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In Focus: Moving Ahead

Bharat Earth Movers sets sight on South America, Rs 2,600-crore turnover

Recently upgraded to a category-1 mini-ratna, the Rs 2,200-crore mining equipment major Bharat Earth Movers (BEML) is eyeing Rs 2,600-crore turnover in 2006-07. The company enjoys a 70 per cent market share in the Indian earthmover industry. In the recent past, the company has entered into a tie-up with Compagnie Comercio E Construcoes (CCC) in Brazil to form a joint venture to set up or acquire a plant to manufacture and supply 500 wagons and 200 earth-moving equipment in the continent.

BEML will invest Rs 100 crore and hold 60 per cent in the Brazilian joint venture which will help it to tap the South American market which is witnessing rapid expansion due to increased mining and related activities.

Bharat Earth Movers, the second largest manufacturer of earthmoving equipment in Asia, manufactures a wide range of equipment like heavy earthmovers, rail coaches, military tanks, heavy-duty trucks, trailers and high-powered diesel engines. At the end of June 2006, the public sector engineering company had orders worth Rs 2,487 crore. These include a Rs 1,500-crore order from the Delhi Metro and an order from the Union defence ministry worth Rs 800 crore.

BEML exports to over 25 countries in Europe, Africa and West Asia. The company is actively exploring the joint venture route to tap export opportunities and turnkey projects in mining and allied fields.

To fund its diversification and expansion, the company is planning to raise Rs 450-500 crore through a public issue. It has also achieved backward integration by putting in place a flexible system for engine manufacturing. The company is also in talks with Komatsu of Japan and Caterpillar, US to sell stake in its Mysore plant. This plant is expected to become a low-cost outsourcing base for the Asian, Chinese and Australian markets.

The company has, however, reported a disappointing set of numbers for the quarter ended June 2006. Year-on-year sales slipped 11 per cent, while operating profit margin improve by only a tad to 5.73 per cent.

The BEML stock has seen wide fluctuations over the past one year. From a level of Rs 900 in September 2005, the scrip surged to touch a high of 1,736 in early March and then tanked to 770 levels in mid June after the market meltdown in May.