BHEL, battling falling margins & orders, hopes worst is over

Bharat Heavy Electricals Ltd (BHEL) is feeling the pinch of being the largest power equipment maker in the country. With a crippling slowdown facing the sector, its order book has dried by half and its investors have given it a thumbs down, with share prices at a seven-year low. Slowdown in demand, a lower order book and implementation issues due to payment delays by customers, deteriorating working capital, depleting cash in the books and falling operating profit margins are dragging the company down - signifying the ills now gripping the capital goods sector. "A host of infrastructural bottlenecks related to power shortages, mining ban in many states and delays in commissioning of large projects are key headwinds for recovery in industrial production. We are currently operating in a difficult business environment," said B Prasada Rao, chairman and managing director, in a recent investor conference call. Power, which contributes almost 80 per cent of BHEL's revenue, has been the biggest worry. The company used to win about Rs 60,000 crore of orders in a year. This has come down to Rs 25,000-30,000 crore. Once an order is booked, it takes two to three years for BHEL to make the equipment, making it important to keep the project pipeline moving. To combat this, the company is looking for other opportunities, particularly from the state and central utilities, which continue to invest in new projects as compared to private sector power companies. more at: http://www.business-standard.com/article/companies/bhel-battling-falling-margins-orders-hopes-worst-is-over-113062800027_1.html