The next general election in 2019 will be conducted entirely with new electronic voting machines and the finance minister has announced that the centre will buy these machines from Bharat Electronics (BEL) and Electronics Corporation of India Limited (ECIL).
In an interview with CNBC-TV18, MV Gowtama, CMD of BEL spoke about how the company will benefit through the sale of electronic voting machines (EVMs).
Below is the verbatim transcript of the interview.
Anuj: How big is this opportunity for you and can you give us some numbers?
A: The total requirement of electronic voting machines will be about 25 lakh. However, in terms of business it will be shared between Bharat Electronics (BEL) and Electronics Corporation of India Limited (ECIL).
The revenue that we expect out of this business is about Rs 6,000 crore each for both BEL and ECIL.
Latha: Rs 6,000 crore is revenue. How much do you make? Will the government allow you to make a decent profit?
A: Certainly they will allow us to make a decent profit as they were allowing us in the past. Therefore, I expect that the same trend will continue. There will be a cost audit and they will allow a decent percentage. However, post audit they will allow the booking of the profit.
Latha: Normally what kind of margins are you allowed making?
A: We are allowed only 10 percent in this case.
Anuj: Ten percent means Rs 600 crore gets added to the profitability?
A: Yes.
Sonia: This Rs 6,000 crore of revenues will come over how many years and in FY18 itself what can we expect?
A: FY18 will be nearly 50 percent and FY19 will be another 50 percent. We need to complete the deliveries by September-October 2018.
Latha: When we last spoke you said the 'Akash' order will come about Rs 7,000 crore. Is it in your books now?
A: When we last spoke to you we were having two programmes. One was LR-SAM; we were able to acquire that before March. Second is Akash seven squadrons. The negotiations have reached almost a final stage and I expect the order to materialise by about June-July.
Latha: Both are USD 1 billion each?
A: Yes, both are USD 1 billion each. Last year we acquired orders more than Rs 16,000 crore.
Sonia: The EVM order will be Rs 3,000 crore in FY18 and last time you had said that you expect Rs 13,000 crore worth of orders in FY18 but can you give us an updated figure putting all these fresh orders together. What could the order pipeline be in FY18 and FY19?
A: In FY18, I expect order book to touch about Rs 16,000 crore. However, for FY19 I expect the order book to touch Rs 13,000 crore,
Latha: Akash LR-SAM orders - what margins you usually get in defence?
A: Margins depends on our efficiency and being large system integration programme the margins will not be more than 10 percent typically.
Latha: Are you getting a decent amount of foreign direct investment (FDI) in defence this year. We were given to expect that there will be a lot of foreign investment. Has there been?
A: Many of the foreign companies are starting their own subsidiaries in India and certainly the FDI flow in defence is happening. Therefore, in next two-three years many foreign MNCs will consolidate their FDI. They have their own operations commencing in India to be in line with 'Make in India' policy of the government.
Latha: This year only USD 200,000 has come, FY17. You are hopeful that FY18 will be different?
A: Yes, FY18 will be different because the consolidation of MNCs in establishing their own companies, their own units, their own joint ventures are happening now. So certainly FDI is going to flow much more in defence in the coming two years.
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