Fund managers exit BHEL on weak order book

In March 2011, mutual funds held 7.03% share in BHEL, which has declined to 5.89% in December 2011

May 24, 2012 5:55 IST | India Infoline News Service
The mutual fund industry has been constantly off-loading its investment in Bharat Heavy Electricals Ltd (BHEL)—India’s biggest power-equipment maker. Over the past one-year, BHEL’s shareholding pattern is constantly declining.
In March 2011, mutual funds held 7.03% share in BHEL, which has declined to 5.89% in December 2011. For the fourth quarter of the financial year ended 31 March 2012, fund managers literally dump the stock of this company from their portfolios due to its poor earnings visibility and weakening order book.
According to BHEL’s shareholding pattern as on 31 March 2012, mutual funds held about 1.44% share in the company compared to 7.03% shares held by the mutual funds in March 2011.
During FY11-12, New Delhi-based company has struggled not only to acquire new orders but has also faced cancellations of the orders that it had already received due to issues like non availability of coal, land and financing and also dilemma in getting environmental clearances for the industrial projects.
The intense competition from the Chinese power equipment manufacturer is another trouble for BHEL. For FY11-12, BHEL’s order inflows plunged 63.5% to Rs. 22,096 crore, registering the biggest drop in 10 years. BHEL's market share in the BTG (boiler-turbine-generator) space stood at around 65% in 2007  and has now come down to about 40%.
Most analysts have forecast a flat or marginal drop in earnings growth in fiscal 2013 from last year. Investor sentiment towards BHEL will hinge primarily on its ability to gain more orders in the near to medium term.

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