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Bhel prepares strategic plan to take on competition

Bhel prepares strategic plan to take on competition

New Delhi: State-owned Bharat Heavy Electricals Ltd (Bhel) will soon unveil a strategic plan to prepare the company to face up to the joint challenge posed by Chinese manufacturers and local joint ventures.

The preparations for the plan are under way, with India’s largest power generation equipment manufacturer having held a strategy meeting of its top brass at Shimla last month. The in-house exercise is to assist the company to streamline its existing businesses and to plan new ventures.

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 and defence are expected to expand in a big way.

“We are working on a new strategic plan, which is expected to be ready in the next six months. We are preparing the organization for the future," said B.P. Rao, chairman and managing director of Bhel.

The plan will help the company chart its course for the next 10 years that includes the 12th Plan (2012-17) and the 13th Plan (2017-22).

“We are preparing ourselves," said a senior Bhel executive who attended the meeting in Shimla, but did not want to be identified.

“Our strategic plan will be detailed for the next five years and will also spell out the long-term goals for the 10th year. It will provide long-term direction for the company," Rao said.

While Bhel has been facing competition from Chinese power generation equipment manufacturers such as Sepco Plc, Shanghai Electric Group Co. Ltd, Dongfang Electric Corp. Ltd and Harbin Power Equipment Co. Ltd, both in the domestic and overseas markets, it also faces challenges from local JVs between Larsen and Toubro Ltd and Mitsubishi Heavy Industries Ltd; Toshiba Corp. of Japan and the JSW Group; Ansaldo Caldaie SpA of Italy and Gammon India Ltd; Alstom SA of France and Bharat Forge Ltd; BGR Energy Systems Ltd and Hitachi Power Europe GmbH; and Thermax Ltd and Babcock and Wilcox Co.

“The sheer size of Bhel offers both advantages and disadvantages. They can quote very low rates and absorb the shock due to their size and the number of businesses that they are in," said a top executive at one the local JV firms, who did not want to be identified.

“The disadvantage is that due to the very size, inefficiencies can creep in and add to the cost," he said. “It can go either way. While they have the advantages of being a public sector unit, going forward, competitive pricing will be a huge factor in the Indian equipment market."

The country expects to add an additional 62,374 megawatts (MW) during the 11th Plan that ends in 2012. Of this, orders for a capacity of 42,431.58MW have been placed with Bhel. The government plans to add 100,000MW during the 12th Plan to the current capacity of 174,000MW, which is likely to see a lot of competition for equipment orders.

“We have seen in the past that Bhel is a fairly market-oriented company. When it faces competition, it will possibly gear up to meet it. They have a tremendous ability to adopt technology," said Anish De, chief executive at Mercados EMI Asia, an energy consulting firm.

Bhel posted a net profit of 6,011 crore on revenue of 43,337 crore in the fiscal ended 31 March. The firm has an order book position of at least 1.64 trillion and an annual capacity of 15,000MW. It aims to become a $10 billion (nearly 45,000 crore)-plus company by 2012.

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