Truly defensive

Mumbai : In a scenario where investors prefer to stay away from high debt and interest rate-sensitive companies, Bharat Electronics Ltd (BEL) emerges as a good defensive bet. Apart from its cash-rich position, the raw material intensity of its business is also lower. Further, while BEL has a dominant status in the defence sector, its revenue visibility is the highest (order book to sales is four times) in the capital goods sector, with low execution risk.

Cash constitutes about 50 per cent each of the company’s total assets and market capitalisation. While this has impacted the return profile (return on capital employed of around 23 per cent was down 200 basis points in FY11 compared to FY10), it came to the rescue of the company in the past one year, which witnessed significant rise in interest costs by other infrastructure players.