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BEML Ltd.

BSE: 500048 | NSE: BEML |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE258A01016 | SECTOR: Infrastructure - General

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Annual Report

For Year :
2018 2017 2016 2015 2014 2013 2012 2011 2010

Director’s Report

BOARD’S REPORT

The Board of Directors has pleasure in presenting the 54th Annual Report and Audited Accounts for the year ended 31.03.2018.

Financial results:

(Rs, Crores,

Particulars

2017-18

2016-17

Gross Revenue

3306

2837

Revenue from operations

3305

2835

Profit before Depreciation, Interest and Tax

276

208

Finance costs

48

48

Depreciation and amortization expense

64

62

Profit Before Tax

164

98

Tax Expense

34

14

Other Comprehensive Income

71

12

Total Comprehensive Income

59

73

Profit available for

280

292

appropriations

Debenture Redemption Reserve

-

31

Balance c/f

280

261

Turnover & Profitability:

Your Company achieved all time high Revenue from Operations of Rs,3305 crores as against Rs,2835 crores in the previous year, registering growth of 16.61% compared to previous year Revenue from Operations. The increase in sales is mainly on account of increase in the turnover of Rail & Metro Business due to increase in sale of metro cars to Delhi Metro Rail Corporation under RS-10, RS-13 and Kolkata Metro Rail Corporation projects. In addition to the above, Mining & Construction business and Defence business also contributed to the growth in turnover over previous year.

The Value of Production (net of consortium supplies and excise duty) is Rs,3227 crores as against Rs,2624 crores in the previous year. The Profit before Tax was about Rs,164 crores as against Profit before Tax of Rs,98 crores recorded in the previous financial year, which is the highest ever in the last six years.

There was no change in the nature of business of the Company during the year. Further, there was no material change / commitment occurred affecting the financial position of the Company subsequent to the financial year ended 31.03.2018 till the date of this report.

Performance vis-a-vis MoU:

Performance of your Company, in terms of the Memorandum of Understanding (MoU) signed with the Department of Defence Production, Ministry of Defence (MoD), Government of India, was rated as “Very Good” for the financial year 2016-17 and the rating for the financial year 2017-18 is under selfevaluation.

Dividend:

Your Board of Directors has recommended a dividend of Rs,8/- per equity share i.e., 80%, for the year 2017-18 keeping in view the future prospects of the Company and at the same time meeting the aspirations of the shareholders.

Order Book Position:

The Order Book of Company as on 01.04.2018 is over Rs,6700 crores. The Order book comprises of three business verticals, i.e., Mining & Construction, Defence, Rail & Metro.

Exports:

During 2017-18, your Company made exports aggregating Rs,28.53 crores (physical exports of Rs,28.13 crores and export incentive of Rs,0.40 crores) as against Rs,30.80 crores (physical exports of Rs,20.18 crores, deemed exports of Rs,9.98 crores and export incentive of Rs,0.64 crores) during the previous year.

Strategic Disinvestment:

Ministry of Defence vide its letter dated 01.12.2016 communicated that Cabinet Committee on Economic Affairs (CCEA) had accorded “in-principle” approval for strategic disinvestment of the Company. Department of Investment and Public Asset Management (DIPAM) vide its O.M. dated 19.12.2016 communicated that an Inter-Ministerial Group (IMG) had been constituted by the competent authority for the purpose of appointing intermediaries such as Asset Valuer (AV), Transaction Advisor (TA) and Legal Advisor (LA) for the strategic disinvestment of 26% equity in the Company out of Government of India shareholding of 54.03%. After confirmation, the Company vide letter dated 06.01.2017 intimated NSE and BSE about the ‘inprinciple’ approval of CCEA and also posted on the web-site of the Company, in terms of Regulation 30 of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 [hereinafter referred to as ''Listing Regulations''].

As per the terms, MoD has appointed M/s RBSA Valuation Advisors LLP Ahmedabad as Asset Valuer, and DIPAM has appointed M/s. SBI Capital Markets Limited as TA and M/s Crawford Bayley as LA respectively.

Further, DIPAM has advised that due diligence to be undertaken for taking further action in the matter.

Quality:

Your Company views quality improvement as a business strategy and hence remains proactive in the areas of product and service quality. At BEML, Corporate Quality Policy emphasizing Total Quality Management (TQM), ensures that quality system adopted, results in products, services and processes that meet stringent standards and performance criteria. Quality Department is empowered to spearhead the thrust towards Total Quality Management.

All manufacturing divisions have been certified for Quality Management System (QMS) as per ISO 9000-2008 standard. KGF Complex, Bengaluru Complex and Mysuru Complex are also certified for Environmental Management System (EMS) as per ISO 14000. Two manufacturing divisions, Bengaluru

Complex and Hydraulics & Power line Division have been awarded with the above certifications as per 2015 version standards and for remaining manufacturing units, the same certification is planned by September 2018.

Further, Bengaluru Complex is certified as per BS OHSAS 18001-2007 Integrated Management System standard and Aerospace Manufacturing Division (ASMD), Mysuru complex is certified as per AS9100C standard.

Key initiatives / actions taken during the year for continuous improvement towards Quality Assurance, is as under:

- Customer complaint handling system was created to enable direct on-line logging of complaints through company website and analysing complaints to channelize quality improvement actions.

- Vendor development remains a continuous “focus area” to improve quality of vendors’ supplies. Focus is given to upgrade the quality system of vendors by extending support and encouraging vendors to upgrade facilities and implement quality systems. These initiatives have resulted in increase in the number of ISO 9000 certified vendors and improved quality performance.

- Various Quality Assurance initiatives have been taken up such as introduction of additional jigs and fixtures, imbibing the Concept of 5S, Kaizen, Zero defect work centers and Quality Circles, across the company with target based monitoring of progress by each manufacturing division, and have resulted in lower internal and external failure costs.

- Periodic process / system audits are being conducted, and feedbacks are given to vendors on continuous basis with regard to the rejections and necessary guidance given for corrective and preventive action, for process / system improvements right from development stage to ensure quality in their supplies.

- Quality Improvement Projects are identified across the divisions, through Cross Functional Teams. Wherever design modifications are required the same is effected to enhance product reliability in the form of Design improvement projects.

- Quality Circle Team “Metro” from Bengaluru complex has won the prestigious QCI - DL Shah National Quality award 2017 for the case study “Ensuring Zero defect in Metro coach bogie manufacturing by Business Process Reengineering”.

- Your Company has upgraded the existing Laboratory facilities, at Kolar Gold Fields and Mysuru manufacturing divisions, and is in the process of obtaining National Accreditation Board for Testing and Calibration Laboratories certification during 2018-19.

Make in India Initiative and Indigenization:

Your Company is committed for the success of “Make in India” programme and has adopted various initiatives under ‘Make in India’ concept launched by the Government of India. It is Company’s endeavour to achieve self-reliance by wholeheartedly participating in ''Make in India'' drive with increased sourcing from local manufacturers.

During the year, under this initiative Company has designed and developed products such as 180T (BE1800D) Diesel Excavator, 850HP BD475-1Bull Dozer under Mining & Construction Segment, Arjun Armed Repair & Recovery Vehicle, Truck Mounted Crane, Medium Bullet Proof Vehicle, High Mobility Vehicle for 155mm caliber Mounted Gun System under Defence Segment and Metro Cars for Kolkata Metro Rail Corporation and Intermediate Metro Cars for Bangalore Metro Rail Corporation Limited under Rail & Metro Segment.

Your Company has achieved level of indigenization over 90% in the mainline M&C products, Rail Coaches & EMU’s, over 80% in High Mobility Vehicles (HMV) and over 60% in Metro cars. Further, efforts are underway to reach higher levels. Company has nominated a Nodal Officer for ''Make in India'' drive and list of items for indigenization are hosted on Company’s website www.bemlindia.in. Also a display center is set-up in Bengaluru Complex, where prospective vendors can have access to samples, drawings and technical specifications and explore opportunities to partner with the Company. The new Public Procurement (Preference to Make in India), Order 2017 announced by Govt. of India has given a new impetus for local manufacturers by way of eligibility to address the surging metro market in India.

Start Ups:

The Ministry of Commerce & Industry, Government of India has launched ‘Start Up’ concept under ‘Make in India’ initiative during 2016.

An entity working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property, if it aims to develop and commercialize a new product or service or process or a significantly improved existing product or service or process, that will create or add value for customers or workflow are covered under this Start-up.

A Company that has been in existence for less than seven years and with sales revenues not exceeding ''25 crores will be recognized under Start Ups. However, your Company has relaxed the aforesaid eligibility criteria of prior turnover and experience for registration from Start Ups in order to encourage them to participate in supplies for Company’s procurements. Further, the Company’s identified areas of Start Up are hosted on Company’s web-site www.bemlindia.in and vendors need to contact Quality wing of the Company for Start Up activities.

Renewable Energy Development, Energy Conservation, Research & Development and Technology Absorption:

(i) Renewable Energy Development:

In realizing the goal of ‘Go Green’, your Company has commenced its initiation by setting up a 5MW Windmill Project at Gadag District, Karnataka which is generating power since 2007. It has generated 84 Lakh Kwh power during 2017-18 aggregating to 899 Lakh Kwh from the date installation resulting in greenhouse gas reduction. In addition, the Company has also set up 9MW Windmill Project at Dammur Village, Koppal district and has generated 87 Lakh Kwh power during 2017-18, aggregating to 193 Lakh Kwh from the date of installation. Another, 9MW project at Mittalkode has been commissioned. With this, the total commissioned renewable energy capacity of over 23MW which will meet major portion of captive consumption of the Company. The Company’s 5MW Windmill at Gadag and 9MW Windmill at Bagalkot District have contributed towards ensuring clean energy as part of sustainable development by mitigating 15710 tons of carbon during the year 2017-18.

(ii) Energy Conservation:

Your Company continues to give emphasis on conservation of energy. The efficiency of energy utilization is closely monitored to attain higher level of energy conservation. In order to conserve energy, your Company has replaced all its light fittings with LED Lighting and has undertaken to replace other energy saving equipment in a phased manner.

(iii) Research & Development and Technology Absorption:

Your Company has an in-house Research and Development setup. It continues to play a vital role in design and development of new products/ aggregates, continuous up-gradation of existing products and indigenization activity.

R&D centre at KGF Complex (“R&D Facility”), the biggest design and development center for earth moving machinery in India is supplemented by R&D centers located at Truck Division and Engine Division at Mysuru Complex and Product Engineering teams co-located at all manufacturing divisions. Facilities in specialized areas like hydraulics, power train, structural engineering, and material science are available at the R&D Centre. Computer Aided Design (CAD) / Computer Aided Engineering facilities are established for digital design and virtual simulation for product design and validation. R&D facilities for diesel engine design and development, including emission measuring infrastructure and testing facilities are located at Mysuru Complex.

The R&D set-up in Defence business vertical is engaged in the areas of High Mobility Heavy Duty vehicles, Armoured Recovery and Repair Vehicles (ARRVs), Mine Ploughs, Transmissions and Engines. The Company has entered into technology tie-ups with M/s. Pearson Engineering Ltd, UK for Mine ploughs.

The R&D set-up in Rail & Metro business vertical is basically involved in design & development of Metro & Railway rolling stock products, up-gradation of existing products based on the market need and indigenization of imported aggregates. In this regard, the Company has entered into technology tie-up with M/s. Hyundai Rotem Company for Metro Cars.

During the year, R&D designed, developed and launched upgraded version of various products under Mining & Construction, Rail & Metro and Defence segments of the Company.

In terms of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, the information on energy conservation and technology absorption including the products developed by the Company during the year is placed at Annexure-I.

Foreign Exchange Earnings and Outgo:

During the year, the Company’s foreign exchange earnings stood at Rs,23 crores and the total foreign exchange utilized was Rs,396 crores.

A sum of Rs,0.88 crores was incurred towards deputation of personnel abroad for business / export promotion, after-sales-services and training purposes.

Finance:

The working capital requirements were met from the internal accruals and credit facilities availed from banks. There was no overdue installment of principal and/or interest to the banks. ICRA has reaffirmed the long-term rating of [ICRA]A and the short-term rating of [ICRA]A1 for Rs,2,750 Crores limit towards fund based cash credit and non fund based bank guarantee limit for the year 2017-18. The outlook on the long term rating is Stable.

The Vision-2018 for Payment and Settlement Systems in India brought by the RBI in June 2016 reiterated the commitment to encourage greater use of electronic payments by all sections of society so as to achieve a “less-cash” society. Government also made fiscal measures for the encouragement of card culture in 2016 budget. In this direction, BEML has also adopted cashless transactions across the Company. The Company has organised various awareness programmes on Digital India initiative, for employees and executives including their dependants residing in townships also. To take stock of the effectiveness of the cashless initiatives of the Company, Internal Audit has taken up the Audit on cashless transactions periodically.

Goods and Service Tax (GST), one of the biggest tax reforms since independence, has been rolled out by Govt. of India with effect from 01.07.2017. GST has subsumed several of the erstwhile indirect taxes levied by Union of India and States/Union Territories. GST is an integrated tax which works on the concept of “One Nation One Tax”. Some of the major benefits of GST implementation accruing to the industry at large and your Company in particular, would be removal of cascading effect of taxes and seamless flow of Input Tax credit benefits, reduced compliances. The Company has migrated to GST regime by enrolling in 17 States covering all its plants, Regional and District offices spread across the country within the statutory time lines. The Company has upgraded and customized ERP system to be totally GST compliant. With the above, GST was effectively implemented from

01.07.2017. Further to the implementation of GST, all transactions are being carried out in compliance to the GST law.

The Company’s contributions to Central and State Exchequers were in the order of ''948.44 crores during the year by way of Excise Duty, Customs Duty, Sales Tax, Service Tax, GST, Dividend and Tax there on, and other taxes and duties.

Internal Financial Controls:

Your Company has put in place adequate Internal Financial Controls (IFCs) with respect to Financial Statements. The Company has various manuals such as, Manual for Accounts, Cost Accounting & Pricing, Stores, Purchase, Audit, etc., and the same are being periodically updated, circulated and also uploaded in ‘BEML Bulletin Board’ for viewing and compliance by concerned employees and officers for carrying out various activities in a transparent manner and in line with the delegation of powers and no instances of material weakness in the operations has been observed. The adequacy of internal financial controls over financial reporting is covered by the Statutory Auditors in their Audit Report. In addition, the details of the IFCs are included under the heading ‘Internal control systems and their adequacy’ in the Management Discussion & Analysis Report which forms part of this report.

Fixed Deposits:

The Company did not accept any fixed deposits during the year, and there was no outstanding Fixed Deposits at the beginning / end of the year. Accordingly, there was no default in payment of deposits / interest thereon.

Enterprise Risk Management:

In terms of Section 134(3)(n) of the Companies Act, 2013, Regulation 17(9) of the Listing Regulations, and Para 7.3 of DPE Guidelines, your Company has formulated “Risk Management Policy” with an objective to ensure sustainable business growth with stability and to promote a pro-active approach in identifying, evaluating, reporting and managing or mitigating risks associated with the business. In order to achieve the key business objectives, the policy establishes a structured and disciplined approach to risk management in order to manage or mitigate risk related issues. The said policy is also placed on the Company''s website www.bemlindia.in.

In terms of Regulation 21 of the Listing Regulations, the Company has constituted Risk Management Committee consists of Director (Rail & Metro Business), Director (Mining & Construction Business), Director (Defence Business), Director (Finance) and one Independent Director as per the policy.

Further, the aforesaid Risk Management Committee shall appraise the key risks along with mitigation plans and report to the Board periodically.

Related Party Transactions:

Your Company has formulated a “Policy on Related Party Transactions” to regulate transactions entered into between the Company and its related parties. In terms of Regulation 46(2)(g) of the Listing Regulations, the said policy is placed on the web-site of the Company at www.bemlindia.in.

During the year 2017-18, all transactions that were entered into with the related parties were fair, transparent and at arm’s length basis and also in the ordinary course of business of the Company. The said related party transactions were also duly considered and noted by the Audit Committee. Information as required under section 188 in Form AOC-2, pursuant to Section 134(3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014, is attached to this report as Annexure-II.

Report on the performance and financial position of Subsidiaries and Joint venture company

Subsidiary Companies:

(i) M/s Vignyan Industries Limited (VIL):

VIL has recorded Revenue from Operations (Net of ED) of Rs,30 crores which is at the same level recorded during FY 2016-17. The value of production of the Company stood at Rs,31 crores as against Rs,29 crores and the Company achieved Profit before Tax of Rs,0.43 crores as against profit of Rs,0.13 crores in the previous year. Further, VIL Board has recommended a dividend of Rs,5 per share i.e., 5% on the paid up equity share capital amounting Rs,14 lakhs excluding tax, after a gap of 7 years.

VIL is planning to explore new markets for reducing dependency on M/s BEML Limited, the holding company. However, in anticipation of order from BEML for high alloy grade castings like T-72 and Tatra Variants relating to Defence business, Axle Box and Buffer Assembly relating to Rail business, and new castings for Mining & Construction business, necessary development and production are planned. These proposals would help VIL to achieve about Rs,74 Crs by 2020-21 as envisaged in the Perspective Plan.

The order book position remained at 1,444 MTs as on 01.04.2018. More and more casting requirements are expected from Holding Company as well as from other customers. With this, VIL is confident of achieving better results for the financial year 2018-19.

(ii) M/s MAMC Industries Limited (MIL):

Your Company entered into a Consortium Agreement with M/s. Coal India Limited (CIL) and M/s. Damodar Valley Corporation (DVC) on 08.06.2010 for acquiring specified assets of M/s. Mining and Allied Machinery Corporation Limited (under liquidation). The agreement, inter-alia, provided for formation of a Joint Venture company (JV) with a shareholding pattern of 48:26:26 among BEML, CIL and DVC respectively. The Company has paid the proportionate share of Rs,48 crores towards the total bid consideration of Rs,100 crores for the said acquisition, based on the order passed by the Hon’ble High Court of Calcutta. The said assets were taken possession by the MAMC Consortium. Further up to 2017-18, the Company has incurred a sum of Rs,10.01crores towards maintenance, security and other related expenditure. The expenditure incurred by CIL and DVC on account of this proposal is not ascertained. The total sum of Rs,58.01 crores is disclosed as ''Advance to MAMC Consortium'' pending allotment of equity shares in the capital of JV company.

In the meantime, a company in the name of ‘MAMC Industries Limited’ (MIL) was formed and incorporated by your Company as a wholly owned subsidiary for the intended purpose of JV formation. Shareholders’ agreement, as duly approved by the Boards of all three members of the consortium, has been submitted to MoD for necessary approval. Further, MoD has directed to submit ‘Business Plan’ and ‘Financial Viability Report’ of the proposed JV. A meeting of Interim Board of Management of Consortium has decided to engage M/s SBI Caps for preparing the “Financial viability & Business Plan” report.

Considering that further investment / expenditure on this project would be an additional burden on the Company, the Board of Directors suggested taking up the matter with Interim Board of Management of Consortium of BEML, CIL and DVC for exit option rather than pursing with M/s. SBI Caps for the aforesaid report. Hence, it was proposed to take up with IBM for exploring the possibility of selling the assets of erstwhile MAMC purchased through Court auction either by Consortium as a whole or the share of BEML to a prospective buyer, if any. Further to the discussion held on 25.04.2018 among the members of MAMC Consortium, a draft Deed of Conveyance has been proposed to submit to the Official liquidator of Calcutta High Court for further action.

(iii) M/s. BEML Brazil Industrial Ltda (BBIL):

Your Company entered the Brazil market for brand building exercise and local value addition for the products to meet local standards in anticipation of good business potentials for Freight Wagons and Mining & Construction equipment. As per the requirement under the local laws, BBIL was established. Based on the enquiries, few mining equipment were also supplied to local customers. In the meantime, low cost Chinese equipment flooded the Brazilian market along with their local manufacturing facilities. Further, your Company faced stiff competition in high-end equipment segment from international players like CAT and Komatsu. In view of these developments, it is proposed to handle the Brazilian market directly and to wind up the existing facilities in Brazil. In view of this, BBIL is kept under dormant state. BEML has decided to close the office for which legal action is underway and BBILs registration will be cancelled soon after capital repatriation.

Joint Venture Company - M/s BEML Midwest Limited (BMWL):

BMWL was formed and registered with the Registrar of Companies at Hyderabad on 18.04.2007. BEML holds 45% share and M/s Midwest Granite Pvt. Ltd. (MGPL) and P T Sumber Mitra Jaya of Indonesia as partners holding the balance 55% share. The Company has been established to capitalize on the growing business opportunities in the contract mining segment. However, due to certain unauthorized transactions and the oppression and mismanagement by the nominees of MGPL, your Company had filed an application before Hon’ble Company Law Board (CLB) seeking for suitable relief. As a counter measure, MGPL had also filed a petition on the matter. CLB vide its common order dated 01.06.2012 directed the Central Government to appoint an inspector to investigate the affairs of BMWL and take appropriate action. As per the legal advice, your Company preferred two appeals before Hon''ble High Court of Andhra Pradesh at Hyderabad against the said common order of CLB. The Hon’ble High Court passed the order on 19.08.2013, thereby setting aside the said common order and directing CLB to proceed with a fresh enquiry, and decide the issue in accordance with law and merits also taking into consideration the report of investigation as directed by CLB and pass appropriate orders without getting influenced by the impugned common order of CLB. The Company has filed an application with CLB praying for necessary directions to Regional Director (RD), Ministry of Corporate Affairs, Hyderabad for time bound completion of investigation so that the matter could effectively be heard by CLB. In the meanwhile, the Government has constituted National Company Law Tribunal (NCLT) by dissolving CLB and notified that the jurisdiction is shifted to Hyderabad from Chennai. The case files were transferred to NCLT. Regular hearings are taking place at NCLT, however, RD, MCA is yet to submit the investigation report for deciding the matter. In the meanwhile, based on the order of NCLT dated 22.12.2017 consequent to the request from the landlord to vacate the premises of Registered Office (RO) of BMWL for his bonfire use, it has been shifted to a suitable place.

There was no company which became or ceased to be a subsidiary, joint venture or associate of the Company during the year under review.

A separate section on report on the performance and financial position of each of the subsidiaries, Joint Venture Company are placed under Form AOC-1 provided in the consolidated financial statement of the Company, in terms of section 129(3) of the Companies Act, 2013 read with rule 5 of Companies (Accounts) Rules, 2014.

Particulars of Loans, Guarantees or Investments:

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statement.

Consolidated Financial Statement:

Consolidated Financial Statement of your Company and its subsidiaries and Joint Venture Company prepared in terms of Section 129(3) of the Companies Act, 2013, is attached to this report.

Vigilance:

The Company has an independent Vigilance department headed by Chief Vigilance Officer (CVO). The Vigilance activities were carried out in a holistic manner and covered prevention, detection and enforcement. CVO has provided aid and advice to the executives of the Company on all matters pertaining to Vigilance, as an extension of the CVC in its exercise of superintendence over Vigilance Administration of the Company and provided the link to the Administrative Ministry and the CBI.

- Complaint Handling Policy - The CVO after determining the ‘Vigilance Angle’, handled 16 registered Complaints during the FY 2017-18 (12 Complaints added during the FY 2017-18, 04 Complaints brought forward from last year).

- During the year, 16 complaints were handled, out of which 7 complaints were disposed. Disciplinary action and system / process improvements have been recommended and implemented.

- Online Vigilance Clearance for Executives and Employees has been set up.

- CCTV Cameras at Sensitive areas and Display of Vigilance Boards at prominent locations were positioned across BEML complexes.

- Vigilance Manual of 2nd edition (updated version) was published during August 2017, wherein, certain new topics have been added. All the latest Revisions to the Rules, Instructions & Circulars issued by Central Vigilance Commission, are also incorporated into this Edition, in a user friendly format.

- Keeping in view the changing business scenario, after risk assessment exercise the sensitive areas list was reviewed and fresh areas were notified as sensitive.

- The Vigilance Awareness Week-2017 with the theme “My Vision - Corruption Free India” was observed in BEML Limited from 30.10.2017 to 04.11.2017. Citizens Integrity pledge was also administered to the Students & Staff at Schools and Colleges where the Company had organized events as part of Observance of Vigilance Awareness Week - 2017 (VAW). Vendors meet organised on 07.11.2017, wherein, vendors from all over India were invited to share business prospects of the Company and also to address their Grievances. Company jointly with BEL and HAL, has organised a 2 km Walkathon -Vigithon on 05.11.2017 with the caption ‘Clean-Green-Vigil’. About 400 staff from all the three organisations participated in the Vigithon. To inculcate values of Integrity, Morality and Ethics among school students, an “Integrity Club” was opened at BEML Shishya School, Bengaluru, and Kendriya Vidyalaya & BEML Composite Pre-university College at Kolar Gold Fields. Thus, VAW-2017 was observed at all BEML Complexes/ Divisions in line with the directives of CVC.

Integrity Pact

Pursuant to the directives from Central Vigilance Commission and Ministry of Defence, your Company is adopting Integrity Pact with all vendors / suppliers / contractors / service providers for all orders / contracts of value Rs,1 crore and above. The pact essentially envisages an agreement between the prospective vendors / bidders and the Company, committing the persons / officials of both sides, not to resort to any corrupt practices in any aspect / stage of the contract. Only those vendors / bidders, who commit themselves to such a pact with the principal, would be considered competent to participate in the bidding process. Integrity Pact, in respect of a particular contract, would be operative from the stage of invitation of bids till the final completion of contract. Any violation of the same would entail disqualification of the bidders and exclusion for future business dealings. Two Independent External Monitors (IEMs) have been appointed to review the cases on bi-monthly basis. During the year, Rs,858 crores worth of purchase orders were entered into Integrity pact.

Procurements

BEML Supplier Relationship Management (SRM) is aiming to establish web based seamless relationship and collaboration of procurement process with its global business partners. Your Company endeavours to procure all materials and services through e-procurement platform on ERP system. Presently, the

Company upgraded the SRM e-procurement software which is having encryption facility for better security. During the year, about 86% of the total requirements were sourced through e-procurement.

Micro and Small Enterprises:

Following steps have been adopted under the Micro and Small Enterprises (MSEs) Order 2012:

- Your Company is procuring materials required for production and for others through Micro & Small Enterprises (MSEs). 358 items which are reserved are being procured exclusively from MSEs.

- Appropriate weightage has been given for MSEs in the MoU from the year 2015-16 onwards in order to ensure the objective of achieving overall procurement of 20% from MSEs.

- In order to encourage MSEs, vendors meet has been organized and list of components that could be sourced from MSEs are placed on the Company’s website www.bemlindia.in for the information of MSE vendors. Further, local procurement made by your Company is uploaded on ‘MSME SAMBANDH’ Portal.

- As per the directives of Government, minimum 20% of procurements have to be procured from MSE’s, out of which 4% from SC/ST Enterprises. During 2017-18, your Company placed orders for goods and services to the extent of Rs,323 crores from MSEs which constituted 26.09% (includes Rs,0.18 crores constituting 0.0145% from SC/ST Enterprises) of the indigenous procurement of Rs,1238 crores.

Vendor Development:

Vendor development is a continuous process to identify and develop new vendors to bring in competition among the vendors and to reduce costs. The methods followed to identify potential new vendors are publication of Expression of Interest (EoI) in BEML website, participation in exhibitions and seminars and organize vendor meets. In order to increase vendor base, open ended EoI is published and made available on BEML website. During the year 2017-18, 44 vendors have responded. The procurements from single source are being reviewed periodically by Audit Committee and at Board Level.

Your Company recognizes outsourcing as one of the strategic tools to achieve cost benefits and also complement the strengths of private sector to build a strong industrial base. Your Company is well on its journey to become a system integrator by outsourcing a substantial part of manufacturing activities from Indian vendors, enabling the Company to enhance the capacity, attain cost effectiveness and improve competitiveness in the global market. To facilitate outsourcing, the Company has well established policies, procedures and guidelines -

- Your Company has a Vendor Development Cell to work as a single window help desk for new vendors.

- New vendors can register through Online / Manual.

- New vendors are supported by way of imparting knowledge on manufacturing processes, specifications, quality plans, etc.

- Company also extends its testing facilities to its vendors wherever required.

- To attract new vendors, Company resorts to publishing of EoI periodically, participation in all vendor development programs organized by MSMEs, CII, FICCI, CODISSIA, NSIC, PIA, NSSH and other agencies.

- To enhance transparency in all its procurement processes, Company has well established e-Procurement Portal.

Further, as per the directives of Ministry of Defence, the Company has framed an ‘Outsourcing and Vendor Development Policy’ as duly approved by the Board. The objective of the policy is to enhance cost effectiveness and improve competitiveness of the Company in global market. The other significant objective of this Outsourcing and Vendor Development Policy is to build a manufacturing eco system in the country to attain self-reliance. On the other hand, participation of Indian private industry will be an enabler in building technological and manufacturing capability inside the country. Based on the policy so framed, a Road Map for vendor development has been prepared with yearly targets and monitored at the Board level periodically.

Compliance under the Right to Information Act, 2005:

The information required to be provided to citizens under Section 4(1)(b) of RTI Act, 2005 is placed on Company website at www.bemlindia.in. It contains general information of the Company and its functions and duties, powers and duties of employees / officers, decision making process, rules, regulations, manuals and records held by the Company, directory of the Company’s officers, pay scales of officers / employees etc., and procedure for seeking information and inspection of records. The Company has nominated a Central Public Information Officer, Appellate Authority, Transparency Officer and six Central Assistant Public Information Officers representing Complex / Divisions to attend to the queries and appeals. Further, during the year 2017-18 the Company received 154 applications seeking information pertaining to human resources, recruitment, contracts, tenders, business related matters etc and the same were disposed of.

Rajbhasha:

Your Company continued its efforts in implementing the Official Language (OL) Policy. OL Implementation Committee is constituted under the Chairmanship of CMD to review the status of the use of Hindi across the Company. The said Committee met quarterly during the year and reviewed the implementation status.

OL inspection was carried out by the Officials of Department of Defence Production, Ministry of Defence, New Delhi at Palakkad complex, Regional office at Kolkata and District offices at Guwahati and Bhilai. Further OL inspection carried out by Deputy Director (RIO) at RO, Kolkata.

252 executives/employees were trained in various courses of Hindi under Hindi Teaching Scheme of Government of India during the period under review. 15 Hindi workshops were organized in which 394 officials were trained. Hindi Fortnight was observed from 14.09.2017 to 28.09.2017 throughout the Company and variety of competitions was organized. World Hindi Day was observed on 10.01.2018 at RO, Singrauli.

District office, Bhilai has been awarded with Rajbhasha Vishisht Seva Samman-2017 by TOLIC, Bhilai.

The newly revamped website of your company is made available in Hindi also and the contents are updated periodically.

Composition of Audit Committee:

In terms of Section 177 of the Companies Act, 2013, Regulation 18 of the Listing Regulations and Chapter 4 of the DPE Guidelines on Corporate Governance for CPSEs, your Company has constituted the Audit Committee. The Committee comprises of Shri B P Rao, Independent Director as Chairman, Shri Sudhir Kumar Beri and Shri M G Raghuveer, Independent Directors and Shri B R Viswanatha, Director (Mining & Construction Business) as its members. All the recommendations made by the Audit Committee were accepted by the Board.

Whistle Blower Policy:

In terms of the provisions of Section 177(9) of the Companies Act, 2013, Regulation 22 of the Listing Regulations and Para 4.3 of the DPE Guidelines, your Company has formulated necessary “Vigil Mechanism/ Whistle Blower Policy” for directors and employees to report genuine concerns. The said policy provides for adequate safeguards against victimization of director/s or employee/s or any other person who avail the said mechanism and also provides for direct access to the chairperson of the Audit Committee in appropriate or exceptional cases. As per the said policy, none of the employees have been denied access to Audit Committee. In terms of Regulation 46(2) (e) of the Listing Regulations, the said policy is placed on the Company''s website www.bemlindia.in.

Compliance of applicable Secretarial Standards:

Section 118(10) of the Companies Act 2013, stipulates that the Company shall observe secretarial standards with respect to Meetings of Board of Directors (SS-1) and General Meetings (SS-2) as specified by the Institute of Company Secretaries of India. Further, the Standard 9 of SS-1 stipulated that the Report of the Board of Directors shall include a statement on compliances of applicable Secretarial Standards. Accordingly, your Company has complied with the provisions of applicable standards of SS-1 and SS-2 issued by the Institute of Company Secretaries of India in letter and spirit.

Corporate Governance Report:

In terms of Para 8.2.3 of the DPE Guidelines of CPSEs grading is done by DPE on the basis of compliance with Corporate Governance guidelines / norms. Accordingly, your Company is graded as ‘Excellent’ for the year 2017-18. Further, in terms of Regulation 34 of the Listing Regulations and Chapter 8 of the DPE Guidelines, a report on Corporate Governance along with Compliance Certificate is placed at Annexure-III.

Management Discussion and Analysis Report:

In terms of Regulation 34(2) (e) of the Listing Regulations and Para 7.5.1 of the DPE Guidelines of CPSEs, a report on Management Discussion and Analysis Report is placed at Annexure-IV.

Business Responsibility Report:

In terms of Regulation 34(2) (f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations

2015, the annual report of the top 500 listed entities based on market capitalization shall contain Business Responsibility Report (BRR) w.e.f. FY 2016-17. The said BRR contains the initiatives taken by the Company from an environmental, social and governance perspective, which is placed at Annexure-V.

Awards & Recognitions:

- On 15.08.2017, your Company has bagged many prizes during the Independence Day Horticulture Show 2017 conducted by Mysore Horticultural Society, Bengaluru, which is a matter of pride to the Company.

- On 22.09.2017, “Metro Team” of your Company won the prestigious QCI - DL Shah National Quality Award -2017. The team made a presentation on ‘Metro Quality Assurance’ with a case study on “Ensuing Zero Defect in Metro Coach Bogie Manufacturing by Business Process Reengineering” based on six sigma using Taguchi Method.

- On 12.12.2017, your Company received Certificate of Yellow Dot Award for 50 plus years of invaluable contribution in the field of infrastructure and construction sector to build strong Nation.

- On 17.12.2017, your Company has bagged the SKOCH ORDER-OF-MERIT Award for qualifying amongst “Top 80 Technology Projects in India” for Design and Development of “180T Electric Excavator BE1800E”.

- On 16.01.2018, your Company bagged best seller award for Crawler Dozers at the “5th Annual Equipment India Awards 2018” held in New Delhi.

- On 19.01.2018, the Company has bagged “Top Public Sector Exporter in Southern Region (GOLD)” award for the year 2015-16 organized by Federation of Indian Export Organisations (FIEO), under Ministry of Commerce. The award was presented to BEML after considering various parameters including export turnover, presence in emerging markets, product diversification and growth.

- On 23.01.2018, Mr. M.S. Nagendra of Mysuru Complex won the Gold medal in the All India level open Rifle shooting championship in the Para Senior men section held at Hubballi.

- On 25.01.2018, Mr T.M Thammaiah, Machinist, Mysuru Complex was awarded Prime Minister’s “Shram Shree” award for the year 2016 in recognition of his duties.

- On 25.01.2018, Company has bagged many prizes under Industrial category at the Republic Day Horticultural Flower Show, which is a matter of pride to the Company.

- On 10.02.2018, two R&D engineers received Technology Innovation awards from SODET (Society of Defence Technologists) for Design & Development of ‘Stainless Steel EMU'' & “Design and Development of All Wheel Steering System (AWS) for BEML HDT 8x8 Vehicle”.

Manpower:

The number of employees of the Company as on 31.03.2018 stood at 7,722 as against 8,221 of the previous year, resulting in 6% reduction.

The category-wise number of SC/ST and Ex-serviceman employees as on 01.01.2018 and recruitment made are as under :

Category

Group

Total Strength As on

No. of SC/ST and Ex-servicemen

Scheduled Caste

Scheduled Tribe

Ex-Service Men

1.1.2018

1.1.2017

1.1.2018

1.1.2017

1.1.2018

1.1.2017

1.1.2018

1.1.2017

Group-A

1824

1735

394

318

109

73

13

6

Group-B

383

518

5

88

5

43

8

15

Group-C

5619

6041

1286

1373

279

284

246

258

Group-D

19

23

10

13

3

4

0

0

Total

7845

8317

1695

1792

396

404

267

279

The Company has recruited 45 candidates in Group A during the year under review as under:

- 29 from General category

- 8 from OBC category and

- 7 from Scheduled Caste and 1 from Scheduled Tribe category

Human Resource Development & Industrial Relations:

In your Company’s approach to value creation, emphasis is given on the people and their engagement, well-being and development which has been the key factor in achieving business success in today’s competitive scenario.

The financial year 2017-18 was a milestone year for the Company, as major improvements and initiatives were implemented in the HR areas related to leveraging IT for HR, Succession Planning for critical senior positions, process re-engineering and optimization of human capital, Leadership development programmes through training abroad and also at IIM’s / XLRI etc.

Special efforts have been put in place to create a comprehensive HR Portal “SAMPARK” which provides various Employee Self Services, On-line Performance Management System, On-line Vigilance Clearance System, On-line Promotion Test, On-line submission of Property Returns, On-line Attendance Management System etc.

During the year, based on the Assessment Development Centres (ADC) scores and Individual Development Plan recommendation senior level executives were nominated for Strategic and Leadership Programmes abroad and also premier institutions such as IIM’s/ XLRI. Continued importance was also given on Project Management, Creativity, Ethical & Moral Competencies, Conflict Resolutions & Skill Development.

To ensure systematic Talent Management, Company implemented revised Promotion Policy for more objectivity and transparency with due linkage to Assessment Development Centres scores and also through on-line written test.

The Industrial Relations Scenario in the Company has been peaceful. Cordial and smooth relations were maintained between the Management and the Unions / Associations. Regular Meetings with the representatives of the recognized Unions / Officers Associations at the Divisional, Complex and Corporate Levels were held and employee related matters were resolved amicably.

The functioning of various bi-partite Committees at Complex level resolved production related matters.

Outstanding contribution and dedication of our employee to his duties was also recognized through winning of Prime Minister Shram Shree Award by Shri. T.M.Thammaiah, Mysuru Complex.

Grievance Redressal System for SCs/STs

In terms of Department of Personnel & Training guidelines, your Company has constituted SC/ST Cell at all Complexes / Divisions, wherein the HR heads, being Liaison Officers, of the respective Complex/ Division are conducting periodical meetings with respective representatives of SC / ST Employees Welfare Associations to redress the grievances / issues appropriately. Further, the Chief Liaison Officer who is in the rank of Executive Director meets all the Cell Officers, Liaison Officers and Office Bearers of SC/ ST Welfare Associations periodically and monitor the status on redressal of grievances.

Public Grievance Redressal through CPGRAMS

Centralized Public Grievance Redress and Monitoring System (CPGRAMS) initiated by the Department of Administrative Reforms and Public Grievances under Ministry of Personnel, Public Grievances and Pensions, is the platform based on web technology primarily aims to enable submission of grievances by the aggrieved citizens for scrutinizing and taking action for speedy redressal of these grievances. For this purpose, your Company has nominated Deputy General Manager (HR) as the Nodal Officer to deal with various public grievances and to ensure prompt and proper feedback to the concerned persons.

Compliance under Persons with Disabilities Act, 1995:

Your Company complies with the provisions under the Persons with Disabilities (Equal opportunities, Protection of rights and full participation) Act, 1995 (PwD Act). In terms of various provisions under PwD Act, your Company has ensured reservation of vacancies for the posts identified for each disability, carry forward of vacancies which could not be filled up due to non-availability of suitable persons with disability during the year.

Corporate Social Responsibility & Sustainability:

The Company has constituted Corporate Social Responsibility & Sustainability (CSR) Committee in terms of Section 135 of the Companies Act, 2013 and DPE Guidelines on MoU. The Committee comprises of Shri. Sudhir Kumar Beri, Independent Director as Chairman, Shri. B R Viswanatha, Director (Mining & Construction Business) and Shri. R H Muralidhara, Director (Defence Business) as members. The CSR Committee oversees the CSR & SD activities and its implementation in compliance with the Companies Act, 2013 and DPE Guidelines on the subject. Further details of CSR are placed under the same heading in Annexure-III and an annual report on CSR activities undertaken during the year are placed at Annexure-VI.

Environment and Pollution Control

In order to protect the environment in the vicinity of the factory premises / township, tree plantation were undertaken. Your Company planted saplings of various types of avenue trees / flower bearing trees in the vacant lands belonging to the Company for maintaining ecological balance in the surrounding areas. The Company in association with the Stats Forest Department had undertaken planting of saplings at all its Manufacturing Complexes and Townships on a regular basis. During the year, a total of 10,298 Nos. of Tree Saplings have been planted at Bengaluru, Mysuru and Palakkad Complexes as part of sustainable development. Apart from this an exclusive Dr. B.R. Ambedkar ‘Environment Park’ was inaugurated at KGF Complex on the eve of ‘World Environment Day’ and around 4,500 saplings were planted. Thus total saplings planted during the year is about 14,798.

Particulars of Employees

There were no employees of the Company who received remuneration in excess of the limits prescribed under Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Skill India Initiatives

Your Company has undertaken ''Skill Development Initiatives’ (SDI) in line with Government of India’s ''Skill India'' initiative launched during 2015. Skill development programmes in your Company is aimed to hone the skills of the productive manpower, ensure optimum utilization of resources and also to skill the marginalized / unskilled manpower of the organization. Apart from such organizational requirements, various other skill development initiatives have also been undertaken to contribute towards ‘Skilling India’ in addition to apprenticeship training conducted to hone the skill/trade of students passing out of various ITIs/ Polytechnics/Engineering Colleges. At BEML, the SDI includes the following main activities:

(a) Centres of Excellence(CoE) for Hydraulics, Structural Welding, Electrical and Engine at KGF Complex, Stainless Steel welding & Electrical and Wire Harnessing at Bengaluru Complex and for Electrical & Electronics at Mysuru(Imparting training Programme on assembling and Testing of Electrical aggregates, skill development of advanced/upgraded electrical system of BEML Equipments), Power Train of Tatra vehicle at Palakkad are established.

(b) Service training Programme for the customers from all over the country and abroad, and for BEML Service personnel are conducted at Global Service Centre at Nagpur, Service Training Centre at KGF and at Mysuru.

(c) Apprenticeship training under the Apprenticeship Act is imparted at Training Centres to upgrade the skills of ITI passed students in their respective Trades as also that of Diploma Holders and Engineering Graduates. As per the Apprentices Act 1961, the Company has imparted training to the apprentices constituting 10.08% of the total workforce.

(d) Capability Building in the area of Technology to enhance the capability of the Engineers working in Production, R&D and allied areas, a tie-up has been established with Indian Institute of Technology - Madras (IIT-M) and a MoU signed for long term collaboration for Sponsoring R&D projects and training of Engineers through Continuing Education Programmes. Having a permanent BEML facility at IIT-M Technology Park for utilizing R&D facilities of IIT-M is also under consideration. Tie-up with Advanced Product Design and Prototyping (APDAP) setup of Indian Institute of Science, Bengaluru (IISc), Centre for Railway Research at IIT Kharagpur and National Institute of Design, Ahmedabad (NID) for Engineering Consultancy Services are in advanced stages of finalization.

(e) Other SDI such as Unskilled to Skilled training, Skilling the unskilled by imparting Semi-Skilled Training and multi-skilling for training in other trade/s viz. Welder/Fitter/Electrician/Crane Operators etc. so that their services can be optimally utilized.

For the Society at large, your Company has also adopted Govt. ITI at KGF and Govt. ITI at Mysuru as a part of SDI. Trainees of Govt ITI at KGF are being provided with six month practical training in KGF Complex while Mysuru Complex is the industrial partner to ITI at KM Dodi and is being provided with assembly items etc.

Prohibition of Sexual Harassment of Women at Workplace:

In terms of the provisions of the Sexual Harassment of Women at a Work Place (Prevention, Prohibition & Redressal) Act, 2013, an Internal Complaints Committee is functional in all Complexes / Divisions for receiving complaints of Sexual Harassment, if any, and it has been displayed in all the prominent locations for the information of all women employees. No cases have been filed under this Act during the year 2017-18.

IT Initiatives:

IT is being seen as a great enabler at your Company having undertaken several initiatives on Technology front. State-of-the-art video conferencing facilities at Corporate Office and at other major offices have improved communication capabilities. The Company has improved infrastructure resiliency by setting up disaster recovery data center and redundant connectivity to improve availability of the systems. File Life-Cycle Management (FLM), a step towards paperless office has been introduced. ‘Sampark’ a portal for employee has been launched and the same is aimed at improving employee experience through several workflow enabled processes like performance appraisal and is going to work as a platform for further automation to be added in future. Further, transparent information sharing has been enabled using ‘BEML Bulletin Board’.

Your Company is investing in securing the business environment by implementing the concept of Air Gap and Network Operations Centre monitoring links, device health and security alerts. Implementation of Customer Complaint Management System will help to improve customer service experience and bring in more transparency through on-line tracking. Company has implemented Biometric Attendance Tracking system that integrates with ERP system to improve workforce management process by recording accurate attendance of our workforce.

Swachh Bharat Abhiyan:

Swachh Bharat Mission was launched by the Government of India during 2014 with the objective of fulfilling the dream of transforming urban India in totally sanitized, healthy and livable cities and towns during next five years. The Company has committed towards realization of the dream of Father of the Nation for a ‘Clean India'' through the Swachh Bharat Abhiyan.

Your Company had organized ‘Swachh Bharat Pakhwada’ from 1st December to 15th December 2017, across the Company. Various Programmes related to cleanliness and competitions were conducted across the Company on daily basis during the fortnight, as per the calendar of activities drawn for the purpose.

Your Company has celebrated the “Third Anniversary of Swachh Bharat Campaign” on October 2, 2017 to coincide with the ‘Gandhi Jayanthi’. Various programmes like administration of Swachhta Pledge, organizing special cleaning drives, Walkathon to spread the message of cleanliness, distribution and planting of saplings etc, were conducted across the Company including its subsidiary, VIL.

The following activities were undertaken during the year 2017-18 under the Swachh Bharat Abhiyan:

- Pledge taking and conducting public awareness programmes on cleanliness and environment protection such as walkathons, skit/street play to create awareness on cleaning surroundings etc. All employees have taken a pledge to devote 100 hours in a year as ‘Shramadaan’ to ensure cleanliness of the work area & surroundings. Various training programmes on waste management, need and significance of cleanliness have been conducted as part of the initiative.

- Construction of toilets, bio-gas units for utilization of organic waste and vermi-compost bins, painting of buildings, extensive cleaning of production hangars, high standard of housekeeping, renovation of toilets, fogging and eradication of mosquito menace etc are being undertaken.

- Separate bins for collection of dry / wet waste, paper, plastic etc are kept at required places to ensure segregation of waste.

- In addition, your Company has undertaken various activities as per the Annual Action Plan based on the recommendations of the Group of Secretaries on ‘Swachh Bharat & Ganga Rejuvenation’(GoS) for the period from 201718 up to 02.10.2019. The main activities are conducting awareness programmes, construction of Toilets, construction of Bio-gas Units, Vermi-Compost Bins, Tree plantation, Renovation of Toilets, Adoption of Dual Pipeline system & Rain Water Harvesting System etc.

Dividend Distribution Policy

In terms of Regulation 43A of the Listing Regulations, the top five hundred listed entities based on market capitalization (calculated as on March 31 of every financial year) shall formulate a dividend distribution policy which shall be disclosed in its annual report and on its website. Accordingly, the Board of Directors at their meeting held on 25.05.2018 has approved the Dividend Distribution Policy including the parameters and circumstances in determining the distribution of dividend to its shareholders and/or retaining profits earned by the Company. The said Policy is posted on Company’s website www.bemlindia.in.

Statutory Auditors

The Comptroller & Auditor General of India has appointed M/s. S.R.R.K Sharma Associates, Chartered Accountants, Bengaluru, as the Statutory Auditors for the financial year 2017-18.

Observation, if any, made in the Independent Auditors’ Report on the financial statement including consolidated financial statement and the reply of the Board of Directors thereto will be given by way of an addendum to this report.

Cost Auditors

Your Company appointed M/s R M Bansal and Co, Cost Accountants, Bengaluru, as Cost Auditors for the year 2017-18 in terms of Section 148 of Companies Act, 2013, read with the Companies (Cost Records and Audit) Rules, 2014 to conduct the audit of the cost records of the Company. Further, as required under the said Rules, the remuneration payable to the Cost Auditor was ratified by the members in the 53rd Annual General Meeting held on 21.09.2017.

Secretarial Auditors

In terms of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules,

2014, the Company appointed M/s. V N Associates, Practicing Company Secretaries, Bengaluru, to undertake the Secretarial Audit of the Company for the year 2017-18.

The Secretarial Audit Report and the replies to the observations made in the said report are placed at Annexure-VII.

C&AG Audit

The Comments of the Comptroller & Auditor General of India under section 143(6)(b) of the Companies Act, 2013 on the financial statement including consolidated financial statement are appended at page No. 154 & 220 to the annual report.

Extract of Annual Return

In terms of Section 92(3) of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014, an extract of the Annual Return in the prescribed form is placed at Annexure-VIII.

Directors:

(1) Appointment of Independent Directors

During the year, no Independent Directors have been appointed on the Board of the Company.

Pursuant to Schedule IV of the Companies Act, 2013, the appointment of the Independent Directors would be formalized through a letter of appointment setting out the terms and conditions of their appointment, which is also placed on the web-site of the Company at www.bemlindia.in. In terms of section 149 of the Companies Act, 2013, the provisions of section 152(6) and (7) in respect of retirement of directors by rotation shall not be applicable to appointment of independent directors.

(2) Statement on declaration by Independent Directors

Independent Directors have given declarations u/s 149(7) of the Companies Act, 2013 that they meet the criteria of independence as laid down u/s 149(6) of the said Act.

(3) Board Evaluation:

The Board of Directors of the Company comprises Functional Directors, Government Nominee Directors and Independent Directors appointed by the Government of India from time to time pursuant to Article 97 of Articles of Association of the Company.

Further, the tenure and remuneration of Functional Directors including Chairman and Managing Director are decided by the Government of India through Public Enterprises Selection Board / Search Committee and the pay scales are governed by the Presidential Directives received from the Ministry of Defence. The Government communication also indicates the detailed terms and conditions of their appointment based on applicability of the relevant rules of the Company. The Government Nominee Directors are not entitled to any remuneration / sitting fee. The Independent Directors are entitled to sitting fees for attending the Board / Committee meetings as duly approved by the Board considering the government directives, statutory acts, rules and regulations.

In view of the above, the performance of all Functional Directors and Government Nominee Directors is being evaluated by the Administrative Ministry every year based on own evaluation methodology. Further, considering the educational qualifications, age, rich and varied experience of the applicants, the Administrative Ministry / Department would appoint the IDs on the Board on the recommendation of Search Committee after obtaining approval of competent authority. In addition, the assessment / evaluation of performance of Independent Directors who will be completing their 3 years tenure was undertaken by the Administrative Ministry.

Considering the above, a separate evaluation criteria has not been framed by the Company.

(4) Remuneration of Directors:

Your Company being a Central Public Sector Enterprise, the appointment, tenure and remuneration of Directors are decided by the Government of India. The Government communication appointing the Functional Directors indicate the detailed terms and conditions of their appointment including a provision for the applicability of the relevant rules of the Company.

Government Nominee Directors were neither paid any remuneration nor sitting fee for attending Board / Committee meetings.

Independent Directors are paid only sitting fee of ''20,000 per meeting of the Board / Committee of the Board attended by them. Further, if there are more than one such meeting on the same day, a sitting fee @ ''10,000 is paid for the second and subsequent meeting/s.

Neither there was payment of commission to the Board of Directors nor any stock option scheme offered to them during the year.

Further, none of the Directors had any pecuniary relationship nor entered into any related party transactions with the Company during the year.

Pursuant to the provisions of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the details of remuneration paid to the Directors during 2017-18 are provided under the ‘Report on Corporate Governance’ annexed to this report.

(5) Change of Directors and Key Managerial Personnel

In terms of Article 97 of the Articles of Association of the Company, the President of India is vested with the power to appoint the Directors of the Company from time to time and also shall determine the term of office of such Directors. Accordingly, the following appointments on the Board of your Company were effected as per the directives of the President of India:

- Shri Suraj Prakash (DIN-08124871), was appointed as Director (Finance) of the Company vide MoD letter No.8 (2)/2016-D (BEML) dated

09.05.2018. He assumed the charge of the post w.e.f 10.05.2018. Further, in terms of section 179 read with Rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Section 203 of the Companies Act, 2013, Shri Suraj Prakash is appointed as a Key Managerial Personnel and Chief Financial Officer of the Company.

- Shri Rajib Kumar Sen (DIN-07669981), Economic Adviser, Ministry of Defence was appointed as Government Nominee Director on the Board vide MoD letter No.8(80)/2015-D(Coord/DDP) dated 30.05.2018 in place of Shri Sanjay Prasad. Consequent to the supersession of earlier orders issued by MoD for appointment of Government Directors on the Board, nomination of Smt. Surina Rajan, Government Nominee Director was withdrawn on 13.06.2018.

- Shri Gurmohinder Singh (DIN-08199586), was appointed as Independent Director vide MoD letter No. 8(2)/2014-D(BEML) dated 10.08.2018 and his appointment had taken effect from

13.08.2018.

Shri B R Viswanatha (DIN- 07363486), Director (Mining & Construction Business) and Shri R H Muralidhara (DIN-07363484), Director (Defence Business) retires by rotation at this annual general meeting and being eligible, offered themselves for reappointment. Shri. Aniruddh Kumar (DIN - 06861374) Director (Rail & Metro Business), ceased to be Director with effect from 01.11.2017 on attaining the age of superannuation.

The Board placed on record its deep the appreciation of the valuable services rendered by the Directors whose term of office ended during the year.

(6) Number of meetings of Board:

During the year, seven meetings of the Board were held on 12.04.2017, 30.05.2017, 11.08.2017, 20.09.2017, 10.11.2017, 18.12.2017 and 07.02.2018. Requirements on number and frequency of meetings, in terms of Section 173(1) of the Companies Act, 2013, Regulation 17(2) of the Listing Regulations, and Para 3.3.1 of the DPE Guidelines, were complied with in full.

(7) Directors’ Responsibility Statement:

Pursuant to section 134(3)(c) and 134(5) of the Companies Act, 2013, your Directors state that,

(a) in the preparation of the annual accounts for the year ended 31.03.2018, the applicable accounting standards has been followed along with proper explanation relating to material departures;

(b) the directors had 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 2017-18 and of the profit of the Company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis;

(e) the directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively;

(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Acknowledgements

Your Directors express their hearty thanks to the Company’s valued customers, in particular Defence Services, M/s Coal India Limited and its Subsidiaries, M/s. Singareni Collieries Company Limited, M/s Steel Authority of India Limited, Railway Board, M/s Delhi Metro Rail Corporation Limited, M/s Bangalore Metro Rail Corporation Limited, M/s Jaipur Metro Rail Corporation, M/s Kolkata Metro Rail Corporation, Integral Coach Factory-Chennai, M/s Bharat Electronics Limited, M/s Bharat Dynamics

Limited, Ordnance Factory Board, Defence Research & Development Organization (DRDO), M/s Brahmos Aerospace Pvt. Ltd., Indian Space Research Organization, M/s Hindustan Aeronautics Limited, Aeronautical Development Agency for their patronage and confidence reposed on the Company. The Directors also acknowledge and thank all collaborators, vendors and other service providers for their valuable assistance and cooperation extended to the Company.

The Directors express their appreciation to the members of Company’s Consortium of Banks and other Bankers and Financial Institutions for their continued support to the Company’s operations. The Directors also thank all the shareholders / investors for reposing continued confidence in the Company.

The Directors wish to thank the Comptroller & Auditor General of India, the Principal Director of Commercial Audit & Ex-officio Member, Audit Board and Statutory Auditors for their valued co-operation.

The Directors also acknowledge the valuable support and assistance received from various Ministries of Government, in particular Ministry of Defence, Ministry of Coal, Ministry of Mines, Ministry of Steel, Ministry of Railways, Ministry of External Affairs and Ministry of Home Affairs. The Directors are also grateful to the Government of Karnataka and Kerala for the support and co-operation extended to the Company.

Your Directors take this opportunity to place on record their appreciation for the invaluable contribution made and excellent co-operation

extended by the employees and executives at all levels for the continued progress and prosperity of the Company.

For and on behalf of the Board of Directors

Sd/-

Bengaluru D K Hota

25.05.2018 Chairman & Managing Director

Director’s Report