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October 07, 2008


BHEL to set up a JV for overseas acquisitions

ET reported that Bharat Heavy Electrical Limited is considering a JV for overseas acquisitions and is talking to ONGC, Reliance Industries, Reliance Energy and L&T to set up a special purpose vehicle for this venture.

Mr K Ravi Kumar CMD of BHEL said that "The venture is being considered to provide necessary muscle to the organization for placing aggressive bids in the overseas market. BHEL unsuccessfully tried to acquire 2 companies, 1 in Europe and another in the US, engaged in manufacture of solar power equipment."

Mr Kumar said that "It is very difficult to compete with global players while placing bids for any overseas acquisitions. There is a clear preference toward local companies in several such deals. A combined effort of three four strong companies could turn the table in our favor."

The new entity would focus on acquiring companies engaged in manufacture of power equipment both in conventional and renewable energy space. It will also look at tapping companies engaged in production of equipment for oil and gas sectors. Only small and medium sized companies may be considered initially for acquisition.

The acquisition would be geared toward getting new technologies and expertise, intellectual property rights, product extensions and market access. The proposed SPV would focus on developed markets in US and Europe to acquire technologies and Indian Performing Rights Society.

The proposal for the SPV is likely to be finalized when BHEL gets some commitment from one or two potential partners. It is understood that the SPV would be designed on the lines of similar SPV formed in partnership by five PSUs for acquiring coal assets abroad. The power equipment venture would also get its capital from all the partnering companies while debt will be raised from the market. A war chest of substantial size is expected to be created so that the entity can place aggressive bids for acquisitions.

While BHEL’s proposal would have to get government nod, sources said the power and heavy industries ministries are in favor of any initiative that helps a PSU grow. The prime minister’s office is understood to have favored the proposal to forge partnership with private partners.