Company Description:

Bharat Electronics Limited was established by the Government of India under the Ministry of Defence in 1954 to meet the specialized electronic needs of the Indian defence services. Over the years, it has grown into a multiproduct, multi-technology, multi-unit company servicing the needs of customers in diverse fields in India and abroad.

Playing the India Thematic:

Government led spending will be the key growth driver for Cement demand in India. The industry will benefit from government’s focus to build infrastructure and provide housing for all by 2022.

Industry Outlook:

  • Government of India’s Defense spending, automation drive to improve governance in public services and the Smart City initiatives will be the key growth driver for manufacturers of communication products and electronic components for defense and civilian applications in India

Industry Outlook:

  • Growing defense and security needs and increasing defense allocation for modernisation and upgrade augurs well for the industry. India at AU$ 59.1 bn is the fifth largest defense spender in the world
  • Increased impetus on homeland security, growing market for solar based power plants and the smart city mission provides non-defense growth opportunities for the industry

Company Outlook

  • Bharat Electronics is well positioned to benefit from the rising defence expenditure, supported by a strong manufacturing base (Capacity utilization of ~60%) and execution track record
  • Strong relationship with defence and government agencies and strategic collaboration with foreign technology partners for new products development along with in-house R&D capabilities (R&D spend at 9% of revenues) positions Bharat Electronics well to tap the opportunity
  • Good order backlog of Rs.401bn (AU$8.02 bn) as at the end of FY18 provides strong revenue visibility of 4x its trailing twelve-month revenue. This is expected to strengthen further with finalisation of two large defence orders in 1HFY19

Exhibit 15: Financials




Company Description:

Power Grid Corporation of India (PWGR) is a central transmission utility (CTU) in India. It owns and operates most of India’s inter-state and inter-regional (ISIR) power transmission system. It has been identified as a nodal agency by the government to set up interregional transmission capacity.

Playing the India Thematic:

Rising share of renewable energy, uneven distribution of fuel/water resources and demand, and bottlenecks in rail infrastructure will keep driving demand for investment in transmission capacity in India.

Industry Outlook:

  • The uneven disposition of energy resources in India, most generation capacity being located in western region and peak deficits in southern and northern region, demand for transmission capacities in India is expected to remain strong
  • The need for inter-regional transfer capacity based on load analysis for various seasons is expected to increase from 74GW in FY17 to 198GW by FY33-34 as per the Ministry of Power. This provides for strong long-term visibility for the transmission sector in India

Company Outlook

  • PWGR, being a central transmission utility (CTU), PWGR enjoys a near monopoly in the interstate and inter-region (ISIR) domain. Though the private sector is keen to grow in the transmission business, stretched balance sheets and higher weighted average cost of capital (WACC) for private players may constrain their participation in the sector
  • PWGR’s pace of project execution remains superior to other players in the industry. Of the 5 Tariff Based Competitive Bidding projects completed on time in India, 3 projects were by PWGR
  • PWGR has Rs. 900 bn (AU$18 bn) worth of projects pending execution over the next 3-4 years, which will drive EPS CAGR of 13% over FY18-20

Exhibit 16: Financials