power projects — Bedabehal in Orissa and Cheyyur in Tamil Nadu — the absence of bulk orders from public sector power generating companies NTPC and DVC have upset BHEL’s calculations. Also, a persisting lack of clarity on coal linkage for scores of private power projects — despite Coal India signing fuel supply agreements on a government directive — has hit the power equipment manufacturer. The latest hit is coming from a fall in demand for state utilities that has already pushed the country's peak power deficit levels to a low of 4% in the December quarter from a high level of 9% in the first quarter.
Domestic thermal power segment has traditionally accounted for three-fourths of BHEL’s revenue, with the other major contributors being transport and industrial equipment, refinery and piping. The current situation has once again pushed analysts to put BHEL in negative territory with expectations of a further decline in revenue and net profits in Q3.
“The situation could not have been worse as BHEL is not only seeing a decline in fresh orders but execution of earlier orders have also slowed down, resulting in lower supplies. While the company's performance is expected to be bettered in coming months, it would still be grossly underutilising its annual power-equipment capacity of 20,000 MW,” the company official quoted earlier said.
Interestingly, while order flows have slowed, the company has maintained the production target, achieving 92.5% of the Rs 26,818-crore projected for the first nine months of the current fiscal. BHEL had an order backlog (those yet to be executed) of Rs 1,02,300 crore as of September 30, 2013.
BHEL’s share in the Indian power equipment market is likely to be eroded further in coming years due to tough competition from Chinese equipment manufacturers and from a clutch of joint ventures like Alstom-Bharat Forge, Toshiba-JSW, L&T-Mitsubishi and BGR-Hitachi. A slew of large private sector power projects that have been stuck for long due to delays in statutory clearances and short supply of fuel are about to take off now, but BHEL could be left high and dry in many cases, industry observers feel.
BHEL’s sluggish order booking has come at a time when it is also facing problems in recovering money from the some of the power projects developers. As of June 2013, the company had unpaid dues of Rs 39,000 crore dues.
Deutsche Bank recently cut BHEL’s order inflow estimate for FY14 by