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BSES vs TEC: 1QFY01 reportcard - Views on News from Equitymaster
 
 
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  • Aug 7, 2000

    BSES vs TEC: 1QFY01 reportcard

    Its time to evaluate the first quarter results of the two major power utilities, BSES and Tata Electric Companies (TEC) vis--vis each other. Their results have much in common. For one, both companies reported healthy growth in their core business of selling electrical energy, compared to their correponding quarters' in the previous year (BSES-16% and TEC-29%).

    But both failed to translate this into profit growth, but for entirely different reasons. In case of BSES, its EPC (Engineering, Procurement and Construction), contracts and computer division income took a 77% hit. This deflated its profitability to a large extent. Another reason for this was a significant 45% jump in the cost of electrical energy purchased. As a result, its 1QFY01 bottomline declined, albeit by a marginal 1%.

    On the other hand, a huge 82% jump in fuel costs played spoilsport in TEC's bottomline growth. Its net profit in 1QFY01 grew by a marginal 5%. As a result, net profit margins of both companies declined. For BSES margins declined by 270 basis points and TEC's declined by 230 basis points.

    1QFY01 (Rs m) BSES TEC BSES/TEC
    Sales 5,879 8,663 67.9%
    Other Income 265 488 54.2%
    Expenditure 4,429 6,786 65.3%
    Operating Profit (EBDIT) 1,450 1,878 77.2%
    Operating Profit Margin (%) 24.7% 21.7%  
    Interest 176 581 30.2%
    Depreciation 475 512 92.8%
    Profit before Tax 1,064 1,273 83.6%
    Tax 200 446 44.8%
    Profit after Tax/(Loss) 864 827 104.4%
    Net profit margin (%) 15.9% 9.5%  
    No. of Shares (eoy) (m) 137.8 225.3  
    Earnings per share* 25.1 14.7  
    *(annualised)      

    But here the similarity ends. On the operational front, BSES turns out to be superior to TEC. Though BSES's operational income is almost 70% of the TEC, its net profit is more than TEC. This is because TEC's cost of funds (interest costs) are more than 3 times BSES.

    Both companies have intentions of making huge investments in the power sector, telecommunications and broadband services. But here, BSES's better operational efficiency track record will stand it in good stead.

     

     

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