 "BHEL to focus on EPC biz and expand product range for growth")
In order to face a double whammy of slow economic growth and aggressive competition, Bharat Heavy Electricals Limited (BHEL) is adopting a two pronged strategy to focus on EPC business and expand its product portfolio to increase its offering to the prospective customers. “Given the current business environment, particularly in the power sector, BHEL is focusing on increasing its value contribution in a shrinking market. Towards this, the company has been adopting a two pronged strategy; focus on EPC business and enlarging the scope of offer,” said B Prasada Rao, Chairman & Managing Director, BHEL, at the 50th annual general meeting of the company.
BHEL is expanding its portfolio by adding flue-gas desulphurisation (FGD), water management systems, air cooled condenser, and other balance of plant (BoP) systems. The company is fully harnessing its potential in the spares & services area, forging partnerships with power plant developers for UMPPs. Increasing level of indigenisation in supercritical technology, development of advanced ultra-supercritical power equipment, and introduction of state-of-the-art CFBC technology are major strategies in the power sector.
In international business, Rao said that BHEL is also exploring collaboration opportunities in target countries to grow exports business by forging opportunity-specific and market specific alliances to strengthen BHEL’s role as an EPC contractor in the international markets.
During 2013-14, BHEL has achieved a turnover of Rs 40,338 crore and a net profit of Rs 3,461 crore – a net profit margin of 9%.
Addressing shareholders, Rao said that, during the year, BHEL synchronised/commissioned all time high power projects of 13,452 MW which is the highest in a single year. This includes commissioning of 11,266 MW in utilities comprising 9 of 600 MW sets, 1,698 MW in captive/industrial sets, and 488 MW in the overseas markets.
CMD added that despite unfavourable externalities, BHEL secured orders worth Rs 28,007 crore from its diversified business segments viz power and industry covering both domestic and international markets. Despite severe market shrinkage and stiff competition in the power sector, BHEL increased its market share from 68% in 2012-13 to 72% in 2013-14 which includes highest ever mega EPC order worth Rs 7,900 crore for 3 x 660 MW supercritical units from NTPC for North Karanpura. At the end of the year, total orders in hand for execution in 2014-15 and beyond, stand at Rs 1,01,566 crore.
Rao said that financial year 2013-14 was the second successive year of sub-5% growth, though the economy marginally improved as compared to 2012-13, with GDP growth of 4.7%. Persistent inflation, high fiscal deficit and high interest rates have negatively affected the growth potential. The cutback in investments, slow momentum in infrastructure and energy sectors, delayed and stalled projects have also contributed to the performance that was below expectations. Investment and capital expenditure by the industry slowed down.
However, as the economy is expected to move at pre-recession levels in near term, the capital expenditure cycle could kick off in a big way in the next few quarters. This will improve business environment and BHEL will benefit from emerging opportunities, Rao added.
To address prevailing pricing pressures, BHEL is focusing on all round cost reduction measures in different areas of operations through competitive buying, supply risk mitigation, IT application, operations improvement, and better employee productivity. In new technology areas, focus is on indigenisation and development of Indian vendors, in addition to design optimisation, standardisation of equipment modules, reducing rework cost, enhancing performance parameters and de-packaging of bought-out-items & civil works, which are adopted across all business areas, he added.
BHEL is expanding its portfolio by adding flue-gas desulphurisation (FGD), water management systems, air cooled condenser, and other balance of plant (BoP) systems. The company is fully harnessing its potential in the spares & services area, forging partnerships with power plant developers for UMPPs. Increasing level of indigenisation in supercritical technology, development of advanced ultra-supercritical power equipment, and introduction of state-of-the-art CFBC technology are major strategies in the power sector.
In international business, Rao said that BHEL is also exploring collaboration opportunities in target countries to grow exports business by forging opportunity-specific and market specific alliances to strengthen BHEL’s role as an EPC contractor in the international markets.
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During 2013-14, BHEL has achieved a turnover of Rs 40,338 crore and a net profit of Rs 3,461 crore – a net profit margin of 9%.
Addressing shareholders, Rao said that, during the year, BHEL synchronised/commissioned all time high power projects of 13,452 MW which is the highest in a single year. This includes commissioning of 11,266 MW in utilities comprising 9 of 600 MW sets, 1,698 MW in captive/industrial sets, and 488 MW in the overseas markets.
CMD added that despite unfavourable externalities, BHEL secured orders worth Rs 28,007 crore from its diversified business segments viz power and industry covering both domestic and international markets. Despite severe market shrinkage and stiff competition in the power sector, BHEL increased its market share from 68% in 2012-13 to 72% in 2013-14 which includes highest ever mega EPC order worth Rs 7,900 crore for 3 x 660 MW supercritical units from NTPC for North Karanpura. At the end of the year, total orders in hand for execution in 2014-15 and beyond, stand at Rs 1,01,566 crore.
Rao said that financial year 2013-14 was the second successive year of sub-5% growth, though the economy marginally improved as compared to 2012-13, with GDP growth of 4.7%. Persistent inflation, high fiscal deficit and high interest rates have negatively affected the growth potential. The cutback in investments, slow momentum in infrastructure and energy sectors, delayed and stalled projects have also contributed to the performance that was below expectations. Investment and capital expenditure by the industry slowed down.
However, as the economy is expected to move at pre-recession levels in near term, the capital expenditure cycle could kick off in a big way in the next few quarters. This will improve business environment and BHEL will benefit from emerging opportunities, Rao added.
To address prevailing pricing pressures, BHEL is focusing on all round cost reduction measures in different areas of operations through competitive buying, supply risk mitigation, IT application, operations improvement, and better employee productivity. In new technology areas, focus is on indigenisation and development of Indian vendors, in addition to design optimisation, standardisation of equipment modules, reducing rework cost, enhancing performance parameters and de-packaging of bought-out-items & civil works, which are adopted across all business areas, he added.