India’s biggest capital goods company, Bharat Heavy Electrical (BHEL), has lost so much value that it now commands a market capitalisation smaller than that of Siemens India. At Rs 42,894 crore, BHEL is now less valuable than Siemens, which commands a market cap of Rs 44,098.4 crore. At the start of 2015, the PSU was valued twice as much as the Indian subsidiary of the German multinational. But an 80% fall in Q1FY16 earnings, followed by a net loss of Rs 204.9 crore in Q2FY16, has prompted the Street to do a rethink.
The Ebitda loss of Rs 470 crore in the July-September quarter was particularly shocking. In early September, Crisil had downgraded the rating outlook on the long-term bank facilities of the engineering firm to “negative” from “stable”, citing slow project execution, stretched working capital and vulnerable profitability.
While BHEL’s order backlog is Rs 1.2 lakh crore, nine times that of Siemens, analysts aren’t convinced the pace of execution will pick up. Moreover, while order inflows had picked up pace in Q1FY16, the momentum was lost again in the July-September quarter when they fell 82% year-on-year, due to lack of any major orders from the power sector.