New Delhi: All four state-owned power utilities that have a stake in PTC India Ltd have decided to exit India’s largest power trading company. Analysts say this could potentially expose PTC to a takeover.
While the decision will have to be approved by the cabinet, the companies have decided on the extreme step because they say PTC has redefined its mandate and diversified into areas where it competes with the utilities.
NTPC Ltd, NHPC Ltd, Power Grid Corp. of India Ltd (PGCIL) and Power Finance Corp. Ltd (PFC), together own a 16.32% stake in the trading firm. While NTPC and NHPC are in the business of power generation, PGCIL and PFC are in the power transmission and finance business. PGCIL, NTPC, and PFC are the original promoters of PTC. All four own an equal stake in the company.
Promoter concerns: PTC India’s Tantra Narayan Thakur.
H.S. Brahma, the Union power secretary, confirmed the development. “The government has to take a decision. It is not that simple and has to go to the cabinet for approval which will take some time.”
The utilities arrived at the decision at a Monday meeting of their chief executives called by the Union power ministry. Their position is that PTC’s entry into new businesses such as project financing, coal mining and power generation and transmission, will set it on collision course with them.
PTC is one of the main promoters of Indian Energy Exchange (IEX), and competes with the other two power trading exchanges, Power Exchange India Ltd (PXIL) and National Power Exchange (NPE). PFC has a 7% stake in PXIL; and PFC, NHPC and NTPC each own a 16.67% stake in NPE which is yet to commence trading.
“We have taken our decision. As the entire money belongs to the government, we need its nod. Unless the government does a rethink, we expect to divest our stake shortly. With the promoters withdrawing there is a risk of a takeover,” said the chairman and managing director of one of the four companies who attened the Monday meeting and did not want to be identified. The issue, according to this person, is that PTC isn’t working towards meeting “the objective with which the organization was created”.
Each of the four utilities owns a 4.08% stake in PTC. The remaining 83.68% is held by mutual funds (18.37%), insurance companies (13.02%), financial institutions and banks (4.64%), foreign institutional investors (31.03%) and the rest by the public. The company has authorized capital of Rs750 crore and the paid-up equity capital base of the company is Rs227.41 crore.
Tantra Narayan Thakur, chairman and managing director, PTC India, said he was “unaware” of Monday’s decision.
Problems between PTC and its promoters started when the former sought to become a complete energy solutions provider and set up PTC India Financial Services Ltd, to provide financial services to companies in any aspect of the power business. It has also taken a 20% stake in a joint venture with Athena Energy Ventures Pvt. Ltd which will develop, construct or acquire generation capacities, transmission and distribution assets, long- term fuel supply contracts, captive coal mines and associated infrastructure.
While this clashes with the interests of the four utilities, one of them—PGCIL—cannot be part of a power exchange because it is in the transmission business. “There are many issues here. One cannot ignore the promoters and take them for granted. The government will go by what promoters will say. They are taking our stand,” said a top NTPC executive who did not want to be identified.
The holding of the promoters in PTC has steadily declined: from 32% after PTC’s initial share sale to 21% after a share sale to institutional investors in early 2008 and 16.32% after another share sale to institutional investors in May.
PTC registered a net profit of Rs33.38 crore for the quarter ended 30 June on revenue of Rs2,372.52 crore. It posted a net profit of Rs90.83 crore on a turnover of Rs6,532.79 crore in 2008-09.
“This development might cause opportunities on the ownership part (an opening for a takeover) but I don’t think it will have much impact on the business part of PTC’s operations,” said a partner at a management consulting firm who did not want to be identified.
Shares of PTC rose 1.30%, to Rs89.45 at close on the Bombay Stock Exchange on Tuesday. The exchange’s benchmark index, the Sensex, closed at 15,074.59 points, up 0.43%.