The scrip of Butwal Power Company is taking an upward trend while the critics are objecting the decision taken by SEBON in regards to the FPO issuance of BPCL. The company’s local bourse suggests that the investors are confident about the company’s performance however, the experts are still putting forward their opinion against the FPO issuance.
The current trend of BPCL shares:
The share price of BPCL has increased in the time span of one month (i.e. from Rs 625 on November 12, 2017 to Rs 746 on December 10, 2017). While the overall market is taking a bearish trend, the share price of BPCL are still rising. This rise can be attributed to two major factors.
The first factor deals with the new joint venture BPCL has undertaken in coordination with three major Chinese companies with shareholding structure of 20% by BPCL, 51% by Sichuan Investment Group Company Limited (SCIG), 17% by Chengdu Xingcheng Investment Group Company Limited (CXIG) and 12% of shares will be held by Qingyuan Engineering Consultant Company Limited (QYEC). This joint venture, named, International Nepal Hydro Joint Development Company Private Limited has an investment of Rs 1 arba 90 crore with the objective of generating 1000 MW of electricity. The initiation of this new venture might have instilled the confidence among investors in BPCL so; the investors are trading BPCL stocks in the highest amount.
The other reason can be attributed towards the approval granted by SEBON in response to the 4,081,000 units of FPO issuance request @ Rs. 501 per unit share of BPCL. It has been assumed that whether the company has issued IPO or not has not been looked rather being a listed company, BPCL must have issued shares to the public has been considered while providing the approval. With regulatory body’s trust in the company, the investors had one more reason to be attracted to the shares of BPCL.
The concern with FPO issuance of BPCL:
There have been two major concerns with the issuance of FPO of BPCL. The first concern deals with contradicting the directives of the regulatory body by the body itself. While the Securities Act, 2006 states that a company is required to issue an IPO before going for the FPO, the regulatory body does not follow the guideline in the case of BPCL. On the other hand, example such that of BPCL might demand the same from the other listed companies in the future and create bias in the approval procedure. Thus, this is one of the major reasons for the issue addressed regarding the FPO issuance of BPCL. BPCL might face risk of being sued by other companies if the laws are not followed properly.
The other major reason is attributed to the drastic increase in share price within a month. The overall market is seeing a downward trend, however, the shares of BPCL is seeing an upward trend with an increase in 19.36% in share price within a month. Thus, this has created doubts among major players in the stock market.
BPCL overview and its operation:
The history of BPCL is often considered to be different than the regular hydropower companies in Nepal. The company was established in 1966 by a Norwegian engineer Mr. Odd Hoftun with its central office located at Buddhanagar, Kathmandu. The fifty one years old company has an experience in the hydropower sector with several milestones attained in terms of commissioning Tinau Hydro Power Project (1 MW), Andhikhola Hydro Electric & Rural Electrification Project (5.1 MW), Jhimruk Hydro Electric and Rural Electrification project (12 MW), Khimti Hydropower Project (60 MW), Khudi hydropower project (4.2 MW), upgrading Andikhola Hydropower Project (9.4 MW) along with the implementation of Nyadi hydropower project (30 MW) and preparation of Manag Marsyangdi Project (100 MW).
BPCL has a number of projects under development which sums up to more than 100 MW:
The board of directors in BPCL consists of experts in the engineering field with professional expertise:
BPCL and its financial overview:
The paid up capital of BPCL at the end of Q1 as of 2074/75 is Rs 1.81 arba which is 7% more than the corresponding first quarter of FY 2073/74. The company has maintained 10% higher reserve and surplus (i.e. Rs 2.36 arba) compared to the first quarter of FY 2073/74. There is a 34% increase in the operating income of the company through the sale of electricity (Rs 21.11 crore). The annualized EPS of BPCL as of Q1 2074/75 is Rs 15.97, P/E ratio stands at Rs 40.20 and Net worth per share amounts to Rs 230.85.
As of Q1 2074/75, BPCL ranks third in terms of net profit among the hydropower companies in Nepal. As of 6
th December, 2017, BPCL has the third highest paid up capital among all hydropower companies. BPCL has fifth highest annualized EPS as of December 6, 2017 compared to all other hydro power companies.
BPCL has been providing satisfying dividend to its shareholders. In the FY 2072/73, the company provided 27% dividend to its shareholders which is the highest divided among the hydropower companies for the mentioned year. The details of dividend of BPCL are attached hereby with.
With the provided facts and figures, the investors can conclude that BPCL has been performing very well since its inception. However, the decision to provide FPO issuance approval by SEBON is still opposed by many. If SEBON takes back its decision, a well performing hydropower has to go through a series of complex legal procedures however, if the company is allowed to go forward with the decision, the experts, market players and other listed companies will remain in doubt about the regulatory body. What take do you have on BPCL? Do you support the decision of SEBON or not? Please feel free to comment below.
(Disclaimer: Any kind of information that is provided in the article should not be used as a sole advice or recommendation by investors in order to design their investment portfolio. So, before taking steps for any kind of the information, the investors are required to base their judgment on their own financial analysis, appropriateness of the information and seek independent financial advice. The information of the company has been taken from the authorized sources such as website of the company, NEPSE and financial reports of the company so, any changes not updated in these may differ in the analysis.)
