State-owned power turbine maker Bharat Heavy Electricals (BHEL) shares slumped as much as 9.5% to Rs 28.45 apiece on the BSE on Monday after the company during the weekend reported a consolidated net loss of Rs 1,532.18 crore for the March quarter, mainly due to lower revenues and deferred tax.
The stock, however, trimmed its losses later and it was trading around 4.5% lower at Rs 30.05. In comparison, the benchmark S&P BSE Sensex was trading nearly a per cent lower at Rs 33,465.08 levels.
BHEL’s total income for the quarter review stood at Rs 5,193.51 crore, down from Rs 10,489.11 crore in the same period last year.
The company has opted for new section 115BAA of the Income Tax Act, 1961 in the current year. Accordingly, deferred tax as on April 1 ,2019 has been restated at the rate of 25.168% which resulted in a reversal of deferred tax assets by Rs 974.41 crore.
Consequently, profit after tax decreased by Rs 956.50 crore and other comprehensive income fell by Rs 17.91 crore.
BHEL’s overall execution was weak in Q4FY20 due to lockdown (company estimates nearly Rs 40 billion hit on revenues). In addition to the domestic lockdown, the execution was impacted also due to delay in imports from Europe and other geographies.
For the full fiscal 2019-20, the company suffered a consolidated net loss of Rs 1,468.35 crore. It had posted a consolidated net profit of Rs 1,002.42 crore in 2018-19.
During Q4FY20, order inflow came in at Rs 6405 crs, down 3.4% YoY, (Rs 3031 crsfrom power segment, Rs 3301 crs from industrial segment, Rs 73 crs from exports segment). For FY20, order inflows stood at Rs 23547 crore, down 1%, YoY
BHEL would continue to face challenges such as lower-order inflow traction, softer execution, margin pressure as well as higher receivables, which could hamper company’s medium-term prospects.
Execution challenges and high level of receivables (Rs 36471 crs down 5.5% vs. FY19) are key concerns and could hamper medium term growth prospects
However, management’s focus on transformation strategy to diversify in the non-power business would aid near term revenue visibility.
Fewer orders and highly competitive pricing environment limit scope for margin expansion. The company’s recent expression of diversification to materialise with a certain time lag owing to the subdued economic environment,
Net net we understand that revival of growth for BHEL will take a long time as both macro and micro headwinds for the company look extremely challenging in the coming 12 to 15 months ahead.
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