Bharat heavy electricals limited


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Bharat heavy electricals limited

  1. 1. Project Report on Financial Analysis of Bharat Heavy Electricals limitedSubmitted to:Prof. RameshSubmitted by:V. Austin SamuelFPB1214/56
  2. 2. CF Assignment Austin Samuel Acknowledgement I take this opportunity to express my profound gratitude and deep regards to my guide(Professor Ramesh. S) for his exemplary guidance, monitoring and constant encouragementthroughout the course of this project. Thehelp and guidance given by him time to time shall carryme a long way in the journey of life on which I am about to embark. His uncompromising demand for logical conclusions, quality of presentation, andoriginality of work and novelty of ideas has benefited this study. I shall always remain grateful tohim and no words of thanks can compensate for the liberty that I had been given to encroachupon whatever little spare time he had at their disposal. Lastly, I thank almighty, my parents, and friends for their constant encouragementwithout which this assignment would not be possible.IBA, For Academic Purpose Only Page 1 of 17
  3. 3. CF Assignment Austin Samuel Bharat Heavy Electricals LimitedAbout the Company: It is an integrated power plant equipment manufacturer and one of the largest engineeringand manufacturing companies in India in terms of turnover. It was established in 1964, usheringin the indigenous Heavy Electrical Equipment industry in India - a dream that has been morethan realized with a well-recognized track record of performance. The company has been earningprofits continuously since 1971-72 and paying dividends since 1976-77. They are engaged in the design, engineering, manufacture, construction, testing,commissioning and servicing of a wide range of products and services for the core sectors of theeconomy, viz. Power, Transmission, Industry, Transportation (Railway), Renewable Energy, Oil& Gas and Defense. The company has 15 manufacturing divisions, two repair units, fourregional offices, eight service centers and 15 regional centers and currently operates at more than150 project sites across India and abroad. We place strong emphasis on innovation and creativedevelopment of new technologies. Our research and development (R&D) efforts are aimed notonly at improving the performance and efficiency of our existing products, but also at usingstate-of-the-art technologies and processes to develop new products. This enables them to have astrong customer orientation, to be sensitive to their needs and respond quickly to the changes inthe market. The high level of quality & reliability of our products is due to adherence to internationalstandards by acquiring and adapting some of the best technologies from leading companies in theworld including General Electric Company, Alstom SA, Siemens AG and Mitsubishi HeavyIndustries Ltd., together with technologies developed in own R&D centres. Most of the manufacturing units and other entities have been accredited to QualityManagement Systems (ISO 9001:2008), Environmental Management Systems (ISO 14001:2004)and Occupational Health & Safety Management Systems (OHSAS 18001:2007). BHEL has a share of 59% in India’s total installed generating capacity contributing 69%(approx.) to the total power generated from utility sets (excluding non-conventional capacity) asof March 31, 2012.IBA, For Academic Purpose Only Page 2 of 17
  4. 4. CF Assignment Austin Samuel BHEL’s global references are spread across 75 countries. The cumulative overseasinstalled capacity of BHEL manufactured power plants exceeds 9,000 MW across 21 countriesincluding Malaysia, Oman, Iraq, the UAE, Bhutan, Egypt and New Zealand. Our physicalexports range from turnkey projects to after sales services. They work with a vision of becoming a global engineering enterprise providing solutionsfor a better tomorrow. Greatest strength being highly skilled and committed workforce of 49,390employees,every employee is given an equal opportunity to develop himself/herself and grow inhis/her career. Continuous training and retraining, career planning, a positive work culture andparticipative style of management - all these have engendered development of a committed andmotivated workforce setting new benchmarks in terms of productivity, quality andresponsivenessAbout the Industry: The electric power industry provides the production and delivery of electric energy, oftenknown as power, or electricity, in sufficient quantities to areas that need electricity through a gridconnection. The grid distributes electrical energy to customers. Electric power is generated bycentral power stations or by distributed generation. Many households and businesses need access to electricity, especially in developed nations,the demand being scarcer in developing nations. Demand for electricity is derived from therequirement for electricity in order to operate domestic appliances, office equipment, industrialmachinery and provide sufficient energy for both domestic and commercial lighting, heating,cooking and industrial processes. Because of this aspect of the industry, it is viewed as a publicutility as infrastructure.IBA, For Academic Purpose Only Page 3 of 17
  5. 5. CF Assignment Austin Samuel Product portfolio of Company:Power Air Preheaters Boilers Control Relay Panels Electrostatic Precipitators Fabric Filters Fans Gas Turbines Hydro Power Plant Piping Systems Pulverizers Pumps Seamless Steel Tubes Soot blowers Steam Generators Steam Turbines Turbo generators ValvesIndustry Capacitors Ceralin Compressors Desalination Plants Diesel Generating Sets Industrial Motors & Alternators Gas Turbines Oil Field Equipment Solar Photovoltaic Power Semiconductor Devices Seamless Steel Tubes Soot blowers Steel Castings & Forgings Steam Generators Steam Turbines Turbo generators ValvesIBA, For Academic Purpose Only Page 4 of 17
  6. 6. CF Assignment Austin SamuelTransmission Bushings Capacitors Control Relay Panels Dry-type Transformers Energy Meters HVDC Transmission System Insulators Switchgears Power Semiconductor Devices Power System Studies Control Shunt ReactorTransportation Electric Rolling Stock Electrics for Rolling Stock Electrics for Urban Transportation SystemNon-ConventionalEnergy Source Mini/Micro Hydro Sets Solar Lanterns Solar Photovoltaic Solar Water Heating Systems Wind Electric GeneratorsR&D Products Fuel Cells Surface Coatings Automated storage &Retrievals Load Sensors Transparent Conducting OxideIBA, For Academic Purpose Only Page 5 of 17
  7. 7. CF Assignment Austin SamuelOrganization structure of the company:IBA, For Academic Purpose Only Page 6 of 17
  8. 8. CF Assignment Austin SamuelSales of BHEL (Quarter wise)IBA, For Academic Purpose Only Page 7 of 17
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  13. 13. CF Assignment Austin SamuelFinancial HRAnalysis: Bharat Heavy Electricals Ltd., a Navratna company, is the largest engineering andmanufacturing enterprise in India for power & infrastructure-related products, with 54% marketshare. The company has a 25-year history of consistent profitability and manufactures over 180products for power sector and other industries like transportation, fertilizer, water, steel andrenewable energy. The companys operations are organized around two major business segments- power (79% of FY11 revenues) and industry (21%). The company has 15 manufacturing divisions, 4 power sector regional centers, over 100project sites, 8 service centers, and 15 regional offices. It is also one of the largest exporters ofengineering products and services from India. It supplies its product to over 60 countries in theworld. The company gets 96.80% revenues from domestic markets and 3.20% from exports. TheCompany was incorporated in 1964.IBA, For Academic Purpose Only Page 12 of 17
  14. 14. CF Assignment Austin SamuelX- Ray Analysis: BHEL has performed extremely well in the past ten years, except in FY03. The companyhas increased its Net Sales by 22% CAGR in the last ten years; however the EPS increased by28% during the same period. This was due to the margin expansion that the company witnessedfrom FY04 to FY08. India’s increased focused on infrastructure and the monopoly situationenjoyed by the company made this possible. FY09 and FY10 again saw a decrease in margins onthe back of increasing raw material prices. The company’s margins have increased substantiallyto 18% in FY11 as raw material prices dipped. The company has grown its BVPS by 19% 10 yr.CAGR. Given the huge revenues and profitability enjoyed by the company, it has managed toincrease its operating cash flow by 14.3% over the last 10 years. Hence, the Company hasexpanded its business successfully in the past. Currently, the Company has Debt to Net Profitratio of 0.03, which shows the company is a relatively debt free company & can repay all its debteasily within a year at current level of profit.IBA, For Academic Purpose Only Page 13 of 17
  15. 15. CF Assignment Austin Samuel BHEL has maintained a high ROE & ROIC, above 25%, over the last 5 years. Thisshows that the management of the Company is very efficient in utilizing the funds. Being acapital intensive industry, the company has huge working capital requirements. The company hasmanaged to maintain its working capital days at an average of 514 days. However, this is 1.5times higher than the industry average of 360 days. The company has managed to reduce its networking capital from 180 levels to 107 in FY11, which is lower than the industry average of 180days but very high when compared to its competitors like ABB and Siemens.P.S: All the above factors say that the 10 YEAR X-RAY of BHEL is very goodIBA, For Academic Purpose Only Page 14 of 17
  16. 16. CF Assignment Austin SamuelConclusion Being a Public sector company and having Sound engineering base and ability toassimilate and maintaining relatively stable industrial relationship it is able to set up powerplants on turnkey basis with a complete know- how for manufacture of entire equipment isavailable with the company. It also has the ability to manufacture or procure to supply spares. It is fully equipped to take capital maintenance and servicing of the power plants andlargest source of domestic business leading to major presence and influence in the market. Theability to successfully overhaul and renovate power stations equipment of different internationalcompanies makes it stand on top on the market share price on competing with Larsen which is itsimmediate competitor. Maintaining a market share of around 35% is not a common thing but BHEL is able to dothis very effectively. Increase in PAT, CFAT suggests that the company is doing well inattaining good sales and thereby good profits. The company should be concentrating more on theAnnual Growth Rate because the AGR was fluctuating from year to year. If sustainability isattained n AGR then the company can make sure to reach the top position in coming 10 years.IBA, For Academic Purpose Only Page 15 of 17
  17. 17. CF Assignment Austin SamuelBibliography: 1. information.asp?symbol=BHEL&name=BHEL-Detailed-Financial-Data 2. 3. 4. information.asp?symbol=BHEL&name=BHEL-Detailed-Financial-Data#.UTlwqdb7C-Y 5. information.asp?symbol=BHEL&name=BHEL-Detailed-Financial-Data#.UTlwqdb7C-Y 6., For Academic Purpose Only Page 16 of 17