The Hindu Business Line : BEL to hire consultant for biz strategies revamp

Bharat Electronics Ltd is re-looking its business strategies in the wake of domestic and foreign companies entering its old and primary domain of defence supplies.

The defence PSU is finalising an MNC consultant for comprehensive advice on the way ahead, areas for diversification into civil areas, and a plan to acquire small or mid-sized overseas companies that can fill its high technology needs, BEL’s Chairman and Managing Director, Mr V.V.R. Sastry, told a news conference here on Tuesday.

“The defence section is now open to foreign companies. Since 2001, private [domestic] companies are also coming up, though at a low-tech level. It is very necessary for us to re-look our strategies,” he said.

Areas identified

Without divulging the number of acquisitions it would make, probably this fiscal, or their geography, Mr Sastry said four to five technology areas have been identified and “money is not a constraint”. A Rs 200-crore capital expenditure mainly for upgrades is in the offing this year.

While it is trying to maximise the level of indigenisation of its products, BEL has identified professional (or non-consumer) electronics as a prime growth area. It has in the past year entered into term sheet agreement with Israel’s Rafael for a joint venture in missile and guidance technologies; and signed MoUs with Lockheed Martin, Boeing, EADS and Northrop Grumman to tap the defence offsets market.

SALES GROWTH FORECAST

Mr Sastry said the company had set a target of 18 per cent sales growth at Rs 4,850 crore for this fiscal and turnover of Rs 10,000 by 2011-12. This would be driven by civil business opportunities in electronic voting machines, emerging wi-max opportunities in various States and automobile applications.

Orders worth Rs 9,450 crore were in hand, and the focus would be on the growing segments of electronic warfare, communications and electronic voting machines.

As much as 84 per cent of the 2007-08 revenue of Rs 4,114 crore came from defence sales, compared to 76 per cent in 2006-07. Mr Sastry attributed this year’s lower percentage growth in sales and profit over the previous year due to the slow flow of defence orders under the Defence Procurement Policy of 2005.

“Last year because of procedural delays under new policies, the resultant customers’ delays and our own inability to get into the civil market as fast as we thought led to a lower percentage growth year-on-year.

“Yet, the growth of 4.5 per cent by turnover and 5.3 per cent by PBT, we feel, are remarkable under the circumstances,” Mr Sastry said. A higher indigenisation level of 83 per cent meant longer field evaluation.

BEL closed fiscal 2007-08 with a PAT of Rs 750 crore (Rs 718 crore) or a 4.4 per cent growth year-on-year; sales turnover was Rs 4,114 crore or four per cent growth year-on-year. In comparison, it had posted 23 per cent higher net profit and 17 per cent sales turnover in 2006-07.

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