New Delhi: The much-awaited takeover of Bharat Heavy Plates and Vessels Ltd (BHPVL) by Bharat Heavy Electricals Ltd (Bhel) is finally moving ahead.
“We expect to complete the takeover by April or May,” confirmed a senior Bhel executive who did not wish to be named. “We have decided to go ahead with our plans as the banks have agreed to write off interest on the loans given to the ailing company.”
Welcoming Bhel’s decision, BHPVL’s managing director Om Prakash said, “I am very happy with the turn of events. Bhel has in principle agreed for the takeover of our firm.”
Bhel is India’s largest power equipment generation company and had been assigned the task of turning around Bharat Plates in association with Engineers India Ltd (EIL).
Bharat Plates is a public sector engineering, procurement and construction company. Bhel is part of a group of profitable public sector units that have been asked by the Union government to help bail out other troubled public sector units. Banks, led by the State Bank of India, have agreed to waive a Rs250 crore interest on a loan taken by Bharat Plates.
The bail-out package for Bharat Plates is around Rs1,000 crore as proposed by EIL. The funds will be used for a one-time settlement of bank loans, retirement of government loans, arrange working capital and to upgrade technology. Bharat Plates, which has the technology and expertise to manufacture equipment for nuclear power plants, is expected to help Bhel’s plans to cater to the nuclear power generation business.
“We have a synergy with BHPVL’s product portfolio. As BHPVL was already our licensee, we will not have any problems of portfolio integration,” the Bhel executive added.
Bharat Plates is under the department of heavy industry and has clients in the refineries, power, defence and pharmaceuticals sectors. The outlook has been improving for the company as it is expecting a turnover of Rs165 crore in the current fiscal year that ends 31 March compared with Rs114 crore in 2005-06.
The company is also expecting a 50% reduction in its losses from Rs70 crore in 2005-06 to Rs35 crore in the current financial year.
While Bharat Plates has been able to secure orders worth Rs300 crore in this fiscal, it has been weighed down by the high-interest burden accruing from loans taken in 2002-03 to finance its voluntary retirement package. “The loan interest alone is of Rs55 crore per year and it had become very difficult to service it,” said Prakash.