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BEML Ltd.

BSE: 500048 Sector: Engineering
NSE: BEML ISIN Code: INE258A01016
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OPEN 927.30
PREVIOUS CLOSE 919.20
VOLUME 42868
52-Week high 1324.40
52-Week low 770.15
P/E 113.71
Mkt Cap.(Rs cr) 3863.57
Buy Price 928.20
Buy Qty 36.00
Sell Price 0.00
Sell Qty 0.00
OPEN 927.30
CLOSE 919.20
VOLUME 42868
52-Week high 1324.40
52-Week low 770.15
P/E 113.71
Mkt Cap.(Rs cr) 3863.57
Buy Price 928.20
Buy Qty 36.00
Sell Price 0.00
Sell Qty 0.00

BEML Ltd. (BEML) - Director Report

Company director report

Your Board of Directors has pleasure in presenting the 52nd Annual Reportand Audited Accounts for the year ended 31.03.2016.

Financial results:

(Rs. in Lakhs)
Particulars 2015-16 2014-15
Gross Revenue including consortium supplies 3426.02 3129.65
Revenue including excise duty 3287.44 2999.17
Net Revenue from operations 2983.72 2809.19
Profit before Depreciation Interest and Tax 166.51 129.56
Finance cost 49.03 70.51
Depreciation and amortization expense 53.21 52.14
Profit Before Tax 64.27 6.91
Tax Expense 11.62 0.15
Profit After Tax 52.65 6.76
Profit available for appropriations 272.76 231.87
APPROPRIATIONS:
Proposed Dividend 16.66 4.16
Dividend tax 3.39 0.85
Debenture Redemption Reserve 32.61 6.76
Profit & Loss Account 220.10 220.10
Net Worth 2109.36 2076.76

Turnover & Profitability:

Your Company achieved gross revenue of Rs.3426.02 crores including the value ofconsortium supplies against Rs.3129.65 crores recorded in the previous year. The revenuefrom operations (net of consortium supplies and excise duty) stood at Rs.2983.72 crores asagainst Rs.2809.19 crores in the previous year registering a growth of 6.21%. The Valueof Production (net of consortium supplies and excise duty) is Rs.2740.01 crores as againstRs.2599.93 crores in the previous year. The Profit before Tax was Rs.64.27 crores asagainst Profit before Tax of Rs.6.91 crores recorded in the previous financial year.Defence Business segment has achieved a Net Sales of Rs.329.60 crores in FY 2015-16 asagainst Rs.160.86 crores in FY 2014-15 registering a growth of about 105%. Despitenon-receipt of orders relating to

GS/GSCN Rail Coaches Rail & Metro segment has registered a Net Sales of Rs.1038.80crores in FY 2015-16 as against Rs.993.16 crores in FY 201415 thereby registering agrowth of 4.60%. Despite sluggish market conditions Mining & Construction segmentachieved a Net Sales of Rs.1615.32 crores in FY 2015-16 as against Rs.1655.17 crores in FY2014-15 thereby resulting in negative growth of 2.41%.

There was no change in the nature of the business of the Company during the year.Further there was no material change/commitment occurred affecting the financial positionof the Company subsequent to the financial year ended 31.03.2016 till the date of thisreport.

Performance vis-a-vis MoU:

Performance of your Company in terms of the Memorandum of Understanding (MoU) signedwith the Department of Defence Production Ministry of Defence (MoD) Government of Indiawas rated as "Good" for the financial year 2014-15 and the rating for thefinancial year 2015-16 is estimated as 'Good' based on self-evaluation.

Further to achieve 'Very Good' rating for 2016-17 the MoU targets are proposed atRs.3150 crores for revenue from operations (net of consortium and excise duty) and Rs.28crores for Profit before Tax (excluding other income extraordinary and exceptionalitems).

Dividend:

Your Board of Directors has recommended a dividend of Rs.4 per share i.e. 40% for theyear 2015-16 keeping in view the future prospects of the Company and at the same timemeeting the aspirations of the shareholders.

Exports:

During 2015-16 your Company made exports aggregating Rs.275.23 crores (physicalexports of Rs.34.66 crores and deemed exports of Rs.240.57 crores) as against Rs.484.33crores (physical exports of Rs.106.78 crores and deemed exports of Rs.377.55 crores)during the previous year. The international presence of the Company increased to 66countries with the entry to Djibouti and Congo during the year.

Quality:

Key initiatives/actions taken during the year for continuous improvement towardsQuality Assurance are as under:

> All the Manufacturing Divisions continue to hold the Quality Managementcertification based on the surveillance audit recommendations.

> MoU targets relating to increase in vendor base and quality improvement projectswere achieved.

> Quality Circle team 'VENUS' from Earth Moving Division participated inInternational Convention on Quality Control Circles ICQCC-2015 held in South Korea from 5thto 8th October 2015 and won 'GOLD' medal.

> Around 400 Kaizen projects and 5'S' with average score were successfullycompleted.

> The data relating to vendor list vis-a-vis part number for all categories ofproject items is made available on-line thereby the vendor base has been streamlined.

> A dedicated screen 'BEML Quality BOARD' on intranet has been created for thedisplay of Quality related improvements. In addition the material standards and servicebulletins are also uploaded.

> Towards customer satisfaction cross functional teams are active Company-wide toaddress critical field quality issues.

> Vendor rejections were effectively monitored through Corrective and PreventiveAction by Source Inspection Team.

Energy Conservation Research & Development and Technology Absorption:

Your Company continues to give emphasis on conservation of energy. The efficiency ofenergy utilization is closely monitored to attain higher level of energy conservation.

Further the Company's Research & Development Centre (R&D) continues to play avital role in design and development of products critical aggregates and indigenizationactivity. During the year R&D designed developed and launched BL120H Backhoe Loaderin addition to successful implementation of various improvement projects for the existingproducts of the Company.

In terms of Section 134(3)(m) of the Companies Act 2013 read with Rule 8 of theCompanies (Accounts) Rules 2014 the information on conservation of energy and technologyabsorption including the products developed by the Company during the year is placed atAnnexure-I.

Foreign Exchange Earnings and Outgo:

During the year the Company's foreign exchange earnings stood at Rs.140 crores and thetotal foreign exchange utilized was Rs.579.67 crores.

A sum of Rs.1.56 crores was incurred towards deputation of personnel abroad forbusiness/export promotion after-sales-services and training purposes.

Finance:

The working capital requirements were met from the internal accruals and creditfacilities availed from banks. There was no overdue installment of principal and/orinterest to the banks.

The Company's contributions to Central and State Exchequers were in the order ofRs.671.63 crores during the year by way of Excise Duty Customs Duty Sales Tax ServiceTax Dividend and Tax there on and other taxes and duties.

Fixed Deposits:

The Company did not accept any fixed deposits during the year and there was nooutstanding Fixed Deposits at the beginning/end of the year. Accordingly there was nodefault in payment of deposits/interest thereon.

Enterprise Risk Management:

Establishment of Risk Management System as required under section 134(3)(n) of theCompanies Act 2013 regn. 17(9) of the Listing Regulations and para 7.3 of DPEGuidelines is under process. Your Company has engaged the services of M/s.PricewaterCoopers (PWC) to study and implement suitable system for the Company.

Related Party Transactions:

Your Company has formulated a "Policy on Related Party Transactions" toregulate transactions entered into between the Company and its related parties. In termsof Regn. 46(2)(g) of the Listing Regulations the said policy is placed on the web-site ofthe Company at www.bemlindia.com .

During the year 2015-16 all transactions that were entered into with the relatedparties were fair transparent and at arm Rs.s length basis and also in the ordinarycourse of business of the Company. The said related party transactions were also dulyconsidered and approved by the Audit Committee.

Report on the performance and financial position of subsidiaries and joint venturecompany

Subsidiary Companies:

(i) M/s. Vignyan Industries Limited (VIL):

VIL has recorded a turnover of Rs.32.18 crores as against Rs.30.67 crores therebyregistering a growth of about 5% over the previous year. The value of production of theCompany stood at Rs.30.88 crores as against Rs.31.50 crores and the Company achievedProfit before Tax of Rs.0.32 crores as against loss of Rs.0.85 crores in the previousyear. The Company has shown improvement in financial parameters mainly due to reduction inmaterial consumption and also reduction in employee benefits expense on account ofsuperannuation of employees.

Considering the market demand for high alloy grade castings like T-72 and TatraVariants relating to Defence business Axle Box and Buffer Assembly relating to Railbusiness and new castings for Mining & Construction business necessary developmentand production are planned. These proposals would help VIL to achieve about Rs.74 Crs by2020-21 as envisaged in the Perspective Plan.

The order book position remained at 1739 MTs as on 01.04.2016. More and more castingrequirements are expected from Holding Company as well as from other customers. With thisVIL is confident of achieving better results for the financial year 2016-17.

(ii) M/s. MAMC Industries Limited (MIL):

Your Company entered into a Consortium Agreement with M/s. Coal India Limited (CIL) andM/s. Damodar Valley Corporation (DVC) on 08.06.2010 for acquiring specified assets of M/s.Mining and Allied Machinery Corporation Limited (under liquidation). The agreementinter-alia provided for formation of a Joint Venture company (JV) with the shareholdingpattern of 48:26:26 among BEML CIL and DVC respectively. The Company has paid theproportionate share of Rs.48 crores towards the total bid consideration of Rs.100 croresfor the said acquisition based on the order passed by the Honble High Court of Calcutta.The said assets were taken possession by the MAMC Consortium. Further up to 2015-16 theCompany

has incurred a sum of Rs.8.76 crores towards maintenance security and other relatedexpenditure. The expenditure incurred by the CIL and DVC on account of this proposal isnot ascertained. The total sum of Rs.56.76 crores is included under the head other loansand advances pending allotment of equity shares in the capital of JV company. Since theCompany intends to treat this as long term investment no independent valuation of thesaid assets has been carried out and the diminution in the value of investments if anycan be ascertained only after the formulation of business plan and obtaining necessaryapproval for shareholders Rs. agreement from Ministry of Defence (MoD) and consequentialallotment of shares in the JV.

In the meantime a company in the name of 'MAMC Industries Limited' (MIL) was formedand incorporated by your Company as a wholly owned subsidiary for the intended purpose ofJV formation. Shareholders' agreement as duly approved by the Boards of all the threemembers of the consortium has been submitted to MoD for necessary approval. Further asrequired by the MoD 'Business Plan' and 'Financial Viability Report' of the proposed JVis being prepared by Central Mine Planning & Design Institute Limited a wholly ownedsubsidiary of CIL.

(iii) M/s. BEML Brazil Industrial Ltda (BBIL):

Your Company entered the Brazil market for brand building exercise and local valueaddition for the products to meet local standards in anticipation of good businesspotentials for Freight Wagons and Mining & Construction equipment. As per therequirement under the local laws BBIL was established. Based on the enquiries few miningequipment were also supplied to local customers. In the meantime low cost Chineseequipment flooded the Brazilian market along with their local manufacturing facilities.Further your Company faced stiff competition in high-end equipment segment frominternational players like CAT and Komatsu. In view of these developments it is proposedto handle the Brazilian market directly and to wind up the existing facilities in Brazil.

Joint Venture Company-M/s. BEML Midwest Limited (BMWL):

BMWL was formed and registered with the Registrar of Companies at Hyderabad on18.04.2007. BEML holds 45% share and M/s Midwest Granite Pvt. Ltd. (MGPL) and P T SumberMitra Jaya of Indonesia as partners holding the balance 55% share. The Company has beenestablished to capitalize on the growing business opportunities in the contract miningsegment. However due to certain unauthorized transactions and the oppression andmismanagement by the nominees of MGPL your Company had filed an application beforeHon'ble Company Law Board (CLB) seeking for suitable relief. As a counter measure MGPLhad also filed a petition on the matter. CLB vide its common order dated 01.06.2012directed the Central Government to appoint an inspector to investigate the affairs of BMWLand take appropriate action. As per the legal advice your Company preferred two appealsbefore Hon'ble High Court of Andhra Pradesh at Hyderabad against the said common order ofCLB. The Hon'ble High Court passed the order on 19.08.2013 thereby setting aside the saidcommon order and directing CLB to proceed with a fresh enquiry and decide the issue inaccordance with law and merits also taking into consideration the report of investigationas directed by CLB and pass appropriate orders without getting influenced by the impugnedcommon order of CLB. The Company has filed an application with CLB praying for necessarydirections to Regional Director Ministry of Corporate Affairs Hyderabad for time boundcompletion of investigation so that the matter could effectively be heard by CLB.

There was no company which became or ceased to be a subsidiary joint venture orassociate of the Company during the year under review.

A separate section on report on the performance and financial position of each of thesubsidiaries joint venture company are placed under Form AOC-1 provided in theconsolidated financial statement of the Company in terms of section 129(3) of theCompanies Act 2013 read with rule 5 of Companies (Accounts) Rules 2014.

Consolidated Financial Statement:

Consolidated Financial Statement of your Company and its subsidiaries and joint venturecompany is attached to this report.

Vigilance:

The Company has an independent Vigilance Department headed by the Chief VigilanceOfficer. The Vigilance Department handled the complaints conductedinvestigations/verifications recommended disciplinary action did anticorruption workpreventive vigilance and technical examination/inspections of works and contracts with theobjective of promoting integrity transparency accountability equity as also increasingefficiency and productivity by leveraging technology in the organization.

During the year a concept paper on Preventive Vigilance including effective strategiesand the measures to be adopted in the organisation was prepared mainly focusing on riskmanagement approach to prevention of corruption. In addition the Vigilance Departmentrecommended certain system improvement based on the in-house experience as well as thebest practices followed in other public system.

Procurements:

Your Company endeavours to procure materials and services through e-procurementplatform on ERP system. During the year about 75% of the total requirements were sourcedthrough e-procurement.

Micro and Small Enterprises:

Keeping in view the effective implementation of Public Procurement Policy for Micro andSmall Enterprises (MSEs) Order 2012 following steps have been adopted:

> List of components that could be sourced from MSEs are placed on the Company'sweb-site at www.bemlindia.com for the information of MSE vendors.

> Communication has been sent to all the registered vendors regarding the saidpolicy with the objective of achieving an overall procurement of 20% from MSEs. Furtherfor enhancing the procurement from MSEs owned by SC/ST all the vendors are approached forcapturing necessary details and update the data bank.

> Appropriate weightage was given for MSEs in the MoU from year 2015-16 onwards inorder to ensure effective implementation of the policy.

> In order to enhance the vendor base from MSEs your Company is participating invarious exhibitions organized by Micro Small and Medium Enterprises National SmallIndustries Corporation etc.

> During 2015-16 your Company placed orders for goods and services to the extent ofRs.188.58 crores from MSEs which constituted 12.37% of the total procurement value ofRs.1524.45 crores.

Compliance under the Right to Information Act 2005:

The information required to be provided to citizens under Section 4(1)(b) of RTI Act2005 is placed on Company website www.bemlindia.com . It contains general information ofthe Company functions powers and duties of employees/officers decision making processrules regulations manuals and records held by the Company directory of the Company'sofficers pay scales of officers/employees etc. and procedure for seeking information andinspection of records. The Company has nominated a Central Public Information OfficerAppellate Authority Transparency Officer and six Central Assistant Public InformationOfficers representing Complex/Divisions to attend to the queries and appeals. Furtherduring the year 2015-16 the Company received 206 applications and queries related to humanresources recruitment contracts tenders business related matters etc. and the samewere disposed off.

Rajbhasha:

Your Company continued its efforts in implementing the Official Language (OL) Policy.OL Implementation Committee is constituted to review the status of use of Hindi across theCompany. The said Committee met four times during the year and reviewed the implementationstatus. OL Inspection was carried out by Joint Director Departement of Official LanguageMinistry of Defence New Delhi at Regional Offices at Delhi and Chennai. FirstSubCommittee of the Parliamentary Committee on OL inspected Regional Office at Delhi andKolkata reviewed the implementation of OL policy and suggested additional measures forimplementation. 542 executives/employees were trained in Hindi under Hindi Teaching Schemeof Government of India during the period under review. 10 Hindi workshops were organizedin which 213 officers/employees were trained. Hindi Fortnight was observed from 01.09.2015to 14.09.2015 throughout the Company and variety of competitions was organized. Website ofyour company is made available in Hindi also and updated the contents periodically.

Corporate Governance:

A report on Corporate Governance along with a Compliance Certificate and ManagementDiscussion and Analysis Report as required under the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 and DPE Guidelines is placed at Annexure-II.

Awards:

> On 03.08.2015 your Company was bestowed with Rajbhasha Award in Big PSU categoryby the Town Official Language Implementation Committee for PSUs for the commendableperformance in implementation of Hindi during the year 2014-15.

> On 20.11.2015 Shri Aniruddh Kumar Director (Rail & Metro Business) wasbestowed with the "Eminent Engineer Award" by the Institution of Engineers(India) for his excellent services rendered in the field of Heavy Engineering Industry.

> On 26.12.2015 your Company had bagged the "Star Performer Award" in theExport category for the year 2013-14 from Engineering Export Promotion Council.

> On 27.01.2016 your Company was bestowed with prestigious "Raksha Mantri'sAward for Excellence" under the Institutional Award category for Best Performance inExports during 2012-13.

> On 12.04.2016 your Company won the "SCOPE Award for Excellence andOutstanding Contribution to the Public Sector Management-Special Institutional Category(Turnaround)" for the year 2013-14.

Manpower:

The number of employees of the Company as on 31.03.2016 stood at 8827 as against 9599of the previous year.

The category-wise number of SC/ST and Ex-

Servicemen employees as on 01.01.2016 and recruitment made are as under :

Category/Group

Total

No. of SC/ST and Ex-servicemen

As on

Scheduled Caste

Scheduled Tribe

Ex-Service Men

1.1.2015 1.1.2016 1.1.2015 1.1.2016 1.1.2015 1.1.2016 1.1.2015 1.1.2016
Group-A 1523 1549 268 283 56 56 7 6
Group-B 976 794 178 135 76 65 11 13
Group-C 7244 6568 1602 1475 339 306 308 275
Group-D 27 25 16 14 4 4
Total 9770 8936 2064 1907 475 431 326 294

The Company recruited 19 candidates during the year under review as under:

- 1 from Scheduled Caste in Group C

- 7 from Scheduled Tribe in Group B and

- 11 from Other Backward Class out of which 2 in Group A and 9 in Group B.

Human Resource Development and Industrial Relations:

The HR Department identified several thrust areas for continuously updatingtechnical/professional knowledge and skills of employees towards fostering a performancedriven work culture in all areas of operations particularly at shop floors. During theyear the Company organized several inhouse and external training programs covering 23156man-days.

The overall industrial relation situation in the Company was cordial during the year.

Sexual Harassment of Women at Workplace:

In terms of the provisions of the Sexual Harassment of Women at Work Place (PreventionProhibition & Redressal) Act 2013 an Internal Complaints Committee is constituted inall the manufacturing units. No sexual harassment complaint was reported under the saidAct during the year 2015-16.

Corporate Social Responsibility & Sustainability:

In terms of Section 135 of the Companies Act 2013 and DPE Guidelines on MoU theCorporate Social Responsibility & Sustainability (CSR) Committee has been constituted.Further details of CSR are placed under the same heading in Annexure-II and an annualreport on CSR activities undertaken during the year is placed at Annexure-III.

Environment and Pollution Control:

In order to protect the environment in and around the factory premises/township treeplantation were undertaken. Your Company planted saplings of various types of avenuetrees/flower bearing trees in the vacant lands belonging to the Company for maintainingecological balance in the surrounding areas.

Particulars of Employees:

There were no employees of the Company who received remuneration in excess of thelimits prescribed under Rule 5 of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014.

Statutory Auditors:

The Comptroller & Auditor General of India has appointed M/s. S.R.R.K SharmaAssociates Chartered Accountants Bengaluru as the Statutory Auditors for the financialyear 2015-16.

Observation if any made in the Independent Auditors' Report on the financialstatement including consolidated financial statement and the reply of the Board ofDirectors thereto will be given by way of an addendum to this report.

Cost Auditors:

Your Company appointed M/s. Murthy & Co. LLP Cost Accountants Bengaluru as CostAuditors for

the year 2015-16 in terms of Section 148 of the Companies Act 2013 read with theCompanies (Cost Records and Audit) Rules 2014 for preparing and filing necessary 'CostAudit Report' for Railway Rolling Stock and its Parts. Further as required under the saidRules the remuneration payable to the Cost Auditor is placed in the notice convening 52ndAnnual General Meeting for ratification of the members.

Secretarial Auditors:

In terms of Section 204 of the Companies Act 2013 read with the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 the Company appointed M/s VN &Associates Practicing Company Secretaries Bengaluru to undertake the Secretarial Auditof the Company for the year 2015-16.

The Secretarial Audit Report and the replies to the observations made in the saidreport are placed at Annexure-IV.

C&AG Audit:

The Comments of the Comptroller & Auditor General of India under section 143(6)(b)of the Companies Act 2013 on the financial statements including consolidated financialstatement are appended at page No. 105 and 146 to the annual report.

Directors:

(1) Appointment of Independent Directors:

During the year the Government of India vide letter Ref: No.10(4)/2012-D(BEML) dated02.12.2015 appointed S/s B P Rao Sudhir Kumar Beri and M G Raghuveer as IndependentDirectors on the Board of the Company.

Pursuant to Schedule IV of the Companies Act 2013 the appointment of the aforesaidIndependent Directors was formalized through a letter of appointment setting out the termsand conditions of their appointment which is also placed on the website of the Company atwww.bemlindia.com .

(2) Statement on declaration by Independent Directors:

Independent Directors have given declarations u/s 149(7) of the Companies Act 2013that they meet the criteria of independence as laid down u/s 149(6) of the said Act.

(3) Remuneration of Directors:

Your Company being a Central Public Sector Enterprise the appointment tenure andremuneration of Directors are decided by the President of India. The Governmentcommunication appointing the Functional Directors indicate the detailed terms andconditions of their appointment including a provision for the applicability of therelevant rules of the Company.

Government Nominee Directors were neither paid any remuneration nor sitting fee forattending Board/ Committee meetings.

Independent Directors are paid only sitting fee of Rs.20000 per meeting of theBoard/Committee of the Board attended by them. Further if there are more than one suchmeeting on the same day a sitting fee @ Rs.10000 is paid for the second and subsequentmeeting/s.

Neither there was payment of commission to the Board of Directors nor any stock optionscheme offered to them during the year.

Further none of the Directors had any pecuniary relationship nor entered into anyrelated party transaction with the Company during the year.

Pursuant to the provisions of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 the details of remuneration paid to the Directors during 2015-16are provided under the 'Report on Corporate Governance' annexed to this report.

(4) Change of Directors:

In terms of Article 97 of the Articles of Association of the Company the President ofIndia is vested with the power to appoint the Directors of the Company from time to timeand also shall determine the term of office of such Directors. Accordingly the followingappointments on the Board of your Company were effected as per the directives of thePresident of India:

> Shri Sanjay Prasad Joint Secretary (Land System) Department of DefenceProduction Ministry of Defence (MoD) was appointed as Government Nominee Director videMoD letter No.10(2)/2011-D(BEML) dated 01.10.2015 in place of Smt. Kusum Singh.

> Shri B P Rao Shri Sudhir Kumar Beri and Shri M G Raghuveer were appointed asIndependent Directors vide MoD letter No.10(4)/2012-D(BEML) dated 02.12.2015.

> Shri B R Viswanath was appointed as Director (Mining & Construction Business)of the Company vide MoD letter No. 10(14)/2014- D(BEML) dated 27.01.2016. He assumed thecharge on 01.02.2016.

> Shri R H Muralidhara was appointed as Director (Defence Business) of the Companyvide MoD letter No. 10(13)/2014-D(BEML) dated 08.02.2016. He assumed the charge on01.03.2016.

> Smt. Surina Rajan Additional Secretary (Defence Production) MoD was appointedas Government Nominee Director vide MoD letter No.8(80)/2015-D(Coord/DDP) dated02.06.2016.

> Shri D K Hota Director (HR) of the Company was appointed as the Chairman &Managing Director of the Company vide MoD letter No. 8(2)/2015-D(BEML) dated 19.05.2016.He assumed charge on 01.07.2016.

The Board placed on record its deep appreciation of the valuable services rendered bythe Directors whose term of office ended during the year.

(5) Number of meetings of Board:

During the year 11 meetings of the Board were held on 29.04.2015 28.05.201529.05.2015 10.07.2015 17.07.2015 14.08.2015 15.09.2015 06.11.2015 21.12.201513.01.2016 and 11.02.2016 Requirements on number and frequency of meetings in terms ofSection 173(1) of the Companies Act 2013 Regn. 17(2) of the Listing Regulations andPara 3.3.1 of the DPE Guidelines were complied with in full.

(6) Directors' Responsibility Statement:

Pursuant to section 134(5) of the Companies Act 2013 your Directors state that basedon the representation received from the management

(a) in the preparation of the annual financial statements for the year ended31.03.2016 the applicable accounting standards have been followed along with properexplanation relating to material departures;

(b) such accounting policies have been selected and applied consistently and judgmentsand estimates have been made that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company as at 31.03.2016 and of the profit of theCompany for the year ended on that date;

(c) proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

(d) the annual financial statements have been prepared on a going concern basis;

(e) proper internal financial controls were put in place and that the internalfinancial controls were adequate and operating effectively.

(f) proper systems have been devised to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

Extract of Annual Return:

In terms of Section 92(3) ofthe Companies Act 2013 read with Rule 12 of the Companies(Management and Administration) Rules 2014 an extract of the Annual Return in theprescribed form is placed at Annexure-V.

Acknowledgements:

Your Directors express their hearty thanks to the Company's valued customers inparticular Defence Services M/s. Coal India Limited and its Subsidiaries M/s. SingareniCollieries Company Limited M/s. Steel Authority of India Limited Railway Board M/s.Delhi Metro Rail Corporation Limited M/s. Bangalore Metro Rail Corporation Limited andM/s. Jaipur Metro Rail Corporation for their patronage and confidence reposed on theCompany. The Directors also acknowledge and thank all collaborators vendors and otherservice providers for their valuable assistance and cooperation extended to the Company.

The Directors express their appreciation to the members of Company's Consortium ofBanks and other Bankers and Financial Institutions for their continued support to theCompany's operations. The Directors also thank all the shareholders/investors for reposingcontinued confidence in the Company.

The Directors wish to thank the Comptroller & Auditor General of India thePrincipal Director of Commercial Audit & Ex-officio Member-Audit Board StatutoryAuditors Cost Auditors and Secretarial Auditors for their valued co-operation.

The Directors also acknowledge the valuable support and assistance received fromvarious Ministries of Government in particular Ministry of Defence Ministry of CoalMinistry of Mines Ministry of Steel Ministry of Railways and the Ministry of ExternalAffairs. The Directors are also grateful to the Government of Karnataka and Kerala for thesupport and co-operation extended to the Company.

Your Directors take this opportunity to place on record their appreciation for theinvaluable contribution made and excellent co-operation extended by the employees andexecutives at all levels for the continued progress and prosperity of the Company.

For and on behalf of the Board of Directors
Sd/-
Bengaluru P Dwarakanath
27.05.2016 Chairman & Managing Director

Annexures to Board's Report for the Financial Year 2015-16

CONSERVATION OF ENERGY

(a) Steps taken or impact on conservation of energy

(i) Used 4KW capacity Portable Air Compressor in place of 55KW capacity Motor Aircompressor resulted in conservation of 148920 kWh equivalent to Rs.9.83 lakhs.

(ii) Installation of 2 Nos. of 5000 litres capacity solar water heating system forcanteen resulted in conservation of 102816 units equivalent to Rs.6.07 lakhs.

(iii) Installation of 100 KVA energy saver unit for shop high bay road and perimeterlightings resulted in conservation of 72264 units equivalent to Rs.5.23 lakhs.

(iv) Installation of 150W Metal halide high bay fitting in place of 800W HPMV lamps forroad lighting inside factory premises resulted in conservation of 68760 units equivalentto Rs.4.06 lakhs.

(v) Installation of solar lighting system for perimeter resulted in conservation of43200 kWh equivalent to Rs.3.13 lakhs.

(vi) Installation of energy efficient Induction Type 47 Nos. of 120W high bay fittingsin shop floor in place of 400W HPMV Lamp fittings resulted in conservation of 51744 unitsequivalent to Rs.3.05 lakhs.

(vii) Installation of 2 Nos. of 60KVA energy saver panels at Hangar for light loadingapplication resulted in conservation of 45360 kWh equivalent to Rs.2.68 lakhs.

(viii) Used 10 Nos. of 15KVA inverter welding sets in place of conventional CO2welding sets resulted in conservation of 43200 kWh equivalent to Rs.2.55 lakhs.

(ix) Installation of LED lights in place of HPSV lights for road lightings resulted inconservation of 32832 units equivalent to Rs.2.38 lakhs.

(x) Installation of energy conservation devices for roof lighting resulted inconservation of 33860 kWh equivalent to Rs.2.24 lakhs.

(xi) Replaced LED lighting in place of incandescent lamps resulted in conservation of27672 kWh equivalent to Rs.1.83 lakhs.

(xii) Used 30/25 Nos. of 90W/30W road lighting in place of 250W/70W MHL resulted inconservation of 25056 units equivalent to Rs.1.30 lakhs.

(xiii) Used LED/CFL lighting in place of fluorescent lights resulted in conservation of17288 kWh equivalent to Rs.1.25 lakhs.

(xiv) Introduction of online hydraulic oil filtration system resulted in conservationof 1260 litres equivalent to Rs.1.20 lakhs.

(b) Steps taken by Company for utilizing alternate sources of energy

Your Company setup 5 MW Windmill during 2007 in Kappadagudda area of Gadag district inKarnataka for captive consumption. The existing Windmill generated 77.50 lakh kWh powerduring 2015-16 resulting in green house gas reduction. Further out of the 18 MW Wind Millproject under progress 9 MW capacity has already been commissioned which has generated 20lakh kWh during the year.

(c) Capital investment on energy conservation equipment

(Rs. in Lakhs)
Conservation equipments Investment
1 Energy saver units for shop high bay road and perimeter lights 10.00
2 LED lights for road lighting 9.55
3 Solar lights for perimeter 9.00
4 Wind Turbine Generators 6.89
5 LED light fitting for shop high bay 5.00
6 1000 LPD solar water heater and its accessories 1.24
7 CFL/LED for office lighting 0.76
Total 42.44

TECHNOLOGY ABSORPTION:

Research & Development (R&D):

(i) Efforts made towards Technology Absorption:

During the year R&D Department took initiatives for design and development of hightechnology products and aggregates for Mining & Construction Defence and Rail &Metro segments as per customer requirements. Some of such products were also manufacturedand launched for customer trials.

Depending on the sectoral needs for the year 2015-16 R&D launched the followingproducts/projects:

Mining & Construction:

> BL120H Back Hoe Loader-designed and developed with higher capacity bucketemission compliant engine and equal tyres at front and rear and rolled out.

> BD50 Dozer-designed and developed 117HP class with Hydrostatic Transmission PowerAngle and Tilt Blade and Closed-centre Load Sensing System.

> BL9H (4X4)-design and development of electronic engine for application.

> BD155-1/BD355-1 Dozers-design and development of Proportional Steering ControlValve.

> BH100A Dump truck-design and development of Wet Multiple Disc brake system onfront brakes.

> BE1000 Excavator-design and development of CAN based single 7" LCD displayinstrumentation.

> Development of 1.5 cu.m Load Haul Dumper.

> BH60M-introduction of Auto Spin Regulator.

> BE1800E Excavator-design and development of splash lubrication type PTO.

> BD355 Dozer-up-gradation with Closed-centre Load Sensing System and engineering ofBS6D170EG engine on BD355-1.

> BL40-up-gradation with BS-III Electronic Engine Bucket leveller and boom kick outmechanism.

> BWS28-up-gradation with BEML Electronic

Engine BEML Transmission modified water tank and pumping system.

Defence:

> SMERCH 8x8 and 10x10 High Mobility Vehicle-designed and developed the vehicleswith technology for additional steerable rear wheel anti lock brake system power-packand ABS and successfully cleared user trials.

Rail & Metro:

> Catenary Maintenance Vehicle-designed developed and supplied to Navi Mumbai MetroCorporation.

> DMRC RS13-design completed for Broad gauge driving trailer car and up-gradation ofpropulsion system introduction of CCTV and other safety features.

> Special standard gauge wagon for Bengaluru Metro-design and development ofprototype completed.

> DMRC RS9-technical support completed for standard gauge metro cars.

(ii) The benefits derived like product improvement cost reduction product developmentor import substitution:

Major R&D initiatives helped the product improvement cost reduction and alsoprovided cutting edge technology features for the existing products that enabled theCompany to retain the existing customers expand the market share and also helped inexploring emerging markets.

These new initiatives enhanced the skill sets knowledge expertise of R&Dpersonnel and raised the confidence level in taking up new challenges arising from time totime.

Design and development of BL120H

Backhoe Loader:

Company has designed developed and introduced BL120H Backhoe loader for the first timein India with higher capacity bucket emission compliant engine and equal tyres at frontand rear.

DMRC RS13

Metro Cars

Product improvement was done and is expected to generate further businessopportunities.

(iii) Imported technology (imported during last three years reckoned from the beginningof the financial year):

Nil.

(iv) Future plan of action:

Keeping in view of emerging trends in technology and also in line with the unfoldingbusiness scenario R&D has put in place plan of action to take up a number ofprojects with enhanced allocation of resources. To achieve this R&D infrastructureand resources are being continuously strengthened/upgraded to handle and cope up with thelatest technologies effectively.

R&D has also planned to develop a series of products/aggregates covering all thethree business segments.

(v) Expenditure on R&D:

Company has spent Rs.66.63 crores on R&D during 2015-16 which is about 1.95% of theturnover (Gross Revenue including consortium supplies).

For and on behalf of the Board of Directors
Sd/-
Bengaluru P Dwarakanath
27.05.2016 Chairman & Managing Director

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