PTC Financial Services (PFS) is facing pressure on its profile after consistent negative growth in the assets under management
(AUM) for three quarters, said rating agency Brickwork, while downgrading its debentures from “AA” to “AA-”.
The negative growth in the loan book of PFS, a unit of PTC India, is on account of funding challenges faced by non-banking financial companies
(NBFCs). This has resulted in curtailed disbursements, stressed asset quality because of high exposure to the power sector and lower profitability, given the higher credit costs.
The rating for PFS, an NBFC, continues to derive comfort from the strong parentage of PTC India, a diversified portfolio, comfortable capitalisation and adequate liquidity. Brickworks, in a statement, said the outlook on financial instruments was “stable”, indicating a low likelihood of rating change over the medium term.
It expected that the business risk profile of PFS would be maintained over the medium term, with an improvement expected in profitability and asset quality. Both would be supported by recoveries from non-performing assets (NPAs) and lower incremental slippages.
PFS is comfortably capitalised, with a total capital adequacy ratio (CAR) of 23.02 per cent as of December 31, 2019. The company has tangible net worth of Rs 2,112 crore and total debt of Rs 9,864 crore, resulting in a moderate gearing of 4.67 times. The company has adequate liquidity. As of March 20 this year, it had cash and cash equivalents of Rs 600 crore and unavailed bank lines of Rs 1,500 crore, against repayments of Rs 1,026 crore for the next three-four months.
The gross NPAs increased to 7.22 per cent in December 2019, from 6.04 per cent in March 2019. Also, net NPAs were up at 3.84 per cent in December 2019, from 3.12 per cent at March-end 2019.