A whole new vision for BHEL

It’s the season of change, change of managements from private conglomerates to government giants. With new management in place, new targets are being framed. India’s biggest capital goods company, Bharat Heavy Electricals Ltd (BHEL), is coming up with a whole new vision.

There’s no doubt that the power sector is the bread and butter for BHEL, but BP Rao, CMD of the company, has a vision to take the country’s No 1 state-run engineering and construction firm to greater heights.

To start with, he wants to revive the highly lucrative offshore rig business. BHEL eyes the railway locomotive business where it is set to graduate to a higher 6,000 horse power locomotives from the present 5,000 and has initiated talks with GE for a partnership.
The company is also gearing up to spruce up its technological capabilities through an inorganic route and is scouting hard for acquisitions in Europe. Meanwhile, BHEL has prepared a launching pad, from where it can propel its growth to new levels, especially in the power equipment sector with not only Indian but MNCs also reposing their faith, moving away from cheap Chinese manufacturers.

Building capacity

In fiscal 2008-09, Bharat Heavy Electricals further built on the growth momentum achieved in the year before, with a spectacular top line growth of 31 per cent and all-time high turnover of Rs 28,033 crore. Despite unprecedented increase in raw material costs, the company sustained its profitability and recorded its highest-ever net profit (PAT) of Rs 3,138 crore, which grew around 10 per cent over the previous fiscal.

During the year, BHEL recorded a surge in Economic Value Addition (EVA), which went up to Rs 2,008 crore from Rs 1,810 crore in the year before. A total dividend of Rs 832 crore—the highest ever, has been declared for 2008-09, which is 170 per cent of the paid-up capital (including an interim dividend of 90 per cent) as against 152.5 per cent paid for 2007-08.

Significantly, the company surpassed its own record set in 2007-08 by securing orders worth Rs 59,678 crore, the highest-ever in a single year, despite operating under intense competitive pressure in domestic and international markets. Utility orders amounted to 17,020 mega watt and industry sector order inflows crossed the Rs 10,000 crore mark for the first time. The confidence reposed by private sector customers is evident from the fact that Rs 13,320 crore worth of orders were placed on BHEL in 2008-09. With an order book position of over Rs 1,17,000 crore—the highest-ever both in physical as well as financial terms, at the close of the financial year, the company expects to achieve robust growth in 2009-10 and beyond, a company statement stated.

Outlining the trends in the global and domestic economies, the CMD said that the year 2008-09 has been a year of great turbulence—economically and politically and saw the economies of many countries on the brink of collapse with growth figures of many economies being revised downwards. The Indian economy, however, grew by 6.7 per cent in 2008-09 according to the revised estimates of CSO —better than most analysts had expected, but lower than the 9 per cent growth of 2007-08. The deceleration in GDP growth was particularly pronounced during the second half of 2008-09, largely due to the adverse impact of the global economic crisis. Industrial sector growth decelerated significantly to 2.6 per cent in 2008-09 from 8.5 per cent in the previous year, due largely to negligible or negative growth during four months in the second half of the year, he said.

Even in such an adverse business environment, he said that the company’s inherent strengths coupled with Government of India’s increased focus on building infrastructure continued to be a source of growth and competitive advantage. Major highlights of the year included the first-ever orders for 2x800 mega watt supercritical boilers, 2x660 mega watt supercritical turbine generator sets, steam generators for new rating 700 MWe Nuclear sets, and retention of 100 per cent share of the R&M market for thermal sets for the third successive year. The leading indicators of industrial production, both quantitative and qualitative, suggest that the recent downturn has been arrested and BHEL is optimistic about its long term prospects, said the CMD.

India has set an ambitious target of adding generating capacity of over 1,60,000 mega watt till 2017 which offers attractive business opportunities for BHEL. On the other hand, such a market scenario also attracts increased competition. Several Indian engineering companies are in the process of setting up power plant equipment manufacturing facilities in collaboration with global OEMs. In the near future, BHEL will face a competitive challenge but capacity and capability building steps taken in the past will set us apart from our competition, he added. Enumerating BHEL’s milestones in international business, he said that bucking the global recessionary trend, BHEL achieved a physical export order inflow of Rs 3,265 crore during the year—an increase of 41 per cent over the previous fiscal. The year marked significant steps towards globalization with successful forays in new markets and new product areas, apart from firmly establishing the company’s presence in existing export markets and areas.

BHEL continued to expand its international footprint by winning the largest ever export order of 2x200 mega watt Steam Turbine based Tishreen Thermal Power Plant from Syria on EPC basis and a long-term business tie-up in the form of a rate contract for 126 MW rated Gas Turbine generating sets with Petroleum Development Oman. Other highlights included entries in new markets of Rwanda and Senegal, besides an unparalleled achievement with the 18th consecutive order for transformers from PPC Greece, said the CMD.
On the performance of BHEL equipment, he said that BHEL-built power generating sets contributed 466 billion units of electricity—73 per cent of the total power generation in the country. BHEL-built thermal sets achieved an all-time high Operating Availability (OA) of 88.2 per cent with a PLF of 80 per cent —exceeding the national average efficiency parameters by 2.6 per cent. Significantly, all the 6 thermal power stations awarded with Government of India’s Meritorious Productivity Awards for excellent performance are equipped with BHEL sets, once again reinforcing the reliability and quality of BHEL equipment.

As part of R&D efforts, BHEL spent Rs 690 crore on R&D programmes, 40 per cent higher than the previous year and 2.46pc of its sales turnover. Technology development efforts undertaken by BHEL led to filing of 213 patents and copyrights, significantly enhancing the company’s intellectual capital.

As part of its continuous endeavour to develop more efficient products/technologies, BHEL is upgrading facilities for solar photo-voltaics to handle thinner and larger multi and mono-crystalline wafers. With this state-of-the-art facility, BHEL will be able to offer Solar Cells of 15-16% efficiency and PV modules-up to 270 W power output from 2009-10 onwards.

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