Bharat Heavy Electricals Ltd (BHEL) said on Monday its provisional net profit for 2010-11 rose 40 per cent over the previous fiscal, bolstered by a strong topline growth and efforts by the equipment major to beef up supply-chain efficiencies.

The state-owned company also attributed the surge in net profit for the fiscal, which rose to Rs 6,021 crore from Rs 4,311 crore in 2009-10, to a change in its accounting policy. The turnover was up 27 per cent at Rs 43,451 crore, according to the provisional estimates.

Order growth

BHEL, which faces increasing competition from private domestic firms as well as Chinese and South Korean rivals, reported it had won new orders worth Rs 60,507 crore in the fiscal ended March 31, marginally above its target of Rs 60,000 crore.

Going by the latest set of provisional numbers for the full fiscal and the numbers issued earlier for the first nine months of the fiscal, the fourth quarter turnover works out to Rs 18,719 crore while the net profit for the January-March period would be around Rs 2,808 crore. The BHEL stock rallied to close nearly 3 per cent up at Rs 2,173.80 on the BSE on the back of the robust provisional numbers.

“We had another successful year. The company has taken a number of initiatives. Localisation of technologies, continuous working on supply chain and lower material costs helped in good profit,” BHEL's Chairman and Managing Director, Mr B. Prasada Rao, said after announcing the company's annual results here.

He said change in the company's accounting policy on provision for warranty obligation for construction contracts also pushed up revenues and profits. “This (change in accounting policy) has resulted in an increase in turnover by Rs 2,456 crore and increase in profit before tax at Rs 414 crore.”

BHEL's shareholders have been paid an interim dividend of 132.5 per cent while the earnings per share in the previous fiscal climbed to Rs 123.

Capex plans

The company has lined up capital expenditure plans totalling Rs 1,700 crore for the current financial year. When asked whether the West Asia and North Africa political crisis has impacted the company's business in the region, Mr Rao said that most of its projects in that region were in the final stages of implementation and hence not likely to impact the company's finances.

“As far as new projects are concerned, there might be some delay as there is no activity in the region (Arab world) as of now,” he said. He also said business from the region accounted for less than one per cent of the firm's total revenues.

On the order book guidance for the current fiscal, Mr Rao said he expects it to be “Rs 60,000 crore-plus” for this year as well. “We anticipate a good order book despite many power projects getting deferred due to delays in coal block allotments,” he said.

BHEL, which earns around 70 per cent of its revenue from its power equipment business, is also trying to boost its exposure to the transmission sector and the transportation equipment segment, where it sees high growth. The company is participating in the tenders for setting up factory for electric loco components in West Bengal and diesel loco unit in Bihar. BHEL is already executing an order for 200 electric locomotives for the Indian Railways.

As part of R&D (research and development) initiatives, the company would establish in Hyderabad a centre for nanotechnology that would explore applications of nano materials in power plant components. The firm aims to spend Rs 1,250 crore for R&D activities this fiscal. BHEL expects to hire about 4,000 people in the current fiscal, which would take the total workforce to 50,000-plus. At present, the firm has a head count of over 46,700.

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