Earnings Analysis: BHEL's surge in interest expense comes as a surprise

MUMBAI: Bharat Heavy Electricals' (BHEL) has reported an almost flat growth in revenues to Rs 10,561 crore year on year, while its net profit declined by 10% as compared to the September quarter of the previous year.

Even as the company’s performance at the operational level has been weak, as was expected given the severe slump in the power sector, a notable surge in the interest expense from Rs 9.64 crore in the Sep ’11 quarter to Rs 25.86 crore in the current quarter came as a surprise as BHEL has traditionally been a debt-free company.

The company’s net profit was also impacted as the its income from other sources was also subdued to Rs 130 crore in Sep ’12 quarter as against an other income of over Rs 300 crore reported by the company a year ago.

In the absence of any significant new orders, BHEL's order book at the end of the quarter stood at Rs 122300 crore, its lowest order backlog for any quarter in over three years.

Bharat Heavy Electricals’ (BHEL) share price dipped by more than 3.5% in the day’s trade following a weak financial performance in the Sep ’12 quarter.