and fuel source projects. It is currently focused primarily on power generation projects in India.

Issue Snapshot:

Issue Open: March 16 – March 18, 2011

Price Band: Rs. 26 – Rs. 28

Discount of Re 1 to the issue price to retail individual bidders

Issue Size: Rs. 407.42 cr  – 438.76 cr

Issue Size: 156,700,000 equity shares

(incl fresh issue of 12.75  crs shares and offer for

sale of 2.92 crs shares)

QIB                            upto        78,350,000 eq sh

Retail                        atleast     54,845,000 eq sh

Non Institutional        atleast     23,505,000 eq sh

Face Value: Rs 10

Book value: Rs 15.29 (December 31, 2010)

Bid size: – 250 equity shares and in multiples

thereof 100% Book built Issue

Capital Structure:

Pre Issue Equity:              Rs. 434.58 cr

Post issue Equity:             Rs. 562.08 cr

Listing: BSE & NSE

Lead Manager: ICICI Securities Ltd, SBI Capital

Markets Ltd, JM Financial Consulants Pvt Ltd,

Almondz Global Securities Ltd.

Co Lead Manager: Avendus Capital Pvt Ltd.

Registrar to issue: Karvy Computershare Pvt Ltd

Shareholding Pattern

Shareholding Pattern Pre Issue Post Issue
Promoters 77.6 % 60 %
Public 22.6 % 40 %
Total 100 % 100 %

CARE & ICRA IPO grading: 4/5 indicating above average fundamentals.

CRISIL IPO grading: 3/5 indicating average fundamentals.

Objective of Issue:

The company will not receive any proceeds from the Offer for sale portion.

The objects of the Fresh Issue are to:

•  Augment its capital base to meet its future capital requirements arising out of

growth in its business.

•  To achieve the benefits of listing on the Stock Exchanges.

Company Financials:

The company has strong fundamentals as indicated by a CRAR of 60.57% against requirement of 15% and nil NPAs, as of 31-12-10. For FY10, it clocked total income of Rs. 53 crore and earned PAT of Rs. 25.5 crore, resulting in EPS of Rs. 0.59 on equity of Rs. 435 crore. For 9mFY11, total income rose to Rs. 83 crore (including Rs. 3.5 crore from sale of wind power) with PAT surging to Rs. 31 crore, translating into an EPS of Rs. 0.72 on 434 Crore Equity Shares.

Translating this Business to Year assuming it will grow the same pace for the fourth Quarter of 2011, PAT After Tax will come to be 41.33 Crores with a EPS of  0.74 which is 62 % jump in Profits from the last year.

Company Recommendations:

A price band is set at Rs 26-28 a share for the issue. At the higher end of the offer price the valuations work out to 1.5x M9FY2011 book value (BV), says the report. “The discount of 20-25% is justified given the much smaller size of operation as compared to other companies like IDFC (2x FY2011 BV) and REC/PFC (1.8x FY2011 BV). Almost 40% of the disbursements of PFS are in the form of equity investments while that of the other companies are in the range of 10-15%. Also since the company’s operation is on a much smaller scale, return on equity (ROE) of the company is not strictly comparable with that of the other companies.”

Comparison with Peers:

Company Name Sales PAT PAT RoA^ Mkt Cap PBV
Rs. Crore (FY11E) (FY11E) (%) (%) (30-12-10)
PFC 10,100 2,660 26.3% 3.0% 27,200 1.28
REC 8,225 2,520 30.6% 3.5% 22,000 1.70
IDFC 4,914 1,316 26.8% 2.8% 21,000 1.84
PTC India Financial 110 42 38.0% 3.9% 1,575* 1.54**

^ FY11 annualised

Verdict: There are certain factors which  good fundamentals, experienced management team and healthy upside potential in India’s power sector. Retail is getting a discount of 1 Rs. share. Assuming the stock to be subscribed at 28 Rs, Retail will get the stock at 27 Rs.  a P/E of 36 times which is really expensive.

Potential of earning growth is high due to small size of issue as compare to its peers. Investors who have long term perspective of 3 Years can definitely think of taking this issue. In a disclosure to National Stock Exchange, PFS said it would allot 2.35 crore shares to three anchor investors – HSBC Bank Mauritius Ltd A/c GMFA Asia Venture Ltd, Capital International Emerging Markets Fund and Emerging Markets Growth Fund Inc.

Traders needs to wait & watch. Right now, grey market doesn’t seems to be too excited about the issue. IPO should get fully subscribed & should easily give a listing Gain.

Best possible way to handle this type of IPO is to subscribe to these kind of IPO’s. Book what you get on the First day on the Listing Gains be it 4-5K.. Even if one needs hold on, in case it doesn’t see good listing, one doesn’t needs to regret because of the Good investment deal one has made.

Post your recommendations on the IPO. Are you subscribing to the IPO. Let the World Know.

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Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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