Business Summary

Bharat Heavy Electricals Limited operates as an engineering and manufacturing enterprise in the energy and infrastructure related sector in India and internationally. The company offers air preheaters, boilers, control relay panels, electrostatic precipitators, fabric filters, fans, gas turbines, hydro power plant, piping systems, pulverizes, pumps, seamless steel tubes, soot blowers, steam generators, steam turbines, turbo generators, and valves for thermal, nuclear, gas, and hydro based utility and captive power plants. It also provides industrial systems and products, including captive power plants, centrifugal compressors, drive turbines, industrial boilers and au!iliaries, waste heat recovery boilers, gas turbines, pumps, heat e!changers, electric machines, valves, heavy castings, forgings, electrostatic precipitators, I"#$" fans, and seamless steel tubes for metallurgical, mining, cement, paper, fertilizers, refineries, and petrochemical industries. In addition, the company offers products for transportation sector that include traction propulsion system and controls, trac% maintenance machines, transportation system, and coach building for Indian railways, as well as underta%es retrofitting and overhauling of rolling stoc%. $urther, it provides renewable energy based products, such as rural water pumping systems, railway signaling, offshore drilling platforms, hydro sets, solar lanterns, solar photovoltaics, solar water heating systems, and wind electric generators& and transmission products comprising power transformers, instrument and dry type transformers, shunt reactors, vacuum and '$( switchgear, gas insulated switchgears, ceramic insulators, circuit brea%ers, control and protection e)uipment, thyristor valves, bushings, capacitors, control relay panels, energy meters, H*"+ transmission system, power semiconductor devices, power system studies, and control shunt reactor. The company was incorporated in ,-(. and is based in /ew "elhi, India.

Market Share
Investors loo% at mar%et share increases and decreases carefully because they can be a sign of the relative competitiveness of the company0s products or services. 1s the total mar%et for a product or service grows, a company that is maintaining its mar%et share is growing revenues at the same rate as the total mar%et. 1 company that is growing its mar%et share will be growing its revenues faster than its competitors.

2ar%et share increases can allow a company to achieve greater scale in its operations and improve profitability. +ompanies are always loo%ing to e!pand their share of the mar%et, in addition to trying to grow the size of the total mar%et by appealing to larger demographics, lowering prices, or through advertising. This calculation is sometimes done over specific countries such as +anada mar%et share or 3' mar%et share.

About the topic

4ur research is on the 56hy the mar%et share of BHEL is decreasing despite of growth in the industry78 In this research we try to find the reasons for decreasing in the mar%et share of BHEL. This topic is saying that company9s mar%et share is decreasing as compare to overall share of industry. Earlier BHEL has ::; mar%et share according to ,,th five year plan share which is now reduced to <.; appro! and before ,,th year plan companies also en=oys the mar%et share of >?; so we try to conclude the reasons for this. 1 shrin%ing order boo% and no significant upside @ even if the government9s scheme of the buybac% of A'3 shares comes into play @ ma%es Bharat Heavy Electricals Ltd a compelling name on the sell list of ma=or bro%erages. The latest to =oin the rally was Boldman 'achs which downgraded BHEL from neutral to sell with a target price of Cs D?>. The stoc% is currently trading at Cs D?> and indicates a further fall of D< percent in the offing. The ma=or reason is most orders for the ,Dth five year plan have been given out and there is very little scope of growth in order boo% over the ne!t few years. The power e)uipment manufacturers have also been losing out at the face of severe competition from +hinese manufacturers. The Indian industry has been lobbying for a heavy import duty on +hinese e)uipments to give a better level playing field to players li%e BHEL. But the imposition of the duty can come only during the budget as indicated in the meeting between the prime minister and D, power company +E4s. That would perhaps be late for BHEL to gain from orders for ,Dth five year plan. Boldman 'achs argues that new players in the system have one or very few orders with no e!it from this investment heavy business. 'o pricing power will be low for any new orders due to fierce competition. Boldman 'achs e!pects BHEL to report a <> percent decline in order inflows this year, resulting in order boo% declines of ,? percent for financial year D?,D and : percent for D?,<. BHEL9s change in order boo%

mi! from high margin subcritical pro=ects to low margin super critical pro=ect could also hurt the company. Eefferies also has BHEL in its underperform list, arguing even if the company agrees to a buybac% there is no upside left at this stoc% price levels which would ma%e it compelling to hold the stoc%. The company does not have surplus cash on boo%s and if it wants a buybac% beyond > ,? percent it will need to borrow funds. Eefferies assumes a situation where the company offers buybac% upto DD? percent of shares at a :? percent premium to current price, it does not indicate any upside to current prices. BHEL is typically e!posed to only the power sector. 1nd, since the sector is facing a rough patch, the ris% in investing in it is very high. It has not announced any ma=or orders in the third )uarter and so there may not be positive surprises in store. 1ll the issues facing the sector li%e environment clearance, land ac)uisition or fuel shortage are long term issues. $or now, there is no trigger in sight for the company.

Secondary Research
'econdary research can be described as the most widely used method for data collection. This process involves accessing information that is already gathered from either the originator or a distributor of primary research. 'econdary research includes collecting information from third party sources such as company websites, sales and accounting records, magazine articles and mar%eting research reports. It also includes any previously gathered information used by the mar%eter from any internal or e!ternal source.

Advantages
1. Ease of Access There are many advantages to using secondary research. This includes the relative ease of access to many sources of secondary data. In the past, secondary data accumulation re)uired mar%eters to visit libraries, or wait for reports to be shipped by mail. /ow with the availability of online access, secondary research is more openly accessed. This offers convenience and generally standardized usage methods for all sources of secondary research. 2. Lo !ost to Ac"uire

The use of secondary data has allowed researchers access to valuable information for little or no cost to ac)uire. Therefore, this information is much less e!pensive then, if the researchers had to carry out the research themselves.
3. !#arification of Research $uestion

The use of secondary research may help the researcher to clarify the research )uestion. 'econdary research is often used prior to primary research to help clarify the research focus.
4. May Ans er Research $uestion

The use of secondary data collection is often used to help align the focus of large scale primary research. 6hen focusing on secondary research, the researcher may realize that the e!act information they were loo%ing to uncover is already available through secondary sources. This would effectively eliminate the need and e!pense to carry out their own primary research.
5. May Sho

%ifficu#ties in !onducting &rimary Research

In many cases, the originators of secondary research include details of how the information was collected. This may include information detailing the procedures used in data collection and difficulties encountered in conducting the primary research. Therefore, the detailed difficulties may persuade the researcher to decide that the potential information obtained is not worth the potential difficulties in conducting the research.

%isadvantages
1. $ua#ity of Research There are some disadvantages to using secondary research. The originators of the primary research are largely self governed and controlled by the mar%eter. Therefore, the secondary research used must be scrutinized closely since the origins of the information may be )uestionable. 2oreover, the researcher needs to ta%e sufficient steps to critically evaluate the validity and reliability of the information provided.

2. 'ot Specific to Researcher(s 'eeds

In many cases, secondary data is not presented in a form that e!actly meets the researcher9s needs. Therefore, the researcher needs to rely on secondary data that is presented and classified in a way that is similar to their needs. ). *ncomp#ete *nformation In many cases, researchers find information that appears valuable and promising. The researcher may not get the full version of the research to gain the full value of the study. This is because many research suppliers offer free portions of their research and then charge e!pensive fees for their full reports. +. 'ot ,ime#y 6hen using secondary research, one must e!ercise caution when using dated information from the past. 6ith companies competing in fast changing industries, an out of date research reports many have little or no relevance to the current mar%et situation.

!onc#usion
In conclusion, the use of secondary research offers many significant advantages to the researcher. It is important for the researcher to identify, reduce, and manage the disadvantages that are accompanied by the use of secondary research.

*ntroduction to Research Methodo#ogy

Cesearch 2ethodology comprises defining and redefining the problem, formulating hypothesis or suggesting solution, collecting, organizing and evaluating the data, ma%ing deduction and reaching to conclusions and determines whether the formulated hypothesis is right and wrong. Cesearch 2ethodology is a way to solve research in study and solving research problems along with logic behind them are defined through research methodology. Thus while tal%ing about research methodologies we are not only tal%ing of research methods but also consider the logic behind the methods. "uring my pro=ect, I collected data through various sources primary F secondary.

Research %esign
1 Cesearch design is purely and simply the framewor% of plan for a study that guides the collection and analysis of data. The study is intended to find the investors preference towards various investment avenues. The study design is descriptive in nature. Cesearch design is the conceptual structure within which the research would ta%e place. The presentation of such a design facilitates research to be as efficient as possible yielding ma!imum information.

Secondary Research Method

'econdary Cesearch 2ethods are Internet Cesearch, Library Cesearch, "ata +ollection 4rganizations and /ews Aapers#2agazines#Eournals#Aeriodicals. 1. *nternet Research Internet research is the practice of using the Internet, especially the 6orld 6ide 6eb, for research. It isG

focused and purposeful Hso not recreational browsingI, uses internet information or internet based resources Hli%e internet discussion forumsI,

tends towards the immediate Hdrawing answers from information you can access without delayI

and tends to access information without a purchase price.

2. Library Research Library research begins when you need information to solve a problem, to fulfill an academic assignment or for your own purposes. Library research is research you do from boo%s. Bo to a library, get out a selection of boo%s on your research topic and read the relevant chapters. Then you put all that info into a research document and cite your references. ). %ata !o##ection !ompany If you have a pro=ect that involves collecting large volumes of data then we have the resource to help you in your data collection and data organizing pro=ect. 4ur data entry services help companies in collecting data from a variety of sources. 4ur clients usually provide us with the source material of the data and we then ta%e over to start collecting data in large volumes. 4ur data collection services include collecting data from electronic media such as the internet to data collection from offline publications. 6e can help e!tract data from a variety of sources and we can handle most data collection tas%s both large and small. If your organization needs a helping hand in your data collection and organization then call us to have a chat about how we can help you outsource the mundane tas% of data collection. 4ur policy is to help you deal with your data entry re)uirements to help you concentrate on the more important tas%s of your business. +. &rint Media Arint media is one of the oldest and basic forms of mass communication. It includes newspapers, wee%lies, magazines, monthlies and other forms of printed =ournals. 1 basic understanding of the print media is essential in the study of mass communication. The contribution of print media in providing information and transfer of %nowledge is remar%able. Even after the advent of electronic media, the print media has not lost its charm or relevance. Arint

media has the advantage of ma%ing a longer impact on the minds of the reader, with more in depth reporting and analysis.

Medium information

a means or instrumentality for storing or communicating the print media responsible for gathering and

&ub#ic press- press

publishing news in the form of newspapers or magazines

.ourna#ism- ne s media newspapers and magazines collectively Sami/dat- underground press a system of clandestine printing and distribution of dissident or banned literature

Reasons for using secondary research in conte0t of our research

4ur research is on the Aublic 'ector 3nderta%ing i.e. BHEL which wor%s on the tender basis and the information is %ept confidential and is not available for private use. 'o we can9t use primary research here. 1nother reason is that A'39' never come with the advertisement =ust because their activities are concerned with the country important sector i.e. Aower F Energy and their customers are not the general public. 'o, it is not possible to use the Arimary Cesearch as general public is not fully aware about the company9s operations. Because of these reasons we are totally dependent on the e!tensive secondary research. 6e mostly dependent on the Internet research because it is most appropriable resource for our research. 6e get most of article from the internet related to our topic. 6e also used various print media li%e newspaper and =ournals.

!ompetitors of B1EL in the *ndian Market

Market Share
Total 'ales BHEL Larsen HLFTI 'uzion BE2L BBC Energy 1I1 Engineering 1lfa Laval Ara= Industries 'anghvi 2otors 6alchandnagar D(J:J.(< <<-D(.<> >D:,.-. D>->.,> ,-DD., -<,.(> >--.<, >>..<> <:>.: :D..,D Aroportion ?.<:D><J.J( ?...::(?,-< ?.?-:D.?J<. ?.?<(><:(( ?.?D:D.<D<< ?.?,DD<:>(. ?.?,?.->.( ?.?,?,(--,?.??.(-:,?D ?.??(JJ<<.J

,hreat gro ing2 *s the best over for B1EL3 9

'ummers are usually a good time in India if you are a power e)uipment ma%er. There is the li%elihood of a power deficit. /ew power pro=ects that need a lot of e)uipment ac)uire a sort of seasonal urgency. 1nd if the economy is tic%ing along o%ay you can even afford to rela!. Biven this bac%drop, Bharat Heavy Electricals Ltd HBHELI, the country0s largest power e)uipment ma%er, should be sitting pretty this summer. India has always been energy hungry. 1t the end of $ebruary, the shortfall of power supplied compared with demand widened to J.<;. But BHEL is anything but happy. +reation of new power pro=ects has slowed considerably over the past year. The state run company itself has reported cancellation of orders worth Cs :,J?? cr. KLast fiscal, only .,??? megawatts of pro=ects were finalized due to issues such as land ac)uisition, financing, environmental clearance and coal lin%age compared with around ,(,??? 26 in D?,? ,,,K says BHEL chairman and managing director B Arasada Cao. The only consolation for the public sector underta%ing HA'3I in a rather difficult year was that >?; of the new pro=ects came its way. But it may not have that comfort in future because of growing competition, particularly from the +hinese. 2ac)uarie E)uities Cesearch in a client note earlier this year warned of a nightmare situation playing out for the blue chip company.

1ot !ompetition
BHEL says its power e)uipment is more efficient, reliable and suited for mi!ed coal used in India than those offered by competition. But there is no denying that competition is getting intense in the power e)uipment sector from within as well as outside the country. In the domestic mar%et, private sector players have set up =oint ventures with global players. Their combined installed capacity is at around <?,??? 26 compared with BHEL0s D?,??? 26. To give the company its due, BHEL has had to live with competition since the country began liberalizing in ,--, and imports began to swell. But its dominance is under threat. Arivate players and +hinese companies together have captured about <:; of the mar%et, estimate stoc% mar%et analysts.

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To cite an e!ample, private companies are bidding aggressively to enter the boiler turbine generator mar%et. Cecently, /TA+ invited bids for ,, super critical boilers. BHEL was the second lowest bidder and it had to match BBC Energy0s bid price to win an order for five super critical boilers. This strategy may help BHEL0s revenues but pressures margins and profits, which are already slowing. "omestic players individually have far smaller installed capacity than BHEL, but they are hungry for orders. They would sacrifice profit for revenue. 'o much so that the price differential between the offerings of Indian companies and those of the +hinese has narrowed. KThe bidding for /TA+ bul% order illustrated that the domestic private sector can bid aggressively,K says 'an=eev Larbade, vice president, fundamental research at Mota% 'ecurities. In this scenario, BHEL cannot but absorb some of its increased costs to remain competitive in a mar%et which would soon face over capacity.

!hinese ,hreat
6hat about the +hinese companies7 'hanghai Electric and "ongfang Electric have bagged orders of .?,??? 26. 1nil 1mbani0s Celiance Aower, which is building mega power pro=ects, depends on +hinese imports. "itto with *edanta, Lanco, Eindal Aower, 1dani and BBC Energy. 'o +hinese e)uipment ma%er 'hanghai Electric0s plans to build a manufacturing facility in India should come as no surprise. It has already established an India office. "ongfang too is in India to service its clients, supply spare parts and overhaul power plants. The +hinese advantage over BHEL and private players is scale. K+hinese companies can deliver e)uipment with much shorter lag than BHEL. Besides, they are around ,? ,:; cheaper,K points out an analyst at 1ngel Bro%ing.

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4A Bhutani, director, engineering and CF" at BHEL, says the +hinese can also offer other benefits such as financing that Indian companies cannot afford. That apart, +hinese manufacturers en=oy state subsidy and avail sovereign guaranteed e!port credit. K6e suffer even due to our archaic 2otor *ehicle 1ct that allows us to use only mechanical trailers instead of hydraulic ones. $or two years, we have been trying to get the 1ct amended,K says Bhutani. But for now, the +hinese threat seems to be receding. K6ith the slowdown in setting up of new power plants, the share of the +hinese in the power e)uipment mar%et is shrin%ing,K notes Mota% 'ecurities0 Larbade.

Budget 4 A Mi0ed Bag

In this year0s budget, BHEL and other domestic capital goods ma%ers had hoped that the government would ma%e imports less competitive by raising customs duty. But the government heeded to private power producers and allowed concessional rates of import duties to continue.

5oreign firms to hurt B1EL(s market share- says !M%

BHEL9s efforts to secure a Cs-,??? crore e)uipment order recently from 1nil 1mbani9s Celiance Aower Ltd for the Mrishnapatnam power pro=ect failed over pricing issues. India9s biggest ma%er of power generation e)uipment, Bharat Heavy Electricals Ltd, or BHEL, says its mar%et share may decline to :?; from the current (?; in five years because of increasing competition from domestic and overseas companies. 56e are e!pecting a <:; growth this year. However, we will not be able to maintain such high levels of growth due to increasing number of entrants in the mar%et,8 said M. Cavi Mumar, chairman and managing director of government owned BHEL. BHEL9s efforts to secure a Cs-,??? crore e)uipment order recently from 1nil 1mbani9s Celiance Aower Ltd for the Mrishnapatnam power pro=ect failed over pricing issues. This order is li%ely to be awarded to +hina9s 'hanghai Electric Broup +o. Ltd, as reported by 2int on DD 1ugust. In order to remain competitive on the pricing front, BHEL has been trying to contain costs by paring its material re)uirements.

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The government, which realizes the threat BHEL is facing, has been trying to restrict overseas e)uipment ma%ers from bidding for domestic pro=ects. It is also denying coal supply to electricity plants with foreign e)uipment, as previously reported by Mint. 5The +hinese e)uipment are cheaper than BHEL9s e)uipment by at least ,: D?; but they are not very competitive in terms of technology due to issues with their design, leading to higher operating and maintenance costs,8 said a 2umbai based e)uity analyst who didn9t wish to be named. 5BHEL, on the other hand, has a very strong product line with e)uipment, having very good heat rates.8 'till, pro=ect developers such as Celiance 1nil "hirubhai 1mbani Broup are placing orders with overseas players such as 'hanghai Electric. BHEL also lost a Cs,,::> crore contract from the 1ndhra Aradesh Aower "evelopment +o. Ltd to a new entrant, LFT 2HI Turbine Benerators, a =oint venture by Larsen and Toubro Ltd and Eapan based 2itsubishi Heavy Industries Ltd. 5BHEL9s mar%et share on a long term cannot be sustained,8 1rvind 2aha=an, e!ecutive director at audit firm MA2B India, said. 5However, even with increasing competition, it can have a significant share, though not a dominant share.8 BHEL is trying to enter sectors such as locomotive manufacturing and the offshore rig business in an attempt to hedge against the ris% of an abrupt downturn in its power business prospects. 56hile the power business will continue to be the most important constituent of BHEL9s portfolio in the coming years, industry sectors such as railway transportation are e!pected to e!pand in a big way,8 Mumar had said earlier. BHEL, which has a manufacturing capacity of ,?,??? 26 per annum, plans to manufacture e)uipment capable of generating :(,???26 by D?,D. The company posted a net profit of CsD,J,: crore on revenues of CsD,,(?J crore in D??> ?J.

B1EL6s market share set to fa## be#o 778

The mar%et share of Bharat Heavy Electricals Ltd HBHELI, India0s largest power e)uipment manufacturer, is set to decline to less than :: per cent in the Eleventh $ive Near Alan compared with over >? per cent in the previous Alan. This is despite the government0s plan to ma%e local manufacturing a pre condition for supplying power e)uipment in the country as the provision would be applicable only

13

on new orders. 4rders for over -? per cent of the >J,:>> 2w capacity targeted for the Eleventh $ive Near Alan HD??> D?,DI have already been placed. MA*' E$9*&ME', S9&&L*ERS *' 2::;4 :< !ompanies BHEL "ongfang Electric 'hanghai Electric LFT +onsortium 1lstom Aower 2#+ Cussia and "oosan, Morea *oith 'iemens F*atech $u=i Electricals, Eapan +2E+, +hina !apacity =M > :,:-: (?? (?? ..: .(. ((? .:? D:? ,,>

1nalysts had been flagging off concerns over BHEL0s declining mar%et share and some had even predicted it to fall to .: per cent in a few years given the cost competitiveness of imported e)uipment. The government0s pre condition of domestic manufacturing is li%ely to allow BHEL to claw bac% mar%et share from overseas companies, but only in the Twelfth Alan. KThe government0s policies will move to absolute insistence on domestic manufacturing,K 2inister of 'tate for Aower Eairam Camesh said. The +onfederation of Indian Industry H+III has been lobbying for ma%ing domestic manufacturing mandatory for overseas e)uipment firms. It is now hopeful that the conditionality of domestic manufacturing will not be limited to orders from state owned utilities, but would also apply to private sector companies. KThe +hinese e)uipment suppliers win bids through tenders but there is the )uestion of availability of spares and parts,K said +II0s 'arita /agpal, head, manufacturing. In the current fiscal, only about :? per cent of the orders for the targeted capacity addition of ,,,?(, 2w have been placed on BHEL, according to data from the power ministry.

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In addition, the 'iemens BHEL consortium has bagged orders for another ,, per cent. The rest of the orders have been bagged by "ongfang Electric, 'hanghai Electric, 1lstom, "oosan, +2E+ and $3EI Electricals. BHEL, however, accounts for about (. per cent of the country0s overall installed capacity of about ,<:,??? 2w. BHEL, with an annual capacity of ,?,??? 2w, has been struggling with a bac%log of orders. 4fficials said it was in the process of e!panding capacity to ,:,??? 2w by D??- end. KBHEL will have a manufacturing capacity of :(,??? 2w in the Eleventh Alan while orders are li%ely to be limited to about ..,??? 2w,K said a senior official of the company. BHEL has, therefore, suggested that orders for the pro=ects earmar%ed for the Twelfth Alan be placed in the last two years of the current Alan to enable better manufacturing capacity utilization. It0s shares closed at Cs ,,>(:.D: at the Bombay 'toc% E!change HB'EI on Thursday, down Cs ,,.:? from the previous day0s close.

7 reasons hy B1EL shares have hit ne 724 eek #o

'hares in power e)uipment company Bharat Heavy Electricals Ltd HBHELI hit a fresh :D wee% low on the bourses $riday. 1t ,?.:? am, it traded < per cent lower at Cs. D,J..? on the /'E, slightly higher than the intraday low of Cs. D,(.J?, which is a new :D wee% low for the stoc%. BHEL, the country0s largest power e)uipment ma%er, has been hit by a string of order cancellations and earnings downgrade over the past month. 4ver the last month, the stoc% has fallen D? per cent, while the 'ense! has declined D.: per cent. K2ost cap goods stoc%s are trading at stressed valuations. BHEL is trading at D??J valuations or even lower. 4rder visibility improvement loo%s unli%ely in the near term,K 'andip 'abharwal, +E4 HA2'I at Arabhudas Lilladher told /"T* Arofit today.

1ere are five reasons hy B1EL shares are do n.

1. Cenewed selling pressure in shares have emerged on account of Cs. ,D,???

crore worth of order cancellation by the Ca=asthan government. BHEL had

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emerged as the lowest bidder for the EA+ Hengineering, procurement and constructionI tenders for new super critical units of 'uratgarh and +hhabra thermal power stations over a year ago. In $ebruary, Tamil /adu had announced its decision to dissolve the E* it had with BHEL to set up the ,(?? 26 3dangudi power pro=ect. BHEL has approached the Tamil /adu government to reconsider its decision to cancel the Cs. J,??? crore =oint venture.
2. Both Ca=asthan F Tamil /adu orders carried high margins. The cancellation

means earnings per share HEA'I cuts of : > per cent in $N,. and ,: per cent cut in $N,:. The stoc% is trading at ,, times $N,. EA' against a low of . times forward EA' in D??J.
3. /ew orders are difficult to come because high interest rates have affected the

investment cycle. 'o, cancellation of orders leads to negative sentiments. In the "ecember )uarter, the company had witnessed order cancellations of Cs. :,J?? crore, which resulted in a negative order inflow of Cs. <,:?? crore for the third )uarter.
4. +oal availability for other pro=ects is also loo%ing blea%.

:. E!pectations for wea% 2arch industrial output data in the ne!t wee% have also fanned worries. The growth rate of the eight core industries slowed down to D per cent in 2arch against (.: per cent last year on account of dismal e!pansion in crude oil and natural gas sectors. These eight industries have a weightage of <>.- per cent in the overall Inde! of Industrial Aroduction HIIAI. In $ebruary, the eight infrastructure industries grew by (.J per cent after a dismal performance of ?.: per cent a month ago.

Brokerages have turned negative on the stock

The stoc% has witnessed a string of downgrades over the last month. Mota% re initiated coverage on the company with a K'ellK rating, saying earnings would be hit due to Ka potential lullK in order wins and rising competition. Earlier, +itigroup had also recommended a K'ellK rating on the stoc%.

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'omura2 B1EL orders over Rs 7)-::: cr may be cance##ed

1 casualty of the coal bloc% allocation scam could be public sector e)uipment ma%er Bharat Heavy Electricals Ltd HBHELI. 1ccording to global financial services group /omura, BHEL may face cancellation of DJ per cent of its total order boo%. BHEL said it has an outstanding order boo% position of about Cs ,,<D,-?? crore at the end of first )uarter D?,D ,<. /omura says orders worth Cs :<,D,>.J? crore run the ris% of cancellation. 4f this, orders worth Cs <,,D(D.J? crore have already been classified as Oslow9. The reasons cited by /omura areG Either non availability of coal lin%age or cancellation of e!isting coal mine or lin%age as a fallout of the allocation scam. However, those associated with BHEL say the company e!ecutes orders worth nearly Cs :?,??? crore annually. 5+onsidering this, the order boo% is full for ne!t DJ <? months.8

%e#ays- %eferment
56hile the status of coal mines allotted to BHEL remains uncertain, we highlight the potential ris% to its order boo% from pro=ects that were ordered on the bac% of these mine allocations,8 /omura analyst 1mar Media told Business Line. /omura has also indicated further ris% to BHEL earnings in the current fiscal. The e)uipment ma%er could face delays in new order flows as well as order deferment. "espite several attempts, BHEL +hairman and 2anaging "irector B. Arasada Cao could not be contacted. In the first )uarter of D?,D ,<, BHEL reported earning Cs (,>>, crore from the power segment out of the total revenues of Cs J,>.<.( crore. It reported a net profit of Cs -D?.- crore during 1pril Eune D?,D.

!ommodity &rices
/omura has also flagged the upside and downside ris%s to the e)uipment manufacturer. 4n the upside, BHEL may benefit from developments in new coal sourcing that could drive new power sector investments. 'econd, any decline in commodity prices would be a %ey ris%, as nearly :? per cent of its order boo% is on fi!ed price contract.

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The factors that would hit BHEL are worsening fuel availability for new pro=ects or those in hand, leading to delays in new and e!isting orders. 1nd growing competition could drive pricing even lower, putting pressure on margins.

B1EL open to co##aborations ith !hinese firms

Bharat Heavy Electricals HBHELI, which is facing stiff competition from +hinese e)uipment ma%ers, today said it is open for collaboration with companies from the neighboring country. In response to a )uery on whether the company would be open for collaboration with +hinese entities, BHEL +hairman and 2anaging "irector B Arasada Cao said, KIf it adds value to us, we are open to thatK. Import of cheaper +hinese power e)uipment are impacting state run BHEL which today posted a net profit of Cs (,J(J crore for the year ended 2arch, D?,D. The government is loo%ing at higher import duty on +hinese power gear to provide a level playing field for domestic manufacturers such as BHEL. 1nnouncing the annual results, Cao said the company is open for collaborations with the private sector. K"efinitely, we will be providing PhelpQ if the private sector comes for help from us. 'econdly, we are open for that Pcollaboration with private sectorQ,K he noted. 1mong others, the company would be ready to offer D( per cent e)uity in power pro=ects. K6e don0t mind deploying our resources... That will also help in PensuringQ better business,K Cao added. 3nperturbed by the significant slowdown in orders from the power sector, he said that current problems in the power sector are temporary in nature. The entity0s order boo% declined to Cs DD,?-( crore last fiscal, as against Cs (?,??? crore in D?,? ,, mainly due to sluggishness in the power sector. 1s part of efforts to boost its overall business in the coming years, BHEL would be focusing on growth areas such as transportation and defence. Cao stressed that transportation is e!pected to be the ne!t growth area for the company after power. K6e have formed a group within the company to focus on metro PbusinessQ... 6e are also PparticipatingQ in the latest tender of "elhi 2etro Cail +orp,K Cao said.

18

1ccording to him, the company is now refocusing on wind mills, which it left long bac%. K6e are now loo%ing for partner again... "efence is another big area,K he added.

B1EL prepares strategic p#an to take on competition

'tate owned Bharat Heavy Electricals Ltd HBHELI will soon unveil a strategic plan to prepare the company to face up to the =oint challenge posed by +hinese manufacturers and local =oint ventures. The preparations for the plan are under way, with India9s largest power generation e)uipment manufacturer having held a strategy meeting of its top brass at 'himla last month. The in house e!ercise is to assist the company to streamline its e!isting businesses and to plan new ventures. 6hile the power business will continue to be the most important constituent of BHEL9s portfolio in the coming years, industry sectors such as railway transportation and defence are e!pected to e!pand in a big way. 56e are wor%ing on a new strategic plan, which is e!pected to be ready in the ne!t si! months. 6e are preparing the organization for the future,8 said B.A. Cao, chairman and managing director of BHEL. The plan will help the company chart its course for the ne!t ,? years that includes the ,Dth Alan HD?,D ,>I and the ,<th Alan HD?,> DDI. 56e are preparing ourselves,8 said a senior BHEL e!ecutive who attended the meeting in 'himla, but did not want to be identified. 54ur strategic plan will be detailed for the ne!t five years and will also spell out the long term goals for the ,?th year. It will provide long term direction for the company,8 Cao said. 6hile BHEL has been facing competition from +hinese power generation e)uipment manufacturers such as 'epco Alc, 'hanghai Electric Broup +o. Ltd, "ongfang Electric +orp. Ltd and Harbin Aower E)uipment +o. Ltd, both in the domestic and overseas mar%ets, it also faces challenges from local E*s between Larsen and Toubro Ltd and 2itsubishi Heavy Industries Ltd& Toshiba +orp. of Eapan and the E'6 Broup& 1nsaldo +aldaie 'p1 of Italy and Bammon India Ltd& 1lstom '1 of $rance and Bharat $orge Ltd& BBC Energy 'ystems Ltd and Hitachi Aower Europe BmbH& and Therma! Ltd and Babcoc% and 6ilco! +o.

19

5The sheer size of BHEL offers both advantages and disadvantages. They can )uote very low rates and absorb the shoc% due to their size and the number of businesses that they are in,8 said a top e!ecutive at one the local E* firms, who did not want to be identified. 5The disadvantage is that due to the very size, inefficiencies can creep in and add to the cost,8 he said. 5It can go either way. 6hile they have the advantages of being a public sector unit, going forward, competitive pricing will be a huge factor in the Indian e)uipment mar%et.8 The country e!pects to add an additional (D,<>. megawatts H26I during the ,,th Alan that ends in D?,D. 4f this, orders for a capacity of .D,.<,.:J26 have been placed with BHEL. The government plans to add ,??,???26 during the ,Dth Alan to the current capacity of ,>.,???26, which is li%ely to see a lot of competition for e)uipment orders. 56e have seen in the past that BHEL is a fairly mar%et oriented company. 6hen it faces competition, it will possibly gear up to meet it. They have a tremendous ability to adopt technology,8 said 1nish "e, chief e!ecutive at 2ercados E2I 1sia, an energy consulting firm. BHEL posted a net profit of Cs (,?,, crore on revenue of Cs .<,<<> crore in the fiscal ended <, 2arch. The firm has an order boo% position of at least Cs ,.(. trillion and an annual capacity of ,:,???26. It aims to become a R,? billion Hnearly Cs .:,??? croreI plus company by D?,D.

B1EL p#ans back ard integration for so#ar pane# business

Bangalore based electronics division HE"/I of Bharat Heavy Electricals Limited HBHELI has proposed to set up a bac%ward integration pro=ect for its solar photovoltaic panel business. The company has planned to set up an integrated manufacturing facility for ingots to wafers, cells and panels using crystalline photovoltaic technology. The company, which currently manufactures solar A* panels at its Bangalore plant, has estimated the investment for new facility in the region of Cs J?? crore, M + Camamurthy, e!ecutive director, E"/ said. 56e are currently manufacturing D( 2w solar photovoltaic panels at our Bangalore plant. 6e intend to embar% on a bac%ward integration for this plant and produce solar

20

cells and further manufacture wafers and ingots in house in a phased manner,K he said. The company plans to e!pand the current capacity of its solar A* panel unit from D( 2w to .J? 2w in two phases with D.? 2w in each phase. The proposed plant will be completely automated and first of its %ind in the country. Till now, no other company manufactures their own solar wafers and cells including solar A* panels, Camamurthy said. The E"/ has submitted a proposal to the company9s board and the final decision is yet to be ta%en in this regard, he said. The company9s head office will decide on the location and e!act investment re)uired for the bac%ward integration pro=ect, he said adding that the management was yet to finalize the location. 56e have not decided on the location for this pro=ect and it re)uires about ,?? acres land. Marnata%a government has also offered us land near Bangalore. However, it is yet to be decided on the location,K + * ' / 2urthy, general manager S '+FA* said. Camamurthy said apart from sourcing the components for its own captive use, the electronics division also plans to sell the solar panels in the domestic mar%et. It may be noted, the company is also in the process of setting up a =oint venture with Bharat Electronics Limited for setting up a larger plant to produce solar cells and panels in the country. 54ur E* proposal with BEL is still on and that re)uires huge investment in the region of Cs D,??? crore. That proposal is not yet closed and the approval from the boards of both BEL and BHEL is awaited. 1 business plan has been readied and is currently under discussion at both the companies,K Camamurthy said. The mar%et for solar A* panels is not stable at present and it is e!pected to stabilize in the ne!t five years. BHEL plans to ma%e use of the opportunity in this mar%et as and when it matures, he added.

Bui#ding a diversified B1EL

B1EL is engaged in the design- engineering- manufacture- construction- testingcommissioning and servicing of a ide range of products and services for the

21

core sectors of the economy. *t is ranked as the 12th #argest po er e"uipment manufacturer in the or#d. BHEL is engaged in the design, engineering, manufacture, construction, testing, commissioning and servicing of a wide range of products and services for the core sectors of the economy. It is ran%ed as the ,Dth largest power e)uipment manufacturer in the world. B. &. Rao, +hairman and 2anaging "irector of BHEL, tal%s about the challenges faced by the company in a chat with The Hindu. E!cerpts. ?ith your vast e0perience in industria# engineering- you have been instrumenta# in conceptua#i/ing B1EL(s approach as per the market demand. !an some more change in this approach in the near future3 Biven the present business environment, particularly in the power sector, we are focusing on increasing our value contribution in a shrin%ing mar%et. Towards this, we have adopted a two pronged strategy to sustain profitable growth in the long term. In the power sector, we will be enhancing our focus on EA+ business and enlarging our scope of offer. 6e have a =oint venture with /TA+ called /BAAL, and it would be the manufacturing base for certain B4A e)uipment such as 1HA and +HA. 6e are also wor%ing with BE India to offer water management solutions for the power sector. 'econdly, smaller business areas such as transportation, transmission, and renewable are getting more attention, so as to maintain a balanced portfolio of offerings. In addition, there would be an increased emphasis on technology and CF" so as to meet emerging business re)uirements. 4f course, capability building is a continuous process for fully realizing our manufacturing capacities. After imp#ementing B1EL(s @Strategic &#an 2::A( and @Strategic &#an 2:12( successfu##y- hat is ne0t3 Today the business environment has become very challenging. 6e have numerous issues, both domestic as well as global. I don9t remember the company confronting so many challenges all at the same time, ever. 3ndoubtedly, this could be a short term phenomenon. In the medium and long term, if the country is to achieve higher B"A growth, business prospects are bound to improve. 6e have tried to address several challenges in our new O'trategic Alan D?,>9, and aspire to touch the R,J billion mar% by D?,>. But success is D per cent ideation and -J per cent implementation. 'o the D e see

22

per cent =ob is over. I have put in place an implementation mechanism to ensure the other -J per cent. I am confident of successfully confronting current business challenges to sustain the long term growth of the company. B1EL has been investing heavi#y in research and deve#opment. 1o going to #everage this to fue# gro th3 6e have identified CF" as the %ey driver of sustaining our leadership position in India. 4ur value addition is highest among our peer group companies. This is the one ma=or factor which gives us a competitive edge vis T vis our competitors. In $N,D, we spent Cs. ,,,(D crore on CF", which was around D.. per cent of turnover. By $N,>, this will be more than doubled. "evelopment of adv ultra super critical technology is one area where we are actively wor%ing. $urther, as a part of our long term plan in this area, we have laid out an CF" policy for the company. 1lso, several O2ission9 pro=ects and OTechnology9 plans have been drawn to maintain our technology momentum. ?hat factors have he#ped you register consistent gro th- high turnover and profit3 BHEL has registered more than D? per cent +1BC over the last five years both in turnover and profits. 'hareholders9 wealth has multiplied many times in the past. +urrent stoc% mar%et is an aberration as business confidence is at an all time low. Mey factors which resulted in our performance were capacity and capability building initiatives which happened during D??> ,D. It consisted of manufacturing capability enhancement to D?,??? 26, aggressive recruitment, consistent focus on innovation and various operations improvement measures. ?hat ou#d be your focus areas to make B1EL a g#oba# engineering enterprise3 1s of now, BHEL has references in >: countries, which we will be e!panding particularly in 2E/1 countries. Today, our e!ports cover everything from individual products to turn%ey power plants. 6e are also loo%ing at some global ac)uisitions to strengthen our technology capabilities or supply chain. 1s time progresses, we intend to establish manufacturing# services in certain business areas which can provide synergy to our domestic operations as well as cater to global mar%ets. are you

23

9pdate us on the #atest deve#opments to become accountab#e in the rene ab#e energy segment. 6e are targeting a share in the /ational 'olar 2ission9s proposed target of DD,??? 26 of grid connected solar power. In this direction, BHEL has signed an agreement with 'pain based 1bengoa a leader in solar pro=ects, to provide EA+ solutions in concentrated solar thermal power H+'AI areas. 6e are also wor%ing =ointly with I4+ and IIT Ca=asthan for development of products and systems in +'A. 6e set a new record by installing ,: 26p Brid Interactive 'A* plants across the country. In the conte!t of the Eawaharlal /ehru /ational 'olar 2ission, BHEL is e!ecuting orders for renovation and operation F maintenance of 'A* plants Haggregate D.,: 26pI in La%shadweep. B1EL has massive cape0 p#ans. *n such a scenariocompany in the ne0t five years3 "uring D??> ,D, we spent around Cs. (,??? crore on our e!pansion programmes. In future, we have plans to set up Breenfield manufacturing facilities for Cailways. 6e are waiting for things to move in a favorable direction. 1part from this, our focus would be on strengthening our manufacturing prowess. 6e would also be investing in various =oint ventures formed in the recent years. 6e have crafted new strategies which are now in the implementation phase. Nou may, perhaps, see a new diversified, bigger and more technology intensive BHEL ten years from now. ?hat kind of additiona# investment is being made to ards going green3 6e are an active player in solar and intend to re enter the wind business. But in India and the world, more than :? per cent energy is thermal, with coal as the fuel. 1nd, coal would continue to remain as the dominant source of fuel for the foreseeable future. Hence, BHEL, as manufacturer of e)uipment, believes that the biggest contribution for green energy initiatives is developing energy efficient, fuel efficient and environment friendly e)uipment for our customers. 4ur e)uipment already boasts of world class performance with respect to AL$, operating availability, planned and forced outages. here do you see the

24

Efforts are on to further improve the heat rate and efficiency and reduce au!iliary power consumption. This ultimately results in lower fuel consumption per unit electricity produced. Introduction and indigenization of supercritical technology by BHEL in India is one of the steps in this direction. Eointly with /TA+ and IB+1C, we are developing advanced ultra supercritical technology for the first time in India. 4ther areas attracting investments are commercialization of IB++ and IBBT technologies in power and transportation areas. ?ith many upcoming proBects- you cha##enge3 6e have recruited more than D?,??? people during D??> ,D. BHEL is fully aware that the contribution of all of our talent is an essential component to our performance. 1ccordingly, we have re oriented the focus of our human resources to develop not only each person9s competencies, but also their performance and potential in alignment with our ongoing business challenges. 6e have also done lateral inductions to meet specific re)uirements. $urther, to meet the industry9s re)uirement of s%illed manpower, BHEL has adopted ITIs at Latur, Ba=pur, Mhandwa and Mha%nar. Two more ITIs at Aeramvalur and Haridwar are under approval by respective state technical boards. $urther, we, in association with +IL, "*+ F ''"1, have set up Mabiguru Industrial Training +entre at Bolpur, 'antini%etan to provide high )uality technical education. 4ur welding research institute at Trichy is being leveraged to develop s%ills. 4n the whole, things are moving in the right direction. ou#d need a considerab#e number of ski##ed are you aiming to meet this

peop#e to maintain efficient customer service. . 1o

%iversification he#ps LC, score over B1EL

?ith po er sector ahead LFT9s diversification has wor%ed well in the current difficult times whereas BHEL has been impacted due to its fortunes being strongly lin%ed with the power sector. This is also reflecting in their share prices and performance for the 'eptember D?,D )uarter. Biven that the trend in unli%ely to change any time soon, analysts believe oes far from over- ana#ysts e0pect LC, to outperform going

25

LFT will continue to outperform and the stoc% remains their preferred pic% in the capital goods space.

LC,(s diversification gains

Both LFT and BHEL are %nown for their strong e!ecution capabilities. However, the woes of the power sector and slowing economic growth are reflecting visibly on BHEL9s performance. In spite of its huge order boo%, BHEL could hardly convert these into revenues due to client side issues Hincluding lac% of fuel and policy clarityI. 4ver the last four )uarters, the company9s revenues have remained flat. 1nd if analyst estimates are any indication, revenues for the current financial year are e!pected to remain flat or could even decline marginally. LFT, too, is facing its share of problems, but it is still in a better position given the business diversification. 1bout a )uarter of LFT9s order boo% comes from the power sector as against about J? per cent in the case of BHEL. That apart, LFT has better mi! of public#private sector clients along with relatively higher proportion coming from the e!port mar%ets. 5In our view, presence of LFT in diverse business opportunities ranging from heavy engineering, construction, power, machinery and industrial products, etc lends it a great benefit of diversification. It de ris%s LFT9s business model from slowdown in any particular industry, which ma%es it one of the best options in capital goods space to play the anticipated policy rate easing and conse)uent decline in cost of capital theme,8 says 2isal 'ingh, director institutional research, Celigare +apital 2ar%ets.

/o wonder, BHEL saw its new order inflow decline by >J per cent year on year in

26

the 'eptember )uarter, while LFT reported a <?.< per cent growth as a result of better inflows from construction, hydrocarbons and industrial sectors.

B1EL2 Ba#ance sheet issues

The trend in new orders and progress of e!isting pro=ects is bound to reflect on growth visibility. +urrently, BHEL has an order boo% of Cs ,DD,??? crore or about two and a half time its current turnover. 6hereas LFT has an order boo% of Cs ,:J,??? crore, which is e)ual to three times its standalone turnover. If one ad=usts for the orders that face the ris% of delay#cancellation in the case of BHEL Ha significant ris% feel analystsI, LFT has got higher visibility. BHEL9s management, too, has indicated that e!isting orders from the private sector could face e!ecution delays at the customers9 end.

%*DEREE', ,RE'%S *n Rs crore B1EL

8 chang e D..? >J.? /1 /1 /1 ,.? D?? bps ?.,

LC,

8 change

4rder boo% 4rder inflows E!ecution rate H) o )I 4rder

,DD,<? ? <,,:< ,<,J:< D.(

,:J,:D J D?,-(> ,:,:<<.? D:.? ,<,,-: ,?.> ,,,<>

,,.? <?.< /1 /1 /1 ,>.< <? bps .D.?

boo%#revenue H!I Aower as ; order J?.? boo% Cevenues 4pertaing margin H;I /et profit ,?,.?? profit ,J.? ,,D>:

27

% change is year-on-year Besides, analysts are also watching the balance sheet issues that are cropping up for BHEL. $or instance, inventory levels are rising and clients are delaying their payments Hdebtor turnover ratio in $N,D at D(. days as against the D., days in $N,,I, leading to higher wor%ing capital re)uirements. In D?,, ,D, the additional wor%ing capital re)uirement Htrade receivables plus inventory minus trade payablesI more than doubled to about Cs J,??? crore compared to D?,? ,,. In fact, for the first time in many years BHEL reported a negative cash flow from operating activities in $N,D@cash balance also fell <? per cent to Cs (,>?? crore. 5"ue to slowdown of order inflow and increasing e!posure towards wor%ing capital intensive EA+, BHEL9s wor%ing capital has come under pressure. But, for LFT the ris% is different. It9s order inflow is growing but orders are not li%e BHEL orders, so advances from these orders are certainly supporting the increasing wor%ing capital re)uirements of LFT. 1lso, LFT has the cushion of monetising its 'A*s when time re)uires to meet its wor%ing capital re)uirements. This comfort BHEL hardly en=oys,8 says Cabindra /ath /aya%, who trac%s the firm at 'BI+1A 'ecurities.

Ana#ysis
1s we %now there is cut throat competition between the LFT and BHEL because most of the heavy e)uipments in Indian metro pro=ects are grabbed by LFT. LFT diversify its business in the difficult times which becomes successful decision but BHEL remains with the fortune of power sector which results in the decrease of the share price of BHEL. In our view, presence of LFT in diverse business opportunities ranging from heavy engineering, construction, power, machinery and industrial products, etc lends it a great benefit of diversification that is why LFT has edge over BHEL. "ue to this diversification there is a difference in new orders i.e. BHEL proportion has been reduced and comes to >J; but on the other hand LFT has increased its growth in getting new order by <?.<;.

1igh RC% spend #ights up ne products- app#ications at B1EL

Having recorded the highest ever turnover of Cs <.,?:? crore, BHEL has spent D.<; of the company9s turnover on CF", which amounts to Cs >JJ crore. 6ith this, the

28

+orporate CF" unit in Hyderabad has achieved Cs (,<<. crore during D??- ,? through products and systems developed in house, as against Cs :,<?? crore achieved last year. In fact, BHEL is one among the four Indian companies figuring in OThe Blobal Innovation ,???9 to be ran%ed for its record e!penditure on CF". The CF" spend is e!pected to go up from the present level to :; in the ne!t four to five years. The +orporate CF" unit has been involved in specific product development in the field of power generation, transmission and utilisation. 1s part of an 2o3 with the government of India, BHEL has developed new products and applications for power generation. 'ome of the specific initiatives include development of super critical and ultra super critical power pro=ects, according to H' Eain, B2 in charge. Alant specific training simulators were designed for Mhaper%heda and Bhusawal thermal power plants. Besides, performance analysis, diagnostics and optimisation pac%ages were also developed for hydro electric pro=ects at 'ewa and Aarbati. $urther, the unit it is now developing a centre for /ano Technology and centers of e!cellence in areas of machine dynamics and compressor F pumps. The +entre for /ano Technology is being developed at a cost of Cs J.D> crore, and it is e!pected to be functional by Eune D?,,. It would ma%e BHEL future ready in the super critical regime. 'ome of the other centers of e!cellence include +entre of E!cellence for 2achine "ynamics, which is being set up with an investment of Cs >.D, crore and +entre of E!cellence for +ompressors and Aumps for Cs -.- crore. 2eanwhile, the unit has received a LoI from 1ABenco for design, engineering, manufacture, supply, erection, civil wor%s, testing and commissioning of phase shifting transformer for its Mothagudem thermal power station. The value of the contract is Cs D>.?J crore. Besides, it has got orders from /aval 'cience and Technological Laboratory, *isa%hapatnam and from "efense 2achinery "evelopment Establishment, Bhopal . 4n the patent front, the +orporate CF" unit has filed D(< intellectual property right HIACI applications. The applications comprise ,<< patents and ,<? copyrights. 6ith this addition, it has filed ,,,?? IACs till date. 1ccording to Eain, the unit is planning to file over .?? IACs by D?,D.

29

Ana#ysis
BHEL is in the top four companies in terms of spending in CF". They are spending D.<; of turnover currently and loo%ing to e!pand it in the future. There current CF" is done in field of power generation and transmission and utilization. +ompany is also spending its revenues in developing nano technology and centre for e!cellence in areas of machine dynamics and compressor and pumps .they are establishing various plant for that so that mar%et share can be increased because nano technology which they are going to prepare is very helpful in competition.

30

Ana#ysis of the Ba#ance Sheet C &rofitabi#ity Ratios of the !ompetitors of B1EL 1. LC,
Ba#ance Sheet
Mar 612 ,D mths Sources Ff 5unds Total 'hare +apital E)uity 'hare +apital 'hare 1pplication 2oney Areference 'hare +apital Ceserves Cevaluation Ceserves 'et orth 'ecured Loans 3nsecured Loans ,ota# %ebt ,ota# Liabi#ities App#ication Ff 5unds Bross Bloc% LessG 1ccum. "epreciation 'et B#ock +apital 6or% in Arogress *nvestments Inventories 'undry "ebtors +ash and Ban% Balance Total +urrent 1ssets Loans and 1dvances $i!ed "eposits Total +1, Loans F 1dvances "eferred +redit +urrent Liabilities Arovisions Total +L F Arovisions 'et !urrent Assets 2iscellaneous E!penses ,ota# Assets +ontingent Liabilities Boo% *alue HCsI ,DD..J ,DD..J ?.?? ?.?? D:,?>-..? D,.,. 27-22).:2 ,,.:<.<. J,..D..< <-;<7.AA )7-11;.A< Mar 612 ,D mths ,?,(,J.>. D,-:D.(, A-GGG.1) J?>.-. 17-;A1.<: ,,>>(.(D ,J,>D-.J. ,,?D?.?D,,:D(.:: D,,..:.>D JJ:.,> .<,J:>... ?.?? <?,(->.:< D,<J>.?<<,?J..(D 1:-AA2.;2 ?.?? )7-11;.A< D,:??.,.,,.:< Mar 611 ,D mths ,D,.>> ,D,.>> <(J.<, ?.?? D,,<<..?: DD.,< 21-;+G.2G ,,?(<.?. (,?-J.?> A-1G1.11 2<-::A.)A Mar 611 ,D mths J,J->.?D D,DD?.JD G-GAG.2: >J:.?? 1+-G;+.;2 ,,:>>.,: ,D,.D>.(, ,,:,J.-J ,:,:D<.>. ,-,.--.D< D,,.<> <:,D<..<. ?.?? D(,,<-.:( D,D<<..< DJ,<>D.-G-;G1.)7 ?.?? 2<-::A.)A ,,(.>.(( <:D..? Mar 61: ,D mths ,D?... ,D?... D:.??.?? ,J,,.D.JD D<.D1;-)11.G+ -::.>< :,J.:.,? G-;::.;) 27-112.+A Mar 61: ,D mths >,D<:.>J ,,>D>.(J 7-7:;.1: J:>.(( 1)-A:7.)7 ,,.,:.<> ,,,,(<.>? ,,,?..J,<,(J<.-( ,D,((D.:: <D(.-J D(,(><..?.?? ,-,..<.>> D,,JJ.<( D,,(<D.,< 7-:+1.)G ?.?? 27-112.+A ,,>,-.<<?<.DJ Mar 6:< ,D mths ,,>.,. ,,>.,. ?.?? ?.?? ,D,<,>.-( D..:12-+7<.G< ,,,?D.<J :,.:<.(: G-77G.:) 1<-:17.A2 Mar 6:< ,D mths :,:>:.?? ,,.D,.<+-17).G1 ,,?.?.-;-2G).A2 :,J?:.?: ,?,?::.:D (-<.,< ,(,::<.>? >,,-J.J: JD.,( D<,J<..>, ?.?? ,:,D,,.?. <,?((.:< ,J,D>>.:> 7-77A.1+ ?.D( 1<-:17.A2 ,,<>,.J( D,D.<D

31

&rofitabi#ity Ratios
Mar 612 &rofitabi#ity Ratios 4perating Arofit ,<.(< 2arginH;I Arofit Before Interest 1nd ,,.?< Ta! 2arginH;I Bross Arofit 2arginH;I +ash Arofit 2arginH;I 1d=usted +ash 2arginH;I /et Arofit 2arginH;I 1d=usted /et Arofit 2arginH;I Ceturn 4n ,,.,> -.:. -.:. >.D? >.D? Mar 611 ,..-, ,D.-> ,<.D. ,?.>, -.J, J..( J.<> ,D.D? ,J.?J ,:.(< .?..,: .?..(. ,..(J Mar 61: ,(.(> ,..J,:.D, -.(: -.-J ,D.D, ,D.D, ,(.?? D(... ,(.J( <.D.D( <.D.>J ,>.<: Mar 6:< ,..(? ,<.?( ,<.D> J.(: J.(: >.<: >.<: ,>.,< DD.?. D?.(< D<<.(D D<..,> D:.>(

+apital -.-(

EmployedH;I Ceturn 4n /et 6orthH;I ,:.-> 1d=usted Ceturn on /et ,:.>( 6orthH;I Ceturn on 1ssets .>-.J(

E!cluding Cevaluations Ceturn on 1ssets .>-.J( Including Cevaluations Ceturn on Long Term ,?.>< $undsH;I

Ana#ysis
The /et 6orth of the company is sharply increasing from D??- to D?,D Hi.e. from Cs. ,D,.(? cr. to Cs. D:,D<< cr.I. The /et Bloc% of the company is also increased from D??- to D?,D Hi.e. from Cs. .,,:. cr. to Cs. >,((( cr.I. The Total 1ssets of the company shows a sharp increment from D??- to D?,D as in D??- it was only Cs. ,-?,:.>D cr. and in D?,D it increased to Cs. <:,,J.>- cr. This shows that the company has e!pand its operation from D??to D?,D as it invested more amount in purchasing assets.

32

The Bross Arofit margin of the company shows the fluctuation from D??- to D?,D Hi.e. in D??- it was ,<.D>;, in D?,? it increased to ,:.D,;, but in D?,, it decreased to ,<.D.; and in D?,D it further decreased to ,,.,>;I.

The 1d=usted /et Arofit margin of the company also shows the fluctuation in the same manner as in D??- it was >.<:;, in D?,? it increased to ,D.D,;, but in D?,, it decreased to J.<>; and in D?,D it further decreased to >.D?;.

The 1d=usted Ceturn on /et worth of the company is constantly decreasing from D??- to D?,, F in D?,D it increased but not by much percentage points Hi.e. in D??- it was D?.(<;, in D?,? it decreased sharply to ,(.J(;, D?,, it further decreased to ,:.(<; but in D?,D it increased by .,< percentage points i.e. ,:.>(;I.

The Ceturn on 1ssets Hincluding CevaluationI has shown a sharp increment from D??- to D?,D Hi.e. in D??- it was D<..,>, in D?,? it was <.D.>J, in D?,, it was .?..(. and in D?,D it increased to .>-.J(I. This is because the company has been investing large amount of money in buying assets as the operation of the company is e!panding.

2. BER
Ba#ance sheet
Mar 612 Mar 611 ,D mths ,D mths Sources Ff 5unds Total 'hare +apital E)uity 'hare +apital 'hare 1pplication 2oney Areference 'hare +apital Ceserves Cevaluation Ceserves 'et orth 'ecured Loans 3nsecured Loans ,ota# %ebt >D.,( >D.,( ?.?? ?.?? ,,?.D.. , ?.?? 1-11+.7 A ,,D(-..>:.?? 1-A++.< >D.,( >D.,( ?.?? ?.?? J>>.(? ?.?? <+<.AG J(?.D.>(.?D 1-))G.)1 Mar 61: ,D mths >D.?? >D.?? ?.?? ?.?? (<,.D? ?.?? A:).2: :<,.<( .?,.D. <)2.G: Mar 6:< ,D mths >D.?? >D.?? ?.?? ?.?? .J-.,: ?.?? 7G1.17 (<:.-J >,.JD A:A.;:

33

,ota# Liabi#ities

< 2-;7<.7

2-2;G.:A

1-G)7.;: Mar 61: ,D mths ,>?..< <,.<. 1)<.:< ,?.<( +.A; ,:... ,,->J.>< ,<>.(< D,,<,.J? >>D.?> JJ:.J, <,>J-.(J ?.?? D,?>..J> D<<.D. D,<?J.,, 1-+;1.7A ?.?? 1-G)7.;: :D.>< ->.(>

1-2G;.<7 Mar 6:< ,D mths ,,<.,> DD.,D <1.:7 :..D +.A; ,D..J ,,D>J.?D ,:.J: ,,<?(.<: (>,.,: :-..-J D,:>D..J ?.?? ,,<<>.,D (>.(> ,,.?..>1-1GA.G< ?.?? 1-2G;.<+ ,>.?J >>.-.

G Mar 612 Mar 611 ,D mths ,D mths App#ication Ff 5unds Bross Bloc% LessG 1ccum. "epreciation 'et B#ock +apital 6or% in Arogress *nvestments Inventories 'undry "ebtors +ash and Ban% Balance Total +urrent 1ssets Loans and 1dvances $i!ed "eposits Total +1, Loans F 1dvances "effered +redit +urrent Liabilities Arovisions Total +L F Arovisions 'et !urrent Assets 2iscellaneous E!penses ,ota# Assets +ontingent Liabilities Boo% *alue HCsI D:(.,> (D.D> 1<).<: ..:, 2)7.;7 D-.:( <,,<>.: ? J...J. .,?,,.? ,,.?(.D . ?.?? :,.,J., . ?.?? D,>DD.. D(-.-? D,--D.J . 2-+27.) : ?.?? 2-;7<.7 G D><.?? ,:...: D?-.J.>..> 1G2.+2 ,D.-( 1)G.;: <J.<( <,,:>.,DD:.:< <,.D,.?J JJ>.<> >D?.-> :,?D-..D ?.?? D,>?,.?<:...D <,?::.:, 1-<A).<1 ?.?? 2-2;G.:< ,<?.J,<,.(D

&rofitabi#ity Ratios
Mar 612 &rofitabi#ity Ratios 4perating Arofit 2arginH;I ,<.>D Arofit Before Interest 1nd Ta! ,<.D< Mar 611 ,D.<> ,,.-Mar 61: ,D.-? ,D..J Mar 6:< ,D.:> ,D.?.

34

2arginH;I Bross Arofit 2arginH;I +ash Arofit 2arginH;I 1d=usted +ash 2arginH;I /et Arofit 2arginH;I 1d=usted /et Arofit 2arginH;I Ceturn 4n +apital EmployedH;I Ceturn 4n /et 6orthH;I 1d=usted Ceturn on /et 6orthH;I Ceturn on 1ssets E!cluding Cevaluations Ceturn on 1ssets

,<.D: (.-. (.-. (..> (..> ,(.,( D?.?: D?.?: ,:...:

,D.?D (.-: (.-: (.J, (.J, D:..<..,< <<.?,<,.(D ,<,.(D :J.?(

,D.:J (.-< (.-< (..(..D:.,, DJ.:J D-.,< ->.(> ->.(> :..(D

,D.D, (.?< (.?< :.-? :.-? D?.(. D?.:? ,-.>< >>.-. >>.-. <-.JD

Including ,:...: <-.-:

Cevaluations Ceturn on Long Term $undsH;I

Ana#ysis
The /et 6orth of the company is sharply increasing from D??- to D?,D Hi.e. from Cs. :(,.,: cr. to Cs. ,,,..:> cr.I. The /et Bloc% of the company is also increased from D??- to D?,D Hi.e. from Cs. -,.?: cr. to Cs. ,-<.-? cr.I. The Total 1ssets of the company shown an increment from D??- to D?,D as in D??- it was only Cs. ,D(J.-. cr. and in D?,D it increased to Cs. DJ:-.:( cr. This shows that the company has e!pand its operation from D??- to D?,D as it invested more amount in purchasing assets. The Bross Arofit margin of the company shows the fluctuation from D??- to D?,D Hi.e. in D??- it was ,D.D,;, in D?,? it increased to ,D.:J;, but in D?,, it decreased to ,D.?D; and in D?,D it increased to ,<.D:;I. The 1d=usted /et Arofit margin of the company has shown an increment from D??- to D?,, but in D?,D it decreased Hi.e. in D??- it was :.-?;, in D?,? it increased to (..-;, in D?,, it increased to (.J,; but in D?,D it decreased to (..>;I. The 1d=usted Ceturn on /et worth of the company is constantly increasing from D??- to D?,, but in D?,D it sharply decreased by ,<.?. percentage points Hi.e. in D??- it was ,-.><;, in D?,? it increased sharply to D-.,<;, in D?,, it

35

further increased to <<.?-; but in D?,D it decreased by ,<.?. percentage points i.e. D?.?:;I. The Ceturn on 1ssets Hincluding CevaluationI has shown a sharp increment from D??- to D?,D Hi.e. in D??- it was >>.-., in D?,? it was ->.(>, in D?,, it was ,<,.(D and in D?,D it was ,:...:I. This is because the company has been investing large amount of money in buying assets as the operation of the company is e!panding.

). BEML
Ba#ance Sheet
Mar 612 Mar 611 Mar 61: Mar 6:< ,D mths ,D mths ,D mths ,D mths Sources Ff 5unds Total 'hare +apital E)uity 'hare +apital 'hare 1pplication 2oney Areference 'hare +apital Ceserves Cevaluation Ceserves 'et orth 'ecured Loans 3nsecured Loans ,ota# %ebt ,ota# Liabi#ities .,.>> .,.>> ?.?? ?.?? D,,<?.< , ?.?? 2-1A2.: ; >J,.>, ,(,.DD <+2.<) )-117.: .,.>> .,.>> ?.?? ?.?? D,?->.D > ?.?? 2-1)<.: + (>(.DD ,.?.-? ;1A.12 2-<7G.1 .,.>> .,.>> ?.?? ?.?? ,,--(.? > ?.?? 2-:)A.; + >:<.?: ,::.:? <:;.77 2-<+G.) .,.>> .,.>> ?.?? ?.?? ,,J><.(? ?.?? 1-<17.)A .>?.-, -(.>< 7GA.G+ 2-+;).:1

1 G < Mar 612 Mar 611 Mar 61: Mar 6:< ,D mths ,D mths ,D mths ,D mths App#ication Ff 5unds Bross Bloc% LessG 1ccum. "epreciation 'et B#ock +apital 6or% in Arogress *nvestments Inventories ,,,DJ.. : :--.D< 72<.22 D<.J( +.+) D,.D?.( . -.:..< :::.-? );<.7) >-.:J ;.2: ,,JJJ., >-J.>, :D..J. 2A).;A <D.D, ;.2: ,,(:<.? ? >.-.:, .-..?D 277.+< D<.(, A.<7 ,,(D?.:J

36

'undry "ebtors +ash and Ban% Balance Total +urrent 1ssets Loans and 1dvances $i!ed "eposits Total +1, Loans F 1dvances "effered +redit +urrent Liabilities Arovisions Total +L F Arovisions 'et !urrent Assets 2iscellaneous E!penses ,ota# Assets +ontingent Liabilities Boo% *alue HCsI

>-D..( ,-D..> <,.?:.: > ->D.?? ?.?? .,<>>.: > ?.?? ,,:?,.? : <,-.?D ,,JD?.? > 2-77A.7 : ?.?? )-117.: 1 D,D.:D :D,.:J

,,DJ>.: < .J.DJ <,DD..> D :-J.-< ?.?? <,JD<.( : ?.?? ,,?D:.( : <,-.,. ,,<...> 2-+A;.; G ?.?? 2-<7G.1 A ,>-.D, :,<.(.

,,<(?.> . .,>.,? <,.<?.J . :<(.:< ,:?.?: .,,,>.. D ?.?? -D:.JJ :(?.JJ ,,.J(.> ( 2-G):.G G ,..: 2-<+G.) < D?(...J-.<.

,,:.:.D> -J.:, <,D(..<( .:-..( ,(:.?? <,JJJ.JD ?.?? ,,,(..-:<(.,: ,,>?,.,. 2-1;A.G; J.<? 2-+;).:) ,:?.>, .:-.-<

&rofitabi#ity Ratios
Mar 612 &rofitabi#ity Ratios 4perating Arofit ..:, 2arginH;I Arofit Before Interest 1nd D.J: Ta! 2arginH;I Bross Arofit 2arginH;I +ash Arofit 2arginH;I 1d=usted +ash 2arginH;I /et Arofit 2arginH;I 1d=usted /et Arofit 2arginH;I Ceturn 4n D.-? D.:. D.:. D.?( D.?( Mar 611 ..>J <.., <.:? D.(> D.(> :.:( :.:( :.?( >.?? ,..( Mar 61: ,,.D. -.J,?.,, >.(> >.(> >.(< >.(< ,,.-< ,?.-. -..D Mar 6:< ,<..,D.<, ,D.:D J.J, J.J, -.<( -.<( ,(.,? ,..?,,.>?

+apital <.--

EmployedH;I Ceturn 4n /et 6orthH;I D.(< 1d=usted Ceturn on /et ,.DD

37

6orthH;I Ceturn

on

1ssets :D,.:J

:,<.(. :,<.(. (.--

.JJ.-.JJ.-,>.D:

.:>.-. .:>.-. D?.J>

E!cluding Cevaluations Ceturn on 1ssets Including :D,.:J Cevaluations Ceturn on Long $undsH;I Term :.,<

Ana#ysis
The /et 6orth of the company is increasing from D??- to D?,D Hi.e. from Cs. ,-,:.<> cr. to Cs. D,>D.?J cr.I. The /et Bloc% of the company has shown a sharp increment from D??- to D?,D Hi.e. from Cs. D::..- cr. to Cs. :D-.DD cr.I. The Total 1ssets of the company shown an increment from D??- to D?,D as in D??- it was only Cs. D.J<.?< cr. and in D?,D it increased to Cs. <,,:.?, cr. This shows that the company has e!pand its operation from D??- to D?,D as it invested more amount in purchasing assets. The Bross Arofit margin of the company is constantly decreasing from D??- to D?,D Hi.e. in D??- it was ,D.:D;, in D?,? it decreased to ,?.,,;, but in D?,, it decreased sharply to <.:?; and in D?,D it further decreased to D.-?;I. The 1d=usted /et Arofit margin of the company has shown a constant decrement from D??- to D?,D Hi.e. in D??- it was -.<(;, in D?,? it decreased to >.(<;, in D?,, it decreased to :.:(; and in D?,D it further decreased to D.?(;I. The 1d=usted Ceturn on /et worth of the company is constantly decreasing from D??- to D?,D and in D?,, it sharply decreased by >.-( percentage points Hi.e. in D??- it was ,,.>?;, in D?,? it decreased to -..D;, in D?,, it further decreased by >.-( percentage points i.e. ,..(; and in D?,D it decreased to ,.DD;I. The Ceturn on 1ssets Hincluding CevaluationI has shown an increment from D??- to D?,D Hi.e. in D??- it was .:>.-., in D?,? it was .JJ.--, in D?,, it was :,<.(. and in D?,D it was :D,.:JI. This is because the company has been investing large amount of money in buying assets as the operation of the company is e!panding.

38

39

5indings
2ar%et share of BHEL is constantly decreasing as in the ,,th five yrs. Alan its mar%et share is ::; and earlier it was >?; and currently its mar%et share is around <:;. The competitors of BHEL are performing better. BHEL faces intense competition from +hinese companies. The competitors of BHEL has number of product lines.

40

Recommendations
The company should thin% to diversify its operation in different fields as their other competitors are doing. Li%e, BE2L manufactures a wide range of products to meet the needs of 2ining, +onstruction, Aower, Irrigation, $ertilizer, +ement, 'teel and Cail 'ectors. The earthmoving e)uipment includes Bulldozers, "ump Truc%s, Hydraulic E!cavators, 6heel Loaders, Cope 'hovels, 6al%ing "raglines, 2otor Braders and 'crapers. Ara= Industries Ltd. manufactures Heat e!changers, cooling towers, water condensers and radiators& "istillery machinery and e)uipment& Brewery plant and e)uipment& 4rganic chemical production plant and e)uipment& Industrial alcohol and wort production plant and e)uipment& 6ater, sewage and industrial effluent treatment plant and e)uipment& etc. 'any includes +oncrete 2achinery& Aort machinery& Hoisting machinery& +oal mining machinery& Aile driving machinery& Coad construction machinery& 6ind power e)uipment. BBC includes Aower Aro=ects "ivision& 4il F Bas E)uipment "ivision& 1ir $in +ooler "ivision& Environmental Engineering "ivision& Electrical Aro=ects "ivision& BBC Boilers Arivate Limited& BBC Turbines +ompany Arivate Limited& Arogen 'ystems F Technologies Limited& etc. 4r the company should go for bac%ward integration i.e. in the solar photovoltaic panel business.

41

Limitations of Study
The study was conducted to understand with respect the "ecrease in the 2ar%et 'hare of BHEL. To understand the overall wor%ing of the company, the period of (? days is not enough. 'econdary data can be general and vague. The data sources may lac% reliability and credibility. 'ome secondary data may simply be inaccurate. The sample used to generate the secondary data is small.

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