PTC India — Q3 FY26 earnings call

We are awaiting their final report and we shall be discussing the report once it is made available to us. Many rounds of discussions have happened with the consultants, but before I discuss this with the board, I cannot share more on this.

Management is delaying disclosure on a key strategic decision regarding PFS, indicating ongoing complexities or lack of finality.

Asked by Channamallu Halaguri

Kindly understand the capital adequacy ratio of PFS is already very high, very comfortable. Almost Rs. 3,000 crores of the net worth is lying in that company. So basically, they do not need further equity infusion from the parent. So that said, it is not as if that we are not supporting them. It is for that company to raise further debt financing, complementing their existing equity structure.

Management clarified PFS's strong financial position, but acknowledged the need for debt financing and the complexity of the divestment process to preserve investor value, addressing concerns about delays.

Asked by Channamallu Halaguri

Sir, it is difficult to predict, but let us understand the overall scenario in which the power sector has been operating. For the past one year, weather has been generally very benign and the power purchase cost on the exchanges have been very down and subdued. So, what it led to was a significant reduction in the power procurement cost for the DISCOMs. And because of that, they temporarily have better liquidity if you compare it with the prior periods.

Management explained the cyclical nature of rebate and surcharge income, linking it to weather and DISCOM liquidity, suggesting the current lower levels might not be a permanent 'new normal'.

Asked by Vipulkumar Shah

Should that happen, that possibility that the trading arm of the NTPC and the PTC, the business somehow, a synergy is provided. In that case, we are going to be benefited because now there is a regulation which says that you are at the unequivocal surplus power of all the NTPC power plants. It has to be compulsorily first offered into the trading, for trading in the market. So, unless and until that is done, the fixed cost is not paid to the NTPC. So that power volume is also a significant volume that would come to us if, should that synergy thing happen. So yes, there is a lot of statistics synergy.

Management confirmed the significant potential for increased trading volumes and synergy benefits for PTC if NTPC's surplus power is routed through the company, following the change in promoter structure.

Asked by O. P. Gandhi

Yes, for this, basically the expense on technology and some manpower expense was the main reason for this loss in this particular quarter. But with the market coupling and all, the scenario is looking positive for HPX.

Management attributed HPX's Q3 loss to specific investments in technology and manpower, indicating a strategic spend for future growth rather than operational weakness, with a positive outlook due to market coupling.

Asked by Mangesh Kulkarni

So that is one. If you look at our cash balances, it comprises of two components. One is the working capital, which is meant to support our core trading business. And currently, it may look as if we are having a very high level of cash on our balance sheets because the cash is not currently deployed in the working capital cycle. Currently, we are sitting in a situation that there are no significant outstanding against any of our major principal trading partners. And because of that, that working capital cycle is so squeezed that we are almost, if I am right, we are not having more than 4 days of average net outstanding. So, on one hand, it is a very good operational performance, but on the other hand, it affects our rebate and surcharge incomes. But having said that, to support our trading business, I think at least Rs. 2,000 crores war chest is required to remain competitive in this business. And that has always been the case. So other than that, this Rs. 1,100 crores also, which we have received from sale of PEL, that fund is cognizant of available for equity investment or other kind of investments. The management is that. We are working on many fronts. If you have been following our company, you would know we have recently signed MoUs with Neyveli Lignite Corporation. We have signed MoU with SECI, we have signed MoU with some of other PSUs also. So basically, all these MoUs are meant to explore what could be the possible synergy and what could be possible avenues for further investments. When we have anything concrete to share, we shall be sharing.

Management provided a detailed breakdown of its cash utilization strategy, distinguishing between working capital needs (Rs. 2,000 crores) and funds for strategic investments (Rs. 1,100 crores from PEL sale), outlining active exploration of new avenues through MoUs.

Asked by Abhir Pandit

You see, actually, this question has to be addressed in two parts. Number one, unless and until there is a long-term contract for offtake of power from a project, the financial closure of projects won't happen. So at least one leg of the transaction for financial closure of the expected and upcoming power projects, there has to be a certain degree of assurance to the financiers that power will be taken up. So, for developers, of course, they are always perpetually in the need for a financial closure and therefore a long term PPA. So, I don't see that debt need going away. What I see is that back-to-back basis that power cannot be directly sold to a DISCOM or any other consuming entity. The consuming entities on the other hand want flexibility. So that means there is ample room for traders like us to be in this business that we can take calculated risk and we can do the long-term contracting with the developers and then we slice dice and mix and match and merge that power and tailor made and custom made the solutions for the clients at the DISCOM. So of course, long-term trade is not going away, but less and less it is likely that there would be an intermediary in between.

Management clarified that long-term PPAs are still crucial for project financing but the market is evolving towards more flexible, customized solutions, positioning PTC as a key intermediary in this changing landscape.

Asked by Vipulkumar Shah

The business opportunity from the market coupling directly it is not coming to the PTC because PTC in any case is simply a trader on the exchanges and currently since PTC owns around 22.5% equity in the HPX. So, it is an associated company and therefore, we cannot take the trading membership on the HPX. So, our trading portfolio is being serviced with the help of other two exchanges. So, per se directly it is not affecting the PTC, but indirectly since we own 22.5% of the HPX and if significant volume of power trading was to move away from leading and dominant exchange to all the 3 exchanges in an equitable manner, then it will definitely add immense value to the HPX and then being the leading shareholder of the HPX, that benefit will accrue to PTC.

Management explained that while market coupling doesn't directly impact PTC's trading operations, its significant equity stake in HPX provides an indirect benefit through increased valuation if market volumes are distributed more equitably across exchanges.

Asked by Rajiv Agarwal