positive note, however, BHEL's April-December new orders grew 9.1% over orders worth Rs 10,693 crore booked in the same period of the previous fiscal. The company is set to declare its third-quarter results next week.
According to company sources, apart from the unanticipated delays in award of two ultra mega power projects — Bedabehal in Orissa and Cheyyur in Tamil Nadu — the absence of bulk orders from public sector power generating companies NTPC and DVC have upset BHEL’s calculations. Also, a persisting lack of clarity on coal linkage for scores of private power projects — despite Coal India signing fuel supply agreements on a government directive — has hit the power equipment manufacturer. The latest hit is coming from a fall in demand for state utilities that has already pushed the country's peak power deficit levels to a low of 4% in the December quarter from a high level of 9% in the first quarter.
Domestic thermal power segment has traditionally accounted for three-fourths of BHEL’s revenue, with the other major contributors being transport and industrial equipment, refinery and piping. The current situation has once again pushed analysts to put BHEL in negative territory with expectations of a further decline in revenue and net profits in Q3.
“The situation could not have been worse as BHEL is not only seeing a decline in fresh orders but execution of earlier orders have also slowed down, resulting in lower supplies. While the company's performance is expected to be bettered in coming months, it would still be grossly underutilising its annual power-equipment capacity of 20,000 MW,” the company official quoted earlier said.
Interestingly, while order flows have slowed, the company has maintained the production target, achieving 92.5% of the Rs 26,818-crore projected for the first nine months of the current fiscal. BHEL had an order backlog (those yet to be executed) of Rs 1,02,300 crore as of September 30, 2013.
BHEL’s share in the Indian power equipment market is likely to be eroded further in coming years due to tough competition from Chinese equipment manufacturers and from a clutch of joint ventures like Alstom-Bharat