Surat Electric

Till Thursday the scrip would have qualified as gainer. On last tarding day of the week, the price fell by Rs 21.50.

The reason is that despite the issue of management control being clear with UTI deciding to sell its stake to Torrent, the scrip does not offer any fundamental value.

With the imposition of presidents rule in Gujarat, the possibility of Gujarat government selling its stake to Torrent which already controlled a sizeable equity was ruled out.

The uncertainty is now over. However, this distribution company is not very efficient. This is reflected in its T &D loss which stands at 15 per cent.

 

Surat Electricity is not a very liquid scrip. The highest traded volume in last one year has been 18,300 shares.

The company operates in a city which is not very amenable to price hike and very recently there were protests when the tariff was hiked.

The state government directive has forced the company to charge the same tariff as GEB.

In any case, power stocks due to the fixed returns are not fundamental buy. The efforts of the company to get a sanction from state government for its expansion plans have not yielded any results.

The company has not been able to earn formula returns. Against a reasonable return of Rs 7.09 crore, the clear profit is only Rs 3.07 crore. This is the fourth year in which company has not been able to earn formula returns.