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BSES vs TEC: The 'Power' struggle - Views on News from Equitymaster
 
 
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  • May 6, 2000

    BSES vs TEC: The 'Power' struggle

    Tata Electric Companies (TEC) comprising Tata Power, Tata Hydro Electric and Andhra Valley is India's largest private sector power supplier (capacity 1,777 MW). Its clients are largely corporates. BSES by the way is one of TEC's biggest consumers.

    BSES on the other hand is one of the most efficient distributors of power in India. Its 500 MW plant at Dahanu (Maharashtra) generates 50% of its requirements in-house. It supplies power to retail consumers in the northern suburbs of Mumbai.

    Both companies are stalwarts in their own line of business. But with increasing convergence of services, their businesses have already shown signs of overlap. TEC is looking to build its own retail consumer base, while BSES has set its sights to become one of the largest generators of power in India.

    (Rs m) TEC BSES TEC/BSES
    Sales 20,608 14,558 142%
    Other Income 2,518 3,791 66%
    Expenditure 15,593 13,425 116%
    Operating Profit (EBDIT) 5,015 1,133 443%
    Operating Profit Margin (%) 24.3% 7.8%  
    Interest 1,469 666 221%
    Depreciation 1,517 1,416 107%
    Profit before Tax 4,549 2,842 160%
    Tax 1,471 640 230%
    Profit after Tax/(Loss) 3,078 2,202 140%
    Net profit margin (%) 14.9% 15.1%  
    Earnings per share* 18.19 21.30  
    (annualised)      

    *Figures represent nine months Dec ended 1999 consolidated results

    While TEC's turnover and net profit for the nine month period ended December 2000 is clearly ahead of BSES, it lags behind BSES in terms of its debt servicing management (interest burden) and EPS. Though both the companies are yet to announce their FY2000 results, but these nine-month results should provide sufficient indicators to their FY2000 performance.

    TEC has been losing ground on the bourses and BSES is a favourite of fund managers. You can buy 1 share of TEC (all three companies consolidated) at Rs 115 approximately, and a share of BSES at Rs 250 approximately. This discrepancy in valuations has crept up quite recently, with the investors according BSES tech valuations owing to its Internet plans.

    But prudent investors who have already witnessed volatility in technology stocks might just take a second look at TEC.

     

     

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