BHEL expects good days post elections

Much hinges upon the expected Rs 1,000 cr orders

Navratna company Bharat Heavy Electricals Limited (BHEL) is expecting a turnaround post elections. The company suffered this year as the power sector had been badly hit by shortages of coal and gas supplies, delays in environmental approvals for power projects and drying up of funds.

The company, which has seen its profit go down by almost 50%, is expecting the new government to render some succor by forming a favourable policy that would generate more orders, particularly from railways, solar power projects and oil companies.

The UPA-II government had announced new projects particularly in Railways but none could take off. As a result, BHEL, particularly its mother unit in Bhopal, received no business.

Bhopal unit of BHEL makes turbines, transformers, motors and switchgears. The company, according to highly placed sources, is expecting business from nuclear turbines, switchgears (mainly used in railways), AC motors and industrial motors once the new government is formed. Also, it would see a boost in its business from oil companies.

“BHEL Bhopal clocked Rs 100 crore in making electronics for Indonesian oil-rigs this year. More business is expected this year,” a well placed company source said.

The total turnover of the company, against last year’s, has been revised downwards and according to the source, has been set at Rs 48,000 crore. BHEL’s turnover declined to Rs 40,366 crore from Rs 50,156 crore in 2012-13, as per a regulatory filing on its provisional earnings for the year ended March 31, 2014.

BHEL is the largest employer in Madhya Pradesh and offers 7,000 direct jobs besides thousands of contractual workers. Though it has pruned nearly Rs 42 crore outsourcing jobs this year, a large number of workers yet get occasional jobs in the company.

“The company has capacity to touch Rs 9,000 crore turnover. And the next year’s target of Rs 5,000 crore business is not a tough task as Rs 4,000 convertible orders are already in hand yet policy issues matter the most. This year the company is expecting orders of Rs 1,000 crore or more from traction motors, industrial motors and switchgears,” a highly placed source in the company told BS on condition of anonymity.

The company this year suffered due to poor GDP growth as manufacturing sector suffered and faced a tough business environment.

“Manufacturing sector feeds BHEL by placing orders in industrial motor manufacturing but poor GDP growth hit the company hard. Yet the company would maintain its 60-80% market share in the segment,” the source further said.

Bhopal unit of BHEL clocked Rs 462 crore from traction motors, now it is poised to enter into AC Motors (alternate current). Against conventional DC Motors (Direct current), biggies like Railways are now demanding AC motors and Bhopal plant of BHEL is expecting more orders to come from Railways. Also a Mainline Electric Multiple Unit (MEMU) coach factory in Bhilwara may come up post elections. “This would churn business of Rs 500 crore or more,” the source said.

Among all its units BHEL Bhopal has maintained its business by pruning cost of operations and bringing down margins. “A total of Rs 350 crore input savings helped the unit a lot,” the source said.