BHEL Bags Rs 2,800 Crore Syngas Project; Stock Down 5.5%

Shares of Bharat Heavy Electricals Ltd (BHEL) fell 5.5% after touching a day’s high of Rs 263.25 on 11th February. This occurred despite the company announcing on 10th February that it had received a letter of acceptance (LoA) from Bharat Coal Gasification and Chemicals Limited (BCGCL) for a project valued at approximately Rs 2,800 crore. This excludes customs duty and goods and services tax.

Bharat Coal Gasification and Chemicals Limited (BCGCL) is a joint venture between Coal India Limited, which holds a 51% stake. BHEL holds the remaining 49%.

The order relates to the Syngas Purification Plant under the LSTK-2 package for BCGCL’s coal-to-2,000-tonnes-per-day ammonium nitrate project at Lakhanpur in Odisha’s Jharsuguda district.

BHEL will undertake design, engineering, equipment supply, civil works, erection, commissioning, and operations and maintenance (O&M). The project is expected to achieve preliminary acceptance, including commissioning and performance guarantee tests, within 42 months from the LoA date. O&M services will continue for another 60 months thereafter.

The company said a domestic entity awarded the order on a nomination basis and that the transaction qualifies as a related-party transaction. However, it has been executed at arm’s length. In this transaction, BHEL is acting as both promoter of BCGCL and executing agency.

Separately, the government is expected to divest up to a 5% stake in BHEL via the Offer for Sale route. The floor price may be set in the Rs 255–260 per share range. Furthermore, the stake sale could raise around Rs 4,500 crore.

The order adds to BHEL’s recent momentum. Last week, it secured an order worth Rs 1,200–1,500 crore from Hindalco Industries for the Aditya Expansion Project Phase II in Odisha.

BHEL Q3 Results

In Q3 results announced on 19th January, BHEL reported a 16.4% YoY rise in revenue to Rs 8,473 crore. EBITDA grew 79% to Rs 546 crore. Margins improved to 6.4% from 4.2%. In addition, net profit increased to Rs 390 crore.

At 10:17 AM, shares of BHEL were trading 5.54% lower at Rs 260.80 on the NSE.

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