Recently, State-owned power equipment maker Bhel emerged as the lowest bidder for a thermal power project in Bangladesh. The $1.6-billion project will give a boost to India's energy diplomacy.
The proposed plant at Khulna will run on imported coal with capacity of 1,320 megawatt (MW), with two units to be built each of 660MW.
Industry sources said Bhel had emerged as the lowest bidder. The decision on awarding the project will be taken by the end of March. It will be the company's biggest overseas power contract.
The tender was floated by Bangladesh India Friendship Power Company, a 50:50 joint venture between NTPC and the Bangladesh Power Development Board.
Meanwhile, BHEL has commissioned a 500MW unit at Anpara-D thermal power plant in Uttar Pradesh.
During the last few years the government of India has taken steps to improve the health of the power sector by resolving the coal supply issues and bringing state governments on board to improve the financial health of state electricity boards.
On the other hand on account of the poor state of the entire power sector, BHEL’s receivables have remained high. The company’s receivables stood at Rs.35,900 crore, more than its annual revenue of Rs.30,667.63 crore in March 2015. However, its management pointed out that about 50% of it is deferred debt which will be due for collection once certain milestones are achieved and the remainder are collectibles, of which over Rs.10,000 crore are more than a year old.
BHEL is a debt-free company and if the government’s measures of Make in India and other electricity reforms are to take off, the company is ideally positioned to capitalise on it. Though 80% of current revenue and order book is from power sector (largely generation), Bhel has taken other initiative to augment growth in future in the other segments.
Industrials which accounts for nearly 20% of the revenue and order book and caters to segment like power transmission, railways, water treatment, defence and solar is likely to see action in the near to medium future.
The government’s initiative of strengthening the state electricity boards through UDAY is likely to see order flows increasing in the transmission sector rather than generation. Bhel has significant presence in the field of power transmission in India with a wide range of transmission systems and products in its portfolio. The company is one of the leading players in transformers in the country and has started booking in big orders in the space.
In order to capitalise on the solar sector, the company is capitalising on its knowledge in the sector. Bhel manufactures space grade solar panel and space grade batteries in association with ISRO. All Indian satellites launched by ISRO are equipped with Bhel manufactured solar panels since 2002 and batteries since 2005. The company is planning to ramp up its cell & module production capacity and enhance EPC capabilities to address the domestic market demand.
In railways Bhel provides electrical propulsion system and its controls and accounts for more than 40% of electric locomotives in operation by Indian Railways. The company is augmenting its locomotive capacity and tying up with global companies to meet the increased demand from dedicated freight corridor.
Bhel is an established supplier for defence equipment. The company is working closely with various defence research institutes of the country to develop new products under the Make in India programme. It has also tied up to address the business opportunity of producing six submarines for Indian Navy.
While it is still early days for the industrial segment to provide the next leg of growth opportunity, but the Bhel is well placed to capitalise on the opportunity.
The company is available at less than its book value, with nearly half of its market capitalisation in cash as per last balance sheet. Dividend yield at current price level is still around 1.12 per cent thus giving some more room before it becomes very attractive.
Source: The Business Standard, Internet and Individual Research.