Bhel net rises 37%, may partner Alstom for nuclear project

Bhel net rises 37%, may partner Alstom for nuclear project

New Delhi: State run Bharat Heavy Electricals Ltd (Bhel) on Thursday reported a 37% growth in net profit for 2009-10 from a year earlier on the back of growing orders from private sector power project developers and hydropower projects.

For the fiscal year ended 31 March, net profit of India’s largest power equipment maker was Rs4,287 crore, against Rs3,138 crore in the preceding year.

The company has orders worth a record Rs1,43,800 crore on its book, with private sector orders accounting for 14,689MW worth in 2009-10. However, Bhel’s order inflow fell 2% to Rs59,031 crore in the last fiscal. “We have an annual capability of manufacturing 15,000MW of power equipment. We plan to raise this to 20,000MW a year by March 2012," B.P. Rao, Bhel chairman and managing director, told reporters. Bhel will update the provisional numbers announced on Thursday with audited earnings later.

Also Read Little room for Bhel stock price to rise

In a related development, Bhel has identified Alstom SA as a partner for its nuclear power plans for which it has signed a memorandum of understanding with Nuclear Power Corp. of India Ltd. The new company will take up engineering, procurement and construction contracts in the nuclear power sector, said people aware of the development, who did not want to be identified. Bhel may also give the new partner some equity in the tripartite venture.

Rao declined to comment on Alstom being selected.

In another development, Bhel is eyeing the suburban railway business and plans to bid for the Chennai metro tender in partnership with technology providers such as Bombardier Inc., Alstom, Siemens or ABB. 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.

In another development, Bhel is in talks with the Pipavav Shipyard Ltd and Cochin Shipyard Ltd for the manufacture of the offshore oil rigs. “We will provide them with the components while they will manufacture" the rigs, Rao said.

Mint had reported on 15 October 2007 about Bhel’s plans to enter the offshore rig manufacturing business in an effort to grow its energy equipment division and tap growing demand for such rigs in both the international and domestic markets. However, the company hasn’t been able to find a technology partner for its offshore rig business.

Power sector analysts say business segments such as transportation, defence or oil and gas make good business sense for Bhel because they offer a good avenue for hedging against any abrupt change in business prospects.

“The real test will be how Bhel maintains these numbers for the financial years 2010-11 and 2011-12 on account of competition coming from both domestic and Chinese manufacturers," said Madanagopal R., an equity research analyst at Mumbai-based Centrum Broking Pvt. Ltd.

While Bhel has been facing competition from Shanghai Electric Group Co. Ltd, DongFang Electric Corp. and Harbin Power Equipment Co. Ltd, this is expected to increase with joint ventures between Toshiba Corp. of Japan and JSW Group; Ansaldo Caldaie SpA of Italy and GB Engineering Enterprises Pvt. Ltd; and Alstom SA of France and Bharat Forge Ltd.

Bhel’s stock on Thursday rose 1.41% to Rs2,419.10 at the close on the Bombay Stock Exchange. The benchmark Sensex index rose 164.85 points, or 0.94%, to 17,692.62.