Bharat Heavy Electricals Ltd Management Discussions

1.1 Economic and Business Overview

World economy has grown at 3.4% in 2025, as per IMF, amidst geopolitical tensions and trade frictions. Indian economy remained resilient in this challenging global scenario on the back of strong private consumption, investment activity, Government consumption and infrastructure push. As per MoSPI, country grew at 7.7% during FY 2025-26, supported by GST rate rationalisation, monetary policy easing, congenial financial conditions and structural reforms. To provide unhindered power supply to the growing economy, policy makers have envisaged 315 GW of coal based power by FY 2035-36 as per recent Long Term Resource Adequacy Plan (LTRAP) released by CEA. This resulted into robust ordering of coal based power projects during the year with BHEL securing significant orders in FY 2025-26.

Indias Nationally Determined Contribution (NDC) for 2031-2035, encourage achieving 60% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2035, thereby giving thrust to hydro and nuclear power alongside renewables and energy storage. Government of Indias roadmap for expanding countrys nuclear power capacity to 100 GW by 2047 and achieving 100 GW Pumped Storage Projects by 2035-36 are transformative policies in this direction. In line with this, power utilities in hydro and nuclear based power projects are planning new capacities. In FY 2025-26, BHEL has received order for two E&M packages for projects viz. Chanju III HEP and Sunni Dam HEP in Hydro power business segment. Transmissionbusinessiswitnessingrisingdemandforproducts in accordance with transformation capacity projection of National Electricity Plan (NEP). The rapid expansion in installed renewable energy (RE) capacity has generated significant opportunities in the Power Transmission segment as demand centres are far away from renewable generation centres and the same is reflected as BHEL received a major order in the transmission segment for Bhadla - Fatehpur HVDC Project during the year.

The Government of Indias strategic push for modernization and indigenization in the Defence sector has unlocked substantial opportunities across all the three armed forces. Leveraging the long-standing relations with Defence institutions, and the Indian Navy for over 30 years as the sole supplier of SRGMs, the Company is working towards emerging opportunities in the defence segment. BHEL is one of the few select firms in the world with the capability to design & manufacture compact heat exchanger and pump modules for military aircrafts, and is currently developing the same for various airborne platforms. In new areas like Coal Gasification, BHEL has received orders worth ~D8,300 Crore (excl. taxes) from Bharat Coal Gasification and Chemicals Ltd. (BCGCL) for its 2000 TPD ammonium nitrate plant. BHEL is poised to contribute significantly towards realising the objectives of National Coal Gasification Mission.

1.2 Opportunities and Threats

The renewed emphasis on global energy security due to recent geopolitical disruptions, has returned coal-based power generation to the centre of national planning. Over 35 GW of thermal power projects ordering on OEMs during the past two fiscals serves as a clear testament to this resurgence. This momentum is projected to sustain as the nation targets 97 GW of additional coal-based capacity by 2034-35 (baseline of 2022-23). BHEL remains pre-eminently positioned to leverage its core competence in equipment manufacturing and EPC execution to address this opportunity.

To ensure grid stability amid the variability of a high renewable energy (RE) injection in the grid, the Government of India is planning significant expansion of hydroelectric capacity, including small hydro, large conventional plants, and pumped storage projects (PSPs). The CEAs roadmap targeting 100 GW of PSP capacity by 2035–36 presents substantial opportunities for BHEL over the next 4–5 years. In the conventional hydro segment, BHEL is well positioned to sustain this momentum going forward. Nuclear power is gaining renewed momentum as a reliable, low-carbon alternative to fossil-based generation, with increasing relevance for energy-intensive applications such as data centres. In India, this renewed focus is reflected in recent developments, including the enactment of the SHANTI Act to facilitate private sector participation and the achievement of criticality by Prototype Fast Breeder Reactor (PFBR), both of which have marked significant milestone in countrys nuclear programme. With extensive experience in supplying equipment for both primary and secondary systems, BHEL is well positioned to capitalise on these emerging opportunities in the nuclear power segment.

With the rapid expansion of renewable energy (RE) and the corresponding required increase in transformation capacity, significant opportunities are emerging in the power transmission segment. As highlighted in recent CEA India Report on Transmission Plan for 500 GW RE by 2030, there is a growing focus on strengthening the grid through advanced technologies such as UHVAC, Synchronous Condensers (SynCon), and HVDC corridors to enable reliable evacuation of renewable power, thereby creating steady stream of opportunities. Consequently, a strong pipeline of transmission projects is developing, for which BHEL is well positioned with its technological capabilities and execution experience. As per the Technology Perspective and Capability Roadmap (TPCR) 2025, modernization and indigenization of equipment for the Indian Armed Forces is expected to accelerate, creating sustained opportunities for BHEL across products such as naval guns, marine gas turbines, and advanced defence equipment. In this context, the company is well positioned to capatilise on the emerging opportunities in this strategically important sector.

Indian Railways ongoing modernization and infrastructure upgradation present significant opportunities in High-Horsepower Locomotives, Trainsets, Signalling Systems, track machines and other rail technologies. These opportunities complement BHELs strength in propulsion systems and electric locomotives, allowing to further expand footprint in the railway sector. The maiden order for the Kavach prototype marks a key milestone, positioning BHEL to establish and grow its presence in the critical segment of modern railway signalling.

The expansion and technological upgradation across core industries—including steel, fertilizers, refineries, and cement—continue to provide significant opportunities for BHEL in industrial products and the captive power segment. Demand for captive power plant has witnessed growth during the year, and momentum is expected to sustain.

In the current geopolitical environment, supply chains are increasingly exposed to disruptions arising from geo-political conflicts, leading to shipping route uncertainties, higher freight and insurance costs, and extended transit timelines. To mitigate these risks, the Company is actively diversifying its supplier base across domestic and global markets. Key initiatives include strengthening vendor partnerships through liquidity support, implementation of efficien t payment systems, and streamlining procurement and subcontracting. These measures are aimed at enhancing supply chain resilience, ensuring continuity of operations, and reducing dependency on vulnerable supply routes in an increasingly uncertain global environment.

1.3 Profile and Performance of Businesses

The company has two business segments i.e. Power and Industry. These segments are driven by the three business divisions i.e. Power Sector, Industry Sector and International Operations. The Power Segment comprises equipment supplies and EPC works for Coal and Lignite, Gas, Hydro and Nuclear Power Plant businesses and Spares & Services business, including new business of Coal to Chemicals.

The Industry Segment caters to major equipment supplies and EPC works for a number of industries including transportation, transmission, defence & aerospace, captive power plants, process industries, renewables, upstream and downstream oil & gas, e-mobility and energy storage, among others.

1.3.1 Power Sector

As the nations economic trajectory remains fundamentally coupled with the expansion of the power sector, ensuring energy security through affordable and resilient power infrastructure is critical to maintaining long-term economic growth.

Indias power demand continues its structural uptrend, driven by economic growth, electrification, digital infrastructure, and rising cooling needs. The country recorded peak electricity demand levels crossing ~245 GW in FY 2025-26. As per the projections by the Central Electricity Authority, peak demand is expected to approach ~270–280 GW by FY 2026–27, implying sustained annual growth in the range of ~10-14%. As on March 31, 2026, India has installed power capacity of ~532 GW and an annual electricity generation of around 1,848 Billion Units (BUs).

BHEL maintained its lions share of 54% in the countrys total installed thermal capacity of utility scale power projects, along with 60% of nuclear power installed capacity (secondary side) and 43% of hydro power installed capacity in the country, by the end of FY 2025-26. Overall at utility scale, including thermal, nuclear and hydro segment, BHEL enjoys 53% share in total installed conventional capacity of the country.

In FY 2025-26, BHEL has secured orders aggregating to D59,256 Crore (excl. taxes) in Power Sector, which includes D8,288 Crore (excl. taxes) from new business stream, i.e. Coal Gasification business, strengthening the future top-line growth. Since its inception in 1964, BHEL has supplied 476 coal-based utility sets, 23 diesel sets, 431 hydro utility sets, 105 gas-based utility sets and 15 nuclear based utility sets in India up to FY 2025-26. Through its concerted effort s, BHEL achieved a domestic capacity addition of 6,080 MW in FY 2025-26 in utility power projects, including 5,180 MW of thermal projects, 700 MW of Nuclear project and 200 MW of hydro projects. Additionally, commissioning of 510 MW was also achieved in overseas hydro projects.

In FY 2025-26 :

• A total capacity addition (CA) of 6,590 MW, highest in last 10 years. (Domestic: 6,080 MW, International: 510 MW)

• Full Load (FL) operation achieved for 1,600 MW and Synchronization (SYN) achieved for 660 MW.

• Combining Capacity Addition (CA), Full Load (FL), Synchronization (SYN), and overseas (OS) projects, 8,850 MW of projects were commissioned/synchronized.