Letter to Shareholders
It is an honour and a privilege to present the 52nd Annual Report of yourcompany. I am extremely humbled as I write my first letter to our valued shareholdersafter assuming office on January 1 2016. This has been a very challenging year for yourcompany. The volatility in economic and business environment is bound to change the way weoperate and create wealth for our shareholders. Holding on to our strengths and buildingnew ones our team of 42000 employees is resolutely focused on achieving immediate targetof regaining growth.
The Year That Was
Today your company is in the midst of the toughest times it has faced since itsinception. The uncertain global economic order caused by weak global recovery slowingglobal trade and Chinas growth transition is the new normal. Thedesired pace of growth continues to elude the domestic industrial sector as it facescontinued pressure from subdued capex and capacity underutilization. Power generationequipment industry in particular has been facing a tough time for the last
Holding on to our strengths and building new ones our team of 42000 employees isresolutely focused on achieving immediate target of regaining growth... few yearsaccentuated by the ongoing energy transition. In addition to this geopoliticaldisturbances in the target export markets and fluctuating energy prices have dampened theinternational business. The overall subdued business environment due to thesefactors and the current business mix affected the financial performance of thecompany with the company registering a turnover of Rs 26587 Crore and a net loss of
Rs 913 Crore during the year.
But the real strength of an organization lies in discovering the opportunities in itschallenges.This is what we believe in and despite the hurdles we have achieved someoutstanding benchmarks in the year 2015-16 which reflect your companys strongfundamentals:
An unprecedented feat in the execution of projects was achieved bycommissioning/synchronizing an all-time high 15059 MW of power generation equipment. Thisincludes commissioning of six supercritical sets which constitutes 55% of thesupercritical sets commissioned in the country during the year.
Like in 2014-15 all the hydroelectric power projects that went on stream in thecountry totalling 810 MW were commissioned by BHEL.
Your company booked orders worth Rs 43727 Crore - the highest in the last five yearswith 42% growth over 2014-15. With this the company has orders worth Rs 110730 Croresfor execution in 2016-17 and beyond.
Your company secured three major orders of 765kV substations under stiff internationalcompetitive bidding for the National Green Energy Corridor project.
500 MW Kosti TPS - Sudan's largest thermal power plant and two 220 kV substations inAfghanistan were successfully commissioned by BHEL.
unprecedented feat in the execution of projects was achieved bycommissioning/synchronizing an all-time high 15059 MW
We are proud of our achievements but are fully aware of the looming challenges. Thecompany is addressing them with its persistent efforts and capitalizing on the newopportunities. As an organization we cannot influence most of the external factors butcan definitely change what is going on within us. It is time for your company to embracethe new and adapt to the market realities.
Creating BHEL of Tomorrow
In our journey of creating BHEL of tomorrow it is our passionate endeavour totransform BHEL into an organization which is "Responsive Robust and Rising"to the needs of its stakeholders. This involves orienting our strategy towards enhancingresponsiveness by delayering and being simple; building new sources of strength for arobust future and diversification to attain a balanced portfolio for creating a risingorganization. Your companys efforts are concentrated towards this drive and I firmlybelieve that this will be the bedrock of our growth in the coming years.
Responsive BHEL to create a more agile organization we are focusing on ExecutionConsolidation and Simplification
What we choose to embrace to be responsive of is a reflection of our intent. With aview to create a more agile organization we are focusing on Execution Consolidationand Simplification (ECS) as the first step. In this process we are identifying theweak links and putting in place an organization structure that is more productive and thatenables us to achieve higher operational efficiency. At the same time we are reviewingour systems and processes to get rid of the cumbersome legacies and move towardssimplification by eliminating waste and low value added activities. Accelerated executionis one of the most important facets for us to be responsive to customers needs. Ourcontinual efforts in this direction have resulted in commissioning /synchronization ofmore than 10000 MW of power projects for the fourth consecutive year with this yearcrossing an all-time high mark of 15000 MW. This includes the highest-ever powergeneration capacity addition of 13061 MW to the Indian utility segment - 23% higher thanthe target of Ministry of Power Government of India and a quantum jump of 59% over theprevious year.
Your company is looking forward to build new strengths on the rock-solid foundationwhich we have built in our journey of over half of a century. We derive this strength fromour deep-rooted focus on research & development. Standing true to the spirit ofinnovation-led growth strategy the company has maintained R&D expenditure at plus2.5% of the turnover for more than five years in a row. The company has strengthened itsfocus on indigenization of supercritical technology to enhance its competitiveness. Recentin-house developments include 765 kV & 1200 kV UHVAC transformer & reactor IGBTpropulsion technology for locomotives and ACEMU STATCOM for industrial & gridapplications Phase Shifting Transformer and 500 kW PCU for solar PV generation. BHEL alsomade its foray into 400 kV GIS by securing the first commercial order.
Derive this strength from our deep-rooted focus on research &development
organization structure to embrace IT as a strategic tool
As digital tools and technologies are profoundly differentiating the way business isbeing conducted your company has put in place an organization structure to embrace IT asa strategic tool for opening up new stream of opportunities in new as well as traditionalbusiness areas.
Most importantly to fulfil this target of a robust organization we have unhinderedfocus on the people development strategy which is today driven by the growing aspirationsof the millennial generation of the company. We are embracing social technologies forincreasing employee engagement and working towards development of employee competencies inline with the business plans through implementation of various learning & developmentinitiatives.
What will define us in the new phase of our journey is how well we rise to theimpending challenges. Our goal is to create an organization which will convert problemsinto possibilities and leverage on the new opportunities emerging from Make inIndia. Thus our absolute focus is on creating a balanced portfolio with focus onindustry business. Towards this we are taking various steps. To harness the opportunitiesemerging from Governments focus on renewables BHEL is in the process of augmentingits manufacturing capacity and enhancing EPC capability for large scale PV based plants.Company is also working towards expansion of its defence portfolio which currentlyincludes Super Rapid Gun Mount & Integrated Platform Management System for navalships thermo pressed components compact heat exchanger for Tejas turret castings forT72 tanks and other strategic equipment. We continue to strengthen our transmissionportfolio. Considerable progress has been achieved in the execution of the worldslargest 800kV 6000MW HVDC NE-Agra project with commissioning of Pole-1 andestablishment of power flow in both directions.
Goal is to create an organization which will convert problems into possibilities andleverage on the new opportunities emerging from Make in India
With focus on the industry company is equally pivoted to maintain its leadership inthe power sector. In order to ensure energy security coal will continue to remain thedominant fuel for power generation in the foreseeable future in view of its abundantdomestic reserves and affordability. Towards this we have focussed on enlarging scope ofoffer and enhancing competitiveness by adding flue-gas desulfurization system air-cooledcondenser water management system and are in the process of expanding offerings forenvironmental solutions.
Partners in Our Journey
These are challenging times but I am sure that our best years lie ahead. BHEL has the strategystructure and staff to ensure that in both good times and tough we makesteady progress. We will not leave any stone unturned in our quest to unlock the potentialand take your company to greater heights. We will continue to put unwavering emphasis oncreating customer value and bolster our inherent strengths to enhance shareholder value.
BHEL has the strategy structure and staff to ensure that in both goodand tough times we make steady progress
Finally I would like to express my sincere gratitude to all our stakeholders: businesspartners including customers and vendors for reposing their faith in us employees fortheir persistent commitment members of the Board for their wisdom members of theManagement Committee for efficiently channelizing the companys resources and youour shareholders for evincing trust in our ability to steer forward BHEL in thesechallenging times. Various ministries of Government of India particularly the Departmentof Heavy Industry have been providing valuable guidance and support in our efforts. I amconfident that we will continue to receive your support in the future.
I see a challenging yet exciting journey ahead for us -one of new beginnings newopportunities and new horizons.
|With best wishes || |
| ||Atul Sobti |
|New Delhi ||Chairman & Managing Director |
|August 10 2016 || |