Time for BHEL to pull up its socks

Published: April 27, 2016 - 18:15

Hardnews Bureau Delhi

The writing has been on the wall for quite a while now. The BHEL management however has steadfastly ignored it. Ultimately it was up to Union Minister of Heavy Industries and Public Enterprises Anant Geete to deliver the message that the time for business as usual is over.

While conducting a review of BHEL’s performance recently, Geete “advised the company to step up its activities in diversification areas like solar and transportation, in a big way to address the slowdown in power sector.” Being a Maharatna PSU, BHEL is supposed to be nimble and responsive to market signals. However, it was caught off guard when the economic slowdown hit the power sector, the company’s bread and butter. If BHEL had made serious efforts at diversification of its business portfolio in time, it would not find itself in the bind it has landed into.

It is true that BHEL’s peers like Larsen Toubro, ABB India and Siemens too have suffered the onslaught of the slowdown but none so much as the PSU.

For example, in the year 2013, BHEL lost as much as 44.6 per cent of its valuation at the BSE. In comparison, loss in market valuation for Larsen Toubro was 30 per cent, 18.8 per cent for Siemens and just 2.4 per cent for ABB India. BHEL’s share price plunged massively from Rs 242.65 on April 13, 2015 to Rs 134.95 on April 13, 2016.

During the same period, Larsen Toubro’ share price fell from Rs 1,803.50  to Rs 1246.30, Siemens’ from Rs 1441.35 to Rs 1169 and ABB India’s from Rs 1394.45 to Rs 1360.

BHEL was hit hard by the power sector slowdown because it had no cushion unlike its better diversified peers.

When the India power sector started booming in 2003, BHEL was unable to meet equipment demand. That created a possibility for Chinese suppliers to enter the market. Later, during the 11th Plan period (2007-12), the PSU went on a thermal power manufacturing binge so that it could maximise its benefits.

Perhaps under the false impression that the boom in the thermal power sector was going to last, at least for the foreseeable future, the BHEL management did not make any serious efforts to ramp up its operations in solar power generation, though the government had already started reviewing power sector options due to the growing urgency to fight climate change. The UPA government announced the National Solar Mission in 2010, envisaging capacity addition of 20,000 MW by 2022. Little wonder that late entrant BHEL remains a marginal player in the solar equipment market.