BGR Energy Systems

The directors have great pleasure in presenting their Twenty Second
 Annual Report together with the audited financial statements for the
 year ended March 31, 2008 to the extended family of the share holders
 and other stake holders of the company.
 
 INITIAL PUBLIC OFFERING (“IPO”) OF EQUITY SHARES OF THE COMPANY
 
 During the year under review, your Company successfully completed its
 maiden Initial Public Offering. The IPO received overwhelming response
 from the Global investors while the subscription book received bids
 from FIIs, MFs, QIBs, PSU banks, private banks, foreign banks, HNIs and
 Retail Investors. The company has issued 2,880,000 and 1,440,000 equity
 shares to Citigroup (CVC) and Reliance Mutual Fund respectively by way
 of Pre – IPO allotment. The IPO was opened for public subscription on
 December 5, 2007 and closed on December 12, 2007. Through the IPO and
 pre-IPO placement, your company and promoters issued 13,456,000 equity
 shares which led to public share holding of 18.69% in your company. The
 issue was over- subscribed by a record 119.54 times on overall basis.
 The trading in fully paid shares of the Company commenced on January 3,
 2008 at NSE and BSE.
 
 The year 2007-08 has been a defining mark in your company’s efforts to
 become a major player in EPC business in power sector. The IPO showed
 the huge appetite for your company’s stock and your company made a
 paradigm shift with aplomb from a closely held company to a widely held
 public listed company.
 
 FINANCIAL RESULTS
 
 During FY 2007-08, your company achieved total income of Rs.1507.75
 crore as against the previous year’s (annualised) turnover of Rs.518.47
 crore, accounting for a topline growth of 191%. Your company also
 registered a sharp growth in profitability. The key parameters of
 EBIDTA and PAT witnessed a growth of 164% and 223% over the previous
 year. The highlights of the financial performance of the company during
 the year March 31, 2008 in comparison with the previous financial
 period ended March 31, 2007 are summarized below :
 
 
                                                   (Rs. in Crore)
 
 Description                             2007-08          2005-07
                                       (12 Months)      (18 Months)
 
 Total Income                            1507.75            777.70
 
 Expenditure                             1352.25            691.63
 
 Profit before Interest,
 depreciation and tax                     155.50             86.07
 
 Interest                                  25.22             17.44
 
 Depreciation                               5.02              8.13
 
 Profit before tax                        125.25             60.50
 
 Provision for tax and FBT                 40.81             21.31
 
 Profit after tax                          84.44             39.19
 
 Surplus brought forward
 from previous year                         9.06             31.58
 
 Amount available
 for appropriation                         93.50             70.77
 
 Less :
 
 a)  Dividend                              14.40              3.24
 
 b)  Tax on dividend                        2.44              0.55
 
 c)  Transfer to general reserve            8.44              3.92
 
 Balance carried to
 
 Balance Sheet                             68.22             63.06
 
 CONSOLIDATED REVENUE AND PROFIT
 
 Your Company’s consolidated revenue and profitability too
 show an upward trend in Financial performance.
 
 (Rs. in Crore)
 
 Description                                   2007-08         2005-07
 
 Sales                                        1522.84           790.28
 
 EBIDTA                                        160.53            88.71
 
 PAT                                            88.46            40.81
 
 DIVIDEND
 
 Your directors, after taking into account the financial results of the
 Company during the year, recommend payment of a dividend of Rs.2/- per
 equity share of Rs.10/- each for the FY 2007 - 08. The equity shares
 allotted to Pre – IPO investors and the public would receive the
 dividend for the full year. Your directors wish to carry an amount of
 Rs.68.22 crore to the Balance Sheet after appropriation towards
 dividend, corporate dividend tax and transfer to general reserves.
 
 BUSINESS TRANSFER
 
 During the year under review, your company sold its Energy Division
 business to GEA BGR Energy System India Limited for a consideration of
 Rs.25.00 Crore. This was effective from July 1, 2007. In view of the
 change in business mix, the financial results of your company are not
 strictly comparable with previous year figures.
 
 SCHMITZ GMBH
 
 Schmitz Reinigungskugeln GmbH, a wholly owned overseas subsidiary in
 Germany ceased to be a subsidiary of your company effective from July
 1, 2007 pursuant to the execution of the Share Transfer Agreement
 between the company and Schmitz India Private Limited. As the business
 of cleaning balls relates to Energy Division it was thought prudent to
 transfer the Overseas subsidiary.
 
 BUSINESS PERFORMANCE
 
 During the year under review, the company has achieved quantum increase
 in turnover, profit and networth. This was yet another land mark year
 for your company, as it delivered record financial and operating
 performance amidst challenging and volatile commodity market
 conditions. The unprecedented uptrend in key raw material cost viz.,
 steel, cement, copper and out sourced equipments and components has
 been a daunting challenge which your company has faced and overcome.
 
 A brief overview of the significant operational and business
 developments in various businesses / projects are given below ;
 
 i) During the FY 2007-08, your company secured Balance of Plant
 contract for ;
 
 a) 500 MW coal based project at Khaperkheda from Mahagenco for a value
 of Rs.998 Crore,
 
 b) 500 MW coal based project at Kothagudam from APGENCO for a value of
 Rs.793 Crore.
 
 ii) Your company created a National record by completing 151 meter NDCT
 tower in 521 days at Vijayawada Thermal Power Station. This is the
 second tallest NDCT in India. Similarly the chimney having a height of
 275 meter for Vijayawada 500 MW TPS was completed in 137 days, which is
 a record in India.  The entire design, engineering and construction of
 these gigantic structures were carried out by your company in house.
 
 iii) The product division viz., Air Fin Cooler has doubled its turnover
 and achieved an all time high turnover of Rs.126.77 Crore.
 
 iv) Environmental Engineering division implemented India’s largest 12
 MLD RO plant for Textile effluent recycling plant.
 
 v) Electrical projects division has executed a state of art technology
 project for laying Optic Fibre Ground Wire (“OPGW”) on new and existing
 high voltage power transmission lines.
 
 FUTURE OUTLOOK – CURRENT YEAR AND YEAR AHEAD
 
 The company’s current order book stands over Rs.11,000 Crore which is
 higher by Rs.7,800 Crore over the order book as of end of the year
 under review. This robust growth in order book will enable your company
 to achieve a quantum growth in its turnover and profitability in the
 current year.
 
 The Plan targets for capacity addition in power sector during the 11th
 and 12th Plan period offer manifold growth opportunities for EPC and
 BOP companies in India. This capacity addition targets are expected to
 witness upward revision in the backdrop of strong economic growth and
 more particularly low per capita power consumption in India.  These
 opportunities are expected to facilitate improvement in the order book
 in the current year and the year ahead.  Consequently, your Board of
 Directors are confident of delivering improved financial results.
 
 EMPLOYEE STOCK OPTION SCHEME
 
 Members’ approval was obtained at the Annual General Meeting held on
 July 11, 2007 for introduction of Employee Stock Option Scheme (“ESOS”)
 2007. Disclosure in respect of ESOS is given in Annexure I of this
 report.
 
 PERFORMANCE OF SUBSIDIARY
 
 Your company’s subsidiary, Progen Systems and Technologies Limited,
 engaged in the business of manufacture of Welded Finned Tubes and
 Pressure Vessels for power and process industries, has achieved
 improvement in business performance. Progen recorded a turnover of Rs.
 17.67 crore and net profit of Rs.3.70 crore for the year ended March
 31, 2008. Statement under Section 212 of the Companies Act, 1956 is
 attached to this report.
 
 DISCLOSURES
 
 The information pursuant to Section 217 (1) (e) of the Companies Act,
 1956 read with the Companies (Disclosure of Particulars in the Report
 of the Board of Directors) Rules, 1988 as amended from time to time
 with respect to conservation of energy and technology absorption are
 not applicable to your company. During the FY 2007 - 08 the foreign
 exchange earnings and outgo were Rs.130.57 crore and Rs.8.16 crore
 respectively.
 
 The particulars required under Section 217(2A) of the Companies Act,
 1956 and the Rules made thereunder are given in Annexure – II.
 
 BOARD OF DIRECTORS
 
 Mr.V.K. Gupta, Mr.G. Radhakrishnan and Mr. S.K. Sridhar resigned from
 the Board of the Company with effect from July 18, 2007. The Board
 places on record, its deep appreciation of the valuable services and
 counsel rendered by them during their tenure.
 
 Pursuant to the provisions of Section 260 of the Companies Act, 1956,
 Mr.Heinrich Bohmer, Mr.M. Gopalakrishna, Mr.S.R. Tagat and Mr.S.A.
 Bohra were appointed as additional directors with effect from July 18,
 2007.  Mr. Heinrich Bohmer, Mr.M. Gopalakrishna, Mr.S.R. Tagat and
 Mr.S.A. Bohra would hold office upto the date of the ensuing annual
 general meeting. The Company has received notices in writing from
 members proposing their candidature under Section 257 of the Companies
 Act, 1956. The appointment of the above directors are in the best
 interest of the Company and the Board recommends their appointment. A
 brief biodata of these directors are given in the Notice. Mrs. Sasikala
 Raghupathy, Director retires by rotation and being eligible for
 re-appointment, offers herself for re-appointment. A brief biodata of
 Mrs. Sasikala Raghupathy is given in the Notice. The Board recommends
 her re-appointment.
 
 DIRECTOR’S RESPONSIBILITY STATEMENT
 
 Pursuant to the requirements under Section 217 (2AA) of the Companies
 Act, 1956 with respect to Directors’ responsibility statement, it is
 hereby confirmed that:
 
 a) In the preparation of the annual accounts for the year ended March
 31, 2008 the applicable accounting standards have been followed and
 proper explanations were provided for material departures, if any ;
 
 b) The directors have selected such accounting policies and applied
 them consistently and made judgments and estimates that are reasonable
 and prudent so as to give a true and fair view of the state of affairs
 of the company as at March 31, 2008 and of the profit of the company
 for the year ended March 31, 2008;
 
 c) The directors have taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of the Companies Act, 1956 for safeguarding the assets of
 the company and for preventing and detecting fraud and other
 irregularities;
 
 d) The directors have prepared the annual accounts for the year ended
 March 31, 2008 on a going concern basis ;
 
 AUDITORS AND AUDITORS’ REPORT
 
 M/s. Manohar Chowdhry & Associates, Chartered Accountants, statutory
 auditors of the Company, retire at the conclusion of the ensuing Annual
 General Meeting of the Company. They have offered themselves for
 re-appointment as statutory auditors and have confirmed that their
 appointment, if made, would be within the prescribed limits under
 Section 224 (1B) of the Companies Act, 1956.
 
 The notes to accounts forming part of the financial statements are self
 explanatory and need no further explanation. There are no
 qualifications or adverse remarks in the Auditors Report which require
 any clarification / explanation.
 
 CORPORATE GOVERNANCE
 
 As per the requirements of Clause 49 of the Listing Agreement a report
 on Corporate Governance together with the following are attached to
 this report.
 
 a) CEO & CFO certificate.
 
 b) Declaration on Code of Conduct
 
 c) Certificate from the Company Auditors.
 
 MANAGEMENT DISCUSSION AND ANALYSIS REPORT (MDA)
 
 The Management Discussion and Analysis on the business and operations
 of the Company is attached to this report.
 
 ACKNOWLEDGEMENTS
 
 Your Directors place on record their sincere gratitude to the investors
 for their overwhelming support and confidence reposed in them. Your
 Directors express their appreciation of the valuable support and
 co-operation received from consortium of banks, business associates,
 customers, vendors and various statutory authorities. Your Directors
 place on record their sincere appreciation of the contribution made by
 the employees of the Company at all levels through their hard work,
 dedication and support.
 
 
                                   For and on behalf of the Board
 
 Place : Chennai                   B. G. Raghupathy
 Date  : July 30, 2008             Chairman & Managing Director