To the Members of BGR ENERGY SYSTEMS LIMITED
Your directors have pleasure in presenting their 32nd Annual Report together with theaudited standalone and consolidated financial statements for the year ended March 31 2018and the auditors' reports thereon.
The highlights of the standalone financial performance of the Company during thefinancial year ended March 31 2018 as compared with the previous financial year endedMarch 31 2017 are summarized below:
|(Rs. in Crore) |
|Description ||2017-18 ||2016-17 |
|Income from operations ||3299 ||3448 |
|Other income ||21 ||- |
|Total Income ||3320 ||3448 |
|Earnings before Interest Depreciation ||394 ||334 |
|Tax and Amortization || || |
|Profit before exceptional item and tax ||82 ||48 |
|Exceptional item ||-11 ||20 |
|Tax Expense ||32 ||24 |
|Net Profit after tax ||39 ||44 |
|Other Comprehensive income(net) ||-0.27 ||0.64 |
|Transfer to general reserve ||- ||4 |
|Net Worth ||1417 ||1378 |
No material changes and commitments have occurred after the closure of the FinancialYear 2017-18 till the date of this Report which would affect the financial position ofyour Company.
DIVIDEND AND APPROPRIATION
In order to augment working capital resources of your Company through retention ofinternal accruals your Board of Directors have not recommended dividend during the year.Your Board of Directors does not propose to appropriate any amount to reserves and wish tocarry the entire profits to balance sheet.
The Company's state of affairs operations review and future outlook have beendiscussed and analyzed in the Management Discussion & Analysis report (Annexure VII)forming part of this Directors report.
SUBSIDIARIES AND JOINT VENTURES
In terms of the Settlement and Seperation Agreement entered into with Hitachi inrespect of joint venture companies viz. BGR Boilers Private Limited and BGR TurbinesCompany Private Limited certain transactions have been completed during the year. BGRBoilers Private Limited made an operating income of Rs. 312.61 Crores and incurred a lossof Rs. 24.51 Crores for the year. BGR Turbines Company Private Limited has made anoperating income of Rs. 34.90 Crores and incurred a loss of Rs. 15.39 Crores for the year.These perfomance figures have not been audited. These JV companies have carried necessaryand significant accounting adjustments consequent to the Settlement Agreement 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 accounts of all subsidiary companies as the case may be and the Company willprovide 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
In accordance with the provisions of Companies Act 2013 Mr.V.R.Mahadevan Directorretires by rotation and being eligible offers himself for reappointment. Consequent toexpiry of the term of appointment Mrs.Swarnamugi R Karthik was reappointed as Director Corporate Strategy for a period of 5 years from February 08 2018. Her appointmentis subject to the approval of the shareholders in the ensuing AGM. A brief profile ofMr.V.R.Mahadevan and Mrs.Swarnamugi R Karthik are given in the notice convening the32nd Annual General Meeting of the Company. The Board of Directors recommends theseappointments.
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 4 Board meetings and 4 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.
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 Committee were accepted and acted uponby the management and compliance thereof are regularly reviewed by the Committee.
The paid-up equity share capital of the Company as on March 31 2018 was Rs. 72.16Crores. During the year under review the Company has not issued new shares 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 Rs. 511700being the unclaimed dividend declared by the Company for the financial year ended March31 2010 was transferred to the Investor Education and Protection Fund of the CentralGovernment in November 2017 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 31 2011 at the Annual General Meeting held on September 222011 will be transferred to the Investor Education and Protection Fund of the CentralGovernment in November 2018 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 2008-09 and FY2009-10 were transferred to the demat account of Investor Education and ProtectionFund(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 VII)forming part of this Directors report.
For prevention prohibition and redressal of sexual harassment of Women at Workplacethe Company has in place an Anti-Sexual Harassment Policy in line with the requirements ofthe Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act2013. During the year under review no complaint was received by the Internal ComplaintsCommittee (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 technology absorption stipulated underSection 134(3)(m) of the Companies Act 2013 read with Rule 8 of the Companies (Accounts)Rules 2014 is annexed herewith as Annexure I. During the FY 2017-18 the Foreign exchangeearnings and outgo were Rs. 324 Crores and Rs. 1 Crore respectively.
DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TOFINANCIAL STATEMENTS
Your Company has in place adequate internal control system which includes financialcontrol commensurate with the size scale and complexity of company's operations. Theinternal audit function evaluate 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 no reportable material weakness or significant deficiencies in the design oroperation of internal financial controls was observed.
CORPORATE SOCIAL RESPONSIBILITY
The Company has the Corporate Social Responsibility Committee of the Board of Directorswith Mrs.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 place. The Policy is in line with Schedule VII of the Companies Act 2013and the Company is focusing on CSR activities pertaining to education health skilldevelopment and destitute women care and welfare. The Annual Report on CSR activities isannexed herewith 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 Financial Statements.
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. There were no othermaterially significant related party transactions made by the Company with promotersdirectors key managerial personnel or other designated persons which may have a potentialconflict with the interest of the Company. All related party transactions are placedbefore the Audit Committee for approval. A transaction not on arm's length is placedbefore the Board for approval subsequent to the recommendation and approval of AuditCommittee. The Policy on related party transactions as approved by the Board is uploadedon Company's website.
DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS ORTRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE
There are no 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 have robustrisk management process.
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 March31 2018 the applicable accounting standards had been followed along with properexplanation relating 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 31 2018 and of the profit ofthe Company for the Financial year ended on that date ; c) the Directors have taken properand sufficient care for the maintenance of adequate accounting records in accordance withthe provisions of the Companies Act 2013 for safeguarding the assets of the Company andfor preventing and detecting fraud and other irregularities; and
d) the Directors had prepared the annual accounts for the year ended March 31 2018 ona going 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 General Meeting heldon September 27 2017 to hold office until the conclusion of the 36th Annual GeneralMeeting to be held in the year 2022 subject to ratification of appointment at every annualgeneral meeting in terms of Section 139 of the Companies Act 2013. They were appointed inplace of Manohar Chowdhry & Associates whose term of office expired at the conclusionof 31st Annual General Meeting of the Company. The requirement for annual ratification ofappointment of Auditors at AGM has since been dispensed with by the Companies (Amendment)Act 2017 effective May 07 2018. Accordingly no ratification is required henceforth andthe statutory auditors would continue in the normal course till the conclusion of 36thAGM. N.R.Doraiswami & Co have confirmed that they are not disqualified from continuingas Auditors of the Company.
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 Boardof Directors appointed Mr.A.N.Raman Cost Accountant as the Cost Auditor of the Companyfor the Financial year 2018-19 under Section 148 of the Companies Act 2013. The CostAudit Report for the financial year ended March 31 2017 issued by Mr.A.N.Raman CostAuditor was submitted to the Central Government on September 07 2017.
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 M / s. B.Chitra & Co Company Secretaries in practice to undertake thesecretarial audit of the Company. The Report of secretarial audit is annexed as AnnexureIV. The audit report is unqualified and without reservation or adverse comment oncompliance.
REPORTING OF FRAUDS 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 VII) 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 V.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in Form MGT-9 is annexedherewith as Annexure VI
ANNEXURES FORMING PART OF BOARD'S 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 the Board.
Your Directors wish to place on record their appreciation for the excellent support andco-operation given by customers shareholders vendors collaborators business partners /associates statutory authorities Central and State Governments during the year underreview.
Your Directors also record their appreciation to the bankers for their trust andcontinuous support to the Company. Your Directors place on record their sincereappreciation to the employees of the company at all levels for their commitment andvaluable contribution to the Company.
| ||For and on behalf of the Board |
|Place : Chennai ||Sasikala Raghupathy |
|Date : August 14 2018 ||Chairperson |
ENERGY CONSERVATION AND TECHNOLOGY ABSORPTION
AFC Division is driving energy conservation measures and alternate source of energyaggressively. During the FY 2017 - 18 the following energy saving measures were taken up:
1. For TTS welding all conventional machines were removed and 05 Lincoln Inverter TIG /ARC welding machines introduced. Power saving is about 10 KWH / machine.
2. At HB manufacturing 10 ADOR INVERTER welding machines added to enhance the facility.Power saving is about 8 KWH / machine.
3. Introduced Harmonic Filters to improve power quality.
4. Converting Finning Machine DC drives to AC drives with energy efficient motors isplanned in the FY 2018-19.
5. Changing conventional factory indoor and outdoor lighting to LED lighting is inprogress and planned to completely convert to LED in a phased manner.
6. Conservation of water by recycling process of used water from hydrostatic testing.
7. Solar power for feeding the office will be studied in detail and will be implementedbased on the merits and de-merits.
8. For ACC Tube welding migration to energy saving Inverter Welding machines (13 KVA)from conventional rectifier machines (32KVA) is in progress.
DISCLOSURE OF PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION ADAPTATION ANDINNOVATION
|1 Efforts made towards technology absorption. ||N.A. |
|2 Benefits derived like product improvement cost reduction product development import substitution. ||N.A. |
|3 In case of imported technology (imported during the last three years reckoned from the beginning of the financial year) || |
|(a) Details of technology imported ||N.A. |
|(b) Year of import || |
|(c) Whether the technology been fully absorbed || |
|(d) If not fully absorbed areas where absorption has not taken place and the reasons thereof. || |
|4 Expenditure incurred on research and development ||Nil |
REMUNERATION POLICY APPLICABILITY
This remuneration policy applies to all Directors Key managerial Personnel anddesignated employees of the Company.
This policy seeks to achieve the following objectives viz.
a. The directors key managerial personnel and designated employees of theCompany are governed by a compensation criteria that fosters meritocracy and industrystandards.
b. Attract and retain high calibre professionals / personnel required to manage thebusiness operations and strategic growth of Company successfully.
c. The remuneration shall be competitive and based on the individual responsibilitiescontribution and performance.
d. To attract retain and motivate talent and a balance of fixed and variable so as toincentivise high level of performance.
The Remuneration Policy is guided by a common reward framework and set of principlesand objectives as more fully and particularly envisaged under Section 178 of the CompaniesAct 2013 and principles pertaining to determining qualifications positive attributesintegrity and independence.
REMUNERATION TO DIRECTORS
a. Fee to Non-executive directors.
A non-executive director may receive remuneration by way of sitting fee for attendingmeetings of the Board or Committee thereof. The amount of fees shall not exceed the amountas may be prescribed under The Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 and any amendment thereto.
b. The amount of fee to Independent directors and women directors shall not be lessthan the fee payable to other directors. c. No sitting fee shall be paid to the executivedirectors for attending Board or Committee meetings.
d. The Board may review the fee at reasonable length of time and in doing so considerindustry trends practices Company's performance shareholder's interest and regulatoryprovisions and environment.
e. No director other than Chairperson of the Board shall be entitled to commissionon profits of the Company and such commission shall be determined by the Board for eachfinancial year and such payment shall be subject to the provisions of the Companies Act2013.
f. Directors shall be entitled to reimbursement of expenses on travelling lodgingboarding and other out-of-pocket expenses incurred for participation in the Board andCommittee meetings and other work related to the Company's business.
REMUNERATION TO KEY MANAGERIAL PERSONNEL
a. The remuneration to key managerial personnel (Joint Managing Director & ChiefExecutive Officer Joint Managing Director Deputy Managing Director & Chief OperatingOfficer Whole Time Director Company Secretary and Chief Financial Officer) shall bedetermined with due regard to the individual's educational and professionalqualifications age experience expertise knowledge and contribution and competition forsuch talents in the industry / corporate sector.
b. The remuneration payable to key managerial personnel may comprise of
i. Fixed salary variable salary bonus / ex-gratia
ii. Perquisites and Allowances performance-linked incentive and other compensation asthe Board may determine.
c. Remuneration to any one executive director shall not exceed five per cent of the netprofits of the Company and the total remuneration payable to all executive directorstogether shall not exceed ten per cent of the net profits of the Company.
REMUNERATION TO DESIGNATED EMPLOYEES
a. For the purpose of this policy an employee who is employed by the company anddesignated as a member of core management but not a director and all Head of functionalresponsibility or management and holding office one level below executive directors areDesignated Employees.
b. The remuneration shall be determined in an equitable manner having regard toqualifications age experience and contribution to the Company need to retain talentand industry / market trends.
c. Remuneration to Designated Employees shall include fixed salary variable salarybonus / ex-gratia Perquisites and Allowances performance-linked incentive and othercompensation as the Board may determine.
REMUNERATION TO OTHER EMPLOYEES
The nature of job and market parity of similar talent will be key factor in paydetermination for different levels of employees.
1. Wage and salary structure will be simple and easy to link performance andcompensation.
2. Discretionary retention bonus may be given in deserving cases as may be decided bymanagement.
3. Annual Pay increases will be based on a combination of appraisal of competency andperformance rating.