BEL thrives in era of declining PSU fortunes

In an era where many government PSU’s are in the throes of a financial crunch and declining turnover, the Bengaluru-based Bharat Electronics Limited (BEL) appears to be thriving.

Last year, BEL, one of the nine Public Sector Undertakings (PSUs) within the Ministry of Defence, achieved its milestone of becoming a Rs 10,000 crore company, which its Chairman and Managing Director, M V Gowtama, attributed to the company’s “emphasis on research and development, updation and infrastructure modernisation.”

BEL’s turnover in the 2018-19 grew 14% to Rs 11,789 crore. The company’s net profit has climbed steadily over a 10-year period, from Rs 745 crore in 2008-09 to Rs 931 crore in 2013-14 to Rs 1,887 crore in the last fiscal. For BEL officers, this is a sign that the company is sitting pretty.

“We are now focusing on diversifying our operations to cover many sectors,” said the head of Research and Development, Mahesh V, and clarified that the company was involved in the development of heavy weapons upgrades, missiles, solar energy products, electronic warfare kit and arguably its most well-known product, the Electronic Voting Machine, which has also been sold to the National Election Commissions, Namibia and is now being considered by Botswana.

In many ways, the genesis of BEL from its founding in 1959 to build communications equipment to its current stature as multi-diversified arms and civil products combine shows its commitment to research and development, Mahesh said, crediting this as the key to the company’s longevity.

Largest R&D unit among PSUs

The Research and Development arm, which has a reputation of being one of the most successful units among the 99 PSUs currently operational in the country, had a revenue expenditure of Rs 883 crore and a capital expenditure of Rs 988 crore in 2017-18 and employs nearly 2,200 engineers. According to Mahesh, the unit is being expanded to cover the development of Unmanned Aerial Vehicles, data systems, Artificial Intelligence and a new tablet for the civilian market.

But not everything has panned out to the company’s liking. In 2018, its joint venture with French company, Thales, to build radar sets for the new Rafale multi-role fighter incurred losses of Rs 2.95 crore, while export sales across the board tapered off to $26.3 million, which is only slightly more than the market cost of single, brand new Lockheed-Martin F-16 fighter aircraft.

The company blamed the situation “to a lack of a letter of credit by a customer for various naval systems,” coupled with political transformation in several customer countries, including Sri Lanka, Myanmar and the Maldives.

“Things have picked up in 2019,” Mahesh said and proffered highlights of the company’s performance report for 2018-19, which showed that the company had picked up $116.62 million (Rs 830 crore) in export orders.

Gowtama added that as of August 1, BEL has an order book of Rs 52,480 crore, of which defence sector accounts for 89% and 11% are civilian. In the last financial year, the company had Rs 23,431 crore of new orders, he explained.

“A big-ticket project we got last year is the Rs 9,200 crore contract to deliver Long Range Surface-to-Air Missile (LRSAM) systems for seven ships of the Indian Navy, plus Smart City Projects as well as the Naval Airfield Integrated Security System, Kerala-Fibre Optics Network, L-70 Gun Upgrade, and Integrated Perimeter Security Solution,” he said.

The Akash system is another source of income for the company, which has already delivered eight squadrons to the Indian Air Force and two regiments to the Indian Army.

These developments are partly responsible for keeping the company above water in an abruptly crowded field which Gowtama described had been brought upon by abrupt changes in the business environment. A BEL officer clarified that this was triggered by the government opening the defence market for private companies.

“The landscape for PSUs has changed dramatically over the last year,” the officer told DH, adding that the government’s plan to spend $130 billion on military modernisation over the next five years had created a goldrush for companies seeking a piece of the pie.

Mahesh, however, said that he sees the increasing number of entrants to the defence sector as an opportunity. “For the development of the Akash missile system, for example, we collaborated with 200 companies. We don’t see increased competition as a problem,” he added.