This is just the start of a bad earnings cycle for BHEL- execution problems are expected to continue, if not escalate, while competitive pressures and lower utilisation will impact margins further, over the coming years-Nomura
State-run BHEL’s June quarter results were shocking-24% year-on-year (yoy) decline in revenues clearly highlights the extremely challenging state of power sector, says Nomura Financial Advisory and Securities (India) Pvt Ltd. According to a Nomura research note, BHEL’s EBITDA plunged 68% yoy, while profit after tax (PAT) declined 49%, finding some support from higher other income. Reported order inflow of Rs14.7 billion was also negligible in the context of full year expectation of Rs300-350 billion. The details of the quarterly results are given below:
According to Nomura, this is just the start of a bad earnings cycle for BHEL, as execution problems are expected to continue if not escalate further (especially in the current liquidity tightening scenario), while competitive pressures and lower utilisation will have further impact on margins over the coming years.
Hence, Nomura has made a ‘Reduce’ recommendation for the BHEL share with a target price of Rs185.
On the long term forecast for BHEL, Nomura points out:
(a) Commodity price declines could be a key upside risk, as nearly 50% of the order book is on fixed-price contracts;
(b) Significant developments in new coal sourcing, whether domestically or through imports, could drive new power capex, thus benefitting BHEL.
Even as demand for power is unlikely to slow, Nomura expects actual capacity to be constrained by land and fuel availability and environmental clearances. Meanwhile, new concerns on execution emerge, as order book credibility for the sector is in question now.
The apex court also pulled up the union government for dilly-dallying on the issue of price fixation for the last 10 years
The Supreme Court on Tuesday agreed to examine the new national pharmaceutical pricing policy framed by the Indian government for fixing prices of essential medicines in the country.
A Bench headed by Justice GS Singhvi asked the Centre to file its response on a petition challenging the policy and raised questions on prices of medicines fixed by the Government.
After going through data provided by the petitioner in the public interest litigation (PIL), the Bench said, “Margin of profit for manufacturers and dealers has become 10% to 1,300% of the cost of manufacture of the drug.”
The Bench also pulled up the Centre for dilly-dallying on the issue of price fixation for the last 10 years and saying that nothing has been done by the Centre despite various committees including parliamentary committee deliberating on the issue.
The assessment was done by the petitioner after analysing the market price, price fixed by the Government and the cost of production of drug.
While hearing another case, the court had earlier also slammed the Government for not controlling the price of such drugs during the last 18 years.
The court had made it clear to the Centre that it should not form a pharmaceutical policy, which may cause increase in the price of essential drugs.
The court had said drugs prescribed by the doctors were going beyond the reach of common man and “any formula for price fixation which goes against common man should be quashed“.
The Bench had pulled up the Government for not taking any decision on bringing more drugs under the price control after 1999 and during the pendency of case before it for the last 10 years.
Rajan, a gold medallist from IIT-Delhi and IIM-Ahmedabad, will replace D subbarao as governor of the RBI next month
Dr Raghuram Rajan, the chief economic advisor of finance ministry, is appointed as next governor of the Reserve Bank of India (RBI). He will take over from Duvvuri Subbaro, whose term ends on 4th September.
In a statement, the finance ministry said, "The Prime Minister has approved the appointment of Dr Raghuram Rajan as the Governor of RBI for a term of three years".
Last year, Rajan was appointed as the chief economic advisor to the finance ministry. He has formerly worked as the chief economist at the International Monetary Fund (IMF).
The immediate challenges before Rajan would be to stabilise the rupee volatility, changing interest rate scenario amid weaker GDP growth, high inflation levels and high vulnerabilities of the external environment.
Rajan is taking over as RBI chief at a time when the Indian rupee has fallen over 12% per cent since January this year.