Bharat Heavy Electricals Ltd.

(BHEL)
Presented by:
M. Arsalan Sheikh (#7989)
Ahsan Bham (#8106)
Sobia Khan(#6316)
Capital Goods Industry:
Overview
• Manufacturing sector is the key end-user sector of
capital goods
• Presence of a large width of products, with almost all
major capital goods being manufactured locally
• Focus/investment in branding & marketing and
customer orientation is low.
• Most items produced compare functionally with those
manufactured elsewhere in the world, but lag behind
as far as finish is concerned
• Labor is highly cost-competitive
Capital Goods Industry:
Statistics
• Capital goods sector has registered a growth
of 7.0% during the current year 2008-09.
• The share of China in India’s total import of
capital goods has gone up from 38 per cent in
2002-03 to 50 per cent in 2007-08
• BHEL has been growing at a CAGR of around
25 per cent since 2007-08
Heavy Industry:
Overview
Production
Growth
Industry Unit
2007-08 2008-09 Rate (%)

Industrial Machinery Rs. lakhs 355892.3 515431.6 44.83

Machine Tools Rs. lakhs 269144.6 242816.7 (9.78)
Boilers Rs. lakhs 823134 1015393 23.36
Turbines (Steam/Hydro) Rs. lakhs 351814.3 419300.4 19.18
Electric Generators Rs. lakhs 147415.98 177809.5 20.62
Power Distribution Transformers Mill. KVA 73.26 71.86 (1.91)
Telecommunication cables Mill. Mtr. 8013.2 7050.68 12.0
Commercial Vehicles Numbers 545104 416491 (23.59)
Passenger Cars Numbers 1421984 1516791 6.67
Source: Department of IPP
Heavy Electrical Industry:
Overview
• The Government of India has an ambitious mission of
‘Power for All by 2012’ and planned power capacity
addition of 78,577 MW in the 11th five year plan
(2007- 12)
• Manufacturers of Heavy Electrical equipment have
absorbed latest technology available in the world up
to a unit capacity of 660/800 MW for thermal sets.
• Latest technology for generation of nuclear power will
be accessible to Indian manufacturers and bigger
players in the field like Bharat Heavy Electricals Ltd.
(BHEL) and Larsen & Toubro will be benefited
immensely.
Heavy Electrical Industry:
Categories
• Boilers
– High pressure steam thus generated may be used
directly as the working fluid in a prime mover to
convert thermal energy to mechanical work, which
in turn may be converted to electrical energy.
• Transformers
– The transformer industry in India has developed for
over 50 years and has a well matured technology
base. Energy efficient amorphous core transformers
with low losses and low noise levels are also being
developed to meet International requirements.
Heavy Electrical Industry:
Categories
• Switchgear and Control Gear
– Switchgear & Control gear Industry in India is a
fully developed and mature industry, producing
and supplying a wide variety of switchgear and
control gear items needed by the industrial and
power sector. This industry sector manufactures
the entire voltage range from 240 V to 800 KV.
• Generator Sets
– Manufacturers in India are capable of
manufacturing AC Generator right from 0.5 KVA to
25,000 KVA with specified voltage ratings.
Heavy Electrical Industry:
Categories
• Turbines
– The capacity established for manufacture of
various kinds of turbines such as steam and hydro
turbines including industrial turbines is more than
10,000 MW per annum
Heavy Electrical Industry:
Leading Players (2006)
Categories Players
Transformer Crompton Greeves, BHEL, Vijay Electricals, Emco, Bharat
Bijlee
Switchgears ABB, Siemens, L&T, Crompton Greeves, BHEL, Areva T&D
India Ltd. (formerly Alstom)
Steam & Hydro Turbines BHEL, Triveni Engineering & Inds., Bellis India
Generator/Generating Sets Honda Siel Power Products, Powerica, Kirloskar
Electronic Co., Cummins India
Boilers BHEL, Thermax, Saraswati Industrial Syndicate, Sterling
Strips
 Porter’s 5 Forces Model
Suppliers
Materials, parts, components,
other resources
Suppliers are well diversified
across the globe
Prompt delivery by Suppliers
are ensured by BHEL

Substitutes
Has many substitutes that might
pose a threat
Has less diversification with
sectors, so that concentrated
focusing on the respective sector
avoids chance of getting
substituted
Has a order book worth
thousands of Crores
Rivalry among competitors
Creating competitive advantages
to gain bigger market share
Acquisitions, mergers and joint-
ventures in other countries
Technological Improvements
Potential of New Entrants
Competitive Price
Many orders are captured in
recent times
Existing tactic in the market will
not help in the current scenario

Buyers
Wide Customer base in India
and in all parts of the world
With excellent customer
satisfaction the order are
booked for the next two years
(Information from the
employee)
BHEL:
Introduction
• Lower cost is due to low capital cost
• Manpower has been streamlined; with the
introduction of VRS their manpower cost are of the
order of 17% of turnover. Hence their fixed cost is low
as compared to their competitors.
• Also continuous productivity improvements, value
engineering and better inventory management among
others contributes to their cost competitiveness.
• Technology absorption/engineering skills.
BHEL:
Introduction
• Technical/development abilities to improve the
product and keep it current.
• Professional strategic management (coming up with
suitable strategies in marketing, operations and
financial management)
• Skills established in production, erection,
commissioning and servicing
• Ability to offer total solution and system sale
• BHEL targets to achieve Rs 50,000 crore turnover by
2011-12
BHEL:
M&A Strategy

• Intensifying competition

• Global markets

• Growth in new industries

• Get the technology and market access
– BHEL acquired Bharat Heavy Plates and Vessels
BHEL:
International Competition
• Enhancing overseas business is one of the strategic
thrust areas.
• Physical export orders worth Rs.3,265 Crore ($ 653
Million) received in 2008-09.
• BHEL plans to enhance export revenues to Rs.6,000-
7,000 Crore by 2011-12
– By positioning BHEL as an effective EPC contractor
– Attempting large projects through project partnerships
– Leveraging business through Govt. of India line of credit
– Product sales through distribution networks
BHEL:
Core competence
• In order to meet the increasing demand of power
equipments it is currently expanding its capacities to
20,000 MW, which expected to commission by Dec
2011.
• Robust order book with visibility for next three and half
years
• Capacity expansion to provide economies of scale
• Supercritical projects to provide the next growth trigger
• BHEL proving its prowess in spite of competition from
Chinese equipment
BHEL:
Power Segment
• The manufacturing range of BHEL includes
Steam turbines, Boilers, Generators up to 500
MW for utility and combined cycle application
and is capable of manufacturing Steam
Turbines with super critical steam cycle
parameters and matching generators up to
660/800 MW size.
• BHEL has the capacity to manufacture gas
turbines up to 260 MW.
BHEL:
Power Segment
• BHEL is the largest manufacturer of boiler in
the country accounting for around 2/3rd of
the market share. It has the capacity to
manufacture steam generators for utilities
ranging from 30 to 500MW capacity using
coal, lignite, oil, natural gas or a combination
of these fuels.
BHEL:
Financials
BHEL:
Next five years…
• Technical collaboration
• Investing heavily in R&D
• Improving finishing of its products
• Introducing new technologies in power
generation
• Increase its overseas business by increasing
supplies
BHEL:
Global Competitiveness
• BHEL has fully established state-of-the-art
technology for manufacture of HT Motors up to
28000 kw rating
• Winning a prestigious contract for supply of 650 HT
Motors for Essar Steel Plant Valued (at Indian Rs. 650
million (US $14.8741 million)
• The company has an investment plan of Indian Rs.
1340 million (US $30.5951 million) for modernization
of production and testing facilities
BHEL:
Global Competitiveness
• BHEL is taking long strides to become a major
global player in the field of HT Motors also by
enhancing its presence in international market
• The company is targeting a six-fold increase in
its physical exports by 2012
• India's BHEL gets $44 Million order from
Oman in 2009
BHEL:
SWOT Analysis
• Strengths
– Sound engineering base and easy to assimilate
– Ability to manufacture or procure or supply spares
– Largest source of domestic business leading to
major presence and influence in the market
– Ability to successfully overhaul and renovate
power stations equipment of different
international companies
– Low labor cost
BHEL:
SWOT Analysis
• Weaknesses
– Large delivery cycles in comparison with
international suppliers of similar products
– Inability to provide suppliers’ credit, soft loans,
and financing power projects
BHEL:
SWOT Analysis
• Opportunities
– Demand for power and hence plant equipment is
expected to grow
– Private sector power plants to offer expanded market
as utilities suffers resource crunch
– Ageing power plants would give rise to more spares
and services business
– Life expansion program for old power stations.
– Easy processing of joint ventures/
collaboration/import/ acquisition of new technology.
BHEL:
SWOT Analysis
• Threats
– Increased competition both national and international
– Multilateral agencies reluctant to lend to power sector
because of poor financial management of S.E.Bs
– More concessions to private sector and not to
government owned utilities like NTPC or S.E.Bs, so
future power projects would be opened up in private
sector
– Level playing ground not available, foreign companies
spending much more on business promotion tactics.