According to news reports, BSES, one of India's largest power distribution and generation companies has pre-paid its entire loan outstandings to Indian financial institutions (FIs), with its latest payment of Rs 385 m. Last year, BSES had pre-paid Rs 440 m out of the Rs 1.1 bn loan it had availed for its 500 MW Dahanu project. With the latest pre-payment, the total amount pre-paid in 1998-99 adds up to Rs 1.5 bn. This will significantly reduce the interest burden on the company. Apparently, BSES has put its cash surplus to good use.
In 1QFY2000, BSES posted net profit of Rs 850 m (up 11.4% over 1QFY99). Income from EPC contracts continued to post strong growth, with 31% rise over 1QFY99. Interest expenditure was down 23% from Rs 32 m in 1QFY99 to Rs 24 m in 1QFY2000.
With interest burden already on the decline in 1QFY2000, BSES's prepayments of FI debt will enable it to cut interest cost even further, making it more cost efficient.
Lately there have been rumours that Enron is eyeing a stake in the company. This has fuelled speculative interest in the company's stock, which is primarily why BSES's market capitalisation has doubled over the last three weeks, from Rs 21.4 bn to Rs 31.5 bn!
Impressed with its cost efficient performance so far, and with every possibility of further improvement, analysts have recommended the stock as a 'BUY'.
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