Bhel

CONFERENCE CALL - from Capital Markets

Bharat Heavy Electricals

Focus on expedite execution of projects

Bharat Heavy Electricals hosted a conference call on Feb 11, 2016. In the conference call the company was represented by Atul Sopti, CMD and T Chokkalingam, Director Finance of the company.
Key takeaways of the conference call

Order book as end of Dec 31, 2015 was Rs 109201 crore. Orders worth Rs 3646 crore, which are not likely to commence have been excluded from the outstanding order book.

Ordering activity in power sector has pickup albeit by government sector. Order intake for the quarter ended December 2015 was Rs 6037 crore (or 1810 MW) of which power sector orders were Rs 5124 crore and industrial is RS 961 crore and industrial sector orders were Rs 961 crore. Order intake for 9mFY16 was Rs 28096 crore. The company is confident of closing this fiscal with an order intake of Rs 35000 crore.

The company is favourably placed for 9 GW of orders and of which orders worth about Rs 8000 crore expected to materialize within next 45 days. These orders are largely 2X760 MW Uppur Thermal power project from TANGEDCO, 525 MW Tuticorin project of SPIC Electric Power Corporation (SEPC) and 1X250 MW of Rourkela power project.

Of the 9GW where the company is L1 includes 1000 MW Pakhadul Hydroelectric Project from Chenab Valley Power, 4X660 MW Barethi STP of NTPC, 1X660 MW Bhusawal TPS of MAHAGENCO and 4000 MW Pudimadaka power plant of NTPC in AP.

Of the Rs 3646 crore worth of order excluded from other book barring one all other are export orders.

In Q3FY16 the company has reviewed five projects that are stalled for a while. The aggregate unexecuted order book of these five projects is Rs 2000 crore. These five projects include GVK Gobinwal, Nashik Power project of Rattan India Power, Jhabua Power and Pranhita Power projects.

Provisions of Rs 1088.38 crore towards net dues & Rs 98.21 crore towards Work in progress/Finished goods inventory have been made in the results in respect of project on hold. The company has formulated a policy to review the project on hold. The decision to provide for will be taken up after considering factors such as ageing of the order, type of client, sovereign guarantee on the projects etc The Company expected the project on hold will review and has in-fact reviewed some of the projects during Q3FY16. But some could not be reviewed and dragging and thus the company provided for now.

Hence forth the company will do periodic review of its old projects. However no major provisions are expected in Q4FY16 as things stand today.

Of the order backlog the share of stalled or projects not got start letter are about Rs 32600 crore as end of Dec 2015.

Receivables as end of Dec 31, 2015 stood at Rs 35881 crore and of which about 50% are deferred and collectable once mile stone activity is crossed. The rest is collectable and of which more than one year is roughly about Rs 10000 crore.

Awarding of Pudimadka project by NTPC may slip to next fiscal as NTPC is yet to take a call whether the plant to be on import coal or domestic coal. However, the awarding of Barethi might happen in FY2016 itself if everything goes well.

The increase in material cost is largely due to JDU clause as well as mix change with share of EPC going up. Further when volume goes up the company will get better procurement price in case of raw material.

The environment clearance for 5X800 MW Telengana project will be obtained by the client in next 3-4 months as there is change in plan and new EIA has completed.