Motilal Oswal Financial Services

8 November 2020

2QFY21 Results Update | Sector: Capital Goods

BHEL

Sell

Estimate change

TP change

Rating change

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Financials & Valuations (INR b)

Y/E Mar

2020 2021E

Sales

214.9

225.5

EBITDA

-2.3

-0.6

PAT

-14.7

-3.6

EBITDA (%)

-1.1

-0.3

EPS (INR)

-4.2

-1.0

EPS Gr. (%)

BV/Sh. (INR)

83.8

82.8

Ratios

Net D/E

0.0

RoE (%)

-5.0

-1.3

RoCE (%)

-1.1

-0.2

Payout (%)

(34.3)

Valuations

P/E (x)

(6.6) (26.7)

P/BV (x)

0.3

EV/EBITDA (x)

(35.7) (160.7)

Div Yield (%)

4.3

FCF Yield (%)

(34.1) (13.2)

CMP: INR28

TP: INR22 (-22%)

Revenue disappoints once again; losses widen

Receivables remain elevated; recovery a long way off

BHEL IN



3,482

97.3 / 1.3

58 / 19

-11/-11/-53

1457

2022E

267.4

12.1

5.0

4.5

1.4

83.2

0.0

1.7

2.6

70.0

19.4

0.3

7.9

3.0

3.9



Bharat Heavy Electricals (BHEL)’s 2QFY21 earnings were disappointing as

revenue came in 27% below our estimates. Higher fixed cost dented

operating performance, with operating level loss attributable to under-

absorption of costs. The company is yet to show any significant

improvement in pending receivables, with total debtors at INR349b in

1HFY21 (v/s ~INR360b at end-FY20). In spite of the company’s ongoing

efforts, we expect the receivables position to remain elevated in the near

future. Order inflows remained weak, with 50% YoY decline in 2QFY21.

We now expect BHEL to report operating-level loss in FY21E. While orders

are few and far between, the pricing environment remains highly

competitive, limiting scope for margin expansion. While the company has

received an Expression of Interest (EoI) from three major OEMs regarding its

ongoing diversification drive, we believe any material financial impact is still

some time away. We maintain our Sell rating, with TP of INR22 (15x FY22E

EPS).

2QFY21 earnings summary:

Revenue was down 41% YoY to INR37b,

27%

below our estimates.

EBITDA remained in the negative territory, with losses

widening to INR6.3b (v/s our expectation of INR1.3b loss). Bottom-line loss

stood at INR5.6b (v/s our estimate of INR1.9b).

OCF stood at –INR0.6b (v/s –

INR23.5b in 1HFY20). Working capital as a percentage of sales

was

elevated

at ~120% in 1HFY21 (v/s 75% in 1HFY20).

Segmental highlights: (a) Power: 2QFY21

revenue was down 41% YoY to

INR24.9b. EBIT losses came in at INR5b (v/s profit of INR4.3b).

(b) Industry:

2QFY21

revenue was down 47% YoY to INR9.5b. EBIT loss stood at INR1.6b

(v/s profit of INR546m).

The order book (OB) was flat YoY at INR1,076b, with OB/rev at 6.6x.

Segment-wise OB is as follows: Power – INR869b, Industry – INR130b, and

International orders – INR78b.

Order inflows stood at INR37.2b in 2QFY21 (Power – INR29.4b, Industry –

INR7b, and International orders – INR820m).

Around ~80% of orders in the total OB of INR1,076b are executable.

Major orders received include E&M works for 12*80 MW Polavaram

Hydroelectric Power Station and the supply of pump-motor sets for

Palamuru Rangareddy LIS Station-1 and Station-4.

Tendering is underway for 6*700 MW NPCIL, 2*800 MW NTPC Singrauli,

2*800 MW NTPC Lara, and 2*660 MW Pench. Tenders for ~30GW of FGD

orders are in various stages of processing. A similar quantum of new tenders

for FGD orders is likely to be issued in upcoming quarters.

Efficiency at factories stood at ~70% in 1HFY21 (v/s 1HFY20).

Total receivables remain elevated at ~INR349b, of which 11% are from the

private sector, 49% from state entities, 33% from the center, and 7% from

the international markets.

Order inflows remain weak



Shareholding pattern (%)

As On

Promoter

DII

FII

Others

Sep-20

63.2

15.6

4.2

17.0

Jun-20

63.2

18.1

5.1

13.6

Sep-19

63.2

19.1

11.4

6.4



FII Includes depository receipts

Management commentary highlights



Nilesh Bhaiya – Research Analyst

(Nilesh.Bhaiya@MotilalOswal.com)

Pratik Singh – Research Analyst

(Pratik.Singh@MotilalOswal.com)

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

BHEL

Valuation and view



BHEL continues to struggle on account of:

(a)

a weak ordering environment in

the Power sector,

(b)

high receivables of ~INR349b, and

(c)

high FY20 employee

cost at ~25% of sales. In FY20, working capital deteriorated to 99% of sales, from

65% in FY19, weighed by higher inventory, slow movement in receivables, and

poor execution.

We now expect BHEL to report operating-level loss in FY21E. While orders are

few and far between, the pricing environment remains highly competitive,

limiting scope for margin expansion. While the company has received an

Expression of Interest (EoI) from three major OEMs regarding its ongoing

diversification drive, we believe any material financial impact is still some time

away. We maintain our Sell rating, with TP of INR22 (15x FY22E EPS).

FY21E

FY20 FY21E

3QE

4QE

36,952 56,578 1,12,062 2,14,861 2,25,500

-40.6

-0.4

121.9

-29.4

5.0

-6,325

579

15,740 -2,329 -595

-82.4

-110.9

-17.1

1.0

14.0

-1.1

-0.3

945

1,000

1,010

5,070 4,100

1,152

1,150

1,180

5,029 4,667

1,048

1,200

1,290

5,806 4,493

-7,374

-371

14,840 -6,621 -4,869

-1,813

-94

3,673

8,109 -1,226

24.6

25.2

24.8

-122.5 25.2

-5,561

-278

11,167 -14,730 -3,643

-117.5

-5,561

-278

11,167 -14,730 -3,643

-117.5

(INR m)

Est

Var.

2QE

Vs Est

50,632 -27.0%

-18.7

-1,342

-150.3

-2.7

1,200

1,250

-2,542

-641

25.2

-1,901

-260.3

-1,901

-260.3

Quarterly Performance

Y/E March

Sales (Net)

Change (%)

EBITDA

Change (%)

As a % Sales

Interest

Depreciation

Other Income

PBT

Tax

Effective Tax Rate (%)

Reported PAT

Change (%)

Adj. PAT

Change (%)

45,317

-23.7

-2,667

-5.9

1,080

1,148

1,455

-3,440

-1,277

37.1

-2,162

FY20

62,257

-8.2

2,669

10.8

4.3

1,187

1,193

1,356

1,645

459

27.9

1,186

-36.0

1,186

-36.0

56,794

-22.6

3,287

50.3

5.8

1,391

1,145

1,512

2,263

675

29.8

1,588

-17.3

1,588

-17.3

50,493 19,909

-51.0

-56.1

-5,617 -10,589

-140.3

-11.1

-53.2

1,412

1,146

1,543

1,185

1,482

955

-7,090 -11,964

8,252

-2,993

-116.4

25.0

-15,341 -8,972

-324.7

-15,341 -8,972

-324.7

Exhibit 1: Revenue decline continues across both segments, with overall decline at 41%

YoY in 2QFY21

Revenue (INR b)

YoY (%)

44 59 53 100 56 67 63 98 56 63 67 101 59 68 73 104 45 62 57 50 20 37

Source: MOFSL, Company

9 November 2020

BHEL

Exhibit 2: Gross margin declines YoY in 2QFY21 due to subdued execution

Gross Margin (%)

Source: MOFSL, Company

Order book at INR1.1t; book to bill at 6.6x in 2QFY21



The order book stood flat YoY at INR1.1t. Segment-wise OB is as follows: Power

– INR869b, Industry – INR130b, and International orders – INR78b.

Exhibit 3: Although OB remains flat YoY, lower execution leads to rise in book to bill at

6.6x

Order book (INR b)

Book to bill (x TTM)

Source: MOFSL, Company

Segmental performance: Revenue hit across segments



Power: 2QFY21

revenue was down 41% YoY to INR24.9b. EBIT loss came in at

INR5b (v/s profit of INR4.3b).

Industry: 2QFY21

revenue was down 47% YoY to INR9.5b. EBIT loss came in at

INR1.6b (v/s profit of INR546m).

9 November 2020

BHEL

Exhibit 4: Segmental revenues and margins

INR m

Revenues

Power

Growth (%)

Industry

Growth (%)

EBIT

Power

Growth (%)

Industry

Growth (%)

EBIT margin (%)

Power

Industry

57,901

46,362

6.9

11,539

(9.2)

5,463

4,878

11.2

585

(27.1)

9.4

10.5

5.1

FY19

66,069

71,157

51,532

55,123

1.7

2.9

14,538

16,035

31.7

40.8

4,953

6,479

4,257

5,921

(36.4)

(23.6)

696

557

3,810.1

37.8

7.5

9.1

8.3

10.7

4.8

3.5

98,365

81,034

(2.5)

17,331

14.0

15,600

13,066

43.7

2,534

343.4

15.9

16.1

14.6

44,103

34,915

(24.7)

9,188

(20.4)

-193

-541

(111.1)

349

(40.3)

-0.4

-1.6

3.8

FY20

60,290

54,578

42,215

40,727

(18.1)

(26.1)

18,075

13,851

24.3

(13.6)

4,883

5,085

4,337

4,326

1.9

(26.9)

546

759

(21.5)

36.1

8.1

9.3

10.3

10.6

3.0

5.5

FY21

45,936

18,966

34,435

31,747

11,194

24,917

(60.8)

(67.9)

(41.0)

14,189

7,772

9,518

(18.1)

(15.4)

(47.3)

-3,791

-8,210

-6,650

-79

-5,680

-5,040

-3,712

-2,530

-1,610

-8.3

-43.3

-19.3

-0.2

-50.7

-20.2

-26.2

-32.5

-16.9

Source: Company, MOFSL

Exhibit 5: Thermal capacity averages around 18GW over

FY12–16, before falling to 4GW in FY20

Thermal capacity addition (GW)

2 2 2

Exhibit 6: Thermal PLF on rapid decline post FY10, indicating

lower order inflows for BHEL

Thermal PLF (%)

0 2

5 4 4

Source: MOFSL

Exhibit 7: Order inflows average at INR550b over FY08–11, while lower thermal PLF leads to significant decline in ordering

thereafter

Order inflow (INR b)

503

356

112

165 182 189

221

597 590 584

437

317

280 308

235

409

239 235

194

270 295

Source: MOFSL, Company

9 November 2020

BHEL

Exhibit 8: Order backlog declines post FY11 on lower order inflows; currently stands at INR1.1t in 1HFY21 from peak of

INR1.6t in FY11

49.7

25.9 26.4

46.3

17.5

54.9

Order backlog (INR b)

37.3

23.3

YoY (%)

35.3

13.9

(18.1)(14.5)(11.8)

(0.6)

9.6

(5.0)

12.2

(7.9)

(0.2) (2.0) 1.2

2.9

Source: MOFSL, Company

Exhibit 9: Revenue CAGR stands at -10% over FY14–20 due to lower order inflow and weak order book

39.0

14.0

1.9

14.6

19.6

Revenue (INR b)

29.0

13.2

35.5

24.8 26.7

YoY (%)

18.6

1.3

5.6

(29.4)

5.0

2.4

13.6

0.9

(19.2)(22.7)(15.7)

11.6

Source: MOFSL, Company

Exhibit 10: Gross margins on the decline again since FY18…

Gross margin (%)

46.6

42.1

42.9

34.9

42.1

40.8

42.4

38.3

42.3

40.0

Exhibit 11: …with lower absorption of fixed costs leading to

decline in FY20 EBITDA margin

17.7

19.6 20.6 19.4

11.6

6.9

EBITDA margin (%)

38.5 38.0 38.0

3.7

6.7 7.0

(1.1)(0.3)

4.5 5.8

34.5

(5.4)

Source: MOFSL, Company

9 November 2020

BHEL

Exhibit 12: Staff costs as % of sales stand at 25%, indicating key challenge for company

Staff cost (INR b)

18%

% of net sales

25%

21%

14%

15%

19%

21%

18%

13%

11%

12%

47.0

54.0

54.7

57.5

59.3

54.5

53.8

53.9

60.7

55.0

54.0

Source: MOFSL, Company

Exhibit 13: Number of employees on steady decline since

FY12…

No. of Employees

6.2

1.3

0.5

-2.0 -1.8

-5.5 -6.0 -5.6 -5.7 -4.8 -5.6

YoY (%)

Exhibit 14: …however, wage inflation leads to rise in per

employee cost from FY15

Per Employee cost (INR m)

14.3

7.4

-4.6

1.0

1.2

1.1

1.2

5.0

-2.8

1.2

1.3

1.4

1.6

1.5

5.0

6.3

YoY (%)

19.3

4.0

-4.8

1.6

10.7

Source: MOFSL, Company

Exhibit 15: Rise in debtors leads to elongated working

capital cycle…

Net working capital days

WC as a % of sales

Exhibit 16: ...with state utilities forming 49% of total debtors

(~INR349b) at the end of 2QFY21

Private Exports, 7%

Customers,

11%

Central PSU

(Railways

and Govt

Departement), 33%

124 150 206 195 175 174 229 360

State

Utilities,

49%

Source: MOFSL, Company

9 November 2020

BHEL

Valuation and view



Weak ordering outlook:

BHEL draws ~75% of its revenue from the Power

segment. The awarding run-rate in power equipment has fallen to 4–5GW

currently from an annual ~15GW. The outlook on awarding remains weak, with

surplus power capacity in India. Note that thermal PLF was at 61% in FY20. Thus,

we expect BHEL to continue operating at low capacity utilization.

Slow-moving receivables:

BHEL’s receivables stand at ~INR349b in 1HFY21 and

their realization remains slow. Of the total receivables, state players account for

48%, the center 33%, private players 12%, and exports for the remaining 7%.

Due to slow-moving receivables and sluggish revenue, working capital as a

percentage of sales was high at 99% in FY20 (from 63% of sales in FY19).

Huge employee base to dent margins:

BHEL has an employee base of ~34k, and

employee cost formed 18%/25% of sales in FY19/FY20. While we appreciate that

the company has been able to bring down the employee base from 46k in FY10,

wage inflation has negated the benefit of the same. Also, declining revenue

implies lower absorption of fixed costs and hence dents margins. Thus, BHEL

posted EBITDA-level loss in FY20, from 16–20% EBITDA margins in the good

years (FY04–13).

Maintain Sell:

We now expect BHEL to report operating-level loss in FY21E.

While orders are few and far between, the pricing environment remains highly

competitive, limiting scope for margin expansion. While the company has

received an Expression of Interest (EoI) from three major OEMs regarding its

ongoing diversification drive, we believe any material financial impact is still

some time away. We maintain our Sell rating, with TP of INR22 (15x FY22E EPS).

Exhibit 17: Earnings change summary

Earnings Change

INR m

Revenue

EBITDA

EBITDA margin

Adj. PAT

FY21E

2,25,500

1,660

0.7%

-2,618

Old

FY22E

2,67,378

12,966

4.8%

5,026

FY23E

2,73,810

16,007

5.8%

7,793

FY21E

2,25,500

-595

-0.3%

-3,643

New

FY22E

2,67,378

12,084

4.5%

5,029

FY23E

2,73,810

16,007

5.8%

7,793

FY21E

Change

FY22E

-7%

-0.3%

FY23E

0.0%

Source: MOFSL, Company

9 November 2020

BHEL

Financials and valuations

Income Statement

Y/E March

Total Revenues

Change (%)

Staff cost

Manufacturing expenses

Other Expenses

EBITDA

Change (%)

Margin (%)

Depreciation

Interest

Other income

PBT

Tax

Rate (%)

Reported PAT

Adjusted PAT

Change (%)

Balance Sheet

Y/E March

Share Capital

Reserves

Net Worth

Loans

Deferred Tax Liability

Capital Employed

Gross Fixed Assets

Less: Depreciation

Net Fixed Assets

Capital WIP

Investments

Curr. Assets

Inventory

Debtors

Cash & Bank Balance

Loans & Advances

Other Assets

Current Liab. & Prov.

Creditors

Other Liabilities

Provisions

Net Current Assets

Application of Funds

2018

2,88,130

1.3

60,673

1,66,360

41,780

19,317

82.0

6.7

7,864

2,546

6,943

15,850

7,784

49.1

8,066

62.7

2018

7,343

3,18,668

3,26,011

572

-36,259

2,90,324

56,344

25,573

30,771

1,945

6,907

5,61,299

62,588

1,75,013

1,11,759

2,279

2,09,661

3,10,598

1,10,659

1,12,880

87,059

2,50,700

2,90,324

2019

3,04,227

5.6

55,016

1,82,582

45,310

21,320

10.4

7.0

4,748

2,873

6,776

20,475

8,389

41.0

12,087

49.8

2019

6,964

3,07,354

3,14,318

25,272

-34,974

3,04,616

59,962

30,292

29,670

2,354

6,694

5,69,705

77,973

1,57,960

75,033

2,403

2,56,336

3,03,807

1,20,781

1,03,539

79,487

2,65,898

3,04,616

2020

2,14,861

-29.4

54,035

1,40,644

22,511

-2,329

-110.9

-1.1

5,029

5,070

5,806

-6,621

8,109

-122.5

-14,730

2020

6,964

2,84,848

2,91,812

50,088

-27,562

3,14,338

63,313

35,172

28,141

3,140

6,695

5,47,176

89,055

1,23,781

64,186

2,182

2,67,974

2,70,815

98,999

88,519

83,297

2,76,362

3,14,338

2021E

2,25,500

5.0

51,333

1,38,683

36,080

-595

-0.3

4,667

4,100

4,493

-4,869

-1,226

25.2

-3,643

2021E

6,964

2,81,205

2,88,169

50,088

-27,562

3,10,694

66,313

39,839

26,474

3,140

6,695

5,58,609

93,464

1,29,910

51,702

2,290

2,81,243

2,84,225

1,03,901

92,903

87,421

2,74,385

3,10,694

2022E

2,67,378

18.6

51,205

1,65,774

38,315

12,084

4.5

4,883

4,100

3,619

6,720

1,692

25.2

5,029

2022E

6,964

2,82,713

2,89,677

50,088

-27,562

3,12,203

69,313

44,721

24,592

3,140

6,695

6,14,784

73,254

1,53,834

51,508

2,715

3,33,473

3,37,008

1,23,196

1,10,156

1,03,656

2,77,776

3,12,203

(INR m)

2023E

2,73,810

2.4

51,077

1,69,762

36,964

16,007

32.5

5.8

5,099

4,100

3,606

10,414

2,621

25.2

7,793

55.0

(INR m)

2023E

6,964

2,85,051

2,92,015

50,088

-27,562

3,14,541

72,313

49,820

22,493

3,140

6,695

6,27,328

75,017

1,57,535

50,501

2,780

3,41,496

3,45,116

1,26,160

1,12,806

1,06,150

2,82,212

3,14,541

9 November 2020

BHEL

Financials and valuations

Ratios

Y/E March

Basic (INR)

Adj EPS

Cash EPS

Book Value

DPS

Payout (incl. Div. Tax.)

Valuation (x)

P/E

Cash P/E

EV/EBITDA

EV/Sales

Price/Book Value

Dividend Yield (%)

Profitability Ratios (%)

RoE

RoCE

RoIC

Turnover Ratios

Debtors (Days)

Inventory (Days)

Creditors (Days)

Asset Turnover (x)

Leverage Ratio

Net Debt/Equity (x)

Cash Flow Statement

Y/E March

PBT before EO Items

Depreciation

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

(Inc)/Dec in FA

Free Cash Flow

(Pur)/Sale of Investments

CF from Investments

(Inc)/Dec in Networth

(Inc)/Dec in Debt

Dividend Paid

CF from Fin. Activity

Inc/Dec of Cash

Add: Beginning Balance

Closing Balance

2018

2.2

4.3

88.8

1.3

72.3

12.7

6.4

-0.4

0.0

0.3

4.7

2.5

3.2

3.4

222

140

8.8

-0.3

2018

15,850

7,864

-431

-32,738

9,906

-2,698

7,207

6,341

3,643

-504

5,833

-6,707

6,841

1,04,918

1,11,759

2019

3.5

4.8

90.3

1.9

65.1

8.1

5.8

2.2

0.2

0.3

6.7

3.8

4.5

4.4

190

145

9.5

-0.2

2019

20,475

4,748

4,207

-75,892

-38,556

-4,146

-42,702

6,389

2,243

-16,454

24,862

7,870

-412

-36,725

1,11,759

75,033

2020

-4.2

-2.8

83.8

1.2

-34.3

-6.6

-10.0

-35.7

0.4

0.3

4.3

-5.0

-1.1

-6.8

210

151

168

6.9

0.0

2020

-6,621

5,029

3,219

-26,195

-28,910

-4,252

-33,162

5,617

1,365

24,767

5,046

16,696

-10,848

75,033

64,186

2021E

-1.0

0.3

82.8

0.0

-26.7

95.1

-160.7

0.4

0.3

0.0

-1.3

-0.2

-1.6

210

151

168

7.6

0.0

2021E

-4,869

4,667

-1,226

-10,506

-9,876

-3,000

-12,876

4,493

1,493

-4,100

-12,483

64,186

51,702

2022E

1.4

2.8

83.2

0.8

70.0

19.4

9.8

7.9

0.4

0.3

3.0

1.7

2.6

2.1

210

100

168

9.6

0.0

2022E

6,720

4,883

1,692

-3,585

6,807

-3,000

3,807

3,619

619

3,520

-7,620

-194

51,702

51,508

2023E

2.2

3.7

83.9

1.3

70.0

12.5

7.5

6.1

0.4

0.3

4.7

2.7

3.5

3.2

210

100

168

10.7

0.0

(INR m)

2023E

10,414

5,099

2,621

-5,443

7,942

-3,000

4,942

3,606

606

5,455

-9,555

-1,007

51,508

50,501

9 November 2020

BHEL

NOTES

9 November 2020

BHEL

Explanation of Investment Rating

Investment Rating

Expected return (over 12-month)

BUY

>=15%

SELL

< - 10%

NEUTRAL

< - 10 % to 15%

UNDER REVIEW

Rating may undergo a change

NOT RATED

We have forward looking estimates for the stock but we refrain from assigning recommendation

*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within

following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.

Disclosures

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the

Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial

products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are

available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a

registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and

National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National

Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance

Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.

Details of associate entities of Motilal Oswal Financial Services Limited are

available on the website at

http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf

MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and

buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other

compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have

any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the

specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even

though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report

MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report

should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific

merchant banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the

website at

https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx

A graph of daily closing prices of securities is available at

www.nseindia.com, www.bseindia.com.

Research Analyst views on Subject Company may vary based on Fundamental

research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated

from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.

Regional Disclosures (outside India)

This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability

or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.

For Hong Kong:

This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong

Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst

Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of

research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity

to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these

securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not

located in Hong Kong & are not conducting Research Analysis in Hong Kong.

For U.S.

Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under

applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers

Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any

brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is

intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as

"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which

this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration

provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange

Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-

dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this

chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.

registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public

appearances and trading securities held by a research analyst account.

For Singapore

In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets

services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and

Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL

in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,

of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the

SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and

inform MOCMSPL.

Specific Disclosures

1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.

2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company

3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months

4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report

5 Research Analyst has not served as director/officer/employee in the subject company

6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months

8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months

9 MOFSL has not received any compensation or other benefits from third party in connection with the research report

10 MOFSL has not engaged in market making activity for the subject company

9 November 2020

BHEL

********************************************************************************************************************************

The associates of MOFSL may have:

- financial interest in the subject company

- actual/beneficial ownership of 1% or more securities in the subject company

- received compensation/other benefits from the subject company in the past 12 months

- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the

specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even

though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.

- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the

company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)

- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.

The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report

Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not

consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from

clients which are not considered in above disclosures.

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the

research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

Terms & Conditions:

This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and

may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent

of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in

nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,

representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The

report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as

customers by virtue of their receiving this report.

Disclaimer:

The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or

distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for

informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing

in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.

The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment

objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this

document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this

document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views

expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade

securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of

the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and

should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make

modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from

time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to

perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a

separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of

information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or

may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,

directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or

entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,

regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in

all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost

revenue or lost profits that may arise from or in connection with the use of the information.

The person accessing this information specifically agrees to exempt MOFSL or any of its

affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such

misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,

expenses that may be suffered by the person

accessing this information due to any errors and delays.

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;

Website

www.motilaloswal.com.CIN

no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,

Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.

Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:

INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company

Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth

Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is

a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.

Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.

Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no

assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance

Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.

* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National

Company Law Tribunal, Mumbai Bench.

9 November 2020