BHEL, which lost the best bidder status in a prestigious tender of NTPC, says it does not need orders at un-remunerative prices.

“We are not that desperate,” a senior official of BHEL told Business Line , soon after the news broke out, on Thursday, that BGR Energy had emerged the lowest bidder for the supply of turbine-generator sets for NTPC.

Coming on the heels of the South Korean Doosan turning out to be the lowest bidder for the supply of boilers for the same projects of NTPC, the question is “what has happened to BHEL?”

For sure, regardless of its ranking among the bidders, BHEL will get orders for four boilers and two turbine-generators, for the nine supercritical thermal plants of NTPC, of 800 MW each, spread over four locations. With orders on hand worth Rs 1.6 lakh crore, BHEL is indeed not desperate for work, unlike its competitors.

Underdogs winning

However, despite the display of sangfroid at the top, BHEL is seen as a leader that has let underdogs win.

That BHEL is willing to match the prices of the lowest bidder to get the orders for four boilers and two turbines – Rs 1.6 crore and Rs 94 lakh a MW, respectively – indicates that it finds economic value even at these prices. Then, why did it not go aggressive in its bid and retain its place at the top?

Image reasons

BHEL's logic that the prices would become the ‘benchmark', is not convincing because any price is a function of the market conditions prevalent at that point in time.

Not having got the top orders in the NTPC tender is for BHEL more an issue of image than of business. While it can afford to wait out competition, let others take jobs on aggressive prices up to their limited capacity and then sail into the blue ocean, it need not do so — for reasons of image.

China entry

Already, the Chinese are eating into its market. The total order booked for BTG (boiler and turbine-generator) in 2009-11 was 118,000 MW, half of which has gone to the Chinese.

It is another matter that even independent studies of Bank of America Merrill Lynch and JM Financial have clearly established that the Chinese are neither cheap, nor are they good in terms of quality or delivery, a point noted in the Parliament last month.

However, the fact remains that the Indian market leader has yielded space to the Chinese. The stock market has apparently taken noted this.

“BHEL has hugely underperformed the BSE Sensex in the last 12-15 months owing to concerns like slowdown in order inflow growth and the threat of intense competition, impacting profitability and revenue growth beyond 2012-13,” says a report of Edelweiss.

BHEL's officials say any image problem would only be short-lived and sustained profitability would show the company in good light in the long term. However, people also note that the company has failed to do now, what it once did, when a new product called 500 MW boiler was introduced.

BHEL's bids were so aggressive that twelve out of the sixteen orders for the product placed between 1979 and 2000 went to BHEL. The other four were on bilateral credit and, therefore, went to other players.

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