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Bharat Dynamics Ltd.

BSE: 541143 Sector: Engineering
NSE: BDL ISIN Code: INE171Z01018
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OPEN 398.90
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VOLUME 183986
52-Week high 454.25
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P/E 13.15
Mkt Cap.(Rs cr) 7,032
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Sell Price 383.65
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OPEN 398.90
CLOSE 397.40
VOLUME 183986
52-Week high 454.25
52-Week low 147.00
P/E 13.15
Mkt Cap.(Rs cr) 7,032
Buy Price 383.65
Buy Qty 27.00
Sell Price 383.65
Sell Qty 28.00

Bharat Dynamics Ltd. (BDL) - Director Report

Company director report

Dear Members

Your Directors have pleasure in presenting the 49thAnnual Report togetherwith the audited financial statements of the Company for the year ended 31 March 2019.

1. HIGHLIGHTS OF OPERATIONS

• BDL has completely executed Milan- 2T ATGM contract well before the contractualdelivery schedule.

• During the year BDL inaugurated production facility for manufacturing ofMan-Portable Anti-Tank Guided Missile (MP-ATGM)

• During the year BDL inaugurated Acoustic Tank Test Facility at itsVisakhapatnam Unit. The test facility is one of its kind world class test facility usedfor testing underwater weapons like Torpedoes Mines Sono buoys Decoys and other relatedsystems

2. FINANCIAL RESULTS AND PERFORMANCE HIGHLIGHTS

2.1 Performance of the Company in financial terms is summarized below:

र in Crore

S. No Particulars 2018-19 2017-18 % of Increase/ (Decrease)
i) Sales/Revenue from Operations* 3069 4588 (33%)
ii) Value of Production 3235 4641 (30%)
iii) Profit Before Tax 671 774 (13%)
iv) Profit After Tax 423 528 (20%)
v) Value Added 1416 1734 (18%)
vi) Earnings per share# 23 27

-

* As per IND-AS Sales/Revenue from Operations of FY 2018- 19 is after adjustment of LDamount of र 148.98 Crore but whereas LD in previous year is treated as Expense;

# EPS has been calculated based on profits excluding the other comprehensive income.EPS for previous year is adjusted for Bonus issue made during that year.

2.2 Following data reflect the financial position of the Company:

र in Crore

Particulars 2018-19 2017-18 (Decrease)
Gross Block 1008 856 18%
Depreciation 196 136 44%
Net Block 812 720 13%
Working Capital 1390 1086 28%
Capital Employed 2347 1954 20%
Net Worth 2269 1956 16%

2.3 During the year under review your Company has achieved sales turnover of र3069 Crore as against sales turnover of र 4588 Crore of previous year. The reductionin revenue from operations in F.Y. 18-19 as compared to previous year is due to completionof order book of ground support equipments to Akash Weapon systems. Your Company hasachieved profit before tax of र 671 Crore as compared to र 774 Crore achieved inthe previous year. Profit after tax is at र 423 Crore as against र 528 Crore inthe previous year. As far as profit margin is concerned there is an improvement inoperating margin even though there is reduction in turnover.

2.4 This year your Company made an operating profit of र 617 Crore as againstर 677 Crore in the previous year indicating a significant improvement in operationalperformance. Major order executed during the year for the Armed forces includes AkashWeapon system ATGMs and other products.

2.5 The order book position of the Company as on 01 April 2019 is around र 7258Crore comprising mainly of Akash MR- SAM ATGMs Export of LWT and other products.

3. FIXED DEPOSITS FROM PUBLIC:

3.1 The Company did not accept any fixed deposits from Public during the year andthere was no outstanding Fixed Deposits at the beginning/end of the year. Accordinglythere was no default in payment of deposits/interest thereon.

4. Dividend & transfer to general reserve:

4.1 Your Company has a consistent track record of Dividend Payment. The Board hasrecommended a Final Dividend of र 1.67/- per equity share of र 10/-eachamounting to र 30.61 Crore for the year 2018-19. Further your Company has paidinterim dividend of र 96.22 Crore (i.e र 5.25 per equity share of र 10each) in March 2019.

4.2 An amount of र 230 Crore is being transferred to General Reserve for the year2018-19.

5. CAPITAL STRUCTURE:

5.1 The paid up capital of the Company as on 31st March 2019 stood atर 183.28 Crore (183281250 equity shares of र 10/- each).The AuthorizedCapital of the Company is र 200 Crore (200000000 equity shares of र 10/-each) as on 31st March 2019.

6. PERFORMANCE AGAINST MoU:

6.1 Your Company signs a Memorandum of Understanding (MoU) every year with the Ministryof Defence Government of India. The performance of the Company for the year 2017- 18 hasbeen rated "Very Good". The MoU rating for the year 2018- 19 is underevaluation. The MoU for the financial year 2019- 20 was finalized with the Ministry witha Net Sales target fixed at र 4200 Crore. Your Company is striving to achieve thetargets fixed in the MoU.

7. MODERNIZATION UPGRADATION AND INDIGENIZATION:

7.1 Manufacturing Capacities of ATGMs and other products are being ramped up. Duringthe year an amount of र 90 Crore has been earmarked for Capital Expenditure (CAPEX)towards modernization of Plant & Machinery and other Infrastructure developmentprogramme.

7.2 The following Key Technology Upgradation projects were taken up for implementationduring the financial year 2018- 19:

a) 160 KV X-RAY machine

b) SMD Pick and place machine.

c) Automatic inspection System.

7.3 Your Company is putting up determined efforts towards increasing indigenizationcontents in the manufacture of ATGMs with the objective of increasing self-reliancereduction of Foreign Exchange out flow and achieving cost reduction. Indigenization ofproducts like Konkurs-M Invar and Milan-2T has been achieved upto 95% 78.6% and 71%respectively.

8. RESEARCH & DEVELOPMENT

8.1 Your Company recognizes that Research & Development is a thrust area for designand development of various products for Indian Armed Forces. During the year R&Dfacilities like PADS Schematic design software Advanced Structural and Thermal Analysissoftware Rapid prototyping and Reliability software Opto-mechanical software PCB designtools and other Development tools have been established.

8.2 Your Company has identified various products to meet the requirement of IndianArmed Forces and currently its research and development focusing in the followingmissions:

a) Counter Measures Dispensing System (CMDS): An airborne defensive system toprovide self-protection to aircrafts and helicopters by dispensing Chaffs / Flares. BDLhas developed CMDS for Jaguar and variants of CMDS for many platforms including AdvancedLight Helicopter (ALH) Light Combat Aircraft (LCA) Airborne Early Warning and Control(AEW&C) Mirage upgrade Light Combat Helicopter (LCH) and Medium Lift Helicopter(MLH). However flight trials are yet to be conducted for LCH and MLH. During 2018-19first batch of CMDS for Mirage were supplied to M/s.HAL for integration to aircraft. CMDSfor MLH were supplied to M/s.BEL for developmental trials. Development of CMDS for AVROreplacement aircraft is under progress. There is a substantial export market for CMDS.

b) Dispenser Unit for 050 mm round cartridges for Sukhoi Aircraft: BDL has designedand developed 050 mm Dispenser Unit for Su-30 MKI aircraft for dispensing 050 mmcartridges (chaffs and/or flares). 050 mm Dispenser Unit has been developed asForm-Fit-Functional replacement of existing Dispenser Unit of Russian-make CMDS. Anothervariant of 050 mm Dispenser Unit has been developed which is compatible to work withBDL-CMDS. Both variants of 050 mm Dispenser Unit are ready for flight trials.

c) Amogha-III: It is a 3rd generation fire and forget IIR seeker basedATGM. Prototypes of all the sub-assemblies of the missile are being developed as perin-house design. Pop- out test which is the first milestone of the project wassuccessfully conducted twice during the year. System configuration has been finalized.Design of sub-systems are under progress.

8.3 The following table shows the recent trend in in-house R&D expenditure:

(र in Crore)

Particulars 2015-16 2016-17 2017-18 2018-19
Sales Turnover (Gross) 4160 4887 4588 3069
R&D expenditure 29.43 34.71 40.22 53.45

8.4 Apart from in-house R&D activities your Company has entered into MoUs withDRDO labs for co-development of various missiles with a substantial financial commitmentand manpower support from the Company. This will further enhance the R&D efforts ofBDL to strengthen Government of India's Make in India programme.

9. PROCUREMENT FROM MSMEs

9.1 Your Company has been providing increased thrust on procurement from Micro Small& Medium Enterprises (MSMEs) as per the guidelines/notifications issued by theMinistry of MSMEs.

9.2 Your Company being a weapons manufacturing Company has been granted exemptions videMSME Notification No.F.No.21(1)/201 I-MA Dated 23 March 2012. However your Company wouldendeavor to procure general items from SMEs. A list of 358 items were reserved in theCompany's IMM manual for procurement from SMEs.

9.3 As per Government of India guidelines issued from time to time your Company extendsvarious facilities/concessions to vendors registered with NSIC under its Single PointRegistration Scheme such as

a) Issue of Tender documents free of cost.

b) Exemption from payment of Earnest Money Deposit.

c) Price Preference of 15% over the quotation of large- scale units. In case the SMEhappens to be within 15% range above the L1 price who is not an SME SME unit shall beprovided with a counter price to reduce to L1 price. A quantity of up to 25% shall beordered on SME on acceptance of L1 price. Out of 25% of annual procurement from MSEs 5%has been earmarked for procurement from MSEs owned by Scheduled Castes or the ScheduledTribes entrepreneurs. Further another 3% has been earmarked for women owned MSEs.

d) Pre-qualification experience is relaxed for Start-ups (whether MSMEs or otherwise)as per guidelines of Govt. of India subject to the meeting of quality and technicalspecifications as per clarification given by Ministry of Finance Department ofExpenditure (DoE).

e) Interest free advance is also being paid to MSMEs and startups against BankGuarantee for 110% of order value.

f) Vendors registered in other Defence PSUs will be considered as Deemed Registered.This Deemed registration will enable the vendors to participate in all future tenders ofDPSUs for similar category of goods/services subject to fulfillment of other eligibilitycriteria indicated in the RFQ.

g) Providing Test facilities to MSMEs/Start-Up vendors.

9.4 Your Company has registered in Trade Receivables Discounting System (TReDS). It isan initiative undertaken by Reserve Bank of India to safeguard the interest of MicroSmall and Medium Enterprises (MSMEs) facilitating the financing of trade receivables ofMSMEs from corporate buyers through multiple financiers. It enables discounting ofinvoices of MSME sellers raised against large corporate allowing them to reduce workingcapital needs. In Trade Receivables Discounting System all registered MSMEs can discounttheir bills of exchange or invoice through TReDS with a quoted price of Bankers

9.5 Preference to Make in India:

The "Make in India" initiative is based on four pillars i.e. New processesNew infrastructure New sectors and New mindsets which have been identified to give boostto entrepreneurship in India not only in manufacturing but also other sectors. TheGovernment has issued Public Procurement (Preference to Make in India) Order 2017 as partof the policy of the Government of India to encourage 'Make in India' and promotemanufacturing and production of goods and services in India with a view to enhancingincome and employment. Subject to the provisions of this Order and to any specificinstructions issued by the Nodal Ministry or in pursuance of this Order purchasepreference shall be given to local suppliers in all procurements undertaken by procuringentities in the manner specified. As per the order the minimum local content shallordinarily be 50%. The Nodal Ministry may prescribe a higher or lower percentage inrespect of any particular item and may prescribe the manner of calculation of localcontent.

In procurement of goods for INR 5 million and less and where the Nodal Ministrydetermines that there is sufficient local capacity and local competition only localsuppliers would be eligible. For procurements valued at more than INR 5 million (or wherethere is insufficient local capacity/ competition) if the lowest bid is not from anon-local supplier the lowest- cost local supplier who is within a margin of 20% of L1would be given the opportunity to match L1. If the procurement is of a type that the ordercan be divided and given to more than one supplier the non-local supplier who is thelowest bidder will get half of the order and the local supplier will get the other halfprovided if it agrees to match the price of L1. If the procurement cannot be divided thenthe lowest cost of local supplier would be given the order provided if it agrees to matchL1.

9.6 Government e-Marketplace (GeM): Your Company has registered with GeM as perRule No.149 of the General Financial Rules 2017. GeM is a one stop portal to facilitateonline procurement of common use Goods & Services required by various GovernmentDepartments/ Organizations/PSUs. GeM aims to enhance transparency efficiency and speed inpublic procurement. It provides the tools of e-bidding reverse e-auction and demandaggregation to facilitate the government users to achieve the best value for their money.

10. EXHIBITIONS:

10.1 Senior Executives and Directors participated in National and InternationalExhibitions during the year 2018-19. Such platforms are used to gain awareness in advancedtechnologies interact with experts and share knowledge. Visiting the pavilions of othercountries and understanding the systems available with them enables your Company to drawup its own future business plans effectively. During the year your Company participatedin the exhibitions as details given in Page 21.

11. EXPORTS

11.1 Your Company is now focused more into export markets. During the year yourCompany has framed an Export Policy in line with the MoD guidelines with an object tostrive continuously to identify potential opportunities for exports especially defenceexports and strive to obtain the orders by working in coordination with various stakeholders like GoI PSUs Private Sectors etc. Your Company aims to create an exportoriented ecosystem within the organisation and among the vendors.

11.2 Your Company envisages lot of potential for exporting its products to friendlyforeign countries. This assessment is based on the MoU target for export order executionduring 2019-20 which is र 420 Crore.

12. BOARD OF DIRECTORS:

12.1 The Board of Directors of the Company comprises Functional Directors GovernmentNominee Directors and Independent Directors who are appointed by the Government of Indiafrom time to time.Further the tenure and remuneration of Functional Directors includingChairman and Managing Director are decided by the Government of India through PublicEnterprises Selection Board/Search Committee. The Government communication also indicatesthe detailed terms and conditions of their appointment including a provision for theapplicability of the relevant rules of the Company.

12.2 The Government Nominee Directors are not entitled to any remuneration/ sittingfee. The Independent Directors are entitled to sitting fees for attending theBoard/Committee meetings as duly approved by the Board considering the governmentdirectives statutory acts rules and regulations

12.3 Appointment of Independent Directors

In order to fulfill the requirement of SEBI (LODR) Regulations 2015 Government ofIndia vide its letter No.H- 62011/2/2016-D (BDL) dated 13 September 2017 appointed threenew Independent Directors viz. Shri Ajay Nath Shri KS Sampath and Smt.Latha NarasimhaMurthy as Part- time Non-Official Directors w.e.f 13 September 2017 for a period of threeyears or until further orders whichever is the earliest.

Aero India held from 20 - 24 Feb 2019 at Bengaluru

Chief of the Army Staff General during his visit to BDL stall

Principal Director of Commercial Audit during his visit to BDL

Exhibition at Langkawi Malaysia - 26-30 Mar 2019

Secretary DP at Lima 2019 International Exhibition at Langkawi Malaysia -26-30 Mar 2019

Visit by Chief of Philippines Navy

Indo-Defence Expo 7-10 Nov 2018 At Jakarta Indonesia

EDEX-2018 Egyptian Defence Exposition at Cairo Egypt-3-5 Dec 2018

12.4 During the year the Government of India vide letterNo.DDP-M0001(24)/04/2018-D(BDL) dated 28th November 2018 extended the term ofoffice of Independent Directors Smt. Sushama V Dabak and Prof. Ajay Pandey for anotherperiod of one year with effect from 01 December 2018 or until further orders whichever isthe earliest.

(i) 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.

(ii) Change in Directorate:

The following changes took place in the Directorate of your Company

S.No Name of the Director Designation Date of Appointment Date of cessation
1 Shri.V.Udaya Bhaskar Chairman & Managing Director - 28/02/2019
2 Cmde Siddharth Mishra Chairman & Managing Director 01/03/2019 -
3 Shri.K.Divakar Director (Technical) - 31/08/2018
4 Shri.N.P.Diwakar Director (Technical) 01/09/2018 -
5 Shri.G.Satheesh Reddy Government Director 01/05/2018 31/12/2018
6 Shri.MSR Prasad Government Director 31/12/2018 -
7 Shri.V.Gurudatta Prasad Director (Production) - 31/05/2019
8 Shri.P.Radha Krishna Director (Production) 01/06/2019 -

In terms of provisions of section 152 of the Act Shri. S. Piramanayagam Director(Finance) & CFO retires by rotation at the ensuing Annual General Meeting and beingeligible offers himself for reappointment.

(iii) Number of Meetings of Board:

During the year 2018-19 Seven (7) Board Meetings were held on 30 May 2018 20 July2018 14 August 2018 31 October 2018 11 November 2018 14 February 2019 and 18 March2019.

(iv) Performance Evaluation

The provisions of Section 134(3)(p) of the Companies Act 2013 relating to evaluationof Board of Directors do not apply to your Company since necessary exemptions are providedto all government companies. Further similar exemptions were granted to your Company bySecurities Exchange Board of India (SEBI) under the provisions of SEBI (ListingObligations and Disclosure Requirements {LODR}) Regulations 2015 vide their letter No.SEBI/HO/CFD/DIL1/OW/P/2018/1679/1 dated January 17 2018.

13. DIRECTORS' RESPONSIBILITY STATEMENT:

13.1 As per Section 134(5) of the Companies Act 2013 as amended the Directors state:

(i) that in the preparation of the annual accounts the applicable Accounting Standardshave been followed along with proper explanation relating to material departures.

(ii) that the selected accounting policies have been applied consistently and judgmentsand estimates made are reasonable and prudent so as to give a true and fair view of thestate of affairs of the Company as at 31 March 2019 and of the profit of the Company forthe year ended on that date.

(iii) that 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.

(iv) that the annual accounts have been prepared on a going concern basis.

(v) that the Company has devised proper internal financial controls and that suchinternal financial controls were adequate and operating effectively.

14. EVENTS SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS:

14.1 Material changes and commitments affecting the financial position of the companywhich have occurred between 31 March 2019 and date of signing of this Report are - Nil.

15. MANPOWER AND RESERVATION OF POSTS FOR SCs/STs:

15.1 The Company has been following Presidential Directives of the Government withregard to reservation of posts for SCs/STs in recruitments.

15.2 Total manpower strength as on 31 March 2019 is at 3034 (including four functionaldirectors) out of which the number of persons on temporary rolls is 33. Of the totalstrength 84 are ex-servicemen 577 are of Schedule Caste and 213 are of Scheduled Tribes.The percentage of Scheduled Caste and Scheduled Tribes in respect of Employees is at19.02% and 7.02% respectively.

15.3 Number of persons on temporary rolls as on 31 March 2019 is 33 out of which 7belong to Scheduled Caste category.

15.4 The No.of Scheduled Caste and Scheduled Tribes in various categories of posts ason 31 March 2019 is given below:

Number of Employees

Category

Total Strength

Scheduled Castes

Scheduled Tribes

31-03-2018 31-03-2019 31-03-2018 31-03-2019 31-03-2018 31-03-2019
Group-A 856 864 153 156 86 83
Group-B 17 78 2 17 1 5
Group-C 1892 1797 342 329 111 107
Group-D 266 258 71 68 18 18
Temporary 60 33 18 7 1 0
Total 3091* 3030* 586 577 217 213

*excluding four functional directors.

15.5 Recruitment of employees in Scheduled Caste and Scheduled Tribes during 2018-19 isgiven below:

Classification of posts Total Vacancies Released Total Recruitment

Reservation of posts (out of Col.2)

Recruitment made during the year 2018-19

(1) (2) (3)

(4)

(5)

SCs STs SCs STs
Group-A 24 24 5 0 5 0
Group-B 0 0 0 0 0 0
Group-C 24 24 9 1 9 1
Group-D 0 0 0 0 0 0
Total 48 48 14 1 14 1

16. EMPLOYMENT OF WOMEN:

16.1 As per the recommendation No.51 Para (ii)(a) of the National Commission for Women(NCW) in its Annual Report for the year 1995-96 the employment position of Women as on 31March 2019 is given below as directed by the Ministry of Defence vide their letter Nos.39(6)/99/D(B&C) dated 27 August 1999.

I. Executives

Grade No. of Employees Women Percentage
i 78 12 15.38%
ii 193 23 11.92%
iii 207 32 15.46%
IV 149 19 12.75%
V 83 10 12.05%
Vi 176 11 6.25%
Vii 40 0 0.00%
Viii 14 1 7.14%
IX 2 0 0%
Functional Directors 3 - 0%
CMD 1 - 0%
Total 946 108 11.42%

II. Non-Executives

Grade No. of Employees Women Percentage
WG-0 2 0 0.00%
WG-1 10 1 10.00%
WG-2 143 20 13.99%
WG-3 170 16 9.41%
WG-4 331 34 10.27%
WG-5 193 40 20.73%
WG-6 196 28 14.29%
WG-7 53 7 13.21%
WG-8 53 5 9.43%
WG-9 97 3 3.09%
WG-10 23 0 0.00%
WG-11 192 5 2.60%
WG-12 592 51 8.61%
Total 2055 210 10.22%

17. PERSONS WITH DISABILITIES (PWD) AS ON 31 MARCH 2019:

17.1 The total number of Physically Challenged employees as on 31 March 2019 is 111 andits percentage to total employees works out to 3.66%.

HI LD VI Total
Group-A 6 14 5 25
Group-B 0 0 0 0
Group-C 18 47 8 73
Group-D 4 5 4 13
Total 28 66 17 111

HI- Hearing Impaired LD-Locomotive Disability VI-Visually Impaired.

18. HUMAN RESOURCE DEVELOPMENT:

18.1 During the year under review the Company has conducted training programmes for 819Executives and 1408 Non Executives to impart training on knowledge based developmentoriented and need based topics. Such training programmes were organized in-house and atpremises of external agencies to cover the present and future requirements of the Company.

18.2 Apart from regular training programmes your Company organized the followingactivities/ programmes during the year:

(a) Executive Education Programmes organized for Board of Directors: During theyear your Company has sponsored Executive Education Programmes for the Board of Directorsorganized by IIM-A IICA-IFC ICAI SCOPE and Gujarat National Law University.

(b) Management Development Programmes (MDPs):

Your Company sponsored 46 Senior Executives (in Grade V & above) for ManagementDevelopment Programmes (MDPs) conducted by premier Institutes in India like IIM-LucknowIIM-Indore and XLRI Jamshedpur during the year 2018-19.

(c) Advanced Management Programmes (AMP):

Your Company sponsored 02 principal Executives at General Manager and AdditionalGeneral Manager level for the Advanced Management Programme (AMP) conducted by Instituteof Public Enterprises Hyderabad in collaboration with INPAQT BV Solutions RotterdamNetherlands and Indian Institute of Public Administration New Delhi in collaboration withEcole National Administration Paris and Hertie School of Governance Berlin.

18.3 During the year Assessment Development Centre has assessed the 'Competency&Behavioral traits' of the Executives. 202 Executives in Gr.VI to Gr. VIII haveundergone assessment through M/s Thomas Assessment Pvt. Limited (TAPL) at BDL's trainingcentre in 14 batches.

19. 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.Further in accordance with Ministry of Corporate Affairsnotification no. GSR 463(E) dated June 05 2015 Government Companies are exempt fromSection 197 of the Companies Act 2013 and its rules thereof.

20. FOREIGN VISITS:

Your Company incurred an expenditure of around र 81.94 lakh during the year underreport towards foreign travel for business trips and also for on the Job-Training ofpersonnel.

21. INDUSTRIAL RELATIONS AND EMPLOYEE WELFARE:

21.1 Your Company continues to enjoy cordial and harmonious Industrial relations withthe cooperation and support of all sections of employees viz. Recognized Trade UnionAssociations such as SC ST OBC and Officers Association. All statutory committees suchas Works Committee Safety Committee Canteen Management Committee and other participativeforums have extended their Co-operation to maintain discipline at all levels.

21.2 Compliance on statutory welfare provisions are followed meticulously. The Companyhas been taking care of medical needs of employees and their family members as per BDLMedical Rules. Further in line with DPE guidelines Company has framed Pension Scheme andPost- Retirement Medical Benefit Scheme for the Executive and Non- Executives of theCompany.

21.3 During the year a Memorandum of Settlement was entered between Management andRecognized Union on Performance Linked Annual Incentive Scheme for Non-Executives with thesupport and aid of Conciliation Officer cum Assistant Labour Commissioner (Central)Hyderabad.

22. SECURITY:

22.1 Central Industrial Security Force (CISF) is providing Security and Fire Servicesin both Kanchanbagh and Bhanur Units. During the year under report CISF has played avital role in the Security and safeguarding of property of the Company. CISF team adoptedrobust security measures combining physical measures with technology to keep the highlysensitive installations secure.

22.2 The Plant Security Council is in place to review the security arrangements andimplementation of IB guidelines. Regular security audits plant security council meetingsare being conducted at both of our units. Meetings at regular intervals with the nearbyindustries law enforcement/sister agencies are being taking place for effectiveco-ordination mechanism.

22.3 You Company conducts regular programmes including mock drills on security andsafety awareness. Employees are sensitized on the security threat and action to be takenin case of emergency and fire accidents.

23. SAFETY:

23.1 Safety Health and Environment (SHE) is strictly followed at your Company. The twoCorporate Committees i.e. Industrial Safety Committee which is statutory and ExplosiveSafety Committee are functioning to meet the needs of the Company. Safety committeemeetings are held at regular interval for monitoring Safety Health and Environment as perthe statutory requirement. The works are carried out incompliance with the Factories Act1948 and Explosive safety strictly adhering to the Storage & Transport of ExplosiveCommittee (STEC) regulations.

23.2 Annual explosive safety audit is conducted by Centre for Fire Explosive &Environment safety (CFEES) New Delhi and the observations made by the audit team have beencomplied with. Regular medical check-ups are carried out for employees working inhazardous areas.

23.3 Training programmes are arranged by Human Resource Department through NationalSafety Council (NSC). Safety committee members and employees working in variousdepartments are sent for trainings conducted by National Safety Council-Mumbai in relevantworking environments.

23.4 Safety Engineering Department has organized guest lecture by experienced andpersons with expertise in the field on Explosive safety and Industrial Safety to educatethe employees of the Company. A three-day training program was conducted by 4-STechnologies on both Industrial safety & Explosive safety and ESD measures.

23.5 During Explosive safety audit Director of "CFEES" Center for FireExplosive & Environment Safety MoD-New Delhi delivered a talk on latest developmentsin Explosive safety on 9th April 2019 to inculcate Safety consciousness and to establishsafe working environment among all working in BDL.

23.6 Safety officers of BDL Safety Engineering Department conducted classes on bothIndustrial Safety and Explosive Safety in induction programme to new entrants & forunit level classes in coordination with ISTM-HRD.

23.7 Safety Day/Week was celebrated during the month of March-2019. On this occasionSafety pledge was administered to all the employees and various competitions on health& safety are conducted by Safety Engineering Department and employees are awarded toboost their interest towards safety. On the occasion of valedictory function Director ofFactories (T.S) & Dy. Chief Inspector of Factories were invited as guests to grace theoccasion.

23.8 Safety Engineering Department is in continuous interaction with Director ofFactories and Centre for Fire Explosive & Environment Safety (CFEES) Ministry ofdefence New Delhi to update their guide lines for compliance. Mock drills for cyanideantidote are carried by CMO Medical officers of BDL-KBU. Fire mock drills are conductedat regular intervals to ensure fire-fighting preparedness.

24. ANNUAL RETURN:

In accordance with the provisions of the Companies Act 2013 Company is required toattach an extract of Annual Return for the year under report and the same is placed as Annexure-I.

25. ENVIRONMENT AND POLLUTION CONTROL:

25.1 Your company contributes in all aspects for clean and green environment bysystematically integrating best practices to bring in cleaner technologies and greeningthe environment through recycle reuse and reduce approach. Effluent treatment plantSewage treatment plant are being operated. Various environmental protection activitiessuch as water conservation tree plantation disposal of hazardous waste and metal scrapplanting of saplings and landscaping utilizing treated effluent water and domestic waterhave been carried out. Company has been reviewing status of various types of pollutionsthrough ISO 14001 core team meetings internal audits and management review meeting atregular intervals. Annual surveillance audits are being carried out at all the three unitsto assess the effectiveness of EMS.

25.2 The following steps have been taken for controlling and preventing pollution inall respects:

i) Waste Management:

All food waste generated from canteen is being given for animal feeding and composting.The hazardous waste e-waste and biomedical waste is being given to the agency registeredwith the pollution control board. The lead acid batteries are being given to theauthorized recyclers/dealers on buy back. Metal scrap is disposed through M/s MSTC Ltd (AGovt. of India Undertaking).

ii) Testing of Environmental Parameters:

The environment parameters like ambient air quality wastewater from sewage treatmentplant and effluent treatment plant air quality of diesel generator set and Venturiscrubber are tested at all the three units through certified agency at regular intervals.

iii) Celebration of World Environment day 2018

World Environment Day 2018 was celebrated in all the three units of BDL. On thisoccasion with the theme "BEAT PLASTIC POLLUTION" banners were displayedat prominent locations and saplings were planted in all three units. Slogan writingelocution and quiz competitions were organised based on the theme in three languages i.e.Hindi Telugu and English and the winners have been presented with prizes.

26. QUALITY:

26.1 Your Company manufactures products which are single shot in nature. These productsrequire stringent Quality standards and high degree of reliability. In pursuit of thisobjective BDL has adopted International Quality Management system practices by way ofobtaining ISO/AS certification for the last 23 years. Presently Milan Akash CP-IGMPElectronics Division Design &Engineering divisions and Bhanur Unit have beencertified to AS 9100D Aerospace standard.

26.2 All the three units of BDL at Kanchanbagh Bhanur and Vizag have been certifiedwith ISO 14001:2004 Environmental Management System (EMS). Your Company has been certifiedwith ISO 27001:2013 (Information Security Management System) Standard.Material Testing Labof Bhanur Unit has been accredited with ISO / IEC 17025: 2005 (NABL) Certification in thefield of testing.

26.3 During the year regular audits by external agencies are conducted for all theISO/AS certified divisions. Customer satisfaction is being measured for all major productsmanufactured in those divisions.

26.4 Your Company is continuously striving to improve customer satisfaction throughcustomer meets and interaction with users. Corrective actions are taken wherever necessaryfor improvement.

27. OFFICIAL LANGUAGE (OL) IMPLEMENTATION:

27.1 Implementation of OL Act-1963 (as amended 1967) & Rules there under areensured. Quarterly OLIC Meetings are held regularly under the Chairmanship of CMD &Directors besides submission of Quarterly progress reports on use of OL are sent in timeto authorities concerned.

27.2 Under OL Act 1963 and the Presidential Orders thereon the papers laid before theParliament Annual Report of the Company MoU with MoD and brief of the Company along withpresentation for various delegations and Parliamentary Committees were prepared inbilingual form and submitted.

27.3 Hindi fortnight was celebrated from 01 to 14 September. On the eve of thisvarious competitions were organized at Kanchanbagh Bhanur Unit & Vishakhapatnam Unit.Cash Awards were given to the winners of the competitions. Complying with the assurancesgiven to the Parliamentary Committee on OL Hindi films HINDI MEDIUM at Kanchanbagh andGOLD at Bhanur Unit were shown on 8th & 10th September respectively through multimediaduring the Fortnight Celebrations.

27.4 TOLIC (U) functioning is being taken care by BDL and was awarded "DakshinKshetriya Rajbhasha Puraskar" for the year 2017-18 in Region "C" for bestimplementation of OL on 14th Feb. 2019. The award was presented by Hon'ble Governor ofKerala.

27.5 On the eve of Vigilance Awareness Week National Safety Week Fire Safety WeekWorld Environment Day & Quami Ekata Diwas various competitions were conducted inHindi English & Telugu to involve more and more employees of the Organization andbring awareness on these subjects.

27.6 On the occasions of Republic Day and Independence Day Celebrations CMD addressedthe gathering in Hindi. Similarly on the eve of Vigilance Awareness Week SwatchataPakhawada and Constitution Day the pledge was taken in Hindi & English.

27.7 Inspection on OL implementation in the Organisation was conducted by JointDirector (OL) DDP MoD at Vishakhapatnam Unit Liaison Office and Corporate Office &KBU on 09.01.2018 29.05.2018 & 14.11.2018 respectively. Appreciations were recordedin the reports received there on.

27.8 The Website of the company prepared in Hindi was updated from time to time incompliance to the directives of Govt. of India.

27.9 With an objective to promote and propagate Hindi and inculcate the reading habitamong the Officers & Employees of the Company various Hindi Magazines and News Paperssuch as Hindi Milap Swatrantra Vaartha Dakshin Samachar Golconda Darpan MilindPatrika etc. are subscribed regularly. Besides this popular Hindi books on all subjectsare also purchased annually with the same objective as per the directives of DOL.

28. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO:

28.1 Your Company being a Defence PSU the disclosure of information with respect toconservation of energy technology absorption foreign exchange earnings and outgo underthe provisions of Section 134(3)(m) read with Rule 8(3) of the Companies (Accounts) Rules2014 is not required as the Ministry of Corporate Affairs vide Notification GSR No.680 (E)dated 4th September 2015 has granted exemption to Defence Public Sector Undertakings.

28.2 Renewable Energy

Under Green Energy commitment to Hon'ble Prime Minister of India BDL has agreed tosetup 10 MW Grid connected Solar PV power plants under EPC mode of the 300MW Defensescheme. The Company installed 5 MW Grid connected Solar Power plant at BDL-Bhanur unitthrough M/s. Solar Energy Corporation of India which has become operational sinceSeptember 2017. The generated power is being used for self- consumption for BDL-Bhanurunit which results in reduced electricity bills and increase savings. The Company hasinstalled another 5MW Grid connected Solar Power plant at Ibrahimpatnam unit through M/s.Solar Energy Corporation of India which has become operational from this current yearApril 2019. This generated power is self-consumption for BDL-Kanchanbagh unit whichresults in reduced electricity bills and increase savings. This plant is connectedTelangana state electrical power grid at Mangalpally sub-station.

29 VIGILANCE:

29.1 Vigilance Awareness Week-2018 (VAW-2018) was organized from 29 October 2018 to 03November 2018. On 29 October 2018 Shri S.Piramanayagam Director (Finance) BDLadministered the Pledge and other Senior Officers read the messages of the Governmentauthorities. Live video conference of administering the Pledge & reading of themessages took place by covering all the divisions of BDL viz. i) Kanchanbagh-Hyderabad-Telangana ii) Bhanur-Sangareddy Dist.-Telangana iii) Visakhapatnam-AndhraPradesh iv) Corporate Office-Gachibowli and declared commencement of the Vigilanceawareness week Celebrations with the Theme of "Eradicate Corruption- Build a NewIndia".

29.2 On 30 October 2018 CVO BDL inaugurated the Vigilance Awareness Week-2018celebrations at BDL-Bhanur Sangareddy Dist. Shri Rakesh Kumar Dubbudu founder of FACTLY& Transparency Campaigner delivered a lecture on the theme of VAW-2018 at AuditoriumBDL- Township Bhanur.Prizes were distributed to winners in the Competitions conductedduring the VAW-2018 Celebrations

29.3 On 01 November 2018 Shri.P.V.K.Ramana Prasad Principal Chief Legal AdvisorAnti-Corruption Bureau Telangana State delivered a Guest Lecture and participated in aninteractive session with the Senior Executives of BDL & MIDHANI at "Midhani"Conference Hall Kanchanbagh Hyderabad as part of the Vigilance Awareness WeekCelebrations of 2018.

29.4 On 03 November 2018 Valedictory Function was organized wherein Hon'ble JusticeShri Abhinand Kumar Shavili Judge of the High Court for the State of Telangana &Andhra Pradesh delivered a guest lecture on "Eradicate Corruption- Build a NewIndia" as part of Vigilance Awareness Week- 2018 celebrations. Prizes weredistributed to winners in Various Competitions participated by the employees ofBDL-Kanchanbagh & Students of BP DAV School Midhani Township Kanchanbagh during theValedictory function.

29.5 "Integrity Pledge for Citizens" was administered on 29 October 2018 toall the employees of BDL-Kanchanbagh Bhanur Badamafi and Visakhapatnam and also tocollege students. On the eve of Shri Sardar Vallabhai Patelji's Birth Anniversary - TreePlantation was organized in BDL- Township Bhanur.

29.6 Various workshops/seminars/Training Programmes were organized and VigilanceAwareness initiatives were taken by Vigilance Department. The main focus of the Vigilancedepartment has been preventive/pro-active vigilance. System improvement suggestions weregiven to the Management on areas like e-tendering recruitment and absorption ofManagement Trainees Resignation e-payment e-procurement departmental promotionsforeign visits merit awards to employees civil works etc during the year under report.

30. CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY DEVELOPMENT:

30.1 Pursuant to the provisions of Section 135 of the Companies Act 2013 and TheCompanies (Corporate Social Responsibility) Rules 2014 read with various clarifications/amendments issued by Ministry of Corporate Affairs & DPE guidelines the Company hasundertaken various activities as per the CSR Policy. The programmes/initiatives/projectsare taken up inline with the Schedule-VII of the Companies Act-2013 which are dulyincorporated in CSR policy and forms the guiding principle for all our programmes. TheBoard of Directors of your Company has constituted Board Level Committee on CorporateSocial Responsibility and Sustainable Development (CSR & SD) (please refer CorporateGovernance Report) in line with the provisions of Section135 of the Companies Act 2013.The Committee has formulated and recommended CSR Policy to the Board indicating theprojects/activities to be undertaken by the Company as specified in ScheduleVII of theCompanies Act 2013.

30.2 The CSR and SD activities are monitored periodically by the Committee and anannual report on CSR and SD activities undertaken during the year 2018-19 is enclosed at Annexure-II.

30.3 Your Company has been very conscious about its responsibilities towards society.Your Company has also ventured into backward/ under developed areas in Andhra Pradesh andTelangana to undertake Corporate Social Responsibility (CSR) activities by sponsoringvarious schemes.

30.4 The core areas of focus under CSR are Health Care Nutrition Education &Literacy Skill Development & Sustainable Livelihoods Sanitation Safe Drinking Wateretc. Your Company also adopted villages in Andhra Pradesh and Telangana State underCorporate Social Responsibility initiative and the focus is on the necessities of humanlife- health water and other conveniences.

30.5 During the year 2018-19 the CSR & SD expenditure target was र 1633.40lakh (including carry forward unspent amount of previous years). Against the target theCompany has incurred an expenditure of र 1683.10 lakh and achieved 100% CSR targetamount required under the provisions of Companies Act 2013.CSR activities beingundertaken are placed on Company's website hhtp://www.bdl-india.in

31. AUDIT COMMITTEE:

An Audit Committee is in place as a part of good Corporate Governance. Eight meetingshave been held during the year 2018- 19 to review internal control systems and theiradequacy including coverage of Audit Functions. Details of composition terms ofreference etc. are covered in Report on Corporate Governance.

32. RELATED PARTY TRANSACTIONS

There are no materially significant related party transactions during the year underreview which may have a potential conflict with the interest of the Company at large.Thus disclosure in Form AOC-2 is not required. Members may refer to the notes to theaccounts for details of related party transactions. The policy for related partytransaction has been uploaded on the Company's website www.bdl-india.in .

33 PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS:

Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 are given in the notes to the Financial Statement

34 INTERNAL CONTROL SYSTEMS

Your Company had put in place all required internal controls and systems to meet thecanons of financial propriety. External audit firms are appointed to ensure their adequacyand report thereon. Detailed analysis of reports of Internal Audit Firms as well asreports of Internal Audit Department of your Company is placed before the Audit Committeefor its review and advice. The adequacy of internal control procedures are reviewed andreported by Statutory Auditors in their Audit Report. The necessary disclosures have beenmade in Notes to Accounts. Your Company being a Government Company is subject toGovernment Audit also.

35. AUDITORS:

M/s.S.R.Mohan & Co. Chartered Accountants Hyderabad were appointed as StatutoryAuditors of the Company for the financial Year 2018-19 by the Comptroller & AuditorGeneral of India. The Auditors have audited the Accounts and their Report is placed as apart of the Annual Report.

36. COMMENTS OF THE COMPTROLLER & AUDITOR GENERAL OF INDIA

The Comments of Comptroller and Auditor General of India (C&AG) under Section 143(5) of the Companies Act 2013 on the accounts of the Company for the year ended 31 March2019 are placed next to the Statutory Auditors Report.

37. COST AUDITORS

Your Company appointed M/s. Narasimha Murthy & Co. Cost Accountants Hyderabad asCost Auditors for the FY 2018-19 in terms of Section 148 of the Companies Act 2013 readwith the Companies (Cost Records and Audit) Rules 2014.

38. SECRETARIAL AUDIT

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. Narender & Associates Practicing Company Secretaries (PCS RegistrationNo.5024) for the financial year 2018-19 to undertake the Secretarial Audit of the Company.The Secretarial Audit Report is annexed to this report as Annexure III.

39. CEO / CFO CERTIFICATION:

As per the requirements of SEBI Listing Regulations and DPE Guidelines the CEO/CFOcertificate has been obtained and placed before the Audit Committee and the Board.

40 MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management Discussion and Analysis Report required under the SEBI (LODR) Regulations2015 and also under the DPE Guidelines on Corporate Governance for Central Public SectorEnterprises (CPSEs) is attached to this Report as Annexure IV.

41. CORPORATE GOVERNANCE:

41.1 Corporate Governance is about application of best management practices complianceof laws and adherence to ethical standards to achieve Company's objective of enhancingstakeholders' value and discharge of social responsibility.

41.2 The Company has a well-established transparent and fair administrative set up toprovide for professionalism and accountability.

41.3 As per the guidelines on Corporate Governance for CPSEs issued by DPE vide its OMNo. 18 (8)/2005-GM dated 14 May 2010 and in terms of the SEBI (LODR) Regulations 2015Report on Corporate Governance along with Certificate on compliance of conditions onCorporate Governance from a Practicing Company Secretary are attached to this report asAnnexure-V.

41.4 Quarterly and Yearly compliance reports on Corporate Governance are beingforwarded to Stock Exchanges and MoD in the prescribed format. Your Company received"Excellent" rating from MoD for compliance of Corporate Governance under DPEGuidelines for the year 2017-18 and compliance on Corporate Governance for the year2018-19 is under evaluation.

42. RISK MANAGEMENT:

Pursuant to the Reg. 21 of SEBI (LODR) Regulations 2015 the Company has constituted aRisk Management Committee. The details of Committee and its terms of reference are set outin the Corporate Governance Report

43. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION & REDRESSAL) ACT 2013:

In line with the provisions contained under "The Sexual Harassment of Women at theworkplace (Prevention Prohibition & Redressal) Act 2013 your Company has put inplace "Anti Sexual Harassment Policy" in line with the requirements of the aboveAct. During the year 2018-19 your Company has not received any Sexual harassmentcomplaints.

44. COMPLIANCE UNDER THE RIGHT TO INFORMATION ACT 2005.

The information required to be provided to citizens under Section 4(1)(b) of Right toInformation Act 2005 is placed on Company's Website www.bdl-india.in . It containsgeneral information of the Company functions powers and duties of employees/ officersdecisions making process rules regulations manuals and records held by the Companydirectory of the Company's Officers pay scales of officers/ employees and procedure forseeking information and inspection of records. The Company has nominated a Central PublicInformation Officer of Senior Manager Level to attend to queries and appeals. Furtherduring the year 2018-19 the Company received 120 applications/queries and the same weredisposed-off except one RTI request which is under process.

45. VIGIL MECHANISM

Pursuant to the provisions of the Section 177(9) of the Companies Act 2013read withRule (7) of the Companies (Meeting of the Board & its Power) Rules 2014 and DPEGuidelines for CPSEs the Board of Directors had approved the policy onWhistleblower/Vigil Mechanism and the same was hosted on website of the Company. Thepolicy inter-alia provides a direct access to the Chairman of the Audit Committee

46. BUSINESS RESPONSIBILITY REPORT

The Securities and Exchange Board of India (SEBI) has mandated inclusion of BusinessResponsibility Report ("BR report") as part of the Annual Report for 500 listedentities based on market capitalization. Your Company has prepared a comprehensive policyframework for BR report after studying the SEBI (LODR) Regulations 2015 requirements andkeeping in view the business and governance environment in which BDL as a Defence PSUoperates. The Company's BR report for the year is attached to this Report as Annexure VI.

47. DIVIDEND DISTRIBUTION POLICY

47.1 In terms of SEBI (LODR) Regulations 2015 the top 500 listed Companies based onmarket capitalization shall formulate a Dividend Distribution Policy. As per the MarketCapitalization data released by stock exchanges the Company ranks in the list of top 500listed Companies.

47.2 Accordingly dividend distribution policy has been adopted to set out theparameters and circumstances that will be taken into account by the Board in determiningthe distribution of dividend to its shareholders and/or retaining the profit into thebusiness. The policy is available on the BDL's website www.bdl-india.in

48. ACKNOWLEDGEMENT

48.1 Your Directors gratefully acknowledge the valuable support and assistance receivedfrom all Government Agencies particularly Ministry of Defence Ordnance FactoriesDepartment of Defence Production DRDO Laboratories Central Government Departments StateGovernments of Telangana and Andhra Pradesh Quality Assurance Agencies of Government ofIndia and other PSUs for the help extended by them from time to time.

48.2 The Company wishes to place on record its appreciation for the cooperationextended and guidance provided by the Comptroller & Auditor General of India thePrincipal Director of Commercial Audit & Ex-officio Member Audit Board StatutoryAuditors Bankers and Suppliers.

48.3 The Directors take this opportunity to place on record their deep appreciation forthe valuable contribution made and co-operation extended by the employees at all levels topropel the Company to greater heights and to sustain its growth path in the years to come.

For and on behalf of the Board
Cmde Siddharth Mishra (Retd.)
Chairman and Managing Director
DIN: 08367035
Place: Hyderabad
Date: 10 August 2019