Karnataka-based Bharat Electronics Ltd (BEL), a central PSU and one among the elite group of PSUs which have been conferred the Navaratna status, is the only company that has equal business presence in all the three defence sectors of army, navy and air force. The defence PSU also has unique products for non-military purpose like electronic voting machines. Set up in 1954, it has grown into a company serving in diverse fields in India and abroad. With the Union government earmarking huge funds for the defence sector, BEL hopes to ride high in the coming years. The company is considering foray into new business areas to achieve the Rs 10,000-crore turnover mark in the next three years. Primarily, BEL has decided to harvest benefits by getting into the nuclear power insturmentation segment. It has chalked out a plan to expand its products portfolio without making any huge investment, but by utilising the existing infrastructure available in its nine factories across the country. In an interview to FE?s Jaishankar Jayaramiah, BEL?s chairman & managing director Ashwani Kumar Datt discusses the company?s business plans. Excerpts:
BEL is now in the process of identifying new business segments. Tell us about your business plans and the steps taken by the company to proceed with new.
Yes. BEL has appointed KPMG, a global consulting firm, to help identify future market opportunities for growth. The consulting firm has submitted its first phase report identifying a few sectors, of which BEL has selected five business segments including nuclear power instrumentation, railway instrumentation, solar energy or clean energy solutions and homeland security. Now our internal teams are analysing these sectors. The idea is to get into these fields in the next three to four years and generate an additional Rs 500 crore business annually.
Can you please throw more light on the proposed nuclear power-based business?
Basically, it will be nuclear power instrumentation. Now as nuclear power stations come in, we wish to be the designer and manufacturer of nuclear power instrumentation. Already, some work has been done, basically not for the new reactors but for the earlier systems. Some work has been started through our Kotdwara plant. Investment will not be an issue, as we already have adequate infrastructure. Small expenditure may occur for upgrading the facilities.
BEL has already signed an MoU with another PSU, Bharat Heavy Electricals Ltd (Bhel), to have joint venture in the solar energy space. What is the status of that?
We (BEL and Bhel) have formed two teams to understand the market and returns on the investment because it involves large investment. The joint initiative may require an investment of Rs 2,500 crore. Now we are in the process of analysing the business model. We have to decide on the nature of funding. And also it should be seen whether the government incentives in terms of subsidy are viable or not. This was proposed to be a 50:50 joint venture. But the equity ratio may change. We are deliberating on some equity with technology providers to ensure their commitment to the project. So, hopefully, the stake pattern will be refigured and it may not be on a 50:50 ratio.
What are the other sectors you are confidently looking at?
We are betting big in the homeland security segment. We already got a small business of Rs 30 crore. But it?s a prestigious one, as it involves providing security for Parliament. Basically, the project is to install the access control security system in Parliament. The company also bagged orders to provide security cover to the Cabinet Secretariat and RBI. The electronic security ring will have closed-circuit television (CCTV), baggage checking devices and other gadgets. We are a late entrant into this field and, therefore, have to prove ourselves by successfully completing these prestigious projects. This is the area we are confident of growing in future.
Your new initiatives would certainly require huge investment. How will you manage the funding?
Only the project in the solar space may require major investment, as it would require Rs 2,500 crore. We expect that investment may not be too large for other projects because they are not capital-intensive. Moreover, we have already established infrastructure in all our nine factories in the country to implement these projects. All these initiatives may require Rs 300- 500 crore investment.
BEL was scouting for joint ventures for technologies. What is the current position?
We have been discussing about 10-12 proposals for joint ventures ? one or two in India and some with foreign companies, especially for some sub-sets of things like seekers. Basically, seeker is a radar but it?s a very miniature type of radar which will guide missiles. For that, we are in discussion with both European and Israeli companies to set up joint venture. Some discussion have already taken place on technical inputs, while financial issues are still to be resolved primarily on account of FDI which is smaller than what they expect. Hopefully, some of the joint venture proposals should come through. We are keen to forge joint ventures in areas such as missiles, electro-optics and portions of radars, like radars for civilian areas. BEL is also ready to work with potential partners either through a joint venture or some sort of arrangement like long-term partnership.
When and which areas will help you achieve the Rs 10,000-crore turnover mark?
Last year, we recorded a turnover of Rs 4,624 crore. We will achieve the Rs 10,000-crore mark in the next three years, probably by 2012-13. Segments like radar, communications and electronic warfare will drive the company?s growth.
What is the current share of military and non-military business? Will not your business proportion change with the company entering into new segments? And, looking forward, what will be your product mix?
Last year, the defence sector contributed 85% of our business, while the remaining 15% turnover came from the non-defence segment. It?s likely to be in the range of 80% defence and 20% civil in future. The ratio may not change much, but we are hoping to increase volumes within this proportion. In future, radar will remain as our major product, followed by communication equipment for all the three defence services of army, navy and airforce. Then come command and control systems, electronic warfare and electro optics.
Are you facing any talent shortage as all of your products involve high-level R&D work?
We are the people who supplied talent for everyone in the country. Actually, we lose people to our competitors. Our competitors know BEL is a good ground for training. Now, things are changing. Economic slowdown has changed the scenario as we have started getting lots of talented engineers. Particularly, we are concentrating more on our R&D department. Currently, the company is spending Rs 250 crore or 5% of its turnover for its R&D division. It keep on increasing. The R&D spend may go up to Rs 500 crore in the next three years.