The company has received 80% to 90% orders from the private sector. Analysts believe markets gained from Chinese players as the main reason for BHEL’s order book overflowing
While Bharat Heavy Electricals Ltd. (BHEL) current order book stands at Rs125,800 million, as per analysts 80% to 90% of the orders received in the first half of the current fiscal have been from the private sector. All thanks to a combination of weakened presence of Chinese players in the Indian power sector and reduced orders from the public sector.
Historically, being a public sector undertaking, BHEL’s major chunk of orders has been from public sector utilities. This trend of more order inflow from the private sector companies has been witnessed recently in the first two quarters of this fiscal and analysts expect this to continue.
“BHEL has received a lot of private sector orders, especially from the second quarter onwards. If you study the first half of this fiscal as a whole, 80% to 90% orders for BHEL are from the private sector,” said an analyst.
Market players say this new trend is a result of the private sector companies now moving towards domestic companies like BHEL and L&T, rather than the Chinese players who were predominant last year. Introduction of new product categories has also helped BHEL gain more market from the Chinese players.
“Unlike last year, wherein lot of Chinese companies were taking the market away from BHEL, this year BHEL has gained on the private sector. BHEL has introduced a lot of new product categories like the super-critical 600MW unit and the 500MW unit; these moves have helped it gain market share. There is pricing advantage if you do a 660MW plant, compared to a 500MW plant. It could prove cheaper by 3% to 4%,” added the analyst.
In addition, price cuts announced by BHEL in the beginning of this year have also helped it gain more orders. “The price cuts were announced due to low cost of raw material,” added the analyst.
This new trend of orders from the private sector for Indian power companies is likely to continue for the next two quarters of this fiscal. “There were 70% to 80% orders from the private sector in the first two quarters; the second half of the fiscal is likely to witness around 30% to 40% orders from the private sector,” said the analyst.
Analysts believe this market gain from the Chinese players will be helpful to both the players in the power sector —BHEL and L&T. While L&T is strongly increasing its presence in the power sector, BHEL has the largest market share of 60%. Analysts believe BHEL will continue to retain this market share and enjoy more orders, while L&T is likely to witness an incremental advantage in orders, as it is a new power sector entrant.
In addition, the new statutory norms for the Indian power sector are likely to help Indian companies like BHEL and L&T further. As per analysts, Chinese players in the power sector are unlikely to match the new heat rates to be proposed for boilers in India. This in turn, would translate into more orders for Indian companies, which were earlier contracted to the Chinese players. Officials from BHEL were unavailable for immediate comments.
— Amritha Pillay [email protected]