India Inc owes BHEL `40,000 crore in debt

Delayed payments at company, which reported `50,015 crore revenues last year, have resulted in negative cash flows

Across India Inc, a cash crunch is hurting companies. Receivables at India’s biggest electrical equipment maker BHEL have piled up to as much as `40,000 crore at the end of 2012-13, up from `16,000 crore five years ago. The delayed payments at the company, which reported revenues of `50,015 crore last year, have resulted in negative cash flows. Indeed, it’s been a difficult year for India’s $25-billion electrical equipment manufacturing industry. Not only has industry-wide production shrunk eight percent in fiscal 2013, the first decline in a decade, cash flows across the sector have been squeezed as cash-strapped power producers scale back orders and defer payments.

The malaise is deeper. The Hyderabad-headquartered Lanco Infratech, too, has seen its receivables balloon to `4,658 crore at the end of March, up from `3,764 crore last year. The problem is no less serious at BGR Energy Systems where trade receivables have risen to `2,861 crore in March, 2013 from `2,616 crore a year earlier.

Analysts believe others like engineering firm ABB — whose trade receivables rose to `3,281 crore at the end of 2012, from `3,094 crore as of December 31, 2011 — too are in a spot. The firm’s finance Chief Amlan Datta Mazumdar, in a recent conference call with analysts, expressed hope that the receivables situation would improve soon. “I can confirm to you that our receivables are good; it is a delay on the part of our customers to be able to pay us, but we have no doubt in our mind at all that they are due and we will get paid,” Datta said.

In a recent note, investment bank JPMorgan said Siemens India was also hurt by project delays and liquidity pressures faced by customers. While the government is the biggest culprit, private players are also struggling to meet payments on time.

MS Unnikrishnan, MD & CEO at Thermax, said one of the reasons for the rise in receivables is certainly delays in payments by the government for various contracts across sectors such as water treatment or road building. “However, even private industry is now delaying payments because of two reasons. The first is a lack of availability of funds and second is that companies are withholding payments in order to boost interest income,” Unnikrishnan said.

In general, industry has seen a rise in receivables due to a shortage of liquidity. “This is directly related to the cash flow of customers. The other reason may be that customers are not taking delivery of capital goods due to low capacity utilisation levels,” Unnikrishnan said.

Tata Chemicals’ domestic business is facing a working capital crunch as a result of delays in fertiliser subsidy payments from the government. Delays in subsidy payments have resulted in some bills remaining unpaid since September, R Mukundan, managing director, Tata Chemicals, told reporters after the company reported fiscal 2013 results in late May.

The company’s subsidy payments receivable ballooned to `1,753 crore at the end of March, from the `1,166.73 crore it was owed at the same time last year. Tata Chemicals’ trade receivables, which includes outstanding subsidy payments, increased to `3,437.16 crore as of March 31, from `2,315.30 crore, a year earlier.

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