After taking into account a tight macro-economic environment, Bharat Heavy Electrical Ltd (BHEL) has given conservative order inflow guidance at 14,000-15,000 megawatt (MW) for financial year 2012-13.
The state run company had missed its FY12 order guidance by 64% to Rs 22,096, registering the biggest drop in ten years.
The company's, chairman and managing director B Prasada Rao, however says that he expects the NTPC's 800 MW order within a month. Rao is confident of being able to face competition from China and has been able to offer competitive prices competition from Chinese manufacturers.
However, going ahead, key concerns like slowing order inflow, heightened competition, and margin erosion due to inflationary pressure remain for the company.
Meanwhile, earlier this week, the company has reported 21%, year-on-year rise in the March quarter net profit to Rs 3,380 crore Net sales increased 7.5% to Rs 19,259 crore, YoY mainly due to increased capacities. EBITDA margin improved at 25.2% for the quarter as against 23.4% in a year ago period. Other income too went up to Rs 399 crore from Rs 368 crore YoY.
Below is the edited transcript of Rao’s interview with CNBC-TV18. Also watch the accompanying video.
Q: Let’s start with your order flow guidance for FY13. What are you expecting and guiding?
A: See the target what we have for this year is about 14000-15000 megawatts and most of these projects are coming from last year. In fact last year they should have got finalized but they didn’t get finalized. They are mostly in the central and state sectors. If you look at last year, only 4,000 megawatts were finalized.
Therefore, we are expecting all these projects could get finalized this year unless otherwise a major event happens, like it happened in Rajasthan, the cancellation of the tender itself, which was totally unexpected.
Q: Your FY12 order inflow was quite tepid. When do you see a serious pick up in investment activity and order flow inflows picking up for BHEL?
A: I am seeing that there are reforms happening particularly if you look at the distribution companies. In South India for example, the distribution companies have revised their tariffs. In North India also some of the states are already fixing revised tariffs. On the coal linkage side also the prime ministers office is taking interest to see that the coal linkage is given. Once all these factors are in place, the demand starts happening again.
I believe that if the country has to grow at 7-8%, power is an important segment. Today we have only 200,000 megawatts and the integrated energy policy predicted that we should have 8 lakh megawatts by 2030 if we have to grow at 7-8% GDP. All this will not happen if power does not happen. So, these reforms will therefore be a necessity and need of the day.
I am sure the government is giving enough attention to it. We expect things should happen, maybe this year it will pick up over last year and in next two-three years time we should come back to the normalcy of 2009-2010 levels where 24,000 megawatts per year was happening.
Q: Can you give us some update on the Rs 12,000 crore Rajasthan SEB order?
A: No actually I don’t have any information on that as to why the tender has been cancelled really. We are trying to understand why is it so. We feel the requirement is there, the coal linkage has happened; environment clearance has been given, so I don’t expect the project to be dropped. The project will happen. Probably there will be a re-bidding. We are trying to se what is the real reason for this.
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