A. COMPANY OVERVIEW
BGR Energy Systems Limited (''the company'') is a public limited company
incorporated under the provisions of the Companies Act, 1956. Its
equity shares are listed on Bombay Stock Exchange (''BSE'') and National
Stock Exchange (''NSE''). The company is a manufacturer of capital
equipments for Power Plants, Petrochemical Industries, Refineries,
Process Industries and undertakes turnkey Balance of Plant (''BOP'') and
Erection Procurement and Construction (''EPC'') contracts for Power
plants. The company has been achieving its objectives through its five
business units: Power projects, Electrical projects, Oil and Gas
equipment, Environmental engineering and Air Fin Coolers.
ii. Contingent liabilities
The company recognizes contingent liability for disclosure in notes to
accounts, if any of the following conditions is fulfilled:
a) a possible obligation that arises from past events and the existence
of which will be confirmed only by the occurrence or non-occurrence of
one or more uncertain future events not wholly within the control of
the enterprise; or
b) a present obligation that arises from past events but is not
it is not probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; or
a reliable estimate of the amount of the obligation cannot be made.
b. Terms/rights attached to equity shares
The company has one class of shares referred to as equity shares having
a par value of Rs. 10. Each holder of equity shares is entitled to one
vote per share.
c. Nil (540,00,000) shares out of the issued, subscribed and paid up
share capital were alloted as bonus shares in the last five years by
capitalization of profits.
a) The balance in project specific escrow accounts have been netted off
against respective project''s working capital loan accounts.
b) The company has availed working capital loans on pari-passu basis
from State Bank of India and State Bank of Hyderabad. These loans are
secured by hypothecation of inventories, trade receivables and movable
assets of the capital goods segment of the company. The loans from
State Bank of India and State Bank of Hyderabad are further secured by
a second charge on the fixed assets of the company.
c) The company has availed contract specific working capital loans from
State Bank of India, State Bank of Hyderabad, State Bank of Travancore,
State Bank of Patiala, State Bank of Bikaner & Jaipur, State Bank of
Mysore, IDBI Bank, Punjab National Bank, Vijaya Bank, Indian Bank,
Indian Overseas Bank, Corporation Bank, Allahabad Bank, Bank of India,
Andhra Bank, Central Bank of India, Syndicate Bank, Axis Bank, ICICI
Bank, ING Vysya Bank Ltd, Export Import Bank of India, Union Bank of
India and The Karur Vysya Bank Limited. These loans are secured by
hypothecation of inventories, trade receivables and movable current
assets of the respective contracts. The participating banks share the
securities on pari-passu basis.
(a) Plant and equipment include original cost of Rs. 792 lakhs (Rs. 792
lakhs), which are jointly owned along with a Joint Venture, of which
the company is a member
(b) Office fixtures and office equipments includes original cost of Rs. 7
lakhs (Rs. 7 lakhs), which are jointly owned along with subsidiary
(c) Buildings include original cost of Rs. 1642 lakhs (Rs. 1169 lakhs),
which are constructed on lease hold land.
(d) Impairment loss recognised in the statement of profit and loss
during the financial year for office equipments & furniture and
fixtures is Rs. 32 lakhs (Rs. 81 lakhs) (refer Note 41).
2.1. Other Loans and advances include dues from customers and tax
refund (net of provision for taxation) from the Government.
2.2. Cochin Project: The end client of Cochin Port Road Connectivity
Project viz., Cochin Port Road Company Ltd., (SPV of NHAI) terminated
the contract on May 28, 2007. Consequently, the end client encashed BGs
for a value of Rs. 1270 lakhs furnished by the company on behalf of MECON
GEA (JV). The main contractor viz., MECON GEA (JV) contested the
termination of the contract. The disputes after having been reviewed by
the Dispute Review Board are now subject to arbitration. The Arbitral
Tribunal has passed preliminary order in favour of the J V, which is
under challenge before the High Court of Delhi. The High Court of Delhi
has passed the judgement recommending that the Arbitral Tribunal permit
the NHAI to contest their disputes and to adjudicate the same on
merits. The final arguments before the Arbitral Tribunal is listed for
hearing in August'' 2014. The arbitral award is expected in due course
of time. Based on legal opinion, the company has identified a sum of Rs.
1654 lakhs (Rs. 1654 lakhs) as at March 31, 2014 as recoverable advances
from the end client through the JV and is grouped under other loans and
2.3 Tuticorin Project: The end client of Tirunelveli Tuticorin Port
Connectivity Project viz., Tuticorin Port Road Company Ltd (SPV of
NHAI) terminated the contract and encashed BGs for aggregate value of Rs.
2652 lakhs and the same were restituted as per orders of the High Court
of Madras (Madurai Bench). The disputes, including termination of
contract, after having been reviewed by the Disputes Review Board are
now subject to arbitration. The proceeding before the Arbitral Tribunal
are in an advanced stage. In view of these facts, the company has
identified the sum of Rs. 83 lakhs (Rs. 83 lakhs) as at March 31, 2014 as
recoverable advances from the end client through the JV and is grouped
under other loans and advances.
3.1. Trade receivables Others, includes retention amount of Rs. 150898
lakhs (Rs. 127332 lakhs) which, in accordance with the terms of the
contracts were not due for payments as at March 31, 2014
3.2. During the year, the company and State Company for Oil Projects,
Iraq (Client) terminated with mutual consent the contract for two gas
development projects. In line with the mutual terms of settlement, the
company has accounted a loss of Rs. 202 lakhs (net of provisions) and the
same is included under trade receivables written off. (refer Note 27)
3.3. The company has sought confirmation of balances of major trade
receivables. In cases where letters of confirmation have been received
from parties, book balances have been reconciled and adjusted, if
required. In other cases, balances in accounts of trade receivables
have been taken as per books of account.
4. EMPLOYEE STOCK OPTION PLANS
Stock option granted to the employees under the stock option scheme
established are evaluated as per the accounting treatment prescribed by
the SEBI (Employee Stock Option Scheme and Employee Stock Purchase
Scheme) Guidelines, 1999. The Company follows the intrinsic value
method of accounting for the options and accordingly, the excess of
value of the stock options as determined by an independent valuer on
the date of grant over the exercise price of the options, if any, is
recognized as deferred employee compensation cost and is charged to the
statement of profit and loss.
Employee Stock Option Scheme 2007
Pursuant to the decision of the shareholders, at their meeting held on
July 11, 2007, the company has established an ''Employee Stock Option
Plan 2007'' (''ESOS 2007'' or ''the Scheme'') to be administered by the
Compensation Committee of the Board of Directors. ESOS 2007 provides
for grant of options amounting to not more than 1.5% of the issued and
paid up equity capital of the company outstanding at any point of time
to officers, directors and key employees to purchase equity shares of
face value of Rs. 10 each, with such option conferring a right upon the
employee to apply for one equity shares of the company, in accordance
with the terms and conditions of such issue. The exercise price of the
option is Rs. 408.
5. PARTICULARS OF RELATED PARTIES List of related parties
a. Subsidiary companies
i. Progen Systems and Technologies Limited ii. BGR Boilers Private
Limited iii. BGR Turbines Company Private Limited iv. Sravanaa
b. Associate company Nil
c. Other companies (enterprises where significant influence exists and
enterprises where key management personnel have significant influence)
i. GEA Cooling Tower Technologies (India) Private Limited
ii. GEA BGR Energy System India Limited
iii. Germanischer Lloyd Industrial Services (India) Private Limited
iv. Mega Funds India Limited
v. Sasikala Estate Private Limited
vi. Schmitz India Private Limited
vii. Cuddalore Powergen Corporation Limited
viii. ANI Constructions Private Limited
ix. Nannilam Property Private Limited
x. Pragathi Computers Private Limited
xi. BGR Odisha Powergen Limited
xii. BGR Investment Holdings Company Limited
xiii. BGR Power Limited
d. Joint ventures
Mecon GEA Energy System (India) Limited (JV)
e. Key management personnel
i. Mr. B.G.Raghupathy Chairman and Managing Director (till July 28,
ii. Mr.A.Swaminathan Joint Managing Director and CEO (Director - Sales
& Marketing till September 30, 2013)
iii. Mr. V.R. Mahadevan Joint Managing Director (Director -
Technologies & HR till September 24, 2013)
iv. Mr. K. Chandrashekhar Director - Projects
v. Ms. Swarnamugi Karthik Director - Corporate Strategy
f. Relatives of key management personnel
i. Ms. Priyadarshini Raghupathy (Daughter of Mr.B.G.Raghupathy and
Mrs. Sasikala Raghupathy) ii. Ms. Vaani Raghupathy (Daughter of
Mr.B.G.Raghupathy and Mrs. Sasikala Raghupathy) iii. Mr. Arjun Govind
Raghupathy (Son of Mr.B.G.Raghupathy and Mrs. Sasikala Raghupathy)
Party-wise disclosure of related party transactions:
1. Sales represent, GEA Cooling Tower Technologies (India) Private
Limited Rs. 2736 lakhs (Rs. 6454 lakhs).
2. Purchases represent, Progen Systems and Technologies Limited Rs. 260
lakhs (Rs. 21 lakhs), GEA Cooling Tower Technologies (India) Private
limited Rs. 2452 lakhs (Rs. 3903 lakhs), GEA BGR Energy System India
Limited Rs. 41 lakhs (Rs. 92 lakhs), BGR Boilers Private Limited Rs. 17707
lakhs (Rs. 31 lakhs), BGR Turbines Company Private Limited Rs. 492 lakhs (Rs.
3. Investments made represent, Sravanaa Properties Limited Rs. Nil (Rs.
4. Sale of Investments represent, BGR Investment Holdings Company
Limited Rs. 34 lakhs (Rs. Nil), BGR Power Limited Rs. 10 lakhs (Rs. Nil).
5. Remuneration to key management personnel represents, Mr.
B.G.Raghupathy Rs. 44 lakhs (Rs. 1319 lakhs), Mr. T. Sankaralingam Rs. Nil (Rs.
95 lakhs), Mr. V.R. Mahadevan Rs. 147 lakhs (Rs. 122 lakhs), Mr. A.
Swaminathan Rs. 206 lakhs (Rs. 206 lakhs), Mr. K ChandrashekharRs. 97 lakhs
(Rs. 40 lakhs), Mrs. Swarnamugi KarthikRs. 88 lakhs (Rs. 13 lakhs).
6. Remuneration to relatives of key management personnel represent,
Mrs. Swarnamugi Karthik Rs. Nil (Rs. 16 lakhs), Mrs.Priyadarshini
Raghupathy Rs. 32 lakhs (Rs. 8 lakhs), Ms. Vaani Raghupathy Rs. 8 lakhs (Rs. 3
lakhs), Mr. Arjun Govind Raghupathy Rs. 4 lakhs (Rs. 3 lakhs).
7. Rent paid represents, GEA BGR Energy System India Limited. Rs. 0.28
lakhs (Rs. 0.34 lakhs), Sasikala Estate Private Limited Rs. 89 lakhs (Rs. 106
lakhs), ANI Construction Private Limited Rs. 9 lakhs (Rs. 9 lakhs). Mr &
Mrs B G Raghupathy Rs. 42 lakhs (Rs. 45 lakhs), Sravanaa Properties Limited
Rs. 18 lakhs (Rs. 5 lakhs).
8. Purchase of fixed assets represent, GEA Cooling Tower Technologies
(India) Private Limited Rs. Nil (Rs. 16 lakhs).
9. Sale of fixed assets represent, BGR Boilers Private Limited Rs. Nil
(Rs. 31 lakhs).
10. Others represent, royalty to Mr. B.G. RaghupathyRs. 8 lakhs (Rs. 25
lakhs), Mrs. Sasikala RaghupathyRs. 17 lakhs (Rs. Nil).
11. Advances given represent, Progen Systems and Technologies Limited
Rs. 931 lakhs (Rs. 34 lakhs), BGR Boilers Private Limited Rs. 38192 lakhs (Rs.
1387 lakhs), BGR Turbines Company Private Limited Rs. 241 lakhs (Rs. 12577
lakhs), GEA BGR Energy Systems India Limited Rs. 60 lakhs (Rs. 1 lakh), GEA
Cooling Tower Technologies (India) Private Limited Rs. 474 lakhs (Rs. 230
12. Repayment of advance given represents, Mega Funds India Limited Rs.
Nil (Rs. 4 lakhs).
13. Gurantees given represent, Progen Systems and Technologies Limited
Rs. 51 lakhs (Rs. 208 lakhs), GEA Cooling Tower Technologies (India)
Private limited Rs. 661 lakhs (Rs. 661 lakhs).
14. Balances outstanding (Net) represent, Progen Systems and
Technologies Limited Rs. 1277 lakhs (Rs. 554 lakhs), BGR Boilers Private
Limited Rs. 22898 lakhs (Rs. 1688 lakhs), BGR Turbines Company Private
Limited Rs. 12348 lakhs (Rs. 12599 lakhs), GEA Cooling Tower Technologies
(India)Private Limited Rs. 74 lakhs (Rs. 1111 lakhs), GEA BGR Energy System
India Limited Rs. 66 lakhs (Rs. 21 lakhs (cr. bal)), Cuddalore Powergen
Corporation Limited Rs. 671 lakhs (Rs. 671 lakhs), Nannilam Property
Private Limited Rs. 508 lakhs (Rs. 508 lakhs), Mega Funds India Limited Rs.
39 lakhs (Rs. 39 lakhs), Schmitz India Private Limited Rs. 60 lakhs (Rs. 60
lakhs), B.G.Raghupathy Rs. 8 lakhs (cr.bal.) (Rs. 3 lakhs (cr. bal)),
Sravanaa Properties Limited Rs. 6 lakhs (Rs. 6 lakhs), Sasikala Estate
Private Limited Rs. 7 (cr.bal) lakhs (Rs. Nil), Mrs. Sasikala RaghupathyRs.
39 lakhs(cr. bal)(Rs. Nil)
15. CONTINGENT LIABILITIES, GUARANTEES, CAPITAL COMMITMENTS AND OTHER
Rs. in lakhs
Particulars As at As at
March 31, 2014 March 31, 2013
A Contingent liabilities
Claims against the company not
acknowledged as debt
a) On account of sales tax 4222 4228
b) On account of income tax* 10848 23045
c) On account of service tax** 37 37
d) On account of contractual obligations 2350 2350
e) On account of royalty 4547 4538
Guarantees and counter guarantees given
on behalf of subsidiary 712 869
and other company
C Capital commitments
Estimated amount of contracts remaining
to be executed on capital account
(net of advances) 817 809
D Other commitments
Commitments to fund subsidiaries 5681 7180
* Income-tax demand includes a sum of Rs. Nil (Rs. 11495 lakhs) which has
been contested by the IT authorities before the Income-Tax Appellate
** Service tax demand represents a sum ofRs. 37 lakhs (Rs. 37 lakhs) which
has been contested by the service tax authorities before the Customs
Excise and Service Tax Appellate Tribunal.
16. IMPAIRMENT OF ASSETS
a. Cash generating units :
There is no impairment loss in cash generating units and hence no
provision was made in the financial statements.
b. Other assets :
The company has made a provision of Rs. 32 lakhs (Rs. 81 lakhs) in the
books of accounts towards impairment of other fixed assets based on the
17. In respect to construction contracts, cost of material includes
value added tax, central sales tax, works contract tax and service tax.
18. Interest income from fixed deposits have been netted off with
interest expense on working capital facilities.
19. During the last quarter, search operations under Section 132 of
the Income-tax Act 1961, was carried out by the Income-tax Authorities,
for which the company has provided statements and documents.
20. (a) Current tax includes Rs. Nil (Rs. 160 lakhs) being provision for
income-tax in respect of earlier years. (b) MAT credit entitlement
includes Rs. 395 lakhs (Rs. Nil) being MAT credit in respect of earlier
21. PREVIOUS YEAR FIGURES
Figures of previous year have been regrouped / rearranged, wherever
required to conform to the current year presentation.