Energypac Power follows familiar pattern - bright before listing, bleak after

Energypac Power Generation has joined the ranks of companies that share an uncanny resemblance in their way of doing business - a rosy picture painted before listing, which faded soon after, much to the dismay of investors.

Its profit fell 33 per cent in 2021 - the same year it was listed on the secondary market. The business has remained sluggish since then, according to annual financial statements, and eventually sank into the red in FY24.

Ironically, Energypac Power Generation received recognition as the "Most Innovative Power Engineering Company in Bangladesh" from UK-based business magazine Global Economics Limited in 2024, amid the downtrend.

Energypac, which claims to be one of the leading power engineering companies in Bangladesh, has blamed the Covid pandemic and the depreciation of the local currency against the dollar in every annual report it has published since listing.

 

But except for GBB Power, which reported a nominal loss of Tk 35 million for FY24, peers of Energypac have posted profits - some even reporting income growth in their latest earnings disclosures. GBB Power had earned a profit of Tk 111 million in FY23.

Other peer companies of Energypac include Baraka Power, Baraka Patenga Power, Doreen Power Generations and Systems, Khulna Power Company, Shahjibazar Power Company, and United Power Generation & Distribution Company.

Preferring anonymity, a senior official of IDLC Asset Management Company said the impacts of Covid and foreign exchange loss should have applied to all listed and non-listed peers of Energypac. "If Energypac alone incurs steep losses, that means its business has been failing," he said.

An analysis of the company's financial statements reveals that its loan burden is the key problem eating into profits.

At a time when the business was in its worst shape, the company took out fresh loans, causing term loans to soar 74 per cent year-on-year to Tk 9.49 billion in FY24. In that year, finance costs surged 94 per cent to Tk 1.24 billion.

There was no explanation given as to why the company borrowed or where it spent the money. However, subsequent financial results do not offer much hope for investors. The company reported a loss of Tk 207.85 million in the first three quarters of FY25 through March this year. The fourth-quarter results are still pending.

On the wide gap between financial results before and after listing, Md. Ashequr Rahman, Managing Director of Midway Securities, said many companies had shown a growth trajectory before going public so that they could secure a good valuation through the book-building method.

"Such valuation also helps companies get bank loans. But eventually, their real picture [business status] started to manifest," he said.

Mr Rahman also noted that the excuses of Covid and post-Covid impacts were not relevant in 2024 and 2025.

The FE correspondent tried to reach Company Secretary Md. Alauddin Shibly by phone repeatedly for comments but failed.

How is Energypac doing now?

Meanwhile, the company has failed to pay rent for a commercial space in the capital's Tejgaon area, used for archiving, since February this year, said a source requesting anonymity.

"The non-payment of such nominal rents indicates that the company is in a very tight spot," said a senior researcher at BRAC EPL Stock Brokerage, who also preferred to remain anonymous.

"Prudent management tries to reduce loan burden by collecting funds from low-cost sources," he added. "Many companies, including Renata, have issued bonds to repay bank loans in an effort to reduce the cost of funds."

According to Energypac's financial statement, loans and borrowings stood at Tk 12.87 billion in FY24 - equivalent to 80 per cent of its liabilities and 56 per cent of total shareholders' equity and liabilities combined.

While liabilities skyrocketed, annual revenue declined 48 per cent to Tk 2.80 billion in FY24 from the previous year.

Despite a year-on-year rise in revenue by 22 per cent to Tk 1.72 billion in the first half of FY25, Energypac failed to return to profit.

Its finance costs rose 37 per cent year-on-year in H1 FY25, while the cost of sales increased 33 per cent during the same period compared to a year ago.

This sorry state of the company was hard to predict from its five-year business performance shown in the prospectus it submitted with its application for listing.

mufazzal.fe@gmail.com