Mumbai: Bharat Heavy Electricals Ltd (Bhel), the largest power equipment maker in the country, expects to close orders worth about $2.5 billion in the next 4-6 weeks as firms step up investment in the power sector, its chairman said.
“We have already negotiated prices, we are only waiting for their financial closure,” K. Ravikumar said.
The state-run company, which the market values at nearly $22 billion, is counting on private power firms to boost its order book as delays in bids and rising competition slow orders from the government, he said.
Bhel has orders on hand worth Rs1,30,000 crore. This includes Rs15,000 crore signed this year, with the private sector contributing 90%.
It hopes to get Rs55,000 crore of orders in the current year to March 2010. This could rise by Rs10000 crore if it gets part of a bulk equipment contract from NTPC Ltd, the country’s largest utility, expected to be awarded in January-March, Ravikumar said.
The company is expanding its capacity to meet rising demand and is also looking to new areas as competition from domestic and foreign players increase, Ravikumar, who is also managing director, said.
A reviving market for IPOs has sparked a flurry of capital raising by power companies this year, drawn by rising demand for electricity in a country that faces 12% shortfall during peak hours.
Last month, state-run hydropower generator NHPC Ltd raised $1.25 billion in an IPO and in July private sector Adani Power collected $630 million.
NTPC and Indiabulls Power are also waiting in the wings to launch share sales.
“We have seen a lot of resurgence of IPPs (independent power producers). It’s good that more money is coming into the sector,” Ravikumar said.
Bhel, in which the government holds nearly 68%, hopes to expand its revenue by at least 25% in 2009-10, but costs will come down by only 100-150 basis points against 200 basis points expected earlier, he said.
“The reduction in raw material costs has been lower because we are importing more finished assemblies, rather than making them here,” he said. “Despite this, we should get 30% profit growth.”
The company mainly makes turbines, boilers and generators and is expanding total annual capacity to 15,000 megawatt of equipment by March 2010 from 10,000 MW. This will further rise to 20,000 MW by December 2011.
It has spent Rs1200 crore so far on the expansion and has earmarked another 12 billion this year.
With competition rising from private and foreign equipment manufacturers, Bhel expects its market share to slip to around 55% in a few years from 65% now.
It is betting on new businesses that could contribute up to 30% of revenues by 2012.
“Transmission segment is something we are really keen on. We want to be present across the whole spectrum, to make equipment and substations and switchgear,” Ravikumar said.
The company is also close to finalising a manufacturing joint venture with a partner and has set aside Rs1,000 crore for equity, he said. He declined to name the partner.
Bhel has also recently received orders for manufacturing railway locomotives and oil rigs and is keen on expanding in renewable energy.
With cash reserves at about Rs10,000 crore, it expects to fund all forays from internal accruals, but Ravikumar said the firm could raise debt if required. He ruled out fund raising through share sales anytime soon.
“If we can pan out our investments over a number of years, we don’t need to raise funds. Money is not a problem,” he said.
Shares in Bhel, a favourite among foreign funds, have climbed 61% this year, in line with the benchmark BSE index.