Overview

In 1954, in a newly independent India, Bharat Electronics Ltd (NSE:BEL) was set up in association with CSF, France (now, Thales), to manufacture basic communication equipment, BEL now produces a wide range of state-of-the-art equipment in fields such as Defence Communication, Radars, Naval Systems, C4I Systems, Weapon Systems, Homeland Security, Telecom & Broadcast Systems, Electronic Warfare, Tank Electronics, Electro Optics, Professional Electronic Components and Solar Photovoltaic Systems, BEL also provides turnkey system solutions. Civilian products from BEL include Electronic Voting Machines, Tablet PC, solar-powered traffic signal systems and Access Control Systems.¹

Starting from a single Unit in Jalahalli, Bangalore, BEL has established its presence across the country by setting up eight other Units – in Ghaziabad, Pune, Machilipatnam, Panchkula, Kotdwara, Navi Mumbai, Chennai and Hyderabad. Each Unit has a specific product mix and customer focus. BEL has also set up a wide network of offices and service centres countrywide as well as two overseas offices – at New York and Singapore.

BEL was established to meet the specialized electronic equipment requirements of the Indian Defence Services. While this continues to be its prime focus, the Company has a significant presence in the civilian market, too. BEL exports some of its products and services to a number of countries as well.

BEL has been laying great emphasis on Research and Development right from the early years. It has also been able to successfully partner as production agency with many DRDO labs. From a meagre turnover of Rs.2 lakhs in 1956-57, BEL has grown manifold to record a turnover of Rs.7,510 crores (provisional) in 2015-16.

Industry Overview

The Indian Economy is estimated to become fifth largest in the world as per World Economic Outlook (WEO) of October 2019. The Union Budget 2019-20, had articulated about India becoming 5 trillion USD economy by 2024-25. Given the challenges in Global Economies like trade tensions between the world’s largest economies, protectionism etc., the Global output growth is estimated to be slower. As per Second Advance Estimates released by Central Statistics Office (CSO) in February 2020, the Indian economy growth is estimated to be 5% in 2019-20, compared to 6.1% in 2018-19. However, there is growth in macroeconomic stability of India for the last five years, but the challenge faced by the financial sectors in India has put an undue pressure on the Indian economy. ²

The Balance of Payment has improved due to higher capital flows by way of FDI and Foreign Portfolio Investment (FPI) to the country leading to increase in foreign exchange reserves (USD 302 billion in end March 2019 to USD 461.2 billion as on 10 January 2020).The Current Account Deficit (CAD) has been narrowing leading to reduction in external indebtedness and independent domestic policy.

The unprecedented and unforeseen crisis due to the virulent novel Corona Virus (Covid-19) has shaken the entire human kind across the world. However, due to Covid-19, the real impact on the Indian economy is to be seen in the near future as the situation is evolving. The pandemic Covid-19 which started in China has affected the whole world and the economies are reeling under the lockdown of various Industries across sectors including Defence.

Defence

As per SIPRI report released in April 2020, the total World Military spending rose to USD 1.917 trillion in 2019 compared to USD 1.822 trillion in 2018 which is an increase of 3.6% compared to the previous year. This is the largest annual growth in Defence spending since 2010.

The United States continues to be the highest military spender in the world, followed by China, India, Russia and Saudi Arabia, with India as the 3rd largest military spender in the World.

In the challenging Geo Political situation, the Indian Union Budget in February, 2020 has allocated Rs 4,71,378 Crores for 2020-21 for Defence, with an increase of 9.37% over the previous year of Rs 4,31,011 Crores. The budget for Capital Expenditure has increased from Rs 1,03,394 Crores in 2019-20 to Rs 1,13,734 Crores in 2020-21, which is about 10% hike over the previous year.

The Capital Expenditure allocated to Air Force is Rs43,282 Crores, Army is Rs32,462 Crores and Navy is Rs 26,688 Crores. Out of the total budget allocation, 59% of Air Force budget is for Capital Expenditure, Navy it is 54% and Army 18%.

The increase in capital budget for defence is not commensurate with the procurement plans of the defence forces and it may also impact the payments for the delivery of ongoing projects of the Defence forces. The Pandemic Covid-19 is likely to impact the Indian Defence Budget /Expenditure in the coming years.

Non-Defence

Apart from its core Defence Business, BEL has ventured into several non-defence areas like Homeland Security, Smart City, Energy Storage Products, Solar, Space Electronics, Network & Cyber Security, Railways & Metro solutions, Composites and Software.

Homeland Security

The Homeland Security market in India is spread across Central/State Governments, Government Entities including PSUs and Private Sector Organizations. A significant market opportunity exists in Police Modernization, Critical Infrastructure Protection, Border Management, Counter Terrorism Activities, Urban Area Security, Ground Transportation, Port & Maritime Security, etc. Prevailing internal security concerns due to terrorist activities & crime, data thefts, remote monitoring needs for centralized command & control, Asset Protection & Disaster Management, growth in public infrastructure, increased IT spending, various Government initiatives, increase in security spending are boosting demand for the Homeland Security market in India.

The total budget allocation of Union Home Ministry for 2020-21 for the Police Forces (which includes the Central Armed Police Forces and Delhi Police) is Rs 1,05,244 Crores against Rs 1,03,204 Crores in 2019-20, a hike of 2%. Out of this budget, Rs 77,887 Crores has been allocated for the Central Armed Police Forces.

Smart City

Under the Smart City Mission launched by Government of India in June 2015, 100 smart cities have been selected and all the 100 cities have incorporated Special Purpose Vehicles (SPVs), City Level Advisory Forums (CLAF) and appointed Project Management Consultants (PMC) to appraise, approve, implement, manage, operate, monitor and evaluate the projects. The 2020-21 Budget has proposed for setting up of 5 new smart cities, which will be full-fledged new development similar to Gujarat International Finance Tec - City, Special Economic Zones, etc.

The 2020-21 Budget has not mentioned any particular budget increment for the Smart Cities Mission. The 2019 budget had allocated Rs 6,450 Crore for the Smart Cities Mission for 2019-20 against Rs 6,169 Crore in 2018-19, a 4.5 % hike than the previous year. As per reports, as much as 5,151 smart city projects with a cost of Rs 2 Lakh Crore are in various stages of implementation among the 100 smart cities since the inception of Smart City Mission.

The new Strategic Business Unit headed by a General Manager, which was formed exclusively to address the Smart City and Homeland Security Business has made significant achievement by bagging several orders for Homeland Security and Smart City Projects which are under different stages of implementation.

Energy Storage Products

There are substantial business opportunities in the alternative power storage segment in the coming years due to huge requirement of high energy, maintenance free batteries for defence and strategic applications and also the policy interventions by GoI towards E-vehicles.

Among the mature storage technologies, Lithiumion batteries are the most versatile and efficient storage devices and find usage in a wide spectrum of applications in both defence and non-defence areas. The Electric Vehicles (EV) market in India has gained momentum after several policy initiatives like the National Electric Mobility Mission Plan (NEMMP), Faster Adoption & Manufacturing of Hybrid & EV (FAME) and FAME 2. As per report, the market for Lithium-ion battery in India is expected to grow at a CAGR of 35% in the next 3-4 years.

In addition to Lithium-ion opportunities, Fuel Cell technology-based Energy Storage Products are also projected to dominate the future energy storage markets globally as well as in India.

Solar

The Government has set an ambitious target of generating 450GW of renewable energy by 2030. This includes a target of generating 175GW of renewable energy by 2022 with a target of 100GW from Solar Power. However, the GoI is confident of achieving 225GW of renewable energy by 2022 breaching the set target of 175GW. In the Budget for year 2020-21, Rs 2,516 Crores has been earmarked for solar power which includes both grid-interactive and off-grid projects.

BEL has scaled up its operations from a Cell/Module manufacturing to execution of Solar Power Plant projects under Engineering Procurement Construction (EPC) / Developer mode. BEL has created a new Micro SBU to give a focused approach to target the requirements of Solar Business. In near future, this segment is expected to contribute to BEL’s business on a continuous basis

BEL has also been shortlisted by ISRO for manufacturing of Multi Junction Solar Cells for space application. The plant with a capacity of about 60,000 multi junction Cells per annum will be setup by ISRO and complete manufacturing will be operated by BEL.

Space Electronics

ISRO has opened up opportunities for manufacturing of ‘Polar Space Launch Vehicles’ (PSLVs) and Small & Micro Satellites, for the Indian Industry. The Global requirement for small satellites is expected to touch around 500 numbers per annum. ISRO has ambitious plans to increase the number of Satellite launches on an average of about 18 satellites per annum from the year 2020-21 onwards. In commensurate with the plans of ISRO, the Department of Space (DoS) has been allocated a budget of Rs 13,479 Crores for year 2020-21 in comparison to Rs 11,538 Crores in the previous year. In addition to this, ISRO has approval for launch of 30 PSLVs and 10 Geo Synchronous Satellite Launch Vehicles (GSLVs) in next three years.

BEL is one of the major players in ground segment of Satellite Communication and desires to enter into Space Electronic Systems, manufacture of Small & Micro Satellite and address Launch Vehicle segment jointly with Indian private industry. BEL has long term objective of becoming a prominent player in Space Based Assets and Payloads. During year 2019-20, BEL has responded to New Space India Limited (NSIL) EoI for productionisation of PSLV for ISRO in consortium and also expressed its interest for participation in productionisation of Small Satellite Launch Vehicle (SSLV) for ISRO.

BEL has qualified as an industry partner of ISRO for Assembly, Integration and Testing (AIT) of satellites. During this year, BEL has completed Satellite AIT of three RISAT satellites at ISRO. BEL has collaborated with ISRO and has come out with new products like next generation Indigenous Receivers for Positioning and Navigation (IRNSS), GSAT Terminals, LTCC based Substrates and High power TWTs, which have usage in Defence, Government Services and Paramilitary Applications. BEL is jointly working with ISRO for supply and commissioning of various types of Satellite Networks and HUBs for SatCom Applications.

Network and Cyber Security

With the advancement of digital technologies and their use in almost all areas, businesses like e-Governance, defence, banking, etc have become vulnerable to cyber attacks. To address the above issues, Cyber Security solutions in the areas of Cyber Warfare, Espionage, National Defence, Protection of Intellectual Property, Data Security for employee/ customer/personal information are being developed. The global Cyber Security market is expected to reach about USD 190 billion by year 2025 and Cyber Security market in India is estimated to be about Rs 30,000 Crores for next 3 years.

BEL is working in the domain areas of Network Elements and Security, Computing Elements, Encryption, AI & Data Analytics, Security Management, Digital Identity Solutions, Cyber Forensics, Security Services, Secure Network Segregation Solution etc.

BEL has completed the implementation of projects like Security Analytics Centre (SAC) and developed products like Data Diode, PKI, Secure Storage Solutions, Secure Computing Devices, etc.

The total capital outlay for Indian Railway (amount spent on asset creation) for 2020-21 is Rs 1,61,042 Crore which is 3% higher than the 2019-20 (Rs 1,56,352 Crores). There are substantial business opportunities in the Rail and Metro business in India. As per the reports, around 34 Metro Rail projects are under construction stage including 9 newly approved projects in different parts of India.

The modernization and new projects like National Common Mobility Card (NCMC) compliant Automatic Fare Collection (AFC) Gating system for Metro’s, Indian Computer Based Train Control/Automatic Train Supervision (ATS), Real Time Information System (RTIS) for Indian Railways, LTE based Mission critical communication networks for railways, Unmanned Railway Crossing system, Composite Panels for Rail and Metros, etc. are some of the key areas in which BEL is pursuing for business.

BEL is collaborating with various Public/Private organizations in the area of ATS System, Mission critical Communication System, Composite panel etc. NCMC compliant AFC gating system executed by BEL will be implemented across all modes of transportation i.e. Metro, Trains or Buses in phased manner. Also, having done the pilot implementation of RTIS project, BEL is keen to participate in Phase-II implementation of RTIS project for pan India coverage.

Composites

Composites are used for the manufacture of various products in Aerospace & Defence, Wind Energy, Transportation, Marine Applications etc. As per the reports, the Global Composites market size is expected to grow from USD 90.6 billion in 2019 to USD 131.6 billion by 2024. The demands for lightweight, highperformance, corrosion resistance, long life are some of the key factors which are influencing the growth of Composite business.

BEL is planning to address the Composites structure requirements of Shipyards, Aero structures, Railways & Metros, Land equipments, etc.

BEL has setup facilities for Resin Film Infusion (RFI) and Vacuum Assisted Resin Transfer Molding Process (VARTM). BEL has also tied up with CSIR lab, Academia for consultancy and development of Composites structures. Composite panels are being planned for development as per the requirement of Shipyards and Railways.

Software

India is one of the leading software development center in the World and Indian IT Industry is growing at a CAGR of 10.71%. As per reports, the Indian IT Industry comprising of Software Products, IT services, Engineering and R&D services, ITES/BPO, Hardware and e-commerce is expected to grow to USD 350 billion by 2025. Majority of the revenue comes from exports of software and services.

Focused Approach for New Areas in Defence To give a focused approach to upcoming areas in Defence & Aerospace sector, BEL has ventured into Unmanned Systems, RF and IR Seekers, Missiles, Rockets, Glide Bombs & Ammunition.

Unmanned Systems

The Indian UAV segment offers an overall opportunity of about USD 5 billion during the LTIPP Plan period ending by 2027. Opportunities in Unmanned Systems include Unmanned Aerial Vehicle (UAV) systems, Unmanned Ground Vehicles (UGVs) and Unmanned Underwater Vehicles (UUVs) & Unmanned Surface Vehicle (USV) systems.

BEL has been addressing the UAV/UGV/UUV/USV requirements of the Indian Defence / Non-Defence segments by partnering with DRDO / foreign OEMs/ Indian Academia/ Startups etc. BEL has been working on the Payloads (like EO, Communication, ESM etc.) and Ground Control Station requirements of UAVs and also developing capabilities in Drone Guard Systems. BEL has started a Micro SBU to address the opportunities of Unmanned Systems for both Defense and Non-Defence customers.

RF and IR Seekers

The next generation of SAM and other AD Missiles are based on active/passive seeker technologies, which uses RF seekers and IR seekers for homing on to the targets. The requirements for RF and IR Seekers are derived demands arising out of procurement of various Next Generation Missiles.

As per the defence acquisition plans of India and friendly countries, opportunities for RF and IR Seekers is about Rs 28,000 Crores in next 10 years.

As per the defence acquisition plans of India, opportunities for this segment is about Rs 10,000 Crores in next 10 years.

BEL is already engaged in the development and manufacture of Missile Electronics and parts, Ammunition fuzes etc. BEL is pursuing several MoD and DRDO (DCCP) opportunities which are at different stages of procurements. Apart from this, BEL is also creating necessary infrastructure for manufacture of missiles, glide bombs, rockets and its related parts.

Diversification / Expansion Plans

As a diversification strategy, the Company has been exploring opportunities in allied defence and nondefence areas for growth, leveraging its strengths and capabilities acquired in the defence electronics domain. In the past 4-5 years, the non-defence portion, on an average (exception being in 2018-19 due to EVM/VVPTs) in company’s business is about 15-20% of total turnover. This year company has about 18% of turnover from non-defence segment. The company aims to achieve revenues of about 20-25% of company’s turnover from the non-defence business in the coming years.

The Company has been putting continuous efforts and focus to enter and address several new areas in both defence and non-defence for further expanding its business in new markets and sustaining the growth. Some of the areas being focused upon by BEL in defence include – Next Generation Weapon Programs including critical parts in RF, EO and other Electronic parts, Airborne Radars, Arms & Ammunitions and Explosives, Unmanned Systems, Aircraft Integration, Night Vision Devices, INS solutions for various Platforms, Helmet mounted Display Systems, Counter Measures Systems for Airborne Platforms, Composites etc.

Some of the areas being focused upon by BEL in the non-defence include - Air Traffic Controller Radars, Space Electronics, Space Launch Vehicles, Space grade Solar Cells, Satellite Assembly & Integration, Railway and Metro Solutions, Software, Electric Vehicles (Li-ion Cells, Fuel Cells, Charging Stations, etc), Homeland Security and Smart City Businesses, Smart Meters, Healthcare electronic equipments to combat COVID-19 situation

BEL has successfully diversified into Electronic Fuzes, Critical parts for Weapon Programs, Light weight Composite Shelters & Masts, Homeland Security & Smart Cities, Network & Cyber Security, Rail & Metro solutions (Real time Train Information System, Automatic fare Collection and Gating system for Metro), Intelligent Traffic Management Systems, Energy Storage Products, Solar Power Plants, Cells & Modules, Satellite Assembly & Integration, X-Ray Baggage Scanners (X-BIS) etc.

BEL also continuously strives to expand its business by capturing new customers in the existing geographical markets as well as new geographies for its proven products, Systems and Solutions. BEL has ventured into new Business Models like Government Owned Company Operated (GOCO Model), OPEX Model etc to expand its business by capturing new Customer segments. BEL is striving to exploit its dual use technologies for expanding the market as well as customization of its products / solutions to meet the new customer segments / geographical areas, especially in the export markets

BEL is leveraging on its new International Marketing offices to expand the reach of its products and services to the new Markets and also explore Offset Opportunities. BEL is also forging partnership with other PSUs/ Industry players for quickly expanding the geo spatial reach through resource sharing.

Financial Highlights

Company’s Turnover for the year 2019-20 has increased to Rs 12,60,776 Lakhs from Rs 11,78,922 Lakhs in 2018-19, registering a growth of 6.94%. Profit after tax for the year is Rs 1,79,383 Lakhs as compared to Rs 1,92,729 Lakhs in the previous year. Turnover from indigenously developed products is 79%. Supplies to the defence contributed to 82% of turnover in 2019-20 as compared to 68% in the previous year.

For the quarter ended 30-06-2020, the company has reported a Consolidated sales of Rs 1641.46 Crore, down -71.35 % from last quarter Sales of Rs 5728.57 Crore and down -20.38 % from last year same quarter Sales of Rs 2061.72 Crore Company has reported net profit after tax of Rs 47.53 Crore in latest quarter.

Bharat Electronics Consolidated September 2020 Net Sales at Rs 3,195.24 crore, up 16.26% Y-o-Y ³

Net Sales at Rs 3,195.24 crore in September 2020 up 16.26% from Rs. 2,748.32 crore in September 2019.

Quarterly Net Profit at Rs. 399.01 crore in September 2020 up 16.04% from Rs. 343.85 crore in September 2019.

EBITDA stands at Rs. 654.77 crore in September 2020 up 16.87% from Rs. 560.25 crore in September 2019.

Bharat Elec EPS has increased to Rs. 1.64 in September 2020 from Rs. 1.42 in September 2019.

Bharat Elec shares closed at 92.45 on November 06, 2020 (NSE) and has given 45.25% returns over the last 6 months and -15.49% over the last 12 months.

Recent developments

August 10, 2020; BEL upgrades ATDS Maareech manufacturing facility with an eye on ‘Atmanirbhar Bharat’ ⁴

The Hon’ble Raksha Mantri, Shri Rajnath Singh, on Monday inaugurated through Video Conference the upgraded, state-of-the-art Maareech Integration Facility.

Mr Gowtama M V, Chairman & Managing Director, Bharat Electronics Limited (BEL), on the occasion gave a presentation to the Hon’ble Raksha Mantri on Advanced Torpedo Decoy System (ATDS) Maareech. This initiative by BEL is in accordance with the Hon’ble Prime Minister, Shri Narendra Modi’s vision of an ‘Atmanirbhar Bharat’, a self-reliant nation.

ATDS Maareech is a fully indigenous system involving sensors and decoys developed jointly by DRDO labs, Naval Physical & Oceanographic Laboratory (NPOL) and Naval Science and Technological Laboratory (NSTL), and productionised by BEL. Two production grade systems manufactured by BEL have been installed and trial evaluated on-board INS Gomati and INS Ganga. The Indian Navy has awarded BEL a contract for Maareech systems.

Prior to the induction of ATDS Maareech, the Indian Navy had imported the system for 12 platforms. But now with the indigenous development of this system, BEL has upgraded its existing facilities with capacity to manufacture and deliver 12 ATDS Maareech systems every year. This facility enables BEL to provide a reliable defence mechanism for Surface Ships of the Indian Navy against possible torpedo attacks. The upgraded ATDS facilities include Test Bays for electronic cabinets, Expendable Decoy Manufacturing and Towed Array Integration & Testing facility (Ramp Structure, Oil Filling facility, Load Test facility and Neutral Buoyancy Tank facility). BEL has constructed a new building for ATDS manufacturing at a cost of around Rs.12 Crores. The indigenously developed Maareech System is a big step towards ‘Atmanirbhar Bharat’, as it saves the country around USD 4 Million in foreign exchange per system.

August 14, 2020; BEL completes manufacturing milestone of 30,000 ventilators

Bharat Electronics Limited (BEL), a Navratna PSU under the Ministry of Defence, is happy to announce the successful completion of manufacturing 30,000 numbers of ICU Ventilators in a record time to help GoI in its efforts in combating the COVID-19 pandemic. Ministry of Health & Family Welfare had earlier placed an order for these 30,000 ICU Ventilators in April 2020 to meet the healthcare infrastructure requirements of the nation, seeing the rise in COVID cases.

BEL has manufactured the ICU Ventilator, Model CV 200, based on licensing agreement with M/s Skanray Technologies Private Ltd, Mysuru, and design support from DRDO. The indigenization efforts of DRDO, BEL and Skanray in addressing the non-availability of critical components like highly complex medical grade miniature proportional valves, on/off solenoid valves, oxygen sensors and flow sensors was certainly a game changer as India can now boast of a capable and mature medical electronics ecosystem. After receiving the order, based on its Agile Production System Capability, within two weeks BEL established the manufacturing line to produce 500 to 1,000 Ventilators per day.

Manufacturing of these ventilators was undertaken during severe lockdown period and BEL received immense support from various Government agencies to resolve the supply chain disruptions. As manufacturing of these Ventilators was centred at the Bangalore Unit of BEL, the Karnataka Government took extra initiatives by earmarking a nodal IAS officer for BEL to liaison with, to resolve various lockdown related issues. BEL also would like to make special mention of the support rendered by scores of Indian industries ranging from MSMEs to large business houses in supporting BEL towards manufacturing of 30,000 ventilators in a short span of time.

The valuable feedback received from the committee of expert doctors and hospitals pan India helped BEL to quickly upgrade the Ventilator with additional modes of operation through software to address Indian COVID patient needs. Seamless coordination between the Central and State government authorities helped BEL in undertaking the installation and commissioning work expeditiously with the help of reputed private partners.

BEL would like to thank each and everyone who participated in this ambitious program. BEL, DRDO, Skanray and all other industry partners are proud to be part of the GoI initiative in creating a capable ecosystem for manufacturing medical grade equipment indigenously and timely addressing of the healthcare needs of its nation. This a true example of Make In India and Atmanirbhar Bharat initiatives undertaken by GoI.

Bharat Elec Consolidated December 2020 Net Sales at Rs 2,320.39 crore, up 1.86% Y-o-Y ⁵

January 29, 2021; Reported Consolidated quarterly numbers for Bharat Electronics are:

• Net Sales at Rs 2,320.39 crore in December 2020 up 1.86% from Rs. 2,278.08 crore in December 2019.
• Quarterly Net Profit at Rs. 278.05 crore in December 2020 up 24.87% from Rs. 222.68 crore in December 2019.
• EBITDA stands at Rs. 479.73 crore in December 2020 up 22.98% from Rs. 390.09 crore in December 2019.
• Bharat Elec EPS has increased to Rs. 1.14 in December 2020 from Rs. 0.91 in December 2019.

References

1. ^ https://bel-india.in/ContentPage.aspx?MId=1&CId=1&LId=1&link=0
2. ^ https://bel-india.in/Documentviews.aspx?fileName=Annaul-Report-2019-20-07-09-2020.pdf
3. ^ https://www.moneycontrol.com/news/business/earnings/bharat-elec-consolidated-september-2020-net-sales-at-rs-3195-24-crore-up-16-26-y-o-y-6090981.html
4. ^ https://bel-india.in/News.aspx?MId=18&LId=1&type=1&link=0
5. ^ https://www.moneycontrol.com/news/business/earnings/bharat-elec-consolidated-december-2020-net-sales-at-rs-2320-39-crore-up-1-86-y-o-y-6414271.html