BHEL's fortunes poised for revival as order book fills up on demand for coal-fired power

BHEL, which struggled to get power equipment contracts for about three years before FY24, now has a full order book for boilers and engineering, procurement and construction contracts and faces a capacity constraint, they said.

The state-run engineering company received orders worth about ₹52,000 crore for 9.6 gigawatts (GW) of thermal power projects in FY24, the highest ever by value for coal-based projects for the company. The order momentum is expected to continue in FY25, with the government planning to set up 80 GW of thermal power capacity by 2032.

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The power sector makes for about 70% of BHEL's operations, the other major segment being industry, which caters to major equipment supplies and EPC works for industries including transportation, transmission, defence, aerospace, and captive power plants.

The company, which had not received any orders in the thermal power space for about three years starting August 2019 to September 2022, is now getting orders and enquiries even from private companies for the purchase of boiler, turbine and generator (BTG) goods, one of the two people mentioned above said.

Well-positioned

The company’s full order book, in the context of plans to set up additional thermal power plants, has raised concerns over whether BHEL’s limited capacity to manufacture boilers and other equipment will hinder the scaling up of India's thermal capacity.

However, in its annual report for FY24, BHEL said the “primary opportunities" for the company lie in the government’s plans to augment the country's thermal power generation capacity to about 280 GW by 2032 and that it is “well positioned to capitalise on the opportunity, leveraging the expertise in manufacturing power equipment, and experience in setting up thermal power plants."

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An official with state-run NTPC, the country’s largest power producer, said despite BHEL’s packed order book, it expects to get its share of boilers and other products well within the required timeline.

Queries mailed to BHEL and NTPC remained unanswered till press time.

The shift towards thermal energy generation occurred primarily due to the country's peak electricity demand reaching unprecedented levels in FY24, topped only by the peak demand in summer this year.

In FY24, peak electricity demand in India touched 243 GW and is expected to reach 384 GW by FY32, BHEL said in its annual report. BHEL also anticipated that the rush to cater to India's growing electricity needs will continue for the next few years.

"...electricity generation has witnessed a growth rate of 7% on year-to-year basis, a trend which is expected to continue in near-to-medium term," the company said. "To meet the demand for power in the near future, coal-based high-efficiency supercritical power plants are expected to play a crucial role, especially till other reliable technology options achieve commercial acceptability."

BHEL paid dividend of about ₹55 crore to the government of India for FY24, its third consecutive year of giving payouts to shareholders following a gap during the pandemic. In FY22 and FY23, BHEL paid the government almost ₹88 crore in dividends annually. The government owns about 63% of BHEL’s equity.

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India Ratings and Research, a credit rating company, changed BHEL's outlook to "stable" in June 2024 from "negative" for the first time since 2021, as per documents in the public domain.

BHEL shares fell 2.8% to ₹279.60 on the BSE on Monday. They have gained 48.57% so far this year.