It is an honor and a privilege to present the 56th Annual Report to ourvalued shareholders. I am writing to you at a time when the entire world is combating withthe Covid-19 pandemic which has far reaching consequences on societies economies andbusinesses across the globe. The pandemic has added yet another layer of complexity to analready challenging business environment with falling global GDP growth rates and declinein ordering of thermal power projects. Now that the world is slowly coming to terms withthis unprecedented crisis it is time for us to adjust to the 'new normal' and reorientourselves accordingly.
Covid response & contribution
Your company has undertaken various steps to deal with COVID-19 situation and respondedwith agility to minimize the impact on its stakeholders. Business continuity &preparedness has been ensured during the lockdown through the 'work-from-home' modeespecially in areas such as design and engineering training knowledge sharing and otherHR related activities finance related activities etc. During the lockdown workcontinued at critical sites with the support of local authorities which resulted inrecommissioning of 1x800 MW Kothagudem thermal project and commissioning of BhadradriUnit-1 in Telangana.
Your company has also risen to the occasion to support the national efforts on COVID-19through monetary contribution of ' 15.72 crore to PMCARES fund as well as throughdevelopment of multiple products for in-house use and by various govt. departments/municipalities and has also provided support to local communities in every possible way.
Key performance highlights
Even though the lockdown was imposed in the country from 25th March 2020the impact on your company's operations was being felt much earlier on account ofdisruptions in material supplies from China Italy etc. which started from January 2020itself and significantly affected the performance during the entire quarter.
Despite the sharp decline of nearly 14% in the IIP of capital goods yourcompany matched the order inflows to that of FY19 with total worth of orders booked at '23547 crores.
The company recorded a turnover of ' 20491 crores as against ' 29423 crores inthe previous year.
Focus on budgetary control and cost optimization measures by the organizationresulted in containment of the loss at ' 662 crores.
With strenuous focus on cash collections the company achieved a cash collectionto billing ratio of 114% which is the highest in the last ten years.
BHEL firmly established itself as the leader in the domestic emission controlequipment market with the largest market share.
A number of initiatives were taken by the company in new business areas liketransportation defence & aerospace energy storage business among others which areexpected to improve the performance in years to come.
Economic & Business Environment
Global economic growth which has been subdued for the past three years is expected tocontract further in FY 2020-21. High frequency indicators of Indian economy also indicatea decline in industrial production activity and consumption demand. The Government hastaken a number of steps to revive the economy and these are expected to provide tractionin the coming quarters. Our Hon'ble Prime Minister's call for 'AatmaNirbhar Bharat' willprovide further momentum to the Make in India initiative and spur domestic manufacturing.
National Infrastructure Pipeline 2019 envisages an investment of about ' 111 lakh Croretill 2024-25 which is expected to provide opportunities to engineering and manufacturingcompanies like BHEL. Power sector specific reforms such as liquidity infusion to DISCOMSproposed amendment to Electricity Act 2003 etc. will provide the much needed impetus forthe long term growth of the sector. Although ordering for new coal-based power generationequipment remains weak demand for emission control business is strong and growing.
Indian Railways continues to move ahead with initiatives to decarbonize its operationsand upgrade & modernize infrastructure. Thrust on indigenization in defence &aerospace sectors will also continue to present new opportunities.
Moving ahead resolutely
Your company is on the transformational path from being a primarily Power Sector playerto a Global Engineering Enterprise with focus on improving operational and executionefficiencies along with strict financial and quality control. The immediate focus is toimprove the pace of execution through a project centric approach and to take-updiversification activities in parallel for laying the foundations of a strong and growingBHEL.
For this a slew of transformation initiatives have been undertaken across the companyalong with declaration of 2020 as the Year of transformation. Focused and all-out effortsare being made in the areas of:
1) Business Expansion & Diversification: Your company is maintainingleadership in its core businesses by focusing on expanding the offerings through renewedthrust on spares & services segment increasing the value proposition through digitalenablers strengthening of emission control business and development of energy- efficientand environment friendly power plants using AUSC technology.
In addition growing non-power business such as railways transportation defence &aerospace EPC in downstream oil & gas industry 4.0 solutions and contractmanufacturing in high technology areas is the focus area of the management. In line withthe vision of 'AatmaNirbhar Bharat' the recent initiative of Government of India toprogressively ban import of certain defence weapons and platforms is very encouraging.
Your company believes in creating opportunities in adversity and had floated anExpression of Interest (EOI) inviting global manufacturing companies to leverage on BHELfacilities & capabilities to set up manufacturing base in India. This EOI has receivedan excellent response and dedicated teams are working towards finalising the same quickly.
2) Execution: Timely and cost-efficient project completion is a priority foryour company. Material supply suiting project requirements implementation of a realtimeIntegrated Project Management System (IPMS) improvement in integrated projectengineering advance engineering and procurement activities empanelment of EPC civilagencies for pre-bid tie ups real-time site data capture among others are major stepstaken in this direction.
3) Cost Optimisation: Keeping in mind the impact on profitability a two prongedapproach has been adopted for cost optimization-review & improvement of designs andbulking of & improvement in procurement requirement/ processes. Additional stepsadopted for improved inventory management and focused vendor development will further addto the bottom line of the organization.
4) Quality: BHEL has been at the forefront of the Quality movement in thecountry since the 1980s. To help revive and revitalize this quality tradition acompanywide 'Quality first' initiative has been launched to keep our products andsolutions aligned with the stringent quality requirements in the global market. A strongquality culture is being nurtured through 'Empowerment Education Engagement andEncouragement'.
5) Receivables Management: In order to improve the liquidity position multiplesteps have been taken for quick realization of outstanding dues in ongoing projectsthrough timely and quality execution prioritizing pending works in old commissionedprojects to enable release of payments and vacation of bank guarantees and quickconversion of contract assets to collectibles by achieving various project milestones.
6) People: In line with the philosophy that a dedicated and motivated workforceis the foundation of any organization a number of initiatives have been taken towardsleadership development reform of performance management system strengthening of internalcommunication training/ retraining for continued learning through e-based platformssimplifying policies for making them employee centric etc.
7) Technology development: BHEL has traditionally been a leader in technologythrough focused R&D and has been the highest spender in capital goods sector in India(>2.5% of its annual turnover). A number of initiatives have been launched forindigenization of items and development of core technical competencies e.g. Flue GasDesuphurization sub-systems Air cooled condensers higher capacity pumps propulsionsystems and various imported high-value Bought out items. Your company has also taken-upprojects of national importance such as installation of India's highest efficiency thermalpower plant based on Advanced Ultra Supercritical Technology (AUSC) in collaboration withNTPC (MoU signed in FY 2019-20) pilot plant for conversion of high ash coal to methanoland high efficiency PERC cells amongst others.
We are confident that with multiple initiatives presently in progress as well asenvisaged the stage is set for sustained growth for years to come.
I would like to express my deep gratitude and appreciation for the continued faith andsupport of our esteemed shareholders customers business associates as well as otherpartners in our journey. Engagement and support from each member of the BHEL family andmy fellow Directors on the Board remains our source of strength. I would like to thankvarious Ministries of the Government of India particularly the Department of HeavyIndustry Ministry of Heavy Industries & Public Enterprises for their continuousguidance and support in our efforts.
I am confident that with your continued support a transformed BHEL will continue tobe at the core of selfreliance in engineering and manufacturing in the country.
With best wishes
| ||(Dr. Nalin Shinghal) |
| ||Chairman & Managing Director |
|Place : New Delhi || |
|Dated: September 1 2020 || |