Public sector power equipment manufacturer Bhel has moved on to a high-growth trajectory, thanks to some strategic moves made by the management in recent years to cut manufacturing costs and improve project execution.
This is also reflected in its financial performance, with the company reporting a record 40% growth in its profit after tax for the fiscal 2010-11. The company’s value addition per employee jumped 38% during the year.
The company is increasingly sourcing inputs like steel, CRGO steel, copper and transformer oil to optimise its raw material cost. It has also diversified its sourcing to reduce supply risks. As part of the strategy, the company has opened a procurement office in Shanghai recently.
Bhel is also implementing lean manufacturing concept and outsourcing non-core manufacturing. It is continuously expanding its vendor base to improve timely availability of key components.
It has also charted some strategic moves to set up manufacturing facilities for key raw materials like CRGO steel and critical components such as large-sized forgings to cut its dependence on imports. That should also help in ensuring cheaper availability of key raw materials for its equipment manufacturing units.
The company has entered into partnership with Japan?s Toshiba to boost its presence in transmission and distribution equipment business.
Bhel has also sharpened its focus on research and development to improve its competitiveness in the power equipment. It spent over R1,000 crore on R&D in the financial year 2010-11, 21% more than the previous year. Bhel increased interest in R&D is a reflection of the company?s growing confidence in its ability to develop new products on its own.
Bhel R&D efforts have started paying off, with the company generating R7,758 crore in revenue from products developed in-house in 2010-11?an increase of 15% over the previous year.
The power equipment major has also shown sharp reflexes in making moves to tap opportunities in emerging areas like renewable and nuclear energy.
Bhel has signed an agreement with Spain?s Abengoa to implement solar thermal power projects in India. It has also entered into a strategic alliance with Bharat Electronics Ltd to manufacture key raw materials like solar wafers, solar cells and modules for use in solar PV-based power generating plants.
Similarly, it has forged partnership with Alstom to supply 700 mw turbine-generators for Nuclear Power Corporation?s upcoming units in Rajasthan and Gujarat units. It is also in talks with GE Hitachi to explore the possibility of manufacturing some components of nuclear reactors.
The company bagged new equipment supply orders worth R59,000 crore in the financial year. Its outstanding order book stands at R1.64 lakh crore. These figures would have been higher if NTPC?s contract for the bulk supply of 660 mw supercritical equipment was finalised on time.
NTPC has also floated tender for the supply of 800 mw supercritical equipment. The contract is expected to be awarded during this financial year.
Bhel will get equipment supply orders, whether its offer is the lowest or not. NTPC is most likely to place orders for the supply of both 660 mw and 800 mw supercritical equipment in the current financial year. It would not be an exaggeration to say that Bhel represents the best of the Indian manufacturing sector.