Result Update

Rating matrix
Rating Target Target Period Potential Upside : .......Hold : : : | 72 12 months 5%

PTC India (POWTRA)

| 68
WHATS CHANGED
PRICE TARGET ........................................................................... Changed from | 77 to | 72
FY14E 12855 161 135

February 15, 2013

Key Financials
(| Crore) Net Sales EBITDA Net Profit FY11 8997 140 139 FY12 7667 147 120 FY13E 8958 148 114

EPS (FY13E) ............................................................................. Changed from | 4.3 to | 3.6 EPS (FY14E) ............................................................................. Changed from | 4.7 to | 4.6 RATING ....................................................................................... Changed from Buy to Hold

Valuation summary
PE (x) Target PE (x) EV/EBITDA (x) P/BV (x) RoNW (%) RoCE (%) FY11 14.9 14.5 17.6 1.0 6.4 9.1 FY12 17.2 16.7 11.8 0.9 5.4 7.5 FY13E 18.1 17.5 12.2 0.9 5.0 7.0 FY14E 15.3 14.9 10.4 0.9 5.6 7.9

Disappointment on tolling and other income

PTC India reported Q3FY13 results, which were below expectations. Lower-than-expected tolling business volumes/performance and lower other income (| 1.3 crore vs. estimates of | 7 crore) were the key reason for PAT deviation. Reported PAT came in at ~| 22 crore vs. estimate of | 28 crore. Key reason for lower other income was | 70 crore equity commitment towards Teesta Project owing capital cost revision. Tolling volumes, grid constraints pull down overall performance Tolling volumes from Simhadri came in below expectations at 22.7 crore units as the boiler faced some teething issues. Even realisations were lower at | 5.3/unit vs. | 5.5/unit in Q2FY13. This, we believe, impacted the financial contribution from the tolling business. Also, short-term volumes and margins got impacted due to grid constraints as the same was diverted to power exchanges and hence, lower margins. Trading margins for Q3FY13 stood at 3.8 paisa vs. 4 paisa in Q2FY13. TN dues to reduce by H1FY14 Given the reconstitution of the TN SEB board, of late, PTC has not received any further payments as the total outstanding stood at | 380 crore. However, the management expects payments to resume soon while outstanding will be cleared by H1FY14. On the other hand, the company has not provided any timeline on payments from UP SEB but is expecting things to resume in FY14 given UP SEB has no choice but to go for disciplined price hikes and adhere to the SEB restructuring package. Pick-up in long term PPA, recovery of dues from SEB key monitorables Gradual stabilisation of the tolling business (Simhadri, Meenakshi and Amarkantak volumes) coupled with stable base business operations provide reasonable visibility. Though margins are expected to move in the 4-4.5 paisa range, we believe contribution of long term volumes will rise gradually from hereon. Also, recovery of dues from SEBs will be significant medium term catalyst for re-rating. Hence, we recommend HOLD rating on the stock with a target price of | 72/share.
Exhibit 1: Key Financials
|crore Total Revenues Q3FY13 1,877.8 30.0 1.6 1.0 1.2 0.0 22.7 0.8 Q3FY13E 2,847.0 30.9 1.1 1.0 7.0 0.0 28.0 0.9 Q3FY12 1,330.0 21.0 1.6 1.1 4.3 10.3 9.5 0.3 Q2FY13 2,793.0 57.1 2.0 1.0 6.2 0.0 45.0 1.5 YoY Gr(%) 41 43 (290 bp) -10.6 -71.1 -100.0 138.2 142 QoQ Gr(%) -33 -47 (220 bp) 0.0 -80.2 NA -49.6 -50

Stock data
Market Capitalisation Debt (Q3FY13) Cash (Q3FY13) EV 52 week H/L Equity capital Face value MF Holding (%) FII Holding (%) | 2062 Crore | 0 Crore | 150 Crore | 1912Crore | 150/39 | 294 Crore | 10 15.3 15.6

Price movement
6,500 6,000 5,500 5,000 4,500 4,000 Feb-12 May-12 Aug-12 Nov-12 Nifty (L.H.S) Price (R.H.S) 100 86 72 58 44 30 Feb-13

Analysts name
Chirag J Shah shah.chirag@icicisecurities.com

EBITDA
EBITDA Margin (%) Depreciation

Other Income
Interest Net Profit EPS (|)

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Exhibit 2: Assumption Sheet

Volume (billion units) % of Short term volumes % of Long term volumes* PAT growth FY10 18.2 62.3 37.7 3.0 FY11 24.5 66.7 33.3 47.1 FY12 27.8 63.2 36.8 -13.1 FY13E 27.7 64.8 35.2 -5.0 FY14E 32.9 58.5 41.5 17.7

Source: Company, ICICIdirect.com Research * Includes cross border trades with Bhutan.

Result analysis and key conference call highlights

Volumes from the Simhadri tolling project got impacted owing to stabilisation issues in the boiler in Q3FY13. The management has clarified that issues have been resolved Volumes from the power tolling agreement with Simhadri Power stood at 22.7 crore units We expect the share of long term power to be at 35% and 42% by FY13E and FY14E, respectively The management expects Meenakshi Power to contribute to long term volumes by Q1FY14. Also, the company expects projects to the tune of 3000 MW over FY13E-14E and 5900 MW in FY15E Total PPAs signed by the company as of Q3FY13 stood at 14402 MW (including cross border trade)

Exhibit 3: Trend in volumes traded

10000 9000 8000 . 7000 6000 5159 5000 4000 3000 2000 1000 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 6388 5700 3797 2180 4204 4440 3201 (million units) 8655 7730 6726 5860 5191 4564 4380 6566 5871 9428

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

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Exhibit 4: Movement in realisation and cost per unit of power traded

6 5 4 3 2 1 0 Q1FY11Q2FY11 Q3FY11Q4FY11 Q1FY12Q2FY12Q3FY12 Q4FY12Q1FY13 Q2FY13Q3FY13 Average Realisation Cost per Unit Trading Margin (Rs) (|) 0.07 0.06 0.05 (|) . 0.04 0.03 0.02 0.01 0.00

Source: Company, ICICIdirect.com Research

Exhibit 5: Projection for volume growth

35000
We expect PTC to register volumes of 27.7 BUs and 32.9 BUs in FY13E and FY14E, respectively

32860 27659 24481 18233 13825 24325

30000 . (million units) 25000 20000 15000 10000 5000 FY09 FY10 FY11 FY12

FY13E

FY14E

Source: Company, ICICIdirect.com Research

Exhibit 6: Strategic investments made by PTC

Company PTC India Financial Services PTC Energy Athena Energy Ventures Teesta Urja Krishna Godavari Power Utilities Chenab Valley Projects Total PTC Stake (%) 60.0 100.0 18.0 11.0 34.7 2.0 Amount invested by PTC (| crore) 268 55 27 156 130 0 635

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

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Valuations
Gradual stabilisation of the tolling business (Simhadri, Meenakshi and Amarkantak volumes) coupled with stable base business operations provide reasonable visibility. Though margins are expected to move in the 4-4.5 paisa range, we believe contribution of long term volumes will rise gradually from hereon. Also, recovery of dues from SEBs will be a significant medium term catalyst for rating. Hence, we recommend HOLD rating on the stock with a target price of | 72/share. For the base business, we are expecting PTC to report a volume of 2770crore and 3290 crore units for FY13E and FY14E respectively. We have valued the same at 9x FY14E EPS. On the other hand, we have applied a 20% holding company discount to the stake held in PFS and 1x on equity invested in strategic investments.
Exhibit 7: Valuation snapshot
Particulars Basis of Valuation Value per share

Core Business PFS Other Investments

Total Valuation CMP Upside/(Downside)

9x FY14E EPS 20% Holding Co. discount on Market Cap 1x BV

43 14 15
72 69 3.6

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

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Financial summary
Profit and loss statement
(| Crore) (Year-end March) Total operating Income Growth (%) Raw Material Expenses Employee Expenses Administrative Expenses Other expenses Total Operating Expenditure EBITDA Growth (%) Depreciation Interest Other Income PBT Others Total Tax PAT Growth (%) EPS (|) FY11 8,997.3 15.8 8,837.1 7.0 0.0 13.3 8,857.4 139.9 119.6 5.0 1.1 63.0 196.8 0.0 58.3 138.5 46.9 4.7 FY12P 7,667.2 -14.8 7,491.5 11.9 0.0 16.4 7,519.9 147.3 5.3 4.5 26.0 50.5 167.4 0.0 47.0 120.4 -13.1 4.1 FY13E 16.8 13.1 0.0 18.8 FY14E 43.5 13.7 0.0 18.6 (Year-end March) Profit after Tax Add: Depreciation (Inc)/dec in Current Assets Inc/(dec) in CL and Provisions Others CF from operating activities (Inc)/dec in Investments (Inc)/dec in Fixed Assets 148.4 0.7 4.1 0.0 16.5 160.7 0.0 46.4 114.3 -5.0 3.9 161.2 8.7 4.3 0.0 32.0 188.9 1.0 54.3 134.6 17.7 4.6 Others CF from investing activities Issue/(Buy back) of Equity Inc/(dec) in loan funds Dividend paid & dividend tax Inc/(dec) in Sec. premium Others CF from financing activities Net Cash flow Opening Cash Closing Cash FY11 138.5 5.0 427.9 211.0 -934.0 -151.5 -176.7 -1.1 60.3 -117.5 0.4 0.0 -41.2 3.2 0.0 -37.6 -306.5 994.5 688.0 FY12E 120.4 4.5 1,656.7 771.0 -3,300.0 -747.5 229.1 -0.3 -26.0 202.9 0.0 0.0 -51.4 0.0 0.0 -51.4 -596.0 688.0 92.0 FY13E 114.3 4.1 -200.0 236.3 -300.0 -145.3 -70.0 -0.2 0.0 -70.2 0.0 0.0 -51.4 0.0 0.0 -51.4 -266.8 92.0 -174.8 8,957.7 12,855.2 8,777.4 12,661.7

Cash flow statement

(| Crore) FY14E 134.6 4.3 389.3 792.4 -1,000.0 320.6 0.0 -0.2 0.0 -0.2 0.0 0.0 -51.4 0.0 1.0 -50.4 270.1 -174.8 95.3

8,809.3 12,694.0

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Balance sheet
(| Crore) (Year-end March) Liabilities Equity Capital Reserve and Surplus Total Shareholders funds Total Debt Total Liabilities Assets Gross Block Less: Acc Depreciation Net Block Capital WIP Total Fixed Assets Investments Inventory Debtors Loans and Advances Other Current Assets Cash Total Current Assets Creditors Provisions Total Current Liabilities Net Current Assets Others Assets Application of Funds 61.0 24.0 36.9 0.0 36.9 1,052.7 0.0 977.9 22.3 10.1 687.7 1,698.0 546.3 54.7 601.1 1,083.0 0.0 2,172.6 62.1 29.0 33.1 0.0 33.1 823.5 0.0 2,581.0 85.6 0.4 45.8 2,712.8 1,310.8 61.3 1,372.0 1,330.6 0.0 2,241.2 62.3 34.1 28.3 0.0 28.3 893.5 0.0 2,434.5 22.3 10.1 -174.8 2,292.2 1,546.5 61.9 1,608.4 683.9 0.0 2,304.6 62.5 39.2 23.4 0.0 23.4 893.5 0.0 2,819.4 22.3 14.6 95.3 2,951.6 2,338.9 61.9 2,400.8 424.2 0.0 2,387.8 295.0 1,877.6 2,172.6 0.0 2,172.6 295.0 1,946.6 2,241.6 0.0 2,241.6 295.0 2,009.6 2,304.5 0.0 2,304.5 295.0 2,092.8 2,387.8 0.0 2,387.8 FY11 FY12E FY13E FY14E

Key ratios
(Year-end March) Per share data (|) EPS Cash EPS BV DPS Cash Per Share Operating Ratios (%) EBITDA Margin PBT / Total Operating income PAT Margin Inventory days Debtor days Creditor days Return Ratios (%) RoE RoCE ROA Valuation Ratios (x) P/E EV / EBITDA EV / Net Sales Market Cap / Sales Price to Book Value Solvency Ratios Debt/EBITDA Debt / Equity Quick Ratio 0.0 0.0 1.7 0.0 0.0 1.9 0.0 0.0 1.5 0.0 0.0 1.2 14.9 12.9 0.2 0.2 1.0 17.2 12.3 0.2 0.3 0.9 18.1 12.2 0.2 0.2 0.9 15.3 11.2 0.1 0.2 0.9 6.4 9.1 6.4 5.4 7.5 5.3 5.0 7.0 4.9 5.6 7.9 5.6 2.2 2.2 1.5 0.0 39.8 21.6 2.2 2.2 1.3 0.0 121.5 60.6 1.8 1.8 1.0 0.0 98.3 30.0 1.5 1.5 1.0 1.0 79.2 28.0 4.7 4.9 73.7 1.5 23.3 4.1 4.2 76.0 1.5 1.6 3.9 4.0 78.1 1.5 -5.9 4.6 4.7 80.9 1.5 3.2 FY11 FY12E FY13E FY14E

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

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Company Description
PTC India Ltd, a Government of India initiative, is a pioneer in starting a power market in India. The company has maintained its leadership position in power trading since inception and at present has around 41% share of the trading market. PTC has also been authorised by the Government of India to trade electricity with Bhutan and Nepal. The company is also actively participating on Indian Energy Exchange, the first national level power exchange in the country. The trading activities undertaken by PTC include long term trading of power generated from large power projects as well as short-term trading arising as a result of supply and demand mismatches, which inevitably arise in various regions of the country.
Exhibit 8: Recommendation History
90

70 | 50 30 Apr-12 May-12 Jul-12 Price Aug-12 Oct-12 Nov-12 Jan-13 Feb-13

Target Price

Source: Bloomberg, ICICIdirect.com Research

Exhibit 9: Recent Releases

Date 4-Apr-12 1-Jun-12 17-Aug-12 8-Oct-12 9 noc 2012 8-Jan-13 Event Q4 FY12 Preview Q4 FY12 Review Q1 FY13 Review Q2FY13 Preview Q2FY13 Review Q3FY13 Preview CMP 67 55 60 60 68 78 Target Price 62 68 65 65 77 77 Rating Buy Buy Hold Hold Buy Hold

Source: ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

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ICICIdirect.com coverage universe (Power)

Sector / Company JP Power(JAIHYD) NHPC (NHPC) NTPC (NTPC) Power Grid (POWGRI) PTC India (POWTRA) Tata Power (TATPOW) M Cap CMP Target Rating (| Cr) 8,797 32 39 Buy 28 27 Hold 23,986 149 178 Buy 136,050 111 129 Buy 51,382 2,032 70 77 Hold 94 97 Hold 22306 EPS (|) P/E (x) EV/EBITDA (x) RoCE (%) FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E 1.5 2.2 3.0 20.9 14.5 10.7 16.0 10.8 9.2 6.3 8.1 8.2 2.3 2.2 2.2 12.4 12.7 12.6 10.0 11.5 10.0 9.0 7.6 6.4 11.2 11.3 13.0 13.3 13.2 11.5 10.0 11.6 11.0 11.5 10.9 10.5 7.0 8.0 9.1 15.9 13.9 12.2 12.6 12.0 11.3 13.2 12.1 11.6 4.7 4.1 3.7 14.9 17.2 18.8 12.1 14.0 12.2 7.5 6.8 8.0 -4.6 4.5 4.8 NA 20.8 19.4 10.4 10.0 8.6 8.8 7.2 8.6 RoE (%) FY12 FY13E FY14E 7.3 9.5 12.6 10.5 9.5 9.3 12.6 12.7 12.7 13.8 14.2 14.5 5.4 4.8 5.7 NA 8.5 8.6

Source: ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

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RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: > 10%/ 15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;

Pankaj Pandey

Head Research ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com

pankaj.pandey@icicisecurities.com

ANALYST CERTIFICATION
We /I, , Chirag Shah PGDBM research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.

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