PTC India Financial Services Limited: Ratings downgraded to [ICRA]A- (Negative) / [ICRA]A2+

The ratings downgrade for PTC India Financial Services Limited (PFS) factors in the significant decline in the lending book, as its ability to mobilise funds has remained constrained over the past few years, following the concerns of corporate governance issues highlighted by independent directors in January 2022. Further, the audit qualifications for the period ended on March 31, 2024, highlighted further corporate governance issues like conducting few meetings with shorter notice and delays in signing and finalisation of minutes of audit committee and board meetings, along with ineffective and inadequate quality, quantity and timelines of information flow between the company and its board members. Consequently, lender confidence is likely to be affected resulting in continued impact on its ability to mobilise funds, which will moderate the loan book size.

The capitalisation profile for PFS is comfortable for the current scale of operations, with a gearing of 1.5 times as on March 31, 2024, and an adequate liquidity position backed by higher on-balance sheet liquidity. ICRA takes note of the majority stake held by PTC India Limited (PTC; ~65% shareholding as on March 31, 2024) in the company. However, ICRA does not expect any financial support to PFS from PTC. PFS' reported asset quality indicators remain weak, albeit some improvement in gross and et stage 3% of 12.8% and 6.1%, respectively, as on March 31, 2024, from 13.6% and 8.0%, respectively, as on March 31, 2023, due to no incremental slippages and some recoveries in FY2024.

PFS' relatively modest competitive position in the infrastructure finance segment led to subdued profitability over the past few years, reflected in the subpar average 3-year (FY2022-FY2024) return on assets (RoMA) and return on equity (RoE) of 1.8% and 6.6%, respectively. The improvement in FY2024 was largely on the back of the lower leverage, nil slippages, and resolution on some stressed accounts. Going forward, the company's ability to scale-up its business volumes, while controlling fresh slippages on a sustained basis, and raise funds through diverse sources at competitive rates would be imperative for improving its credit profile.

The Negative outlook on the long-term rating reflects ICRA's expectations of continued weakness in business growth and consequent decline in the loan book size and subdued earnings profile.

Shares of PTC India Financial Services Limited was last trading in BSE at Rs. 39.86 as compared to the previous close of Rs. 40.32. The total number of shares traded during the day was 178005 in over 1542 trades.

The stock hit an intraday high of Rs. 40.70 and intraday low of 39.70. The net turnover during the day was Rs. 7153406.00.

Source : Equity Bulls

Keywords

PTCIndiaFinancialServices INE560K01014 PFS RatingDowngrade