BSES Limited, one of the foremost private players in the power sector, has logged in a 7% growth in its core business of selling electricity during 1QFY03. However, a staid growth in income from EPC, contracts and comptuer division resulted in a just over 6% growth in operational income. Lower other income was largely responsible for nearly 5% dip in bottomline 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
In terms of volumes, the company sold 1,588 MUs of electrical energy during the quarter (up 7.5% YoY). In terms of realisations, BSES sold these units at approximately Rs 3.90 per unit as compared to Rs 3.92 per unit in 1QFY02. Despite this, the company's operating margins more or less were steady at 22.3% during the quarter. Higher depreciation and lower other income (likely due to fall in interest rates) were largely the reasons for the dip in bottomline.
BSES had reported Rs 996 m as net profit last year for the June quarter. The company has restated its expenditure since then, by including Rs 118 m as tax on electricity, which was not accounted for during June quarter 2001.
Cost of energy purchased
Cost of fuel
Costs related to EPC and others
Tax on electricity
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. BSES has recently bagged 2 out of 3 distribution circles in Delhi recently. The company has invested in 51% each in both Central East Delhi Electricity Distribution Company Ltd. (Rs 592 m) and South West Delhi Electricity Distribution Company Ltd. (Rs 23,460 m) and has management control of both the distribution companies.
Moreover, the sword of the standby charges dispute hangs over the company. The company has so far deposited Rs 1,120 m with the MERC over stand by charges dispute with Tata Power (Rs 143 m in 1QFY03). 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, BSES had made a provision of Rs 950 m for certain future contingencies in FY02, which should negate the risk to some extent.
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 (nearly 39% stake) in the company, BSES is likely to achieve these targets, organically or inorganically.
Over the long term, growth will come through with capacity addition. At Rs 204 the stock trades at 8.3x annualised 1QFY03 earnings. BSES is a long term story and hence, is likely to see steady growth in line with its topline (capacity) improvement going forward.
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