New Delhi: India’s largest power equipment maker, Bharat Heavy Electricals Ltd, or Bhel, is aggressively eyeing an entry into locomotive manufacturing in an effort to tap Indian Railways’ expansion drive and is exploring partnerships with large global engine makers as well as the acquisition of an European firm that can provide it with technology.
“We are looking for a very active presence in the transportation sector. We also plan to manufacture locomotives and coaches. In order to get the technology for it, we are in talks to acquire a European company,” said a senior Bhel executive who did not wish to be named.
The executive declined to name the company, the country it is based in, or even the size of the deal-in-the-making, citing competitive considerations. “Our team is there to evaluate the deal. We hope to conclude this (acquisition) in the second quarter,” the executive added.
Business prospects: Power sector analysts say locomotive manufacturing makes good business sense for Bhel because it offers a good avenue for hedging against any abrupt change in the electricity segment. (Rajeev Dabral / Mint)
Bhel is also talking to French train maker Alstom, German rail transit solutions firm Bombardier Transportation GmbH and a Japanese consortium comprising Itochu Corp., Mitsubishi Corp. and Toshiba Corp. for jointly supplying 1,000 railway locomotives for the Indian Railways’ marquee project, the dedicated freight corridor, as reported by Mint on 4 April.
Industry analysts say there are a number of players who possess the technology to make coaches and engines in eastern Europe and Spain but that the deal size would be high.
“Though there are some companies that have the technology to manufacture the engines and coaches, whether they will meet the criteria prescribed by the Indian procurers is left to be seen,” said a New Delhi-based infrastructure analyst who did not wish to be identified.
“While the power business will continue to be the most important constituent of Bhel’s portfolio in the coming years, industry sectors such as railway transportation are expected to expand in a big way,” K. Ravi Kumar, Bhel’s chairman and managing director, had earlier said.
Power sector analysts say locomotive manufacturing makes good business sense for Bhel because it offers a good avenue for hedging against any abrupt change in business prospects in the power sector.
“Bhel is already present in a small way in the railway sector. A transfer of technology will help it grow in the sector,” said Anish De, chief executive officer at Mercados Asia, an energy consulting firm.
Bhel, with a manufacturing capacity of 10,000MW per annum, has orders to manufacture equipment that can generate 31,923MW.
The company posted a net profit of Rs2,815 crore on revenues of Rs21,608 crore in 2007-08 and ended the year with orders of Rs50,265 crore.
Bhel expects to achieve a turnover of Rs45,000 crore by 2011-12 and a manufacturing capability of 15,000MW by the end of 2009.
By 2012, the power equipment maker plans to manufacture equipment capable of generating 56,000MW.