BHEL sees decline in cash balance

Debt level of the company rose to 76% of net sales in 2011-12, up from 66% in the previous year

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India Ratings & Research (Ind-Ra), a part of the US-based financial rating Fitch Group, said cash balance of public sector capital goods company Bharat Heavy Electricals Limited had declined to Rs 3,000 crore in nine months ending December 2012 from respectively Rs 6,700 crore and Rs 9,600 crore in the previous two financial years.

"This is due to an increase in working capital cycles on account of lack of order inflows and consequently lower project advances coupled with delays in payments from some customers,” said Ind-Ra in a statement.

The debt level of the company had risen to 76% of net sales in 2011-12, up from 66% in the previous year. But liquidity position was considered comfortable with the support of customer advances, trade payables and cash balances. This comfort has weakened in the nine month period of 2012-13 with declining cash balance.

Ind-Ra has a long term issuer rating of Stable for the company. The present ratings do not factor in any support from the government of India (having ownership was 67.7% in BHEL).

“However, if BHEL’s standalone rating were to move lower than sovereign, support on account of the GoI ownership and its strategic importance can be incorporated into the ratings,” said the statement.