Apr 16, 2001|
Engineering story: Bhel dependent
The December quarter of FY01 has been dismal for the top 10 engineering companies of India. Although turnover has fallen by a marginal 4%, these companies together have recorded a net loss of Rs 637 m. The sample of companies include Bharat Electronics, Bharat Earth Movers (BEML), Bharat Heavy Electricals (Bhel), Otis Elevators, Kirloskar Oil, Lakshmi, Atlas Copco, Thermax, Kirloskar Brothers and Siemens.
|No. of Months
|Profit before tax
|Profit after tax
|Gross profit margin (%)
|Effective tax rate (%)
|Net profit margin (%)
The reasons for this are not hard to find. The engineering industry is dependent on infrastructure development, especially investments in the power sector, for growth. FY01 has not been a very good year for power sector, and consequently it has slowed growth for the engineering sector as well.
But the sample above is dominated by India's No.1 engineering company, Bhel. It has contributed 47% to the December 2000 turnover. Similarly, it earned a loss of Rs 1,980 m in December 2000. If we remove this from the sample, then the sample of 9 companies (excluding Bhel) has actually earned a profit of Rs 1,343 m. In December 1999 quarter, Bhel had contributed 66% to the sample's bottomline.
It is obvious that the March 2001 quarter performance is heavily dependent on Bhel's performance. Bhel has already declared its results for FY01. Based on that, the company has earned a huge Rs 4.8 bn profit in the March 2001 quarter. While the other 9 sample companies have yet to declare results, it is safe to assume that the March quarter results will be much better than the preceding quarter.
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