MUMBAI, DECEMBER 30: Bharat Electronics Ltd (BEL), one of the largest Defence electronics equipment manufacturer, is going to see a big boost in business as it landed the very lucrative deal of manufacturing Defence equipments for the Indian military. The centre has been pushing for the modernisation of the Indian Defence sector for a while and the deal with BEL is the next step in this direction. BEL is going to be the key beneficiary in the modernisation scheme of replacing and upgrading military hardware in the country.
The company right now has a 60 per cent share in the Defence electronics segment. This deal is going to bring a boost in BEL’s sales as the orders that are going to be placed under the deal are going to be for whole systems rather than for parts and separate products. This is part of BEL’s long term plan f shifting business from manufacturing of separate parts to manufacturing entire units and systems of electronic equipments.
In order to introduce technologically advanced products, BEL has been investing heavily in R&D and expenditure on research and development is also set to increase from 8-10 per cent of sales. To. In FY15, BEL incurred R&D expenditure of ₹560 crore, which was 8.3 per cent of sales, according to analysts, for new product development. An official added: “BEL has not only maintained a consistent policy of R&D investments but also has launched collaborative R&D with private small and medium-size firms in the country. On an average, 80 per cent of BEL’s sales turnover is from indigenous R&D every year.”
Recently, BEL launched a product development and innovation centre in Bengaluru to give a further thrust towards indigenous R&D, the official added. From FY12-15, BEL has incurred total capital expenditure of ₹620 crore. To capture growth opportunities in the Defence procurement plan, BEL is expanding its production capacities through greenfield and brownfield expansions. The company has lined up a huge capex plan of ₹1,500 crore spread over the next three years. Analysts pointed out that BEL’s current order book comprises major orders from the Air Force and the Army. Among these are the Battlefield Surveillance System, Command Information Decision Support System, Gun and Tank Upgrades Communication Sets, New Generation Radars, Electronic Warfare Systems, among others.
BEL is also eyeing exports as part of its growth strategy. The company is inking strategic alliances with global original equipment manufacturers (OEMs), which will help BEL in joint production and development of new products. BEL intends to focus on South-East Asian countries for communication, sonars, and coastal security solutions.
Over the last decade, the country’s Defence budget has grown from ₹75,900 crore to ₹2,22,400 crore, indicating 11 per cent compounded annual growth rate over FY05-15. Analysts said BEL will continue to get preference over private players from the government for the supply of products and act as a system integrator for large orders. With the Centre planning acquisition of $100-billion Defence equipment over the next decade to upgrade Defence systems, including communication systems, jet fighters, artillery, submarines and tanks, among others, BEL, which supplies radar, military communication equipment, tank electronics and opto electronics to the Defence forces, is likely to be a key beneficiary, added analysts.