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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 '14    « Mar 13
To the Members,
 
 The Directors feel privileged to present the 50th Annual Report on the
 business and operations of the company and the statement of accounts
 for the year ended March 31, 2014.
 
 Financial Performance
 
                                          Financial Year
 
 Figures (in Rs. Crore except           2013-14        2012-13 
 per share data)
 
 a) Turnover (Gross)                     40338          50156
 
 b) Revenue from                         38389          47618 
    operations (Net)
 
 c) Other Operational                      720            807
    Income
 
 d) Operating expenses                   34595          39037
 
 e) Operating profit                      4514           9388
 
 f) Add : Other income                    1616           1122
 
 g) Profit before                         6130          10510
    depreciation, finance 
    cost & tax expense
 
 h) Less: Depreciation                     983            953
 
 i) Less: Finance costs                    133            125
 
 j) Profit before tax                     5014           9432
 
 k) Less: Tax expense                     1553           2817
 
 l) Profit after Tax                      3461           6615
 
 m) Add: Balance brought                  1102           1031
 forward from the
 previous year
 
 n) Profit available for                  4563           7646
 appropriation
 
 i) Adjustment                              81
 pursuant to
 Amalgamation
 
 ii) Dividend (including                   693           1323
 interim dividend)
 
 iii) Corporate                            118            221
 Dividend tax ((incl. on interim
 dividend)
 
 iv) Amount transferred                   2500           5000 
 to General Reserve
 
 o) Balance in Statement                  1171           1102
 of Profit & Loss
 
 p) Earnings per Share (Rs.)             14.14          27.03
 
 q) NAV per share (Rs.)                 135.02         124.38
 
 Despite various issues relating to power projects like fuel linkages,
 fund constraints, land acquisition etc., BHEL recorded a turnover of Rs.
 40338 Crore in the year 2013-14. Net worth of the company has gone up
 by 8.55 %.
 
 Performance of BHEL for the year 2012-13 has been rated as ''Very Good''
 in terms of MoU signed with the Government of India. BHEL has been
 awarded MoU Composite score of ''2.49''.
 
 Dividend
 
 The Board has recommended a final dividend of 76 % (Rs. 1.52 per share),
 Rs. 372.04 Crore, for the year 2013-14. An interim dividend of 65.5 % (Rs.
 1.31 per share), Rs. 320.64 Crore, on share capital of Rs. 489.52 Crore,
 has already been paid for the year 2013-14.  Thus the total dividend
 (exclusive of dividend tax) for the year 2013-14 is Rs. 692.68 Crore (Rs.
 2.83 per share) as against Rs. 1323 Crore (Rs. 5.41 per share) paid in the
 previous year.
 
 Provision of Rs. 63.23 Crore has been made for Corporate Dividend Tax on
 the final dividend proposed. Corporate Dividend Tax of Rs. 54.49 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. 28007 Crore during the
 year. Sector-wise orders booked are as follows:
 
                                               (Rs. in Crore)
 
                                  2013-14        2012-13
 
 Power Sector                      20433          25560
 
 Industry Sector*                   5007           4086
 
 International
 
 Operations                         2567           2004
 
 Total Orders
 
 Booked                            28007          31650
 
 Order Book
 outstanding at the
 end of the year                  101500         115100
 
 *excludes inter sectoral orders
 
 Events Occurring after the Balance Sheet Date
 
 There were no significant events occurring after the Balance sheet
 date.
 
 Directors'' Responsibility Statement
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956, it is hereby
 confirmed:
 
 (i) that in the preparation of the annual accounts for the financial
 year ended 31st March, 2014 the applicable Accounting Standards have
 been followed along with proper explanation relating to material
 departures;
 
 (ii) that the Directors have selected such accounting policies and
 applied them consistently and made judgments and estimates that were
 reasonable and prudent so as to give a true and fair view of the state
 of affairs of the company as at the end of the financial year 2013-14
 and of the profit of the company for that period;
 
 (iii) that the Directors have taken proper and sufficient 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;
 
 (iv) that the Directors have prepared the annual accounts for the
 financial year ended 31st March, 2014 on a going concern'' basis.
 
 Management Discussion and Analysis
 
 A report on Management Discussion and Analysis is placed at Annexure -
 
 I.  Board of Directors
 
 Appointment
 
 Shri Atul Sobti has been appointed as an Additional Director w.e.f.
 01.12.2013 to take charge of the office of Director (Power).
 
 Pursuant to DHI letter no. 1(18)/2011-PEXI, dated 31.12.2013, the term
 of Shri B. Prasada Rao, CMD, has been extended by the President of
 India for a period of two years w.e.f. 01.01.2014.
 
 Shri S.K. Bahri, Additional Secretary & Financial Adviser, Department
 of Industrial Policy & Promotion, Ministry of Commerce & Industry has
 been appointed as Part-time Official Director w.e.f.  31.03.2014.
 
 Ms. Harinder Hira has been appointed as Part-time Non-official Director
 w.e.f. 08.05.2014.
 
 In accordance with Section 161 of the Companies Act, 2013 and Article
 67(iv) of the Articles of Association of the company, Shri Atul Sobti,
 Shri S.K Bahri and Ms. Harinder Hira shall hold their directorships
 upto the 50th Annual General Meeting of the company and are eligible
 for appointment as Directors at the Meeting.
 
 Cessation
 
 Shri Trimbakdas S. Zanwar who was appointed as Part-time Non-Official
 Director w.e.f. 12.11.2010 ceased to be a Director of the company on
 completion of his tenure on 11.11.2013.
 
 Shri Atul Saraya, who was appointed as Director (Power) w.e.f.
 01.10.2009 ceased to be a Director of the company on attaining the age
 of superannuation on 30.11.2013.
 
 Ms. Kusumjit Sidhu, IAS, former Additional Secretary & Financial
 Adviser, Ministry of Commerce & Industry, consequent upon her
 appointment as Secretary, Department of Public Enterprises, has
 relinquished her position as Part-time Official Director w.e.f.
 01.01.2014.
 
 Shri S. Ravi who was appointed as Part-time Non- Official Director
 w.e.f. 10.03.2011 ceased to be a Director of the company on completion
 of his tenure on 09.03.2014.
 
 The Board of Directors place on record their deep appreciation for the
 valuable services rendered as well as advice and guidance provided by
 Shri Trimbakdas S. Zanwar, Shri Atul Saraya, Ms. Kusumjit Sidhu and
 Shri S. Ravi 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 R. Krishnan
 and W.V.K Krishna Shankar will retire by rotation at the Annual General
 Meeting and being eligible, offer themselves for re-appointment.
 
 In compliance with Clause 49(IV)(G)(i) of the Listing Agreement, brief
 resumes of the Directors proposed for appointment and re-appointment
 along with the nature of their expertise in specific functional areas
 and names of companies in which the person also holds directorship
 along with the membership of the Committees of the Board are given at
 Annexure-II forming part of the Directors'' Report.
 
 Sustainable Development
 
 The concept of sustainability is ingrained in the DNA of BHEL which is
 evident from the mission statement- Providing Sustainable Business
 solutions in the fields of Energy, Industry & Infrastructure. BHEL is
 committed to be an environment friendly company in all its areas of
 activities, products and services and providing a safe & healthy work
 environment.
 
 The company is putting in efforts to reduce the carbon footprint of its
 organisational activities and also its customers by adopting
 sustainable business practices. Various projects and initiatives are
 being undertaken in the areas of Renewable Energy Generation, Material
 and Natural Resource Management, Energy Management, Water & Bio-
 Diversity Management and Carbon Management.
 
 BHEL has always been endeavouring to act as a responsible corporate
 citizen committed to the welfare of society through inclusive growth
 aimed at capacity building, empowerment of communities, environment
 protection and development of backward regions and upliftment of the
 marginalised & under-privileged sections of the society.
 
 During 2013-14, BHEL spent 1.64% of PAT of the year 2012-13 towards CSR
 & Sustainability activities.  company has supported various social
 initiatives across the country by undertaking projects in diversified
 areas like Community Development, Health & Hygiene, Education,
 Environment Protection, Disaster Management, and Talent up
 gradation/Skill development. Further details are given in Annexure–III.
 
 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
 
 BHEL''s products and systems are technology intensive and thus, BHEL has
 adopted R&D and technology development as the central driver for
 implementing its strategy and fulfilling its endeavour to become a
 global engineering enterprise. As part of Strategic Plan 2012-17, the
 company is transforming its R&D and innovation in a structured and
 focused manner through five pronged approach consisting of Strategic
 Direction, Portfolio Management, Partnerships & Alliances, Knowledge
 Management and Enablers to improve the performance of existing products
 and develop new product for meeting global benchmarks.
 
 The R&D expenditure of the company during 2013- 14 was Rs. 1114 Crore
 which was 2.76% of the turnover as against 2.49% for the previous year.
 This also includes the expenditure incurred on R&D efforts gone into
 major modifications / improvements in products/designs against customer
 requirements which are not covered in R&D projects. Similarly, the IPR
 capital of the company has grown by 19% as compared to 2012-13, taking
 the total to 2589.
 
 Further, investments in R&D are being intensified to enhance
 capabilities in Product Development & Engineering. 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 commercialisation, Carbon capture, Solar
 (PV, Thin Film, CSP), 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. Further details are
 given in Annexure-V.
 
 Official Language Implementation
 
 Continuous efforts were made for propagation and effective
 implementation of Rajbhasha in the company. All the Units and Divisions
 have Hindi cells for assistance in fulfilling the Rajbhasha
 requirements. Quarterly Meetings of Official Language Implementation
 Committee were conducted on regular basis to monitor and review the
 progress made in achieving the targets fixed in Annual Programme for
 2013-14.
 
 More than 600 non Hindi speaking employees were imparted training under
 Hindi teaching scheme of Govt. of India. Training for using Unicode
 Hindi on computer was also imparted to employees of all the
 Units/Divisions. To motivate employees to work in Hindi 80 Hindi
 workshops were organized covering more than 2000 employees. In
 addition, 2 Translation Training Programmes were conducted with the
 help of Central Translation Bureau, Rajbhasha Vibhag, Ministry of Home
 Affairs.
 
 Inter Unit Rajbhasha Scheme has been introduced to increase the
 competition amongst the Units and Divisions in this area. Under the
 scheme, 12 Units were given award for excellent Rajbhash
 Implementation. Two executives were awarded for Hindi Book writing
 under Hindi Book Award Scheme.
 
 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.
 
 Twelve wards of employees who obtained B-2 grade or above in Hindi
 subject at Board level examinations were given awards.
 
 Our company 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 10 Units/ Divisions of BHEL
 were awarded by the TOLICs for various achievements in this area.
 
 Vigilance
 
 The Vigilance organisation of BHEL is headed by a Chief Vigilance
 Officer (CVO) appointed by the Ministry. Major manufacturing Units /
 Power Sector Region of BHEL have a vigilance set up headed by a senior
 vigilance executive reporting to the CVO.
 
 Preventive vigilance has remained the focus area of BHEL Vigilance all
 through the years. During 2013-14 emphasis was on systemic
 improvements.  Based on system studies carried out, suggestions towards
 system improvements were rendered for incorporation in the policies /
 guidelines.  Consequently policies / guidelines were revised during the
 year:
 
 Purchase Policy
 
 Reverse Auction Guidelines
 
 Guidelines for Suspension of Business
 
 Dealings with Vendors
 
 Amendments to Vendor Registration Procedures
 
 - SEARP, 2010.
 
 Public Awareness is an important corner stone for good governance. An
 enlightened employee not only can contribute in achieving the
 organisational goal but also in system improvements. Training
 programmes were conducted to update employees about companys policies,
 rules and procedures.  104 such programmes were organized during the
 year 2013-14 in various BHEL Units and Regions.  In addition,
 interactive sessions were held with line executives representing
 different functional areas to sensitise them about the risk prone
 areas.
 
 To create awareness about the procedures of procurement in BHEL, to
 disseminate the instructions issued by Statutory Authorities and to
 share the case studies, quarterly e-Newsletter DISHA is being
 published.
 
 The Vigilance Awareness Week was observed from 28th October to 2nd
 November, 2013 in Corporate Office, Manufacturing Units, Power sector
 Regions and Project Sites of BHEL. Observance of Vigilance Awareness
 Week commenced with the PLEDGE of Integrity by the employees.
 
 Interactive sessions/discussions on the theme Promoting Good
 Governance-Positive Contribu- tion of Vigilance, were organized at
 Corporate Office and in Units/Regions. Lectures and interactions with
 various eminent personalities, expert speakers on relevant topics
 varying from RTI, Fraud Risk Management to Ethics and Values etc. were
 also organized across the organisation during Vigilance Awareness Week.
 
 During 2013-14, Vigilance emphasised on procure- ment through open
 tender route particularly for high value packages. Tender conditions
 related to rate contracts were studied and suitable terms and
 conditions were incorporated to thwart cartelisation by vendors.
 Further, quality inspections and utilization of BHEL T&Ps in
 sub-contracted/ outsourced works were selected as focus area for
 enhancing the end quality of products and productivity.
 
 Corporate Vigilance teams inspected 6 Vigilance Units of BHEL. The
 findings were discussed in interactive sessions with the 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 organisation.
 
 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
 web site.  In addition, e-tendering route is being promoted for
 procurement and e-payment system has been implemented to reduce vendor
 interface.
 
 Safety & Security
 
 Dedicated Safety and Occupational Health Centers are being run in the
 factory premises taking care of safety and health issues at the work
 place. Various measures like periodic health and safety awareness
 campaigns, mock drills in identified hazardous areas once in 6 months,
 job safety analysis for identified activities, periodic maintenance &
 testing of material handling equipment, monitoring of quality of food &
 water etc. are being taken to ensure best possible safe working
 environment. Most of the manufacturing units and other entities have
 been accredited to Environmental Management Systems (ISO 14001:2004)
 and Occupational Health & Safety Management Systems (OHSAS 18001:2007).
 
 The company''s security mechanism is sufficient and geared up to provide
 security to each Plant/Unit.  Installation of CCTV''s and SOP have been
 installed in many of the plants. 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. The Management, security staff and the
 employees of company are sensitised to the security needs of company.
 
 Adequate measures have been taken for Security of computers and
 software. Department of Electronics, Govt. of India (SRAC) has also
 carried out audit/ review of our software security mechanism and their
 suggestions have been implemented.
 
 Corporate Governance
 
 As per the requirements of Clause 49 of the Listing Agreement a
 detailed report on Corporate Governance together with the following is
 given at
 
 Annexure - VI:
 
 (i) CEO/CFO Certificate [as per Clause 49(V)] and
 
 (ii) Certificate from the company''s Auditors [as per Clause 49(VII)].
 
 Other Disclosures
 
 Information in accordance with the provisions of Section 217(1)(e) of
 the Companies Act, 1956 read with Companies (Disclosure of Particulars
 in the Report of the Board of Directors) Rules, 1988 regarding
 conservation of energy, technology absorption and foreign exchange
 earnings and outgo is given at Annexure-VII.
 
 As per Notification No. GSR 289(E) dated March 31, 2011 issued by the
 Ministry of Corporate Affairs, amending the provisions of the Companies
 (Particulars of Employees) Rules, 1975 issued in terms of Section
 217(2A) of the Companies Act, 1956, it is not necessary for Government
 companies to include the particulars of employees drawing salaries of Rs.
 60 lakh or more per annum, employed throughout the financial year or Rs.
 5 lakh per month, if employed for part of the financial year.  The
 company being a Government company, the information has not been
 included as a part of the Directors'' Report. However such particulars
 will be made available to any member on receiving a specific request in
 this regard during the course of Annual General Meeting.
 
 Statement pursuant to Section 212 of the Companies Act, 1956 relating
 to Subsidiary Companies is given at Annexure-VIII.
 
 Auditors
 
 The Auditors of your company are appointed by the Comptroller and
 Auditor General of India. The names of auditors appointed for the year
 2013-14 are printed separately in the Annual Report.
 
 The detail of cost auditors appointed for the year 2013-14 and Cost
 Audit details are printed separately in the Annual Report.
 
 The reply to the point referred to in 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 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 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 : July 14, 2014
 
 
 
Source : Dion Global Solutions Limited
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