Operator: Ladies and gentlemen, good day and welcome to the Q2 and H1 FY27 Investor Conference call hosted by PTC India Financial Services Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. I now hand the conference over to Ms. Priya Chaudhary from PTC Financial. Thank you, and over to you, Ms. Priya.
Priya Chaudhary: Thank you. Good morning, everyone, and welcome to the Q2 and H1 FY27 investor call of PTC India Financial Services Limited. I am Priya Chaudhary, Head Investor Relations at PTC Financial Services. Q2 FY27 marked a meaningful improvement in PFS's operating momentum, with AUM returning to growth at INR 3,684 crore, a 25% growth rate, while the loan sanctions and disbursements reached their highest level in several years at INR 3,098 crore and INR 1,595 crore respectively. This reflects our continued focus on core infrastructure financing, leveraging established relationships, and our two decades of sector experience for stronger execution. Our strategy remains centered on quality-led and diversified infrastructure lending across ticket sizes and the broader value chain, with focused exposure to select sunshine sectors and renewable energy, which now constitutes around 45% of our loan book. We remain client-focused and execution-oriented while maintaining disciplined underwriting and a strong focus on asset quality and portfolio monitoring.
Priya Chaudhary: The quarter also saw fresh bank sanctions and drawdowns strengthening funding availability. Our gross Stage 3 remains contained, supported by adequate provisioning. We remain committed to building sustainable growth with prudent risk management and long-term value creation. I would now like to introduce the senior management team present in today's call. Rajiv Malhotra, MD and CEO. He is joined by Dilip Srivastava, Director of Finance and CFO, and Sanjeev Kumar, Director of Operations. With this, I would now like to hand over the call to our MD and CEO, Rajiv Malhotra, for his opening remarks and update on the company's performance. Over to you, sir.
Rajiv Malhotra: Good afternoon, everybody, and thank you for joining us this afternoon. Some of you would have gone through the numbers that we have already shared with you. I would just like to explain what the company's intent has been, although we have said so earlier in time. I think this was a quarter of setting the tone for what you will see more of in the future. Like I said, focused. Infrastructure remains the focus, quality assets, increasing the book size, and thereby gathering value for the company and its shareholders. Both on the asset side, where you see a growth in the numbers, and that is after a few quarters, so it is a reversal of a trend. If you look at the liability side, again, you will see a footprint in the market.
Rajiv Malhotra: As we go further, we expect the performance metrics to become better, like we have been communicating in the past. Give us a couple of quarters when you will find spreads, metrics tightening for a bit because we are in the portfolio-building phase. Next couple of quarters this year, you will see us just following up on the start made now. With that, I will close my remarks and Priya, back to you.
Priya Chaudhary: Just one second. Handing over to Sanjeev, sir, for comments on the business.
Sanjeev Kumar: Thank you, Priya Chaudhry. Good evening, everyone. At the outset, I would like to mention that as we have closed H1 2027, we have sharpened our focus on building a meaningful, resilient, and high-quality infrastructure lending portfolio. As already explained by MD also, our objective has been going forward will be to leverage PFS's high core strength in infrastructure financing, go back to our basics, deepen our existing client relationship, and drive sustainable growth across large, medium, and small ticket size opportunities with a balanced focus on both private sector and PSU borrowers. I am pleased to share that we have made some very good progress during Q2, and the business momentum built during the quarter is reflected in our operating performances also. Our loan assets have moved to an upward trajectory after a gap of 10 quarters, reaching INR 3,684 crores.
Sanjeev Kumar: Sanctions during the quarter were at the 36-quarter high at INR 3,355 crores with a net sanction of INR 3,098 crores, while disbursements were at 19-quarter high of INR 1,595 crores. These are encouraging indicators of the traction we are seeing across our origination and execution, and importantly demonstrate that the strategy we put in place at the beginning of the year is beginning to translate into the business outcomes. The momentum has been built through the quarter and our focus now is to carry this forward through the remainder of FY 2027 and beyond. We have a strong disbursement pipeline for the current quarter also, while simultaneously building a quality pipeline that can support sustained growth over the medium term. Our approach continues to be centered around quality-led growth with disciplined underwriting.
Sanjeev Kumar: We remain focused on understanding and underlying business and cash flows, appropriate structuring and maintaining the right balance between growth and the risk. At the same time, we have adopted a client-focused and execution-oriented approach with greater engagement with our client and a focus on faster turnaround in evaluation and execution of the opportunities. Deepening our existing relationship remains an important part of our origination strategy alongside developing new relationships. We are also pursuing a broad-based lending strategy across ticket size, enabling us to participate in a wider range of infrastructure opportunities. Our origination is diversified across the infrastructure value chain, rather than being concentrated in any one segment. Within the broader infrastructure universe, we are maintaining a focused exposure to select sunshine sectors, where we see sustainable growth opportunities and where PFS can leverage its domain understanding and underwriting capabilities.
Sanjeev Kumar: This approach is intended not only to support portfolio diversification quality, but also to improve the overall risk-adjusted returns and NIM profile of the portfolio. Another area where we have seen encouraging traction is renewable energy and energy transition. Our renewable energy portfolio has increased by approximately 45% during this quarter, reflecting our continued focus on sustainable infrastructure and our ability to identify and execute opportunities in this segment. This includes opportunities across renewable energy, as well as newer area of energy transition ecosystem. Overall, H1 has been a period of stronger business activities, improved execution, and renewed traction in our core infrastructure franchises. Going forward, our focus will remain on converting the existing pipeline, building a strong and diversified book, deepening client relationship and maintaining discipline in underwriting.
Sanjeev Kumar: Our objective will be to ensure momentum we have created is sustained while building a high quality and resilient infrastructure portfolio that can support consistent growth over the coming years. That is all from our business update. Thank you.
Priya Chaudhary: Dilip sir will just give an update on the financial numbers of the company.
Dilip Srivastava: Good afternoon to all of you. In Q2 FY27, we witnessed a significant increase in business volume, with PFS recording loan sanction of INR 3,098 crores and disbursement of INR 1,595 crores during the quarter. This translated into a positive trajectory in the loan book, with the loan assets increasing to INR 3,684 crores as on 30 September 2026 from INR 2,946 crores in comparison to the previous quarter, 30 June 2026, representing a sequential increase of approximately 25%. Total income for the quarter stood at INR 114 crores, while profit after tax stood at INR 44 crores. Return on assets on annualized basis and return on net worth annualized basis is at 3.65% and 5.64% respectively. Interest spread improved to 1.18% during Q2 FY27, reflecting an improvement in the lending spread during the quarter. Asset quality improved during the quarter, with gross Stage 3 asset declining to INR 126 crores from INR 190 crores in the Q1 FY27.
Dilip Srivastava: The company continued to maintain a comfortable liquidity position with a positive cumulative net cash flow across all the reported ALM maturity buckets. The liquidity coverage ratio remained strong, providing adequate liquidity headroom. Another positive development during the quarter was strengthening of our funding position, supported by a fresh sanction of INR 200 crores from Central Bank of India, which also marked the addition of a new bank in the company lender base. We also have an in-principle sanction from another bank, and we are expecting formal sanction letter to be received very soon. We consider to encourage that both the existing and prospective lender across segments with a focus on further diversifying and strengthening our funding base going forward.
Dilip Srivastava: Overall, Q2 of FY27 reflected a strengthening financial position characterized by significant increase in disbursement, growth in loan assets, improvement in interest spread, lower gross Stage 3 assets, and a comfortable liquidity position. With this, I conclude my update on the financial number.
Priya Chaudhary: We will now open the floor to Q&A.
Operator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may please press star and 1 on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Aditya Shah from Vikram Advisory Services. Please go ahead.
Aditya Shah: I have four or five questions. I will take it one by one. The first one is, could you please explain the impairment provision that we have taken this quarter and the changes in the gross Stage 3 assets, gross and net both. Could you please explain what happened and which are these assets?
Sanjeev Kumar: What are the further questions, if you can come up with?
Aditya Shah: Okay. I will give you all of them together then. What is your expectation of the overall loan book at the end of this year and probably the next 2, 3 years? Because when we say sequentially it is a 25% growth, that is right, but on a H1 basis, it is the same. There is practically no growth. INR 1,500 crores of disbursements this quarter is also having INR 800 crores of repayments, prepayments sort of. So net loan book growth is just INR 700, 800 crores. How do you expect it to be or behave in the coming years? The third question is: how do you view in the rising interest rate scenario for NIMs and spread? What is our average borrower size currently, and how do you expect it to be in the next 2, 3 years?
Aditya Shah: The last one is, as of now is, what is the average seasoning years of the current loan book?
Sanjeev Kumar: Okay. First part, the impairment. I will ask Dileep to address this part.
Dilip Srivastava: The impairment part that we have for the one Kundli Manesar, it is a loan account that this quarter it has been slipped to the NPA. Accordingly, against the EAD of INR 124 crore, we have created a provision of INR 19 crore. That is already reflected in the results which has been declared. On the total, if you compare the PAT is almost same or it is better than what was declared in Q1. This is regarding the provisioning side. The overall loan book, I think, we are expecting that it should be up to, net amount, it should be approximate INR 5,000 crore by end of this year. That is our target considering all the disbursements taken together.
Aditya Shah: No. But sir, on the impairment, I would say that, the last quarter, it was INR 190 crore of gross and 47 or something like that of net. Now, the current gross Stage 3 gross is 126 roughly. That is just single asset or is it two, three assets combined?
Aditya Shah: No. But sir, on the impairment, I would say that, the last quarter, it was INR 190 crore of gross and 47 or something like that of net. Now, the current gross Stage 3 gross is 126 roughly. That is just single asset or is it two, three assets combined?
Dilip Srivastava: No, it is three assets, Stage 3. One is that Kundli Manesar as I explained. Another is this Varam Bio is coming in the books.
Aditya Shah: Yeah
Dilip Srivastava: We have already provided for.
Aditya Shah: Yes.
Dilip Srivastava: And Danu Wind Parks. So that was lying as earlier in this NPA. So we have written off this quarter. So the results, because that was already provided 75%.
Aditya Shah: Right
Dilip Srivastava: The outstanding loan book has been technical write-off.
Aditya Shah: Okay. The one that became an NPA was given as loan when? Is it pre-2020?
Sanjeev Kumar: Yeah, it is a pre-2020 loan. It is a road project.
Aditya Shah: Okay.
Sanjeev Kumar: It is covered by a guarantee from the concessioning authority, that is HSIIDC, Haryana government.
Dilip Srivastava: Haryana government.
Sanjeev Kumar: Recovery would be there. The concession agreement provides 90% of the debt due to be paid by them if they actually terminate it. This is an annuity project, so we expect that it can be corrected also in due course of time.
Dilip Srivastava: We are part of the concession lending over a year led by the SBI.
Aditya Shah: Okay. We can go for the next questions then.
Sanjeev Kumar: Your question is about 25% loan growth. It is true that the 25% loan growth is seen because of a low base. Our base has been diminished to a great extent in past quarters. This 25% growth is also translated with the more than INR 1,500 crore of disbursement. This is the highest disbursement in last three, four, five years. It is actually a real growth. Since the repayments, most of the high cost loans repayments have already taken place. In future, we do not expect that much of repayment again hitting us. Growth prospect will be at least 25% till in coming years also. It will be better than that. Because now we have started doing business and we have posed ourself as a good prospective lender.
Sanjeev Kumar: Better performance even in coming quarters. As well as in-
Aditya Shah: What do we expect as spreads for the future lending? Do we have a set benchmark that below which we will not lend in terms of spreads? Because currently what I see is that our NIMs are very high, as in reasonably high is because of higher equity. Once we have larger and larger loan books with the growth that you are recommending to have, it will be difficult to manage at this 1% spread currently. What is your guideline on that?
Sanjeev Kumar: See, you are right that it will be difficult to maintain at such high level because of equity combination. As we go on growing and leveraging high, this NIM is expected to go a little below, but not alarmingly. It will be in line with the industry practice. We will maintain that.
Aditya Shah: What is the average we are expecting ourselves to have? Is it 3 times, 4 times?
Sanjeev Kumar: Plus percent plus, but it will not go less than 2% in future.
Aditya Shah: No, I am saying times leverage. Meaning equity leverage. How many times do we expect ourselves to have?
Sanjeev Kumar: That is a long process. Currently our equity percentage is very high.
Aditya Shah: Yes, exactly.
Sanjeev Kumar: Let our books grow for next three, four years. Then we will be able to expect an optimum leverage maybe around four or four and a half type of thing.
Dilip Srivastava: This will get translated what he is explaining that once that balance sheet size is getting increased, that will help us to improve our cost of borrowing as well, because that is going to improve our credit rating as well. That will get translated in the lower cost of borrowing. We expect that we will remain competitive in the market as well.
Aditya Shah: Correct. That would be in 2 years from now, or we expect ourselves to be lowering our cost of borrowing next year itself?
Sanjeev Kumar: It is a continuous process. We expect every quarter our cost of borrowing will go down a bit, and our target is to be as per market rates, which we should be capable enough to lend at the rate which market is doing. We may expect that within a year we can do that.
Dilip Srivastava: See, after a long period, lenders have given a new facility to us so that now it is on the positive track, and lenders are also having confidence and giving the BFFs. We expect that it could improve in the future as well, continuously.
Aditya Shah: Okay, great, sir. The last 2 questions are the average borrower size of our current present loan book of INR 3,600 crore and the average seasoning years of this present loan book.
Sanjeev Kumar: The average ticket size is currently falling between INR 100 crore to INR 150 crore per loan. We will maintain that ratio, maybe at INR 150 crore or a little more than that will be the future, maybe at that time of closure of this year. It will be something around INR 150 crore plus. We will continue to be a little on a lower side of the ticket sizes. Apart from that, the average seasoning as of now of the loan is something around four years. It may go improving if we will be able to do some project loans also. Currently, for the next six months, we are not targeting anything on this part, how much is the loan seasoning should be there, but the sustainability will always be taken into consideration while appraising the projects.
Aditya Shah: Correct, sir. My last question on the average size is that in this current environment, when we have INR 100 crore, INR 150 crore average ticket size, which we expect to remain itself between around INR 100 crore, don't you think, sir, that at 2% to 3% NIMs, having such concentration or even on a INR 5,000 crore or a INR 10,000 crore loan book is a bit riskier? Should we not be more granular in terms of our ticket sizes?
Sanjeev Kumar: See, we are an infrastructure lender.
Aditya Shah: I agree.
Sanjeev Kumar: You will have to understand infrastructure projects are typically very high ticket size cases. We have been consciously keeping our loans book granular, but that is not sustainable. When you go for a very low ticket size projects, it will definitely be going for the less reliable developers also and less domain is also left for us and very few sectors which are more vulnerable to the market scenarios will be available to us. To go for a better developers and better projects, we will have to increase our ticket size a bit. Still our loan is much more granular than the other market players. INR 150 crore is still a very small ticket size as compared to the infrastructure projects being lent by other market players in current scenario.
Sanjeev Kumar: We will have to stay in the market, and we will have to work on our core strength, and that is infrastructure finance.
Aditya Shah: Broadly, can we expect that we would have a NIM of 3%, 3.5% on a long-term basis and with a spread of more than 2%? Am I right in expecting that in the next 1, 2 years or 3 years from now? Why I am asking this question is that this is very important in case of a bad cycle, that our company already faced from that thermal power problem, and it is continuing even now. Infra cycles are obviously, as you know, sir, that are very long cycles, and once the problem start it continues for many years. In such a scenario, should we expect ourselves to have 3%, 4% NIMs continuously and 2% upwards of spreads? Because as investors, that is very important to us in terms of judging the risk in terms of a bad cycle.
Rajiv Malhotra: I am sorry, Rajiv Malhotra here. Could you explain? I did not get the question. The thermal cycle, what is this about?
Aditya Shah: From 2014, 2015 onwards, there were issues in the thermal power sector, and we had heavy concentration over it, and there were numerous NPAs, and because of which the company as a whole faced a problem of earnings and lowering of loan books and all of that. The primary reason that I understand in infra financing company is that, since the spreads are very low and if the NIMs are not very high, in bad cycles, there are major losses to be booked. How do we protect ourselves in such a scenario going forward? Today the loan book is just 3 years or 4 years seasoned. As we are lending more in the next 2, 3 years, probably next 2, 3 years, we will not find any issues.
Aditya Shah: But going after that, how do we protect ourselves to make it more sustainable and not go through these kind of cycles again and again, is my question.
Rajiv Malhotra: Okay. Let me try and explain it, because I am not sure I have still understood it fully, but.
Aditya Shah: Okay
Rajiv Malhotra: I will still try to explain. One, the idea that we were at any point exposed or overexposed to thermal power is incorrect. There is something wrong with that impression.
Aditya Shah: Okay.
Rajiv Malhotra: Right from that point where you said, 2014, PFS has been seen as a niche player in the renewables. Historically, there was some exposure to thermal, but it was not an overexposure.
Rajiv Malhotra: What happened to thermal sector at a point in time had to do with fuel allocations then, and we know all that which happened.
Aditya Shah: Yes
Rajiv Malhotra: Now, even then, the company was not overexposed to that sector. You may want to check your facts when you get back. Because primarily we were a renewable energy play, and we continue to be that. The effort now has been that we move into diversifying into other areas of infrastructure. Because infrastructure, it stays our focus, but infrastructure other than, say, generation projects, be it renewable, and then we get to other sectors like roads, where you know we have exposure. To digital infrastructure, which is something which is, as we speak, emerging, and where we may have been one of the early lenders and early adopters of the idea to get into appraising and understanding what the potential of this sector was.
Rajiv Malhotra: Electric mobility has also shown up. It has varying degrees of success, and that again has to do with how the current regime and how the ecosystem is thinking about infrastructure for the future.
Aditya Shah: Okay.
Rajiv Malhotra: So let us understand that, one, we are going granular in terms of our exposure to these different sectors. All of these are being built for a future which is different from what you have seen in the past. Were the thermal power wave to come back at any point in time, we will take calibrated kind of exposures to that.
Aditya Shah: Okay.
Rajiv Malhotra: Now-
Rajiv Malhotra: Again, a question on the seasoning.
Rajiv Malhotra: It is not important for us to stay in, let us say, an infrastructure loan for the best part of, say, 12 years or 10 years and believe that then the risk of that project or the risk profile has reduced, and therefore we are better off. Because as providers of debt, if we see the first three to four years kind of point in time for a project life cycle, that's where the returns to lenders happen. Typically, there is a tendency for refinancing. While one way to view it is a loss of opportunity, the other way to view it is
Rajiv Malhotra: refinancing actually provides you the natural churn in your portfolios. That in fact has been, and it has worked for us in the past, and it will continue to work. Having said that, if the primary reason in such cases may be the cost of funding
Rajiv Malhotra: we don't have an intent of keeping the cost of funding here, as has just been explained by Dilipji to you.
Aditya Shah: Mm-hmm. Yes.
Rajiv Malhotra: Now put this all together, I think you will get your answer.
Aditya Shah: Okay. I will be happy to see such growth for the next 2 quarters and take it forward from there. Thank you.
Rajiv Malhotra: Yeah. Thank you.
Operator: Thank you. Ladies and gentlemen, to ask a question, please press star and one. Next question is from the line of Chandramallu Halagodi, an individual investor. Please go ahead.
Channamallu Halagodi: Thank you for this opportunity. I am Chandramallu Halagodi. I am holding 2.46 lakh shares in this company. What is the total amount you got sanctioned from different bank sources, and what is the total amount you got cash in hand? What is the total cash level you are having with you at this stage, sir?
Rajiv Malhotra: We have sanction from Central Bank of India up to INR 100 crore. INR 100 crore we have already drawn that amount and utilized in September itself. Another bank, they have given a INR 200 crore in principle approval, so formal approval we are awaiting. Discussions with other lenders are also in the pipeline. This is regarding the financing part. As of now, we are having close to INR 600 crore plus, including the HQLA requirement.
Channamallu Halagodi: Okay. One more question, sir. By when we can expect zero NPA level status in this company? What tentative time you required to achieve that status, sir?
Rajiv Malhotra: Achieving zero NPA target is always our endeavor, and if the current
Sanjeev Kumar: Whatever efforts we are taking, it materializes, it may be achieved within this year itself. But a lending institution having zero NPA, I think it's a dream of every institution and nobody has ever achieved this, I guess. At least a 10-year-old seasoned lender itself. We are in the lending business. Defaults will happen and new NPAs will come up all the time, and existing NPAs will keep on resolving existing NPAs, and this will go on. Because of that, the provisioning even on the standard assets are being done. It's a part and parcel of business. Zero NPA, I don't think anybody will be able to comment on anything like that ever in any lending institution.
Channamallu Halagodi: Okay, sir. You appointed one person from your company as nodal officer to share data for divestment of PFS, sir. What is the present situation? Is it at initial stage of divestment or due diligence stage, sir? Please explain on that, sir.
Dilip Srivastava: You are right that disclosure has been given in terms of having a nodal person for data sharing, as you say. That is happening. We will not be able to comment what stage the efforts are at because if you have seen what we filed with the exchanges, I think you should be able to infer that work is on that particular transaction.
Channamallu Halagodi: That NPA level increases from INR 47 crore to INR 105 crore. Is it possible to clear that NPA by the end of this financial year, sir?
Dilip Srivastava: INR 47 to INR 105, sir. As explained by the Director of Operations, NPA, just clearing that zero NPA, it is a very theoretical number. But still, we are targeting to reduce our gross NPA, which is evident from the Q-
Channamallu Halagodi: Sir, what I am asking, this present NPA level, which is INR 105 crore now, sir, is it possible that INR 105 crore you will resolve by the end of this financial year?
Sanjeev Kumar: Yeah, it is possible.
Dilip Srivastava: We will see, sir. We will see.
Sanjeev Kumar: Yes, it is possible and we are doing all efforts to achieve that.
Channamallu Halagodi: Okay, sir. Thank you, sir.
Operator: Thank you. Participants, you may press star and 1 to ask a question. The next question is from the line of Vishal Mehta from Oakland Capital. Please go ahead.
Vishal Mehta: Hello, am I audible?
Operator: Yes, sir, you are. Please go ahead.
Vishal Mehta: Rajiv, sir, congratulations on a good show on the growth side. I just had one question, two questions rather. One is regarding the growth. Is it possible to quantify the number of loans that you have sanctioned but yet not disbursed?
Rajiv Malhotra: Surely. Thank you, Vishal. Sanjeev Ji is just going to take up this question for you.
Sanjeev Kumar: Yeah. I reiterate the question what you are saying. I just rephrase that you wanted a portfolio of undisbursed sanctions. Am I right?
Vishal Mehta: Yes, sir.
Sanjeev Kumar: Currently, we have about INR 2,500 crore of undisbursed portfolio, which are lined up for sanction. Sorry, sanction, which are lined up for disbursement. It may take some time, but these are undisbursed portfolio, which we are actually keeping in our list as a pipeline. We are going on sanctioning every month again and again. Fresh sanctions will also happen.
Vishal Mehta: Got it. This is not including the sanctioned disbursement pipeline which you were talking about. That is additional.
Sanjeev Kumar: This number what I have given is our sanctioned portfolio, which are waiting for disbursement for some compliances or completion or stage of.
Vishal Mehta: Got it. This, I think in a way should cover us for the INR 5,000 crore target which we were hoping for.
Sanjeev Kumar: That is a target after discounting the prepayments also. That is the net balance sheet what we are expecting.
Vishal Mehta: Sure. Great, sir. One more question was regarding the gross and the net Stage 3 assets. Sorry for repeating it, but is it possible to explain that our gross Stage 3 has gone down from INR 190 to INR 126, but our net Stage 3 has gone up from INR 47 to INR 105. We have made a provision of INR 51 crores this quarter as well. Could you just highlight why the net one gone up and the gross number has come down?
Dilip Srivastava: We already explained that one account, Danu Wind Parks, we have already written off. In that account, technically written off, so provisioning was close to 75%. Here, as of now in Stage 3, only 2 accounts are there. One is a Kundli Manesar, and there is a Varam Bio. Varam Bio is INR 2 lakh crores, which has already been 100% provided for. In Kundli Manesar, out of INR 124 crores, INR 19 crores, 15% we have already provided for. So provisioning goes as per the IRAC norms and ECL methodology. As per the IRAC norms, it is at 10% only, but still we have provided for 15% as per our conservative ECL methodology. This is the number that provisioning that net NPA is coming on the higher side comparison to the previous one.
Vishal Mehta: But if you write off the loan, wouldn't that go out of the net NPA?
Dilip Srivastava: Balance sheet cleaning. So technical write-off that liability, provisioning as well as gross loan, everything will be written off from the books.
Sanjeev Kumar: This is as per prudential norm. Writing off doesn't mean that our claim is not there. All claim and recovery efforts are on.
Dilip Srivastava: This is a normal practice in our financial industry.
Sanjeev Kumar: It's a prudential norm prescribed by RBI to write off after a certain extent of age or seasoning of any NPA account, taking so many considerations to clean up the book and show a real picture to the investor and to the public for that. That's why this has been written off, but the books recoverable is already there. We'll put all our effort to recover that.
Vishal Mehta: Great, sir. Wish you all the best for the future. Congratulations.
Dilip Srivastava: Thank you.
Sanjeev Kumar: Thank you, sir.
Operator: Thank you. The next question is from the line of Amit Sheila from Banyan Capital. Please go ahead.
Amit Singh: Just a couple of questions. What is the recovery that you are expecting out of Danu, and by when can we expect it?
Rajiv Malhotra: Requesting Srinivas to answer your question.
Dilip Srivastava: As far as Danu is concerned, I think the resolution process we have adopted is through the IBC process. We have filed our application, and we are awaiting the hearings for admission of the account. Post that, it is a process that will be run as per the IBC guidelines. There is value in Danu, but then the realizable amount will be subject to whatever interest that evinces from the bidders when the process of bidding starts. At this juncture, it will be a bit premature to put a value to it. But yes, given that it is technically written off, we are expecting a substantial amount of recovery in any case because it is an operating asset with a good PPA remaining tenure, and a good tariff.
Amit Singh: It will probably go to the next year, right? Very probably. Next financial year.
Dilip Srivastava: Obviously, the process under IBC guidelines does take some time post admission. The recovery would be, assuming that it is admitted in over the next couple of months, then yes, there is a certain amount of time that will be required under the process. The recovery as such will be sometime in the next financial year.
Amit Singh: Okay. What is the repayment that we are expecting in H2?
Dilip Srivastava: Repayment. Which repayment?
Amit Singh: Total repayments.
Dilip Srivastava: You are talking of overall repayments as far as existing is concerned?
Amit Singh: Yes.
Sanjeev Kumar: Repayment of borrowing side you are asking?
Amit Singh: Total repayments. When we give the INR 5,000 crore guidance, what are the repayments that we are expecting in H2?
Dilip Srivastava: Repayment like in this H1 current year, the total repayment of loan amount was close to INR 248 crore.
Sanjeev Kumar: The scheduled repayment would be something around INR 300 crore next half year. Apart from prepayment, which is actually the thing which is unpredictable, it would also go down as far as our books are concerned. At this point of time, predicting how much prepayment will be done is not possible. I can give you a figure of planned repayments. That may be something around INR 300 crore.
Amit Singh: Okay. Just two more questions. What is the gross Stage 2 currently?
Dilip Srivastava: In Stage 2, only net of provision, the total amount is INR 114 crores related to IL&FS. Out of INR 114 crores, we have already provided back INR 65 crores. The balance amount is INR 65 crores net of provisioning.
Amit Singh: Okay. Any ROA guidance for the year?
Dilip Srivastava: Return on assets for this current quarter you are asking?
Amit Singh: For the full year.
Dilip Srivastava: For the full year.
Amit Singh: Got it.
Dilip Srivastava: Return on assets this complete year is close to the
Sanjeev Kumar: Hi, Krishna. Can we have the
Amit Singh: How much we have budgeted?
Sanjeev Kumar: How much is the budget?
Amit Singh: It's 4.16 we have budgeted.
Sanjeev Kumar: We have budgeted for 4.16% of ROA.
Amit Singh: 4.16.
Dilip Srivastava: Return on assets for this Q2 was 3.65%, and for the H1 ended for the September it is 3.49.
Amit Singh: The full year guidance is 4.16, right?
Sanjeev Kumar: Yeah, that is the budget we have done for the complete year.
Dilip Srivastava: We expect it should be more than the existing numbers. Whatever is 3.49 for the current six months.
Amit Singh: Just one question. Any guidance on the disbursements for the H2?
Dilip Srivastava: We explained that we are targeting to reach the balance sheet size of INR 5,000 crores. We explained on those parts. We are expecting that we should be reaching before end of March.
Rajiv Malhotra: In fact, this question has been answered two, three times.
Amit Singh: Okay. Thank you so much.
Operator: Thank you. Next question is from the line of Manoj Kumar Pandey, an individual investor. Please go ahead.
Manoj Kumar Jhawar: Hello. Good afternoon, sir. I thank you all for improved result and turnaround of the company in this quarter. The main question is, as an individual investor, I have been invested in this company since last 12 years, and I had seen many ups and downs, but finally there is a sign of recovery. But one thing I would like to attract attention of the management, that you see the market value, your present book value is almost approximately INR 50. Against that, the market value is around INR 20, INR 24, INR 25. Now, in the backdrop that the company has announced a disinvestment, or it may be some kind of a strategic sale. So keeping the price of the share languishing at this level despite the fact that the company is showing tremendous improvement from this quarter is not justified.
Manoj Kumar Jhawar: I would request that the management should consider a buyback option of its shares to improve the sentiment. To undertake the buyback, the company is already well capitalized. It should not have any hindrance, and it has many benefits for a company going for a strategic disinvestment. I would like to have your answer, please. Thank you.
Rajiv Malhotra: Thank you for bringing this to our notice, and I can assure you that we will keep your suggestion in front of us. However, even as a management, I do not think we can, at this point, comment either way. Because, see, pricing is something which is a lot of factors. What we can do is to ensure that the value in this company increases, and its intrinsic value of the equity you hold is good.
Manoj Kumar Jhawar: Yeah.
Rajiv Malhotra: Going forward, I can say when it comes to measures like the one you have said, and capital that, which is what capital uses, our priority would be ensuring that we leverage the capital that we have to build the portfolio levels. Like, we have given you targets. There are 2 and 3-year plans also that we have at the back of the mind. So we would keep in mind what we can do where our shareholders do get whatever are the intended rewards. But primarily, the capital that we carry, we would leverage that to rebuild the portfolio, which we have just started in this quarter.
Manoj Kumar Jhawar: Okay, sir. But the company is well capitalized, and since the share value is languishing since so many years, the trend is now, as per your projections, people are going to scale it up very fast. So the benefits should accrue not only to investor, as well as to the owner, PTC also. That is why I request that both the boards, PFS as well as PTC, should consider it on a priority basis. As how to enhance the value to the owners as well as to the investor. And it is a management tool.
Rajiv Malhotra: No, sir. Thank you. Like I said, we have taken on board your suggestion.
Manoj Kumar Jhawar: Yeah.
Rajiv Malhotra: However, like you rightly said, it is a question before not only the board of PFS, it is also the board of PTC. Right now we are acting only as the management of PFS. This is way beyond our pay grade. Having said that, I again repeat, we have noted your suggestion.
Manoj Kumar Jhawar: Okay, sir. Thank you so much. Please consider dividend also, sir, next time.
Rajiv Malhotra: Sorry. Again, your suggestion.
Operator: Thank you. Next question is from the line of Dinesh Kotwale from KRE Capital. Please go ahead.
[Analyst] (KRE Capital): Thank you. Sorry for repeating the same thing. Actually, I have only one question on 105. The breakup is still not clear. The INR 105 crore, is it entirely due to Danu? Some other code effects. Can you please explain the exact reason, what is the breakup of it and the recovery time? Sorry. I would like to pitch in one more question. The cost of borrowing is very high. It is more than 9%, so anything we are doing to approach the credit agency to improve to AAA or something like that?
Dilip Srivastava: Again, this Stage 3, we explained that two accounts, Kundli Manesar and Varam Bio Energy, is there. So out of total exposure of INR 126 crore, we have already provided for INR 21 crore, and the net amount after this exposure is coming close to INR 105 crore net of provisioning. This is regarding that provisioning part. Regarding that credit rating improvement, because as of now we are at A level, we will be taking up with the rating agencies for improvement. We expect that improvement should happen on that part.
[Analyst] (KRE Capital): Okay. So the entire INR 105 crore is due to Kundli Manesar. Increase is only due to Kundli Manesar, right? 20A.
Dilip Srivastava: Yes, sir.
[Analyst] (KRE Capital): Okay. Thank you.
Dilip Srivastava: Thank you.
Operator: Thank you. The next question is from the line of Harsh Toshi from PhillipCapital. Please go ahead.
Harsh Doshi: Sir, I wanted to understand the 3,000 sanctioned this year. Could you give us some color on the new book, the split by sector, project stage, average ticket size, how many borrowers are there, average yield on these loans?
Rajiv Malhotra: Yeah, I will refrain from going into average which can be misleading.
Harsh Doshi: Okay.
Rajiv Malhotra: So INR 3,000 crore during the quarter is across renewable energy, roads, digital infrastructure. Anything else?
Dilip Srivastava: Yes, and thermal also a little bit. CGP.
Rajiv Malhotra: And an operating thermal. Yes.
Dilip Srivastava: Yes. Operating thermal.
Rajiv Malhotra: That is about it, and the ticket size varies right from INR 50 crore to INR 500 crore. Let us refrain from the averages. As we saw opportunity and quality assets that were there, we have made these efforts to put together the INR 3,000 crore of sanctions.
Harsh Doshi: Understood, sir. How many borrowers would be there, if you could throw some light?
Dilip Srivastava: Maybe something around 15.
Rajiv Malhotra: Yeah.
Harsh Doshi: 15 borrowers. What is the average yield on these loans?
Dilip Srivastava: We have not got the calculation as of now because these are not disbursed cases. The average return can be only booked at the time of disbursement. They are funding most of it on a floating rate basis.
Harsh Doshi: Okay. Understood. Got it.
Operator: Thank you. The next question is from the line of Vishal Biraia from Bandhan Asset Management. Please go ahead.
Vishal Biraia: Hi. Sir, a couple of questions. Which are the sectors or companies which have contributed to this huge repayment plus prepayment combined in H1 and especially in this quarter?
Dilip Srivastava: They were basically state utilities companies, discoms.
Vishal Biraia: Right.
Dilip Srivastava: Because big ticket size, one, two, three cases were there, we have prepaid.
Vishal Biraia: Okay. Do we plan to lend to the discoms as and when there is demand?
Dilip Srivastava: Yeah, we are not averse of lending to discoms as of now also. Whenever the opportunity and right pricing comes, we are keen to look into that.
Vishal Biraia: Okay. Because what we have heard is the kind of yields that discoms are currently ready to pay, the kind of rates that discoms are ready to pay seem to be very low, and that would be not remunerative for us at this stage. Will that be a fair understanding?
Rajiv Malhotra: Repeat the question, please, for our understanding.
Vishal Biraia: I was saying that the current rate of borrowing for the discoms are much lower. So for us to lend to the discoms would be difficult in the near to medium term. Will that be a fair understanding?
Rajiv Malhotra: I think what Sanjeev Kumar has already answered, we are keeping our eyes peeled for opportunity that meets our risk-return profile. Obviously, we are not going to lend at the rates that you seem to be referring to.
Vishal Biraia: Okay.
Rajiv Malhotra: Lending not for the sake of lending to discoms.
Vishal Biraia: Sure. We have meaningfully increased our disbursements to renewables. Could you give a perspective as to what is this marginal cost of lending to renewables?
Rajiv Malhotra: Marginal cost? Wait.
Dilip Srivastava: We are maintaining the spread on that, and marginal cost of lending, if you mean that how much over the cost of fund, we are doing it a fair bit of about, say-
Vishal Biraia: No.
Dilip Srivastava: Percent over.
Vishal Biraia: Let me clarify. What I meant to ask was, for the incremental disbursements that we have done and largely to renewables in the Q2, this would have done at what yield?
Rajiv Malhotra: Average we have given in our investor presentation as well. Average yield for the period is 10.45% against the average cost of borrowing of 9.20%.
Vishal Biraia: Sir, I was not asking the average. I was asking specifically for this incremental lending that we have done in this quarter.
Rajiv Malhotra: No, I think we will not be able to answer that question right now. Maybe we could do that later. But we are in the process of mixing up stock and flow variables. I would not have a ready answer to say what is lent to renewables during the quarter and what is the relatable. I heard you use the word marginal cost.
Vishal Biraia: No problem. I will skip that. The other thing is on the cost of funds. If you could clarify as to what is the marginal cost of borrowing for us. For the incremental borrowing that we have done, what is the rate that we are paying?
Rajiv Malhotra: Can you please take that? Thank you.
Dilip Srivastava: We can give a band. We won't be able to give.
Rajiv Malhotra: We have already disclosed 9.27%, our weighted average.
Vishal Biraia: That is the average. Based on the stock, that is the average rate. I understand that. Incrementally, what is the cost?
Rajiv Malhotra: Appreciate that we can't give you a precise number, not on this call.
Dilip Srivastava: Once it is materialized, the disbursements are taken, then only the rate can be fixed up. It is only at an in-principle sanction stage in most of the borrowings. Better rates may not be discussed here.
Vishal Biraia: What of the total borrowing book that we have, how much is linked to Repo and how much is linked to MCLR, how much is linked to EBLR?
Dilip Srivastava: Most of the cases, one year this spread link is there. It is not that immediately they have to revise the Repo rate so that is applicable to us.
Vishal Biraia: Okay. Most of the borrowing is linked to Repo. Is that right?
Dilip Srivastava: No. I think that it is their MCLR on analyzed basis when that will be applicable.
Vishal Biraia: Okay.
Dilip Srivastava: The impact will come.
Vishal Biraia: Okay. On the credit rating side, when is the credit rating assessment due? When can we go back to the agencies and present again for a rating update?
Dilip Srivastava: It will be coming in the next quarter. Already that result has been declared. We will be taking up that with the rating agencies again, and even for the next period as well. That process is there. They can look on it part and we will be taking up.
Vishal Biraia: Okay. In the next quarter you mean this is for CRISIL and ICRA both or one of them?
Dilip Srivastava: We checked it. Right now is not with me, but in the next quarter it is coming one rating agency, after that, I think probably coming for the next rating agency.
Vishal Biraia: Okay. Last question is on Danu. Why was it written off in this quarter?
Dilip Srivastava: You know that whatever taken in the books of accounts is not individual call. Considering all the aspects regarding the RBI regulations, then the factors related to the latest development in that particular account, considering all those aspects, the call is taken. Why is that being written off in this particular quarter? I do not think that any specific answer to that part is there.
Vishal Biraia: Okay. Did anything change in terms of the parameters of that company which led to the write-off in this particular quarter?
Dilip Srivastava: Technical write-off, actually it is linked to the cleaning of the balance sheet. Right? So those accounts are lying. So we have just to improve the Gross NPA and Net NPA, all those things that considering multiple aspects, it is not a single aspect that call has been taken.
Vishal Biraia: Okay. Thank you very much. Thank you for answering my question.
Operator: Thank you. Ladies and gentlemen, we will take that as the last question for today. I now hand the conference over to Mr. Rajiv Malhotra for closing comments.
Rajiv Malhotra: Thank you for staying with us for the best part of an hour, asking us some fairly penetrative questions. I would just like to repeat that how we would like you to think about this quarter. It is a quarter that sets the tone for a scaling up and improvement of metrics, building or rebuilding the portfolio over the next couple of quarters. One quarter that follows the other, we expect to give you a bigger portfolio, quality portfolio, which should be giving you quality earnings. As we close the financial year, we hope to be at our targeted points. This was essentially a quarter when we have stuck to focus, gone back to the basics as my colleagues here have mentioned, and we will continue to do more of the same. Thank you very much once again for being with us this afternoon.
Operator: Thank you. Ladies and gentlemen, on behalf of PTC India Financial Services Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.
