BEL looking at diversification to hedge against growth uncertainties

Bengaluru-based defence PSU Bharat Electronics (BEL) plans to explore diversification into energy storage products, unmanned systems, space electronics and solar cells/power plants.

“The prevailing turbulence in the global business environment has been impacting business and posing a major threat for growth. To combat the risks associated, the company is foraying into new business areas and keeping pace with the fast changing technological advancements,” MV Gowtama, Chairman and Managing Director, BEL, told analysts.

Also read: Auto parts makers see bright spots in non-auto businesses

The areas for diversification the company has identified are seekers & missiles, network & cyber security, arms & ammunitions, railway/metro solutions, software, composites and healthcare solutions.

It is also tapping into the ‘Make in India’ initiative to enhance indigenisation in the defence sector.

Increased competition

“The future for the company looks promising as well as challenging. The defence sector is being opened up for private sector participation with the evolution of the Defence Procurement Procedure. In this changing business scenario, BEL is focussing on enhancing interaction levels and building long-term relationships with emerging strategic partners, customers and other key stakeholders in the Indian defence industry,” Gowtama said.

Also read: BEL’s focus on R&D increases indigenisation

Following BEL’s AGM, analyst firm Motilal Oswal said in a report: “We are impressed with the management’s strategic vision as well as commentary on opportunities and margins, leading us to increase our EPS estimates by 3-6 per cent over FY21-23E and TP to ₹130/share.”

It added: “BEL is in a sweet spot. Over the next few years, there are multiple opportunities available including: QRSAM opportunity of ₹300 crore over the next decade; LRSAM order pipeline of ₹150 crore over the next three years; repeat orders for Akash missiles in the next one year and then repeat order after every two years; huge requirement of weapons and sensors across India's borders owing to rising tensions; drone opportunities; radars; and electro-optics.

“In the non-defence segment, opportunities include: Smart City and homeland security orders; railway signalling and automated gates for metro projects; and medical equipment (it provided 30,000 ventilators in record time toward the Covid crisis). There are opportunities in the services business, including annual maintenance contracts as well as defence software.”