Macquarie India Holdings Limited is selling over half of its stake in the public issue of PTC Financial Services that provides financing solutions (both debt and equity) to companies with projects across the energy value chain. Macquarie had co-invested with Goldman Sachs in PTC Financial Services in early 2008. Both the financial investors had brought in around Rs 77 crore each.

The two investors held 20% stake each initially that was diluted down to 11.2% after the parent firm infused further cash in the company in March 2009. PTC holds 77.6% in the finance subsidiary that will drop to 57% post the issue. Goldman Sachs’ stake will dilute to 8.2% while that of Macquarie will shrink to 3.28%.

A financial services arm of power trading firm PTC, the company plans to use the money raised through fresh issue of equity to augment its capital base besides meeting future capital requirements. PTC Financial Services has not declared how much it intends to raise but assuming it would like to ensure at least 25% markup to the issue price of shares to the financial investors, it would raise upwards of Rs 255 crore.

For the six months ended September’10, the company had net profit of Rs 25.5 crore, almost the same level as the year ended March’10. If the issue is priced at Rs 20 (that gives 25% return to Macquarie), at an annualised net profit for the current fiscal and at the expanded capital base, the company will be valued at a price to earnings ratio of around 23 that appears high compared to nearest industry peer Power Finance Corp that trades around 14-15 P/E ratio.

However, given its profile and strong financial backers, it could well be asking for a bigger premium at its maiden float. Given the spurt in new power generation projects to feed the requirement of growing industries, PTC Financial Services figures in a sweet spot to take advantage of future investments in the energy domain.

The company made its first principal investment in Indian Energy Exchange Limited (or IEX the country’s first nationwide, automated and online electricity trading platform) in December 2007, investing Rs 6.5 crore for 26% stake and has expanded the portfolio to eight companies aggregating to Rs 418.6 crore as of September 30, 2010. In September, it part liquidated its investment in IEX bringing down its holding to 21.12% for Rs 13.5 crore.

It has disclosed that, as of September 30, 2010,  its board has approved aggregate equity commitment of Rs 82.2 crore for four companies and committed aggregate debt of Rs 276.5 crore for 11 companies in the renewable energy sector.

On the debt side, PTC Financial Services disbursed its first loan of Rs 20 crore in March 2009 and has since then grown its loan as of September 30 to Rs 604.8 crore across 12 companies with projects representing 7,529 MW of aggregate power generation capacity. Its capital to risk-weighted asset ratio as of September 30, 2010 was 60.98% and return on average total assets in fiscal 2010 was 3.20%.

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