Power sector troubles may dim BHEL’s prospects

India’s top engineering company – the state-run Bharat Heavy Electricals (BHEL) – has been struggling over the last couple of years in the face of a slowdown in the economy and investment by firms.

But what has been troubling is not just its declining order book and earnings but also the surprises the company has delivered on the downside in the last few quarters while its closest peer Larsen and Toubro (L&T) has managed to exceed expectations. The figures tell the story.

The power sector, which accounts for close to 79% of BHEL’s revenues, has been impacted by the economic downturn and the knock on impact has been felt by BHELBSE -2.73 % whose revenue growth in the December 2012 slid by over 4% while its net profits contracted by over 17% year-on-year for the first time in the last decade. At Rs 1.14 lakh crore, BHEL’s order backlog at the end of December 2012 was lower than its order book of Rs 1.17 lakh crore at the end of FY09.

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