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Bharat Heavy Electricals

BSE: 500103|NSE: BHEL|ISIN: INE257A01026|SECTOR: Infrastructure - General
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« Mar 15
Chairman's Speech (Bharat Heavy Electricals) Year : Mar '16
Dear Shareholders,
 
 It is an honour and a privilege to present the 52nd Annual Report of
 your company. I am extremely humbled as I write my first letter to our
 valued shareholders, after assuming office on January 1, 2016. This has
 been a very challenging year for your company. The volatility in
 economic and business environment is bound to change the way we operate
 and create wealth for our shareholders. Holding on to our strengths and
 building new ones, our team of 42,000 employees is resolutely focused
 on achieving immediate target of regaining growth.
 
 The Year That Was…
 
 Today, your company is in the midst of the toughest times it has faced
 since its inception. The uncertain global economic order, caused by
 weak global recovery, slowing global trade and China''s growth
 transition, is the ''new normal''. The desired pace of growth continues
 to elude the domestic industrial sector as it faces continued pressure
 from subdued capex and capacity underutilization. Power generation
 equipment industry, in particular, has been facing a tough time for the
 last few years, accentuated by the ongoing energy transition.  In
 addition to this, geopolitical disturbances in the target export
 markets and fluctuating energy prices have dampened the international
 business. The overall subdued business environment due to these factors
 and the current business mix affected the financial performance of the
 company, with the company registering a turnover of Rs. 26,587 Crore
 and a net loss of Rs. 913 Crore during the year.
 
 But, the real strength of an organization lies in discovering the
 opportunities in its challenges. This is what we believe in, and
 despite the hurdles, we have achieved some outstanding benchmarks in
 the year 2015- 16 which reflect your company’s strong fundamentals:
 
 - An unprecedented feat in the execution of projects was achieved by
 commissioning/synchronizing an all-time high 15,059 MW of power
 generation equipment. This includes commissioning of six supercritical
 sets which constitutes 55% of the supercritical sets commissioned in
 the country during the year.
 
 - Like in 2014-15, all the hydroelectric power projects that went on
 stream in the country, totalling 810 MW, were commissioned by BHEL.
 
 - Your company booked orders worth Rs. 43,727 Crore - the highest in
 the last five years with 42% growth over 2014-15. With this, the
 company has orders worth Rs. 1,10,730 Crores for execution in 2016-17
 and beyond.
 
 - Your company secured three major orders of 765kV substations under
 stiff international competitive bidding for the National Green Energy
 Corridor project.
 
 - 500 MW Kosti TPS - Sudans largest thermal power plant, and two 220 kV
 substations in Afghanistan were successfully commissioned by BHEL.
 
 We are proud of our achievements but are fully aware of the looming
 challenges. The company is addressing them with its persistent efforts
 and capitalizing on the new opportunities. As an organization, we
 cannot influence most of the external factors but can definitely change
 what is going on within us. It is time for your company to embrace the
 new and adapt to the market realities.
 
 Creating BHEL of Tomorrow
 
 In our journey of creating BHEL of tomorrow, it is our passionate
 endeavour to transform BHEL into an organization which is Responsive,
 Robust and Rising to the needs of its stakeholders. This involves
 orienting our strategy towards enhancing responsiveness by delayering
 and being simple; building new sources of strength for a robust future
 and diversification to attain a balanced portfolio for creating a
 rising organization. Your company''s efforts are concentrated towards
 this drive and I firmly believe that this will be the bedrock of our
 growth in the coming years.
 
 What we choose to embrace, to be responsive of, is a reflection of our
 intent. With a view to create a more agile organization, we are
 focusing on Execution, Consolidation and Simplification (ECS) as the
 first step. In this process, we are identifying the weak links and
 putting in place an organization structure that is more productive and
 that enables us to achieve higher operational efficiency. At the same
 time, we are reviewing our systems and processes to get rid of the
 cumbersome legacies and move towards simplification by eliminating
 waste and low value added activities. Accelerated execution is one of
 the most important facets for us to be responsive to customer''s needs.
 Our continual efforts in this direction have resulted in commissioning
 /synchronization of more than 10,000 MW of power projects for the
 fourth consecutive year, with this year crossing an all-time high mark
 of 15,000 MW. This includes the highest-ever power generation capacity
 addition of 13,061 MW to the Indian utility segment - 23% higher than
 the target of Ministry of Power, Government of India and a quantum jump
 of 59% over the previous year.
 
 Robust BHEL!
 
 Your company is looking forward to build new strengths on the
 rock-solid foundation which we have built in our journey of over half
 of a century. We derive this strength from our deep-rooted focus on
 research & development.  Standing true to the spirit of innovation-led
 growth strategy, the company has maintained R&D expenditure at plus
 2.5% of the turnover for more than five years in a row. The company has
 strengthened its focus on indigenization of supercritical technology to
 enhance its competitiveness. Recent in-house developments include 765
 kV & 1200 kV UHVAC transformer & reactor, IGBT propulsion technology
 for locomotives and ACEMU, STATCOM for industrial & grid applications,
 Phase Shifting Transformer and 500 kW PCU for solar PV generation. BHEL
 also made its foray into 400 kV GIS by securing the first commercial
 order.
 
 As digital tools and technologies are profoundly differentiating the
 way business is being conducted, your company has put in place an
 organization structure to embrace IT as a strategic tool for opening up
 new stream of opportunities in new as well as traditional business
 areas.
 
 Most importantly, to fulfil this target of a robust organization, we
 have unhindered focus on the people development strategy which is today
 driven by the growing aspirations of the millennial generation of the
 company. We are embracing social technologies for increasing employee
 engagement and working towards development of employee competencies in
 line with the business plans through implementation of various learning
 & development initiatives.
 
 Rising BHEL!
 
 What will define us in the new phase of our journey is how well we rise
 to the impending challenges. Our goal is to create an organization
 which will convert problems into possibilities and leverage on the new
 opportunities emerging from ''Make in India''. Thus, our absolute focus
 is on creating a balanced portfolio with focus on industry business.
 Towards this, we are taking various steps. To harness the opportunities
 emerging from Government''s focus on renewables, BHEL is in the process
 of augmenting its manufacturing capacity and enhancing EPC capability
 for large scale PV based plants. Company is also working towards
 expansion of its defence portfolio which currently includes Super Rapid
 Gun Mount & Integrated Platform Management System for naval ships,
 thermo pressed components, compact heat exchanger for Tejas, turret
 castings for T72 tanks and other strategic equipment. We continue to
 strengthen our transmission portfolio. Considerable progress has been
 achieved in the execution of the world''s largest ± 800kV, 6000MW HVDC
 NE-Agra project with commissioning of Pole-1 and establishment of power
 flow in both directions.
 
 With focus on the industry, company is equally pivoted to maintain its
 leadership in the power sector. In order to ensure energy security,
 coal will continue to remain the dominant fuel for power generation in
 the foreseeable future in view of its abundant domestic reserves and
 affordability. Towards this, we have focussed on enlarging scope of
 offer and enhancing competitiveness by adding flue-gas desulfurization
 system, air-cooled condenser, water management system and are in the
 process of expanding offerings for environmental solutions.
 
 Partners in Our Journey
 
 These are challenging times, but I am sure that our best years lie
 ahead. BHEL has the ''strategy, structure, and staff'' to ensure that, in
 both good times and tough, we make steady progress. We will not leave
 any stone unturned in our quest to unlock the potential and take your
 company to greater heights. We will continue to put unwavering emphasis
 on creating customer value and bolster our inherent strengths to
 enhance shareholder value.
 
 Finally, I would like to express my sincere gratitude to all our
 stakeholders: business partners including customers and vendors for
 reposing their faith in us, employees for their persistent commitment,
 members of the Board for their wisdom, members of the Management
 Committee for efficiently channelizing the company''s resources, and
 you, our shareholders, for evincing trust in our ability to steer
 forward BHEL in these challenging times.  Various ministries of
 Government of India, particularly the Department of Heavy Industry,
 have been providing valuable guidance and support in our efforts. I am
 confident that we will continue to receive your support in the future.
 
 I see a challenging, yet exciting, journey ahead for us -one of new
 beginnings, new opportunities and new horizons.
 
 With best wishes,
 
                                                       Atul Sobti
 
                                     Chairman & Managing Director
 
 New Delhi
 
 August 10, 2016
Source : Dion Global Solutions Limited
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