Slow turnaround in sight for BHEL

livemint.com:

Bharat Heavy Electricals Ltd (BHEL) have shot up 139% in the past year, despite persistent concerns about mounting receivables, elevated debt and strained working capital. The company’s main issue is that payment terms in some ongoing projects are highly skewed towards the latter stages. Other problems include slow execution, delays, and milestone-linked payments.

In the September quarter, BHEL’s trade receivables rose 13% year-on-year to ₹7,493. However, things may take a turn for the better. BHEL expects to complete projects totalling 20 GW in the next 12 to 18 months.

This has given analysts at JM Financial Institutional Securities confidence that the stress on receivables will ease from March 2025. “The decrease in debtor days along with better payment terms (minimum 10% advance) will translate into 44% compound annual growth rate (CAGR) in the cash balance during FY23-26 versus around 10% CAGR during the preceding five years," the analysts explained. Some analysts also foresee a potential turnaround in BHEL's ordering cycle from FY24.

Its outstanding order book stood at ₹1.14 trillion as of the end of September 2023. “We foresee BHEL’s total order intake surging to ₹1.8 trillion during FY24-26, which is nearly thrice the orders in the three years preceding FY24," Antique Stock Broking wrote in a report. This optimism stems from the anticipation of large orders such as the 3x800 MW Talabira project and the 2x800 MW Koderma project, among others.