BMTC has postponed its Rs 750 crore IPO for the time being due to volatile market conditions. But its never too late to look at their plans. BMTC had submitted a Rs 3000 crore plan tothe center under JNNURM to "modernize and expand its network to meet the public transport demands of a growing city.". The plan is (source: Livemint) "to raise money from the public to add luxury buses on newer routes".
Going by the year old LiveMint article, BMTC certainly has a good image:
- only profitable public transport company in india
- earned a profit of Rs224 crore on an income of Rs887.59 crore for the year to March 2007
- employs around 6 people for each bus, as against 10 people per bus at the loss making BrihanMumbai Electric Supply and Transport Undertaking (BEST).
Now, as per another news sources (Hindu), here is how BMTC plans to use this money:
The capital raised from the IPO is to be used for fleet acquisition, including buying 1,000 Volvo buses, 500 other buses (for “Suvarna Karnataka Service” that will have no standing passengers), bus shelters, and other expansion plans of the corporation
Now, for me as an investor, I need two critical pieces of information before rating this IPO.
- What is BMTC's track record in modernization efforts? To be more specific, how are their Volvo services faring (overheard - not good)? How are their Suvarna services doing (overheard - okay)? How much investment do these bus shelters need, and do they have the required jurisdiction to design bus shelters (we know via some recent news sources - BBMP is building bus shelters for BMTC, and they are running late).
- Using public money is a good idea - adds the pressure of performance to BMTC. But I wonder if the present tightly monopolized setup guarantees that the public money will be put to the best use. Perhaps the monopoly is required to ensure the success of this IPO - we will have to use BMTC for lack of choice. But if public transport sector in Bangalore is opened for competetion later on, will that be akin to cheating those will buy into the BMTC IPO today?
I wish BMTC all the success, so don't get me wrong. But success of BMTC as a public entity, and with the shield of monopoly, is first in making sure it can carry 50% of city's commuters on its buses. Whether it makes money or loses some, that comes next (sorry to say this, but a public body exists for service first, profit later). And thus, its financial restructuring requires a closer scrutiny from us - the people. I was not sure if that is happening today, and thats why this post.