BHEL

BHEL’s Q1FY14 performance was a big disappointment. Net sales dropped 24% (YoY) at Rs.6325 crore and net profits dipped down further, down 49% at Rs.465 crore. The company had a forex gain of around Rs.350 crore and if that had not been there, net profit would have slipped over 70%. There are has been a complete fall all around – drop in power business revenue and EBIT and ditto for industry business. Its EBITDA was down by a shocking 75% and EBITDA margin was at 4.5% v/s 13.4%.  The performance of BHEL, the largest PSU capital goods company indicates the state of the economy – it shows that companies place orders but then do not pay and keep deferring the implementation given the general despondency of the economy. This cut back has affected topline and thus the bottomline. Finance cost rose 5 times at Rs.28 crore but this was offset by tax outgo, which halved from Rs.414 crore to Rs.203 crore.

Order book of the state-run capital goods company stood at Rs 1,08,600 crore as on June 30. Going ahead, pain is expected to continue. There is no overnight improvement estimated in order inflow and the economy itself is expected to stay lackluster. The only bright spot for the company is the depreciating rupee. This makes imports from China pretty expensive and that might mean more orders for BHEL. Surprisingly, while domestic institutions are selling, FIIs are buying into the stock. As at end of Q1FY14, FII holding increased from 12.93% to 14.98% and that of DII fell from 13.11% to 12.23%.