Rating Rationale
December 28, 2017 | 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 PTC'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+').

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. As on March 31, 2017, there were 33 trading licensees and PTC had a market share of 32% of short-term (bilateral transactions and through power exchange) volume traded in fiscal 2017. PTC 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 company had nil borrowing, and had cash and cash equivalent of around Rs 600 crore along with unutilised bank lines of Rs 1,400 crore as on September 30, 2017 on a standalone basis. The financial risk profile is further supported by nil bank borrowing. Given that the company does not intend to invest further in its subsidiaries, PEL and PFS, the financial risk profile is expected to remain robust over the medium term. Any further investment in these or other companies, which adversely impacts the financial risk profile will remain a key rating 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 2017. 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 33% of short-term power traded in fiscal 2017. 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 business under PEL, is weaker compared to the more established trading business. The wind business faces inherent risks such as wind speed variability, long-term wind patterns, and technology risks. While the entire capacity of 288 megawatt has been commissioned as on March 31, 2017, the portfolio remains exposed to stabilisation risk with limited track record of operations and payment receipt from the discoms.
About the Company

PTC was incorporated in 1999 to support implementation of the Government of India's Mega Power Policy. The promoters are NHPC Ltd (rated 'CRISIL AAA/Stable'), 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 license, 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 2017. It traded 48,320 million units in fiscal 2017, compared with 42,370 million units in fiscal 2016.

For the six months ended September 30, 2017, PTC, on a standalone basis, had net profit of Rs 196 crore on sales of Rs 9,691 crore, against Rs 170 crore and Rs 7,694 crore, respectively, for the corresponding period of the previous year.

Key Financial Indicators
Particulars Unit 2017 2016
Revenue Rs crore 14,117 12,476
Profit After Tax (PAT) Rs crore 257 231
PAT Margins % 1.8 1.8
Adjusted debt/adjusted networth Times 1.04 0.41
Interest coverage Times 13.7 90.7

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 - Rating History for last 3 Years
  Current 2017 (History) 2016  2015  2014  Start of 2014
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  100  CRISIL A1+    No Rating Change    No Rating Change    No Rating Change  22-08-14  CRISIL A1+  -- 
Fund-based Bank Facilities  LT/ST  150  CRISIL A1+    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL A1+ 
Non Fund-based Bank Facilities  LT/ST  2700  CRISIL A1+    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL A1+ 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
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
Rating criteria for manufaturing and service sector companies
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt

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