ICRA Downgrades PTC India Financial Services Ltd’s Ratings

PTC India Financial Services Limited reported in a stock exchange filing that ICRA, the credit rating agency, has downgraded its long-term rating to ‘[ICRA] A-‘ from ‘[ICRA] A+’ with a ‘negative’ outlook. The short-term rating was also revised to [ICRA]A2+ from [ICRA]A1.

ICRA cited the downgrade of PTC India Financial Services (PFS) ratings due to a substantial decrease in its lending book, aggravated by ongoing challenges in fund mobilisation since independent directors raised concerns over corporate governance in January 2022. Moreover, audit qualifications for the fiscal year ended March 31, 2024, highlighted additional governance issues, including irregularities in meeting scheduling, delays in finalising meeting minutes, and inadequate information flow between the company and its board members.

Consequently, this downgrade is expected to impact lender confidence, potentially limiting PFS’s ability to raise funds and thereby moderating its loan book size. Despite these challenges, PFS maintains a comfortable capitalisation profile with a gearing ratio of 1.5 times as of March 31, 2024, and adequate liquidity supported by robust on-balance sheet funds.

Asset quality indicators for PFS remain a concern. However, there was a slight improvement, with gross and net stage 3% decreasing to 12.8% and 6.1%, respectively, as of March 31, 2024, from 13.6% and 8.0% in the previous year, driven by no new slippages and recoveries in FY 2024.

Given its modest competitive position in infrastructure finance, PFS has seen subdued profitability in recent years, reflected in average 3-year returns on assets (RoMA) and return on equity (RoE) of 1.8% and 6.6%, respectively, for FY2022-FY2024. The improvement in FY2024 was primarily due to reduced leverage, the absence of new slippages, and the resolution of some stressed accounts.

Looking ahead, PFS’s ability to expand its business volumes, control fresh slippages consistently, and secure funds at competitive rates will be critical for enhancing its credit profile. As of March 31, 2024, PFS’s outstanding loan book totalled ₹5,395 crore, down from ₹7,339 crore a year earlier, comprising investments in renewable energy (20%), thermal and hydropower (7%), transmission (21%), distribution (30%), roads (9%), and other sectors (14%).

On June 18, 2024, the share price of PTC India Financial Services Limited opened at ₹41.00, touching the day’s high at ₹43.85, as of 10:02 AM on the NSE.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.