Twitter
Advertisement

FirstSource, Spencer's bet starts paying off for CESC

Latest News
article-main
FacebookTwitterWhatsappLinkedin

A raft of positive triggers, all at the same time, is likely to fire up CESC Ltd's valuations.

These include expected completion of a major power project in Haldia and turnaround of two of its diversified investments Spencer's Retail and Firstsource Solutions

"We recently interacted with the management of CESC. Its core business of power generation and distribution in Kolkata would get a boost with the commissioning of a 600 mw power plant at Haldia in fiscal 2016, a 50% increase in its regulated power asset base. The performance of its subsidiaries, Firstsource and Spencer's, continues to be healthy. FSL continues to repay debts by generating adequate cash from operations while the store-level Ebitda of Spencer's is expanding gradually and Spencer's is selectively adding stores now, after two years of consolidation." brokerage firm Sharekhan said in a research report last week.

The report said concern over non-linkage of coal and the partial power purchase agreement for its Chandrapur power plant could recede as the coal linkage committee recently decided in favour of power plants that are ready to be commissioned but do not have coal supply assurance yet.

CESC currently generates four power stations, all in West Bengal, cumulatively producing 1,225 mw while arm Dhariwal Infrastructure Ltd's Chandrapur project in Maharashtra commissioned the first 300 mw unit in February, and the second unit is likely to get started soon.

While CESC's retail arm Spencer's projected turnaround may get delayed due economic slowdown, the retail business is taking all the right steps like cutting down its post-tax losses closing down unprofitable stores and earning store-level profits.

"Store-level Ebitda of Spencer's is expanding gradually and it is selectively adding stores now, after two years of consolidation," Sharekhan said.

Spencer's currently has 128 stores of different sizes across the country, but post the consolidation, it would invest mostly on the larger-sized hyper stores, now numbering 34.

"Hyper stores defined as clear focus area and 12-14 new such stores to be opened in fiscal 2015," CESC earlier said in an investors' presentation after March earnings.

"This will also help in fully leveraging both back-end and marketing costs. Apart from this, focus will be on improving the non-food business and in-store experiences," CESC has said in CESC's annual report.

For an outsourcing company, which got a fresh lease of life through a timely infusion of funds just as it was about to default on its FCCBs, there's new found confidence in Firstsource as debt levels are coming down and quality people are willing to join the company again.

"Firstsource is back in the game as the revamped senior team executes a well crafted turnaround through better revenue mix and tight control on operations. Improved profitability should help management continue with its commitment of repaying $ 45 million of debt every year and we expect near-zero debt balance sheet by fiscal 2017-end," Emkay Global said recently in a report.

"During 2013-14, we met our commitment on repayment of debts, broke operational silos, realigned the process and rationalised employee structure and costs. These restructuring exercises are expected to yield substantial benefits in fiscal 2014-15 as well," chairman Sanjiv Goenka has said in its annual report.

Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.
Advertisement

Live tv

Advertisement
Advertisement