To the Members of
BGR ENERGY SYSTEMS LIMITED
The Directors have pleasure in presenting the Twenty Fifth Annual
Report together with the audited financial statements for the year ended
March 31, 2011.
FINANCIAL RESULTS – “BILLION DOLLAR” REVENUE
During FY 2010-11, the total income of the Company crossed Rs. 4700
Crore, thus becoming a Billion Dollar company in revenues.
The highlights of the financial performance of the Company during the
financial year ended March 31, 2011 as compared with the previous
financial year ended March 31, 2010 are summarized below:
(Rs. in Crore)
Description 2010-11 2009-10
Sales 4747 3069
Other income 22 25
Total Income 4769 3094
Expenditure 4210 2726
Profit before depreciation, Interest 559 368
and Tax
Interest 60 54
Depreciation 17 10
Profit before tax 482 305
Provision for tax and FBT 158 104
Profit after tax 324 201
Amount available for appropriation 324 201
Less:
a) Dividend 72 50
b) Tax on dividend 12 9
c) Transfer to general reserve 32 20
Balance carried to Balance Sheet 208 122
The sales registered a growth of 55% and stood at Rs. 4747.49 Crore as
compared to Rs. 3069.25 Crore in the previous year. The Company’s Profits
from Operations for the year ended 31st March, 2011 increased by 52% to
Rs. 559.28 Crore as compared to Rs. 368.22 Crore in the previous year. The
consolidated financial statements are attached to this report.
DIVIDEND
The Board of Directors recommended a dividend of Rs. 10 per equity share
of Rs. 10 each subject to the approval of the Members at the forthcoming
25th Annual General Meeting. The dividend will be paid to members whose
name appear in the Register of Members as on September 22, 2011. Your
directors wish to carry an amount of Rs. 207.55 Crore to the Balance
Sheet after appropriation towards dividend, corporate dividend tax and
transfer to general reserve.
BUSINESS PERFORMANCE
The progress in growth achieved by your Company during the last three
years has been well recognized and the leading financial dailies and
magazines have consistently categorized your Company as a “Fast Growing
Company.” Your Company achieved quantum growth over the previous year
in income, Profitability and other key performance parameters.
A brief overview and major milestones of operations are as follows:
a) The Power Projects Division secured a contract for Balance of Plant
(“BoP”) for 2 x 660 MW coal based supercritical thermal power project
at Krishnapatnam, Andhra Pradesh from Thermal Powertech Corporation
India Limited, promoted by Gayathri projects, and Semcorp, Singapore.
The value of the order is Rs. 2168 Crore.
b) Your Board takes pride to inform that the 500 MW Vijayawada Thermal
Power Station project was completed and after successful performance
test handed over to APGENCO during the year. The 500 MW Kakatiya
Thermal Power Project of APGENCO has achieved commercial operation
during September, 2010. The 500 MW Kothagudam Thermal Power project of
APGENCO achieved plant synchronization in March, 2011. The 500 MW
Khaperkheda Thermal Power project of MAHAGENCO achieved plant
synchronization in March, 2011. Your Directors wish to state that your
Company is the only private sector EPC Company in India to have
completed three BoP contracts for 500 MW units and successfully
commissioned and synchronized the plants.
c) The 600 MW Mettur Thermal power project of TNEB achieved boiler
hydro test during December, 2010 and the unit is gearing up for
commencement of power generation in September, 2011. The boiler hydro
test for 2 x 600 MW Kalisindh project of RRVUNL was completed during
April, 2011. Your Company is executing the Mettur and Kalisindh
projects on EPC basis including supply of Boiler, Steam Turbine and
Generator.
d) Electrical Projects Division has secured a contract for Rs. 17.02
Crore from Nuclear Power Corporation of India Limited for Bharatiya
Nabikiya Vidyut Nigam Limited at Kalpakkam for supply of cabling
systems and other electrical works for Power island area in the 500 MW
Prototype Fast Breeder Reactor and a turnkey contract for Rs. 36.61 Crore
from Power Grid Corporation of India Limited for fiber optic cable based
communication solutions over powerlines in Southern region, which is
being implemented in lieu of the existing Unified Load Despatch Centre.
e) Environmental Engineering Division has achieved a breakthrough
during the year in Condensate Polishing Unit business by bagging two
orders for Super Critical power projects of 2 x 660 MW Tiroda
(Maharashtra) and 2 x 660 MW Kawai (Rajasthan) of Adani Power Limited.
The division also commissioned Mannari and Karaipudur common effuent
treatment plants using Reverse Osmosis Technology during the year.
f) Air Fin Cooler division has registered sales of Rs. 130 Crore and
closed the year with a healthy order book of Rs. 155 Crore. The division
has expanded its production facilities during the year.
g) During the year, Oil & Gas Equipment division has successfully
executed contracts for SCOP, Iraq, Akash & Al-Mansuriya and Southern
Refnery Company. The division has bagged orders from Cairn Energy, GEO
Enpro Petroleum, GPEC, Bharuch, IOCL and other reputed customers in
India. The new 100% Export Oriented Unit is now servicing international
markets.
STRATEGIC INITIATIVES
During the year under review, your Company’s strategic alliance with
Hitachi for Super Critical Steam Turbine and Generators and Steam
Generators have been successfully consummated into joint ventures.
These joint ventures have brought to life two special purpose companies
with equity participation from Hitachi as explained below.
Hitachi Power Europe GmbH, Germany – BGR Boilers Private Limited
Your Company has signed a Joint Venture agreement with Hitachi Power
Europe GmbH, Germany for the business of design, engineering and
manufacture of Super Critical Steam Generator of 600 MW, 800 MW, 1000
MW and 1100 MW rating and the new JV Company “BGR Boilers Private
Limited” will establish manufacturing facilities as a Special Purpose
Vehicle. Hitachi Power Europe will contribute 30% of the equity share
capital of the new JV Company. During FY 2010-11, your Company invested
Rs. 36.05 Crore in the share capital of JV Company and holds 70% of the
equity capital.
Hitachi, Ltd., Japan – BGR Turbines company Private Limited
Your Company has signed a Joint Venture agreement with Hitachi, Ltd.,
Japan for the business of design, engineering and manufacture of
Supercritical Steam Turbine and Generators of 660 MW, 800 MW and 1000
MW capacity and the new JV Company “BGR Turbines Company Private
Limited” will establish manufacturing facilities as a Special Purpose
Vehicle. Hitachi will contribute 26% of the equity share capital of the
JV Company. During FY 2010-11, your Company invested Rs. 95.96 Crore in
the share capital of the JV Company and holds 74% of the equity
capital.
With these strategic Joint Ventures your Company has positioned itself
well to capture entire value chain in EPC contracting business for
power sector.
INDIAN POWER SECTOR SCENARIO
The Indian economy has emerged rapidly from the global slowdown of
2007-2009 and remains one of the fast growing economies of the world.
The GDP growth is well over 8% and the growth momentum is maintained.
The Government of India and State and Central utilities continue to
accord primacy to capacity addition in power generation. In view of
environmental consideration and need for higher efficiency, there has
been marked preference for supercritical technology based power
equipment viz., Boiler, Turbine and Generator of large unit sizes
during the year under review. The capacity addition target for the 12th
Five year plan is well over 100,000 MW. Of this, it is estimated that
about 80,000 MW would be coal based thermal power plants utilizing
supercritical technology. The Government policy on power sector
investment encourages manufacturing capacity build-up within the
country. During the year, the investment interest in power sector by
private sector industries has witnessed a positive trend. A number of
IPP projects currently planned on merchant power plant basis auger well
for the power sector development in India. Your Company is now
targeting projects for an aggregate capacity of 40,000 MW and
anticipates to be successful to secure sizeable market share.
During the year under review, there has been a slow down and delays in
award of contracts for large power projects by State and Central
utilities on account of variety of reasons including coal linkage,
environmental clearance, land acquisition etc.
FUTURE OUTLOOK, THE YEAR AHEAD
The growth trajectory of Indian economy makes it imperative for the
public and private sector utilities to make investment in generation,
transmission and distribution of power. The capacity addition programme
of 12th Five Year Plan and investment plans by private parties in power
sector offer robust growth opportunities for your Company. Your
Company’s strategic initiative to set up manufacturing facilities to
manufacture Super Critical Boiler, Turbine and Generator would provide
competitive edge in terms of cost, price and delivery. EPC and BOP
contracting business of the Company faces intense competition from
domestic players. Your Company’s position of pre-eminence in the
industry, despite intense competition and cost pressures, is expected
to reinforce your Company’s ability to overcome these challenges. With
robust demand for power in the foreseeable future and the resulting
opportunities for power generation equipment and EPC business, your
Company’s power projects division is well positioned to sustain the
growth momentum in the mid-term and in the long-term as well. The
proven execution capabilities, competencies and the capacity to offer
the entire range of services and equipment viz., design, engineering,
project execution, construction, manufacturing and supply of Steam
Generator, Steam Turbine and Generator, BOP equipment and civil works
would continue to facilitate your Company to achieve improved order
booking, revenue and Profitability.
CONSOLIDATED FINANCIAL STATEMENT
In accordance with the Accounting Standard AS-21 on Consolidated
Financial Statements read with Accounting Standard AS-27 on financial
reporting of interest in Joint Ventures, the audited Consolidated
Financial Statements are annexed to this Annual Report.
PERFORMANCE OF SUBSIDIARIES
In accordance with the general circular issued by the Ministry of
Corporate Affairs, Government of India, the Balance Sheet, Profit and
Loss Account (wherever applicable) and other documents of the
subsidiary companies are not attached with the financial statements of
the Company. The Company will make available the annual accounts of the
subsidiary companies and related information to the members of the
Company who may be interested in obtaining the same. The annual
accounts of the subsidiary companies will also be kept open for
inspection at the Registered Office of the Company. The Consolidated
Financial Statements presented by the Company include the financial
results of its subsidiary companies.
HUMAN RESOURCES
In the backdrop of growth in power and infrastructure sector, there has
been an acute shortage of human resources. However, your Company has
been successful in attracting talents at senior and middle level
positions to manage design, engineering and project management
responsibilities. Your Company has initiated steps to build a highly
competent and motivated manpower pool and has recruited graduate
engineers from colleges of National repute.
In order to evaluate, reward and recognize performance, the Company has
installed robust Performance Management System. The Company’s Human
Resource process is being IT enabled. Your Company continues to lay
strong emphasis on HR, talent acquisition and retention. Your Company
has witnessed a rapid growth in human resources during the financial
year 2010-11 and the current employee strength is 1829.
EMPLOYEE STOCK OPTION SCHEME
The Company has implemented the Employee Stock Option Scheme (“Scheme”)
in accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 (“the SEBI Guidelines”). The
Compensation Committee, constituted in accordance with the SEBI
Guidelines, administers and monitors the Scheme. The applicable
disclosures as stipulated under the SEBI Guidelines as at March 31,
2011 are attached as Annexure – I of this report.
STATUTORY INFORMATION
The disclosure of 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 with respect to
conservation of energy are not applicable to your Company. The
particulars relating to technology absorption are enclosed as Annexure
– II of this report. During the FY 2010-11, the Foreign exchange
earnings and outgo were Rs. 1124.90 Crore and Rs. 24.32 Crore respectively.
In terms of the provisions of Section 217 (2A) of the Companies Act,
1956 read with the Companies (Particulars of Employees) Rules 1975, as
amended, the names and other particulars of the employees are set out
in the annexure to the Directors’ Report. Having regard to the
provisions of Section 219(1) (b)(iv) of the said Act, the Annual Report
excluding the aforesaid information is being sent to all the members of
the Company. Any member interested in obtaining such particulars, may
write to the Company Secretary of the Company.
BOARD OF DIRECTORS
Mr. M. Gopalakrishna and Mr. S.A. Bohra, Directors, retire by rotation
and being eligible for re-appointment, offer themselves for
re-appointment. The Board recommends their re-appointment. profile of
these Directors are given in the Notice convening the 25th Annual
General Meeting of the Company.
On February 10, 2011, Mr. Gnana Rajasekaran has been co-opted as an
independent Director on the Board and he holds Office up to the date of
the forthcoming Annual General Meeting in terms of Section 257 of the
Companies Act, 1956. The Company received a notice proposing Mr. Gnana
Rajasekaran for appointment to the Office of Director. The profile of
Mr.Gnana Rajasekaran is given in the Notice convening the 25th Annual
General Meeting of the Company. The Board recommends his appointment.
Mr. S. Rathinam was re-appointed as Director – Finance of the Company
for a period of one year effective from February 7, 2011. The profile
of Mr. S. Rathinam and the terms and conditions of his appointment
including remuneration are given in the Notice convening the 25th
Annual General Meeting of the Company.
DIRECTORS’ 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 Financial year
ended March 31, 2011, the applicable accounting standards read with
requirements set out under Schedule VI to the Companies Act, 1956 have
been followed and there are no material departures from the same;
b) the Directors have selected such accounting policies and applied
them consistently and made judgements 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, 2011 and of the Profit of the Company for
the financial year ended on that date;
c) the Directors have taken proper and suffcient 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; and
d) the Directors have prepared the annual accounts for the year ended
March 31, 2011 on a going concern basis.
STATUTORY AUDITORS’ AND AUDITORS’ REPORT
Manohar Chowdhry & Associates, Chartered Accountants, Statutory
Auditors of the Company, hold Office until the conclusion of the ensuing
Annual General Meeting and are eligible for re-appointment.
The Company has received a letter from Manohar Chowdhry & Associates,
Chartered Accountants to the effect that their re- appointment, if
made, would be within the limits prescribed under Section 224(1B) of
the Companies Act, 1956 and that they are not disqualified for
re-appointment within the meaning of Section 226 of the Companies Act,
1956.
CORPORATE GOVERNANCE
The Company is committed to maintain and comply with the standards of
Corporate Governance as set out in Clause 49 of the Listing Agreement
and your Directors are pleased to attach a report on Corporate
Governance together with the following Certifcates / Declarations.
a) Chief Executive Officer and Chief Financial Officer certifcate.
b) Declaration on code of conduct.
c) Certifcate from the Company’s Auditors.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management Discussion and Analysis report for the financial year under
review, as stipulated under Clause 49 of the Listing Agreement with the
Stock Exchanges, is presented in a separate section forming part of the
Annual Report.
ACKNOWLEDGEMENTS
Your Directors wish to take this opportunity to thank the customers,
vendors, consortium of banks, collaborators, business partners /
associates, statutory authorities, Central and State Governments for
the valuable co-operation, assistance and support received during the
last financial year. 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 : May 26, 2011 Chairman & Managing Director
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