BHEL net profit up 17%; turnover tops Rs 20,000 cr

Firming up joint venture with Nuclear Power Corporation Kamal Narang

Number crunch: Mr K. Ravi Kumar, CMD, BHEL, with Mr C. P. Singh, Director, at a press conference in the Capital on Thursday. —

Our Bureau

New Delhi, April 3

Faced with sluggish topline growth and higher provisioning denting its fourth quarter margins, Bharat Heavy Electricals Ltd (BHEL) announced a lower-than-expected 17 per cent rise in net profit at Rs 2,815 crore in 2007-08, according to provisional numbers released by the company on Thursday. The state-owned equipment major’s turnover rose 15 per cent to Rs 21,608 crore during the fiscal, from Rs 18,739 crore in 2006-07.

Q4 margins hit

Announcing the results at a pres conference here, BHEL’s Chairman and Managing Director, Mr K. Ravi Kumar, said that the company’s fourth quarter numbers have taken a hit on account of higher provisioning done in employee wages and in meeting certain “contractual obligations.”

“Fourth-quarter margin was lower due to a high wage bill. An increase of one per cent in raw material costs and contractual obligations also impacting by another 2.5 per cent,” he said, without elaborating on the quantum of the margin.

While the company’s topline growth was marginally below the 18 per cent jump in output clocked by the capital goods segment in latest industrial production data for April-January 2007-08, and way below the 29 per cent registered by the company in 2006-07, the engineering firm said it does not expect a slowdown in orders this year.

Mr Kumar said he was confident that rising input costs will not impact margins much in the long-term, as BHEL has already placed long-term orders for commodities such as steel and other metals in sync with their order book.

BHEL’s cumulative order book for execution in 2008-09 and beyond stood at about Rs 85,500 crore, of which orders worth over Rs 50,000 crore was secured during the last fiscal itself. “The order inflow rose 41 per cent to Rs 50,265 crore in 2007-08, up from Rs 35,643 crore in 2006-07,” Mr Kumar said.

The big jump in the order book position was primarily on account of the Ministry of Power’s directive that all utilities place order for project execution before the end of the last fiscal with equipment suppliers such as BHEL and others.

BHEL is also getting into a pact with Nuclear Power Corporation of India to float a joint venture for manufacturing equipment for nuclear power plants. BHEL is also expected to shortly incorporate a joint venture with NTPC Ltd to manufacture power equipment and offer EPC services to power producers.