After five consecutive quarters of revenue decline, PTC India Ltd reported a 16.9% growth in revenue, but there are questions about its sustainability as tolling projects get delayed and state electricity boards (SEBs) take time in clearing dues.

A new tolling project—where the company supplies the coal and sells the power produced—helped it arrest the fall in revenue in September. PTC India sold 8.9% more electricity in the September quarter from a year earlier. It was mainly because a new unit of the Simhapuri factory in Andhra Pradesh was commissioned under a tolling agreement and boosted volume by almost 300 million units.

Even though average margins for the trading business remained flat at around 4 paise per unit, thanks to the high-margin tolling business, where yields are around 80 paise per unit, PTC India was able to report a 29.7% jump in operating profit.

The stock has been underperforming the broader markets for some time now. For the stock to gain momentum, the company has to witness a structural improvement in receivables and volumes. Despite the talk of reforms, SEBs are excruciatingly slow in cleaning their books. This snail’s pace restructuring continues to weigh on intermediaries like PTC India. Trade receivables increased 20.5% over the past three months to 3,109 crore.

Uttar Pradesh, which owes the company 1,266 crore, is yet to begin payments. The state electricity commission has approved tariffs hikes for commercial consumers. However, PTC India is not sure when the payments will resume as it fears these tariff hikes will be challenged in the appellate tribunal, potentially delaying implementation.

The other headwind the company is facing is volumes. While electricity purchases by state utilities continue to remain subdued, the recent grid failures have made transmission companies wary about the strain on their networks. As a precautionary measure, transmission firms have begun keeping some idle capacity as a margin of safety.

The strategy is crimping grid utilization, thus impacting the volumes of PTC India. In the last six months, the company lost business equivalent to 1.5 billion units of electricity because of grid constraints. S.N. Goel, a director at PTC India, said in a conference call, “Trading companies as a result were not able to dispatch more electricity. Hopefully, new capacities will help us sell more."

Also, generating more lucrative tolling volumes will be a challenge in the near term as the second unit of the Meenakshi power plant in Andhra Pradesh, with which PTC India has a tolling agreement, is delayed and is now targeted to be commissioned by July.

Overall, PTC India has reported better-than-expected earnings for the second quarter. But the outlook continues to be plagued by uncertainty because of transmission constraints and weak SEBs.