BHEL plans Rs 4200 crore capex by Dec '09

Bharat Heavy Electricals, BHEL has announced its first quarter results. The company's standalone net profit was up 33% at Rs 384.41 crore versus Rs 288.91 crore, (YoY). Its standalone net sales were up 33% at Rs 4,329.24 crore versus Rs 3,233.92 crore, (YoY). Its other income up 41.4% to Rs 291.7 crore.

Ravi Kumar, CMD of BHEL projects a 25% growth in turnover and a corresponding growth in gross profit - around 24% in FY09. The company is planning a capex of Rs 4200 crore by FY09 - by December 2009 and another Rs 5,000 crore by December 2011. This would be through internal accrual, Ravi Kumar said. 

Excerpts from CNBC-TV18’s exclusive interview with Ravi Kumar:

Q: What do you see happening on the margin front- can you  hold it at this current levels and how much more you have to face by way of employee expenses in the next few quarters?

A: I think we have already provided 40% hike for the employees and 50% of DA (Dearness Allowance) - we have merged with that and I think it is enough for wage revision which we are planning.

Q: Your margins fell by 2.5%, what was the reason for that kind of impact on the margins and how do you see it panning out for the rest of FY09?

A: We have already given an indication of what we are projecting that there will be a 25% growth in turnover and a corresponding growth in gross profit that is around 24% and that should hold good for the rest three quarters.

Q: What happens with the capex plans that you have because the power division has performed very well for you, are there any capex issues that BHEL might face this time?

A: We are planning capex of Rs 4,200 crore by FY09, December 2009 and another Rs 5,000 crore by December 2011 and that will be through internal accrual. We have a surplus cash of about Rs 9,000 crore.

Q:  How serious is the capacity challenges that you are facing, are you facing some shortages in critical components?

A: On the supply chain management there are certain constraints. We are coming out with joint venture for manufacturing castings and forgings this will take care up to 1,600 mega watt of range. It will be both for LP Forgings and Generative Forgings; they are already making HP forgings and IP forgings. So we would come out with a JV with a big capacity and 60% of it will be exported and 40% will be for internal use.