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Last Updated : Jun 19, 2017 04:15 PM IST | Source: CNBC-TV18

Expect revenue to grow by 15% in FY18: BEL

In an interview to CNBC-TV18, MV Gowtama, CMD of Bharat Electronics Ltd (BEL) spoke about the latest happenings in his company and sector.

In an interview to CNBC-TV18, MV Gowtama, CMD of Bharat Electronics Ltd (BEL) spoke about the latest happenings in his company and sector.

The company has received an order for 8 lakh electronic voting machine (EVM) worth Rs 1,300 crore from the election commission.

Have manufactured Reliance Defence and Engineering orders and Gowtama is confident that Reliance Defence will take delivery.

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He believes that delayed shipment will certainly cause some pressure on margins.

He expects to see lower returns on the equipments, which are supplied to the Reliance Defence.

The company is negotiating with air force for supply of 7 squadrons of Akash and he expects negotiations to be completed in next two-three months.

The company is also looking at an order of a significant value from coastguard . “I expect this contract also will be signed in FY18,” he said.

“I expect the company to grow at about 15 percent year-on-year growth in terms of revenue whereas the profitability in coming years will not be repeat of FY17,” said Gowtama.

Below is the verbatim transcript of the interview.

Anuj: Give us an update on what is happening on the EVM front because I believe that could be the next big trigger for you in terms of the Voter-verifiable paper audit trail (VVPAT) machines that election commission has ordered and that could be a big order for you, if you could give us some numbers?

A: We have received an order for more than 8 lakh VVPAT machines from the election commission. The order is worth about Rs 1,300 crore and it does not include freight insurance and shipment etc. So the figure will touch more or less about Rs 1,500 crore from the VVPAT.

Similarly, Electronics Corporation India Ltd (ECIL) Hyderabad also has received order for supply of VVPAT, similar numbers. So the total order of VVPAT on both the organisations put together will be about Rs 3,100 crore.

Latha: The other reason why people were excited about your stock was also because of defence orders, what happened with the Reliance Defence order, has it come or when is it likely?

A: We have already got orders from Reliance Defence and we have manufactured our equipment and we kept them ready for installation. This equipment could not be taken up earlier but I am quite confident -- they have promised us that all efforts are on and shortly they will be taking the equipments from us. I am very happy the way in which the Reliance officials reacted and they were very positive about picking up the material from us.

Latha: Does that reduce the margins you have on a project like this because the shipment is delayed?

A: Certainly it will have a little effect no doubt about it. In business, time matters a lot. So I certainly agree that it will have little lower margins. We have inventory carrying cost for the material which we have already manufactured. So this year, we may see a little lower return for the equipment that we supply to the Reliance.

Sonia: Can you give us what the incremental orders would be for FY18? you have guided for Rs 10,000 crore of incremental orders in FY18 and you spoke about Rs 3,100 crore coming in from the VVPAT machines, what about the rest, where do you see the orders coming from and if you can break that for us in terms of what you expect the first half of FY18?

A: First of all VVPAT – Rs 3,100 crore is both to BEL and ECIL, it is 50 percent each. Similarly, for the EVM, we will be having typically about more than 3,000 crore order and that again will be shifted between BEL and ECIL.

So from October 2017 to September 2018, we will be delivering VVPATs and EVMs worth more than Rs 3,000 crore from BEL and similarly ECIL will be delivering more than Rs 3,000 crore from their kitty.

Coming to order book of BEL, the likely orders in FY18 – we are negotiating with air force for supply of 7 squadrons of Akash. The price negotiations are going on right now and I expect in another two-three months, we will be completing the negotiation and come to final conclusion of the value as well as the scope.

Similarly, we have many other orders in different verticals lined up. Coastguard requires coastal surveillance phase II system. The Defence Acquisition Council (DAC) has approved induction of phase II of coastal surveillance system through BEL. I expect this contract also will be signed in FY18. So these things certainly will propel us more than Rs 10,000 crore of order book during FY18.

Anuj: Can you give us some more timeline, you said FY18 but if you have some more details and how big would that order be?

A: I expect that order to be of a significant number because the scope for that is being discussed and finalised between BEL and the Coastguard, very early to give you some information but as and when some more clarity comes, the request for proposal (RFP) for that is expected anytime. The moment RFP comes this scope will be finalised and then we can predict on the numbers.

So I need another two-three months’ time to get the RFP and then bring details to you. Apart from this, we have got many other programmes where we have already submitted bids where negotiations are going on and this covers the entire spectrum of Bharat Electronics, be it communications, be it gun upgrades and tank electronics etc. These orders certainly will be able to cross Rs 10,000 crore, I am very confident with that.

Latha: Since your order intake has shown a quantum leap, it is certainly better than the previous averages, can you guide us in terms of revenue and margins for the next couple of years?

A: I expect the company to grow at about 15 percent Y-o-Y growth in terms of revenue whereas the profitability in coming years will not be repeat of FY17, certainly the competition is setting in and we will not be able to get big margins when we participate in competitive tenders.

Also our business is changing from equipment supply to execution of system of systems, large system integration programmes where lot of infrastructure also needs to be developed along with delivery of system and hence in coming days, the margins will certainly be stressed and maintaining 17 percent growth rate in margins is going to be little difficult in coming days unless we improve upon our efficiency furthermore. So we have taken up various activities in the company to ensure that we have better cost cutting measures and certainly maintain our profitability in the coming days also.

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First Published on Jun 19, 2017 12:24 pm

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