The Weakness Is In The Core

Despite the Indian economy showing decent signs of recovery, it seems like the woes of the capital goods sector are yet not over. Public sector major BHEL's PAT literally nosedived during the second quarter of FY14 by more than 64 per cent to Rs 455.95 crore against Rs 1274.50 crore earned during the quarter ending September 2012. The company’s topline also remained subdued in the September quarter owing to a sober order book and low commissioning of projects. It earned a total income of Rs 9482.25 crore during Q2FY14, which was 11 per cent higher in the corresponding quarter of previous financial year.

During the quarter, the company acquired another loss making public sector company Bharat Heavy Plate and Vessels and a loss of Rs 191.35 crore pertaining to that company has found its way to BHEL’s Profit & Loss statement. This has resulted in a sharp decline in its overall PAT. Even if BHPV had not been there, BHEL’s profitability would have been down by around 50 per cent, clearly showing a bleak picture for the company. In fact its other income has saved the day as it earned a whopping Rs 497.90 crore which stood at just Rs 130.67 crore during corresponding period last year.

The company faced a real challenge in its core area of operation; power, where its revenue declined from Rs 8954.40 crore to Rs 7576.38 crore during Q2FY14. Revenue from the industry segment has also declined to Rs 1739.56 crore against Rs 2054.88 crore earned during Q2FY13. This clearly shows an overall decline in the company’s performance in every segment and a pathetic manufacturing environment. Though there is a sharp decline in the PAT, during the first half of the year the company’s capital employed has increased mainly owing to the fresh investment into the power segment. During this period, the company has employed Rs 29376.13 crore of capital, while this stood at Rs 26557.14 crore during the corresponding half year of FY13. As far as the order book of the company is concerned, BHEL has an order book of Rs 102300 crore as at the end of Q2FY14.