Slower order inflows did not deter power equipment major BHEL from managing double-digit profit growth in the March 2012 quarter.

Net profits expanded 21 per cent compared with the March 2011 quarter. While net sales saw a 7.5 per cent growth, adjusting the March 2011 quarter sales for comparability (due to change in warranty claim policy), it expanded 20 per cent.

The quarter also saw little threat to the company's operating profit margins, which remained steady at over 24 per cent. The industries segment, which houses transportation and renewable energy businesses of the company, has once again buttressed growth. The segment accounted for close to a fourth of sales in the March 2012 quarter against 18 per cent a year ago. Superior segment margins of the industry division could also be one reason for BHEL managing to keep profitability intact.

But BHEL may not be in this sweet spot for too long. BHEL has to match the price of the lowest bidder in some of NTPC's bulk orders in order to win the project. That could, in the coming year or two, pose some challenge to profit margins. That said, it hopes to enjoy some cost efficiencies as it gradually indigenises its super-critical technology.

Order book

While new orders for the year dwindled to a third of previous year's order inflows, BHEL ended the year with Rs 1,35,000 crore of orders or 65,000-70,000 MW of projects. These orders will convert to revenue in a little over three years, thus, providing medium-term revenue visibility.

BHEL expects 14,000-15,000 MW of orders in FY13. Many of the bulk tenders that it bagged in FY12 will also be added to the order book this year. Hence, the company may see an improvement in order flows in the current fiscal.

BHEL also ended the year utilising over 100 per cent capacity. Given the current order book, the company may well run at full capacity, with its newly expanded capacity of 20,000 MW.

> vidya@thehindu.co.in

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