Bhel proved the biggest gainer among Sensex stocks on Thursday on renewed buying after a recent fall.
The stock of the state-run power equipment major climbed strongly by 3.29% to Rs 215 on BSE by 11:15 IST. By then, it had recovered from an intra-day low of Rs 207.90, but was still off the day's high of Rs 216.50. Volumes reached over 470,000 shares till that time. The scrip has now risen 9.55% from Rs 196.25 on 11 March 2003. Earlier, between 27 February and 11 March 2003, the scrip had lost 11.13% from Rs 220.85.
Renewed buying by institutions (including FIIs and more particularly Prudential ICICI), after a recent fall (on fears of war breaking out in west Asia) has perked up the scrip today. Dealers say the current buying is on optimism that the war will be brief. However, they warn, if it is prolonged, selling will manifest again.
Fundamentally, the company seems sound on the basis of its strong order book position and the sustained flow of orders.
On 17 March 2003, Bhel announced a tie-up with Tata Consultancy Services for providing comprehensive solutions and to develop innovative, cutting-edge technology and futuristic IT-based solutions for the power sector. Bhel said the broad areas identified for cooperation include asset management, control systems and knowledge-based decision systems for power plants and power plant equipment.
Last week, the company bagged a Rs 1,589-crore worth project from Madhya Pradesh for setting up a 500-MW-capacity unit at Birsinghpur thermal power station. Bhel said the project, placed by Madhya Pradesh State Electricity Board, is expected to be commissioned within 42 months. The project envisages the design, manufacture, supply, erection, testing and commissioning of main plant equipment, comprising turbine generators and boilers with the associated auxillaries and control and instrumentation system
The Union Budget for 2003-04 has proved quite unkind to Bhel in that it has slashed customs duty on high voltage transmission equipment from 25% to 5%. The measure will reduce the total cost of import of such equipment and may put pressure on demand for domestic power equipment. The budget has been held to be favourable for the power sector in the long term though, due to the proposed reforms in the power sector. The budget has laid much emphasis on infrastructure, which could form the core trigger for industrial development. Other announcements include the extension of the mega power project policy to all power projects. Also, the Electricity Bill is expected to be passed in Parliament soon.
The Electricity Bill could lead to improvement in the financials of the power equipment sector. The bill seeks to abolish the current restrictions on power generators and aims at reforming the sector. Analysts say the bill will improve the health of state electricity boards. This, in turn, will help Bhel improve its financials as the power equipment major receives 60% of its revenues from SEBs.
For the third quarter ended 31 December 2002, Bhel posted a net profit growth of 1.5% to Rs 81.33 crore, compared to Rs 80.15 crore in the corresponding period of the previous year. Total income increased by 14% to Rs 1,699.76 crore (Rs 16.99 billion) from Rs 1,490.17 crore (Rs 14.9 billion) in DQ 2001.
Meanwhile, analysts are hopeful that Bhel may post excellent results in the coming quarters following its strong order book position. Bhel's order book stood at Rs 12,850 crore (Rs 128.5 billion) as at the end of December 2002. The order intake is estimated to grow by 20% despite one large order from BSES worth Rs 2,850 crore (Rs 28.5 billion) getting postponed to FY 2003-04.
Bhel is the largest engineering and manufacturing enterprise of its kind in India, and is one of the leading international companies in the field of power equipment manufacture. The Centre has decided to sell 17% equity stake in Bhel to bring down its holding in the company to 51% from 67.7%. The heavy industry ministry has granted its concurrence to the proposal for divesting 17% stake to the public, financial institutions and employees.
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