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Bharat Heavy Electricals Directors Report, BHEL Reports by Directors
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Bharat Heavy Electricals

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Directors Report Year End : Mar '16    « Mar 15
The Directors are pleased to present the 52nd Annual Report on the
 business and operations of the company and the audited financial
 statements for the year ended March 31, 2016.
 
 During the year, the company created new benchmark in project execution
 with the commissioning/ synchronization of all-time high of 15,059 MW
 of power plants in a single year, up by 26% from the previous year.
 This includes an all-time high power generation capacity addition of
 13,061 MW to the Indian utility segment, 59% more than the last year.
 
 The company secured orders worth Rs. 43,727 Crore – the highest in the
 last five years. The company was able to increase its market share in
 Power sector from five-year average of 66% to 74%. BHEL recorded
 Turnover of Rs. 26,587 Crore during the year despite unfavourable
 business environment.
 
 Financial Performance
  
                                                     Financial Year
  
 Figures (in Rs. Crore except                    2015-16       2014-15 
 per share data)
 
 a)   Turnover (Gross)                             26587         30947
 
 b)   Excise Duty and                              (1449)        (1405) 
      Service Tax
 
 c)   Revenue from                                 25138         29542 
      Operations (Net)
 
 d)   Other Operational                              492           700
      Income
 
 e)   Total Revenue                                25630         30242
 
 f)   Operating Expenses                          (27594)       (28153)
 
 g)   Operating Profit/                            (1964)         2089
     (Loss)
 
 h)   Other Income                                  1450          1220
 
 i)   Profit/ (Loss) before                         (514)         3309
      Depreciation, Finance cost & 
      Direct Tax
 
 j)   Depreciation                                  (936)        (1077)
 
 k)   Finance Cost                                   (27)          (92)
 
 l)   Profit/ (Loss) before                        (1477)         2140
      tax
 
 m)   Direct Tax including                           564          (721)
      Deferred Tax
 
 n)   Profit/ (Loss) after                          (913)         1419
      Tax
 
 o)   Balance brought                               1209          1171
      forward from the previous year
 
 p)   Depreciation                                     -           (40)
      Adjustment
 
 q)   Profit available for                           296          2550
      appropriation
 
 r)   Appropriation
 
      i) Dividend (including                         (98)         (284)
      interim dividend)
 
      ii) Corporate                                  (20)          (57)
      Dividend tax (incl.  on interim 
      dividend)
 
      iii) Amount transferred                          -         (1000)
      to General Reserve
 
 s)   Balance in Statement                           178          1209
      of Profit and Loss
 
 t)   NAV per share (Rs.)                         135.04        139.26
 
 Figures in bracket denote expenses, loss or appropriation.
 
 Performance of BHEL for the year 2014-15 has been rated as Good in
 terms of MoU signed with the Govt.  of India.
 
 Dividend
 
 The Board has recommended a final dividend of 20 % (Rs. 0.40 per share)
 on share capital of Rs. 489.52 Crore for the year 2015-16. The total
 payout on account of dividend (Rs. 97.90 Crore) along with Corporate
 Dividend Tax (Rs. 19.93 Crore) amounts to Rs. 117.83 Crore.
 
 Orders Received
 
 Despite operating in a subdued business environment, the company
 secured orders worth Rs. 43,727 Crore during the year, the highest in
 the last five years and 42% growth over 2014-15. Sector-wise orders
 booked are as follows:
 
                                             Rs. in Crore
 
                                  2015 -16      2014 -15
 
 Power Sector                        38529         24873
 
 Industry Sector                      5125          5221
 
 International Operations               73           720
 
 Total Orders Booked                 43727         30814
 
 Order Book outstanding at the
 end of the year                    110730*       101000
 
 *Orders worth Rs. 7429 Crore have been excluded during the year from
 the order outstanding which are not likely to commence and this has no
 impact on revenue.
 
 Events Occurring after the Balance Sheet Date
 
 There were no significant events occurring after the Balance Sheet
 date.
 
 Directors'' Responsibility Statement
 
 Pursuant to Section 134(5) of the Companies Act, 2013, it is hereby
 confirmed that:
 
 (i) In the preparation of the annual accounts for the financial year
 ended March 31, 2016, the applicable accounting standards have been
 followed and proper explanation relating to material departures has
 been provided;
 
 (ii) 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 at the end of the financial year and of the profit and
 loss of the company for that period;
 
 (iii) The Directors have taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of this Act for safeguarding the assets of the company and
 for preventing and detecting fraud and other irregularities;
 
 (iv) The Directors have prepared the annual accounts on a going concern
 basis;
 
 (v) The Directors have laid down internal financial controls to be
 followed by the company and that such internal financial controls are
 adequate and were operating effectively;
 
 (vi) The Directors have devised proper systems to ensure compliance
 with the provisions of all applicable laws and that such systems are
 adequate and operating effectively.
 
 Management Discussion and Analysis
 
 Indian economy is experiencing a turnaround with economic growth
 projected at 7.6 per cent in 2016-17 in an environment of slow global
 economic recovery.  Performance of the company during the year was
 affected by subdued business environment.
 
 During the year, an unprecedented feat in the execution of projects was
 achieved by your company by commissioning/synchronizing an all-time
 high 15,059 MW of power generation equipment. BHEL booked orders worth
 Rs. 43,727 Crore - highest in the last five years from its Power
 Sector, Industry Sector and International Operations. Long term growth
 strategy of BHEL is to maintain leadership in existing businesses and
 expand industry business by harnessing opportunities emerging from
 ''Make in India'' in the areas of Solar power, transmission,
 transportation, defence and water.
 
 Company has mitigation strategies in place to address risks emanating
 from prevailing economic uncertainties and volatility in business
 environment.  Further, a strong resolve has been made towards
 transformation of BHEL into an organization which is Responsive,
 Robust and Rising to needs of the customers, employees and
 shareholders. Focus on Execution, Consolidation and Simplification
 (ECS) is one of the first steps to initiate this transformation
 process.
 
 Further details are given in Annexure-I.
 
 Board of Directors
 
 - Details of changes in Directors & Key Managerial Personnel
 
 Appointment
 
 Shri Amitabh Mathur was appointed as Additional Director w.e.f.
 01.09.2015 to take charge of the office of Director (IS&P). He was
 subsequently appointed as Director in the 51st Annual General Meeting
 of the Company.
 
 Shri Subrata Biswas was appointed as Additional Director w.e.f.
 24.09.2015 to take charge of the office of Director (E,R&D).
 
 S/Shri Rajesh Kishore, Keshav N. Desiraju and R. Swaminathan have been
 appointed as Part-time Non-official Directors w.e.f. 18.12.2015.
 
 Shri Atul Sobti, the then Director (Power), BHEL pursuant to DHI Order
 dated 01.09.2015, was appointed as Chairman & Managing Director, BHEL
 w.e.f. 01.01.2016.
 
 Shri T. Chockalingam was appointed as Additional Director w.e.f.
 11.02.2016 to take charge of the office of Director (Finance).
 
 Dr. Subhash Chandra Pandey, Additional Secretary & Financial Adviser,
 Department of Industrial Policy and Promotion, Ministry of Commerce &
 Industry has been appointed as Part-time Official Director w.e.f.
 31.03.2016.
 
 Shri Akhil Joshi was appointed as Additional Director w.e.f. 10.08.2016
 to take charge of the office of Director (Power).
 
 In accordance with Section 161 of the Companies Act, 2013 and Article
 67(iv) of the Articles of Association of the Company, S/ Shri Subrata
 Biswas, Rajesh Kishore, Keshav N. Desiraju, R. Swaminathan, T.
 Chockalingam, Dr. Subhash Chandra Pandey and Akhil Joshi being
 appointed as additional directors, shall hold directorship upto the
 52nd Annual General Meeting of the company and are eligible for
 appointment as Directors at the Meeting.
 
 Cessation
 
 Shri W.V.K Krishna Shankar, who was appointed as Director (IS&P) w.e.f.
 01.08.2013 ceased to be a Director of the company on attaining the age
 of superannuation on 31.08.2015.
 
 Shri B. Prasada Rao, who was appointed as Chairman and Managing
 Director w.e.f. 01.10.2009, ceased to be Chairman and Managing Director
 w.e.f. 31.12.2015 on completion of his tenure.
 
 Shri S.K. Bahri, former Additional Secretary & Financial Adviser,
 Department of Industrial Policy and Promotion, Ministry of Commerce &
 Industry, pursuant to Order dated 26.02.2016 of the Department of
 Industrial Policy & Promotion, Ministry of Commerce & Industry
 regarding his repatriation to parent cadre, relinquished his charge of
 the post of Part-time Official Director on the Board of BHEL w.e.f.
 29.02.2016.
 
 The Board of Directors place on record their deep appreciation of the
 valuable services rendered as well as advice and guidance provided by
 S/ Shri W.V.K.  Krishna Shankar, B. Prasada Rao and S.K. Bahri during
 their tenure.
 
 Further, pursuant to Section 152 of the Companies Act, 2013 and Article
 67(i) of the Articles of Association of the Company, S/Shri D.
 Bandyopadhyay and Amitabh Mathur will retire by rotation at the Annual
 General Meeting and being eligible, offer themselves for re-
 appointment.
 
 In compliance with Regulation 36(3) of the SEBI (Listing Obligations &
 Disclosure Requirements) Regulations, 2015, brief resume of the
 Directors proposed for appointment and re-appointment alongwith the
 nature of their expertise in specific functional areas and names of
 companies in which the person also holds directorship alongwith the
 membership of the committees of the Board are given in the explanatory
 statement/ annexure to the Notice.
 
 No Director has given resignation during the year.
 
 - Audit committee details
 
 Details of Board Level Audit Committee are given at Point 6.3 of the
 Corporate Governance Report.  Further, there has been no instance where
 the Board of Directors have not accepted recommendation of the Audit
 Committee.
 
 CEO/CFO Certificate
 
 CEO/CFO certificate (as per Regulation 17(8) of Listing Regulations) is
 placed at Annexure-II.
 
 Sustainable Development
 
 BHEL believes in doing business in a sustainable manner. To promote
 inclusive growth, the thrust on CSR initiatives continued which
 resulted in creating social infrastructure for the benefit of
 community.  During 2015-16, an amount of Rs. 66.20 Crore was spent on
 CSR initiatives by BHEL. The details of sustainability initiatives has
 been provided in Annexure-III.
 
 Business Responsibility Report
 
 In line with the requirement of the listing regulations, Business
 Responsibility Report describing the initiatives taken by the company
 from environmental, social and governance perspectives as per the
 suggested format is enclosed at Annexure-IV.
 
 R & D and Technological Achievements
 
 BHEL''s R&D strategy, structure and infrastructure are aligned to meet
 the challenges of present & future business environment. The R&D
 expenditure of the company for 2015-16 is Rs. 893.07 Crore which is
 3.36% of the turnover. This includes the expenditure incurred on R&D
 efforts made at manufacturing units for major modifications/
 improvements in products/ designs against customer requirements which
 are not covered in Corporate R&D projects. The company filed 477 patent
 and copyright applications during the year 2015-16, enhancing the
 company''s intellectual property in terms of number of such rights to
 3441.
 
 Further details have been provided in Annexure -V.
 
 Official Language Implementation
 
 Continuous efforts were made for propagation and effective
 implementation of Rajbhasha in the company.  Inspection of 12
 Units/Divisions was done to monitor and review the progress in this
 area. Committee of Parliament on Official Language appreciated the
 efforts being made in the area of Official Language implementation
 during the inspection of HERP- Varanasi on 18th September, 2015 and
 HPBP Trichy on 25th January, 2016.
 
 More than 950 non-Hindi speaking employees were imparted training under
 the Hindi teaching scheme of Govt. of India. Training for using Hindi
 in Unicode on computers was also imparted to more than 5000 employees
 of all the Units/Divisions. 75 Hindi workshops covering more than 1700
 employees were organised to motivate employees to work in Hindi. In
 addition, a five-day translation training programme was conducted with
 the help of Central Translation Bureau, Rajbhasha Vibhag, Ministry of
 Home Affairs, Govt. of India.
 
 Under Inter Unit Rajbhasha Shield Scheme, 11 Units were given award for
 excellent Rajbhasha implementation. In addition, 323 employees were
 given cash award for doing their original work in Hindi.
 
 Thirteen Hindi magazines are being published all over the company. A
 handbook Rajbhasha Sandarshika has been prepared as helping material
 for doing work in Hindi and was distributed to all the Units/Divisions.
 
 Vigilance
 
 The vigilance department of BHEL is headed by a Chief Vigilance Officer
 (CVO) appointed by Department of Heavy Industry (DHI), Ministry of
 Heavy Industries & Public Enterprises, Govt. of India. Major
 manufacturing units / power sector regions of BHEL have vigilance set
 ups headed by senior vigilance executives reporting to the CVO.
 
 BHEL is laying more focus on preventive vigilance to tackle corruption.
 The approach to preventive vigilance includes a combination of review
 of rules & policies particularly concerning procurement and
 recruitment, awareness measures and targeting specific functional
 areas/ issues by engaging stakeholders, in order to minimize scope for
 corruption. Some of the preventive measures initiated in recent times
 are as under:
 
 - Review and update of the policies / manuals in order to align them
 with the extant Govt. policies / guidelines, to bring clarity in the
 provisions to avoid scope for different interpretations
 
 - Expansion of vendor base to ensure competitiveness
 
 - Demarcation of BHEL land and digitization of land records
 
 - Introduction of audit trail in computerized systems for tracking
 changes
 
 - Installation of CCTVs to check material movements and improve
 security environment in unit premises
 
 - Issue of Fraud Prevention Policy and Complaint Handling Policy of the
 company
 
 - Introduction of on-line complaint system to bring more transparency
 
 A detailed Corruption Mitigation Action Plan in respect of potential
 areas of corruption in BHEL has been prepared and it has been taken up
 for implementation by all units / regions. Potential areas of
 corruption have been identified, and in each case, detailed strategy
 has been identified in respect of causes of corruption, proposed action
 plan to mitigate the same and measurable targets and persons
 responsible for implementation in the respective units.
 
 Vigilance department is publishing a quarterly e-Newsletter ''DISHA''
 with a view to create awareness about relevant policies, rules and
 procedures, etc., to disseminate the instructions/ guidelines issued by
 CVC & Govt. of India from time to time and to share best practices and
 case studies.
 
 The Vigilance Awareness Week was observed from 26-31 October, 2015 in
 corporate office, manufacturing units, power sector regions and project
 sites of BHEL with the Pledge of Integrity undertaken by the employees.
 During the week, a documentary film on BHEL Chalo Sath Chalein- Ek
 Anubhav BHEL ka was made by BHEL and telecast by Doordarshan in
 October 2015. Besides showcasing the good governance, transparency and
 best practices adopted by BHEL, the film highlights how the collective
 approach of BHEL''s management and vigilance has brought benefits to the
 company.
 
 Routine / surprise inspections were carried out by units / Corporate
 Vigilance and the learnings were shared with the senior executives of
 management. In addition, circulars were issued by Corporate Vigilance
 for systemic improvements in critical areas.
 
 Since BHEL has adopted Integrity Pact, structured meetings are held
 with the Independent External Monitors (IEMs) every quarter wherein the
 procurement related issues and complaints thereupon are discussed. The
 Integrity Pact has been made mandatory for all purchase orders /
 contracts of value more than Rs. 5 Crore.
 
 Safety & Security
 
 At BHEL we believe that human life is priceless, loss of which can
 neither be made up for by monetary compensations nor can its dedication
 and expertise be substituted. This very premise forms the core of
 occupational safety programmes in BHEL and inspires us to make the
 workplace safer for the employees of BHEL as well as for our business
 associates. BHEL''s major manufacturing units are OHSAS 18001 certified,
 having strong Health, Safety & Environment (HSE) management systems in
 place. This has resulted in improvement of company’s safety
 performance. At project sites, compared to the year 2014, there was
 approximately 27% reduction in incidences of fatalities and nearly 29%
 reduction in the man-days lost due to various types of accidents.
 
 Dedicated Safety and Occupational Health Centres are being run in the
 factory premises catering to safety and health issues of employees at
 the work place. Some of the initiatives taken in our units to build and
 maintain safety and health culture at work place during 2015-16
 included:
 
 - Sponsoring BHEL officials for one year advanced diploma course in
 Industrial Safety, conducted by Central / Regional Labour institute at
 Mumbai, Kanpur, Kolkata, Chennai and Faridabad
 
 - Sharing of good practices through in-house magazines and hand books
 on various safety related topics
 
 - Creating awareness about safety through display of posters, safety
 instructions, standard operating procedures and periodic awareness
 compaigns
 
 - Conducting health & safety related training sessions for regular
 employees, contract workers & trade apprentices
 
 - Creating awareness about hazardous chemicals through making available
 the Material Safety Data Sheet (MSDS) and Standard Operating Procedure
 
 - Conducting special programme on health awareness for women employees
 
 - Creating awareness about road safety amongst the truck drivers
 associated with transportation of our products
 
 - Conducting as well as getting 3rd party external audit for Safety.
 
 The company''s security mechanism is sufficient and geared up to provide
 security to each plant/ unit. Whereas the security of most of the
 plants of the company is being managed by the CISF , in some places,
 the company has its own security/ private agencies sponsored by
 Directorate General Resettlement, Govt. of India or Ex - Servicemen
 corporations.
 
 Security audit of major plants is being done by the Intelligence Bureau
 periodically and the additional requirements wherever pointed out by
 them, are immediately complied with by the concerned units.  Review of
 security is done internally also from time to time.
 
 Adequate measures have been taken by installation of CCTV''s and
 Standard Operating Procedure (SOP) in many plants and offices to
 mitigate any security threats. The management, security staff and the
 employees of the company are sensitized to the security needs of the
 company.
 
 Data and Cyber Security
 
 An organizational Crisis Management Group (CMG) has been set up in BHEL
 for countering cyber-attacks and cyber terrorism, in pursuance of
 priorities and directives from Ministry of Heavy Industries and Public
 Enterprises, Govt. of India. Crisis Management Plan (CMP) for BHEL is
 also in place. All database administrators across various locations of
 the company are notified.
 
 BHEL has created a team of 65 information security professionals
 through training and certification courses, meeting one of the key
 objectives of national cyber security policy of Govt. of India to
 protect Indian cyber space.
 
 All units, regions and divisions of BHEL have been certified for
 ISO/IEC 27001:2013 for Information Security Management System (ISMS).
 
 Corporate Governance
 
 As per the requirements of the Listing Regulations, a detailed report
 on Corporate Governance (including Board/Committee meeting details)
 together with the following is given at Annexure – VI.
 
 (i) Auditors certificate on Corporate Governance under Listing
 Regulations & DPE guidelines on Corporate Governance.
 
 (ii) Secretarial Audit Report u/s 204(1) of the Companies Act, 2013 and
 management reply thereon.
 
 (iii) Extracts of Annual Return pursuant to section 92(3) of the
 Companies Act, 2013 read with rule 12(1) of the Companies (Management
 and Administration) Rules, 2014
 
 Declaration under section 149(6) of the Companies Act, 2013 pertaining
 to criteria of independence has been given by the Independent Directors
 to the Board of Directors.
 
 Loans and Investments
 
 Details of loans and investments covered under the provisions of
 Section 186 of the Companies Act, 2013 forms part of financial
 statement, attached as a separate section in the Annual report FY
 2015-16.  Loan of Rs. 3 Crore towards working capital was given during
 2015-16 to M/s BHEL EML, BHEL''s subsidiary company.
 
 Other Disclosures
 
 Information in accordance with the provisions of Section 134(3)(m) of
 the Companies Act, 2013 read with Companies (Accounts) Rules, 2014
 regarding conservation of energy, technology absorption and foreign
 exchange earnings and outgoings is given at Annexure-VII.
 
 As per provisions of section 197 of the Companies Act, 2013 read with
 the Rule 5 of the Companies (Appointment and Remuneration of Managerial
 Personnel) Rules, 2014, every listed company is required to disclose
 the details of the remuneration of the Directors etc. in the Directors''
 Report. However as per Notification No. GSR 463(E) dated 5th June, 2015
 issued by the Ministr y of Corporate Affairs, Government Companies are
 exempted from complying with provisions of section 197 of the Companies
 Act, 2013.  BHEL being a government company, such particulars are not
 included as part of Directors'' Report.
 
 Statement pursuant to Section 129 of the Companies Act, 2013 (Form
 AOC-1) relating to subsidiary companies & joint ventures and Form AOC-2
 pursuant to section 134(3)(h) of the Companies Act read with Rule 8(2)
 of the Companies (Accounts) Rules, 2014 are given at Annexure-VIII.
 
 Links to Company Websites :
 
 1. Familiarisation Programme of Independent Directors, Weblink :
 
 http://www.bhel.com/investor relations/investor.  php
 
 2. Policy Determining Material Subsidiaries and Policy Dealing with
 Related Party Transactions, Weblink :
 
 http://www.bhel.com/pdf/Policy with regard to Related Party
 Transactions.pdf
 
 Auditors
 
 The auditors of BHEL are appointed by the Comptroller and Auditor
 General of India. The names of auditors appointed for the year 2015-16
 are printed separately in the Annual Report.
 
 The detail of cost auditors appointed for the year 2015- 16 and cost
 audit details are printed separately in the Annual Report.
 
 The Auditors'' Report and Comments of the Comptroller and Auditor
 General of India are given at Annexure- IX.
 
 Acknowledgements
 
 The Board places on record its sincere appreciation towards the
 company''s valued customers in India and abroad and esteemed
 shareholders for the support and confidence reposed by them in the
 management of the company and look forward to the continuance of this
 mutually supportive relationship in future.
 
 The Board also gratefully acknowledges the support and guidance
 received from various ministries of the Govt. of India, particularly
 the Department of Heavy Industry, in the companys operations and
 developmental plans. The Directors also express their gratitude to the
 Comptroller and Auditor General of India, Chairman and Members of Audit
 Board, Statutory Auditors, Branch Auditors, Secretarial Auditor and
 Cost Auditors. The company also wishes to place on record its
 appreciation for the continued co-operation received from all the
 technology collaborators and suppliers and for the support provided by
 the financial institutions and bankers. Last but not the least, the
 Board wishes to place on record its deep gratitude to all BHELites
 whose enthusiasm, team effort, devotion and sense of belongingness have
 made this great company proud.
 
                    For and on behalf of the Board of Directors of 
 
                                      BHARAT HEAVY ELECTRICALS LTD.
 
                                                        Atul Sobti
 
                                      Chairman & Managing Director
 
 Place : New Delhi 
 
 Dated : August 10, 2016
Source : Dion Global Solutions Limited
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