Bhel bets on new business models, overseas opportunities

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Faced with reduced order book and stiff competition, power equipment maker BHEL is exploring new business models apart from scouting for overseas opportunities in Russia, Kazakhstan and other countries.

State-owned BHEL, which saw its net profit nearly half to Rs 3,461 crore in the last fiscal, is also keen to tap opportunities in the nuclear power segment and possible entry into core-nuclear area.

In its 2013-14 annual report, Bharat Heavy Electricals Ltd (BHEL) said the company has taken various strategic initiatives to sustain and grow in present adverse market conditions.

BHEL is exploring new business models with partnerships for power plant developers for upcoming UMPPs and debt financing for new projects in partnership with financial institutions are also underway.

"Further, to harness emerging opportunities in nuclear power, the company is working towards increasing its offering in nuclear plant with focus on indigenisation and entry into core-nuclear area," the report said.

Reflecting tough business conditions, the power equipment major saw its net profit as well as turnover slump in the last financial year compared to 2012-13 period.

Last fiscal, turnover and net profit dropped to Rs 40,338 crore and Rs 3,461 crore, respectively. In 2013-14, the company's outstanding order book was worth Rs 1,01,500 crore, lower than Rs 1,15,100 crore seen in previous financial year.

According to BHEL Chairman and Managing Director B P Rao, the decline was largely due to "unfavourable externalities".

BHEL has mentioned that power sector is facing numerous constraints related to fuel supply, financial health of the state distribution companies, land acquisition, and regulatory clearances.

These factors have resulted in finalisation of fewer new projects and slowdown in execution of some projects, it added.

With regard to overseas opportunities, BHEL said there is potential in the African continent besides South East Asia, Indonesia and Vietnam.

"SAARC region is expected to offer promising opportunities with significant growth potential in countries like Bhutan, Nepal and Bangladesh.

"BHEL is also targeting countries like Russia, Kazakhstan, Belarus, and Tajikistan that form a part of the Commonwealth of Independent States (CIS) and also hold promising investment avenues," the report said.

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