Financial Daily from THE HINDU group of publications
Wednesday, Jan 12, 2005
`BHEL aims at Rs 12,500-cr turnover by 2006-07'
Mr C. Srinivasan, Director (Finance), BHEL
New Delhi , Jan. 11
Bharat Heavy Electricals Ltd (BHEL) is one of the largest engineering and manufacturing enterprise in the energy and infrastructure sectors.
The state-owned company manufactures over 180 products under 30 major product groups and caters to core sectors of the economy, including the power generation and transmission, industry, transportation and telecommunication segments. The company has been earning profits continuously since 1971-72 and paying dividends to shareholders since 1976-77.
Mr C. Srinivasan took charge as Director (Finance) of BHEL in March 2001. In an interview with Business Line, he shared his insights into the company's future plans. Excerpts:
The year 2003-04 saw BHEL's turnover grow nearly 16 per cent and profits zoom 48 per cent. What are the targets that you have set for the current fiscal? Can you share some of the financial targets that you have set for the current Plan period?
BHEL, like all public sector undertakings, is required to sign a memorandum of understanding (MoU) with the Government of India every financial year. In the MoU, we have to furnish performance targets for the financial year. In 2003-04, we had a turnover of Rs 8,652 crore. For the current fiscal, we have to achieve a turnover of Rs 9,000 crore in order to qualify for a `very good' rating under the MoU targets. To qualify for `excellent' rating, we have to achieve a target of Rs 9,450 crore. Since we have been continuously qualifying for `excellent' ratings in the past, we would therefore strive to exceed the Rs 9,500-crore-turnover target during the current fiscal.
What proportion of the revenues is targeted from the industry and power segments during the current plan period?
At present, the power sector accounts for roughly 65 per cent of the turnover, while 35 per cent of the turnover is accounted for by the industry segment, which also includes the captive power plants business. Going forward, we expect the power and industry segment business to be in the 75:25 ratio.
Can you throw some light on the company's `Strategic Plan 2007' and the implementation of the same?
The Strategic Plan was put into action in the year 2001-02. At that time our turnover was around Rs 6,000-odd crore. The plan aims at achieving a turnover of Rs 12,500 crore by the year 2006- 07. We are well on course for meeting the `Strategic Plan' target. Last year, we achieved a turnover of Rs 8,652 crore and our outstanding order book position was upwards of Rs 30,000 crore. The plan also sets targets for managing inventory, working capital, among other things.
The company has recently announced an investment of around Rs 900 crore in existing plants. Where are the funds being used and for what purpose?
With the orders increasing considerably in the last few years, we decided to upgrade our existing facilities to cater to the increased demand, particularly in the power sector. The move to invest about Rs 900-1,000 crore entails adding capacity, wherever possible, and modernising the facilities at our existing plants. The money would be used over the next two years for expanding capacities to meet requirements of Eleventh and Twelfth Five-Year Plans.
We envisage there would be no need for greenfield investments in the near future, once the capacity augmentation drive is through.
Last fiscal, your export orders spanned new and diverse products including `fabric filters' and `electro static precipitators.' What proportion of overall turnover is expected to come about through exports in the future? Can you share some broad targets?
We set targets for both our project as well as product exports. In both categories, we have been adding at least one new product and one new destination in our client list every year. During last year, we added new destinations such as Indonesia, Taiwan, and Thailand. The export business is growing fast and till about last fiscal we had an outstanding export order book position upwards of Rs 1,300 crore.
Can you talk about new and emerging business areas?
New business areas in the power sector such as the captive generation has sprung on account of the delicensing of captive generation in the Electricity Act.
We have bagged some big orders, including a Rs 700-crore order from the Indian Oil Corporation. We have also got orders for captive sets from Hindustan Zinc Ltd and the Jindal Group.
Can you share some details regarding the proposed public offer?
The decision on the issue is purely in the domain of the Government of India, by virtue of it being the majority shareholder. The company comes into the picture only when the final decision is taken on such matters. So, it would not be proper for me to speak on the matter.
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