Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
BPL – The reward for priorities… - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Sep 28, 2000

    BPL – The reward for priorities…

    BPL Limited is among the top losers over the year in BSE National Index, in terms of market capitalisation. The erosion is a whopping Rs 10 bn! The share price has come down from a high of Rs 534 (27th September 1999) to Rs 138 currently. What could be the rational behind this large value erosion?

    BPL is the market leader with 26% share in colour television segment. It also manufacturers refrigerators, alkaline batteries (exported to Japan), home appliances and audio systems. In spite of sales growth slowing down from 38% in FY98 to 4% in FY00, operating margins have been faring well for three consecutive years (prices of colour televisions have halved in last three years). Since it is has gone for backward integration, BPL has a clear cost advantage over its competitors as almost 75% of its raw material requirements are met internally. Moreover, contributions from high-end digital products, in the sales mix, are on the rise (It has a range of colour televisions starting from Rs 8,000 to Rs 75,000).

    Consistent performance…
    (Rs m) FY98 FY99 FY00
    Gross sales 17,461 19,397 20,147
    % growth 35.7% 11.1% 3.9%
    Other income 27 8 3
    Gross profit 1,473 1,747 1,930
    GPM (%) 8.4% 9.0% 9.6%
    Depreciation 153 212 260
    Interest 424 404 485
    Profit before tax 923 1,140 1,188
    Tax 67 115 117
    Profit after tax 856 1,025 1,071
    NPM (%) 4.9% 5.3% 5.3%
    Number of shares 28 28 28
    EPS 31 37 39

    The reason for the erosion in value is that BPL is a conglomerate with diversified interest in various sectors including consumer durables, power, telecom, mobile telephony, Internet and home appliances. In fact, the company has floated separate companies for different joint ventures, though the core areas of these businesses are competitive in nature (for BPL). The list of companies includes BPL Sanyo Technologies, BPL Refrigerators, BPL Sanyo and BPL Engineering, to name a few. Added to the woes, these companies are losing market share steadily over the last three years.

    Market share FY97 FY98 FY99
    BPL Refrigeration (refrigerators) 13.9% 9.7% 6.9%
    BPL Sanyo Utilities (washing machines) 28.4% 15.6% 11.7%
    BPL Sanyo Technologies (audio) 14.1% 11.6% 10.3%

    Source: CMIE

    Valuations FY98 FY99 FY00
    Market price (Rs)* 142 534 139
    P/E 4.60 14.43 3.60
    Market cap (Rs m) 3,933 14,792 3,850
    Market cap/sales 0.23 0.76 0.19
    *price as on September 27th of the respective year

    Clearly, the group lacks focus. The ‘reward’ for this lack of focus is the huge erosion in market capitalisation. The best solution for the company is to move out these businesses and focus on its core areas through BPL Limited. Only then, investors would ‘believe in the best’.



    Equitymaster requests your view! Post a comment on "BPL – The reward for priorities…". Click here!


    More Views on News

    Sorry! There are no related views on news for this company/sector.

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    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: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 21, 2017 02:08 PM


    • Track your investment in BPL LIMITED with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks