Can a ₹76,000 Crore order book fuel future success?

Bharat Electronics: In the budget plan for 2023-24, the government has increased defense expenditure to ₹594 lakh crore. Additionally, the allocation mentioned in the interim Union Budget 2024-25 was over Rs 6.21 lakh crore.

This increase in funding signals a positive outlook for companies like Bharat Electronics Limited (BEL), which creates cutting-edge technologies for our defense. BEL plays a critical role in developing advanced electronic systems for our military. The company’s stock returned an impressive 578.31% in five years. As of January 31, 2024, the company’s total outstanding orders stand at a whopping Rs 76,000 crores.
In this article, we take a closer look at BEL’s journey and look at the company’s business, the company’s revenue split, the status of its order book, the recent large orders received by the company, and its future outlook. Let’s take this brief overview to understand the company’s business and get a complete overview.

Bharat Electronics Ltd.

business overview

rainHarat Electronics Limited (BEL) is a leading Indian manufacturer of defense electronic equipment. It started under the Ministry of Defense in 1954 and has now become a top-tier company. The government owns the majority of BEL, holding a 51.14% stake.
BEL, a leader in the defense industry, specializes in supplying radar, communications and electronic warfare equipment to the Indian Army. The company enjoys a strong presence with nine manufacturing units and two dedicated research units strategically located across India. Of these, the Bangalore and Ghaziabad operations have emerged as pivotal contributors to BEL’s overall financial performance, with the former playing a significant role in generating a majority of the company’s revenue and profits.

Business Segments: Understanding Revenue Breakdown

BEL operates in two main segments targeting both defense and non-defense markets.

defense sector

BEL manufactures electronic products for India’s defense services produced in nine factories with 25 strategic business units. Their product expertise spans radar and fire control systems, weapon systems, communications, and electronic warfare systems. Recent diversifications include weapons and ammunition, seekers and missiles, networks and cybersecurity, and unmanned systems.

non-defense sector

In the non-defense sector, BEL develops products for the civilian market, including the Department of Homeland Security and smart city initiatives. The Bengaluru division’s dedicated vertical focuses on medical electronics and solutions. Their expertise extends to Electronic Voting Machines (EVMs) and VVPAT, HS&SC, Software Solutions/Services, Healthcare Solutions, Civil Aviation, Solar Cells/Power Plants, Railway/Metro/Airport Solutions, Space Electronics and Systems, Alternative Energy Solutions, and Secure Communications. It expands. Solutions and Software.

Bharat Electronics Limited generates a significant portion of its revenue (nearly 90% or Rs 15,089 crore) from the defense sector, supplying products and components to the Indian military and defense public sector.
The non-defense segment contributes 9.3% or Rs 1,578 crores to the total revenue. Exports are only 2.3% or Rs 395 crores, implying limited but potential overseas opportunities.

Bharat Electronics Ltd – Order Status

As of January 30, the company’s current order balance stands at Rs 76,000 crores, of which Rs. 28494 Crore is the order volume for the current financial year 2024. With this, let us take a look at the recent large orders of Bharat Electronics.

CBIC IT infrastructure contract

Value: Rs 665.84 crores + taxes
Scope: Building and managing IT infrastructure
Client: Ministry of Finance, Central Board of Indirect Taxes and Customs (CBIC), India

Missile system spares ordered from Mazagon Dock Shipbuilders Ltd

Value: Rs 69.5 billion
Client: Mazagon Dock Shipbuilders Ltd
Contents: Supply of spare parts related to missile systems.

UP Dial 112 Project Agreement

Value: Rs 44.5 billion
Client: Government of Uttar Pradesh
Details: Comprehensive hardware, AI-based software tools, and cybersecurity solutions for the next-generation, statewide UP Dial 112 project.

Orders from Goa Shipyard Limited and Garden Reach Shipbuilders & Engineers

Value: Rs 267.3 billion
Customer: Goa Shipyard Limited (Value: Rs. 1701 Crore); Garden Reach Shipyard and Engineers (Value: Rs. 972 Crore)
Contents: Supply of 14 types of sensors for next-generation ocean patrol vessels (NGOPV)

Indian Army Fuse Supply Contract

Value: Rs 452.2 billion
Client: Indian Army
Details: Supply of fuses in various sizes.

additional order

• Value: Rs 339.31 Crore
  Details: Combat management systems, complex communication systems, transmit/receive modules, mobile autonomous stabilization systems and other spare parts/services.
• Value: Rs 35.6 billion
  Details: The order includes electronic warfare (EW) testers, medical systems (export), consumables and batteries for electronic voting machines (EVMs), and night vision device spares and services.
• Value: Rs 333.5 billion
  Details: Orders placed after September 15, 2023, include AMC for AEW&C systems, uncooled TI sights, software-defined radios, SWIR payloads, AMCs for IACCS, passive night vision binoculars, and more.

The company has received very large orders from customers like Mazagon Dock Shipyard, Goa Shipyard, Garden Reach Shipbuilders, UP Government, Finance Ministry and some additional orders as well.

The details above only highlight recent orders. However, this year, more orders were accumulated. This reflects the company’s strong order book.

bharat electronics: finance

In the financial year 2022-23, Bharat Electronics recorded a growth of 15.22% with revenue of Rs 17,333 Crore compared to Rs 15,044 Crore in the financial year 2021-22. Strong performance in both domestic and export businesses drove growth across defense and non-defense sectors.
The company’s export sales increased approximately 45% to $48.33 million. They mainly export to countries such as France, USA, Spain, Israel, Germany, Mauritius, Switzerland, Vietnam and Sri Lanka.
Profit after tax increased by 28% to Rs 3,007 Crore in FY 2022-23 compared to Rs 2,349 Crore in FY 2021-22.

Key points to note

Bharat Electronics Limited (BEL) relies heavily on the Indian defense industry, which accounts for about 87% of its revenue. This high dependence creates vulnerability to changes in defense policy or significant spending cuts.

To address this, BEL is actively diversifying its revenue sources, including increasing non-defense revenues and exploring defense equipment exports to friendly countries. Historically, the Company has managed its working capital needs, characterized by high accounts receivable and inventory, through internal cash generation and customer advances.

As of December 31, 2022, the Government of India holds a 51.14% stake in Bharat Electronics, highlighting its strategic importance. This ownership not only highlights BEL as a major domestic defense electronics supplier but also provides economies of scale.

Financially, Bharat Electronics maintains a strong profile with healthy profitability, high returns, and zero leverage. The company’s excellent liquidity and strong debt coverage indicators further solidify its financial strength and stability.

future prospects

• Bharat Electronics Limited (BEL) is strategically expanding into non-defense segments targeting around 30% of its total revenue. BEL leverages its expertise to explore diverse opportunities and innovative business models, including state-owned enterprise operations and OPEX, to reach new customer segments.
• In fiscal 2023-24, BEL is targeting growth of 15-17 per cent, led by both defense and non-defense businesses. The company plans to strengthen its global presence by expanding its marketing offices primarily in Southeast Asia, Europe, the Middle East, Africa, North America, and South America.
• BEL expects orders worth INR 50,000 crore over the next two years and plans capital expenditure of INR 700-800 crores.
• Additionally, the new Strategic Business Unit for Cybersecurity reflects BEL’s commitment to addressing evolving challenges in the digital environment.

Finishing

Bharat Electronics Limited (BEL) is at the forefront of the Indian defense electronics sector, demonstrating robust growth, a diverse order book and a strategic vision for the future. The company’s outstanding performance, combined with its focus on diversification, global expansion and technological advancements, positions BEL as a key player in the evolving defense landscape.

Did you like these different perspectives on your company’s business? Did you find the article informative and interesting? Let me know your thoughts on this in the comments section below!

Written by Akshita Malu

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