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Bharat Heavy Electricals Ltd.

BSE: 500103 Sector: Engineering
NSE: BHEL ISIN Code: INE257A01026
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VOLUME 555058
52-Week high 175.00
52-Week low 90.40
P/E
Mkt Cap.(Rs cr) 31084.52
Buy Price 127.00
Buy Qty 6677.00
Sell Price 0.00
Sell Qty 0.00
OPEN 128.00
CLOSE 128.80
VOLUME 555058
52-Week high 175.00
52-Week low 90.40
P/E
Mkt Cap.(Rs cr) 31084.52
Buy Price 127.00
Buy Qty 6677.00
Sell Price 0.00
Sell Qty 0.00

Bharat Heavy Electricals Ltd. (BHEL) - Director Report

Company director report

To the Members

The Directors are pleased to present the 52nd Annual Report on the businessand operations of the company and the audited financial statements for the year endedMarch 31 2016.

During the year the company created new benchmark in project execution with thecommissioning/ synchronization of all-time high of 15059 MW of power plants in a singleyear up by 26% from the previous year. This includes an all-time high power generationcapacity addition of 13061 MW to the Indian utility segment 59% more than the last year.

The company secured orders worth Rs 43727 Crore – the highest in the last fiveyears. The company was able to increase its market share in Power sector from five-yearaverage of 66% to 74%. BHEL recorded Turnover of Rs 26587 Crore during the year despiteunfavourable business environment.

Financial Performance

Financial Year
Figures (in Rs Crore except per share data) 2015-16 2014-15
a) Turnover (Gross) 26587 30947
b) Excise Duty and (1449) (1405)
Service Tax
c) Revenue from 25138 29542
Operations (Net)
d) Other Operational 492 700
Income
e) Total Revenue 25630 30242
f) Operating Expenses (27594) (28153)
g) Operating Profit/ (1964) 2089
(Loss)
h) Other Income 1450 1220
i) Profit/ (Loss) before (514) 3309
Depreciation Finance cost & Direct Tax
j) Depreciation (936) (1077)
k) Finance Cost (27) (92)
l) Profit/ (Loss) before tax (1477) 2140
m) Direct Tax including 564 (721)
Deferred Tax
n) Profit/ (Loss) after (913) 1419
Tax
o) Balance brought forward from the previous year 1209 1171
p) Depreciation - (40)
Adjustment
q) Profit available for appropriation 296 2550
r) Appropriation
i) Dividend (including interim dividend ) (98) (284)
ii) Corporate (20) (57)
Dividend tax (incl. on interim dividend)
iii) Amount transferred to General Reserve - (1000)
s) Balance in Statement of Profit and Loss 178 1209
t) NAV per share (Rs) 135.04 139.26

Figures in bracket denote expenses loss or appropriation.

Performance of BHEL for the year 2014-15 has been rated as "Good" in terms ofMoU signed with the Govt. of India.

Dividend

The Board has recommended a final dividend of 20 % (Rs 0.40 per share) on share capitalof Rs 489.52 Crore for the year 2015-16. The total payout on account of dividend (Rs 97.90Crore) along with Corporate Dividend Tax (Rs 19.93 Crore) amounts to Rs 117.83 Crore.

Orders Received

Despite operating in a subdued business environment the company secured orders worthRs 43727 Crore during the year the highest in the last five years and 42% growth over2014-15. Sector-wise orders booked are as follows:

Rs in Crore

2015-16 2014-15
Power Sector 38529 24873
Industry Sector 5125 5221
International
Operations 73 720
Total Orders
Booked 43727 30814
Order Book outstanding at the end of the year 110730* 101000

*Orders worth Rs 7429 Crore have been excluded during the year from the orderoutstanding which are not likely to commence and this has no impact on revenue.

Events Occurring after the Balance Sheet Date

There were no significant events occurring after the Balance Sheet date.

Directors’ Responsibility Statement

Pursuant to Section 134(5) of the Companies Act 2013 it is hereby confirmed that: (i)In the preparation of the annual accounts for the financial year ended March 31 2016 theapplicable accounting standards have been followed and proper explanation relating tomaterial departures has been provided;

(ii) The Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit and loss of the company for that period; (iii) The Directors have taken properand sufficient care for the maintenance of adequate accounting records in accordance withthe provisions of this Act for safeguarding the assets of the company and for preventingand detecting fraud and other irregularities; (iv) The Directors have prepared the annualaccounts on a going concern basis; (v) The Directors have laid down internal financialcontrols to be followed by the company and that such internal financial controls areadequate and were operating effectively; (vi) The Directors have devised proper systems toensure compliance with the provisions of all applicable laws and that such systems areadequate and operating effectively.

Management Discussion and Analysis

Indian economy is experiencing a turnaround with economic growth projected at 7.6 percent in 2016-17 in an environment of slow global economic recovery. Performance of thecompany during the year was affected by subdued business environment. During the year anunprecedented feat in the execution of projects was achieved by your company bycommissioning/synchronizing an all-time high 15059 MW of power generation equipment. BHELbooked orders worth Rs 43727 Crore - highest in the last five years from its PowerSector Industry Sector and International Operations. Long term growth strategy of BHEL isto maintain leadership in existing businesses and expand industry business by harnessingopportunities emerging from ‘Make in India’ in the areas of Solar powertransmission transportation defence and water.

Company has mitigation strategies in place to address risks emanating from prevailingeconomic uncertainties and volatility in business environment. Further a strong resolvehas been made towards transformation of BHEL into an organization which is"Responsive Robust and Rising" to needs of the customers employees andshareholders. Focus on Execution Consolidation and Simplification (ECS) is one of thefirst steps to initiate this transformation process. Further details are given in Annexure-I.

Board of Directors

D etails of changes in Directors & Key

Managerial Personnel Appointment

Shri Amitabh Mathur was appointed as Additional Director w.e.f. 01.09.2015 to takecharge of the office of Director (IS&P). He was subsequently appointed as Director inthe 51st Annual General Meeting of the Company.

Shri Subrata Biswas was appointed as Additional Director w.e.f. 24.09.2015 to takecharge of the office of Director (ER&D).

S/Shri Rajesh Kishore Keshav N. Desiraju and R. Swaminathan have been appointed asPart-time Non-official Directors w.e.f. 18.12.2015.

Shri Atul Sobti the then Director (Power) BHEL pursuant to DHI Order dated01.09.2015 was appointed as Chairman & Managing Director BHEL w.e.f. 01.01.2016.

Shri T. Chockalingam was appointed as Additional Director w.e.f. 11.02.2016 to takecharge of the office of Director (Finance).

Dr. Subhash Chandra Pandey Additional Secretary & Financial Adviser Department ofIndustrial Policy and Promotion Ministry of Commerce & Industry has been appointed asPart-time Official Director w.e.f. 31.03.2016.

Shri Akhil Joshi was appointed as Additional Director w.e.f. 10.08.2016 to take chargeof the office of Director (Power).

In accordance with Section 161 of the Companies Act 2013 and Article 67(iv) of theArticles of Association of the Company S/ Shri Subrata Biswas Rajesh Kishore Keshav N.Desiraju R. Swaminathan T. Chockalingam

Dr. Subhash Chandra Pandey and Akhil Joshi being appointed as additional directorsshall hold directorship upto the 52nd Annual General Meeting of the company andare eligible for appointment as Directors at the Meeting.

Cessation

Shri W.V.K. Krishna Shankar who was appointed as Director (IS&P) w.e.f. 01.08.2013ceased to be a Director of the company on attaining the age of superannuation on31.08.2015.

Shri B. Prasada Rao who was appointed as Chairman and Managing Director w.e.f.01.10.2009 ceased to be Chairman and Managing Director w.e.f. 31.12.2015 on completion ofhis tenure.

Shri S.K. Bahri former Additional Secretary & Financial Adviser Department ofIndustrial Policy and Promotion Ministry of Commerce & Industry pursuant to Orderdated 26.02.2016 of the Department of Industrial Policy & Promotion Ministry ofCommerce & Industry regarding his repatriation to parent cadre relinquished hischarge of the post of Part-time Official Director on the Board of BHEL w.e.f. 29.02.2016.The Board of Directors place on record their deep appreciation of the valuable servicesrendered as well as advice and guidance provided by S/ Shri W.V.K. Krishna Shankar B.Prasada Rao and S.K. Bahri during their tenure.

Further pursuant to Section 152 of the Companies Act 2013 and Article 67(i) of theArticles of Association of the Company S/Shri D. Bandyopadhyay and Amitabh Mathur willretire by rotation at the Annual General Meeting and being eligible offer themselves forreappointment.

In compliance with Regulation 36(3) of the SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015 brief resume of the Directors proposed for appointmentand re-appointment alongwith the nature of their expertise in specific functional areasand names of companies in which the person also holds directorship alongwith themembership of the committees of the Board are given in the explanatory statement/ annexureto the Notice.

No Director has given resignation during the year.

Audit committee details

Details of Board Level Audit Committee are given at Point 6.3 of the CorporateGovernance Report. Further there has been no instance where the Board of Directors havenot accepted recommendation of the Audit Committee.

CEO/CFO Certificate

CEO/CFO certificate (as per Regulation 17(8) of Listing Regulations) is placed at Annexure-II.

Sustainable Development

BHEL believes in doing business in a sustainable manner. To promote inclusive growththe thrust on CSR initiatives continued which resulted in creating social infrastructurefor the benefit of community. During 2015-16 an amount of Rs 66.20 Crore was spent on CSRinitiatives by BHEL. The details of sustainability initiatives has been provided in Annexure-III.

Business Responsibility Report

In line with the requirement of the listing regulations Business Responsibility Reportdescribing the initiatives taken by the company from environmental social and governanceperspectives as per the suggested format is enclosed at Annexure -IV.

R & D and Technological Achievements

BHEL’s R&D strategy structure and infrastructure are aligned to meet thechallenges of present & future business environment. The R&D expenditure of thecompany for 2015-16 is Rs 893.07 Crore which is 3.36% of the turnover. This includes theexpenditure incurred on R&D efforts made at manufacturing units for majormodifications/ improvements in products/ designs against customer requirements which arenot covered in Corporate R&D projects. The company filed 477 patent and copyrightapplications during the year 2015-16 enhancing the company’s intellectual propertyin terms of number of such rights to 3441. Further details have been provided in Annexure-V.

Official Language Implementation

Continuous efforts were made for propagation and effective implementation of Rajbhashain the company. Inspection of 12 Units/Divisions was done to monitor and review theprogress in this area. Committee of Parliament on Official Language appreciated theefforts being made in the area of Official Language implementation during the inspectionof HERP-Varanasi on 18th September 2015 and HPBP Trichy on 25th January2016.

Hindi Diwas Samaroh organised at BHEL on 14th September 2015

More than 950 non-Hindi speaking employees were imparted training under the Hinditeaching scheme of Govt. of India. Training for using Hindi in Unicode on computers wasalso imparted to more than 5000 employees of all the Units/Divisions. 75 Hindi workshopscovering more than 1700 employees were organised to motivate employees to work in Hindi.In addition a five-day translation training programme was conducted with the help ofCentral Translation Bureau Rajbhasha Vibhag Ministry of Home Affairs Govt. of India.Under Inter Unit Rajbhasha Shield Scheme 11 Units were given award for excellentRajbhasha implementation. In addition 323 employees were given cash award for doing theiroriginal work in Hindi. Thirteen Hindi magazines are being published all over the company.A handbook "Rajbhasha Sandarshika" has been prepared as helping material fordoing work in Hindi and was distributed to all the Units/Divisions.

Vigilance

The vigilance department of BHEL is headed by a Chief Vigilance Officer (CVO) appointedby Department of Heavy Industry (DHI) Ministry of Heavy Industries & PublicEnterprises Govt. of India. Major manufacturing units / power sector regions of BHEL havevigilance set ups headed by senior vigilance executives reporting to the CVO.

BHEL is laying more focus on preventive vigilance to tackle corruption. The approach topreventive vigilance includes a combination of review of rules & policies particularlyconcerning procurement and recruitment awareness measures and targeting specificfunctional areas/ issues by engaging stakeholders in order to minimize scope forcorruption. Some of the preventive measures initiated in recent times are as under:

Review and update of the policies / manuals in order to align them with the extantGovt. policies / guidelines to bring clarity in the provisions to avoid scope fordifferent interpretations

Expansion of vendor base to ensure competitiveness

Demarcation of BHEL land and digitization of land records

Introduction of audit trail in computerized systems for tracking changes

Installation of CCTVs to check material movements and improve security environment inunit premises

Issue of Fraud Prevention Policy and Complaint

Handling Policy of the company

Introduction of on-line complaint system to bring more transparency A detailedCorruption Mitigation Action Plan in respect of potential areas of corruption in BHEL hasbeen prepared and it has been taken up for implementation by all units / regions.Potential areas of corruption have been identified and in each case detailed strategyhas been identified in respect of causes of corruption proposed action plan to mitigatethe same and measurable targets and persons responsible for implementation in therespective units.

Vigilance department is publishing a quarterly e-Newsletter ‘DISHA’with a view to create awareness about relevant policies rules and procedures etc. todisseminate the instructions/ guidelines issued by CVC & Govt. of India from time totime and to share best practices and case studies.

CMD CVO & GM (Vig.) at Training-cum-Workshop organized for vigilance officers

The Vigilance Awareness Week was observed from 26-31 October 2015 in corporateoffice manufacturing units power sector regions and project sites of BHEL with thePledge of Integrity undertaken by the employees. During the week a documentary film onBHEL "Chalo Sath Chalein- Ek Anubhav BHEL ka" was made by BHEL andtelecast by Doordarshan in October 2015. Besides showcasing the good governancetransparency and best practices adopted by BHEL the film highlights how thecollective approach of BHEL’s management and vigilance has brought benefits to thecompany. Routine / surprise inspections were carried out by units / Corporate Vigilanceand the learnings were shared with the senior executives of management. In additioncirculars were issued by Corporate Vigilance for systemic improvements in critical areas.

Since BHEL has adopted Integrity Pact structured meetings are held with theIndependent External Monitors (IEMs) every quarter wherein the procurement related issuesand complaints thereupon are discussed. The Integrity Pact has been made mandatory for allpurchase orders / contracts of value more than Rs 5 Crore.

Safety & Security

At BHEL we believe that human life is priceless loss of which can neither be made upfor by monetary compensations nor can its dedication and expertise be substituted. Thisvery premise forms the core of occupational safety programmes in BHEL and inspires us tomake the workplace safer for the employees of BHEL as well as for our business associates.BHEL’s major manufacturing units are OHSAS 18001 certified having strong HealthSafety & Environment (HSE) management systems in place. This has resulted inimprovement of company’s safety performance. At project sites compared to the year2014 there was approximately 27% reduction in incidences of fatalities and nearly 29%reduction in the man-days lost due to various types of accidents.

Dedicated Safety and Occupational Health Centres are being run in the factory premisescatering to safety and health issues of employees at the work place. Some of theinitiatives taken in our units to build and maintain safety and health culture at workplace during 2015-16 included:

Sponsoring BHEL officials for one year advanced diploma course in Industrial Safetyconducted by Central / Regional Labour institute at Mumbai

Kanpur Kolkata Chennai and Faridabad

Sharing of good practices through in-house magazines and hand books on various safetyrelated topics

Creating awareness about safety through display of posters safety instructionsstandard operating procedures and periodic awareness compaigns

Conducting health & safety related training sessions for regular employeescontract workers & trade apprentices

Creating awareness about hazardous chemicals through making available the MaterialSafety Data Sheet (MSDS) and Standard Operating Procedure

Conducting special programme on health awareness for women employees

Creating awareness about road safety amongst the truck drivers associated withtransportation of our products

Conducting as well as getting 3rd party external audit for Safety.

The company’s security mechanism is sufficient and geared up to provide securityto each plant/ unit. Whereas the security of most of the plants of the company is beingmanaged by the CISF in some places the company has its own security/ private agenciessponsored by Directorate General Resettlement Govt. of India or Ex - Servicemencorporations.

Security audit of major plants is being done by the Intelligence Bureau periodicallyand the additional requirements wherever pointed out by them are immediately compliedwith by the concerned units. Review of security is done internally also from time to time.Adequate measures have been taken by installation of CCTV’s and Standard OperatingProcedure (SOP) in many plants and offices to mitigate any security threats. Themanagement security staff and the employees of the company are sensitized to the securityneeds of the company.

Data and Cyber Security

An organizational Crisis Management Group (CMG) has been set up in BHEL for counteringcyber-attacks and cyber terrorism in pursuance of priorities and directives from Ministryof Heavy Industries and Public Enterprises Govt. of India. Crisis Management Plan (CMP)for BHEL is also in place. All database administrators across various locations of thecompany are notified.

BHEL has created a team of 65 information security professionals through training andcertification courses meeting one of the key objectives of national cyber security policyof Govt. of India to protect Indian cyber space.

All units regions and divisions of BHEL have been certified for ISO/IEC 27001:2013 forInformation Security Management System (ISMS).

Corporate Governance

As per the requirements of the Listing Regulations a detailed report on CorporateGovernance (including Board/Committee meeting details) together with the following isgiven at Annexure – VI.

(i) Auditors certificate on Corporate Governance under Listing Regulations & DPEguidelines on Corporate Governance. (ii) Secretarial Audit Report u/s 204(1) of theCompanies Act 2013 and management reply thereon.

(iii) Extracts of Annual Return pursuant to section 92(3) of the Companies Act 2013read with rule 12(1) of the Companies (Management and Administration) Rules 2014Declaration under section 149(6) of the Companies Act 2013 pertaining to criteria ofindependence has been given by the Independent Directors to the Board of Directors.

Loans and Investments

Details of loans and investments covered under the provisions of Section 186 of theCompanies Act 2013 forms part of financial statement attached as a separate section inthe Annual report FY 2015-16. Loan of Rs 3 Crore towards working capital was given during2015-16 to M/s BHEL EML BHEL’s subsidiary company.

Other Disclosures

Information in accordance with the provisions of Section 134(3)(m) of the CompaniesAct 2013 read with Companies (Accounts) Rules 2014 regarding conservation of energytechnology absorption and foreign exchange earnings and outgoings is given at

Annexure-VII.

As per provisions of section 197 of the Companies Act 2013 read with the Rule 5 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 every listedcompany is required to disclose the details of the remuneration of the Directors etc. inthe Directors’ Report. However as per Notification No. GSR 463(E) dated 5thJune 2015 issued by the Ministry of Corporate Affairs Government Companies are exemptedfrom complying with provisions of section 197 of the Companies Act 2013. BHEL being agovernment company such particulars are not included as part of Directors’ Report.

Statement pursuant to Section 129 of the Companies Act 2013 (Form AOC-1) relating tosubsidiary companies & joint ventures and Form AOC-2 pursuant to section 134(3)(h) ofthe Companies Act read with Rule 8(2) of the Companies (Accounts) Rules 2014 are given atAnnexure-VIII.

Links to Company Websites :

1. F amiliarisation Programme of Independent Directors Weblink :http://www.bhel.com/investor_relations/investor. php

2. P olicy Determining Material Subsidiaries Policy Dealing with Related PartyTransactions Weblink : http://www.bhel.com/pdf/Policy_with_regard_to_Related_Party_Transactions.pdf

Auditors

The auditors of BHEL are appointed by the Comptroller and Auditor General of India. Thenames of auditors appointed for the year 2015-16 are printed separately in the AnnualReport. The detail of cost auditors appointed for the year 2015-16 and cost audit detailsare printed separately in the Annual Report.

The Auditors’ Report and Comments of the Comptroller and Auditor General of Indiaare given at

Annexure- IX.

Acknowledgements

The Board places on record its sincere appreciation towards the company’s valuedcustomers in India and abroad and esteemed shareholders for the support and confidencereposed by them in the management of the company and look forward to the continuance ofthis mutually supportive relationship in future. The Board also gratefully acknowledgesthe support and guidance received from various ministries of the Govt. of Indiaparticularly the Department of and Heavy Industry in the company’s operations anddevelopmental plans. The Directors also express their gratitude to the Comptroller andAuditor General of India Chairman and Members of Audit Board Statutory Auditors BranchAuditors Secretarial Auditor and Cost Auditors. The company also wishes to place onrecord its appreciation for the continued co-operation received from all the technologycollaborators and suppliers and for the support provided by the financial institutions andbankers. Last but not the least the Board wishes to place on record its deep gratitude toall BHELites whose enthusiasm team effort devotion and sense of belongingness have madethis great company proud.

For and on behalf of the Board of Directors of
BHARAT HEAVY ELECTRICALS LTD.
Atul Sobti
Chairman & Managing Director
Place : New Delhi
Dated : August 10 2016

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