India’s power sector is witnessing a new twist as NTPC Ltd, the country’s largest thermal power generator, has made a move to buy out co-promoters’ stakes in the troubled power trading firm PTC India Ltd. However, its proposal has hit a roadblock with NHPC Ltd, India’s largest hydropower producer, unwilling to let go of its stake despite previously distancing itself from the power trading business.
The Buyout Moves and Stalemate
Earlier this year, NHPC had dropped plans to buy out its co-promoters’ holdings in PTC India, citing that trading was not its core business. Soon after, NTPC expressed interest in consolidating promoter stakes under its belt. Yet, NHPC has now backtracked on its divestment stance, deciding to retain its 4.05% stake, which continues to provide healthy dividend payouts.
Each of the four state-run promoters—NTPC, NHPC, Power Finance Corporation (PFC), and Power Grid Corporation of India (PGCIL)—hold 12 million shares (4.05% each) in PTC India. NTPC had reportedly offered to buy out these holdings, but apart from its pitch, no further progress has been made.
The Dividend Dilemma
For fiscal year 2024–25, PTC India declared a cumulative dividend of ₹11.7 per share. This translates into a handsome ₹14 crore payout for each co-promoter holding 12 million shares. With such stable returns, NHPC finds little incentive to sell.
Adding to the appeal, PTC India has posted a robust financial performance. In Q1 FY25, consolidated net profit surged 61% year-on-year to ₹242.88 crore, compared with ₹150.76 crore a year earlier. The stock has also outperformed the broader market, gaining over 10% year-to-date against the Nifty 50’s 3.8% rise.
PTC India’s Troubled Past
PTC India’s ownership has long been under scrutiny due to controversies surrounding its finance arm, PTC India Financial Services (PFS). In 2022, allegations of loan evergreening and misgovernance led to regulatory probes. Subsequently, co-promoters considered selling their stakes and appointed ICICI Securities to manage the process, following a nod from the Ministry of Power.
NHPC initially showed interest in consolidating promoter holdings but dropped the plan. In its 2024–25 annual report, NHPC maintained ambiguity by stating it was “exploring options” around its stake, leaving the door open for either divestment or consolidation in the future.
Governance and Regulatory Clouds
The governance controversies deepened in 2023, when the Securities and Exchange Board of India (SEBI) barred PTC India’s then chairman Rajib Kumar Mishra and PFS’s ex-MD Pawan Singh over suspected lapses. Mishra challenged the order, and in December 2024, the Securities Appellate Tribunal (SAT) overturned SEBI’s ban on him. Even so, the PTC board decided not to reinstate him in leadership roles.
What Lies Ahead
The situation reflects the complex dynamics of India’s energy sector, where strategic interests, dividend yields, and reputational risks intersect. While NTPC’s ambition to strengthen its position in the power trading business remains clear, NHPC’s dividend-driven reluctance could stall any significant restructuring of PTC’s promoter base in the near term.
For investors, PTC’s strong earnings growth and attractive dividends are a silver lining against the backdrop of governance uncertainties. However, unless the promoters and the Ministry of Power align on a clear strategy, PTC India may continue to operate under a fragmented ownership structure, leaving its long-term direction unresolved.
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Disclaimer
This article should not be interpreted as investment advice. For any investment decisions, consult a reputable financial advisor. The author and publisher are not responsible for any losses incurred by investors or traders based on the information provided.