Term Paper Bhel

8/3/2019 Term Paper Bhel

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TERM PAPER ON

By:

Avinash Hacholli

USN: 1PI10MBA25


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INTRODUCTION:

BHEL is one of the Indias largest engineering & manufacturing enterprise in the energy-

related/infrastructure sector.

The company has grown in stature over the years with continued inflow of orders, manufacturing

prowess, continued thrust on technology leading to a strong presence in domestic and international

markets as a major supplier of power plant equipments besides establishing substantial inroads in select

segment of products in Industrial sector and Railways. BHEL caters to core sectors of the IndianEconomy viz., Power Generation and Transmission, Industry, Transportation, Renewable Energy,

Defence, etc.

The wide network of BHELs 15 manufacturing divisions, 2 repair units, 4 power sector regions, 8

service centres, 15 regional offices, 2 subsidiaries and a large number of Project Sites spread all over

India and abroad enables the company to provide most suitable products, systems and services-

efficiently and at competitive prices.

HISTORY:

BHEL was founded in 1950s. Its operations are organised around three business sectors: Power, Industry

- including Transmission, Transportation, and Telecommunication & Renewable Energy - and Overseas

Business. BHEL is the largest engineering and manufacturing enterprise in India in the energy-

related/infrastructure sector. BHEL manufactures over 180 products under 30 major product groups and

caters to core sectors of the Indian Economy viz., Power Generation & Transmission, Industry,

Transportation, Telecommunication, Renewable Energy, etc.

BHELs history in chronological order is as given below:

FEB. 1947 The planning board felt the need for electrical machinery in India.

MAR. 1948 Sir J.C.Ghosh set up heavy electrical generating equipment factory in the state sector.

JAN. 1955 S.A.Gadkary committee reiterates the need for heavy electrical factory.

AUG. 1956 Heavy Electrical (Pvt.) LTD, was incorporated which was later renamed as HE (I)

LTD.

NOV. 1964 Bharat Heavy Electrical Ltd was established and plants at Haridwar, Hyderabad &

Trichy were set up.

JULY 1972 Action committee of public Enterprises recommends integration.

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JAN. 1974 HE (I) LTD and BHEL were formally merged and the corporate plan of the company

was prepared.

JAN. 1980 BHEL set up 3rd generation plants at

TRICHY steel tube plant

HARIDWAR casting and forging plant

JHANSI transformer plant

In 1982-

BHEL enters into power equipments, to reduce its dependence on the power sector. So, it developed the

capability to produce a variety of electrical, electronic and mechanical equipments for all sectors,

including transmission, transportation, oil and gas and other allied industries.

In 1992-

During the year, 10 thermal sets, 2 gas sets and 11 hydro sets were commissioned.

In 1994-

During the year the company established Asias largest fuel evaluation test facility at Trichy - The

Company commissioned ten industrial power plants resulting in power generating capacity addition of

293 KW.

In 1995-

The countrys premier state owned undertaking, BHEL, commissioned Indias first 250 mw capacity

thermal generating unit at Dahanu power station in Maharashtra. BHEL won this World Bank contract

against competition from multinationals.

In 1997-

In Feb. Greater autonomy was given to PSUs. 9PSUs including BHEL were selected as Navratnas to

become Global Giants The public sector Bharat Heavy Electricals Ltd.

In 1998-

The public sector Bharat Heavy Electricals Ltd (BHEL) has entered into an agreement with the Indian

Space Research Organization (ISRO) for manufacture and supply of solar panels for upcoming Indian

Satellites.

In 1999-

Bharat Heavy Electricals Ltd (BHEL) has entered into a technical collaboration agreement with Babcock

Borsig Power GmbH of Germany for the manufacture of `once through boilers`

In 2000

The Company has won the top exporters award among the public and private sector companies in India

for the 11th Consecutive year. The Company is considering a proposal to launch a voluntary retirement

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scheme (VRS) to `select` employees who have been underperforming and not managed any promotions

or those who have consistently taken leave or any other proficiency related criteria.

In 2001-

Bharat Heavy Electricals Ltd. has bagged the prestigious `Golden peacock` national quality award for the

second consecutive year for achieving excellence in quality conforming to global standards.

In 2002,

Awarded the top exporters` award by Engineering Export Promotion Council for the year 1999-

2000Receives award from Confederation of Indian Industry (CII) becoming the first PSU to win this

honor.

In 2003-BHEL and TCS tie-up to develop IT-based solutions for power sector.

In 2004-

BHEL has joined hands with a UN body `Global Compact` to share experiences with global corporate

houses for greater focus on corporate social responsibility Appoints A K Puri as the chairman and

managing director of Bharat Heavy Electricals Ltd (BHEL).

In 2005-

BHEL, TCS jointly working on marketing initiative `Power Pack`-Appoints Dr V. Gopalakrishnan as

Chief of the Bharat Heavy Electricals Ltd at Trichy, Bangalore plants win five National Safety Awards

In 2006-

BHEL inks agreement with IIT Madras for new courses. Bechtel signs Dabhol agreement with BHEL

In 2007-

BHEL has raised its research & development spend to Rs 238 crore during fiscal 2006-07, up from Rs

152 crore last year. BHEL gets ICWAI national award for excellence in cost management 2006. In Feb.

BHEL pays all-time high 125% interim dividend for fiscal 2006-07. BHEL achieved an all-time high

turnover of Rs.18739 crore in Comparison to last year of Rs 14525 crore Net profits has soared by 44%

to Rs. 2415 crore in comparison to last year of Rs. 1679.20 crore.

In 2008-

Rs 15,000 crore, its all-time high .BHEL, said the recent MoU with the TNEB for setting up two 800

Mw thermal power stations near Chennai had resulted in the power plant major bagging orders.

In 2009-

Bharat Heavy Electricals on June 12 said it has bagged Rs 4,015-crore from Hindalco Industries for

supplying boilers, turbines and generators at its 900-MW captive power plant in Orissa.

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In 2010-

Bharat Heavy Electrical Limited (BHEL), Indian power equipment maker, has bagged orders valued at

Rs 900 crore from Oil and Natural Gas Commission (ONGC) in order to supply six on-shore oil rigs.

In 2011-

BHEL is ranked ninth most innovative company in the world by US business magazine Forbes.

PRESENT STATUS IN INDUSTRY:

With the overall pie increasing, international players gained inroads in the Indian power sector taking

advantage of BHELs long lead time and initial cost difference. However, with respect to Chinese

equipments performance issues in Indian conditions, cost advantage waning away, developers taking

cognizance of quality of BHELs equipments and IPR related issues, BHEL is likely to maintain its

dominant position in the industry.BHEL is aggressively expanding its capacity from the current base of

15 GW to 20 GW by Q4FY12. This, along with various JVs to debottleneck its supply chain is expected

to speed up execution for BHEL.

Supercritical power plants are expected to contribute a major chunk (~55%) of XII plan capacity

addition. BHEL has tied up with technology partners viz. Alstom and Siemens for supercritical

technology and is expected to completely absorb this technology after execution of 810 sets. It has also

formed JV with state utilities to create captive stream of orders.

Competition is likely to increase for BHEL with players like L&T (JV with MHI), Bharat Forge (JV with

Alstom), JSW group (JV with Toshiba) and Thermax (technology transfer agreement with B&W) eyeing

opportunities in the Indian Power sector. Though it is still some time for capacities of these players to

come on stream, players like L&TMHI JV has already started to take market share away from

incumbents.

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SUMMARY OF BUSINESS AREAS AND PRODUCTS / SERVICES:

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POWER:

In Power generation segment, BHEL is the largest manufacturer in India supplying wide range of

products & systems for thermal, nuclear, gas and hydro-based utility and captive power plants.

BHEL has proven turnkey capabilities for executing power projects from concept-to-commissioning.

BHEL supplied utility power generating sets have crossed the landmark of 1, 00,000 MW and continue

to maintain the record of nearly two-third of the overall installed capacity and around three-fourth of the

power generated in India.

It supplies steam turbines, generators, boilers and matching auxiliaries up to 800 MW ratings, including

sets of 660/700/800 MW based on supercritical technology. It has facilities to go up to 1000 MW unit

size. To make efficient use of high ash content coal available in India, BHEL also supplies circulating

fluidised bed combustion (CFBC) boilers for thermal plants.

BHEL is the only Indian company capable of manufacturing large-size gas-based power plant

equipment, comprising of advanced-class gas turbines up to 289 MW (ISO) rating for open and

combined-cycle operations. BHEL is one of the few companies worldwide, involved in the developmentof Integrated Gasification Combined Cycle (IGCC) technology which would usher in clean coal

technology.

TRANSPORTATION:

Most of the trains of Indian Railways, whether electric or diesel powered, are equipped with BHELs

traction propulsion system and controls. The systems supplied are both with the conventional DC and

state -of the art AC drives. Indias first underground metro at Kolkata runs on drives and controls

supplied by BHEL. Almost all the EMUs in service are equipped with electrics manufactured and

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PRODUCT

SEGMENTS

P O W ER T R A N S P O R T A T I O NINTERNATIONAL

BUSINESSOIL & GAS

RENEWABLE

ENERGY INDUSTRY


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supplied by BHEL. BHEL has proved once again its capabilities and technological excellence by

successfully establishing itself as an indigenous manufacturer of energy efficient IGBT based propulsion

system for AC drives, a landmark achievement in transportation sector.

Loco manufacturing capacity at Jhansi unit is under augmentation to meet increased requirements of

Indian Railways. BHEL has also diversified into the area of track maintenance machines and coach

building for Indian Railways and undertakes retrofitting and overhauling of rolling stock.

INDUSTRIES:

BHEL is a leading manufacturer of a variety of Industrial Systems & Products to meet the demand of a

number of industries, like metallurgical, mining, cement, paper, fertilizers, refineries & petro-chemicals

etc. besides captive/industrial power utilities. BHEL has supplied systems and individual productsincluding a large number of co-generation Captive power plants, Centrifugal compressors, Drive

Turbines, Industrial boilers and auxiliaries, Waste heat recovery boilers, Gas turbines, Pumps, Heat

exchangers, Electrical machines, Valves, Heavy castings and forgings, Electrostatic precipitators, ID/FD

fans, Seamless steel tubes etc. to a number of industries other than power utilities.

BHEL has also emerged as a major supplier of controls and instrumentation systems, especially

distributed digital control systems for various power plants and industries.

RENEWABLE ENERGY:

In conformity with its concern for the environment, BHEL has been contributing to the national effort for

developing and promoting renewable energy based products on a sustained basis. Starting from small

applications like Solar Powered Street Lighting, Rural Water Pumping Systems, Railway signalling

Offshore Drilling Platforms, etc.

BHEL has supplied and commissioned large size stand-alone as well as Grid-interactive Solar Power

Plants in a number of major cities and remote areas of the country. With an aim to perform a significantrole in National Solar Missions proposed target of 20,000 MW of grid connected solar power, BHEL

signed an agreement with Abengoa, Spain, a leader in solar projects to provide EPC solutions in

Concentrated Solar Thermal Power (CSP) areas.

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OIL & GAS:

BHEL possesses expertise to design, manufacture and service various types of onshore rigs to suit the

Indian service conditions. The range of equipment covers onshore deep drilling rigs, super-deep drilling

rigs, helirigs, work-over rigs, mobile rigs and desert rigs with matching draw works and hoisting

equipment. BHEL now has the capability to manufacture conventional on shore deep drilling rigs up to a

depth of 9,000 meters, mobile rigs to a depth of 3,000 meters and well servicing rigs to a well depth of

6,100 meters. The company is in the process of manufacturing environment friendly AC-technology

based oil rings for on shore application.

BHEL is supplying onshore drilling rig equipment viz. Draw works, Rotary-table, Traveling block,

Swivel, Mast and Sub structure, Mud systems and Rig electrics , Well heads & X-Mas tree valves up to

10,000 psi rating for onshore as well as offshore application to ONGC, Oil India Ltd. and Private

Drilling Companies.

INTERNATIONAL BUSINESS:

In international arena, the prevailing environment of heightened uncertainties worsened by political

turmoil in the Arab world has adversely affected the business prospects of BHELs traditional markets.

In spite of such situation, BHEL was able to sustain its exports momentum and expanded its foot print in

new markets. The company is poised to maintain its references in the overseas market encompassing

almost the entire range of products and services, covering Thermal, Hydro and Gas-based turnkey power

projects, Substation projects, and Rehabilitation projects, besides a wide variety of products like

Transformers, Motors, Compressors, Valves, Electrostatic Precipitators, Photovoltaic equipments,

Insulators, Heat Exchangers, and Switchgears etc. The company has been successful in meeting the

requirements of international markets in terms of complexity of work as well as technology, quality and

other requirements.

BHEL has proved its capability to undertake projects on fast-track basis. Continued focus on After-

Sales-Services led to orders for Spares & Services from UAE, Bangladesh, Nepal, France, Sri Lanka,

Kazakhstan, Iraq, New Zealand, Malta, Thailand, Yemen and Libya. Besides undertaking turnkey

projects on its own, BHEL also possesses the requisite flexibility to interface and complement other

international companies for large projects, and has also exhibited adaptability by manufacturing and

supplying intermediate products. The company is taking a number of strategic business initiatives to fuel

further growth in international business which includes exploration of opportunities in solar energy

related projects, equipments and projects in Transmission & Distribution arena in overseas markets.

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SERVICE SEGMENT:

BHEL provides with certain services:

PROJECT ENGINEERING:

The total engineering for thermal power stations is undertaken by a core group project engineering

management. With over 500 engineers and supporting staff, this division offers specialized service in

different technical disciplines.

CONSTRUCTIONS MANAGEMENT

BHEL has a full-fledged construction management division to undertake erection work. This division

well organized with over 500 experienced engineers,1000 technicians and 1300 skilled workers besides

construction equipment valued at over 40 million US Dollars.

SERVICE AFTER SALES

Renovation modernization and rehabilitation works of aged power stations are also undertaken. BHEL

has a separate spare group response for insuring ready availability of essential spares to Power stations.

PROJECTS MANAGEMENT

Entrusted with the overall coordination of the project the division initiates, directs coordinates,

supervises and control all activities that are necessary for the performance of the project right from the

conception stage until the contractual obligations are fully discharged. BHEL offers a wide spectrum of

products and services for core sectors like power transmission industry, transportation, oil & gas

telecommunication etc., deseeds supply of non-conventional energy systems. It has also embarked it to

other areas including defence & aviation.ORGANIZATION STRUCTURE (HIGH LEVEL)

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SERVICE

SEGMENTS

PROJECT

ENGINEERING

SERVICE AFTER

SALES

PROJECTS

MANAGEMENT

CONSTRUCTION

MANAGEMENT


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MARKETING & SALES ORGANIZATIONAL STRUCTURE:

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SIZE AND GROWTH RATES

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MAJOR COMPETITORS TO BHEL

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COMPANY COUNTRY

ABB Switzerland

GE USA

RAYTHEON USA

L&T IndiaCNMI & EC China

ELECTRO CONSULT Italy

GEC-ALSTHOM UK

FUJI Japan

MITSUBISHI Japan

ROLLS ROYCE Germany

SIEMENS Germany

MACRO ENVIRONMENTAL FACTORS:

POLITICAL FACTORS:

BHEL being a public sector undertaking is greatly influenced by the political forces. There is a change in

policies every time the government changes. The business decisions are steered to a great extent based

on the individual preferences of the new leadership. The company does big business overseas and these

projects are directly dependent on the incumbent rulers international trade policies.

The government policies and regulations relating the companys client industries can largely affect the

future of its business with these customers. For example, power sector has seen a massive growth in the

last few years and has been at the top of the political agenda. Now power companies are the major clients

of BHEL.

ECONOMIC FACTORS:

The economic boom in India particularly in the last one decade has played a significant role in charting

the success of the company. Power Generation is one of the primary indices of a countrys economic

development. Turn key projects are the need of the hour and BHEL has proven turnkeycapabilities for executing power projects from Concept-to Commissioning.

SOCIAL FACTORS:

Companies are taking more interest in corporate social responsibility these days and steps have been

taken by BHEL too to further the same. Its contributions towards CSR till date include adoption of

villages, free medical camps/charitable dispensaries, schools for the underprivileged and handicapped

children, ban on child labour, disaster/natural calamity aid, Employment for handicapped, Widowresettlement, Employment for Ex-serviceman, irrigation using treated sewage, pollution checking

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camps, plantation of millions of trees, energy saving and conservation of natural resources

through environmental management.

TECHNOLOGICAL FACTORS:

BHEL being an engineering and manufacturing giant is to a great degree driven by technological

developments and innovations and has its earnest efforts directed towards improving its

technological prowess to meet the changing requirements of a growing economy.

BHEL has been a leader always and the fact that Indias first underground metro at Kolkata runs on

drives and controls supplied by BHEL is a testimony to this. The Company has proven expertise in

Plant Performance Improvement through renovation and up-rating of a variety of power plant

equipments to improve the performance of existing plants. It has also emerged as a major supplier ofcontrols and instrumentation systems for various power plants and industries.

ENVIRONMENTAL FACTORS:

BHEL is an environment friendly company in all its activities, products and services besides

providing safe and healthy working environment to all its stakeholders. The depleting water and energy

resources are a cause of concern for all. BHEL has taken certain measures to conserve these precious

resources. It has set up rainwater Harvesting Plants and Energy Conservation Projects utilizing efficient

technologies.

Proper disposal of Chemical and other wastes is also a major concern for which the company has put up

Chemical storage and disposal plants. The company has made the principles of the Global Compact

program of the United Nations a part of its strategy, culture and day-to-day operations.

LEGAL FACTORS:

BHEL has attained ISO - 9001 certification for quality management and all its manufacturing

units/divisions have been upgraded to the latest ISO-9001: 2000 version. The entire major units/divisionsof BHEL have been awarded ISO -14001 certification for environmental management systems and

OHSAS-18001 certification for occupational health and safety management systems.

The company has to adhere to the scores of legal rules and regulations, the acts, particularly the

Companies Act 1956, The Factories Act, the Environmental Protection Act, and Sale of Goods Act etc.

These days no company wants to be unethical in its activities and be on the wrong side of the law books,

as the media in India is very active and the smallest of irregularities noticed and reported by them can

ruin the image of the company hugely.

BUYER BEHAVIOR IN THE INDUSTRY

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It can be explained by Porters five forces model as given below:

I. Bargaining power of suppliers:

Here the bargaining power of suppliers is not very high, since government controls the tariff structure;

however this might change in future. Suppliers are well diversified in the globe and BHEL ensures

prompt delivery by the suppliers.

II. Bargaining power of Buyers:

Bargaining power of the retail customer s is low, as power is in short supply. However government is a

big buyer and payment by government is more erratic. Wide customer base in India and in all the parts of

the world

Also being PSU it is under the control of government, thus it cannot take decisions on its own in terms of

supplier or customer selection. A chairman is appointed by the government who is vested with the

powers of decision making on behalf of the government.

MARKET SEGMENTS AND POSITIONING

BHEL has its contribution are 6 sectors. These sectors are as follows:

1. Power

2. Transmission

3. Industries: Petrochemicals

4. Refineries, Cement etc.

5. Oil and Gas

6. Non-Conventional energies

7. Transportation

The breakup of the two major sectors diagrammatically can be represented as follows:

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POWER SECTOR:

The power sector consists of turbines SBU and Boilers SBU. BHEL is the topmost producer of boilers

with two third market share and even turbines and generators are manufactured the most by them again

making them the market leader. But the Indian power sector is not growing uniformly and government

wishes to have a double increase in growth. Thus Indian power sector is a steady and non-uniform

growth sector and not grown enough to match the demand. Hence its a slow growth sector. Thus the

SBUs come in the cash cow segment of BCG matrix.In this case, it is clear why BHEL is more involved

in this sector as it can gain huge profits by investing comparatively low. Thus it is the most profitable

sector for BHEL and is the net supplier of resources.

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TRANSMISSION SECTOR:

The transmission sector comes under the industry segment which caters to 22% of BHELs industrysegment. It consists of gas insulated substation SBU and transformation SBU which holds a good market

share and the growth in this sector is much more than power sector which is 40% y-o-y. Thus these are

the question mark products of BHEL and should be invested upon more to bring it to star position. It

should invest more in technology to sustain competition in this sector and saving it from becoming a dog

product.

INDUSTRIAL SECTOR:

The industrial equipment sector consists of control system and instrumentation SBUs and comprises of

62% share of the industry sector of BHEL. This sector has recorded a reduced growth rate of 9.2%

compared to last year but BHEL holds a healthy market share of around 70% in these SBUs. Thus due to

high market share and low growth it is also a cash cow sector for BHEL and profitable for improving the

business of other sectors. The BCG matrix of this sector looks like

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REFINERIES AND CEMENT SECTOR:

The cement sector does not have any individual player who accounts for more than 12% of market share.

But the growth of cement sector has dropped to 10.43%. Hence, BHEL with a small market share in a

slow growth market is a dog SBU.

The refineries SBU takes a good share of the market and it is growing rapidly in India at 62% which

accounts to a high growth. Thus with a high market share and high growth this is a star SBU for BHEL

and it should reap upon the most on it.

The BCG matrix looks as follows:

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OIL AND GAS SECTOR:

The oil and gas sector is growing by 45% in which the major contribution is of gas sector. Since BHEL

is one of the oldest producers of drilling equipments it has a good market share in its supply. But due to

cheap and technologically better equipments supply from international level, BHEL has lost significant

market share. Due to the high growth market and decreasing market share it is a question mark product

now and BHEL should decide fast whether to invest more and improvise market share or divest from this

sector.

The BCG matrix can be presented as follows:

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NON-CONVENTIONAL ENERGIES:

The renewable energy sector especially wind energy is seeing a massive growth y-o-y. Thus its a highly

growing market. But due to many producers of equipments and foreign competition BHEL has not

succeeded to secure a high market share. In fact all producers hold more or less similar market share. But

due to the overseas expansions of BHEL it has a high market share in this sector. Thus this is on the

verge of becoming a star product for BHEL.

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TRANSPORTATION SECTOR:

BHEL is the largest supplier of locomotives to Indian railways thus holding a huge market share.

Moreover, this sector is expanding by leaps and bounds. Hence this SBU is also a star product for BHEL

and it should improvise on this by implementing high technology and newer products.

PRODUCT LIFECYCLE ANALYSIS FOR COMPANY PRODUCTS

BHEL products dont have any particular life cycle as they are in B2B marketing. It can be observed that

the market share of BHEL is on the verge of achieving maturity stage. This can be substantiated from the

fact that L&T has started to occupy the position which BHEL had in past and also due to government

policies.

CHANNEL AND DISTRIBUTION STRATEGIES

BHEL calls for tenders to transporters for delivering the products to its customers. It prefers roadways

over other means of transportation because of location of its customer base.

PRICING STRATEGIES

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For most of the BHEL products, the cycle goes beyond 12 months resulting in WIP (work-in-progress) at

the end of the year. The cause of concern for BHEL is the raw material in transit which has been paid

for. Material cost typically accounts for 55 per cent of the production cost. The cycle time for

implementing an order is progressively getting shorter and this has resulted in advance procurement of

material and when BHEL is certain about getting an order, commencement of work even before getting

the order.

For example, a turbo generator of 200mw is expected to be delivered within 13 months but this is not

possible without advance procurement of material.

BHEL has done away with individual sourcing of the same material by the units and resorted to bulking

of the material. This has resulted in better discounts and improved efficiency.

Secondly, BHEL has shifted to long term rate contracts and they also guarantee load to the suppliers.

Almost 70 to 75 per cent of their purchases are through long term contracts resulting in savings in cost

and time.

Thirdly, they have shifted to value engineering-wherever possible, they use less expensive different

material compared to what was used. The change in design parameters and standardisation resulted in

optimum use of material without affecting the quality. Every year, the material cost is being reduced by

0.5 to 1 per cent. Together, BHELs depreciation and interest cost is just 2.5 per cent against the standard

8 per cent (4+4) for the majority of engineering companies.

Pricing strategies followed in BHEL varies according to the market conditions and the current market

demand for their products. The various pricing strategies followed by BHEL at different situations are as

follows:-

Cut-all

Follow the leader Hot and cold price (price fixed as per quantity order)

Probe price

Fixed / variable price

Dual price

Denial price

Skimming price

MARKETING & SALES MANAGEMENT

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HIERARCHICAL STRUCTURE OF MARKETING DEPARTMENT IN BHEL

BHEL does not undertake any promotional activities to advertise its products to the customers.

SALES & SUPPLY BILL

There are four modes of payments:

100% advance payments in case of private party.

Through letter of credit in case of private and government party.

100% advance 90% balance after dispatch from PSUs.

100% after dispatch in case of government agencies.

For export to foreign country advance payment of 100% amount.

SWOT ANALYSIS

STRENGTHS

Good corporate image & established Brand Name.

Complete range of products for transmission and distribution.

Strong relationship with NTPC is strength as NTPC is planning a capacity expansion of Rs. 52 bn

and based on the past, 85% of NTPC projects have been bagged by BHEL. The company also

enjoys purchase price preference.

Considered to be having design ability.

WEAKNESSES

The procurement process in the company is cumbersome and subject to auditing.

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Low exposure to the needs and dynamics of distribution business.

Role clarity on the requirement of being an equipment supplier or a solution provider

Acceptance of customers to execute low value high volumes jobs. Being a public sector company

BHEL is suffering from sub optimality of control due to:i. Displacement of social objectives by political objectives, which may lead to redundant costs

and also rising costs.

ii. Direct political intervention in managerial decision over an arm length relationship that would

restrict governments task of setting appropriate managerial incentive structure.

iii. Private goals that lead to budget growth and employment growth.

iv. Internal inefficiencies in bureaucratic activity

Larger delivery cycles in comparison with international suppliers of similar equipment.

Inability to provide suppliers credit, soft loans and financing of power projects Non-productive

working environment and increased of private sector participation.

OPPORTUNITIES

BHEL has huge investments opportunities in infrastructure by governments & large organizations

leading to greater demand of goods & services. Ageing power plants would give rise to more

spares and services business.

Increase in demand (part of economic recovery process) leading to industry operating at full

capacity.

Formation of business groups & tie- ups for joint bidding.

Early birds to learn faster and thus achieve repeat orders

Demand for power and hence plant equipment is expected to grow.

Increased external commercial borrowings opportunities leading to better payment options.

THREATS

BHEL has number of small contractors leading to price war & loss of business.

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Emergence of new players in the market and old players becoming strong and eating away a part

of the market share.

Political pulls and pressures may jeopardize the whole process, raising alar m about the

privatization and being anti-people.

Increased threats from Chinese manufacturers

RECOMMENDATIONS FOR FUTURE

There should be less interference from the government in the decision making process of BHEL.

Every country has different working culture, thus employees need to be trained on these lines so

that they can handle the projects in an efficient manner.

BHEL should make long term contracts with the suppliers so that they can get the goods on timeand also they can get goods at cheaper price.

They need to improve the efficiency of their distribution channels.

REFERENCES:

http://www.bhel.com/about.php

http://www.acsmoney.com/CorporateInfo/Directors-Report/Bharat-Heavy-Electricals-

Ltd/500103

http://www.indiamart.com/bhel/products.html

http://www.thehindubusinessline.com/companies/article1520144.ece

http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=880166
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