Star PSU: Bharat Electronics expands global presence to boost exports

BEL has ventured into new businesses such as arms and ammunition, medical electronic devices, and unmanned system platforms, says Anandi Ramalingam

Braving the pandemic blues and semiconductor shortage, navratna defence public sector undertaking (PSU) Bharat Electronics Ltd (BEL) ended the financial year 2020-21 on a healthy note, with a 9 per cent increase in net sales to Rs 14,109 crore and a 15 per cent rise in net profit to Rs 2,099 crore, compared to the previous financial year. The performance was commendable in light of the contraction in India’s GDP, the health crisis and the resulting lockdowns.

Its performance on various financial metrics — sales growth, profit growth, return ratios — and, notably, its achievements in its own line of business, is what earned BEL the “Star PSU of the Year” at the Business Standard Annual Awards for Corporate Excellence 2021.

Prior to the pandemic, in 2019-20 too, the company’s net sales rose by around 7 per cent year-on-year to Rs 12,968 crore. And a year after the pandemic struck, BEL ended 2021-22 with a turnover of about Rs 15,000 crore, according to provisional numbers, including export sales of $32.3 million, as compared to $51.9 million in 2020-21.

It has exported to the US, France, Israel, Germany, Switzerland, Sweden, China, Republic of Armenia, Maldives, Indonesia, Sri Lanka, Turkey and Bhutan in the last two years.

“BEL will continue to explore new growth opportunities through diversification, capability enhancement and competitiveness, and modernisation. BEL has ventured into new potential businesses such as arms and ammunition, medical electronic devices, unmanned system platforms, and is poised to make significant headway in these segments in the years to come,” the company’s officiating chairman and managing director, Anandi Ramalingam, has said.

What provides growth and predictability to BEL’s business is its order book. It was Rs 51,973 crore in 2019-20, about four times the then annual sales figure, and increased to Rs 53,434 crore in 2020-21. The order book was up another 7 per cent to Rs 57,000 crore in 2021-22.

Some of the major orders secured during 2021-22 were, “Avionics Pack for Light Combat Aircraft (LCA), Advanced Electronic Warfare Suite for Fighter Aircraft, Instrumented Electronic Warfare Range (IEWR), Electronic Voting Machine (EVM) and Voter Verifiable Paper Audit Trail (VVPAT), Radar Warning Receiver (RWR) and Missile Approach Warning System (MAWS), Electronic Gun and IoT Gateway, among others.”

In a step towards making the Indian Air Force future-ready, the company had signed a Rs 1,109-crore deal with the ministry of defence at the end of March 2022 for the IEWR. This technology in Atmanirbhar Bharat will be used to test and evaluate airborne electronic warfare equipment and validate their deployment in an operational scenario.

Moving in line with the Make in India initiative and the government’s efforts to boost micro, small and medium enterprises, BEL has lined up a long-term outsourcing and vendor development policy, too. This has put additional focus on domestic players as vendors and outsourcing partners.

“BEL is taking steps to increase the level of indigenisation through several measures. These include strengthening the technology development process through short, medium and long-term technology road maps, increased investments in R&D and setting up of a company-wide Knowledge Management System,” Ramalingam said.

Though the defence segment contributes round 80 per cent of the company’s annual revenue, the non-defence segment is slowly gathering momentum. Based on company estimates, the non-defence segment business opportunity is expected to be around Rs 2 trillion in the next 10-15 years.

In this segment, the major thrust areas for the company include the civil aviation sector, space technologies, solar sector, railways and metro solutions, cyber security, electric vehicle energy storage products and health care products, among others. It is this wide basket of products, and in growing sectors at that, that is likely to drive the company’s growth in the days ahead.

The metro segment itself has a potential market size of Rs 7,000 crore annually, while electric vehicles and solar segments are booming, owing to India’s ambitious green energy targets. The country has set a target of achieving a staggering 500 gigawatt (Gw) of renewable energy capacity by 2030, from around 100 Gw currently.

BEL’s non-defence segment reportedly contributes around 14 per cent of its order book. “The company aims to achieve and maintain revenues of about 25-30 per cent of its turnover from the non-defence business in the coming years,” Ramalingam said.  

In the defence segment, radar and missile systems, communication and network centric systems, anti-submarine warfare and sonar systems, tank electronics, gun upgrades, electro-optic systems, and electronic warfare and avionics systems are reportedly key growth drivers for the company.

To expand the overseas business, BEL has already opened marketing offices in Oman, New York, Singapore, Vietnam and Sri Lanka, and is working closely with Indian companies and local partners in several countries.

“BEL is fast expanding its global presence, putting its best foot forward to give a thrust to exports worldwide. All-out efforts are being made to tap new markets across the globe and develop new markets in the Indian Ocean Region and friendly foreign countries through overseas marketing offices. The idea behind these initiatives is to increase customer interactions and gain insights to develop customised solutions for these markets,” Ramalingam said, in response to questions from Business Standard.

The company expects the share of exports in sales to grow from around 3 per cent now to over 10 per cent in coming years. At present, the order book for exports is over $400 million. The country has set an ambitious target of Rs 35,000 crore in defence exports by 2025, and is making a strong policy push to achieve this, along with greater private sector participation.

According to a report by Morgan Stanley Research, Indian defence equipment production is expected to grow at a rate of 10 per cent annually between FY21 and FY25. BEL has already indicated that it may outperform industry growth numbers.

Going by this performance, its definite plans for the future and its potential for faster growth, BEL is a Star PSU by any standard, outshining its peers.