BEML sees FY09 growth at 20%

Q: You spoke about the metro coach division, how big can that part of the business become for BEML in a 1-2 years from now as a percentage of your order book?

A: If you look at last year’s rail business, the turnover was Rs 105 crore. In the current year, it scaled to Rs 272 crore. We are pretty confident that this will cross Rs 500 crore in the current year with DMRC and other rail orders coming in. For the first time in its history, the company forayed into the rail spares business. We hold an order book of about Rs 102 crore in the rail spares business. Of this, we have already delivered Rs 10 crore this year. So, this should add almost Rs 100 crore out of the Rs 500 crore business that we are expecting in the current year. This would help the company’s overall growth.

Q: Give us an idea of the kind of capital expenditure that you hope to incur on expansion? You also had plans to finalize a joint venture with a German company for your boogie and wagon business - what's the update there?

A: From 2004-05 to 2007-08, we have finalised about Rs 440 crore capex. In the current year, we are planning around Rs 120-150 crore. On an average, about Rs 550 crore capital outlay is predominantly linked to the expansion and diversification of projects, which includes the Metro, the rail unit which we have already established at Kolar Gold Fields, various modernization and planned renewal efforts of replacing machineries, and various inputs that we are bringing for the ERP company that we have implemented. We are going for supply chain management and for PLM, or product lifecycle management. So, these will help us to improve business efficiency, productivity, and profitability.

Q: The government is looking to scrap purchase preference that some companies such as yours are currently enjoying. How will this change the comparative landscape for companies such as BEML?

A: The government is discontinuing its purchase preference policy which is basically valid for tenders between Rs 5 crore to Rs 100 crore. We do not benefited greatly as most of our orders are outside the purview of the purchase preference policy. In addition, the government said individual ministries can continue to offer purchase preference policy if they consider so. So, in some form or the other it will be available, but this will not materially alter the business growth of BEML as already planned.