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‘Make at BHEL’ offer to foreign companies can lift the sagging stock

BHEL’s decision to offer foreign companies its idle capacity to make in India will allow the unlocking of value, giving investors clarity on its future revenue stream and likely raising valuation multiples at the state-owned engineering company.

“Value unlocking of the low-capacity utilisation plants and effective utilisation of land banks can help improve the overall growth potential in the medium to long term” said Renjith Sivaram, analyst, ICICI Securities. “How BHEL can scale up the new business segment to make it commercially viable in terms of size and profitability will be a key determinant to opening up a new growth segment for the company.”

BHEL has offered partnerships at its 16 manufacturing facilities across the country, and the package would include its unutilised land bank and extensive built-up industrial and residential spaces. Its manpower includes about 9,000 engineers.

This would avoid cumbersome land acquisition, a laundry list of clearance from government agencies for MNCs to set up their manufacturing facilities in India, while helping BHEL monetise its assets.

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