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India Ratings and Research has revised the outlook on Bharat Heavy Electricals Ltd (BHEL) to negative from stable due to higher than expected decline in its revenue, leading to EBITDA losses in 1QFY20.
The rating agency expects further moderation in September quarter. The company faced delay in customer clearances and receipt of imported equipment in the industrial segment, resulting in slower-than expected revenue booking in the two projects.
However, BHEL’s management is hopeful of a significantly higher sales booking in December and March quarters, thus meeting the management revenue targets. The optimism is driven by the resolution of the issues and hence higher supplies and execution in the projects. However, given the large fixed-cost in the business with annual employee costs of ₹6000 crore, a continued moderation in revenue can result in EBITDA losses.
The revenue declined 24 per cent year-on-year to ₹4500 crore in June quarter, leading to an EBITDA loss of ₹270 crore (₹290 crore). The negative outlook also factors in 42 per cent decline in order inflow at ₹23,900 crore last fiscal and ₹3.890 crore in June quarter against ₹4370 crore logged in the same period last year.
Shares of BHEL was trading marginally up by 0.10 per cent at ₹48.35 close to its 52 week low of ₹47.45 at 1.20 pm.
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