Bharat Heavy Electricals Ltd (BHEL), the country's biggest power equipment company, has adopted a policy of forming joint ventures and concluding technical tie-ups for venturing into newer areas of business.
While parking of surplus funds in productive activities is one driver for the approach, attention on diversification and risk sharing seems to be the theme behind all such collaborations.
The company has a cash surplus of Rs 10,000 crore. It has floated joint ventures (JVs) and technical tie-ups or started preliminary exercises for entry into nuclear equipment, wind energy, specialised grade steel, transmission, transportation and water treatment businesses.
It has also adopted the collaboration route for its traditional power business. It has set up JVs with NTPC and the governments of Karnataka, Tamil Nadu, Madhya Pradesh and Maharashtra. The ones with the state governments are for power generation.
In another six months, the company will see some of its JVs taking concrete shape. "We are starting all these ventures, including a non-banking finance company, because we want to put our extra resources into productive use. If we put these resources in banks, it will give low returns," B P Rao, chairman and managing director, told Business Standard.
While most tie-ups are still in the pipeline, its JV with NTPC for power equipment, NTPC BHEL Power Projects Pvt Ltd, has taken off, with two projects being implemented. In the case of wind energy, BHEL does not plan to float a separate company but will have a business agreement with a leading foreign player in this segment. All other collaborations, including those for steel for which it has tied up with government-owned Steel Authority of India, transmission and transportation, will be through equity participation in separate companies. BHEL and Toshiba Corporation have signed a memorandum of understanding to explore the possibility of a JV for a transmission and distribution business in India and other countries, while with GE India, BHEL has joined hands for water treatment equipment.
In transportation, BHEL has signed with Alstom for participating in the tender for setting up a factory for electrical locomotive components at Dankuni, West Bengal, and with GE for participating in the tender for setting up a diesel loco factory at Marhowra, Bihar.