Rating Rationale
October 31, 2023 | Mumbai
PTC India Limited
Rating reaffirmed at 'CRISIL A1+'
 
Rating Action
Total Bank Loan Facilities RatedRs.5500 Crore
Short Term RatingCRISIL A1+ (Reaffirmed)
 
Rs.300 Crore Commercial PaperCRISIL A1+ (Reaffirmed)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL A1+’ rating on the short-term bank facilities and Rs 300 crore commercial paper of PTC India Ltd (PTC India).

 

CRISIL Ratings has taken note of the recent announcement made by PTC India on October 19, 2023, regarding approval of the bid submitted by Oil and Natural Gas Corporation Ltd (ONGC) to acquire a 100% stake in its wholly owned subsidiary, PTC Energy Ltd (PEL; CRISIL A/Watch Positive/A1) at an equity value of Rs 925 crore subject to adjustment in bid value as per bid format. The transaction is subject to conditions precedent, including receipt of regulatory and shareholder approvals. CRISIL Ratings believes that acquisition of PEL by ONGC will support the standalone credit profile of PTC India.

 

The rating continues to reflect the leadership position of PTC India in the domestic power trading market, healthy relationships with customers, strong market linkages because of its long track record, and its robust financial risk profile. These strengths are partially offset by exposure to counterparty risk and risk inherent in the wind energy industry with respect to PEL.

Analytical Approach

To arrive at its rating, CRISIL Ratings has combined the business and financial risk profiles of PTC India and its wholly owned subsidiary, PEL. Both these entities have strong operational, financial and management linkages. Also, adjustments for assets and liabilities have been made as per CRISIL Ratings’ capital allocation approach for the financing business undertaken by PTC India Financial Services Limited (PFS).

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

  • Leadership position in the domestic power trading market: PTC India is the largest player in the Indian power trading market, with a market share of over 35% of total volume traded in fiscal 2023. The company is likely to maintain its dominant market position over the medium term, despite the intensifying competition.
     
  • Long track record of operations resulting in strong customer relationships and market linkages: PTC India was the first company to start power trading in India in 2001; over the years, it has established strong relationships with various players. Long- and medium-term trades, which fetch a relatively higher margin (including cross border), contributed around 47% of total volume, while short-term trades accounted for the balance, during fiscal 2023. Furthermore, the company has maintained healthy relationships with state power utilities (SPUs). Efficiency in client servicing and management should also help the company maintain its market leadership position.

 

  • Healthy financial risk profile: Financial risk profile is underscored by a comfortable capital structure and healthy cash accrual. PTC India receives a rebate from generation companies in case of timely payment for the power procured and charges surcharge from distribution companies (discoms) in case of delay in payment for the power sold. Net working capital cycle* ranged from 16 to 31 days over the three fiscals through March 2023. The company has no long-term debt on a standalone basis and meets its working capital through a fund-based limit of Rs 2,000 crore (of which Rs 1,800 crore was unutilised as of March 2023). Cash and equivalents were healthy at Rs 1,179 crore as of March 2023. With better receivables under the new Electricity (Late Payment Surcharge and Related Matters) Rules, 2022, cash balance has improved, and company remained net cash** surplus as on March 31, 2023. Further, receipt of pending instalments in the coming months should keep the working capital position comfortable and debt levels stable over the medium term. However, this is a key rating sensitivity factor.

 

PTC India has been planning to sell its stake in its subsidiary, PEL. Consequently, on October 19, 2023, the company has approved the bid of ONGC for acquisition of 100% stake in PEL. CRISIL Ratings will continue to closely monitor developments in this regard. No additional investments/support is envisaged from PTC India towards the subsidiaries at present (PEL and PFS). However, CRISIL Ratings expects that PTC India may provide need-based support to these subsidiaries, in case of distress. Any significant investment in these or other companies, which adversely impacts financial risk profile of PTC India, will remain a key sensitivity factor.

 

*Net working capital cycle = debtor days less creditor days; CRISIL Ratings has added the sale/purchase of electricity of agency nature also in the revenue from operations since the debtors / creditors include those amounts as well.

**Net cash = Cash and equivalents – Total debt

 

Weaknesses:

  • Susceptibility to counterparty risk and open positions: PTC India remains susceptible to weak credit risk profiles of customers, mainly SPUs. The company tries to mitigate counterparty risk by distributing sales across multiple buyers and through payment security mechanisms. Seasonal reversal of buy-and-sell positions of SPUs also acts as a natural hedge. However, the large scale of operations reduces the risk of default and enables PTC India to negotiate better terms with clients. Net working capital cycle ranged from 16 to 31 days over the three fiscals ended March 31, 2023. From the peak of 38 days during the Covid-19 pandemic, working capital cycle has reduced consistently over the years.

 

The company has started receiving payments (both current dues as well as installments) under the new LPS rules, which may help reduce counterparty risk. However, risk of prolonged delays in payment by customers remains a key rating sensitivity factor.

 

  • Exposure to risks inherent in the wind energy industry: The business risk profile of the wind energy segment under PEL is weaker compared with the more established trading business and will remain exposed to inherent risks such as wind speed variability, long-term wind patterns and technology risk.

Liquidity: Strong

On a standalone basis, cash and equivalent stood at Rs 1,179 crore, along with an unutilized bank limit of Rs 1,800 crore as on March 31, 2023. These, along with annual cash accrual, should suffice to cover working capital expenses over the medium term. Ability to stretch payables provides additional comfort. Given the operational track record and longstanding relationships with discoms, liquidity should be prudently managed and will remain healthy over the medium term. As on September 30, 2023, PEL had maintained DSRA of Rs 104 crore (Rs 70 crore in form of fixed deposits and Rs 34 crore in form of Bank guarantee). In addition, cash and equivalent including bank balance and deposits stood at Rs 121 crore.

Rating Sensitivity factors

Downward factors:

  • Any subsequent development in the matter of resignation of directors with alleged governance issues impacting the business and financial risk profiles
  • Significant delay in realisation of dues from counterparties, leading to receivables* (standalone) of around 120 days or more, on a sustained basis
  • Significant weakening of financial risk profile and liquidity due to higher reliance on debt

 

*Excluding receivables on account of tariff revision, compensation and change in law matter, which are paid only after being received.

About the Company

PTC India was incorporated in 1999, to support implementation of the mega power policy of the government. The promoters are NHPC Ltd, NTPC Ltd (CRISIL AAA/Stable/A1+), Power Finance Corporation Ltd (‘CRISIL AAA/Stable/CRISIL A1+’), and Power Grid Corporation of India Ltd (‘CRISIL AAA/Stable/CRISIL A1+’). PTC India has a Category I license issued by the Central Electricity Regulatory Commission under the Electricity Act 2003, which permits unlimited trading in power. It is the largest player in the power trading market with share of over 35% in fiscal 2023. PTC India traded around 71 billion units in fiscal 2023 (around 87 billion units in fiscal 2022).

 

For the three months ended June 30, 2023, PTC India, on a standalone basis, reported revenue from operations of Rs 4,570 crore and profit after tax of Rs 112 crore as against Rs 4,017 crore and Rs 74 crore, respectively, for the corresponding period previous fiscal.

Key Financial Indicators(Standalone)*

As on/for the period ended March 31

 

2023

2022

Operating income

Rs crore

14,887

15,631

Profit after tax (PAT)

Rs crore

370

425

PAT margin

%

2.5

2.7

Adjusted debt/adjusted networth

Times

0.06

0.40

Interest coverage

Times

13.7

14.5

*As per analytical adjustments made by CRISIL Ratings

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of the
instrument		 Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs. Crore)		 Complexity
Level		 Rating assigned
with outlook
NA Fund-Based Facilities** NA NA NA 100 NA CRISIL A1+
NA Non-Fund Based Limit* NA NA NA 1390 NA CRISIL A1+
NA Non-Fund Based Limit NA NA NA 1960 NA CRISIL A1+
NA Non-Fund Based Limit** NA NA NA 250 NA CRISIL A1+
NA Fund-Based Facilities NA NA NA 1600 NA CRISIL A1+
NA Non-Fund Based Limit*$ NA NA NA 100 NA CRISIL A1+
NA Proposed Short Term Bank Loan Facility NA NA NA 100 NA CRISIL A1+
NA Commercial paper NA NA 7-365 days 300 Simple CRISIL A1+

*Interchangeable with fund-based facilities

**Out of the total limits of IDBI bank limited (including fund-based and non-fund based), Rs.300 cr. limit is interchangeable with Commercial Paper limit

$Rs 100 crore bank guarantee limit considered for non-fund based limit

Annexure – List of entities consolidated

Names of entities consolidated

Extent of consolidation

Rationale for consolidation

PTC Energy Ltd

Full

Strong financial and business linkages

PTC India Financial Services Ltd

Moderately consolidated

Adjustments for the assets and liabilities as per the capital allocation approach of CRISIL Ratings
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities ST 1800.0 CRISIL A1+ 30-01-23 CRISIL A1+ 16-12-22 CRISIL A1+ 06-01-21 CRISIL A1+ 01-06-20 CRISIL A1+ CRISIL A1+
      --   -- 31-01-22 CRISIL A1+   -- 25-02-20 CRISIL A1+ --
Non-Fund Based Facilities ST 3700.0 CRISIL A1+ 30-01-23 CRISIL A1+ 16-12-22 CRISIL A1+ 06-01-21 CRISIL A1+ 01-06-20 CRISIL A1+ CRISIL A1+
      --   -- 31-01-22 CRISIL A1+   -- 25-02-20 CRISIL A1+ --
Commercial Paper ST 300.0 CRISIL A1+ 30-01-23 CRISIL A1+ 16-12-22 CRISIL A1+ 06-01-21 CRISIL A1+ 01-06-20 CRISIL A1+ CRISIL A1+
      --   -- 31-01-22 CRISIL A1+   -- 25-02-20 CRISIL A1+ --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Fund-Based Facilities 100 Kotak Mahindra Bank Limited CRISIL A1+
Fund-Based Facilities 300 Canara Bank CRISIL A1+
Fund-Based Facilities 350 HDFC Bank Limited CRISIL A1+
Fund-Based Facilities 400 Union Bank of India CRISIL A1+
Fund-Based Facilities& 100 IDBI Bank Limited CRISIL A1+
Fund-Based Facilities 300 Indian Bank CRISIL A1+
Fund-Based Facilities 150 The Federal Bank Limited CRISIL A1+
Non-Fund Based Limit& 250 IDBI Bank Limited CRISIL A1+
Non-Fund Based Limit 300 Union Bank of India CRISIL A1+
Non-Fund Based Limit% 200 HDFC Bank Limited CRISIL A1+
Non-Fund Based Limit% 100 Kotak Mahindra Bank Limited CRISIL A1+
Non-Fund Based Limit 200 Indian Overseas Bank CRISIL A1+
Non-Fund Based Limit% 440 IndusInd Bank Limited CRISIL A1+
Non-Fund Based Limit 550 ICICI Bank Limited CRISIL A1+
Non-Fund Based Limit 360 IndusInd Bank Limited CRISIL A1+
Non-Fund Based Limit 150 IDFC Limited CRISIL A1+
Non-Fund Based Limit% 500 ICICI Bank Limited CRISIL A1+
Non-Fund Based Limit% 150 Indian Overseas Bank CRISIL A1+
Non-Fund Based Limit~% 100 The Federal Bank Limited CRISIL A1+
Non-Fund Based Limit 400 Canara Bank CRISIL A1+
Proposed Short Term Bank Loan Facility 100 Not Applicable CRISIL A1+
& - Out of the total limits of IDBI bank limited (including fund-based and non-fund based), Rs.300 cr. limit is interchangeable with Commercial Paper limit
% - Interchangeable with fund based facilities
~ - Rs.100 cr. BG limit considered for non-fund based limit.
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Criteria for rating trading companies
Criteria for rating wind power projects
CRISILs Criteria for rating short term debt
CRISILs Criteria for Consolidation

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