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Defending Its Gains
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Given the sensitive nature of some of its products, BEL needs government clearance for its exports. However, BEL chairman and managing director Anil Kumar says the company is focused on exports and confident of increasing it.
Among the big defence projects BEL is part of is Akash — India's medium range surface-to air-missile. In 2011-12, BEL supplied only 15 of the defence forces' planned acquisition of 96 Akash missile systems as another supplier, also a PSU, failed to deliver parts. In spite of the temporary setback, BEL plans to grow 10-12 per cent this year and touch Rs 6,300 crore in revenues. With an order backlog of Rs 25,748 crore, it has revenue visibility for the next five years as India continues to increase its defence spend.
BEL is also working on coastal surveillance, digital radio trunking, integrated anti-submarine warfare and other ship-borne systems. Interestingly, over the past few years, BEL's non-defence revenue share has gone up — from 80:20 in favour of defence in FY11 to 73:27 in FY12. Margins in the civilian business are lower than in the defence business. Kumar says civilian revenues went up primarily because of services provided to the socio-economic and caste census and national population register. "We designed and developed a low-cost tablet PC and supplied over 600,000 units to the Ministry of Rural Development. While this may be a one-time opportunity, what it shows is that when required, we can innovate and deliver new equipment according to our country's unique needs."
BEL is also chasing the offset opportunity that will arise once the Indian Air Force's medium multi-role combat aircraft deal is done. "We are pursuing other offset deals also. I am hopeful that BEL will bag some deals because of the offset clause," adds Kumar.
While the CMD is understandably cautious, BEL plans to set up a joint venture with Thales to manufacture and sell both civilian and defence radars. As India looks to focus more on domestic design and manufacturing of telecom equipment, BEL is examining opportunities in this space too. "We spend more than 7 per cent of our revenues on R&D; significantly higher than that of several private players," says Kumar.
From a peak of about 19,000 employees, BEL today has right-sized to about 11,900. "This year, we will increase capital expenditure to meet enhanced needs. We have a comfortable order book position and good visibility on revenues, so the focus will be on execution," adds Kumar.
(This story was published in Businessworld Issue Dated 11-06-2012)