For BHEL, Coalgate concerns over, new orders inflow and margins hold key

BHEL after hitting 52 weeks lows of Rs 195.05 on 12 September’12 due to Coal gate concerns, has. however, rebounded by a sharp 19% thereafter. The Inter Ministerial Group though nearing phase I of scrutiny of 29 coal mines allotted to the private sector players, so far hasn't de-allocated coal mines of a company whose Engineering procurement and construction (EPC) or boiler turbine generator (BTG) contract has been awarded to BHEL. Though some customers of BHEL as GVK power and DB power have had to pay some penalty in terms of recommendation for deduction of bank guarantee by IMG however Chirag Muchhalla, analysts at Nirmal Bang observes that, this is unlikely to result in any delay or cancelation of order execution for BHEL. GVK Power as per recommendation of IMG will see deduction of bank guarantee for Seregarha coal block while DB power will see deduction for Durgapur II/Sariya coal block of DB Power. However the final recommendation will have to be given by Coal ministry after seeing IMG's recomendation . BHEL has 2x270MW BTG order from GVK Power linked to power project with Seregarha coal mine and 2x600MW BTG order from DB Power is linked to Durgapur II/Sariya coal block. Though deduction of bank guarantee does not pose the risk of coal block de-allocation, however CHIRAG adds that “even in a worst-case scenario if GVK and DB Power were to lose coal blocks in futur it would not impact BHEL”. more at: http://business-standard.com/india/news/for-bhel-coalgate-concerns-over-new-orders-inflowmargins-hold-key/187994/on