Bharat Heavy Electricals Ltd's Board of Directors will meet on Tuesday to consider the report of a consultant appointed by it regarding plans to float a project financing arm.
The State-owned company had in September last year appointed Crisil to examine the proposal. Though the arm, BHEL plans to leverage its balance sheet and reserves to expand its role beyond equipment supplies and enter the financial services sector.
Coming in the wake of increasing competition in its core area of equipment supplies, the Rs 34,500-crore equipment major plans to set up a financing arm in the form of a non-banking finance company through a joint venture with a financial sector partner.
Plans include offering financing options to customers that place equipment orders with the firm, which had reserves of Rs 15,400 crore at end-March 2010. The immediate mandate would be restricted to addressing project financing requirements of the firm's customers.
The proposal for a dedicated financing arm hopes to build on a move initiated by BHEL to pick up minority stakes in generation projects, especially those being set up by State-sector power utilities, where it is assured of equipment deals.
As a step in the direction of project financing, BHEL has committed up to 26-per-cent equity participation in thermal projects using supercritical sets in Tamil Nadu, Karnataka and Maharashtra and plans to follow the model in Gujarat and Madhya Pradesh.