B.P. Rao: On Maintaining The Growth Momentum

Name:  B. PRASADA RAO
Profile: Chairman and Managing Director, BHEL
Age: 57
Why He Won For proving that a public sector company can hold its own in the face of stiff competition from India as well as overseas. And for cutting through bottlenecks to grab new opportunities in a growing economy.


When I took over as the BHEL chairman in 2009, there was a lot of buzz in the market. A lot of orders were coming our way and we were growing fast, allowing our topline to grow from Rs. 10,000 crore five years ago to Rs. 43,000 crore today.

During this time, we have faced tough competition from the Chinese, as well as peers from India who went into joint ventures with foreign players. My biggest challenge was to maintain our growth momentum in this environment.

Any organisation has to gear up to manage this growth. There are many facets to this — managing materials, sales and projects, primarily. Also, in our case, handling projects. Sadly for us, problems in the environment that are outside our control have grown manifold. For instance, while moving to better technology and bigger machines, the hurdles faced in transporting these to the units have also increased. It takes anywhere between three and four months to transport equipment that weighs 200 tonnes. This is a big constraint.

I identified six major focus areas for the company. Accelerated project execution was the big one. The market was large and we needed to execute faster to get more orders. This meant producing equipment, erecting and commissioning projects faster. Our products come from various parts of the country: Boilers from Trichy, turbines from Haridwar, transformers from Bhopal, control systems from Bangalore and ducts from Rudrapur. Each of these facilities has to work like a well-synchronised watch.

We have also grown and developed our supplier and vendor network. We outsource production of components that are not economically viable in the company. Outsourced components are now about 10 percent.

The second focus has been research and development. Till now, we have followed a model of collaboration. We got the technology from abroad, implemented it and later developed and localised the technology. But today the Indian market has opened up and we now have zero custom duties [no country has this]. Now we are rarely able to get technology from abroad and need to step up our R&D efforts.

About 2.5 percent of BHEL’s total sales are allocated for R&D today. In our segment, we are the highest spenders in the country. In the last three years, we have been filing around one patent daily and have around 1,400 patents to our name. But we make sure that this shouldn’t be R&D for the sake of R&D. About 20 percent of the company’s topline comes from R&D efforts of the five years. For instance, we developed the surface coating required for blades in hydro power plants in Himachal Pradesh. Due to high silt in water, blades were getting worn out every year. With this surface coating, the life can be extended by three or four fold. Earlier after every monsoon, we had to change the blades. But now we change every four years.

The third area of focus is diversification. We have diversified into a number of areas but need to intensify that. For instance, in transportation we are looking to increase our engagement with Railways. We are also getting into other emerging areas like solar and nuclear energy, water and transmission and distribution.

Quality is another important area. BHEL products command a premium for superior quality. They often are able to deliver 10 percent more power than competition. Power plants also need power to run, and for that we need efficient equipment. Lesser the coal use per unit of power produced, better it is. For us, the rate is 2.5 percent.

While quality is important, we need to make sure that we give best products at lowest prices. One of our major cost components is specialised steel used to make our products. One of them is electrical steel or CRGO [Cold Rolled Grain-Oriented]. We are big consumers of CRGO. We use this steel to make transformers and generators. So we have initiated talks with SAIL and Vizag Steel to set up plants. It makes sense for them too as they are assured that the production will be bought by us.

People and talent are also a big challenge. We have been adding 4,000 people a year for the last four years.  And the thing about this sector is that people need to be trained for four to five years before they can be deployed. The learning curve is long. One way to manage this is to have seniors in the organisation adopt and mentor young talent groups. We have a formal mentoring programme and have also adopted ITIs (Industrial Training Institutes). ITIs near our manufacturing facilities have a six-month training programme in our plants.

Initiatives in these focus areas are helping. A lot has been said of the competition from Chinese companies. But I can say with confidence that many of our customers, who went to the Chinese, have come back. Ninety percent of the new orders in 2009 came from private companies! At the same time, I have requested Government of India for a level-playing field. I can’t go to China and start selling as they have a 30 percent custom duty. I’m hoping that some steps on this regard [to increase custom duty on imports] will happen.

It has been a satisfying stint until now. It has been hectic too, which means I rarely get to listen to old songs from Hindi and Telugu movies, something that really helps me relax. At home, it helps that my wife also works at BHEL. But we make sure that office work is not discussed at home. My wife does complain that she gets to know more about the company from her colleagues than from me!

(As told to Prince Mathews Thomas)


‘Rao had the perspective needed’
Ashok Puri, Managing Director, Hinduja National Power Corporation, former Chairman and MD of BHEL

I have known Prasada Rao very closely [since the time] he joined the corporate planning department of BHEL in 1999. We have worked closely and Rao was my General Manager, Corporate Planning, when I took over as the CMD.

He led the team that drafted our 10-year strategic plan in 2004. At that time, BHEL had a turnover of about $2 billion. His plan visualised us growing to $10 billion by 2012. Competition has increased a lot in this period, but the company is on course to meeting that target.

A planner drawing such a road map has to co-ordinate with all business units and manufacturing units and understand the company’s future needs. Additional businesses were added and resources made available to make this possible. Rao had the perspective needed to do this.

Early on, it was clear that Rao had exceptional talent. The organisation was able to recognise this and he was promoted from General Manager to Director. Normally at BHEL, a general manager has to work as an executive director for some time before becoming a director. In Rao’s case, we gave him the opportunity to join the board a little earlier.

BHEL is in a technology-driven business. The company requires deft handling of its relationship with global companies. It also needs to keep making judicious investment in R&D. Rao saw this clearly and today the company’s spend on R&D is among the highest in the country.

I worked in the private sector before joining BHEL. Now I am back in the private sector. One key difference that I notice is that despite the government being the largest shareholder, there is no clear ‘owner’ of a public sector company. There are instead a multitude of people from ministers to bureaucrats. You need to respond to them collectively as owners. The big challenge is to harmonise the expectations of these shareholders and manage the business. Rao has the right credentials to do this.