As India's Power Demand Soared, Only BHEL Had Capacity To Deliver
Other players like L&T, too, are returning to the ring amid India’s rising requirement for power demand, but the industry faces challenges after it faced a lull.
India was beginning to forget about new coal-based power plants even as renewables grew sharply in recent years.
But unexpected surges in power demand changed that, and more so for one company.
In May, India’s peak power touched a record 231 gigawatt (GW). While power consumption dipped 4% in May this year, thanks to early monsoons, previous years have seen massive surges in demand for power generation plants, particularly those that can generate firm power.
As it turns out, with these peak demands, only one company in India had the ready capacity to meet the equipment requirement — the state-run capital goods manufacturer Bharat Heavy Electricals Limited (BHEL).
This March, BHEL hit its highest ever order book and annual order inflows.
So much so that this has come as a lease of life for the company.
In a way, one milestone has led to the other. And given the demand for increased power, other players like L&T are also returning to the ring.
BHEL’s Second Lease Of Life
A senior analyst tracking the power sector termed this a second lease of life for BHEL, founded as Bharat Heavy Electricals Limited in 1964.
But this story unfolds in the summer of 2023.
At the end of March 2023, the state-run entity had just Rs 23,548 crore worth of new orders to show as wins for its entire financial year.
While BHEL was struggling with a lack of orders from the thermal power segment, India was in the grip of heat waves and higher demand for electricity as industrial activity saw a rebound.
By the end of 2023’s summer, India’s peak power demand had reached a new high of 243 GW, making it amply clear that thermal power was here to stay, for its most favoured ability to supply stable or firm power during peak hours.
In its commentary for FY23, BHEL had said that a significant milestone for that year included the only EPC (engineering, procurement and construction) thermal power plant tender awarded in the country, a 2x660 megawatt (MW) order from NTPC for Talcher, after a gap of more than three years. It was the start of a turnaround for BHEL’s power sector prospects.
Since then, two companies — state-run NTPC and Gautam Adani-promoted Adani Power — have increased their focus on expanding their thermal power capacities.
In January, NTPC said it has 17.56 GW of total thermal capacity under construction at present. For Adani Power, this number is at 11 GW of thermal power capacity, as per their latest investor presentation.
Analysts pointed out that Adani Power’s capacity equipment additions in the prior decades were largely Chinese, a contractor nationality no longer favoured in the industry for geo-political reasons.
This, in turn, has led to an unusual beneficiary — BHEL, which is noted to have won more than 90% of the plant orders placed in the 800 MW size thermal power unit segment in India.
Agencies rating BHEL’s debt have noted that most project orders currently being implemented in the Indian thermal power industry are contracted to the state-run firm.
In terms of numbers, this has translated to 9.6 GW worth of thermal power orders of a value of Rs 52,000 crore in FY24 alone. For FY25, BHEL in a recent presentation said it has won 14.6 GW of thermal power sector orders — its highest ever in the last decade.
That is also because the first seven years of the last decade were marked by a constant decline in demand for new thermal power capacity.
MS Unnikrishnan, former managing director and CEO for Thermax and at present CEO of IITB-Monash Research Academy, told The Core, “As India embarked upon the introduction of super-critical power units in India, the country depended a lot on Chinese and Korean power equipment manufacturers. As the market expanded geo-metrically, Indian companies like BHEL, L&T, BGR Energy and Thermax created substantial capacity within the country itself and started bidding, winning and executing these super-critical thermal power projects. A certain amount of protection initiatives taken by the Government of India ensured their profitability. Most of the power plant orders were bagged by Indian companies.”
However, he added, this later changed, with increased focus on renewable power and the global banking community shying away from fossil fuel. “As the market was bereft of any orders (thermal) for an extended period of nearly 7-8 years, most of the local equipment manufacturing capacity was idling,” he added.
With funding and preference for coal-based power declining, most of the Indian companies moved to other segments. BHEL remained the only company with the capacity for thermal orders.
“The country realised the need for the recreation of thermal power capacity along with renewable energy generation in order to create grid stability. The current beneficiary is only BHEL, and I hope other Indian manufacturers will get their act together quickly and fulfil the country’s demand,” Unnikrishnan said.
Last Man Standing
“Prior to the spurt in thermal power orders, there was a lull. While other competitors moved to different segments, BHEL was the only entity available with the needed apparatus,” said the senior analyst mentioned earlier in the story.
Reluctance to place orders with Chinese manufacturers and the absence of strong domestic competition have translated into evident gains for BHEL, such as a multi-fold rise in new order wins and order books.
To be sure, competitors like Larsen & Toubro have now returned to the ring, having won two of the three units that NTPC bid out in a bundle in November 2024, estimated at Rs 22,000 crore. BHEL won the third unit in the same bundle.
L&T’s management in previous media calls has noted their return to thermal power plant order bids, after fruitful discussions over earlier stated unfavourable terms and conditions in the bidding process.
Analysts at Antique Stock Broking expect BHEL’s winning streak to continue.
“The thermal order pipeline continues to remain interesting and BHEL is favorably placed to win future orders given limited competition with a majority of the competitors now having moved out of the sector,” they noted in a report released in May.
The Recoup
Even as other competitors re-focus on thermal power orders, BHEL has had enough time to recoup its books. As of March 2025, BHEL had orders under execution, also called the orderbook, worth Rs 1.96 trillion.
More than 45% of this was received as new orders in the financial year ending March 2025 alone, most of it from the power sector. This April, BHEL announced, “With double-digit revenue growth, a record order book, and a healthy execution pipeline, BHEL enters FY 2025–26 with strong momentum.”
“I believe they are running very close to capacity,” said the analyst quoted earlier. A second senior executive from the industry also noted similar concerns on available capacities.
BHEL’s capacity utilisation data is not publicly available, and an email query sent to the company last week remained unanswered. The Core will update this story if it receives a response.
A Crumbled Eco-System
Meanwhile, India plans to add 80 GW of coal-based power capacity by 2031-32. Industry watchers caution that capital goods capacity needs to be made available to cater to this demand, as the ecosystem took a bit of a beating when there was a lull.
“The challenge is whether the industry would be able to keep up with the demand. India has in the past added 20 GW per year, but back then, Chinese manufacturers were catering to this demand as well,” said Sabyasachi Majumdar, senior director at CareEdge Ratings.
Vendors who catered to the industry earlier either shut down or moved on to other businesses. This is a challenge that the industry faces.
“The biggest blow had been to the huge manufacturing /fabricating eco-system created by the main equipment manufacturers for coal-handling, ash handling, power plant accessories, etc,” Unnikrishnan said.
