Bhel was the biggest loser among Sensex stocks on Monday on sustained selling pressure from institutions.

The stock of the state-run power equipment major was down by 2.52% to Rs 204.75 on the BSE, off its intra-day high of Rs 212.70. A relatively higher volume of over 268,000 shares was recorded on the counter by 14:46 IST. In two sessions, the scrip lost 6.65% from Rs 219.35 on 27 February 2003. Earlier, between 31 January and 27 February 2003, it rose by 24.63% from Rs 176.

The fall in the Bharat Heavy Electricals scrip was due to sustained selling pressure, especially from institutions, after the Union Budget for 2003-04 slashed customs duty on high voltage transmission equipment from 25% to 5%. Though the Budget has been held to be favourable for the power sector in general (in the long term), domestic high-voltage transmission equipment manufacturers were not too happy by the reduction in customs duty. The reduction will reduce the total cost of import of such equipment and may put pressure on demand for domestic power equipment.

However, domestic power equipment companies may gain over the long term due to reforms in the power sector. The Budget has laid much emphasis on infrastructure, which could form the core trigger for industrial development. Other announcements include the extension of the mega power project policy to all power projects. Also, the Electricity Bill will soon be passed in Parliament.

Analysts said the passage of the Electricity Bill may lead to improvement in the financials of the power equipment sector. The Bill seeks to abolish the current restrictions on power generators and aims at reforming the sector. Analysts said the Bill will improve the health of state electricity boards. This, in turn, will help Bhel improve its financials as the power equipment major receives 60% of its revenues from SEBs.

For the third quarter ended 31 December 2002, Bhel posted a net profit growth of 1.5% to Rs 81.33 crore, compared to Rs 80.15 crore in the corresponding period of the previous year. Total income increased by 14% to Rs 1,699.76 crore (Rs 16.99 billion) from Rs 1,490.17 crore (Rs 14.9 billion) in DQ 2001.

Meanwhile, analysts are hopeful that Bhel may post excellent results in the coming quarters following its strong order book position. Bhel's order book stood at Rs 12,850 crore as at the end of December 2002. The order intake is estimated to grow by 20% despite one large order from BSES worth Rs 2,850 crore (Rs 28.5 billion) getting postponed to FY 2003-04.

Bhel expects two large orders to compensate for this shortfall – Karnataka Power Corporation's 500 MW Bellary project worth Rs 1,000 crore (Rs 10 billion) and the 500 MW Birsingpur project promoted by the Madhya Pradesh State Electricity Board worth Rs 1,800 crore (Rs 18 billion).

Bhel is the largest engineering and manufacturing enterprise of its kind in India, and is one of the leading international companies in the field of power equipment manufacture. The Centre has decided to sell 17% equity stake in Bhel to bring down its holding in the company to 51% from 67.7%. The Heavy Industry ministry has granted its concurrence to the proposal for divesting 17% stake to the public, financial institutions and employees.