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Bharat Dynamics Ltd.

BSE: 541143 Sector: Engineering
NSE: BDL ISIN Code: INE171Z01018
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VOLUME 7136
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P/E 25.31
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Bharat Dynamics Ltd. (BDL) - Director Report

Company director report

Dear Members

Your Directors have pleasure in presenting the 50th Annual Report togetherwith the audited financial statements of the Company for the year ended 31 March 2020.

1. HIGHLIGHTS OF OPERATIONS

• Hon'ble Raksha Mantri Shri Rajnath Singh visited BDL on 03 Aug 2019 as a part ofthe Golden Jubilee Celebrations of your company. Medium Range Surface to Air Missile (MRSAM) was handed over by Hon'ble RM to the Indian Air Force.

• During the year Akash SAM two regiment order along with GSE has been executedcompletely. Further your company has received Akash SAM order worth Rs.1700 Crore forsupply of Akash Missiles along with associated spares.

• Handed over first Heavy Weight Torpedo (Varunastra) from the production order ofIndian Navy during "Bandhan" Programme in February 2020.

• Corporate Office of your Company has been certified with ISO 9001: 2015Certification in Feb 2020 by the Certification body M/s. Novo Star Management SolutionsIndia Pvt Ltd Bengaluru.

• During the year your company has obtained PCMM level-II certification and thefirst Defence PSU to implement the PCMM level certification for HR Process.

2. FINANCIAL RESULTS AND PERFORMANCE HIGHLIGHTS

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

Rs. in Crore

Particulars 2019-20 2018-19 % of Increase/ (Decrease)
Sales/Revenue from Operations 3095 3069 0.85%
Value of Production 2592 3235 (19.88%)
Profit Before Tax 742 671 10.58%
Profit After Tax 535 423 26.48%
Value Added 1555 1416 9.82%
Earnings per share# (in Rs.) 29.18 23.06 26.54%
# EPS has been calculated bases on profits excluding the other compirehensive income.

2.2 Following data reflect the financial position of the Company:

Rs. in Crore

Particulars 2019-20 2018-19 % of Increase/ (Decrease)
Gross Block 1011 1008 0.30%
Depreciation 258 196 31%
Net Block 753 812 (7.27%)
Working Capital 2260 1390 62.59%
Capital Employed 3192 2347 36%
Net Worth 2607 2269 14.90%

2.3 COVID-19:

Due to COVID-19 pandemic and consequent lockdown your Company's manufacturingfacilities remained shut from March 23 2020 and partially resumed with 33% staff w.e.fMay 04 2020 and with 50% staff from May 20 2020 in compliance with the MHA GOIguidelines. Since the lockdown was started from last week of March 2020 there was notmuch impact on the business of your Company for the year under review. However thelockdown has adversely impacted your Company's operations during April and May 2020 therewas no production during this period. As the situation is very dynamic your company isclosely monitoring it. Your Company hopes that the business situation will normalizeduring the current financial year in case any further interruptions in businessoperations the revenues and profitability are likely to be impacted in the currentfinancial year. Indian Armed forces are the major customers of your Company and yourCompany do not foresee any fall in demand for its products/services. Indian Armed Forceshave extended the delivery dates for one of the contracts and remaining contracts aregoing to be completed within the scheduled dates and as such there is no significantimpact on your company on this account. Your Company is well positioned to fulfil itsobligations and existing contracts/arrangements.

2.4 During the year under reviewyour Company has achieved revenue from operations ofRs.3095 Crore as against the revenues of Rs.3069 Crore of previous year. Your Companyachieved nominal growth in revenues as compared to previous year. Your Company hasachieved profit before tax of 742 Crore as compared to Rs.671 Crore achieved in theprevious year. Profit after tax is at Rs.535 Crore as against Rs.423 Crore in the previousyear. As far as profit margin is concerned there is an improvement in operating marginsdue to product-mix and increase in operational efficiency though there is minimalincrease in turnover. During the year there was an amendment to the Income tax rates andaccordingly your company has opted for new tax rates.

2.5 This year your Company made an operating profit of Rs.689 Crore as against Rs.617Crore in the previous year indicating a significant improvement in operationalperformance. Major orders executed during the year for the Armed forces includes AkashWeapon system ATGMs and other products

2.6 The order book position of the Company as on 01 April 2020 is around Rs.7413 Crorecomprising mainly of Akash MR- SAM ATGMs Export of LWT and other products.

3. FIXED DEPOSITS FROM PUBLIC

The Company did not accept any fixed deposits from Public during the year and therewas no outstanding Fixed Deposits at the beginning/end of the year. Accordingly there wasno default in payment of deposits/interest thereon.

4. DIVIDEND & TRANSFER TO GENERAL RESERVE

Your Company has a consistent track record of Dividend Payment. The Board hasrecommended a Final Dividend of Rs.2.55/- per equity share of Rs.10/- each amounting toRs.46.74 Crore for the year 2019-20. Further your Company has paid interim dividend ofRs.6.25 per share amounting to Rs.114.55 Crore in March 2020.An amount of Rs.400 Crore isbeing transferred to General Reserve for the year 2019-20.

5. CAPITAL STRUCTURE

The paid up capital of the Company as on 31st March 2020 stood at Rs.183.28 Crore(183281250 equity shares of Rs.10/- each).The Authorized Capital of the Company isRs.200 Crore (200000000 equity shares of Rs.10/- each) as on 31st March

2020.

6. PERFORMANCE AGAINST MoU

Your Company signs a Memorandum of Understanding (MoU) every year with the Ministry ofDefence Government of India.

The performance of the Company for the year 2018-19 has been rated"Good". TheMoU rating for the year 2019-20 is under evaluation.

7. MODERNIZATION UPGRADATION AND INDIGENIZATION

7.1 During the year an amount of Rs.57 Crore has been spent on Capital Expenditure(CAPEX) programme towards modernization of Plant & Machinery and other Infrastructuredevelopment. Accordingly as a part of CAPEX programme the technologies such aspreheating oven environmental chambers shock machine test equipments and high speedcameras were taken up for upgradation.

7.2 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. Indigenisation ofproducts like Konkurs-M Invar Milan-2T Akash TAL-XP and Varunastra has been achievedup to 96% 78.6% 71% 96% 82.9% and 86.8 % 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 Telemetry Ground Station 512 Core HPC system Hand held RF signalGenerator Humidity Controlled Cabinet Frequency Response Analyzer LAN setup for D&Edivision 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) Amogha-III: It is a 3rd generation fire and forget IIR seeker based ATGM.Prototypes of all the sub-assemblies of the missile are being developed as per in-housedesign. Field firing test of the missile was conducted from 01 - 03 Feb 2020. The missilewas launched during Defexpo-2020 and the first model was handed over to Hon'ble RakshaMantri Shri Rajnath Singh by Cmde Siddharth Mishra (Retd) CMD.

b) CMDS Mk-II with AI feature to provide self-protection to the aircraft againstpreviously known missile threat at designated way points.

c) Dispenser for AN-32 aircraft for dispensing flares and chaffs.

d) Tester for 050mm Dispenser Unit (DU) of Su-30 MKI aircraft.

e) Konkurs Launcher Test Equipment (KLTE) Ver. II and Konkurs Missile Test Equipment(KMTE) Ver.II:KLTE Ver.II is Microcontroller based test equipment to check theserviceability of Konkurs ATGM launchers whereas KMTE Ver. II is used to check theserviceability of Konkurs-M ATGMs. User trials are conducted successfully during the year.

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

(Rs. in Crore)

Particulars 2019-20 2018-19 2017-18
Sales Turnover (Gross) 3095 3069 4588
R&D expenditure 73.87 53.45 40.22
% of R&D expenditure 2.39% 1.74% 0.88%

8.4 Apart from in-house R&D activities your Company also entered into MoUs withfollowing institutions for R&D activity:

• IIIT Hyderabad for development of Artificial Intelligence (AI) products.

• IIT Kanpur for design & development of UAV& ventilators.

• T-hub with an objective to foster a collaborative environment in bringing thestart-ups.

9. PROCUREMENT FROM MSMEs

9.1 During the year your company has shown more thrust in procurement from MicroSmall & Medium Enterprises (MSMEs) though there were exemptions granted to yourCompany being a weapons manufacturing Company vide MSME Notification No.F.No.21(1)/201I-MA Dated 23 March 2012. Your Company would endeavor to procure general items from SMEs.

9.2 As per Government of India guidelines issued from time to time your Company isextending its various facilities/concessions to vendors registered with NSIC under itsSingle Point Registration 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

d) Tester for 050mm Dispenser Unit (DU) of Su-30 MKI aircraft.

e) Konkurs Launcher Test Equipment (KLTE)

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.

9.3 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.

9.4 Government e-Marketplace (GeM): Your Company has registered with GeM as per RuleNo.149 of the General Financial Rules 2017. GeM is a one stop portal to facilitate onlineprocurement of common use Goods & Services required by various Government Departments/Organizations/PSUs. GeM aims to enhance transparency efficiency and speed in publicprocurement. It provides the tools of e-bidding reverse e-auction and demand aggregationto facilitate the government users to achieve the best value for their money.

9.5 Your Company has well placed Integrity Pact which is signed with bidders to enablethem to raise any issues with regard to high value tenders of more than Rs.2 Crore floatedfrom time to time. People of high repute and integrity are appointed as IndependentExternal Monitors to oversee implementation of the said Integrity Pact. The pactessentially envisages an agreement between the prospective vendors/bidders and BDLcommitting the Persons/officials of both sides not to resort to any corrupt practices inany aspect/stage of the contract. Any violation of the same would entail disqualificationof the bidders and exclusion from future business dealings.

10. EXHIBITIONS

Senior Executives and Directors participated in National and International Exhibitionsduring the year 2019-20. During the year your Company participated in the DEFEXP-2020please refer to pages 19-21:

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. Accordingly your company has signed a contract with Indian ChannelPartner for export of Light Weight Torpedoes (LWT-XP) to a friendly country. During theyear 2019-20 your company has registered exports value of Rs.174 Crore through its IndianChannel partner.

12. BOARD OF DIRECTORS:

12.1 The Board of Directors of the Company comprises Functional Directors GovernmentNominee Directors and Independent Directors (i.e Non Official Part Time Directors) who areappointed by the Government of India from time to time.Further the tenure andremuneration of Functional Directors including Chairman and Managing Director are decidedby the Government of India through Public Enterprises Selection Board/Search Committee.The Government communication also indicates the detailed terms and conditions of theirappointment including a provision for the applicability of the relevant rules of theCompany.

12.2 The Government Nominee Directors are not entitled to any remuneration/ sittingfee. The Independent Directors (i.e Non Official Part Time Directors) are entitled tositting fees for attending the Board/Committee meetings as duly approved by the Boardconsidering the government directives statutory acts rules and regulations.

12.3 Independent Directors (i.e Non Official Part Time 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.K.S.Sampath and Smt.LathaNarasimhamurthy as Part-time Non-Official Directors w.e.f 13 September 2017 for a periodof three years or until further orders whichever is the earliest. Accordingly their termis going to be completed in September 2020.

12.4 During the year the term of office of Independent Directors Smt.Sushama V Dabakand Prof.Ajay Pandey was completed w.e.f 01 December 2019. Accordingly the Board placeson record its appreciation for their valuable contributions extended to the Company duringtheir tenure.

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.

12.5 In terms of provisions of section 152 of the Act Shri. N.P. Diwakar Director(Technical) & Shri. Ashwani Kumar Government Director retires by rotation at theensuing Annual General Meeting and being eligible offers themself for reappointment.

12.6 Number of Meetings of Board:

During the year 2019-20 Six (6) Board Meetings were held on 30 May 2019 10 August2019 12 November 2019 30 November 2019 9 January 2020 12 February 2020.

12.7 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 letterNo.SEBI/HO/CFD/DIL1/ OW/P/2018/1679/1 dated January 17 2018.

13. DIRECTORS' RESPONSIBILITY STATEMENT:

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 2020 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

Material changes and commitments affecting the financial position of the company whichhave occurred between 31 March

2020 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/OBC in recruitments.

15.2 Total man power strength as on 31 March 2020 is at 2950 (including four functionaldirectors) out of which the number of persons on temporary rolls is 37. Of the totalstrength 91 are ex-servicemen 566 are of Schedule Caste 213 are of Scheduled Tribes and811 are of OBC category. The percentage of Scheduled Caste and Scheduled Tribes in respectof Employees is at 19.17% and 7.22% respectively.

15.3 Number of persons on temporary rolls as on 31 March 2020 is 37 out of which 6belong to Scheduled Caste category and 2 belong to Scheduled Tribe category.

15.4 The No.of Scheduled Caste Scheduled Tribes and OBC in various categories of postsas on 31 March 2020 is given below:

Category

Number of Employees

Total Strength

Scheduled Castes

Scheduled Tribes

OBC

31-03-2020 31-03-2019 31-03-2020 31-03-2019 31-03-2020 31-03-2019 31-03-2020 31-03-2019
Group-A 833 864 155 156 82 83 164 164
Group-B 72 78 17 17 4 5 22 22
Group-C 1762 1797 324 329 108 107 523 516
Group-D 242 258 64 68 17 18 92 98
Temporary 37 33 6 7 2 0 10 8
Total 2946* 3030* 566 577 213 213 811 808

15.5 Recruitment of employees in Scheduled Caste Scheduled Tribes and OBC during2019-20 is given below:

Classification of posts Total Vacancies Released Total Recruitment

Reservation of posts (out of Col.2)

Recruitment made during the year 2019-20

(1) (2) (3)

(4)

(5)

SCs STs OBC SCs STs OBC
Group-A 1 1 - - - - - -
Group-B - - - - - - - -
Group-C 6 6 1 - 2 1 - 2
Group-D - - - - - - - -
Total 7 7 1 - 2 1 - 2

16. EMPLOYMENT OF WOMEN:

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 2020 is given below as directed by the Ministry

I. EXECUTIVES

Grade No. of Employees Women Percentage
i 72 12 16.66
ii 168 22 13.09
iii 157 25 15.92
IV 197 24 12.18
V 85 10 11.76
VI 169 11 6.50
VII 39 - -
VIII 15 1 6.66
IX 03 - -
Functional Directors 03 - -
CMD 01 - -
Total 909 105 11.55

II. NON-EXECUTIVES

Grade No. of Employees Women Percentage
WG-0 1
WG-1 4
WG-2 135 20 14.81
WG-3 61 12 19.67
WG-4 378 31 8.20
WG-5 164 31 18.90
WG-6 209 30 14.35
WG-7 136 17 12.5
WG-8 35 3 8.57
WG-9 114 5 4.38
WG-10 18
WG-11 153 4 2.61
WG-12 596 50 8.39
Total 2004 203 10.13

17 PERSONS WITH DISABILITIES (PWD) AS ON 31 MARCH 2020

The total number of Physically Challenged employees as on 31 March 2020 is 108 and itspercentage to total employees works out to 3.66%.

HI LD VI Total
Group-A 6 13 5 24
Group-B 0 0 0 0
Group-C 18 46 8 72
Group-D 4 5 3 12
Total 28 64 16 108

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

18. HUMAN RESOURCE DEVELOPMENT:

18.1 During the year under review the Company has conducted various training programmeson knowledge based development oriented and need based topics. Such training programmeswere organized in-house and at premises of external agencies to cover the present andfuture requirements of the Company. The details of the same are as below:

No. of Employees Trained During FY 2019-20

(Executive VS Non Executives)

Particulars No.of Executives participated No.of Non Executives participated TOTAL
External Programmes 514 297 811
In House Programmes 1800 1954 3754
TOTAL 2314 2251 4565
MANDAYS 6409 4016 10425
AVERAGE MANDAYS SPENT-2019-20 (Total Mandays/Manpower (Executives/Non-Executives) 6.63 1.89 3.38
AVERAGE MANDAYS SPENT-2018-19 (Total Mandays/Manpower (Executives/Non-Executives) 4.51 1.60 2.45

18.2 The Company organized the following important activities/programmes during theyear:

(a) Executive Education Programmes organized for Board of Directors:

During the year your Company has sponsored two independent directors for the ExecutiveEducation Programmes for the Board of Directors organized by IICA Gurgaon.

(b) Management Development Programmes (MDPs):

Your Company sponsored ninety-nine Executives (in Grade IV to VI) for ManagementDevelopment Programmes (MDPs) conducted by premier Institutes in India like IIM- LucknowIIM-Indore IIM- Kozhikode XLRI Jamshedpur and NIFM Faridabad during the year 2019-20.

(c) Advanced Management Programmes (AMP): Your Company sponsored three principalExecutives at General Manager and above level for the Advanced Management Programme (AMP)conducted by SCOPE New Delhi in association with Indian Institute of Management (IIM)Calcutta International Labour Organization Geneva and University of Maryland School ofPublic Policy Washington D.C.

18.3 As a part of initiatives for women employees work life balance as well asleadership development the Company has conducted nine leadership development programmesfifteen capability development programmes and seven customized training programmesexclusively for Women Employees (Executives & Non-Executives) in association withreputed Institutes like M/s. Vyakti Vikas Kendra India (Art of Living) BangaloreM/sHeartfulness Institute (Kanha Shanti Vanam) Hyderabad M/s ICFAI Business SchoolHyderabad and M/s PARSAM Institute of Statutory Rules Bangalore.

18.4 In addition to above your company implemented many measures in order to achievePeople Capability Maturity Model (PCMM) Level-II certification.

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 CorporateAffairs notification no. GSR 463(E) dated June 05 2015Government Companies are exemptfrom Section 197 of the Companies Act 2013 and its rules thereof.

20. FOREIGN VISITS

Your Company incurred an expenditure of around Rs.55.10 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 the verification elections conducted by Central IndustrialRelation Machinery (CIRM) on 24 August 2019. BDEU (Reg. No.A-3197) has secured majorityvotes and subsequently management conferred recognition for a period of two years.

21.4 Golden Jubilee Celebration:

Your Company is celebrating the Golden Jubilee this year. A grand function wasorganized on 03 August 2019 wherein Hon'ble Raksha Mantri Shri. Rajnath Singh graced theoccasion as chief guest and inaugurated the Golden Jubilee year of your Company. As partof this Hon'ble Raksha Mantri unveiled the statue of Dr. APJ Abdul Kalam at BDL premisesand released Golden Jubilee Postal stamp.

Celebrating the Golden Jubilee series of activities and programs (including games andtournaments) were organized by the Company for the employees including retired employeeswhere employees have actively participated and made programmees a grand success.

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 safe guarding of property of your Company. CISF teamadopted robust security measures combining physical measures with technology to keep thehighly sensitive installations secure.

22.2 The Plant Security Council is in place to review the security arrangements andimplementation of IB guidelines. Regular security review meetings are being conducted bothby Management and CISF to beef up security.

22.3 As a part of security measures your company has installed Biometric AccessControl System in addition to computerized photo identity cards to prevent unauthorizedentry. CCTV cameras have been installed all over the factory premises to cover more areasunder CCTV surveillance. Door frames metal detectors X-Ray Baggage machines are also inplace. Barricades Boom Barriers and Mochas are provided to strengthen physical securitymeasures.

22.4 Your Company conducts regular programmes on security and safety awareness besidesobserving Security Week/Fire Week. Employees are sensitized on the security threat andaction to be taken in case of emergency and fire accidents.

23. SAFETY:

23.1 Your company is strictly following applicable norms to maintain safety and goodhealth of the employees. The two committees i.e Industrial Safety Committee and ExplosiveSafety Committee meetings are held at regular intervals for monitoring the health andsafety of the employees. The Industrial works are carried out in compliance with theFactories Act 1948 and Explosive safety is being followed adhering to the STEC (Storage& Transportation of Explosives Committee) regulations issued by CFEES MoD New Delhi.Annual Audit is conducted by CFEES and their recommendations are implemented promptly.Further regular medical checkups are carried out to employees working in hazardous andother areas.

23.2 During the year Safety Department has organized competitions on the occasion of49th National safety Day/ week starting from 4th March. Valedictory function was postponedin definitely due to Pandemic COVID 19. Safety Department contribution towards SWATCH THAHE SEVA was immense in cleaning up the factory premises and in disposal of unserviceableexplosive materials. Safety Department has played a vital role in obtaining PCMM (PeoplesCapability Maturity Model) level -2 certification for BDL.

23.3 The recent outbreak of COVID-19 has caused widespread concern in terms of itsimpact on the lives of the people. Considering the seriousness of COVID-19 your companyproactively took several initiatives and measures to mitigate the pandemic and accentuatethe nation's efforts to fight against COVID-19. In order to quickly respond to any kind ofemergency situation management has constituted Community Assistance Teams involvingacross section of 2 employees in various units and offices of the Company. Theemployees and their families wherever they are staying were encouraged to approach anymember of the team with any issue bothering them during the lock down period.

Further high level committees were formed during lock down to ensure preparedness ofthe organization to resume work maintaining precautionary measures in the Unit in terms offire safety and maintenance of machines. The essential services were rostered to work ondaily basis. Several precautionary and preventive measures across all Units/Offices wereadopted to ensure the safety and health of all employees. All areas in the premises weredisinfected completely by using user friendly disinfectant mediums PPE were madeavailable vehicles were disinfected guidelines/instructions were issued on securityprocedures working procedure sanitization etc. Thus continuing the measures adoptedduring lockdown and also implementing the guidelines issued from MHA from time to timeyour Company has displayed its ability in maintaining operations in all the Units/Officessmoothly.

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. The solid and hazardous waste are being disposed-offthrough certified agencies and testing of environmental parameters of ambient air qualitystack quality of DG sets/venture scrubbers Sewage Treatment Plants and Effluent TreatmentPlants are done as per the specified frequency.

During the year all three Units of BDL i.e. Kanchanbagh Bhanur and Visakhapatnam havebeen re-certified with ISO 14001:2015 (EMS) by M/s TUV India Pvt. Ltd.

25.2 Celebration of World Environment Day 2019

The world environment day - 2019 was celebrated with great enthusiasm in all the threeunits of BDL. On this occasion banners were displayed at prominent locations and saplingswere planted on 6 June 2019 in all the units. Slogan writing elocution and quizcompetitions were organized based on the theme "Air Pollution" in threelanguages.

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 24 years. Presently Milan Akash CP-IGMPElectronics Division Design &Engineering divisions and Bhanur Unit have beencertified to AS 9100D Aerospace standard. Visakhapatnam Unit also successfully completedfinal certification audit and recommended for AS 9100D certification by M/s Novo StarManagement Systems Solutions India Pvt. Ltd.

26.2 During the year Corporate Office of the company has been certified with ISO9001:2015 certification by M/s Novo Star Management Systems Solutions India Pvt. Ltd. TheCertificate is valid for a period of 3 years.Electronics Division has been certified withAFQMS (Approval of the Firm and its Quality Management System) by DGAQA (DirectorateGeneral of Aeronautical Quality Assurance). The Certificate is valid for a period of 3years.

26.3 All the three units of BDL at Kanchanbagh Bhanur and Vishakhapatnam have beencertified with ISO 14001:2004 Environmental Management System (EMS). Your Company has beencertified with ISO 27001:2013 (Information Security Management System) Standard. MaterialTesting Lab of Bhanur Unit has been accredited with ISO / IEC 17025: 2005 (NABL)Certification in the field of testing. During the year regular audits by externalagencies are conducted for all the ISO/AS certified divisions. Customer satisfaction isbeing measured for all major products manufactured 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 improvements order to strengthen this during the year Product Support Group has beencreated headed by an Executive Director to cater to the needs of the customers aftersales support.

27. OFFICIAL LANGUAGE (OL) IMPLEMENTATION:

27.1 During the year implementation of OL Act-1963 (as amended 1967) & Rules thereunder are ensured. Quarterly OLIC Meetings are held regularly under the Chairmanship ofCMD & Directors besides submission of Quarterly progress reports on use of OL are sentin time to 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 for Officers and Employees of Corporate OfficeKanchanbagh Bhanur Unit & Vishakhapatnam Unit.

27.4 Similarly Hindi Day was celebrated for the Officers and employees of CorporateOffice under the chairmanship of CMD & Chairman OLIC on 24th September. Cash Awardswere given to the winners of the competitions and Officers and Employees for doingoriginal work in Hindi during the year. Complying with the assurances given to theParliamentary Committee on OL Hindi film 'SWADES' was shown at Bhanur Unit throughmultimedia during the Fortnight Celebrations.

27.5 TOLIC (U) functioning which is taken care by BDL was adjudged for "Daksh inKshetriya Rajbhasha Puraskar" for the year 2018-19 in Region "C" for bestimplementation of OL. Under the auspice of TOLIC (U) an "Orientation Program onOL" was organized for newly joined Hindi Officers/Translators/Nodal Officers /Staffof 21 Member Offices of TOLIC (U) on 13th March 2020.

27.6 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.

27.7 On the occasions of Republic Day Independence Day Celebrations Golden JubileeYear Celebrations CMD of the Organisation addressed the gathering in Hindi. SimilarlyVigilance Awareness Week Swatchata Pakhawada Constitution Day the pledge was taken inHindi & English.

27.8 As part of the Golden Jubilee Year Celebrations of the Organization Hon'bleRaksha Mantri visited BDL and unveiled the statue of 'Bharatratna' APJ Abdul Kalam. Duringthe visit CMD addressed the gathering in Hindi. Besides Invitation Card Banners andother promotional material was prepared in bilingual form

27.9 First Sub-Committee of Parliamentary Committee on Official Language inspected andreviewed the OL implementation in BDL on 27th February 2020. The Committee headed byProf. Ram Gopal Yadav appreciated the efforts put in the area of Implementation of OL byBDL.

27.10 Inspection on OL implementation in the Visakhapatnam Unit was held by JD (OL)DDP MoD on 03.10.2019. Appreciations were recorded in the reports received there on. TheWebsite of the company prepared in Hindi was updated from time to time in compliance withthe directives of Govt. of India.

27.11 The Organization is assigned with functioning of TOLIC (U) consisting 47 PSUs asits Member Offices. Regular half yearly Meetings of the body are organized in May&October. During the Financial Year 2019-20 both the half Yearly Meetings werechaired by Cmde. Siddharth Mishra (Retd.) CMD BDL & Chairman TOLIC (U). Further'PATHIK' the House Journal of TOLIC (U) was published and released in the TOLIC halfyearly Meeting held on 24.05.2019 and distributed. Officers and Employees of theorganization took active participation in the Inter PSU Competition conducted by TOLIC (U)and won four prizes.

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

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.

The Company operates 10 MW Solar Power plant for captive consumption for its units atBhanur and Kanchanbagh.

29. VIGILANCE:

29.1 The main objective of Vigilance Department of the Company has beenpreventive/pro-active vigilance. Therefore as a part of proactive vigilance thedepartment has issued Systemic Improvement Suggestions in the areas of like e-tenderingRecruitment Departmental Promotion Reservation Absorption of Management TraineesInter-Unit Transfers Sensitive Area Rotation and Civil work etc. and of which many havebeen implemented by the Management during the year under report.

29.2 Being an extended arm of the Central Vigilance Commission (CVC) New Delhi thedepartment has submitted Various reports (e.g. Monthly Quarterly Annual & CTE Type)to the Commission and also to Ministry of Defence and to the Board of the Company. TheDepartment has also issued clearances to employees in cases of Recruitment PromotionAbsorption Confirmation Foreign visits for postings in sensitive areas etc. Thedepartment has also accorded priority in handling the complaints as per the complainthandling policy of the CVC.

29.3 Observation of Vigilance Awareness Week is an integral part of the department onthe theme advised by CVC. Vigilance Awareness Week-2019 was observed from 28th October2019 to 03rd November 2019 with the theme of "Integrity-A Way of Life" withgreat zeal and enthusiasm. Shri.S.Piramanayagam Director (Finance) administered the"Integrity Pledge" and Dr. Upender Vennam Chief Vigilance Officer read out CVCmessage and other senior officials read out message from Government of Authorities atCorporate Office on 28.10.2019. Live video conference of administering the Pledge &reading of the messages took place by covering all the divisions of BDL viz.

i) Corporate Office-Hyderabad

ii) Kanchanbagh Unit-Hyderabad

iii) Bhanur Unit-Sangareddy Dist.-Telangana

iv) Visakhapatnam- Andhra Pradesh.

29.4 Similarly in an effort to spread the message of Integrity among Citizens of thecountry 2000 Pamphlets were distributed with message of Mahatma Gandhiji "Earthprovides enough to satisfy every man's need but not every man's greed" and the CVC'sintegrity pledge for citizens along with the URL address for taking e-pledge was publishedat the back of the pamphlet.

29.5 On 30th October 2019 A workshop on "Ethics Integrity and Moral Values atWork Place" by Shri Ashutosh Kumar Mishra an eminent speaker was conducted on31.10.2019 in collaboration with Mishra Dhatu Nigam Limited Hyderabad as part ofVigilance Awareness Week-2019 for the employees.

29.6 On 31st October 2019 Coinciding with the birthday of Shri Sardar VallabhaiPatel walkathons were conducted at Bhanur Unit Sangareddy Vizag Unit Andhra Pradeshand at Kanchanbagh Unit Hyderabad wherein procession were taken out by forming HumanChains on the streets and public were apprised of the need to ensure integrity in theirday-to-day life and to say 'no' to any kind of illegal gratification.

29.7 As part of Vigilance Awareness Week-2019 to make 'Integrity' a part of theirlife School children were encouraged through various competitions like Essay WritingPoster Making and Elocution. Further 'Integrity Clubs' have been set up at two schools atBhanur and Kanchanbagh. In order to promote ethical habits a philatelic exhibitcontaining quotes of Mahatma Gandhiji on stamps and related materials collected by CVO/BDLwas displayed permanently at these two schools.

29.8 On 01st November 2019 a Valedictory Function was organized wherein Chief GuestFormer Jt. Director CBI Shri VV Laxminarayana IPS Addl. DG (Police) (Retd.) delivered aguest lecture on the theme 'Integrity-A Way of Life' at BDL- Bhanur and interacted withemployees and their family members giving an account of nature and extent of corruptionand the ways and means to control corruption. Cmde. Siddharth Mishra CMD BDL exhortedthe employees to fearlessly expose the improper and unethical practices at work place andadvised them to contribute to the PSU by displaying exemplary commitment. A 'VigilanceCompendium' consisting of Circulars issued by CVC the synopsis of conducting DisciplinaryProceedings CDA Rules Standing Orders of the Company was released.

29.9 Keeping the priority of preventive vigilance various workshops/seminars/trainingprogrammes were organized and vigilance awareness initiatives were undertaken by theVigilance Department 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 variousclarifications/amendments issued by Ministry of Corporate Affairs & DPE guidelinesthe Company has undertaken various activities as per the CSR Policy. Theprogrammes/initiatives/projects are taken up inline with the Schedule-VII of the CompaniesAct 2013 which are duly incorporated in CSR policy and forms the guiding principle forall our programmes. The Board of Directors of your Company has constituted Board LevelCommitteeon Corporate Social Responsibility and Sustainable Development (CSR & SD)(please refer Corporate Governance Report) in line with the provisions of Section135 ofthe Companies Act 2013. The Committee has formulated and recommended CSR Policy to theBoard indicating the projects/activities to be undertaken by the Company as specified inScheduleVII ofthe Companies 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 2019-20 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 2019-20 the CSR & SD expenditure target was Rs.1499 lakh(including carry forward unspent amount of previous years). Against the target thecompany has incurred an expenditure of Rs.1556 lakh and achieved 100% CSR target amountrequired under the provisions of Companies Act 2013.CSR activities being undertaken areplaced on Company's website hhtp://www.bdl-india.in

31. AUDIT COMMITTEE

An Audit Committee isin place as a part of good Corporate Governance. Eight meetingshave been held during the year 201920 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 theaccountsfor details of related party transactions. The policy for related partytransaction has been uploaded on the Company'swebsite www.bdl-india.in.

33. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

Details of Loans Guarantees and Investmentscovered under the provisions of Section 186of theCompanies Act 2013 are given in the notes to theFinancial 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.G.Natesan & Co. Chartered Accountants Hyderabad were appointed as StatutoryAuditors of the Company for the financial Year 2019-20 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 March2020 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 2019-20 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 year2019-20 to undertake the Secretarial Audit of theCompany.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 Guidelineson 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 conditionsonCorporate Governance from a Practicing Company Secretary are attached to this report as Annexure-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 DPEGuidelinesfor the year 2018-19 and compliance on Corporate Governance for the year 2019-20is 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 RiskManagement Policy etc. are set out in 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 2019-20 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 contains generalinformation of the Company functions powers and duties of employees/officers decisionsmaking process rules regulations manuals and records held by the Company directory ofthe Company's Officers pay scales of officers/ employees and procedure for seekinginformation 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 2019-20 the Company received 75 applications/queries and the same weredisposed-off.

45. VIGIL MECHANISM

Pursuant to the provisions of the Section 177(9) of the Companies Act 2013 read 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 AnnexureVI.

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 websitewww.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 : 29.06.2020