BHEL to focus on metro rail projects this year

17542740.cmsBHEL – a Maha Ratna Company and one of India’s largest engineering and manufacturing company has announced its provisional quarter numbers for FY13, where the company’s order inflow stands at Rs 31,528 crore verses Rs 22,096 crore. The company also reported a provisional net sales at Rs 50,015 crore verses Rs 47,228 crore. FY13, order inflow has been 47 percent higher than FY12. “BHEL’s order book as on March 31 stands at Rs 1.15 lakh crore. BHEL plans to focus on metro rail projects this year. The company has performed well in exports segment. Projects of around 16,000 MW are in tender stages,” says BP Rao, chairman, BHEL.

Below is the edited transcript of his interview to RailNews.

Q: Can you give us a sense in terms of where exactly the traction and the order book guidance will be for FY14, how would you be placed in FY14?

A: The result was part of the bulk tender which was finalised long back. We have been waiting for order from Gadarwara, which had been shifted from Odisha to Gadarwara, Madhya Pradesh and here there are all necessary clearances. Foundation stone laying ceremony will be laid shortly. Orders are not only coming in from NTPC but EPC order came in from Suratgarh. This project is on for sometime and is ready with all clearances. Their decision making got delayed and we got this order immediately and very shortly we will start this project.

The third project from Orissa Power Generation Operation is also taking off. We have some orders from NTPC. We have various packages like Electrostatic Precipitator (ESP) packages and C&I packages. We have also won projects where there are retrofit jobs for existing projects, existing power plants where we need to replace them.

We have bagged order for Medha project for coal and ash handling which is being done by other developer or other equipment supplier. We have also performed well in the export segment. We have bagged both hydro projects of 1700 MW from Bhutan. Many projects in power sectors were finalized in 2012-13.

Q: After meeting your order book guidance for FY13 can you give us an indication of what the order inflows may look like in FY14?

A: I am not giving any guidance. I am only saying that there are various tenders which are in the offing. Projects of around 16,000 MW are in the tender stages for next 6-9 months. I am only indicating that scene in power sector is improving from 2011 to 2014.

Q: Concentrating on the pricing part of it because while volumes in terms of order inflows have clearly increased according to you the pricing pressures seen in some recent bids will possibly hamper the companies margins going forward. Hence what kind of margin contraction do you possibly expect as pricing and working capital pressures possibly build up for the company?

A: I won’t be able to give any guideline on margin. Having said that BHEL continuously works for improvement of the technology absorption levels, improvement of vendor base, improvement of localisation, improvement in creating competition among the vendors to supply to us and our own productivity in terms of design to cost and lean manufacturing initiatives, these are continuous exercises.

In fact we have been reaping good benefits out of it. In last year we have reduced the metal consumption by 1.5 percent. 1.5 percent is Rs 50000 crore which is a huge amount and it is making us much more competitive with respect to positioning ourselves with respect to our competitors. Product dept and volumes will give us the advantage because the fixed cost gets divided with the volume. So, per unit cost could be that much lower. We are competitively positioning ourselves.

Our own R&D is helping us to reduce further costs. All these factors are helping us to position ourselves very competitively in the market. Therefore we are able to maintain our margins. This year there is only a marginal reduction in the profit but 13 percent in net profit over a turnover is something which very few companies deliver.

Q: Some concerns are building up on the company’s working capital position because of delayed customer advances. Could you highlight the net cash position at the end of FY13 for the company and how much was it last year in FY12?

A: We have roughly about Rs 6,000 crore cash surplus at the end of the day.