New Delhi: State-owned Bharat Heavy Electricals Ltd, or Bhel, has dropped all its existing overseas acquisition plans, citing bureaucratic hurdles it faces on account of being a public sector company.
“We have problems when we want to acquire firms overseas. There are a host of procedures that we need to follow which is not the case with private firms. For everything, we need to float a tender. Even if we want to make an acquisition through a private firm, we need to float a tender to find a strategic partner,” said a senior Bhel executive, who didn’t want to be identified.
Some of Bhel’s plans abroad included the acquisition of Czech power company Skoda Power AS’ turbine manufacturing facility and units for manufacturing boilers and railway coaches, among others.
“In such acquisitions, the time limit is short and there is a need for quick decision-making, something which we do not have. Then comes the problem of setting up companies for tax-saving purpose and to incorporate different companies, which throws up its own set of challenges...,” said another Bhel executive, who also didn’t want to be identified.
Public sector units have lost out to their private sector rivals in their bid to acquire resources or assets overseas partly due to procedures that are at times lengthy and time-consuming.
A case in point is NTPC Ltd, India’s largest power generation company, which could not bid for the Singapore-based Temasek’s assets because the Indian government was late in approving the requests, as reported in Mint on 23 March 2007 and 20 December 2007.
Bhel has a robust balance sheet and a Rs10,000 crore cash surplus that has been parked in banks, at a time when the economic downturn worldwide has opened up a host of opportunities for acquisitions overseas.
Of Bhel’s order book position of Rs1.25 trillion, global orders account for around Rs7,500 crore. West Asia, Africa and Central Asia are the primary international markets for Bhel, which plans to raise exports to Rs10,300 crore by 2012. The firm posted a net profit of Rs3,039 crore on revenue of Rs27,505 crore in fiscal 2008-09. It aims to become a $10 billion (around Rs47,200 crore)-plus firm by 2012.
“These limitations will hurt Bhel’s prospects and may affect its technology upgradation plans,” said Madanagopal R., an equity research analyst at Mumbai-based Centrum Broking Pvt. Ltd, who tracks Bhel.
Bhel has an annual capacity of manufacturing power equi-pment that can produce 10,000MW of electricity. Bhel says it plans to raise this to 15,000MW a year by December.
Shares of Bhel rose 0.90% to close at Rs1,981.95 on the Bombay Stock Exchange on Friday. The Sensex, was up 1.10% at 13,887.15 points.