Spurred by a jump in orders, India’s largest power equipment maker Bharat Heavy Electricals Ltd (Bhel) on Thursday reported a 17% growth in net profit for the fiscal year 2007-08 compared with the previous year.
Its net profit was Rs2,815 crore compared with Rs2,415 crore a year ago. The company’s order book rose 41% to Rs50,265 crore and turnover was up 15% at Rs21,608 crore, its highest till date.
“There is a shortage of raw materials, problems in supply chain management and availability of skilled manpower. However, our projects in the 11th Plan period (2007-12) will be on time as we have taken advanced manufacturing action and ordered raw materials,” said K. Ravi Kumar, chairman and managing director.
However, power sector analysts say Bhel will not be able to sustain a growth trajectory in the long term because of increasing competition.
“Bhel will increasingly witness competition from overseas firms, particularly Chinese suppliers. When China’s domestic demands are met, these firms will start dumping in the Indian market as they will have an immense cost advantage,” said a New Delhi-based analyst, who did not want to be identified.
Bhel remains unfazed and proposes to introduce thermal power generator units with new capacities of 270MW, 525MW and 600MW to counter the Chinese threat.
“We are ready to take on international competition,” said Kumar.
He, however, admitted that since the yuan is undervalued, there will be pressure from Chinese companies such as Dongfang Electric Corp. Ltd, Shanghai Electric Power Co. Ltd and Harbin Power Equipment Co. Ltd.
“Currency fluctuation will hurt our margins to a certain extent. However, 40% of our contracts are covered for price fluctuations,” Kumar added.
To meet the increasing demand, Bhel plans to hire around 20,000 employees over the next five years that could even include lateral recruitment.
In another development, Bhel is in talks with Reliance Power Ltd (RPL) of the Reliance-Anil Dhirubhai Ambani Group for supplying equipment to the two 4,000MW projects of RPL at Sasan in Madhya Pradesh and Krishnapatnam in Andhra Pradesh.
The company will also start making, in a venture with Nuclear Power Corp. of India Ltd (NPCIL), nuclear-powered turbines and generators with capacities of 1,000MW and 1,600MW. It may also take up engineering, procurement and construction activities in the nuclear power sector.
“We, along with NPCIL, may also partner with an overseas technology provider for the nuclear power business. We are open to even giving them equity.”
Bhel has an annual manufacturing capacity of making power equipment that have a total capacity of 10,000MW, which the company plans to raise to 15,000MW a year by December 2009.