SWOT ANALYSIS OF BHEL, JHANSI

STRENGTHS The company has 180 products under 30 major product groups that cater to the needs of the core sector like power, industry, transmission, transportation, defense, telecommunications and oil business. BHEL's ability to acquire modern technology and make it suitable to Indian conditions has been an exceptional strength of the company. Strong relationship with NTPC is strength as NTPC is planning a capacity expansion of Rs. 52bn and based on the past, 85% of NTPC projects have been bagged by BHEL. The company also enjoys purchase price preference.

WEAKNESSES PSU status is a big weakness for BHEL as it is subject to their rules and regulations and is forced to carry a huge amount of labor force, which it is unable to retrench. The company offers very stringent credit facilities to the customers and this is a weakness when compared in the face of rising competition. On the other hand their customers in the power segment, SEBs, have a huge amount of receivables standing against their name in the company's balance sheet. This is a major weakness of the company. The company is vertically integrated, which could have been avoided by outsourcing its components for power generation and transmission. This could reduce the cost.

OPPORTUNITIES The power sector reforms are expected to pick up in the near future in India, which would directly benefit BHEL. Increase in defense budget will increase the top line for the company. NTPC is planning additional capacities to the tune of 2,800 MW, at a cost of Rs 52 bn. BHEL could benefit a lot as it has happened in the past that significant portion of the project of NTPC is handled by BHEL. Nearly 85% of the NTPC projects were assigned to BHEL only. The business of modernization and renovations of power plants is expected to grow in India. The disinvestment plans of the government would bring in new resources and experience into the company. Joint venture with Siemens in the name of Power Plant Performance Improvement Ltd. (PPIL) is a major strength for the company. This tie-up will be beneficial as there is a lot of scope for business.

THREATS The global trend of consolidation has already resulted in a fall in turnover of the company and this will prove to be a major threat in the years to come as well. The company is dependent on NTPC to a great extent. Recently, the government has permitted the import of second hand capital goods that are 10 years old without the need for a license. This move will definitely increase competitive pressures for BHEL.