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31. July 2008

India - Bhel charts out major diversification

NEW DELHI: Bharat Heavy Electricals Ltd (Bhel), India’s largest power generation equipment maker, is planning a major diversification to expand its revenue base in the years ahead, chairman and managing director K Ravi Kumar told.

“We are planning to diversify into the manufacture of diesel locomotives, making and refurbishing of oil rigs, defence equipment and casting and forging,” he said.

Bhel is searching for joint venture partners for its new business forays and also for the expansion of its existing businesses.

Kumar said the company was trying to tie up with Alstom SA, Siemens AG and General Electric Co for its transportation venture. “Indian Railways will also be a partner in the foray.”

Bhel will significantly expand its casting and forging capacity to meet not only its increasing in-house demands but also those of its customers. Kumar said that a new JV was likely to be incorporated by September. “We will use 40% of the castings and forgings by the company internally. The rest will be exported,” he added.

Its existing casting & forging capacity for smaller components meets its own requirements and also caters to power producers, engineering companies and steelmakers in India and abroad.

Oil rigs is another business that Bhel is looking at reviving. “Though we’ve had that business for a while, we didn’t get any orders for a very long time. Now we want to revive it,” Kumar said. Bhel recently bagged OIL and ONGC orders worth Rs 700 crore to refurbish oil rigs. “It’s a big business,” he said.

With the Indo-US nuclear deal now moving ahead, Bhel is planning to hike its capacity to make nuclear power generation equipment. “We are already making 540-mw units, and want to make 700-mw units now. With the treaty going forward, we will also be able to make 1,000-mw and 1,600-mw units through our joint venture with the Nuclear Power Corporation of India Ltd,” Kumar said.

Bhel’s capacity can be used for both nuclear power generation equipment and the traditional coal-based power generation gear. Capacity expansion would depend on how many components the company decides to make. “If we decide to outsource some of the equipment, our capacity expansion will be lower.”

Kumar added that it was tough to say how much investment Indian companies would attract as the US may insist on some of the reactor components being bought from American companies. He pegged the initial cost of making nuclear power equipment at Rs 6 crore per mw.

“The problem in nuclear power generation is fuel. The treaty will help us get enriched uranium not only for the new capacity but also for existing units that are running way below capacity,” he said.

BHEL has self-sufficiency in making units with generation capacity of up to 700 mw, but may need technical help beyond that, Kumar said. “The treaty will boost our nuclear power generation equipment business JV with NPCIL as we are sure that the projects will come up. This will give us significant revenue visibility.”

Engineering major Larsen & Toubro will be a major beneficiary because of its capacity to take up civil works, he said.

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