Bharat Heavy Electricals Directors Report, BHEL Reports by Directors

Bharat Heavy Electricals

BSE: 500103|NSE: BHEL|ISIN: INE257A01026|SECTOR: Infrastructure - General
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Directors Report Year End : Mar '15    « Mar 14
To the Members,
 The Directors are delighted to present the 51st Annual Report on the
 business and operations of the Company and the statement of accounts
 for the year ended March 31, 2015.
 Financial Performance
                                                   Financial Year
 Figures (in Rs. Crore except                  2014-15       2013-14 
 per share data)
 a) Turnover (Gross)                             30947         40338
 b) Revenue from operations (Net)                29542         38389
 c) Other Operational Income                       641           720
 d) Operating expenses                           28094         34595
 e) Operating profit                              2089          4514
 f) Add : Other income                            1220          1616
 g) Profit before depreciation, finance
 cost & tax expense                               3309          6130
 h) Less: Depreciation                            1077           983
 i) Less: Finance costs                             92           133
 j) Profit before tax                             2140          5014
 k) Less: Tax expense                              721          1553
 l) Profit after Tax                              1419          3461
 m) Add: Balance brought forward from the
 previous year                                    1171          1102
 n) Profit available for appropriation            2590          4563
 i) Adjustment pursuant to Amalgamation              0            81
 ii) Depreciation Adjustment                        41             0
 iii) Dividend (including interim dividend)        284           693
 iv) Corporate Dividend tax (incl. on interim
 dividend)                                          57           118
 v) Amount transferred to General Reserve         1000          2500
 o) Balance in Statement of Profit & Loss         1208          1171
 p) Earnings per Share (Rs.)                      5.80         14.14
 q) NAV per share (Rs.)                         139.26        135.02
 Despite various issues relating to power projects like fuel linkages,
 fund constraints, land acquisition etc., BHEL recorded turnover of Rs.
 30947 Crore in the year 2014-15. Net worth of the company has gone up
 by 3.14 %.
 Performance of BHEL for the year 2013-14 has been rated as Good'' in
 terms of MoU signed with the Government of India. BHEL has been awarded
 the MoU Composite score of 3.131''.
 Details of changes in Market Capitalisation
 Description                   As at 31st March       Increase/
                               2015       2014        in %
 Market Capitalization
 (Rs. in Crore)              57604.27    47985.20      20.05
 Price - Earnings Ratio         40.58       13.86     192.78
 Note: Data based on share prices quoted on NSE.
 Percentage increase over/ decrease in the market quotations of the
 shares of the company in comparison to the rate at which the company
 came out with the last public offer- BHEL has not offered shares to the
 public at large in an IPO.
 The Board has recommended a Final Dividend of 31 % (Rs. 0.62 per
 share), Rs. 151.75 Crore, for the year 2014-15. An interim dividend of
 27 % (Rs. 0.54 per share), Rs. 132.17 Crore, on share capital of Rs.
 489.52 Crore, has already been paid for the year 2014-15.  Thus the
 total dividend (exclusive of dividend tax) for the year 2014-15 is Rs.
 283.92 Crore (Rs. 1.16 per share) as against Rs. 692.68 Crore (Rs. 2.83
 per share) paid in the previous year.
 Provision of Rs. 30.89 Crore has been made for Corporate Dividend Tax
 on the Final dividend proposed. Corporate Dividend Tax of Rs. 26.43
 Crore has already been paid on the interim dividend.
 Orders Received
 Despite operating in a subdued but healthy competitive business
 environment, the company secured orders worth Rs. 30814 Crore during
 the year.  Sector-wise orders booked are as follows:
                                                (Rs. in Crore)
                                         2014-15      2013-14
 Power Sector                              24873        20433
 Industry Sector*                           5221         5007
 International Operations                    720         2567
 Total Orders Booked                       30814        28007
 Order Book outstanding at the
 end of the year                          101000       101500
 *excludes inter sectoral orders
 Events Occurring after the Balance Sheet Date
 There were no significant events occurring after the Balance sheet
 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, 2015, the applicable accounting standards have been
 followed along with proper explanation relating to material departures;
 (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
 (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
 A report on Management Discussion and Analysis is placed at Annexure –
 Board of Directors
 Shri Rajesh Kumar Singh, Joint Secretary, Department of Heavy Industry,
 Ministry of Heavy Industries & Public Enterprises, has been appointed
 as Part-time Official Director w.e.f. 22.12.2014.
 Shri T.N. Veeraraghavan has been appointed as an Additional Director
 w.e.f. 07.01.2015 to take charge of the office of Director (E,R&D).
 Shri D. Bandyopadhyay has been appointed as an Additional Director
 w.e.f. 01.08.2015 to take charge of the office of Director (HR).
 In accordance with Section 161 of the Companies Act, 2013 and Article
 67(iv) of the Articles of Association of the Company, Shri Rajesh Kumar
 Singh and Shri D. Bandyopadhyay shall hold their directorships up to
 the 51st Annual General Meeting of the Company and is eligible for
 appointment as Director at the Meeting.
 Shri Ambuj Sharma, Additional Secretary, Department of Heavy Industry,
 Ministry of Heavy Industries & Public Enterprises, consequent to DHI
 order No. 1(2)/1995- PEXI dated 17th December, 2014 has relinquished
 his position as Part-time Official Director on 21.12.2014.
 Shri P.K. Bajpai, who was appointed as Director (Finance) w.e.f.
 01.07.2011 ceased to be a Director of the Company on attaining the age
 of superannuation on 31.05.2015.
 Shri T.N. Veeraraghavan, who was appointed as Director (E,R&D) w.e.f.
 07.01.2015 ceased to be a Director of the Company on attaining the age
 of superannuation on 30.06.2015.
 Shri R. Krishnan, who was appointed as Director(HR), w.e.f. 01.04.2012
 ceased to be a Director of the Company on attaining the age of
 superannuation o n 31.0 7. 2 015 .
 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 Ambuj Sharma, P.K. Bajpai, T.N. Veeraraghavan and R. Krishnan
 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, Shri Atul Sobti
 and Shri S.K. Bahri will retire by rotation at the Annual General
 Meeting and being eligible, offers themselves for re-appointment.
 In compliance with Clause 49(VIII)(E)(1) of the Listing Agreement,
 brief resumes of the Directors proposed for appointment and
 re-appointment along with requisite details are given in the
 Explanatory Statement/ Annexure to the Notice.
 No Director has given resignation during the year.
 CEO/CFO Certificate
 CEO/CFO certificate {as per Clause 49(IX) of Listing Agreement} is
 placed at Annexure – II.
 Sustainable Development
 Sustainability is just a natural extension of the way BHEL sees itself
 and its responsibilities. For almost fifty years of its existence, the
 company has been leveraging technology and innovations for providing
 products, systems and services to its customers enabling them to use
 resources with better efficiency and productivity which is also
 reflected in its Mission Statement – Providing
 Sustainable Business solutions in the fields of Energy, Industry &
 BHEL has ingrained the triple bottom line approach for Sustainable
 Development in its business processes.  It has been creating value for
 its stakeholders since inception. Its R&D efforts have always been
 directed towards development and diffusion of technologies which are
 having reduced environmental footprints.  Its structured CSR programme
 is directed towards bringing prosperity to the society and is aligned
 to the efforts being made by Government of India towards inclusive
 BHEL has undertaken numerous CSR initiatives and more than 300 such CSR
 projects/activities implemented during 2014-15 covered majorly all
 Units/ Regions. In addition, company has undertaken many environmental
 sustainability initiatives which falls broadly in the areas of
 renewable energy generation, material and natural resource management,
 energy management, water & bio-diversity management and carbon
 management. The details of all such sustainability initiatives are
 provided in Annexure-III.
 Business Responsibility Report
 In line with the requirement of clause 55 of the listing agreement,
 Business Responsibility Report describing the initiatives taken by the
 company from an environmental, social and governance perspective as per
 the suggested format is enclosed at Annexure -IV.
 R&D and Technological Achievements
 Continuous product development is the cornerstone of strategy for
 meeting the challenges in today''s environment. BHEL places strong
 emphasis on innovation and creative development, which are the
 important drivers of BHELs R&D programmes for achieving growth. The R&D
 efforts of the company are not only aimed at improving the performance
 and efficiency of the existing products, but also developing new
 products using state-of-the-art technologies and processes.
 BHEL has recorded significant achievements during the year. The R&D
 expenditure of the company for the current financial year is Rs.
 1018.59 Crore which is 3.29% of the turnover. This also includes the
 expenditure incurred on R&D efforts gone into major modifications/
 improvements in product/ designs against customer requirements which
 are not covered in R&D projects. The company filed 453 patent and
 copyright applications filed during the year 2014-15, enhancing the
 company''s intellectual capital to 3010.
 It is imperative to focus on newer areas to meet the challenges of a
 changing business scenario while continuing development in traditional
 areas of business. To meet this objective, BHEL has taken several
 technology development initiatives covering various business verticals
 viz. Power, Transportation, Transmission, Solar, Water, Defence and
 other areas. Company will continue to pursue various projects
 undertaken in recent years with focus on low-carbon path technologies
 including faster assimilation of Supercritical Technology development
 of Advanced Ultra Super Critical Technology, IGCC Technology
 commercialization, Carbon capture, Solar PV & Thermal, 765/1200 kV
 Transmission System, GIS up to 765 kV, ±800 kV HVDC system, IGBT based
 Propulsion Systems for higher rating Locos, EMU, Metro coaches on
 mission mode. The company is also engaged in development of emerging
 technologies like Fuel Cells for distributed environment friendly power
 generation, development of new materials with addition of
 Nano-/micro-particles for improving characteristics, and
 superconducting application in Transformers, Generators, Motors, etc.
 Further details are given 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 this area during the inspection of Corporate
 Office o n 16 .01.15 .
 More than 900 non Hindi speaking employees were imparted training under
 Hindi teaching scheme of Govt. of India. Training for using latest
 version of Unicode Hindi on computer was also imparted to more than
 5000 employees of all the Units/Divisions.  70 Hindi workshops were
 organized to motivate employees to work in Hindi covering more than
 1800 employees. In addition, 1 Translation Training Programme was
 conducted with the help of Central Translation Bureau, Rajbhasha
 Vibhag, Ministry of Home Affairs.
 Under Inter Unit Rajbhasha Shield Scheme, 13 Units were given award for
 excellent Rajbhasha Implememtation. 03 executives were awarded for
 Hindi Book writing under Hindi Book Award Scheme. In addition, 350
 employees who do their work in Hindi were also awarded with cash
 All the Units/Divisions of the company, including Corporate Office,
 celebrated Hindi Divas and Hindi Week/ Fortnight/Month during which
 various competitions, Seminars, Cultural Programme and Kavi Sammelan
 were held.
 BHEL is playing an active role in Town Official Language Implementation
 Committees constituted in various cities. Many interesting
 competitions, Seminars and programmes are conducted under auspices of
 these committees. This year 15 Units/ Divisions of BHEL were awarded by
 the TOLICs for various achievements in this area.
 A handbook Rajbhasha Sahayika has been prepared as helping material
 for doing work in Hindi. It is being distributed to employees in Hindi
 workshops and it has been uploaded on Corporate intranet also.
 13 Hindi Magazines are being published all over the Company to motivate
 the employees for Hindi writing and these are getting awards from
 various institutes. Arunima from Corporate Office was awarded with
 Second Prize by TOLIC (PSU), Delhi for excellent House Journal.
 All BHEL Rajbhasha Coordinators Meet was held on 9th & 10 th October,
 2014 at EPD, Bengaluru.  35 employees from various Units/Division of
 the Company attended the Meet.
 The Vigilance organization of BHEL is headed by a Chief Vigilance
 Officer (CVO) appointed by the Ministry. All major manufacturing Units
 / Power Sector Region of BHEL have vigilance set up, headed by senior
 vigilance executive reporting to the CVO.
 Preventive vigilance remained the focus area of BHEL Vigilance, with
 special emphasis on systemic improvements. To strengthen the vigilance
 administration, Whistleblower Policy of the company was issued.
 Further, action was initiated for review of Works policy, Works Account
 Manual and HR Manual.
 Public Awareness is an important cornerstone for good governance. An
 enlightened employee not only can contribute in achieving the
 organizational goal but also in system improvements. Training
 programmes / sessions were conducted to update employees about
 Company''s policies, rules and procedures in various BHEL Units and
 Regions. In addition, interactive sessions were held with line
 executives representing different functional areas to sensitize them
 about the risk prone areas.
 With a view to create awareness about procurement and works policy,
 rules and procedures etc., to disseminate the instructions/ guidelines
 issued by CVC and Government of India from time to time and to share
 best practices and case studies, a quarterly e-Newsletter DISHA is
 being published by Corporate Vigilance.
 Corporate Vigilance teams inspected 9 Units. The issues observed during
 inspections were discussed in interactive sessions with the respective
 Unit Managements. It was impressed upon officials to focus on the
 aspects of estimation and price reasonability while dealing with
 procurement to remain competitive in the market. The interactive
 sessions helped BHEL officials to appreciate the role of Vigilance in
 promoting a strong, viable and competitive organization.
 The critical review of tender conditions was also undertaken with a
 view to increase competition and check cartel formation. Due to
 proactive action of Vigilance, savings to the tune of Rs. 37.03 Crore
 (approx.) have been achieved.
 BHEL Vigilance prepared a detailed Corruption Mitigation Action Plan in
 respect of potential areas of corruption, which has been taken up for
 implementation by all Units.
 Routine / Surprise Inspections were carried out by Unit / Corporate
 Vigilance to verify the compliance of rule and procedures.
 Instructions/Guidelines were issued concerning following issues for
 further improvement in the system:
 a) Deficiencies in Tendering Process of Transportation Contracts
 b) Clarification on clause 4.0 of Guidelines on Suspension on Business
 Dealings with Suppliers / Contractors
 c) Prequalification Criteria (PQ)
 d) Receipt and Opening of Tenders
 e) Deficiency in Quality Inspections
 f) Reasonableness of Rates
 Some specific areas concerning Estate Management, Stores Management,
 Procurement were identified and Unit Managements were advised to
 initiate action in these areas:
 - Recovery of outstanding dues on account of rent and allied charges
 from the allottees of quarters/ shops in Townships.
 - Identification/ segregation of surplus / usable stores/ scrap
 material from the stores lying outside the workshops in the premises of
 units and not used/ disposed of for very long time.
 - Installation of Bio-metric Attendance System linked with pay system.
 - Procurement through open tender route particularly for high value
 packages and review of PMDs to weed out inactive suppliers.
 To improve record management, Guidelines for Retention / Weeding out of
 Old Records in Vigilance Department issued on 20.08.2014.
 To enhance the skills of Vigilance Officers, a workshop for Vigilance
 Officers was organized from 27.08.2014 to 29.08.2014 at BHEL, Bhopal
 BHEL is committed to bring transparency in day to day operations of the
 Company by leveraging technology. The information regarding procurement
 related matters like status of purchase orders and Contracts, Vendor
 registration along with their current status is hosted on the Company
 website.  In addition, e-tendering route is being promoted for
 procurement and e-payment system has been implemented to reduce vendor
 interface. Further, steps have been taken to promote e-procurement in
 the Company. The percentage of e-procurement increased from 25% to 37%
 and around 26% of tenders (value wise) were decided through Reverse
 Auction during 2014-15.
 Vigilance examined 144 complaints and investigated 30 complaints during
 the year.
 Safety & Security
 Though BHEL has an established and mature Safety Management System
 accredited to OHSAS 18001: 2007, BHEL''s management has further enhanced
 its focus on building a strong safety culture. To reinforce the
 organisation setup for safety and to improve our safety practices
 safety performances and other safety related issues are now reviewed in
 MCM on quarterly basis.
 The result of efforts to improve safety are gradually becoming visible
 as there has been a marked improvement in safety statistics in recent
 past. It is reflected in data related to fatalities and man-days lost
 for the calendar year 2013 and 2014. At project sites, there was
 approximately 45% reduction in incidences of fatalities and 50 %
 reduction in the man-days lost due to various types of accidents during
 calendar year 2014 in comparison to calendar year 2013.
 Dedicated Safety and Occupational Health Centres are being run in the
 factory premises taking care of safety and health issues at the work
 place. Some of the initiatives taken in our units to build and maintain
 safety and health culture at work place during the year are:
 - Sponsoring BHEL officials for 1 year advanced Diploma course in
 Industrial Safety conducted by Central / Regional Labour institute at
 Mumbai, Kanpur, Kolkata, Chennai and Faridabad
 - Periodic health and safety awareness campaigns
 - Regular health and safety related training programmes
 - Display of posters and safety instructions
 - Safety pledge & Tool box meetings
 - Regular Plant Safety Inspections
 - Encouraging use of Personal Protective Equipment
 - Mock Drills in identified hazardous areas at specified frequency
 - Publication of in-house magazines and hand books on various safety
 - Work Permit system for carrying out critical activities
 - Conducting periodic safety drills, Internal audits & 3rd party audits
 - Job Safety Analysis for identified activities
 - Monthly departmental Safety Committee meetings and plant safety
 committee meetings
 - Scheduling preventive maintenance of machine/ equipment
 - Periodic maintenance & testing of material handling equipment
 (including cranes, hoists, lifting tackles, forklifts, pallets); all
 pressure vessels/ air receivers, power presses
 - Making available Material Safety Data Sheet (MSDS) for all the
 hazardous chemicals and safe work procedures are followed
 - Developing operation control procedures (OCPs) and providing it to
 the concerned for effective implementation
 Further, Annual Safety Heads Meet was conducted at Corporate Office on
 16th & 17th Sep, 2014 for sharing of experience amongst the people
 directly involved in ensuring safety at their respective workplaces.
 The Companys security mechanism is sufficient to provide security to
 each Plant/Unit. Security of most of the plants of the company is being
 managed by the CISF except for in some smaller plants where the company
 has its own security. Also, in some plants, Corporate Office and
 Regional Offices, the security is being looked after by the private
 agencies sponsored by Directorate General Resettlement, Govt. of India
 or Ex-Servicemen Corporations.
 Adequate measures have been taken for security of computers. Department
 of Electronics, Govt. of India (SRAC) has also carried out audit/review
 of our software security mechanism and their suggestions have been
 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. Monthly report on
 theft/ pilferage and fire incident compiled by Corporate Security
 Department along with quarterly reports on various security related
 issues as per the decisions taken in the meetings of HR & Security
 Adequate measures have been taken by installation of CCTV''s and SOP in
 many plants and offices to mitigate any security threats.
 The Management, security staff and employees of company are sensitized
 to the security needs of the company.
 Corporate Governance
 As per the requirements of Clause 49 of the Listing Agreement 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 (CG) under clause 49
 of Listing Agreement & 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.
 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 outgo is given at
 As per provisions of section 197 of the Companies Act, 2013 read with
 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 directors etc. in the Directors
 Report. However as per Notification No. GSR 463(E) dated 5th June, 2015
 issued by the Ministry of Corporate Affairs, Government Companies are
 exempted from complying with provisions of section 197 of the Companies
 Act, 2013. BHEL being a Government Company, therefore, such particulars
 have not been included as part of Directors'' Report.
 Statement pursuant to Section 129 of the Companies Act, 2013 (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 :
 2. Policy Determining Material Subsidiaries and Policy Dealing with
 Related Party Transactions, Weblink : toRelatedPartyTransactions.pdf
 The Auditors of your Company are appointed by the Comptroller and
 Auditor General of India. The names of auditors appointed for the year
 2014-15 are printed separately in the Annual Report.
 The details of cost auditors appointed for the year 2014-15 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.
 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 Government of India,
 particularly the Department of Heavy Industry, in Company''s operations
 and developmental plans. The Directors express their grateful thanks
 also to the Comptroller and Auditor General of India, Chairman and
 Members of Audit Board, Statutory Auditors, Branch Auditors,
 Secretarial Auditors 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
 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 efforts, devotion and sense of
 belongingness has made this great company proud.
                        For and on behalf of the Board of Directors of
                                          BHARAT HEAVY ELECTRICALS LTD.
                                                        B. Prasada Rao
                                          Chairman & Managing Director
 Place : New Delhi
 Dated : 06.08.2015
Source : Dion Global Solutions Limited
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