To the Members of
BGR ENERGY SYSTEMS LIMITED
Your directors have pleasure in presenting their 33rd Annual Report togetherwith the audited financial statements for the year ended March 312019.
The highlights of the standalone financial performance of the Company during thefinancial year ended March 31 2019 as compared with the previous financial year endedMarch 312018 are summarized below:
| || ||(द in Crore) |
|Description ||2018-19 ||2017-18 (Restated) |
|Income from operations ||3229 ||3299 |
|Other income ||0.71 ||21 |
|Total Income ||3230 ||3320 |
|Earnings before Interest Depreciation Tax and Amortization ||338 ||374 |
|Profit before exceptional item and tax ||41 ||83 |
|Exceptional item ||- ||-19 |
|Tax Expense ||12 ||32 |
|Net Profit after tax ||29 ||32 |
|Other Comprehensive income(net) ||-0.62 ||-0.27 |
|Restatement of retained earnings ||-28 ||- |
|Net Worth ||1406 ||1405 |
No material changes and commitments have occurred after the closure of the FinancialYear 2018-19 till the date of this Report which would affect the financial position ofyour Company.
DIVIDEND AND APPROPRIATION
Considering the lower profit during the year and as a measure to augment resourcesyour Board of Directors have not recommended any dividend during the year.
COMPANY'S STATE OF AFFAIRS
Your Company continues to serve one core sector of the Nation - Power generation andalso other key sectors viz. Oil & Gas Water Electricity Transmission andDistribution. Your Company despite significant slowdown and challenges in Indian thermalpower sector sustained its operating performance and the financial position remainsstrong.
Your Company has adopted a Strategy plan "BGR ASCEND 2025" with the objectiveto build and offer a portfolio of high technology systems and services to the Indian andinternational industry whereby sustained growth is achieved and an environment of highvalue creation to all stakeholders is enabled.
The Company's affairs operations review and future outlook have been discussed andanalyzed in the Management Discussion & Analysis report (Annexure VIII) forming partof this Directors report.
SUBSIDIARIES AND JOINT VENTURES
BGR Boilers Private Limited which supplies 660 MW super critical steam generators hadan operating income of ' 124.02 Crores and incurred a loss of ' 15.40 Crores in the year2018-19. BGR Turbines Company Private Limited which supplies 800MW super critical steamturbine generators has had an operating income of ' 9.82 Crores and made a profit of '0.29 Crore in the year 2018-19. These JV companies have carried necessary and significantaccounting adjustments consequent to the Settlement Agreement with Hitachi and suchadjustments have been duly dealt with in the respective company's books of account and hashad no impact on your Company's financial statements.
THE PERFORMANCE AND FINANCIAL POSITION OF EACH SUBSIDIARY AND JV
A report on the performance and financial position of each of the subsidiaries andjoint venture as per rule 5 of the Companies (Accounts) Rules 2014 is provided asannexure to the consolidated financial statement and hence not repeated here for the sakeof brevity as required under rule 8(1) of the Companies (Accounts) Rules 2014.
CONSOLIDATED FINANCIAL STATEMENT
In accordance with Companies Act 2013 and implementation requirements of IndianAccounting Standards (Ind AS) Rules on accounting and disclosure requirements and asprescribed by Regulation 33 of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Audited Consolidated Financial Statements are provided in thisAnnual Report.
As required under Section 129 of the Companies Act 2013 a separate statementcontaining the salient features of the financial statements of subsidiaries is attachedalong with the financial statements.
In terms of Section 136 of the Companies Act 2013 the Company has placed on itswebsite the standalone and consolidated financial statements and the separate audited andunaudited annual financial statements of subsidiary companies as the case may be and theCompany will provide a copy of separate financial statements in respect of each of itssubsidiary to any shareholder of the company who asks for it.
BOARD OF DIRECTORS
The first term of office of Mr.M.Gopalakrishna Mr.S.A.Bohra Mr.S.R.Tagat and Mr.Heinrich Bohmer as independent directors of the Company in terms of the Companies Act2013 expired on March 31 2019. Upon recommendation of the Nomination and RemunerationCommittee and the Board of Directors the shareholders re-appointed Mr.M.GopalakrishnaMr.S.A.Bohra and Mr.S.R.Tagat as independent directors of the Company for a period of 5years with effect from April 01 2019 at the Extra-Ordinary General Meeting held onFebruary 15 2019.
Mr.Heinrich Bohmer independent director of the Company has vacated his office ofdirector on March 312019.
The term of appointment of Mr.A.Swaminathan as Joint Managing Director & CEOexpired on September 30 2018 and pursuant to the recommendation of the Nomination andRemuneration Committee he was appointed as Director - Engineering & ConstructionBusiness for a period of one year from October 01 2018 or up to the date of the ensuingannual general meeting whichever is earlier. Mr. Swaminathan retires by rotation at theensuing annual general meeting and he does not seek reappointment.
The present term of appointment of Mr.VR.Mahadevan as Director/ Joint Managing Directorexpires on May 31 2019 and the Board based on the recommendation of the Nomination andRemuneration Committee appointed him as an additional director and also to office ofJoint Managing Director for a further period of two years from June 012019.
All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013 and SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015.
MEETINGS OF BOARD
During the year 5 Board meetings and 5 Audit Committee meetings were convened andheld. The details of these meetings are given in the Corporate Governance Report. Theintervening gap between any two meetings was within the period prescribed under theCompanies Act 2013.
ANNUAL EVALUATION OF BOARD
Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 and having due regard to the SEBI's GuidanceNote on Board Evaluation dated January 05 2017 the Board has carried out an annualevaluation of its own performance individual directors separately as well as theevaluation of the working of its Audit Committee Committee of Directors StakeholdersRelationship Committee and Nomination and Remuneration Committee. A comprehensiveevaluation process formulated by the Nomination and Remuneration Committee coveringvarious aspects of the functioning of the Board was circulated to all the Directors toevaluate the performance of the Board. The performance evaluation of the Non-IndependentDirectors and the Board as a whole was carried out by the Independent Directors. Theperformance evaluation of the Chairperson of the Company was also carried out by theindependent directors taking into account the views of the executive and non-executivedirectors. The Directors expressed their satisfaction with the evaluation process.
POLICY ON DIRECTORS' APPOINTMENT REMUNERATION AND OTHER DETAILS:
The Nomination and Remuneration Committee framed a policy on appointment of Directorsincluding criteria for determining qualification positive attributes and other matters.The main objective of the policy are given below:
(i) Enhancement of performance of the Board and facilitate effective CorporateGovernance.
(ii) Encourage diversity of thoughts expertise and perspectives.
(iii) Usher in independence in the performance of the Board.
(iv) Eliminate gender bias if any in the constitution and functioning of the Board ofDirectors.
(v) Provide and create an environment for succession planning.
(vi) Identification of senior/key management personnel for appointment as ExecutiveDirectors.
(vii) Provide for appropriate mix of promoter directors professional directors andindependent directors.
On the recommendation of the Nomination and Remuneration Committee the Board hasadopted and framed a Remuneration Policy for the Directors Key Managerial Personnel andother employees pursuant to the provisions of the Companies Act and the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015.
The Company's policy on diversity of Board of Directors is available on the Company'swebsite at http://www.bgrcorp.com/policy/Policy_Diversity_Board.pdf.
The Audit Committee of the Board comprises of four directors of which three members areindependent directors and all the members of Audit Committee are financially literate.More details of the Audit Committee are provided in the Corporate Governance Report. Allkey recommendations and observations of the Audit were accepted and acted upon by themanagement and compliance thereof are regularly reviewed by the Committee.
The paid-up equity share capital of the Company as on March 312019 was ' 72.16 Crores.During the year under review the Company has not issued new shares or shares withdifferential voting rights nor granted stock options nor sweat equity.
TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND
In compliance with Section 124(5) of the Companies Act 2013 a sum of ' 1003420/-being the unclaimed dividend declared by the Company for the financial year ended March31 2011 was transferred to the Investor Education and Protection Fund of the CentralGovernment in November 2018 after giving sufficient notice to the concerned shareholders.
Dividend which remains unclaimed out of the dividend declared by the Company for thefinancial year ended March 312012 at the Annual General Meeting held on September 212012will be transferred to the Investor Education and Protection Fund of the CentralGovernment in November 2019 pursuant to the provisions of Section 124(5) of the CompaniesAct 2013. Thereafter no claim shall lie on these dividends from the shareholders.
Pursuant to the provisions of Section 124(6) of the Companies Act 2013 and the Rulesmade thereunder the shares pertaining to the unclaimed dividend for the FY 2010-11 weretransferred to the demat account of Investor Education and Protection Fund(IEPF).
An overview on the Company's human resources development and efforts to acquire andnurture talent is given in the Management Discussion & Analysis report (Annexure VIII)forming part of this Directors report.
For prevention prohibition and redressal of sexual harassment of Women at workplacethe Company has put in place an Anti-Sexual Harassment Policy in line with therequirements of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. During the year under review no complaint was received by theInternal Complaints Committee (ICC) with allegations of sexual harassment.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are provided elsewhere in the Annual Report.
In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 astatement showing the names and other particulars of the employees drawing remuneration inexcess of the limits set out in the said rules are provided in the annual report. Havingregard to the provisions of the first proviso to Section 136(1) of the Act the annualreport excluding the aforesaid information is being sent to the members of the Company.The said information is available for inspection at the registered office of the Companyduring working hours and any member interested in obtaining such information may write tothe Company Secretary and the same will be furnished on request.
Your Company has not accepted deposit from the public and hence did not haveoutstanding deposits any time during the year under review.
ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The information on conservation of energy stipulated under Section 134(3)(m) of theCompanies Act 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 is annexedherewith as Annexure I. During the FY 2018-19 the Foreign exchange earnings and outgowere ' 212.01 Crores and ' 20.15 Crore respectively. During the year there was no activityrelating to technology absorption and hence there are no particulars to be disclosed withrespect to technology absorption.
DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TOFINANCIAL STATEMENTS
Your Company has in place adequate internal controls system which includes financialcontrol commensurate with the size scale and complexity of company's operations. Theinternal audit function evaluates the efficacy and adequacy of internal control system inthe Company its compliance with operating systems accounting procedures and policies atall locations of the Company. Based on the report of internal audit function processowners undertake corrective and remedial action in their respective areas ofresponsibility and thereby strengthen the controls. Significant audit observations andcorrective actions thereon are periodically reviewed by the Audit Committee. During theyear except the following no reportable material weakness or significant deficiencies inthe design or operation of internal financial controls was observed except manipulation ofcontrol system connected with a fraud reported below.
An employee of the Company was found to have committed fraud over a period of time bytransfer of funds to many bank accounts created by him in fictitious names. He has createdfalse records for making these fraudulent payments and abused his access to the IT networkand software of the Company. In doing such fraudulent fund transfers he has committedforgery falsification of documents and other criminal acts for which action has beeninitiated.
CORPORATE SOCIAL RESPONSIBILITY
The Company has constituted the Corporate Social Responsibility Committee withMrs.Sasikala Raghupathy as Chairperson and Mrs.Swarnamugi R Karthik and Mr.GnanaRajasekaran as members of the Committee. The CSR Policy formulated and recommended by theCommittee is in line with Schedule VII of the Companies Act 2013 and the Company isfocusing on CSR activities pertaining to education health skill development and care ofdestitute women care and their welfare. The information on CSR Policy and activities aregiven in the Corporate Governance Report. The Annual Report on CSR activities is annexedherewith as Annexure II.
The Remuneration Policy formulated under section 178 of the Companies Act 2013 by theNomination and Remuneration Committee is given in Annexure III.
VIGIL MECHANISM/WHISTLE BLOWER POLICY
Your Company has established a vigil mechanism for directors and employees to reportgenuine concerns as required by Section 177 of the Companies Act 2013 read with theCompanies (Meetings of Board and its Powers) Rules 2014 and the policy / mechanism hasadequate safeguards against victimization of persons who use such mechanism and provisionfor direct access to the chairperson of the Audit Committee in appropriate or exceptionalcases.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Particulars of loans guarantees or investments covered under the provisions of Section186 of the Companies Act 2013 are disclosed in the note No. 3 to the FinancialStatements.
RELATED PARTY TRANSACTIONS
All related party transactions that were entered into during the financial year were inthe ordinary course of business and on an arm's length basis and transactions which arenot on arm's length were placed before the Board for approval based on the recommendationof the Audit Committee ( Details are provided in Annexure IV in Form AOC 2). There were noother materially significant related party transactions made by the Company withpromoters directors key managerial personnel or other designated persons which may havea potential conflict with the interest of the Company. All related party transactions areplaced before the Audit Committee for approval and where prior approval was not obtainedsuch transactions were reviewed and approved by the Audit committee subsequently. ThePolicy on related party transactions as approved by the Board is uploaded on Company'swebsite.
DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS ORTRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE
During the Financial year 2018-19 orders were passed by a district court and awardsgiven by two arbitral tribunals against the Company to the extent of ' 27.62 crores andthere are no other significant and material orders passed by the regulators or courts ortribunals impacting the going concern status of the Company.
RISK MANAGEMENT POLICY
The Company as part of Standard Operating System and Procedure institutionalized riskmanagement covering risk identification mitigation and management measures. This RiskCharter and Policy have been brought to practice as part of internal control systems andprocedures. The Management has applied the risk management policy to business activitiesand processes and this is reviewed to ensure that executive management manages riskthrough means of a properly defined framework. The Company is taking steps to make therisk management process more robust and institutionalized.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirements under Section 134(3) (c ) of the Companies Act 2013 withrespect to Directors' responsibility statement it is hereby confirmed that:
a) In the preparation of the annual accounts for the Financial year ended March 312019 the applicable accounting standards had been followed along with proper explanationrelating to material departures if any ;
b) 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 as at March 312019 and of the profit ofthe Company for the Financial year ended on that date;
c) the Directors have taken proper and sufficient care 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; and
d) the Directors had prepared the annual accounts for the year ended March 312019 on agoing concern basis.
e) the Directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.
f) the Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
STATUTORY AUDITORS' AND AUDITOR'S REPORT
N.R.Doraiswami & Co Chartered Accountants Chennai (Firm Regn. No. 000771S) wereappointed as the Statutory Auditors of the Company at the 31st Annual GeneralMeeting held on September 27 2017 to hold office until the conclusion of the 36thAnnual General Meeting to be held in the year 2022. N.R.Doraiswami & Co have confirmedthat they are not disqualified from continuing as Auditors of the Company for the FY2019-20.
COST RECORDS AND COST AUDITORS
The Company is required to maintain cost records as specified by the Central Governmentunder sub-section (1) of Section 148 of the Companies Act 2013 and accordingly during theyear such accounts and records were made and maintained by the Company. The Board ofDirectors appointed A N Raman & Associates Cost Accountant as the Cost Auditor of theCompany for the Financial year 2019-20 under Section 148 of the Companies Act 2013. TheCost Audit Report for the financial year ended March 31 2018 issued by Mr.A.N.Raman CostAuditor was submitted to the Central Government on September 07 2018.
SECRETARIAL STANDARDS AND SECRETARIAL AUDIT
The Board of Directors confirm that your Company has complied with the applicableSecretarial Standards during the year 2018-19.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Mr. V. Suresh Company Secretary in practice to undertake the secretarial auditof the Company. The Report of secretarial audit is annexed as Annexure V. The audit reportis unqualified and without reservation or adverse comment on compliance.
REPORTING OF FRAUD BY AUDITORS
During the year under review the Statutory Auditors Cost Auditors and SecretarialAuditor have not reported any instance of fraud committed in the Company by its officersor employees to the Audit Committee under section 143(12) of the Companies Act 2013details of which needs to be reported.
A Report on Management Discussion & Analysis of Performance (Annexure VIII) andCompliance of Corporate Governance under SEBI (LODR) and the certificate from the auditorsconfirming compliance of the conditions of Corporate Governance are included in thisAnnual Report as Annexure VI.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT-9 is annexedherewith as Annexure VII
ANNEXURES FORMING PART OF DIRECTORS' REPORT
The annexures referred to in this report and other information which are required to bedisclosed are annexed herewith and form part of this Report of Directors.
|Annexure ||Particulars |
|I ||Energy conservation |
|II ||Annual Report on CSR activities |
|III ||Remuneration Policy |
|IV ||Form AOC 2 |
|V ||Secretarial Audit Report |
|VI ||Corporate Governance Report along with the Certificate of Auditors |
|VII ||Extract of Annual Return in Form MGT-9 |
|VIII ||Management Discussion & Analysis Report |
Your Directors wish to place on record their appreciation for the valuable support andco-operation extended by customers vendors collaborators business partners/associatesstatutory authorities Central and State Governments during the year under review.
Your Directors also record their appreciation to the bankers for their financialsupport and trust reposed in the Company. The Board acknowledges the commitment andcontribution made by the employees at all levels during a difficult period. Your Boardconveys its gratitude to the shareholders for their continued patronage and cooperation.
| ||For and on behalf of the Board |
|Place : Chennai ||Sasikala Raghupathy |
|Date : May 30 2019 ||Chairperson |
Manufacturing units of the Company have implemented energy conservation measures andadopted alternate source of energy during the FY 2018 - 19 as below.
1. Conventional welding rectifiers were substituted with inverter welding machines formanufacturing resulting in power saving.
2. Factory indoor lightings were converted to LED lighting.
3. 30/10T EOT cranes have been installed with full inverter drive technology to enablesignificant power saving.Planned to install IGBT Based Inverter Plasma machine in place ofRectifier Based High power consuming machine.
4. 250 LPH RO Plant for AFC factory drinking water has been installed from the existingwater source at factory and thereby outsourcing of Drinking water stopped.