BGR Energy denies any stake sell to L&T-Mitsubishi

Analysts too ruled out such stake possibility leading to stock recovering to its normal

After the news of L&T buying stake in BGR-Hitachi JV share price of BGR Energy gained 20% to Rs 242 a share in intraday. However the company denied such move strongly. Analysts also believe that there is less probability of such action considering that the said JVs are currently having good order book and doing good business.

Also, in FY14 the JVs are expected to contribute to overall revenues of the company and the cash flows which should start rewarding the investments made by BGR. That apart analysts also said that these JVs are strategic for BGR in terms of its positioning in the power equipment segment and future business particularly in the light of increasing competition. No wonder, share price of BGR Energy dropped from the high and closed marginally below its previous day close to Rs 200.95 per share.

"We wish to inform all our stakeholders that the JVs with Hitachi are intact and we report ongoing business through these JVs. We wish to clarify the names of the companies and the equity held in the JVs which have been quoted wrongly by the financial daily, Mint in their report," says company in its press release.

Over the last couple of years BGR Energy has seen significant downgrades as a result of poor industry environment. The power companies have cut their order for the new equipments.

 

The ongoing projects are facing huge challenges, which is why the companies like BGR has been facing issues in terms of new orders and payments from the clients.

"BGR's working capital has seen severe deterioration over the past few quarters from 74 days in FY2010 to 166 days in FY2012, mainly due to high receivables owing to the retention money from SEBs such as RRVUNL and TNEB, which are facing high financial strain," says Amit Patil who tracks the company at Angel Broking.

Further, lower order intake and execution issues and higher working capital has compounded problems for BGR leading to higher debt in the books and liquidity issues. Under these circumstances, the market thought a stake sell could come as a big relief for the company. BGR Energy holds 74% stake in BGR Turbines Company along with 26% stake held by Hitachi Japan. Similarly BGR Energy also holds 70% stake in BGR Boilers remaining held by Hitachi Power Europe.