Fwd: TN Tariff Hike Lights Up PTC India Prospects
Prabhakar A.K
http://economictimes.indiatimes.com/markets/stocks/stocks-in-news/tamil-nadu-tariff-hike-lights-up-ptc-india-prospects/articleshow/12525874.cms
Midcap Mantra
TN Tariff Hike Lights Up PTC India Prospects
Rise in tariffs by Tamil Nadu will enable co to pay back its dues over the next few quarters
JWALIT VYAS ET INTELLIGENCE GROUP
PTC India will benefit from the 37% increase in power tariffs in Tamil Nadu. Not only will the company’s outstanding dues will get paid, but it will also allow it to start working with the Tamil Nadu State Electricity Board.
PTC India’s stock had seen a sharp correction in the past two quarters due to continuous delay in payments from two state electricity boards (SEBs) – Tamil Nadu SEB and Uttar Pradesh SEB. These two states together owe around . 1,200 crore (total outstanding of close to . 3,200 crore) to the company and have not made any payments since October 2011.
The rise in tariffs by Tamil Nadu will enable it to pay back its dues over the next few quarters. This will help PTC India reduce its debt, interest outgo and make more investments in the existing business. The company has taken debt to meet its working capital requirements which was impacted due to an increase in debtors. Profit margins in the trading business are very low and a rise in debt can impact the company’s profit substantially. In the December quarter 2011, the company’s interest outgo increased to . 10.4 crore from zero a year ago, and profit after tax was . 9.5 crore (versus . 38 crore a year ago). Due to this higher interest payment, the company’s PAT declined to 0.7% from 2.2% a year ago. Clearance of outstanding payments by Tamil Nadu SEB will help the company restore its profitability.
Also, the payment from the SEB will allow the company to resume its business with the state discom, which will lead to an increase in trading volumes. Trading volumes have been disappointing in FY12. Short-term trading volumes were impacted in FY12 due to weak financials of the SEBs that were not able to buy power. But this was partly compensated by the increased share of long term-volumes. Besides this, trading volumes will also rise from the long-term tie-ups of around 15,000 MW and provide stability to the company’s trading portfolio.
Apart from Tamil Nadu, there has been some progress on a tariff hike proposal in Uttar Pradesh too. Considering the improving scenario, the outlook for PTC India appears bright.
jwalit.vyas@timesgroup.com
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A.K.Prabhakar