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Bharat Heavy Electricals Ltd.

BSE: 500103 Sector: Engineering
NSE: BHEL ISIN Code: INE257A01026
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OPEN 92.10
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VOLUME 350046
52-Week high 121.77
52-Week low 77.43
P/E 66.45
Mkt Cap.(Rs cr) 33,667
Buy Price 0.00
Buy Qty 0.00
Sell Price 91.70
Sell Qty 1613.00
OPEN 92.10
CLOSE 92.25
VOLUME 350046
52-Week high 121.77
52-Week low 77.43
P/E 66.45
Mkt Cap.(Rs cr) 33,667
Buy Price 0.00
Buy Qty 0.00
Sell Price 91.70
Sell Qty 1613.00

Bharat Heavy Electricals Ltd. (BHEL) - Director Report

Company director report

The Directors are pleased to present the 53rd Annual Report on the businessand operations of the company and the audited Ind AS financial statements for the yearended March 31 2017 alongwith comparative Financial Statements of 2015-16 and opening IndAS Transition Balance Sheet as on 01.04.2015.

During the year the company regained growth and profitability by recording a turnoverof H 28840 Crore a growth of 10.7% over 2015-16 and profit of H 496 Crore as againstloss of H 710 Crore in previous year. The Company achieved a capacity addition of 45274MW of power projects during 12th plan (2012-17) 9% higher than the target of41661 MW set by Government of India for BHEL.

Financial Performance

Financial Year

Figures (in K Crore except per share data) 2016-17 2015-16
(a) Turnover 28840 26050
(b) Other Operational Income 635 588
(c) Revenue from operations 29475 26638
(d) Operating Expenses (28643) (28005)
(e) Operating Profit/(Loss) 832 (1367)
(f) Other Income 996 1498
(g) Profit/ (Loss) before 1828 131
Depreciation Finance cost
& Tax expense
(h) Depreciation & amortisation (849) (936)
expenses
(i) Finance Cost (351) (359)
(j) Profit/ (Loss) before tax 628 (1164)

 

Financial Year

Figures (in K Crore except per share data) 2016-17 2015-16
(k) Tax expense (132) 454
(l) Profit/ (Loss) for the period 496 (710)
from continuing operations
(m) Other Comprehensive (29) (76)
Income
(n) Total Comprehensive 467 (786)
Income for the period
(o) Dividend (including interim dividend )# 294 152
(p) Corporate Dividend tax (incl. 60 31
CDT on interim dividend)
(q) NAV per share (in K) 131.94 131.48

Figures in brackets denote expenses or losses

# Dividend includes final dividend for the previous year and interim dividend for thecurrent year.

Dividend

The Company has paid interim dividend for 2016-17 @ 40% (H 0.80 per share) amounting toH 195.81 Crore on paid up share of capital of H 489.52 Crore and corporate dividend tax ofH 39.86 Crore out of profit for the year. With this the total payout was at H 235.67Crore. The company has also paid final dividend of 2015-16 in 2016-17 of H 97.90 Crore (H0.40 per share) on paid up share capital of H 489.52 Crore alongwith corporate dividendtax of H 19.93 Crore.

The Board has recommended a final dividend for 2016-17

@ 39% (H 0.78 per share) amounting to H 190.91 Crore on paid up share capital of H489.52 Crore and corporate dividend tax of H 38.87 Crore out of profit for the year. Withthis the total payout shall amount to H 229.78 Crore.

The Dividend Distribution Policy of the company is provided separately in the AnnualReport (under Additional Information) and is available on BHEL website (www.bhel.com).

Orders Received

BHEL secured orders worth H 23489 Crore during 2016-17. This was achieved despitesubdued business conditions in the power and infrastructure sectors coupled with intensecompetition in domestic and overseas markets. Sectorwise orders booked are as follows:

( H in Crore)
2016-17 2015-16
Power Sector 7261 38529
Industry Sector 6181 5125
International Operations 10047 73
Total Orders Booked 23489 43727
Order Book outstanding at the 105200 110730
end of the year

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 312017 the applicable accounting standards (Ind AS) have been followed and properexplanation relating to material departures has been provided;

(ii) The Di profitability rectorswith have selected such accountingpoliciesProfit Before Tax of and applied them consistently and made judgments andestimates that are reasonable and prudent so as to give a true and fair view of the stateof affairs of the company at the end of the financial year and of the profit and loss ofthe company for that period; (iii) The Directors have taken proper and sufficient care forthe maintenance of adequate accounting records in accordance with the provisions of thisAct for safeguarding the assets of the company and for preventing and detecting fraud andother irregularities;

(iv) The Directors have prepared the annual accounts on a going concern basis; (v) TheDirectors have laid down internal financial controls to be followed by the company andthat such internal financial controls are adequate and were operating effectively;

(vi) The Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.

Management Discussion and Analysis

Domestic economy is experiencing a turnaround but is still reeling under the impact ofuncertainties. RBI has projected Gross Value Added (GVA) growth of 7.3 % in 2017-18 ascompared to 6.6% in 2016-17. Over the medium run the roll out of the Goods and ServicesTax (GST) and enacting other structural reforms should push the economy towards a highergrowth path. However capacity underutilization and delayed revival of capital investmentstill pose major challenge to the growth of Indian industry.

BHEL recorded a turnover of H 28840 Crore up 10.7% over the previous year reversingthe trend of negative topline growth prevailing for the last three years. Company returnedto H 628 Crore compared to a loss before tax of H 1164 Crore in the last year. ProfitAfter Tax stood at H 496 Crore against a net loss of H 710 Crore in the previous year.BHEL secured orders

worth H 23489 Crore during 2016-17. This was achieved despite subdued businessenvironment coupled with intense competition in domestic and overseas markets. Enhancedfocus on project execution has resulted in BHEL achieving a capacity addition of 45274 MWduring the 12th Five Year Plan period (2012-17) surpassing the target of41661 MW set by the government for BHEL by 9%. Company's strategy is to maintainleadership in existing businesses and focus on diversification to drive the next wave ofgrowth which includes harnessing opportunities in the areas of solar power transmissiontransportation defence and water.

BHEL too is transforming and has embarked upon a transformation journey with a visionof ‘Creating BHEL of Tomorrow' – creating an organization which will be RisingRobust and Responsive to the needs of customers employees shareholders and society. Withseveral initiatives taken under Execution Consolidation

& Simplification as a part of this transformation process the company is alsoputting a series of efforts focused on sustaining growth and profit; asserting leadershipin core business and developing people & digital capabilities; and finally buildingcapabilities in new businesses and technology for sustained growth.

Further details are given in Annexure-I.

Board of Directors

Details of changes in Directors & Key Managerial Personnel Appointment Shri AnshuPrakash Additional Secretary Department of Heavy Industry Ministry of HeavyIndustries & Public Enterprises was appointed as Part-time Official Director w.e.f.31.10.2016.

Shri Bhaskar Jyoti Mahanta Joint Secretary Department of Heavy Industry Ministryof Heavy Industries & Public Enterprises has been appointed as Part-time Official

Director w.e.f. 03.01.2017.

Ms. Surama Padhy has been appointed as Part-time Non-official Director (IndependentDirector) w.e.f. 02.02.2017.

In accordance with Section 161 of the Companies Act 2013 and Article 67(iv) of theArticles of Association of the Company Shri Bhaskar Jyoti Mahanta and Ms. Surama

Padhy being appointed as additional directors shall hold directorship upto the 53rdAnnual General Meeting of the Company and are eligible for appointment as Directors at theMeeting.

Cessation

Shri Rajesh Kumar Singh the then Joint Secretary Department of Heavy IndustryMinistry of Heavy Industries

& Public Enterprises who was appointed as Part-time Official Director w.e.f.22.12.2014 relinquished his charge of the post of Part-time Official Director on theBoard of

BHEL w.e.f. 06.10.2016 on his transfer to UIDAI Ministry of Electronics & IT.

Shri Anshu Prakash the then Additional Secretary Department of Heavy IndustryMinistry of Heavy Industries

& Public Enterprises who was appointed as Part-time Official Director w.e.f.31.10.2016 relinquished his charge of the post of Part-time Official Director on theBoard of

BHEL w.e.f. 03.01.2017 on his transfer to Department of Rural Development.

Ms. Harinder Hira who was appointed as Part-time Non-official Director (IndependentDirector) w.e.f. 08.05.2014 ceased to be a Director of the Company on completion of hertenure on 01.05.2017.

The Board of Directors place on record their deep appreciation of the valuable servicesrendered as well as the advice and guidance provided by S/Shri Rajesh Kumar

Singh Anshu Prakash and Ms. Harinder Hira 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 Subrata Biswas and T. Chockalingam willretire by rotation at the Annual General Meeting and being eligible offered themselvesfor re-appointment.

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 Corporate Governance Report. Further there has been no instance where theBoard of Directors has not 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's strong belief in Sustainable Development resonates in its mission statement“Providing Sustainable Business Solutions in the fields of Energy Industry &Infrastructure”.

Sustainability is integral to our business processes. Thrust on reducing environmentalfootprint throughout our value chain to enhance environmental sustainability continuedduring the reporting period. To promote inclusive growth the focus on CSR initiativescontinued which resulted in the creation of additional social infrastructure benefittingthe society. During 2016-17 an amount of H 37.50 Crore was allocated for various CSRinitiatives by the company. The details of various initiatives related to SustainableDevelopment undertaken during 2016-17 is 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 2016-17 is H 793.62 Crore which is 2.75 % 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 R&D projects. The company during the year 2016-17 enhancing thecompany's intellectual property in terms of number of such rights to 3915. Furtherdetails 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 this area during the inspection of PS-NR ROD-Mumbai

& Corporate R&D on 12.04.16 20.10.2016 & 20.01.2017 respectively.

A special session on Rajbhasha was held in Management Committee Meeting on 12.05.2016.For this session

Shri S.N. Singh Director Central Translation Bureau was invited to deliver a lectureon ‘Rajbhasha Implementation-Our Responsibility'. Second meeting of Hindi AdvisoryCommittee of

Ministry of Heavy Industries and Public Enterprises was organized by BHEL Hyderabadunder Chairmanship of Shri Anant G. Geete Union Minister of Heavy Industries and PublicEnterprises on 29.12.2016.

Under Inter-Unit Rajbhasha Shield Scheme 10 units/ divisions were presented the shieldby CMD for excellent Rajbhasha Implementation. In addition 380 employees who performexemplary work in Hindi were also awarded with cash awards.

Our Company is playing an active role in Town Official

Language Implementation Committees (TOLICs) constituted in various cities. Manyinteresting competitions Seminars and programs are conducted under auspices of thesecommittees. This year 9 units/ divisions of BHEL were awarded by the TOLICs for theirvarious achievements in this area.

Vigilance

Vigilance Department of BHEL is headed by the Chief

Vigilance Officer (CVO) appointed by Department of Heavy Industry (DHI) Ministry ofHeavy Industries & Public

Enterprises Govt. of India. Major manufacturing units

/ Power Sector Regions of BHEL have a vigilance set up headed by a senior vigilanceexecutive reporting to the CVO.

Preventive Vigilance has always remained the focus area of BHEL Vigilance. Additionalimpetus was also given for systemic improvements during 2016-17. Some of the preventivemeasures initiated are as under:

Revision of Works Policy 2016

• Revision of Supplier Evaluation Approval and Review

Procedure (SEARP) 2016

• Revision of Guidelines for Reverse Auction

• Revision of Guidelines for Suspension of Business Dealings with Suppliers /Contractors

• Utilization of Unused Material

Review of Material Estimation Procedure

• Implementation of Sequential Material Supply System by units

Revision of NIT conditions to check Cartelization in

Transport and Fabrication contracts

Review of Corruption Mitigation Action Plan for Potential areas

• Emphasis of Open Tendering and Transparency in Tendering value for money

• Online Vigilance Clearance System

• Review of Township Revenue Collection System

During the year various training programmes were conducted in differentunits/divisions for the employees as part of preventive vigilance. In all the

General Management Programme/Strategic Management Programmes organised by CorporateLearning &

Development (CLD) department a session on vigilance administration is being includedon a regular basis. With a view to create awareness about procurement policy rules andprocedures etc. to disseminate the instructions/ guidelines issued by CVC and Governmentof India from time to time to share best practices and case studies

Vigilance Department publishes Quarterly e-Newsletter

‘DISHA'. Sixteen issues have already been published. The Vigilance Awareness Weekwas observed from

31st October to 5th November 2016. To spread awareness about illeffects of corruption amongst cross section of society various programmes i.e. quizzesdebates essay writing competition elocution panel discussions lectures trainingprogrammes Poster competition slogan competition walkathon etc. were organized forstudents of various schools / colleges (30 colleges / 39 schools) and employees of theorganization.

Routine / Surprise inspections were carried out by Vigilance. The learnings frominspections and surprise checks were shared with the management. Based on these feedbacksvarious system improvements have been initiated by the management. In addition variouscirculars for systemic improvements were also issued.

BHEL signed the Integrity Pact with Transparency

International on 16.12.2008 and the same was adopted in Feb. 2009. Structured meetingsare held with the Independent External Monitors (IEMs) every quarter wherein theprocurement related issues and complaints thereupon are discussed.

With a view to ensure efficient Vigilance Clearance of officers who are applying forsenior level posts in various CPSEs Department of Personnel & Training (DoPT)Ministry of Personnel Public Grievances and Pensions has launched a web portal forVigilance status of Board Level and below Board level officials. Data in respect ofofficials of one level below the Board of BHEL has been updated in the system.

Safety & Security

BHEL is fully committed to providing a safe and healthy work environment in all itsmanufacturing units and project sites. It is our firm belief that safe and healthyworkplace not only boosts people's morale but is also a precondition for greaterproductivity at workplace. It has always been our endeavour to consolidate good safetypractices and make them a part of our work culture. Due to various initiatives taken toimprove safety performance at project sites the number of fatal accidents and man-dayslost due to reportable accidents have decreased. In manufacturing units the number ofreportable accidents has reduced by almost 8% with respect to 2015-16.

Occupational Health Services (OHS) centres are being run in the factory premisesproviding preventive as well as curative occupational health services to employees. Healthmonitoring of employees is carried out at these centres as a preventive health managementmeasure. Some of the initiatives taken in our units/divisions to build and maintain safetyand health culture at workplace during 2016-17 included:

• Awareness training on Material Safety Data Sheet

(MSDS) and Safe Operating Procedures (SOP) to ensure safety in handling and use ofhazardous chemicals.

• Health & Safety related training sessions for Regular Employees ContractWorkers & Trade Apprentices.

• Training at workplace for Crane Operators Riggers and Helpers for ensuringsafety in Material Handling.

• Demonstration of Rescue operation in the event of fall from height and awarenesscreation on appropriate use of Personal Protective Equipment (PPEs) at project sites.

Providing sponsorship to company officials/ supervisors for 1-year Advanced DiplomaCourse in Industrial Safety conducted by Central/Regional Labour Institute at MumbaiKanpur Kolkata Chennai and Faridabad.

Hazard Identification and Risk Assessment exercise for all new activities/processmodification/ equipment installation.

• Tool box talk/pep talks at workplace covering area specific safety issues.

• Conducting periodic maintenance & testing of material handling equipments(cranes lifting tackles hoists forklifts pallets etc.) pressure vessels/airreceivers power presses etc.

• Celebration of Road Safety Week to create awareness amongst employees anddrivers associated with transportation of our products.

Celebration of National Safety Day/week to create awareness about safety topics amongstthe employees contract workers and other stakeholders in our society. The theme of theSafety Day-2017 was “Leadership in Safety and Health Enhances Business

Sustainability”. Employees took safety pledge and several competitions wereorganised to promote safety.

• Sharing of good practices through publication of in-house magazines andhandbooks on various safety related topics.

Data and Cyber Security

An organizational Crisis Management Group (CMG) is in place in BHEL for counteringcyber-attacks and cyber terrorism in pursuance of priorities and directives from

Ministry of Heavy Industries & Public Enterprises Govt. of India. CrisisManagement Plan for BHEL is also in place.

All database administrators across various locations of company are notified.

BHEL has created a total workforce of 225 Information Security professionals including50 in 2016-17 through training and certification courses meeting one of the keyobjectives of national cyber security policy of Govt. of India to protect Indian cyberspace.

All units regions and divisions of BHEL have been certified for ISO/IEC 27001:2013 forInformation Security

Management System (ISMS).

Enterprise Risk Management (ERM) system exists in BHEL and Cyber Security is identifiedas one of the top risks.

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 the Companies Act 2013 and managementreply 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 2014.

Declaration 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 2016-17. Loan of H 3 Crore towards working capital was given during2015-16 to M/s BHEL EML BHEL's subsidiary company. The repayment timeline of theloan is extended to March 2018.

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 outgo 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

5th June 2015 issued by the Ministry of Corporate Affairs Government Companies areexempted from complying with provisions of section 197 of the Companies Act 2013. BHELbeing a government 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. Familiarisation Programme of Independent Directors

Weblink : http://www.bhel.com/investor_relations/investor. php

2. Policy Determining Material Subsidiaries and 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 2016-17 are printed separately in the AnnualReport. The detail of cost auditors appointed for the year 2016-17 and cost audit detailsare printed separately in the Annual Report.

The Auditors' Report and Comments of the Comptroller and Auditor General of India aregiven 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 acknowledges the support and guidance received from variousministries of the Govt. of India particularly the Department of Heavy Industry in thecompany's operations and developmental plans. The Directors also express their gratitudeto the Comptroller and Auditor General of India Chairman and Members of Audit BoardStatutory Auditors Branch Auditors Secretarial Auditor and Cost Auditors. The Directorsalso wish to place on record their appreciation for the continued cooperation receivedfrom all the technology collaborators and suppliers and for the support provided by thefinancial institutions bankers stock exchanges and various stakeholders. Last but notthe least the Board wishes to place on record its deep gratitude to all BHELites whoseenthusiasm team effort devotion and sense of belongingness have made this great companyproud.

For and on behalf of the Board of Directors of

BHARAT HEAVY ELECTRICALS LTD.

Atul Sobti

Chairman & Managing Director

Place: New Delhi Dated: July 19 2017