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Home News Power Sector News BHEL set to win a bigger pie of power equipment market

BHEL set to win a bigger pie of power equipment market

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BHELPower equipment maker Bharat Heavy Electricals Ltd (BHEL) has been facing headwinds for many quarters as the country's power sector undergoes a crisis of sorts. However, the state-run company has made huge investment in capacity expansion to keep itself ready for any revival in the economy.

In the last five years, BHEL has invested Rs 6,660 crore in building new factories and expanding existing units. The manufacturing capacity has increased to 20,000 Megawatts (Mw) per annum, highest among all power-equipment vendors in India.

In comparison, its main competitor, Larsen and Toubro invested around Rs 1,000 crore in expanding its machinery and industrial products division during the period. BHEL's other two competitors in the power equipment sector, Siemens and ABB, spent around Rs 1,000 crore each on expanding their manufacturing footprint during the period.

This puts the company in a favourable position to meet the demand once growth recovers and even grab market share from competitors. During the boom period, from 2005-06 to 2010-11, the company was short on capacity opening opportunity for its competitors. BHEL's market share in new orders declined to 41 per cent during the 12th Plan period from 49 per cent in the previous one. The gainers were Chinese vendors, which grabbed a third of the new orders during the 12th Plan against 22 per cent in the previous period.

Capacity addition ensures the company will not lose market share any more. Rather, it's likely to make some incremental gains, in the market share given its much bigger scale of operations. "The power sector is bogged with issues like coal linkages, environmental clearances and power purchase agreements not coming on time. If these problems are removed, we can quickly ramp up production given enhanced capacity of 20,000 Mw," Chairman B P Rao said after announcing the third quarter results.

Results are already visible. In FY12, the company's order inflow was 43 per cent higher than in the previous year, Rs 31,500 crore worth against Rs 22,000 crore in FY11. Dalal Street is, however, not convinced. Many analysts fear a price war in the power equipment space and fall in the capacity utilisation for manufacturers.

"With fewer projects on the anvil, competition remains intense and pricing irrational. This will keep BHEL margins under pressure due to severe price under-cutting to secure orders," Nirmal Bang Securities analyst Chirag Muchhala said in a recent report early this month. He, however, added BHEL could grab as much as 50 per cent of all new power projects being planned.

Source- Business Standard

 

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