Even as profits nosedive, BHEL unleashes 'image building' blitz

A day after Bharat Heavy Electricals Ltd (BHEL) reported a near 50 per cent dip in its first quarter profits, the state-owned equipment major notified plans to launch a Rs 25 crore 'image building campaign'. The company, which on Saturday had announced its fourth consecutive quarterly fall in net profits, has already floated a tender for roping in an advertising agency for the proposed campaign, the first of its kind in BHEL's 50-year existence.

This, ironically, comes at a time when BHEL is staring at a depleting order book, worsening payment woes and sustained pressure on both sales and profits, leading to valuation concerns that have forced even the disinvestment department to shelve plans to sell a stake in the equipment major.

The tender for selecting an advertising agency for the 'image building campaign' was floated by the company on Monday.

A query e-mailed to BHEL's chairman and managing director BP Rao on Tuesday on the details of the tender remained unanswered. BHEL, the country's biggest power equipment manufacturer, had seen annual order inflows nearly halve to Rs 32,000 crore in 2012-13 from around Rs 60,000 crore just two years back. Plus, it is facing problems with advances and payments from cash-strapped customers, leading to a working capital crunch. The company has already been forced to write-off around Rs 280 crore in the March quarter for which it had carried out provisioning earlier.

The 'image building campaign', coming in this backdrop, has raised several eyebrows, especially in the context of the size of the tender and its timing. Interestingly, on Monday, the day when the tender was floated, BHEL shares tanked around 20 per cent as a reaction to the dismal quarterly numbers. Though the stock is at its seven-and-half-year low, analysts predict the share price may fall further. The sharp drop in profits prompted Deutsche Bank to downgrade the company on Monday to a "sell" rating on concerns about BHEL's balance sheet and a slowdown in project execution. The equipment firm has also been steadily losing ground to Chinese gear manufacturers, an issue that the Planning Commission has flagged as an area of concern.