BHEL likely to finalise NBFC plan by July

Bharat Heavy Electricals Ltd will be taking to its board a revised proposal to float a non-banking financial company (NBFC) to fund power projects.The power equipment maker is incorporating some of the suggestions made by Crisil on the original proposal.BHEL, which had been mulling the NBFC option to get better returns on its cash surplus, had appointed Crisil to advice on the proposal; the financial services firm recently submitted its report to the company.“We will be going to the board again with the (revised) proposal. We expect to finalise the proposal in the next three months,” the BHEL Chairman and Managing Director, Mr B Prasad Rao, told Business Line here.

BHEL, which is expanding its capacity from 13,000 MW last fiscal towards a target of 20,000 MW in the next two years, is sitting on a cash surplus of about Rs 9,000 crore.“The NBFC option will give us a platform to make better use of our cash surplus, especially as the Twelfth Plan Period envisages significant capacity addition in the power sector,” Mr Rao said.BHEL, which has an order book of Rs 1,75,000 crore, may rope in a partner to float the investment arm.

It is estimated that the funding shortage in the power sector in the Eleventh Plan Period would be a whopping Rs 4,50,000 crore. This is given the current funds availability to meet the Government's target of adding 78,577 MW capacity during this period.The funding appetite of the power sector will only grow during the Twelfth Plan, with the Central Electricity Authority setting its sights on a capacity addition target of about 1,20,000 MW, almost twice the Eleventh Plan target.

TWO-FOLD BENEFIT

For BHEL, the NBFC option will bring in a two-fold benefit.Apart from getting better yields from its cash surplus, the company will also help create additional markets for its equipment through funding of new power projects.This is also expected to help the company at a time when it seems close to getting elevated to the Maharatna status. The Ministry of Heavy Industries and Public Enterprises is in the process of putting before the Cabinet new norms for Maharatna qualification.As this status will give the company significant flexibility to go in for overseas acquisition, BHEL's proposed investment arm could give a boost to its overseas ambitions