Bhel’s poor execution, high working capital point to stress in power sector

Bharat Heavy Electricals Ltd’s (Bhel’s) woes continue to mount. The deplorable state of the power sector has been hampering execution and cash flows of the power equipment maker.

Land acquisition delays coupled with slower customer approvals and payment delays have dragged down its power segment sales by 18% year-on-year (y-o-y). Some relief has come in the form of a 24% y-o-y growth in its industrial segment sales.

Nevertheless, overall revenues still fell 8% y-o-y in Q2 FY20. This was about 10% below Bloomberg’s consensus estimate. According to a note by SBICAP Securities Ltd, “BHEL is trying to optimise execution and cash collection from projects as working capital remains a concern.” This stymied revenue growth in the last few quarters.