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March 15, 2011

PTC India Financial Services

IPO Fact Sheet
Issue details Issue opens Issue closes Issue size Offer size Face value Issue to public of which QIB portion Non-institution portion Retail portion IPO rating Price band

Objects of the issue

March 16, 2011 March 18, 2011 Rs407-439 crore 5.67 crore shares (incl. offer for sale of 2.92 crore equity shares) : Rs10 : 15.67 crore shares (incl. offer for sale of 2.92 crore equity shares) : : : : : 50% of issue 15% of issue 35% of issue 4/5 (Care) Rs26-28 per share : : : :

The company aims to augment its capital base to meet future capital requirements arising out of growth in business and to achieve the benefits of listing in the stock exchanges. Company background PFS, a company promoted by PTC India Ltd, was incorporated on September 8, 2006 as a public limited company. The business of the company is to make principal investments and provide financial solution to the companies in the energy value chain. The company gives financial assistance in the form of equity and debt financing. With focus on infrastructure development, it provides an integrated suite of services including provision financing and makes investments in private sector Indian companies in the power sector, including for power generation, equipment supply and fuel source projects. It also provides fee-based syndication and advisory services as well as carbon credit financing against certified emissions reduction (CER). The company is currently regulated by the Reserve bank of India (RBI) as a non deposit taking non banking financial company (NBFC) and it has been classified by the RBI as an infrastructure finance company (IFC). Key positives IFC status The company was classified by the RBI as an IFC in August 2010. The benefits of being categorized an infrastructure finance company are: Exposure of NBFCs to a single project or group is limited to 20% and 35% of their net owned funds. For companies which are classified as IFCs it is increased to 25% and 40%. Companies which are classified as IFCs are entitled to raise 50% of their owned funds from external commercial borrowings (ECBs) without prior approval from the RBI. IFC status enables a company to raise capital by issuing infrastructure bonds at comparatively lower yields.

PTC India Financial Services Ltd (PFS) is coming up with an initial public offering (IPO) of 15.67 crore equity shares of face value of Rs10 each. Of the total issue, 12.7 crore equity shares are fresh issue by the company and 2.92 crore equity shares are being offered for sale by Macquarie India Holdings Ltd. Post-issue, the shareholding of PTC India Ltd will fall to 60.0% from the current holding of 77.6%. The issue is priced at Rs26-28 per share, translating into 1.5x PFS book value at the upper end of the price band. An additional Re1 discount is being offered to retail customers. At the upper end of the price band PFS intends to raise Rs357 crore. It plans to use the proceeds to augment its capital base to meet future capital requirements.
Shareholding pattern Particulars Pre-issue No. of shares Promoter 337,250,001 Investors - GS Strategic 48,666,667 Investments Ltd - Macqurie India 48,666,667 Holdings Ltd Public 0 Total 434,583,335 % 77.6 11.2 11.2 100 Post-issue No. of shares 337,250,001 486,666,667 19,466,667 156,700,000 562,083,335 % 60 8.7 3.5 27.9 100

Sharekhan Ltd, Regd Add: 10th Floor, Beta Building, Lodha iThink Techno Campus, Off. JVLR, Opp. Kanjurmarg Railway Station, Kanjurmarg (East), Mumbai 400 042, Maharashtra. Tel: 022 - 61150000. BSE Cash-INB011073351; F&OINF011073351; NSE INB/INF231073330; CD - INE231073330; MCX Stock Exchange: CD - INE261073330 DP: NSDL-IN-DP-NSDL233-2003; CDSL-IN-DP-CDSL-271-2004; PMS INP000000662; Mutual Fund: ARN 20669. Sharekhan Commodities Pvt. Ltd.: MCX10080; (MCX/TCM/CORP/0425); NCDEX -00132; (NCDEX/TCM/CORP/0142)

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PTC India Financial Services

PTC relationship and brand The company is a subsidiary of and is promoted by PTC India Ltd. We believe that the synergies among the group companies provide PFS with early access to potential business opportunities. Equity and debt financing The company gives financial assistance in the form of equity and debt financing. Equity financing: The company makes strategic investments in companies in the energy value chain in India, including green field and brown field projects.
Equity investments No Company Status of the project Under development Under development Under development Phase I of 126MW commissioned. Phase II of 63MW under development NA Indfarm: 39.60MW commissioned. Phase II under development WTG Manufacturing facility Solar Farm 7 8 Varam Bio Energy Private Ltd PTC Bermaco Green Energy Systems Ltd Commercial operations commenced Under development Capacity (MW) 1320 700 900 189

The nature and extent of the participation in such companies vary in accordance with the requirements, opportunities and risks associated. As on December 31, 2010, the company has approved equity commitments for ten companies for an aggregate of Rs564 crore. As on December 31, 2010 the equity investments aggregated Rs418 crore. All the investments made by the company are in private unlisted companies and all the investments are being made solely for the purpose of earning profits by liquidating them in future and not for the sake of gaining management control. Also the company is in an agreement with PTC India Ltd that all projects where equity requirement is to the tune of Rs100

Total Equity Commitment (Rs cr) 133.4 105 99.7 55.6

O/s Investment (Rs cr) 125 105 60.3 55.6

Shareholding post equity commitment 8% 13.19% 15.47% 26%

Expected date of commercial operations Unit I- Dec 2013 Unit II- May 2014 Unit I-Jan 2012 Unit II- Mar 2012 Phase I-Dec 2011 Phase II-Mar 2013 Phase II - Mar 2011

1 2 3 4

East Coast Steel Energy Pvt Ltd Ind- Barath Energy (Utkal Ltd) Meenakshi Energy Pvt Ltd Ind- Barath Powergencom Ltd India Energy Exchange Ltd RS India Wind Energy Ltd

5 6

NA 99.45

6.9 53.9

5.8 53.9

26% 37%

NA Phase II - Nov 2011

NA 3 10 NA

7.4 9.8 4.39 6.6

7.2 4.4 1.4

37% 37% 26% 26%

Under development Under initial phase of development NA NA

Debt financing projects No. Particulars Capacity (MW) 1320 445 1200 420 NA 450 1320 54 10 10 Type of loan Term of loan (years) 16 3 1 11.5 5 12.5 12 10 10 9.75 Debt commitment (Rs cr) 120 100 90 120 60 75 31.9 39.2 17.3 16.3 Loan disbursed (Rs cr) 100 100 90 80 52.8 43.8 31.9 30 16.1 15.9

1 2 3 4 5 6 7 8 9 10

Thermal Powertech Corp (India) Ltd Konasena Gas Power Ltd Athena Chattisgarh Power Pvt Ltd Surana Power Ltd I Comm ele Ltd Bajaj Energy Power Ltd Jhajjar Power Ltd OCL India Ltd Amreli Power Project Pvt Ltd A.A. Energy Ltd

Long term Short term Short term Long term Short term Long term Long term Long term Long term Long term

Sharekhan

March 2011

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PTC India Financial Services

crore, the first right of financing will lie with PFS and if the capital requirement is above Rs100 crore, the first right of financing will lie with PTC India Ltd. Debt financing: The company is into fund based and non fund based financing including short term and long term financing as well as structured financing. The company also provides bridge loans to promoters for project financing. As on December 31, 2010, the company has approved debt commitments for 31 companies for an aggregate of Rs2,257 crore. As on December 31, 2010 the aggregate outstanding debt financing stood at Rs595 crore. Robust balance sheet growth The total assets, total income and profit after tax (PAT) of the company have grown at a compounded annual growth rate (CAGR) of 191%, 312% and 294% respectively over FY2008-10. The company has approved equity commitments for ten companies for an aggregate of Rs564 crore and has approved debt commitments for 31 companies for an aggregate of Rs2,257 crore. Fee-based and other services It provides various fee-based services including facility agent and security agent services, as well as advisory services such as techno-economic feasibility studies for power projects in India. In addition, it commenced carbon credit financing, which involves purchase of future certified emission reduction from power project developers for sale to third parties. Sources of funds PFS primary sources of funds include equity, term loans and non-convertible debentures (NCDs) issued by it.

Key negatives Dependence on PTC The company is a subsidiary of PTC and depends significantly on PTC for growing and supporting its business. In the event that PTC ceases to become a significant shareholder of the company and ceases to participate in the growth of PFS, then it will adversely affect the business of the company. Small size The company is significantly smaller in size as compared to other infrastructure finance companies like PFC, REC and IDFC. So the capacity of the company to fund larger projects with higher capital requirements is limited. Valuation The company has shown strong growth in the past three years of its operation. Having the brand name of PTC has also helped the company in gaining expertise in the power financing business. At the higher end of the offer price the valuations work out to 1.5x M9FY2011 book value (BV). The discount of 20-25% is justified given the much smaller size of operation as compared to other companies like IDFC (2x FY2011 BV) and REC/PFC (1.8x FY2011 BV). Almost 40% of the disbursements of PFS are in the form of equity investments while that of the other companies are in the range of 10-15%. Also since the companys operation is on a much smaller scale, return on equity (ROE) of the company is not strictly comparable with that of the other companies.

Sharekhan

March 2011

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PTC India Financial Services

Financials
Profit & Loss A/c Particulars Income From investments From interest - on loan financing - on fixed deposits Total interest received Interest and other charges Net interest income Other income Fee based income Income from sale of power Others Total income Administrative expenses Staff expenses Other expenses Depreciation/Amortisation Provision for contingencies Total expenditure PBT Tax Current tax Deferred tax Fringe benefit tax PAT -0.50 0.00 1.64 0.14 0.01 8.53 6.51 4.74 25.45 10.27 2.81 31.22 0.27 1.71 0.01 2.00 1.14 0.96 1.92 0.02 2.90 8.68 2.57 2.57 0.05 5.19 36.70 0.64 3.34 4.05 1.58 9.61 44.29 3.14 0.93 0.00 11.58 4.68 0.00 0.02 41.89 6.67 3.55 0.25 53.90 3.14 0.04 3.14 0.01 0.34 10.67 0.02 10.65 13.57 13.94 48.79 11.60 37.19 54.13 3.81 72.08 28.64 43.44 3.09 10.31 21.28 14.14 FY08 FY09 FY10 Rs (cr) 9MFY11 Balance sheet Particulars Share capital ESOP Reserves & surplus Net worth Loan funds Deferred tax liablities Current liabilities Provisions Total current liabilities Total liabilities Fixed assets Gross Block Less: Depreciation Net block Cap WIP Total Investments Loan financing Current assets, loans & advances Sundry debtors Cash and bank balnces Loans & advances Other current assets Total current assets, loans and advances Miscellaneous expenditure Total assets 0.10 0.30 0.00 0.50 112.33 408.70 0.70 0.70 410.10 630.18 0.00 11.80 4.80 251.10 959.04 0.40 66.40 29.70 5.00 101.50 1.90 1170.16 234.50 0.00 0.00 0.00 0.00 111.80 0.10 200.00 20.00 0.10 0.00 0.10 35.00 0.10 35.00 0.10 35.10 406.70 266.20 35.20 4.10 31.10 0.00 31.10 440.50 595.10 FY08 90.00 20.60 110.60 -0.50 2.20 0.00 2.30 112.30 FY09 434.60 0.10 174.70 609.30 20.00 -0.40 1.20 0.00 1.20 630.20 FY10 434.60 1.20 200.10 635.90 310.80 4.40 7.90 0.00 7.90 959.00 Rs (cr) 9MFY11 434.60 0.40 231.30 666.30 477.40 7.20 17.50 1.80 19.30 1170.20

The "views" expressed in this report are our views only and have been arrived at after analysis of the public offering details. This is not a recommendation under our "Stock Idea" category. It may/may not be included in the Stock Idea by our analysts at a later date.

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Sharekhan

March 2011