BHEL: Critical issue

Bs_logoImage
Sunaina VasudevPriya Kansara Pandya Mumbai
Last Updated : Jan 21 2013 | 5:24 AM IST

Competition from multinational giants and new local players, besides Chinese suppliers, may affect order book

BHEL
BHEL has started feeling the heat of intense competition emerging in the super-critical turbine generator space. The Bharat Forge-Alstom, France (BFA) joint venture has emerged as the lowest bidder in the NTPC-Damodar Valley Corporation’s 7,260-Mw (11 units of 660-Mw each) supercritical turbine generator bulk tender. While NTPC is yet to award the final contract, BHEL will fulfil a part of the contract, according to the tender conditions, with the lowest bidder and the second-lowest bidder supplying five units and four units, respectively.

The outcome highlights the emergence of competition from multinational giants and new local players besides Chinese suppliers. With more players entering the space, capacities are expected to rise to 19,500 Mw (boiler) and 15,000 Mw (turbine generator) by 2013-14, in addition to BHEL’s 15,000 Mw in each segment.

Since L&T was disqualified in the NTPC-DVC tender, it is likely to become more aggressive. Also, other new players are now pre-qualified to bid for super-critical turbine generators. Thus, prospects for a player like BFA winning more orders are bright. This will affect BHEL’s order inflows, revenue growth, margins and superior return profile in the long term.

As a result, analysts have become wary of the outcome of the boiler package contract (11,660 Mw), where apart from BHEL and L&T, companies like Gammon-Ansaldo and BGR-Hitachi have been qualified. Moreover, NTPC’s next round of bulk tender of 5,600 Mw by the end of 2010-11 is also likely to see intense competition.

But, over the medium term, BHEL remains well-placed with an order book to 2009-10 sales ratio of 4.5 times and is set to witness robust order inflows led by bulk tenders and another 6,500-7,000 Mw from joint ventures between the company and state utilities.

Subscribe to Business Standard digital and get complimentary access to The New York Times

Smart Quarterly

₹900

3 Months

₹300/Month

SAVE 25%

Smart Essential

₹2,700

1 Year

₹225/Month

SAVE 46%

Super Saver

₹3,900

2 Years

₹162/Month

Subscribe

Renews automatically, cancel anytime

Here’s what’s included in our digital subscription plans

Access to Exclusive Premium Stories

  • Over 30 subscriber-only stories daily, handpicked by our editors

Complimentary Access to The New York Times

  • News, Games, Cooking, Audio, Wirecutter & The Athletic

Business Standard Epaper

  • Digital replica of our daily newspaper — with options to read, save, and share

Curated Newsletters

  • Insights on markets, finance, politics, tech, and more delivered to your inbox

Market Analysis & Investment Insights

  • In-depth market analysis & insights with access to The Smart Investor

Archives

  • Repository of articles and publications dating back to 1997

Ad-free Reading

  • Uninterrupted reading experience with no advertisements

Seamless Access Across All Devices

  • Access Business Standard across devices — mobile, tablet, or PC, via web or app

More From This Section

First Published: Oct 14 2010 | 12:19 AM IST