BHEL hits 10% lower circuit as report says India may ease curbs on Chinese firms bidding for govt contracts

BHEL share price sees profit booking in trade.

• BHEL shares dropped 10% on reports of relaxed curbs on Chinese firms in India.
• Finance ministry may lift restrictions on Chinese bidders for government contracts
• Siemens, Hitachi Energy, ABB India, and L&T shares also declined after the news

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BHEL shares hit 10 percent lower circuit limit in January 8 trade after a report said that India plans to scrap curbs on Chinese firms bidding for government contracts.

Consequently, shares of Bharat Heavy Electricals hit 10 percent lower circuit to quote at Rs 273.20 apiece. The shares settled at Rs 276.90 per share, down 8.78 percent.

The sharp decline was witnessed after a Reuters report that the finance ministry plans to scrap five-year-old restrictions on Chinese firms bidding for government contracts as New Delhi seeks to revive commercial ties in an environment of eased diplomatic and border tensions.

BHEL builds, commissions, and supplies equipment for numerous thermal power plants across India, including large supercritical projects (800 MW+), playing a key role in India's energy security by manufacturing turbines, generators, and boilers for state-owned entities like NTPC and private players like Adani Power.

Meanwhile, Siemens shares fell over 4% as China's CRRC is also competitor to them in Railway contracts, which could be now allowed to participate in Rail contracts if recommendations of committee are approved as the article suggests.

The restrictions had a significant impact wherein months after they were unveiled, China's state-owned CRRC was disqualified from bidding for a $216-million train-manufacturing contract.

The curbs, imposed in 2020 after a clash between the countries' troops, required Chinese bidders to register with an Indian government committee and obtain political and security clearances.

Other capital goods stocks like Hitachi Energy, ABB India fell 4-4.5%. Shares of blue chip firm L&T fell nearly 3%.

The measures effectively barred Chinese firms from competing for Indian government contracts that were estimated to be worth $700 billion to $750 billion.

"Officials are working to remove the registration requirement for bidders from bordering nations," one government source told Reuters, declining to be named as they were not authorised to speak publicly.

The Ministry of Finance's plan to ease curbs followed requests from other government departments that are facing shortages and project delays due to the 2020 restrictions.

"Several ministries have requested exemptions to overcome the constraints that could derail projects in their sectors," a second government source told Reuters.

Curbs on imports from China of equipment for the power sector have hindered India's plans to raise its thermal power capacity to about 307 GW over the next decade.

A high-level committee headed by a former cabinet secretary, Rajiv Gauba, has also recommended easing the restrictions. Gauba is now a member of a top government think tank.

With inputs from Reuters

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