Bharat Electronics Ltd (BEL), the public sector supplier of defence electronics to armed forces has reported a lower than expected financial results for fiscal 2010-11. Ashwani Kumar Datt, chairman and managing director, BEL, explained to Mahesh Kulkarni the reasons and also outlined future outlook. Edited excerpts:
How was your financial performance in the just-concluded fiscal 2010-11?
Our sales turnover (provisional) increased 6.3 per cent to Rs 5,550 crore in 2010-11 compared to Rs 5,220 crore reported in 2009-10. The estimated profit before tax is Rs 1,120 crore as against Rs 1,045 crore in the previous year, showing a growth of 7 per cent. We will announce our net profit numbers in June after the auditing is done. We are looking at a growth of 11.7 per cent in our turnover to Rs 6,200 crore during fiscal 2011-12.
While the turnover of BEL has been growing steadily over the last few years, your profitability is declining. What were the reasons?
The profit before tax is a concern for us as we have seen a decline over the last two years. This was mainly on account of the enhanced competition which forced us to reduce our product pricing and employee pay revision. One good aspect of this is that we have made a provision for wage hike for the next 10 years. The second reason is that we are getting lower revenues on account of competition from the private sector. We had to reduce our prices to be successful in the competition. Subsequently, our margins were hit. It is expected that we will find solutions to this issue going forward.
During fiscal 2010-11, you failed to achieve the turnover targets. What were the reasons for this?
Yes, it was mainly on account of the delay in getting some of the orders. We have about Rs 300 crore worth of products ready for delivery in the field of coastal surveillance system to the Indian Coast Guard. But, the order did not come. Another order worth Rs 100 crore for supply of missiles to Bharat Dynamics Ltd did not happen. The delay was mainly at various ministries at the government. Had these orders been placed, we would have posted a much higher turnover last fiscal.
What is the present order book position and what is the outlook for 2011-12?
BEL’s order book doubled from Rs 11,350 crore as on April 1, 2010, to Rs 23,600 crore as on April 1, 2011, showing a growth of 108 per cent year-on-year. During the present fiscal, we expect to get another Rs 10,000 crore worth of orders. Of this, already Rs 5,000 crore worth of orders have been finalised and the balance will flow in during the course of the year. While we have set a target of executing Rs 6,200 crore worth of orders this fiscal, the balance will be executed as and when the customers are ready to receive their products. Some of the orders need two years to get executed because after the trials, customers change the specifications and we have to make changes accordingly.
Which are the major orders you expect this fiscal?
We are waiting for the Army order for Akash Weapon System which will be integrated by Bharat Dynamics Ltd. We are also expecting an order for Coastal Surveillance System and communication systems.
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What were the major orders bagged by the company last fiscal?
During the year 2010-11, the company bagged order from the IAF for Akash Weapon System valued at Rs 3,619 crore, Battlefield Surveillance System from the Army for Rs 2,539 crore, Advanced Gun Fire Control System (LYNX U-2) for Rs 1,676 crore, 3D Tactical Control Radar for Rs 1,439 crore, Passive Night Vision Devices order for Rs 950 crore, Command Information & Decision Support System order for Rs 905 crore and National Population Register (Smart card) order for Rs 930 crore.
What is the present mix of turnover from defence and civilian market?
In the last fiscal-ended March 31, 2011, we achieved 80 per cent of our business from the defence segment. This composition will continue this fiscal also. However, we expect some big orders in the civilian product segment this year.
How has been your export performance last fiscal? What is the outlook for 2011-12?
On the export front, we registered a growth of 77 per cent from $23.65 million in 2009-10 to $41.89 million during 2010-11. During fiscal 2011-12, we have an export order book of $66.36 million including the offset order of $42.28 million. The target for this fiscal is $47 million.
What are the major initiatives and achievements in R&D?
Our strength lies in R&D. We are happy to announce a rise in our R&D expenditure year-on-year. The gross R&D expenditure for 2010-11 was Rs 350 crore, an increase of 11 per cent over the previous year. This year, we plan to spend around Rs 450 crore, which is about 8 per cent of our turnover. The turnover from indigenously developed products is 78 per cent. We have constituted an R&D committees for formulating technology roadmaps in our core areas. We have also formed a core design group for Microwave Super components and computing elements. A new D&E facility has been opened at Hyderabad unit for design and development activities in the area of electronic warfare systems.
What are the new business initiatives for the present fiscal?
We are in advanced discussions with Thales of France to form an Indian joint venture in the area of civilian radars and selected defence radars. We have had serious discussions with them and come to certain agreements. We would be forming the JV company sometime this year.
