Disclosure: I have been following this stock and the progress of their products on Flipkart (BPL sells exclusively on Flipkart) for 3 months now. Allocation 25% of my portfolio. My average buying price is Rs 38.
Current Market Price: Rs 38.1, Market Cap: Rs 186 Crore, Debt: Zero.
Bit of History
BPL, which was once the market leader in the consumer electronics segment, especially televisions and telecommunications equipment, was a household name in India in the 1990s. Starting from its core of medical electronics, it expanded into consumer electronics, telecommunications, soft energy and electronic components, with peak group revenue of Rs 4,300 crore in the late 1990s.
BPL had technology co-operation agreement with Sanyo Electronic Company since the early 1980s. Post economic liberalisation in 1991 BPL faced increased competition from South Korean companies LG & Samsung. BPL managed to stave off the competition till late 90s, but started it feel the heat in early 2000s. The company also diversified into several businesses like healthcare, energy and home security systems. These in combination to a dispute within the family led to BPLās downfall. Read The Rise and Fall of BPL.
In a consolidation move, BPL entered into a 50:50 JV with Sanyo in 2004. From 2006 to 2007 Sanyo ran into financial troubles and incurred heavy losses. The JV failed and BPL got out of the consumer electronics business completely. Sanyo was eventually bought out by Panasonic.
Post this BPL concentrated solely on medical equipments and home automation products and solutions. BPL also had a small PCB (printed circuit boards) business, serving mainly as a supplier to LED and TV industry.
Hiving Off of Medical Technologies Vertical
BPL Medical Technologies was spun off into a separate company in 2013. In May 2013, Goldman Sachs purchased a 49% stake in the new company for ā¹110 crore (equivalent to ā¹131 crore or US$19 million in 2016). The report claims that the medical business is profitable but BPL suffers losses due to its legacy debt issues (acquired in 2000s when BPL also went through debt restructuring). So this deal was presumably to unlock value in the medical equipment business. Post this investment, BPL was left with a 20% stake in BPL Medical Technologies and technically it is now an associate company of BPL and not a subsidiary.
Agreement with Flipkart
BPL entered into an exclusive agreement with Flipkart for the sale of consumer appliances under the BPL brand. In July 2015 BPL launched LED TVs on Flipkart. The product range would gradually cover other home appliances products like Washing Machines, Air Conditioners, Refrigerators, Microwave Ovens, and LED / Solar Lamps. While BPL would take care of manufacturing, Flipkart would take care of logistics and customer service (through its subsidiary Jeeves). The exact details of how the revenue would be shared are not public.
Performance on Flipkart
Till June 2016 BPL sold 32 & 40 inch LED TVs, LED Emergency Lamps and small medical devices like pulse monitor and BP monitor.
Lets consider the performance of 32 & 40 inch LED TVs. The average rating on Flipkart is 4.3 and 4.4 respectively. Although the volume data is not public, BPL claims to sell between 8000-10,000 TV sets per month. However, even if you assume average selling price is 15k per unit, then quarterly sales should be Rs 48-60 Cr. But actual quarterly revenue is Rs 15 crore. So I am missing something here.
The products are fairly priced (lesser as compared to brands like Samsung and LG but more than low cost manufacturers like Micromax and Vu). These TV sets right now are apparently imported and assembled, according to this article
I take the number of ratings received on Flipkart as a proxy for sales. Assumption being => no. of Ratings directly proportional to sales. Here are the number of ratings for the 2 TV models. I am ignoring other products for now because their ratings are much lower.
No. of Ratings
-----------------------------
| | 32" | 40" |
|---------------|-----|-----|
| 6th Jun 2016 | 201 | 83 |
| 12th Aug 2016 | 499 | 221 |
So I think its fair to assume that BPL has more than 2.5 times their sales between June and August.
Sometime in late July/early August BPL launched washing machines on Flipkart. In August they also launched 24 inch televisions on Flipkart. The company had earlier claimed that they would expand their product portfolio before Diwali and it is staying true to this promise.
You can see the entire list of BPL products here: Flipkart
FY16 Results
BPL Posted Standalone Revenues of Rs 40 cr (up from Rs 24 cr in FY 15). Although the company suffered an operational loss of Rs 1.46 crores, it was helped by an other income of Rs 15 crore. The source of this other income is unknown. The company debited a sum of Rs 22.4 crore from deferred tax asset, and hence suffered a net loss of Rs 8.45 crores for the year. EPS: -1.73.
Q1 FY17 Results
Revenues Rs 15.8 cr, operation loss of Rs 0.1 cr, other income of Rs 54.6 cr and net profit of Rs 54.1 cr. The source of other income is unknown. EPS: Rs 11 (not annualised)
Positives
The company is debt free. The company is hopeful of a Rs 100 crore revenue this year and plan to increase it to Rs 600 crore in the next 3 years. Source this article. I think in terms of sales the company has progressed well in the past 1 year, and this yearās Diwali season would be crucial to the company.
Quarterly Revenue Trend
All Figures Are in Rs Crore
| | Jun'15 | Sep'15 | Dec'15 | Mar'16 | Jun'16 |
|------------------|--------|--------|--------|--------|--------|
| Sales | 6.4 | 10.0 | 10.7 | 13.2 | 15.8 |
| OPEX | 7.0 | 10.2 | 10.9 | 13.6 | 15.9 |
| Operating Profit | -0.6 | -0.25 | -0.15 | -0.4 | -0.10 |
| Other Income | 14.0 | 0.21 | 0.2 | 2.0 | 54.6 |
| Tax Expense | 0 | 0.16 | 25.4 | -2.9 | 0.04 |
| Net Profit | 13.5 | -0.37 | -25.5 | 3.9 | 54.2 |
As you can see the revenue is slowly and steadily increasing but the operating profit is not. Whenever the company has reported profits it has been due to other income.
Some Concerns
Source of Other Revenue?
BPL sees Other Income quite often in its earnings report. While earlier it could be linked to divestment in energy and medical equipment businesses, the reason for an exceptional Rs 54 crore other income in Q1FY17 is unclear. I dug through the ARs and quarterly reports but the source of this revenue is not very clear. I have emailed their investor relations team and I am yet to receive a reply. It has an indirect subsidiary BPL Power Projects (AP) Private Limited, which apparently operates a thermal power plant. Also, BPL still has 20% stake in BPL Medical Technologies. BPL could be getting dividend revenue from both these sources company. This is my best guess.
####Pledged Shareholding
Promoter shareholding is Rs 63.24%, most of which is pledged. A total of 50.94% of companyās shares, which are with the promoters, are pledged. About 4.86% of BPLās shares are held by 2 asset reconstruction companies.
Edit: The pledge on shares was released on April 12th 2016. Announcement 1 and Announcement 2.
####Contingent Liabilities
The company has Rs 65.35 crore worth of contingent liabilites. Of this Rs 20 crore are in the form of guarantees and balance in the form of unpaid & disputed taxes. Source: FY 15 AR
####Restrictions on Trading
In August 2014 shares of BPL were placed in the T group by NSE and BSE. In āTā segment no speculative trading is allowed and delivery of shares and payment of consideration amount are mandatory. The bourses said the decision is part of a surveillance review to ensure market safety and safeguard the interest of investors. Source: Moneycontrol. Not sure if the restrictions have been lifted.
####Preference Shares
About 16.9 crore Non- Convertible, NonCumulative 0.001% Preference Shares of 100/- each, were allotted on 23rd September, 2005, pursuant to the Scheme of Arrangement approved by the Hon. High Court of Kerala, Ernakulam. Out of which, 1.41 crore shares are redeemable in four equal instalments at the end of the 11th,12th,13th and 14th year and the balance of 28,34,000 shares are redeemable in ten equal installments commencing from 31st March, 2008. The Company is yet to redeem these preference shares and the amount outstanding as on 31st March 2015, was 22.67crores. Company is making arrangements for the redemption of the above and the same will be redeemed in due course. Source FY15 AR
I donāt fully understand the implications of issuance of these preference shares.
I invite other members to provide your comments, feedback on this post and on BPL in general.