Bharat Heavy Electricals Limited’s (BHEL) failure to effectively diversify its business portfolio has meant that the sharp slowdown in the power sector has impacted the company’s turnover, which declined from ₹49,510 crore in 2011-12 to ₹26,587 crore in 2015-16, according to a Comptroller and Auditor General report tabled in Parliament on Tuesday.
‘Profit turns to loss’
The company’s profit of ₹7,040 crore in 2011-12 was converted into a loss of ₹913 crore in 2015-16, the report added.
When questioned about this, the Ministry of Heavy Industries and Public Enterprises in May 2017 said that “several attempts” were made to diversify the company’s product offerings and these efforts were still on.
“The reply, however, is to be viewed against the fact that BHEL could not implement strategic approaches envisaged in Strategic Plan 2012-17 in potential growth areas, viz., transportation, transmission and industrial products,” the report said.
“BHEL did not set year-wise milestones for implementation of the envisaged strategies,” the report added. “BHEL could not achieve any of the strategic plan targets till 2015-16; shortfall ranging between 23.33% and 113.91% against specific goals.”
The CAG report also highlighted the fact that the value of the government’s stake in BHEL suffered because the overall market value of the company has plummeted in recent years.
“The market valuation of BHEL, which was ₹97,940.71 crore at the beginning of April 2011, was reduced to ₹37533.95 crore (as on February 16, 2017) representing a drop by 61.68%,” the report said. “...Consequently, the market value of Government of India holding in BHEL also decreased by ₹38,092.50 crore.”
The CAG pointed out that, even as BHEL had failed to diversify its business, it was losing market share in its core areas as well.
“As on March 31, 2016, in the supercritical segment, against 33 units (including 10 units under four on-hold projects) under implementation by BHEL, 45 units were being implemented by its competitors which may further depress the share of BHEL in its core sector,” the report said.