BHEL’s performance for the September quarter has been disappointing.

Even after adjusting for the Rs 191-crore one-time cost (predominantly wage-related expenses) on merger of Bharat Heavy Plates and Vessels Plant, net profits have almost halved from the levels (Rs 1,274 crore) achieved during the same quarter last year.

Besides, forex translation gains to the extent of Rs 365 crore, arising from deferred debts in overseas projects have also boosted the existing profits.

Outlook

Though the company received about Rs 3,000 crore worth of orders during the quarter, orders in its power segment were predominantly only from the spares and services group, reflecting the weak investment scenario in the country.

The slower execution is visible in the lacklustre operating margins, which came in at 4.5 per cent, compared to 17.9 per cent a year ago.

The order flows may be slightly better in the months to come.

In the power segment, after a lull, the company has bagged an order worth Rs 2,569 crore for steam generators from Neyveli Lignite Corporation in October

With the Cabinet Committee on Investments speeding up clearances in power projects in recent times, the company could stand to gain on two fronts.

It could help speed up execution of stalled projects for which the company has already bagged the equipment orders, for instance, the 4,120-MW boiler package from Jindal Power.

Secondly, it could also help the company bag orders for newly cleared projects such as the Tilaiya UMPP.

The company expects tenders for 15,000 MW to get finalised from now onwards to March. Besides, orders for the 13th Five Year Plan is also expected to come in from FY-15 onwards.

But the risk of slowed execution, payment delays from customers and stretched working capital positions remain.

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