Title - Hit by BTG, Bhel seeks EPC, Metro boosters

Bharat Heavy Electricals Ltd (Bhel), state-owned capital goods company, is looking at engineering, procurement and construction (EPC) contracts and urban transport projects such as Metro rail to offset dwindling revenues from its mainstay boiler, turbine and generator (BTG) business.The company aims to double turnover to Rs1 lakh crore by fiscal 2017 from the Rs48,000 crore clocked in the last fiscal. “Bhel is diversifying into related and unrelated fields for increasing its turnover. Related activities such as strengthening its EPC arm will play a pivotal role in achieving the topline growth,” Ambuj Sharma, joint secretary, heavy industries and public enterprises ministry, told DNA Money.Last fiscal turned out to be bad for Bhel’s BTG segment as many orders got cancelled owing to problems crippling the power sector even as new orders slowed.Currently, Bhel executes EPC work of about 20% of projects in which it supplies BTG equipment.“It is aiming to raise that figure to 50%, and I am sure EPC will be the major revenue driver for the company in the coming years,” he said.Last fiscal, EPC division contributed around 20% to Bhel’s total revenue.Sharma said doubling the topline in five years is not an unrealistic target, which could be gauged by the past performance of the company.“Just three years back, Bhel had a topline of Rs26,000 crore, which it almost doubled in the last fiscal,” he said.

But analysts remain sceptical.

Nirav Vasa, research analyst, SBI Cap Securities, said the company bid aggressively for BTG contracts in the last fiscal. “Quality of orders and bottomline figures will determine the valuation of the company in future and not the topline,” he said. John Perinchery, senior analyst, Asian Market Securities, said the company is finding it hard to get new orders, and doubling the topline in five years is a very ambitious target.

Average per-megawatt investment for a power plant is Rs5 crore in a ratio of 60:40 between BTG and Balance of Plant (BoP). EPC comes under BoP head.

“So for achieving a topline of Rs1 lakh crore, Bhel has to execute both BTG and EPC contracts of worth 20,000 mw, which is a difficult task as we don’t see such type of huge annual ordering in India,” he said.

Moreover, three years back, Bhel was the only domestic BTG manufacturer, but now there are five private companies which have joined hands with foreign companies, while more than two dozen companies are operating in the EPC segment, he said.