Will bullet train project boost BHEL?
It was announced on Thursday that BHEL will manufacture rolling stock for the bullet train in a joint venture with Kawasaki Heavy Industries Ltd (KHI).
The Mumbai-Ahmedabad high-speed rail project could serve as a major shot in the arm for state-run engineering giant Bharat Heavy Electricals Limited (BHEL).
The company received a huge boost after it was announced that BHEL will manufacture rolling stock for the bullet train in a joint venture with Kawasaki Heavy Industries Ltd (KHI). It will be involved in work from manufacturing coaches and civil construction work to laying down rail links.
Kawasaki Heavy Industries is the manufacturer and supplier of the Shinkansen High-Speed Bullet Trains and has supplied metro train sets to countries like USA, Singapore, Taiwan, and Hong Kong, among others.
Railway Minister Piyush Goyal had announced an advancement of bullet train deadline by a year recently to 2022.
During the joint statement issued on Thursday, Prime Minister Narendra Modi and Japanese Prime Minister Shinzo Abe pledged to advancing the ‘Make in India’ and transfer of technology for high-speed rail projects.
Watch | India's Bullet Train Ambitions
BHEL can become a major player in future high-speed rail projects in the country — routes for which have already been identified — as it would have developed the required ecosystem and capability to undertake large projects and also bid for global projects.
The company is also looking at opportunities involving the modernising of the Indian Railways, which is currently being pushed by the government.
BHEL is looking to diversify into other business verticals as its order book has been shrinking. The power sector, which contributes 50 percent of business, has been moving slowly due to lack of clearance leading to cost overruns. It has been facing pressure on margin stiff competition from the Chinese players in the power sector.
The company is also looking at opportunities in building metro trains, for which work is underway in many cities in India.
The company had an outstanding order book of 124,000 crore at the end of June quarter.However, brokerages such as Kotak and UBS are not very positive on the company as they feel that the business order from bullet train is minuscule of Rs 1,500 crore compared to the annual revenue of Rs 30,000 crore. UBS also said that the outlook for power sector remains weak in the medium term.