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Home News Power Sector News BHEL seen to be facing capacity under-utilisation

BHEL seen to be facing capacity under-utilisation

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BHELPublic sector Bharat Heavy Electricals Ltd today announced a plum order from Nabinagar Power Generation Company, but the news is at best of limited cheer.  The Rs 2,854-crore order for the supply of steam generators for three units of 660 MW may even "reinforce BHEL's leadership status", as a company's press release puts it, but analysts have noted that the company is set to face gross under utilisation of its capacity.

In a recent conference call with analysts, BHEL's management said that it expected order intake of Rs 30,000 crore for 2012-13. The company has an outstanding order book position of about Rs 1,13,700 crore at the end of the third quarter of the current year. However, this is seen as inadequate for a company of BHEL's size.

BHEL (which became a 'Maharatna' company a few days ago—a status that gives the public sector company a greater autonomy) has capacity to produce power equipment for 20,000 MW a year. "We see a huge risk of under utilisation of capacity owing to limited order pipeline," says an analysts report of Edelweiss Securities. "This could lead to a sharp dip in order inflows over the next two years, ultimately slowing revenue growth for BHEL," the report says.

Analysts have pointed out that domestic power equipment market could see placement of orders for about 15,000 MW in 2012-14. Also most of the order for the 12th Plan projects have already been placed and there is not much more to come in the coming years.

Furthermore, the private utilities are just not there. Any orders are coming from public sector companies such as NTPC, Damodar Valley Corporation, NHPCIL and the state electricity boards.

Analysts have also taken note of the fact that BHEL's cash position, currently at Rs 3,500 crore, compared with Rs 6,000 crore in the second quarter and Rs 5,000 crore in the third quarter of last year, largely due to "weak advances and weak payment recoveries."

Source- Hindu


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