BHEL orders touch new high in FY09

The country’s biggest capital goods firm, Bharat Heavy Electricals (BHEL), received new orders worth Rs 59,700 crore during the year ended March 31, 2009, its highest in a year, and 20% more than the previous fiscal. This has come about even as there is a slowdown in the economy. Capital goods sector is considered a bellwether for manufacturing sector and high supply orders indicate better prospects for the economy going forward. The latest order book position of other capital goods firms are yet to be made public but BHEL can be considered a lead indicator for the sector. The public sector capital goods major’s new orders were more than twice its revenues in 2008-09. As per the provisional financial data announced last week, BHEL’s order backlog has now reached Rs 1,17,000 crore ($23 billion), 37% more than what it was during the same period in the previous year. The total order book is equivalent to nearly four and a half times the sales for the year. Growth in order book was even higher than the 29% growth in total revenues, which stood at Rs 27,500 crore for 2008-09. About 75% of the new orders for BHEL came from power sector, equivalent to 17,000 mw of generation capacity. Interestingly, the company’s export orders increased 41% to Rs 3,265 crore, despite a near-recessionary global economic scenario. Some of the significant orders for the year were for supercritical range of equipment having 660 mw and 800 mw capacity. BHEL has also received orders for generators from Nuclear Power Corporation of India (NPCIL) for 700 mw nuclear reactors and a high value order of Rs 5,040 crore from Jindal Power, for setting 2,400 mw power plant. The rising order book also comes as a challenge for the company which would need to ramp up its capacity to meet the supply contracts. BHEL had raised its production capacity for power generation equipment from 7,000 mw to 10,000 mw in 2007-08. It is in the process of raising the capacity to 15,000 mw with further plans to take it to 20,000 mw by 2012. However, this would not be sufficient to make up for the order backlog in the current fiscal. As per ETIG analysis, even with a sales growth of 40%, and conservative order intake of Rs 50,000 crore during the current fiscal, the unexecuted order book would swell to Rs 1,30,000 crore by March 2010.