BSES Limited, one of India's premier private utilities, has recorded a 3% growth in operational income during 3QFY02. A marginal dip in operating expenses saw margins improve and BSES finally finished with a 13% profit growth during the quarter.
Sale of electrical energy
Income from EPC, contracts & computer division
Total operating income
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy) (m)
Diluted Earnings per share*
Current P/e ratio
The company's income from EPC, contracts and computer division saw a significant 24% dip during the quarter, thus effecting overall turnover growth. The expenses relating to this division dipped likewise by 21%. However, the big saving for BSES in costs came in the form of lower cost of energy purchased from Tata Power.
Cost of energy purchased
Cost of fuel
Costs related to EPC and others
Surcharge on generation
On a nine month consolidated basis, BSES's operational income improved marginally by over 1% YoY, and its profits were up over 11%. A lower tax buden in the current year has saved BSES's nine month numbers so far. In the nine month period too, EPC, contracts and computer division recorded a 15% decline in revenues.
In these nine months (April-December 2001), BSES generated 2855 million units, up by nearly 7% YoY. However, it actually sold 4377 million units during the period, a growth of over 4% YoY. The shortfall in electricity (1522 MUs) is likely to have been bought from Tata Power. BSES's offtake from Tata Power has seen a marginal decline in 9m FY02, and this has resulted in cost savings for the company, thus improving operating margins.
Sale of electricity
Bought from Tata Power
The degrowth in EPC income during FY02 so far has hit BSES's growth. Another concern in the lacklustre growth in sale of electrical energy. BSES seems to have reached a plateau, as far as income from sale of electricity is concerned. Its Dhanau plant is working at optimal capacity, but beyond that there seems no scope for growth in Maharashtra atleast. The company's Saphale project is on a backburner. Its Orissa venture is in losses, atleast for the time being. It would take atleast 2 years for this business to break-even.
Moreover, the sword of the standby charges dispute hangs over the company. The company has so far deposited Rs 865 m with the MERC over standby charges dispute with Tata Power. It is slated to deposit another Rs 325.6 m with MERC in the fourth quarter of the current year. It must be noted that BSES has designated this total charge as deposits with MERC. If the ruling is not in favour of BSES, then it would have to write off these deposits, thus affecting future bottomline.
However, despite these short term negatives, the company has earmarked an ambitious Vision 2012. As per this, BSES is targeting an aggregate capacity of 9,000 MW by 2012. It is also looking at becoming a developer in at least three transmission circles and acquiring 6 distribution circles by 2012. Given Reliance's interest (over 30% stake) in the company, BSES is likely to achieve these targets, organically or inorganically.
So over the long term growth will come through with capacity addition. At Rs 198 the stock trades at 8.8x our expected FY02 earnings.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407