With a healthy order book from large defence deals, Bharat Electronics Ltd (BEL) is on track to keep its growth momentum going and achieve its annual targets. The key challenge for the Bangalore-headquartered PSU, however, would be to keep pace with the rapidly changing and competitive area of electronics and be flexible enough to tap new business opportunities. BEL chairman and managing director Ashwani Kumar Datt speaks to FE?s Ajay Sukumaran on how the company is on a path of consolidation by moving away from less profitable businesses even as it is formulating strategy for the next phase of growth with a major focus on strengthening research and development. Edited excerpts:
How is the current year looking for you?
We started this year with an order book of almost R23,600 crore as against R11,300 crore last year. So what it means is that most of our SBUs, all the nine factories or 17 SBUs, have a reasonably good order book. We are trying to achieve a sales turnover of R6,200 crore this year, about R700 crore more than the previous year. Other than turnover growth, we wish to achieve another R10,000 crore of fresh orders this year itself, so that at the end of this financial year we should have an order book of R26,000 crore or so. It has been planned well and I think we would reach that level.
What will drive this?
One is the Akash missile systems. Apart from the R200-odd crore we sold last year from the first two squadrons? order last year, the rest of it, almost R950 crore, should be delivered this year. So that would be one single project that would bring us revenue. Another area is the coastal surveillance system. We have done substantial production, in fact, we have also done some installation in locations in Gujarat which are actually being tried out. We may pick up the order, of about R650-700 crore, in July and we will plan to deliver quite a bit of it this year. We have also recently received a big order of night vision devices for the Indian Army. Then, our traditional business from radars would be substantial.
You expect to touch R10,000 crore in revenue by 2013. Will new products like missiles form a bulk of the business then?
Radars and communication would perhaps continue to be 50%-60% of our business even at a time when we do R10,000 crore. Of the rest of it, about R4,000 crore will come through things like night vision devices, electronic warfare systems and missile systems. Again, in missile systems, the opportunity is huge but it can take a bit of time. That?s the reason a good part of our plans are covered by our traditional business and we protect that well.
So R10,000 crore will happen. I’m not worried about that, I am thinking about R25,000 crore. I feel we should be a R25,000 crore company by 2020. It may look like a tall order, but if a company at R39 crore in 1973 can be a R5,000 crore-plus company in 2010, there?s no reason we can?t be at that. An order book of R50,000 crore and revenue of R25,000 crore is what is basically my concern. It is achievable.
What will that entail? Are there new areas you are looking at?
Every few months we would have to rethink the strategy. We need to have clear thinking almost every quarter on how the next quarter or nine months are going to be. We would like to be a reliable resource to Hindustan Aeronautics Ltd (HAL) now because the orders they are picking up now are huge. We have been preparing our factories for quite some time, already four to five factories have finished certification for aerospace standards and we are making some investments there so that we are ready when the work comes, either on account of offsets or with HAL. There was some understanding always with HAL, but frankly what has changed is that we are now looking at numbers which are substantially bigger than before.
The other thing is we would now have a great necessity to focus on areas we are definitely good at and identify businesses which can be better done by others more profitably or which take away our energies. It is a matter of some consolidation, vacating some small businesses and freeing ourselves for something bigger. Again, this is something on which I cannot say I have a plan for the next 10 years. This field would change so rapidly that we would have to think at least on a quarterly basis.
Are there businesses you will exit?
More than businesses, it is processes. For example, making printed circuit boards. Similarly, all these so-called sophisticated machine shops, even plating and painting. We are trying to vacate those areas which do these processes and use them for assembly or integration or final testing so that we add more value per person. Then, of course some of the businesses like antennae, and low-end shelters that we won’t make. Solar traffic lights, traffic actuated lights, all that was great some years ago. Today, anybody can do it, so let others do it.
Costs are an issue. If we try to do everything in-house, we would be priced out. Some of it is forced on us, and some of it is creative thinking. But the need to change almost everyday is now very acute. The pace is much faster now.
But are we defining strategies for the next 2-3 years? Yes. We are making our vision documents, first for 2012 and then Vision 2020. We are reviewing it almost every month at the senior-most level. Primarily, it is about defining very clearly our strengths and the lack of it, and opportunities we would like to be there. The scale of possible business, competition scenario, gaps in R&D, changes required for business models, organisation restructuring, manpower and training are all the tasks before us. We wish to be ready with the 2012 plan in the next two-three months.