Energypac Power Generation (EPGL) is at risk of going out of business with its finance cost persistently going up and revenue shrinking.
It bore half of its revenue as finance cost last year. Finance cost grew even further in FY25.
The company went into the red in FY22 and has shown no sign of recovery.
Meanwhile, its auditor has raised a red flag regarding the company's ability to continue as a going concern.
What caused revenue fall
Energypac used to earn nearly 40 percent of its revenue from power producing subsidiaries. But the company sold or disposed of the subsidiaries in FY23 as the government did not renew its power-purchasing deal with it.
So, FY24 saw that portion of the revenue diminished.
Managing Director and CEO of Energypac Humayun Rashid said they had been facing adversities one after another -- Covid-19, Russia-Ukraine war, rising interest rate, rising dollar rate, and then the political upheaval in the country.
Energypac Power Generation's revenue from selling LPG was cut to half in FY24, compared to the revenue earned in FY19 from the segment.
Amid the prevailing business climate, Energypac could not keep up with the competition in the LPG market.
Revenue from the building material division also decreased by 60 per cent between FY19 and FY24, revenue from the motor vehicle division fell 80 per cent and revenue from the power & energy division had been reduced by 43 per cent during the period.
"There was a raw material shortage. We were unable to open LCs after the dollar crisis had begun. On the one hand, we had difficulties in maintaining steady production for challenges in importing raw materials while on the other the overall demand was going down," said the CEO.
"Our product prices jumped due to the dollar price [higher exchange rate] and higher transportation costs," said Mr Rashid, adding higher prices discouraged customers from buying the company's products.
High interest burden
Despite the sell-off of the power subsidiaries in FY23, Energypac's liabilities increased in FY24.
In FY23, it had loans amounting to Tk 12.6 billion, according to the financial statement for the year. The figure rose to Tk 12.88 billion in FY24, causing finance costs to go up to Tk 1.2 billion in FY24 from Tk 1.1 billion in FY23.
It is not clear as to why the liabilities rose despite a squeeze in the business.
Mr. Rashid told The FE that finance costs had spiked because of the increasing interest rate.
The company is planning to borrow more. "We are currently collaborating with banks to secure funds. If we can obtain the necessary working capital, we have the resources and a favorable business environment to overcome the challenges we are facing," added Mr. Rashid.
Energypac declared no dividend for FY24.
In the meantime, investors experienced a 72 percent erosion of the investments in the stock of Energypac in the last two years.
On Tuesday, the share price of Energypac closed at Tk 12.70 each on the Dhaka Stock Exchange.
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