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Focusing on renewable energy: PTC Financials

According to reports, R M Malla, managing director and chief executive officer, PTC India Financial Services says the company saw a 17 percent increase in its total asset size. In an interview to CNBC-TV18, Malla says the company’s net interest margins (NIMs) continue to stand over 6 percent and it has seen nil non-performing assets as the company provisions for 50 basis points (bps) for all standard assets. Malla further adds the company will continue to focus on renewable energy- solar and wind energy. “We are seeing a lot of interest coming in from large players and given that the country is talking about 1 lakh megawatt (MW) of renewable energy, this is a sector that will see a lot of action in the days to come, adds Malla.

Below is the verbatim transcript of R M Malla’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.

Latha: Just take us through exactly the profit performance. If you stripped off the extra ordinaries from last year what is the profit performance and what was the margin performance?

A: This quarter is a pure interest income and this is for the first time any quarter we have crossed a gross revenue figure of Rs 200 crore and our profit is Rs 54 crore. If we exclude a disinvestment which we did in the corresponding quarter of last financial year our profit is up by almost 44 percent. Same is the figure as far as the nine months results are there. So, we are continuously growing our interest income is growing, our net interest margins (NIM) is well within the range in what we were having in the past and the asset size also is growing. Almost 75 percent increase as compared to December 31 st 2013 so the progress is very good.

Sonia: What exactly the net interest margins were this quarter and what was the cost of funds as well?

A: Essentially, our yield on our assets is close to 13.70 and our interest cost is 9.37 so we have an interest spread of more than 4.3 percent. If you compare NIM because we have a very healthy capital adequacy ratio of close to 26 percent so our NIM is almost more than 6 percent. As our debt equity ratio is very low 3:1, as you know non banking financial companies (NBFCs) can have more than 5 time leveraging but we are prudently thinking of leveraging at a right level. Yesterday’s announcement of Governor of reducing repo rate by 25 basis points is going to be hugely beneficial to us because all our domestic borrowings are at base rate. So once banks now start reducing their base rate we will get a huge benefit and our NIMs as well as our margins will continue to remain at the same level.

Latha: Coming to the provisioning part why were they higher and so much higher?

A: We are one of the few NBFCs where we make provision of 50 basis points on our standard assets. The Reserve Bank has recently come on a 40 basis points that too over a period but we have been providing 50 basis point. What exactly happens so even if we make some disbursements let say on December 15 th on December 31 st we have to make a provision of 50 basis point on the entire loan book including the disbursements which we have made on December 15 th. So, that is why are provisions are higher and in fact we continue to have nil net non-performing asset (NPA) which is also unique feature.

Sonia: Can you give us the numbers on what the loans disbursed were this quarter? Last quarter it was around Rs 800 crore or so?

A: It is in the same range in this quarter also. Our loan book has almost reached Rs 6,000 crore.

Latha: Are you seeing demand?

A: It is a very interesting question; we have lately started focusing on renewable energy and within renewable energy solar and also wind energy. I am very confident the country is talking of 1,00,000 megawatt through solar energy by 2022. The type of interest we are seeing now not only from the existing players but new large players who have not been looking at this. I believe what happened in Jan-Dhan Yojana that instead of 10 crore accounts we have 11 crore accounts or even may be more I firmly believe that India by 2022 will not only cross 1,00,000 and I am seeing a dream that probably by that time India will become the largest solar producer in the world. That is one scenario to just give the figures suppose we do 1,00,000 megawatt in solar it is roughly about Rs 7 lakh crore of investment. If we do a 70:30 debt and equity so it gives a scope of something like Rs 5 lakh crore to domestic banks.

Latha: So your loan book will expect will rise because of solar projects?

A: Renewable both solar and as well as wind. In wind also the country is talking of 50,000 megawatt in next 5-7 years. It is fantastic business to be, I mean the country, is a sort of a rent once you set up a solar project your revenue is assured for 25 years that is the period which at which Power Purchase Agreement (PPA) are signed. The technology is such that nothing happens to a solar project for 25 year and sun is always there and India is such a fortunate country to have sunshine almost for 330 days.

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