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Financial analysis of ITPCL, Cuddalore

Edition: July - September 2018


For any business to continue, management of its finances is one of the most important requirements. Managing the asset quality and debt structure shows the capability of the management to effectively steer the organisation.

The annual report of a company is the mirror of not only the financial health but also of how the management thinks and foresees the future of the company. This document is available freely for listed companies and can be found on the website of the Ministry of Corporate Affairs, for all registered companies.

The power sector is one of the most stressed sectors (as per RBI as of March 2018, scheduled commercial banks have outstanding dues of INR 5.65 lakh crores from the power sector). The recent reports from Pudhukuppam village (Harish, July 19, 2018, “A fishing village enveloped in the black dust”, regarding the pollution in that area (allegedly because of the coal-based power plant) and the financial crisis surrounding the Infrastructure Leasing & Financial Services Limited (IL&FS) group are the trigger points for this study.

The first target was to look into the business as a whole, their subsidiaries, source of procurement, logistics, shareholding pattern, debt structure, and long-term power purchase agreements.

Shareholding and Structure:

The flowchart below will clarify the holding company and subsidiaries of IL&FS Tamil Nadu Power Company Limited.

Company in Focus

ITPCL was incorporated in 2006 as a special purpose vehicle for implementing a coal-based power project in Cuddalore. Later on, IL&FS consolidated its energy business in all sectors (including solar) under the company name IEDCL in 2008. Phase I of the ITPCL project was to commission 1200 MW out of a total planned 3180 MW. Unit 1, with 600 MW capacity, was commissioned in 2015. The company entered into a 15-year Power Purchase Agreement (PPA) with Tamil Nadu Generation and Distribution Company (TANGEDCO) on December 12, 2013 itself. However, this agreement was only for 540 MW, which is 17% of the total planned capacity. Also, the price under this agreement was 20% less than their initial quote. The company went ahead and commissioned another unit of 600 MW in 2016, which until this month (Oct 2018), did not have a long-term Power Purchase Agreement (PPA).

As part of the backward integration, in the year 2011, ITPCL invested and hence acquired coal and logistics companies registered in Indonesia and Singapore respectively. 

The shareholding structure of ITPCL is simple, where IEDCL holds 91.38% and remaining 8.62% is held by AS Coal resource Pte Limited. Out of curiosity, we tried inquiring about this company. Interestingly this company is owned by a British citizen Mr. Jaimin Vyas and the website of this company reveals no other information either about him or the organization. When we called the phone number provided on the website, it did not connect. This lack of information raises questions about the shareholder and his company.

There is not much available in the public domain about the Seychelles-based subsidiary, Se7en Factor Corporation, apart from the fact that it is a marketing company. The actual operation of this company, sitting in a tax haven, is again a matter of further exploration.

Operational flow: 

  1. PT Mantimin Coal Mining (PT-MCM, Indonesia) is supposed to be the source of coal. The company, however, obtained a mining permit only late last year (December 2017).

  2. PT Bangun Asia Persad, a (PT-BAP, Indonesia), parent company of MCM, and an investment holding company.

  3. IL&FS Offshore Maritime Pte Ltd. (Singapore) transports the coal via sea from Indonesia to India.

  4. ITPCL (India) uses this coal for the generation of power.


Financials (FY’17 & FY’18) for these companies:

  1. Source of coal supply – PT Mantimin Coal Mining (PT-MCM, Indonesia)

If we look at the financials available, it shows that for the last three financial years, the company had a negative working capital. This means that the company has inadequate funds for even day-to-day operations and was dependent on loans for the same. 

The negative working capital condition has not shown any improvement in the last three years as is observed in Fig: 1. 


Fig: 1


Further, the debt condition has worsened by 9% CAGR in the last three years. Both short-term and long-term debts are increasing as shown in Fig: 2. 

Fig: 2

This means that the company is refinancing its debt and is kept alive by debt infusion alone, as its revenue from operations has decreased by 30% from FY’16 to FY’17.

  1. Subsidiary investment holding company: PT Bangun Asia Persada (PT-BAP, Indonesia)

Working capital for this company has also been negative for the last 3 years which is shown in Fig: 3. This clearly indicates that they are dependent on the parent company for meeting day-to-day expenditure.  

Fig: 3

One interesting fact that we found out while going through their annual report is that their current liabilities for FY’17 stands 309 times of current assets which was 277 times in FY’16. Short-term and long-term debts are shown in Fig: 4. It clearly shows 1% CAGR in short-term debt which indicates borrowings are increasing over years.


Fig: 4

  1. Transport of Coal from Indonesia to IndiaIL&FS Offshore Maritime Pte Ltd. (Singapore)

The working capital of IL&FS Offshore Maritime Pte Ltd is not only negative but also has gone down by 78% in FY’16 (as compared to FY’15) as is shown in Fig: 5. This significant increase in negative working capital indicates that the rate of increase in the current liabilities is much higher than the rate of creation of the current assets

Fig: 5

Although the short-term debt in FY’17 was nil, it has suddenly popped up in FY’18. There has been no reduction in long-term debt. This means, that the company is not able to financially service its day-to-day operations and hence forced to borrow for the same. 

The overall debt has increased by 49% over 2 financial years which is shown in Fig: 6.


Fig: 6


  1. The user of this Coal and Power Generation company: ITPCL

Working capital is continuously negative and has deteriorated by 27% from FY’15 to FY’17 which is shown in Fig: 7. The negative working capital indicates dependence on external funding for their day to day expenses.

Fig: 7

Although the power generation capacity has doubled from FY’16, the growth in revenue from operations is merely 10%. This means that either it is not utilizing the full capacity or selling the power from unit 2 at a very low price (might be even less than its cost of production, reference: The Annual Report for FY18 also mentions this, stating that “ITPCL faces losses due to lower power off-take”). The company has one long-term power purchase agreement (PPA) with TANGEDCO for 540 MW for 15 years from June 1, 2014, to September 30, 2028. 



ITPCL has now secured a contract with PTC India Limited to provide 550 MW for a period of 3 years, starting October 2018. This is expected to improve the power off-take.

Fig: 8

In the last 4 financial years, ITPCL’s debt has increased by Compound Annual Growth Rate (CAGR) 15%. This means that the company is refinancing its debt and is not able to grow faster than the rate of interest on its debt. 

Fig: 8 shows the change in both short term and long term debt for these years. In the last one year, the increase in short-term debt is 76%, which again shows that the company is even refinancing its short-term debt (the debt to be serviced in less than 1 year). The increase in long-term debt in the last one year is ~5%. These are indications that the organisation is not generating enough revenue compared to its investment and expenses, hence putting it under financial and operational stress.

In the last 3 years, the interest coverage percentage of ITPCL has decreased from 0.63 in FY’16 to negative 0.45 in FY’18. In simple terms, this means that the company is facing mounting losses. Fig. 9 represents the interest coverage ratio (ICR) for  FY’18, FY’17 and FY’16 of ITPCL.

Fig. 9

In FY’18, with both units functional, ITPCL faced a loss of 9% and a year-on-year profit/loss reduction of 14%. The profit for the company after tax was  Rs 146.37 cr for FY’17 and 172.2 cr for FY’16, which shows a clear decrease in profit margin. In FY’18, ITPCL made a loss of 238.0 cr. Fig 10 represents the profit/loss margin for FY’16, 17 & 18 for ITPCL.



  Fig. 10

In the last 3 financial years, the debt to equity ratio of ITPCL has increased from 1.94 in FY’16 to 2.10 in FY’18. Fig 11 shows the change in debt to equity ratio for these years for ITPCL in comparison to Tata Power (standalone basis). Negative debt to equity ratio of Tata Power indicates zero debt and high capital investment by the shareholder whereas in case of ITPCL it is positive which indicates more debt or borrowings in relation to equity or shares. 



Fig. 11


Despite ITPCL’s PPA at 20% lower than its initial quote for unit 1, unit 2 has been commissioned without signing a PPA. PT Mantimin Coal Mining (PT-MCM, Indonesia) which is responsible for supplying raw material (coal) is bankrupt and is kept alive by refinancing debt by IL&FS via different routes. IL&FS Offshore Maritime Pte Ltd. which transports the coal from Indonesia to India is under heavy debt and is continuously making losses and ITPCL itself is under heavy and continuously increasing debt without a credible source of revenue. All these confirm that the current assets and operations of the company are under stress and need to be consolidated instead of going for any fresh investment or expansion of the plant.






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