BSES to invest Rs 650 million in telecom subsidiary
BSES will be investing approximately Rs 650 million into its wholly owned subsidiary BSES Telecom. This will boost the equity from the existing Rs 50 million to Rs 700 million.
BSES is a company engaged in the transmission and distribution of electricity. It holds a licence to distribute power to the northern suburbs of Mumbai till 15th August 2011.It has a client base of 2.7 m customers. There has been a shift in BSESís profile from being a pure distributor of power to a generator of power with the setting up of a 500 MW thermal generation plant at Dahanu.
BSES Telecom has launched its Internet service provider recently. It has also entered into a joint venture with Hyderabad based Sriven Multi-tech for setting up Internet kiosks, which shall provide information and e-commerce services.
The main synergy to emerge out of the investment is that BSES Telecom would be able to use the optical fibre network of BSES Ltd. This will enable BSES Telecomís ISP service to by-pass the costlier telephone network as well as provide more of bandwidth to clients.
The fresh move comes as a diversification into the high growth areas of technology based industries. It is in line with most of the industry majors branching out into such areas. However this sector is expected to be overcrowded and extremely competitive, with more and more players vying for clientele.
The only flip side for BSES would be the diversion of funds from the electricity sector to the telecom sector, when the core business of transmitting and distributing electricity itself requires considerable investment.
Analysts have rated BSES as a ďBuyĒ on account of the recent diversification into Internet and telecom related areas, which is likely to boost itís bottomline. BSES has initiated a Rs 600 m automation plant with Siemens for itís entire distribution network across 48 sub-stations. This will lead to reductions in costs and boost the bottomline.
However some analysts are not positive on the stock as the power business of the company has not shown attractive growth.
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