After Raghupathy, BGR Energy stares into void

Post the demise of its promoter, the Street is worried over the company's prospects and is awaiting clarity over the succession plan

The BGR Energy stock has lost 30 per cent after news B G  Raghupathy, its 59-year-old CMD, died on Sunday night. The Street has fears on succession plans and management of the operations. It fears lack of leadership could hurt performance in the interim.

Officials say there is an efficient set heading the company. The stock trades at three times earnings and 0.4 times book value based on FY14 estimates, far less compared to its own history and peers.

"They had recently inducted Raghupathy’s daughter in a management role, but all this happened unexpectedly. The stock has come to attractive levels. At about a Rs 500-crore market capitalisation, it is worth buying for a company with a consolidated order book of Rs 13,000 crore. Operationally, nothing is wrong. Once the new management will be inducted, the stock will get rerated," said Rabindra Nath Nayak, analyst, SBICAP Securities.

The last few years, however, were tough for BGR Energy. Its share price has corrected 80 per cent from its peak of Rs 950 in 2010 to Rs 77. In June, the promoters announced an ‘offer for sale’ representing 6.13 per cent of its equity for Rs 163 a share, when the stock was trading at Rs 200. But it failed to elicit sufficient response. The stock continued to slide.

Experts say under Raghupathy, the company grew rapidly from Rs 123-crore sales in FY02 to Rs 3,111 crore in FY13. BGR was among the first to quickly move into power equipment. In 2008, it got listed and raised funds to expand capacities. Its shift from balance-of-plant player to power engineering, procurement and construction helped unlock value and allowed it to undertake bigger projects. Raghupathy was the key person behind the joint venture with Hitachi to set up a boiler and a turbine manufacturing unit in Tamil Nadu, with an estimated investment of Rs 4,400 crore.

His strategic thinking, with contacts, proved useful. Though he is survived by wife Sasikala Raghupathy (non-executive director), a son and three daughters, analysts say his children are still young to play a large role.