BEL plans Rs 2,000-cr capex for next 3-4 years

On the back of a good performance in FY16 when Bharat Electronics (BEL) saw its orderbook touch Rs 32,000 crore, SK Sharma, Chairman and Managing Director, said that there are good indications that the company can sustain its pace of acquisitions in FY17.Sharma said the company has plans for Rs 2,000-crore capex in the next 3-4 years and has invested over Rs 400-crore in the last year.Going forward in FY17, Sharma said that he expects the growth for the company to come from areas like radar systems, communications systems, electronic warfare, network-centric systems, weapon systems and night vision projects. This growth, he said, will be balanced and diversified across these segments. BEL will continue to focus on indigenisation, design development of own products, increase industry partnerships to leverage mutual strengths, he said, adding that BEL will also focus more on DRDO and our projects with DRDO will intensify further.Below is the verbatim transcript of SK Sharma’s interview with CNBC-TV18's Rukmini Rao.Q: Do you see order book increasing going forward?A: There has been a good increase last year in the order book and the projects which we have in pipeline there are good indications that we will sustain this kind of acquisition. It may not happen every year like this but yes, on an aggregate you need to talk about a couple of years aggregate, the growth this year will be certainly sustainable.Q: Also if you can give us guidance in terms of your order books for FY17, where do you see the growth coming in for BEL going forward?A: BEL is a diversified company. Now we have seven or eight major business segments and so the segments that we see are the radar segment, the communication, network centric system, electronic warfare, weapon systems and of course night vision products. So, I would say the growth is more balanced. It will be diversified across the segments.Q: We also saw a huge bump up as far as your margins are concerned. So, was that just because of a one off order or this is also a sustainable margin for you?A: The margins will come as a result of aggregate of various projects. It doesn\\'t happen because of one single project. Currently we have at the profit after tax (PAT) level something like 17-18 percent and I would say for the next couple of years because so long as there are no drastic product profile changes or product mix doesn't change drastically, so margins would certainly continue in a healthy way.Q: On the export front, are you happy with the growth that you saw in the year that has gone by and also what is the outlook for your exports for BEL?A: In the last year we had a very good increase in exports. We did USD 85 million last year. Going forward I would say we are looking at current year at least we are looking at USD 100 million plus. So, this should be something like 15-20 percent in exports. But then it is linked to several major contracts coming through wherein we are expecting good business in off sets. But I would say the increase in offsets is slower than expectation but we have good tie-ups. We have some of the partnerships with some of the companies and I am sure the exports are going to grow at a much faster pace in the years to come.Q: Also with respect to the competition that we are seeing especially with the private sector growing in the defence space how is BEL gearing up, at a strategy level how are you looking at tackling this?A: BEL will continue to focus on indigenisation, design development of our own products. We will increase our partnership with industry in order to leverage the mutual strengths, not only with industry, we will continue to focus more on DRDO. Our projects with DRDO will intensify further. As well as the other sister organisations the defence organisations like the shipyards and the ordnance factories and so on. So, we have some major programs which re on with them and we will give thrust on that as well. We will see that we have tie ups with some of the select original equipment manufacturers (OEMs) where we can bring in some critical technologies. But that will be very selective. Our focus will continue on indigenous R&D which today we invest something like nine percent of our turnover is invested in R&D and about 80-85 percent of our revenue gets generated from our own R&D. So, this is where this would give us strength to compete.Q: Want to understand from you in terms of your capital expenditure (capex) plans for FY17 how is that and also your expansion plans if you can share with us those details?A: Capex is been a focus area for us. We have invested something like Rs 400 crore last year upwards of Rs 400 crore. We have plans almost to the extent of about Rs 2,000 crore capex in the next three to four years. In fact many of the projects have already started and some will be starting soon. Modernisation of our facilities continue. That is an ongoing activity. We have been doing it for many years and today many of our facilities are world class in that sense. So, the focus on the capex is definitely one of the strategy which BEL will take on for the next year.Q: We have seen the Prime Minister visit US in terms of the defence opportunities coming out of this and also the missile technology, control regime. How do you see that BEL is likely to be benefitted out of all of this?A: BEL will still focus more on - as I said - our own indigenous developments specially when it comes to critical technologies, it would not be easy access to many of them. So, we will focus more on indigenous developments either in house on in collaboration with the industry and the DRDO. Yes, where other opportunities to work with US or any other country we are certainly very keen and very happy to work with some of them in areas of mutual interest where we can add value to the partnership.