• JUNE 28, 2001

BSES: Power woes!

BSES Limited has declared a marginal 4.7% growth YoY in the FY01 bottomline despite a 15% jump in its overall turnover. A 43% jump in cost of electrical energy purchased to Rs 10 bn was largely responsible for the sluggish bottomline growth.

BSES buys almost half of its electricity requirement from Tata Power Company, which has seen its fuel costs escalate by 44% in FY01. Tata Power's cost of electricity production has gone up and consequently, the cost of power purchased by BSES has also gone up, in a vicious cycle.

(Rs m)4QFY004QFY01ChangeFY00FY01Change
Sale of electrical energy4,9214,849-1.5%19,47921,58410.8%
EPC, Contracts, Computer Service Income7041,697141.2%3,9065,28935.4%
Total turnover5,6256,54616.4%23,38526,87314.9%
Other Income323176-45.4%912758-16.9%
Total expenditure4,1275,21126.3%17,55121,60523.1%
Operating Profit (EBDIT)1,4981,335-10.9%5,8345,268-9.7%
Operating Profit Margin (%)26.6%20.4% 24.9%19.6% 
Profit before Tax 1,126941-16.4%3,9683,504-11.7%
Profit after Tax/(Loss)86698113.2%3,0683,2144.7%
Net profit margin (%)15.4%15.0% 13.1%12.0% 
No. of Shares (eoy) (m)137.8137.8 137.8137.8 
Diluted earnings per share (Rs)   22.323.3 
Current P/e ratio    8.4 

The company recorded 11% growth in sale of electricity (in value terms) in FY01. It was the significant 35% jump in BSES's EPC, contracts and computer service income that saved the day. However, in achieving this growth, the direct costs associated with this division rose by nearly 31%.

Power cost blues
(Rs m)FY00FY01Change
Cost of power purchased7,03510,05442.9%
Cost of fuel4,1613,936-5.4%
Staff costs1,0391,22718.1%
Cost of materials (EPC, contracts & computer services)3,4504,52031.0%

BSES's bottomline would have shrunk even more had it not been for the taxation benefits it received, which saw taxation provisioning decline by 68%. The company's efforts to reduce its debt servicing costs also aided the company post a positive bottomline growth. BSES has declared a dividend of Rs 4 per share for the year FY01.

The company's ambitious Saphale project in Maharashtra has made no headaway and therefore hinders BSES's future growth from sale of electricity. Given BSES dependence on Tata Power for its electricity requirements it has no real control over those costs.

Added to these, in the dispute of standby charges by the Maharashtra Electricity Regulatory Commission, BSES has deposited an adhoc sum of Rs 540 m on an annualised basis. The concern is that the company has not acknowledged this liability and has made no provisions towards it. One must remember that the decision in this dispute may not be in favour of BSES. The liability, if it arises would erode some value from its balance sheet.

At the current price of Rs 195 the stock trades at a P/E multiple of 8.4 times its FY01 earnings. BSES's results were in line with our projections. We had estimated a turnover growth of 14.5% as against the 14.9% growth achieved by BSES in FY01. In terms of net profit, our projections were little conservative at Rs 3,073 m as against Rs 3,214 m actually achieved.

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 (Research Analyst) bearing Registration No. INH000000537 (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, Canada or the European Union countries, 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 (Research Analyst)
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