BHEL sets sights on becoming a US$10 Billion company by 2012; Unveils Strategic Roadmap to further accelerate growth momentum

Spurred by the strong and consistent growth achieved in the last few years, engineering major Bharat Heavy Electricals Limited (BHEL) has now set its sights on becoming a US$10 Billion company by 2012. The company has unveiled a ‘Strategic Plan 2012’ that will enable it grow at a 20% Compounded Annual Growth Rate (CAGR) and achieve a turnover of US$10 Billion by 2011-12, i.e. two and a half times its present turnover of US$4 Billion.

Riding on the continued buoyancy in the Indian economy, especially in the infrastructure and capital goods sectors; the plan focuses on ensuring a sustainable profitable growth for the company over the next five years. In the Power Plant Equipment industry, which constitutes a major chunk of BHEL’s business, reasonably good growth is anticipated. The installed Power capacity base in the country is expected to witness an addition of around 1,50,000 MW during the XIth and XIIth plans.

The growth planks for the company in the next five years are expected to be driven by capacity and capability enhancement that will leverage the company’s efforts in its core area of power, supported by its industry, transportation, transmission, exports and spares & services businesses. Also, in order to retain its competitive edge in the face of mounting competition, various capability-building initiatives like Design-to-cost, Purchase and Supply Management, Lean Manufacturing, etc. have been taken up at the Bhopal and Hyderabad plants and will shortly be put in place across the company.

On the back of the successful completion of its earlier five-year long-term document – ‘Strategic Plan 2007’, BHEL is confident of achieving the goals it has set for itself in the new Strategic Plan. Significantly, it exceeded the turnover target set out in the Strategic Plan 2007, where it had originally targeted a turnover of Rs.125,000 Million at the end of 2006-07 but closed the year with an impressive top line of Rs.187,020 Million.

Giving a cutting edge to its globalization efforts, BHEL will position itself as a regular EPC Contractor in international markets besides pursuing the Mergers and Acquisitions (M&A) route to avail inorganic growth opportunities to enlarge the company’s operations and reach in export markets. With an outstanding physical export order book of over US$1 Billion, the company has gained high growth momentum in international business and is now targeting a seven-fold increase in physical exports from current levels.

In addition, the spares and services business is expected to be the next growth opportunity for the company where revenues are expected to increase four-fold. The marketing activity for spares and services has already been consolidated and systems capability is being strengthened to address various market segments.

R&D and technology development are of strategic importance to the company as it operates in a competitive environment where technology is a major factor. As such, as per the plan, the engineering and technology character of the organization shall be enhanced with focus on innovation and R&D, where the R&D spend will be increased by at least six times from the Rs.2,385 Million invested in R&D efforts in 2006-07.

With the establishment of manufacturing capacity of 10,000 MW per annum by the end of 2007; BHEL has embarked upon a very ambitious plan of enhancing its manufacturing capacity to 15,000 MW per annum with a total investment of around Rs.32,000 Million, for the XIth Plan. Having already tied up technology to produce higher rating super-critical thermal sets, this will further strengthen the position of the company in the domestic market, besides reaffirming its commitment to the country’s power development programme for meeting the country’s power forecast for the XIth Plan and beyond.