Analysis: BPL Ltd

One of the companies that failed in the Consumer Electronics market due to lack of innovation on the part of the promoters is BPL Ltd. It is a classic example of how management energy fizzles out and the company starts charting dangerous routes for itself and its shareholders. We've picked some good companies in the past- to invest, as far as equity is concerned. So, this time, we thought, how about a not so good company. How about a company that has failed, for now- left for the vulture investors of the bourses. There would also be people who would've bought shares of this company when everything was fine globally, money was coming in, and people were betting on all kinds of things. BPL Ltd was one of those things then. It went up to 170 plus levels, and then when things got worse globally, and stock markets plummeted, the stock went down hard, to sub 20 levels, never recovering much and now trading in the thirties.

So, how would one approach such a company? Is this really an opportunity? Let's see.

Financial Performance - Weak
The company has been regularly posting losses. However, the sales are there and that's the plus and indicative of the company doing business. We won't consider the magnitude of the losses in our analysis, just because there's no point. The company doesn't have much interest expenditure, losses are due to increased general expenditure. Many of the loans that the company took were classified as Non performing assets, and were bought by ARCIL (Asset Reconstruction Company India Ltd).

Opportunities
The company is engaged in the industries of Telecom equipment, Healthcare equipment, Electric and Electronic equipment. The markets are huge, and a bull would be betting on the company taking advantage of these huge markets. The company has also entered into an MoU with the govt of Chhattisgarh for commissioning a 300 MW coal based power project in Chhattisgarh. The power project may take at least five years for operationalization. The company is yet to obtain necessary approvals, provisions for coal allotment, land, licenses, etc for the project. The company has been planning to enter the energy segment for quite some time, but it doesn't seem to have made any headway.

BPL was also recently in the news for a tie-up with an American diagnostics products company called Welch Allyn. BPL's healthcare division may manufacture and sell Welch Allyn's products in India. The company is also looking at PPP projects to boost sales, according to the news report.

Verdict
The bull has reasons to bet. A turn around here would mean stock prices going to levels of 150 plus. The company is generating the right news. If the balance sheet follows suit, this would augur very well for the investors. Our suggestion would be to put this on the watchlist. Wait for the next results if you're a cautious investor. Otherwise, there's no harm buying this stock at these prices if you're ready to hold for a really long time. For those who already hold shares of this company, there's no point selling if you do not need that money. If you require the money, go ahead an sell- the stock price won't be seen rising very quickly. Spurts in the stock price are not sustainable when the underlying financial performance doesn't keep up. Having said that, the coming years are crucial for the company. This may prove to be a multibagger.