Rating Rationale
December 21, 2018 | Mumbai
PTC India Limited
Rating Reaffirmed
Rating Action
Total Bank Loan Facilities Rated Rs.2850 Crore
Short Term Rating CRISIL A1+ (Reaffirmed)
Rs.100 Crore Commercial Paper CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL A1+' rating on the short-term bank facilities and commercial paper programme of PTC India Limited (PTC).

The rating continues to reflect the company's leadership position in the power-trading market in India, strong relationships with customers and market linkages because of track record, and robust financial risk profile. These strengths are partially offset by exposure to counterparty risks and open positions, threat of disintermediation and exposure of risks inherent in the wind energy industry.

Analytical Approach

For arriving at its rating, CRISIL has combined the business and financial risk profiles of PTC and its wholly owned subsidiary, PTC Energy Ltd (PEL; 'CRISIL A/Stable/CRISIL A1'). Both the entities have strong operational, financial, and management linkages. CRISIL has also made adjustments for the assets and liabilities as per CRISIL's capital allocation approach for the financing business undertaken by PTC India Financial Services Ltd (PFS, 'CRISIL A+/Stable/CRISIL A1+').

Please refer Annexure - Details of Consolidation, which captures the list of entities considered and their analytical treatment of consolidation. 

Key Rating Drivers & Detailed Description
* Leadership position in the power-trading market in India: PTC is the largest player in the Indian power trading market, with a market share of 38% of total volume traded in fiscal 2018 out of 36 power trade licensees. The company is likely to maintain its dominant market position over the medium term despite intensifying competition.

* Long track record of operations, resulting in strong customer relationships and market linkages: PTC was the first company to start power trading in India and has, over the years, established strong relationships with various players in the energy trading market. The company has maintained healthy relation with state power utilities (SPUs). It is efficient in client servicing and client management, and should continue to leverage its customer relationships and market reputation and maintain its market leadership position.

* Robust financial risk profile: Financial risk profile is underscored by comfortable capital structure, adequate cash accrual, and ample liquidity. The standalone financial risk profile is further supported by nil long term loan and only limited working capital debt. Further, while PTC will support both PEL, PFS in case of distress, no additional investments are expected in these subsidiaries in business as usual scenario which will keep the former's financial risk profile robust over the medium term. Any further investment in these or other companies which adversely impacts the financial risk profile will remain a key sensitivity factor.
* Exposure to counterparty risks and open positions: PTC is susceptible to the credit risk profiles of customers, mainly SPUs, most of which have weak to average credit risk profiles. 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. The risk of default is reduced by PTC's large scale of operations, which helps negotiate better terms with clients. This is evident from low receivables of around 80 days on an average over the five fiscals through 2018. However, the risk of prolonged delays or default in payments by customers, which is a sectorial problem, remains a key rating sensitivity factor.

* Threat of disintermediation: There are two power exchanges in India, Indian Energy Exchange and Power Exchange of India. While the exchange and over-the-counter markets co-exist in the electricity industry globally, power exchanges evolved recently in India. Transactions through power exchanges are primarily in the spot and day-ahead markets and accounted for 55% of short-term power traded in fiscal 2018. The steady rise in share of exchanges may pose a threat to PTC and other bilateral traders in the long term.

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

Liquidity is healthy with expected annual cash accrual of around Rs 400 crore against yearly debt repayment of around Rs 140 crore, on a consolidated basis, over the medium term. Trading business had unutilized bank limit of Rs 600 crores as on March 31, 2018. From fiscal 2019, PTC has changed its working capital management policy for the trading business and plans to pay off creditors upfront to avail the early payment rebate. Consequently it has utilised its existing cash buffer and plans to draw down on external working capital debt. Surplus cash reduced at PTC on standalone basis reduced to Rs 35 crore as on Sep 30, 2018 from Rs 422 cr as on March 31, 2018. Nonetheless given PTC's operational track record and long standing relationship with discoms, the liquidity is expected to be prudently managed and will remain healthy over the medium term. Liquidity at PEL is also healthy with debt service reserve account of Rs 110 crore and cash and cash equivalents of about Rs 20 crore as of December 10, 2018.
About the Company

PTC was incorporated in 1999 to support implementation of the government's mega power policy. The promoters are NHPC Ltd, NTPC Ltd ('CRISIL AAA/FAAA/Stable/CRISIL A1+'), Power Finance Corporation Ltd ('CRISIL AAA/Stable/CRISIL A1+'), and Power Grid Corporation of India Ltd ('CRISIL AAA/Stable/CRISIL A1+'). PTC has a category I licence, which permits unlimited trading in power, issued by the Central Electricity Regulatory Commission under the Electricity Act 2003. It is the largest player in the power trading market, with a share of 40% of the total volume traded in fiscal 2018. It traded 57,018 million units in fiscal 2018, compared with 48,320 million units in fiscal 2017.

For the six months ended September 30, 2018, PTC, on a standalone basis, reported net profit of Rs 157 crore on sales of Rs 7,922 crore, against Rs 196 crore and Rs 6,454 crore, respectively, for the corresponding period of the previous year.

Key Financial Indicators (Consolidated; CRISIL Adjusted Numbers)
Particulars Unit 2018 2017
Revenue Rs crore 18,430 14,116
Profit After Tax (PAT) Rs crore 328 286
PAT Margin % 1.8 2.0
Adjusted debt/adjusted networth Times 0.89 0.85
Interest coverage Times 4.7 14.4

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
ISIN Name of Instrument Date of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs.Cr) Rating Assigned with Outlook
NA Letter of Credit NA NA NA 100 CRISIL A1+
NA Letter of credit & Bank Guarantee NA NA NA 2039 CRISIL A1+
NA Proposed Non Fund based limits NA NA NA 561 CRISIL A1+
NA Short Term Bank Facility NA NA NA 150 CRISIL A1+
NA Commercial Paper NA NA 7-365 days 100 CRISIL A1+
*Interchangeable with short-term bank facility to the extent of Rs 400 crore
Annexure- Details of Consolidation
Name of Instrument
Fully Consolidated Entity:
PTC Energy Ltd
Capital Allocation Method:
PTC India Financial Services Ltd
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  100.00  CRISIL A1+      28-12-17  CRISIL A1+  06-12-16  CRISIL A1+  23-09-15  CRISIL A1+  CRISIL A1+ 
Fund-based Bank Facilities  LT/ST  150.00  CRISIL A1+      28-12-17  CRISIL A1+  06-12-16  CRISIL A1+  23-09-15  CRISIL A1+  CRISIL A1+ 
Non Fund-based Bank Facilities  LT/ST  2700.00  CRISIL A1+      28-12-17  CRISIL A1+  06-12-16  CRISIL A1+  23-09-15  CRISIL A1+  CRISIL A1+ 
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Letter of Credit 100 CRISIL A1+ Letter of Credit 100 CRISIL A1+
Letter of credit & Bank Guarantee* 2039 CRISIL A1+ Letter of credit & Bank Guarantee* 2039 CRISIL A1+
Proposed Non Fund based limits 561 CRISIL A1+ Proposed Non Fund based limits 561 CRISIL A1+
Short Term Bank Facility 150 CRISIL A1+ Short Term Bank Facility 150 CRISIL A1+
Total 2850 -- Total 2850 --
*Interchangeable with short-term bank facility to the extent of Rs 400 crore
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 Consolidation
CRISILs Criteria for rating short term debt

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