State-owned engineering giant Bharat Heavy Electricals Ltd (BHEL) has announced a strategic collaboration with Nuovo Pignone International s.r.l., a subsidiary of Baker Hughes based in Italy. The two firms have entered into a Memorandum of Understanding (MoU), signed on April 9, 2025, that aims to capture the growing opportunity in compressor revamp projects across India’s fertiliser sector.

Details of the 10-Year MoU

The MoU will be in effect for 10 years, unless both parties agree to an extension. Under this partnership:

• BHEL will be the lead bidder for various compressor train revamp projects in India.

• Nuovo Pignone will act as the nominated vendor, undertaking a defined scope of work.

• Importantly, no equity is being exchanged, and the agreement does not create a joint venture. It remains a collaborative strategic tie-up.

Focus on Fertiliser Sector Revamp

This collaboration is significant for India’s fertiliser sector, which requires modernisation of ageing infrastructure. Compressor revamp projects are crucial for enhancing efficiency and reducing emissions in fertiliser manufacturing.

Through this tie-up, BHEL expects to tap into a lucrative segment of the revamp market. The company estimates that the partnership could help secure around 50% of the total financial share in such projects, strengthening its position in the repair and maintenance ecosystem.

No Capital Outlay, Only Strategic Value

There has been no upfront consideration or capital investment as part of this deal. The focus is purely on technical collaboration and execution capabilities. By leveraging Nuovo Pignone’s technical prowess and BHEL’s local footprint, both entities aim to make compressor upgrades seamless and timely.

BHEL’s Financial Snapshot: Q3 Performance

Alongside the MoU announcement, BHEL also reported strong financial performance for the third quarter, marking progress across its business verticals.

Profit and Revenue Performance

• Net profit surged 170% YoY to ₹124 crore, although fell short of analyst expectations pegged at ₹175 crore.

• Revenue jumped by 32% YoY to ₹7,277 crore, exceeding street estimates and signalling robust order execution.

EBITDA and Margin Trends

• EBITDA grew 40% to ₹304 crore.

• EBITDA margins rose modestly by 30 basis points to 4.2% from 3.9% a year ago.

• The margin gains were partially offset by a sharp increase in other expenses, reflecting rising input and operational costs.

Massive Growth in Order Book and Segmental Revenue

Order Inflow and Backlog

• Order inflow rose by an impressive 167% YoY to ₹6,860 crore, indicating strong business momentum.

• BHEL’s order book grew 47% YoY, now standing tall at ₹1.6 lakh crore.

These numbers show positive sentiment and growing demand for BHEL’s engineering and EPC services across sectors.

Segment-Wise Performance

Power Segment

• Revenue from the power division jumped 32% YoY to ₹5,588 crore.

• This continues to be BHEL’s core business, bolstered by recent project completions and maintenance orders.

Industrial Segment

• The industrial segment clocked a 33% rise in revenue to ₹1,688.6 crore.

• Growth came from refinery, transportation, defence, and process industries, aided by newer EPC wins.

Margins Across Segments

• Margins improved across both segments, showcasing operational efficiency and better project execution discipline.

Stock Performance and Market Outlook

BHEL shares ended the day marginally higher at ₹211.80, up by ₹0.85 or 0.40% on the Bombay Stock Exchange (BSE). While the share price movement was muted, analysts are cautiously optimistic due to the strong fundamentals and growing order book.

What Analysts Are Saying

Market experts believe this MoU could act as a catalyst for long-term growth by giving BHEL recurring business in the fertiliser sector, which has often remained underpenetrated by Indian PSUs. Moreover, the high-value order inflow in Q3 signals a favourable capex cycle in infrastructure and power.

Conclusion

The strategic MoU between BHEL and Nuovo Pignone marks an important milestone in India’s industrial equipment revamp journey, especially in critical sectors like fertilisers. It reflects a shift in BHEL’s strategy from just EPC contracts to value-added services and modernisation.

Simultaneously, the company’s solid financial performance in Q3 reinforces its capability to deliver on large-scale, complex engineering assignments across power and industrial verticals. With a ₹1.6 lakh crore order book, the PSU is well-placed to capitalise on India’s infrastructure push and contribute to the country’s energy and manufacturing self-reliance goals.

The Upcoming IPOs in this week and coming weeks are Aten Papers & Foam.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.