Bharat Pumps and Compressors Ltd (BPC), a central PSU, was set up in 1970 to cut the country?s dependence on import of hi-tech equipment like pumps and compressors for use in critical areas like oil & gas exploration, refineries and nuclear plants. Unfortunately, the company was unable to make profits. Eventually, it turned sick and was referred to the Board for Industrial and Financial Restructuring (BIFR). The company has seen a dramatic turnaround in its performance from the financial year 2005-06, thanks to a new operational strategy adopted by the new management. BPC chairman
Abhay Kumar Jain discusses with FE?s Noor Mohammad the company? future business plans. Excerpts:
What was BPC?s financial position before its turnaround began?
BPC?s losses had accumulated to Rs 175.29 crore as on March 31, 2005 and the net worth had turned negative at Rs 121.61 crore. The company was referred to the BIFR and was on the verge of being closed down after 35 years of operations.
What were the main factors responsible for BPC?s operational losses?
Poor commercial strategies and a lack of economies of scale were the principal factors responsible for the company?s losses. Besides, our procurement and marketing practices were also not in line with the market expectations. For example, BPC is also in the business of manufacturing and supplying high-pressure gas cylinders. This is basically a retail business and different from our pump and compressor business. However, before 2005, the same business unit would look after both our custom-built pump-and-compressor and gas cylinder businesses. In effect, we had the same commercial strategy for both the businesses, which otherwise needed different focus.
This led to an anomaly in the company’s procurement policy. For example, our practice was that payments would be made on the delivery of raw materials only. In contrast, the suppliers insisted on payment before delivery. That often led to undue delay in the purchase of key raw materials and constrained the company’s ability to meet the market demand. The result was that we were unable to retain our customers. We have changed this policy as part of the revamp of the business and management practices undertaken in 2005. Now we have a separate business unit (SBU) to look after the gas cylinder business. Materials are purchased before the receipt of orders. We call this ?advance material action.?
When did the company?s performance turn around?
We reported a profit in the financial year 2005-06, for the first time in the company?s history.
How was the company?s financial performance in subsequent years?
The company?s profit before tax (PBT) in the financial year 2006-07 was Rs 19.14 crore, which increased to Rs 31.09 crore in 2009-10. During the same period, our net worth increased from Rs 56.96 crore to Rs 124.06 crore. The turnover went up to Rs 271.12 crore in 2009-10 from Rs 143.72 crore in 2006-07.
How is the growth in the company?s order book?
Our outstanding order book position stood at Rs 147.89 crore as on March 31, 2010. We bagged orders worth Rs 227.64 crore in the financial year 2008-09. But, we could book orders of Rs 104 crore only in 2009-10. The shortfall was mainly due to the delay in award of contracts by our customers. However, we also lost some contracts in bidding, owing to marginal price differences.
What is your strategy to face the competition?
We are taking all possible measures to improve our quality and increase the product range. We are focusing on technological upgrade and design improvement. Under that programme, we have taken key initiatives like introduction of a new method for detailed engineering of compressor house and externally mounted pressure lubrication for 63-10 R Plunger Pump. We have also widened our vendor base for the procurement of key components such as casting, forgings and rubber items. We are also planning a separate SBU for spare parts business. Besides, plans are afoot to diversify into new business areas like lump-sum turnkey contract (LSTK) and health check-up and annual maintenance contract, for pumps and compressors.
Have you taken some measures to improve the companies competitiveness?
We have taken initiatives to improve the energy efficiency of our plant and machinery at BPC. An energy audit was undertaken in 2007 and some of the audit recommendations have been implemented. This has helped us save about Rs 10 crore a year on our energy bills. We are also planning to implement several new energy efficiency measures under the clean development mechanism.
What is the current size of the market for pumps and compressors and how is the outlook for future growth?
The current market size for pumps and compressors is estimated at Rs 10,000 crore a year. Oil & gas exploration and refining companies are the main customers for our pumps and compressors. Energy consumption in India is growing at a fast pace, which should also generate commensurate growth opportunities for our company.
What are BPC?s future plans?
We are looking to acquire the latest technology for pumps and compressors. We are already in talks with Italian companies, GENP and Saipem, for sourcing technology for centrifugal pumps and compressors, respectively. Discussion are also on with National Oilwell Varco (NOV) of the United States for securing technology for pumps.
