BHEL: Desperate bid to preserve cash

At a time when the Finance Minister has tried to allay investor concerns about the state of the economy and criticised rating agency Standard & Poor’s (S&P) for not improving India’s rating, the reality presents a completely different picture with a series of project cancellations by India Inc. For instance, Reliance Infrastructure is in the process of cancelling mega projects worth Rs 20,000 crore on account of inordinate delays by government agencies. Public sector behemoth, BHEL, is exiting its four joint venture (JV) projects with state utilities on account of delays and cash crunch. On the other hand, nearly 15,000 megawatt (MW) of gas-based power projects worth over Rs 75,000 crore are idling due to non-supply of natural gas from Reliance’s KG basin, reports suggest. A peculiar case While all the above cases, which have been reported, point out to a systemic failure, BHEL’s case is peculiar and probably brings out the worst display of planning by the government. One of the reasons cited by BHEL for walking out of the project is a decline in cash balance, though the main reason cited is lack of progress in these projects. Lack of progress on account of state electricity board (SEB) is a known fact and has been on account of various reasons ranging from poor financial health of the boards to delay in land acquisition and environmental clearances to fuel linkages. However, decline in cash balance is a new one in the long list of excuses and deserves a closer look. This comes at a time when the company has posted a record turnover of Rs 50,015 crore and a net profit of Rs 6,485 crore. Finances Despite this, nearly Rs 40,000 crore is still due to the company from power generating firms. Though the profits might look sizeable, BHEL has a negative cash flow on account of its receivables. In other words, its cash inflows are lower than cash outflows despite making profits. more at: http://www.business-standard.com/article/companies/bhel-desperate-bid-to-preserve-cash-113052100626_1.html