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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]
Its much smaller rivals Dabur and Emami continue to record strong growth quarter after quarter
Despite endless restructuring of its business portfolios and continuous high-profile change of its top management, Hindustan Unilever is unable to generate any traction on its sales and profits. For the September quarter, HUL’s revenues were up by 4% while operating profit was completely flat. Compare this with the performance of Dabur India whose revenues were up by 15% while Emami Group’s sales were up by 27%.
HUL’s revenue growth has been stagnant for many quarters now. Over the past three quarters, average topline growth has ranged between 4%-6% which does not even cover inflation. Revenue growth has been continuously declining from a high of 20% it recorded in September 2008.
The recent September quarter has been especially good for fast-moving consumer goods (FMCG) companies mainly because raw material prices were sharply down in that quarter. For instance, Emami’s raw material cost was down by 35% and even Godrej Consumer Products Limited’s (GCPL’s) raw material cost was down by 15%. Both these companies took advantage of lower cost of raw materials and steady demand for their products. Emami’s operating profit was up by as much as 65%. On the other hand, even though HUL’s raw material cost was down by 9%, it had no profit growth. Dabur’s raw material cost has gone up by 3% and yet it has reported a sales growth of 15% compared to the same quarter last year. What is remarkable about HUL is that it had to spend 41% more on advertising compared to same quarter last year to get only a 4% growth in turnover this quarter (Q2 FY 10).
Another key issue with HUL is that it would maintain its high operating profit margin (39% in September 09) rather than creating growth in sales and operating profit. Interestingly, Dabur also enjoys an OPM of 36% which is as high as HUL but Dabur is able to increase its operating profit and revenues virtually every quarter. In the September quarter Dabur’s operating profit jumped by 21% compared to the same quarter last year.
–Debashis Basu with Pallabika Ganguly [email protected]
There has been a surge in foreign institutional investment over the past six months. The sensitive index of the Bombay Stock Exchange has gone up by more than 100% between early March and now, mainly because of investment by foreign institutional investors (FIIs). Collectively, they have put in Rs18,677 crore between March and June 2009. Who have been the big beneficiaries of this investment? Interestingly, it is the real estate companies that seemed to be going under in late last year and early this year which have got most of the money from FIIs.