The PSU, as expected disappointed all with its Q3FY14 net profit which came in at Rs.695 crore, a 41% drop YoY but sequentially, despite net sales falling 4% at Rs.8462, net profit rose 52%.  This can be attributed to the fall in operating costs – it came at 93% of net sales compared to 99% in Q2.  YoY, net sales dropped 15% and that proved to a drag on the bottomline.

EBITDA halved (YoY) to Rs.813 crore while margins fell by to 9.6% from 14.5%. Both its, segments, power as well as industry remain sluggish. Power reported a 12% fall in revenue while its EBIT fell 21%. The story was no different for the industry, wherein revenue slid 28% and EBIT declined 43%.  The company has stated that its order book stands at Rs.1 lakh crore compared to Rs.102 lakh crore in Q2. One wonders what the use of these tall order book numbers is when they do not get translated into orders and show on the earnings.

In these financial conditions, the company should not ideally have declared any dividend. But pushed to the wall by the Govt, which is asking cash-rich PSUs to declare interim dividends to get over its fiscal deficit issues, BHEL declared an interim dividend of Rs 1.31/share on Rs.2 face value.  But is it really so cash-rich? The company, as at 30^th Sept 2013 had cash balance of Rs.6221 crore, down from Rs.7732 crore in Q2FY13. As such there are reports coming that BHEL might have to write off part of the Rs.39,000 crore that clients owe the state-controlled power equipment maker in overdue payments. Thus it seems to have a negative cash flow on account of its receivables and to hand-out a dividend at this stage does not seem prudent.