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Directors Report of Bharat Electronics Ltd.

Mar 31, 2016

The Directors take pleasure in presenting their Report and the Audited Financial Statements for the financial year ended 31 March, 2016 together with the reports of the Statutory Auditors and the Comptroller and Auditor General of India thereon.

Financial Results and Performance Highlights

A summary of the Company''s financial results is given below :

(Rs. in Lakhs)

Particulars 2015-16 2014-15

Value of Production 778,209.47 665,854.35

Turnover (Gross) 752,164.14 669,456.53

Profit before tax 180,914.47 146,668.67

Profit Before Depreciation, 198,257.29 162,203.54 Finance Cost and Tax

Finance Cost 450.08 138.38

Depreciation 16,892.74 15,396.49

Profit Before Tax 180,914.47 146,668.67

Provision for Tax 45,147.88 29,944.58

Profit After Tax 135,766.59 116,724.09

Add : Balance brought forward from previous year 343,461.64 296,682.52

Balance available for Appropriation 479,228.23 413,406.61

Interim Dividend paid 6,000.00 4,800.00

Proposed Final Dividend 34,800.00 18,560.00

Tax on Dividend 8,305.92 4,738.10

Transfer to General Reserve 40,000.00 40,000.00

Transfer to Capital Reserve 2.17 -

Other appropriation 1780.22 1846,87

Reserves & Surplus 849,383.34 780,502.89

Net Worth 873,383.34 788,502.89

Earnings Per Share (in Rs.)* 56.57 48.64

Book Value Per Share (in Rs.)* 363.91 328.54

* EPS & Book Value normalised for the previous periods due to issue of Bonus Shares

Distribution of Value of Production for 2015-16 is given below :

Amount Particulars Percentage (Rs. in Lakhs)

Materials 405,120.63 52.06

Employee Cost 130,184.94 16.73

Other Expenses (Net) 45,096.69 5.79

Depreciation & Amortization 16,892.74 2.17

Provision for Tax 45,147.88 5.80

Profit After Tax 135,766.59 17.45

Total 778,209.47 100.00

Company''s turnover for the year 2015-16 has increased to Rs. 752,164.14 lakhs from Rs. 669,456.53 lakhs in 2014-15, registering a growth of 12.35%. Profit after Tax for the year is Rs. 135,766.59 lakhs as against Rs. 116,724.09 lakhs in the previous year. Turnover from indigenously developed products is 86%. Supplies to the defence contributed to 82% of turnover as against 87% in 2014-15.

During the year 2015-16, your Company had issued bonus shares in the ratio of 2:1 (two fully paid up equity shares of Rs. 10/- each for every equity share held) to all its shareholders. As a consequence the paid up share capital of the company increased from Rs. 8,000 Lakhs to Rs. 24,000 Lakhs.

Dividend

The Board has recommended a Final Dividend of Rs. 14.50 per equity share (145%), Rs. 34,800 lakhs for the year 2015-16. An interim dividend of Rs. 2.5 per equity share (25%), Rs. 6000 lakhs has already been paid for the year 2015-16. Thus, the total dividend for the year 2015-16 is Rs. 17 per equity share (170%), Rs. 40,800 lakhs (excluding corporate dividend tax) on the enhanced paid up capital after bonus issue during the year as against 292% (Rs. 29.20 per share), Rs. 23,360 lakhs paid in the previous year.

Provision of Rs. 7,084.46 lakhs has been made for corporate dividend tax on the final dividend proposed. Corporate dividend tax ofRs. 1,221.46 lakhs has already been paid on the interim dividend paid for the year 2015-16.

Amount Transferred to Reserves

An amount of Rs. 40,000 lakhs is proposed to be transferred to General Reserves for the financial year 2015-16.

Major Orders Executed

Major Projects executed during the year for tri services and non-defence customers include : Akash Weapon System (Army & Airforce), 3 Dimensional Tactical Control Radar to Army, Fire control Systems to Navy, Low Level Light Weight Radar (Aslesha) to Airforce, Integrated Sonar Suite to Navy, L Band Surveillance Radar for Export (Myanmar), Passive Night Vision Devices (PNVD) to Army, V/UHF Search Receiver to Pipavav and GRSE, Electronic Voting machines (EVMs) to ECI and Export (Namibia), Thermal Imaging Fire Control System (TIFCS) to Elbit, Schilka Gun Tank Upgrade to Army, Ship Data Network and New Generation Sonars to Navy.

Some of the significant achievements during the year :

- BEL is setting up a Defence Systems Integration Complex in Anantapur District of Andhra Pradesh. It will be the largest such facility in the country once it is commissioned, covering an area of over 900 acres. This facility will enable BEL to expand its Missile systems business and will carry out manufacturing & integration for the ongoing and upcoming projects. It will have state-of-the- art infrastructure such as Assembly Hangars and Hard Stands for Radars and Weapon integration, RF radiation sources for target simulation, Automatic Test Equipment, Clean Rooms for electronic assembly, Non-Explosive & Explosive Integration Buildings, Missile Storage buildings, Environmental Test Chambers, Fire Stations, Solar Power Plant, Estate and Admin buildings.

- Indigenously developed Surface-to-Air ''Akash'' Missiles of Airforce version successfully test-fired from Integrated Test Range on 28 January 2016 as part of User trial. The missile can fly at supersonic speed ranging from Mach 2.8 to 3.5 and can engage aerial targets upto a range of approximately 25 km. The Missile System was formally inducted into the Indian Air Force in July 2015.

- BEL has successfully completed supply of all systems of Akash Missiles to Indian Airforce.

- Supply for project L-70 Gun Upgrade program commenced. The activity involves Up-gradation of Gun for improved firing performance in local mode for Air Defence application.

- The e-File Management (FLM) for procurement files has been successful at 5 Units in addition to 4 Units implemented earlier.

Exports

BEL achieved an all time high export sales of US$ 85.07 Million registering a growth of 47% over the previous year''s export turnover of US$ 57.85 million. BEL has an export order book of US$ 120 million as on 1 April 2016 which includes offset order book of US$ 24 million. The targeted export sales for the year 2016-17 is US$ 112 million. The long term export plan of BEL is to reach sustained export sales to total sales turnover ratio of 10% from the current level of 7.3%.

During this year, indigenously developed Naval Surveillance Radars RAWL 02 MK-IIA based on SSPA was exported for the first time. Other major range of products exported includes TI based Electro Optical Fire Control Systems, CoMPASS, Electronic Voting Machines, Communication equipment, Radar Warning Receiver, Casings, Stators, Electro Mechanical parts etc.

BEL is fully geared up to meet the expectations of "Make in India" program in the field of Professional defence electronics equipment development and manufacturing with a focus on exports.

BEL has a dedicated International Marketing Division for providing an increased thrust for harnessing the export potential of defence electronics products and systems, which represent its core area of business. BEL has been exporting various products and systems to friendly countries of India. Apart from this, BEL is interacting with electoral commissions of various democratic countries to market Electronic Voting Machines. Having established a coastal surveillance radar system for few neighboring countries, BEL is interacting with Ministry of External Affairs on a regular basis for supply of these systems to other friendly countries of India.

BEL has identified the market segments and has a structured market plan for its products and systems. BEL has been visiting customers on a periodic basis to understand their requirements, acquisition process and to establish long term customer relationship for enhancing export business.

BEL is focusing on the opportunities in the areas of helping OEMs to meet their offset obligations in various RFPs of MOD, on account of the "Offset" policy incorporated in Defence Procurement Procedure (DPP). In this regard BEL is closely working with various major foreign Aerospace and Defence companies. BEL has also identified contract manufacturing (both build to print and build to spec) as one of the areas to address the emerging opportunities with OEMs. Further, efforts are being made to establish long-term supply chain relationships with global players.

BEL has participated in three International Exhibitions to showcase its products & capabilities and for creating brand awareness among global supply chain partners. BEL publishes periodic advertisements in international/defense magazines / periodicals / journals to enhance the visibility of BEL. BEL participated in the International Fleet Review IFR 2016 conducted by Indian Navy, the Make in India Week 2016, Mumbai and Defexpo 2016, Goa with a focus on exports.

BEL has been receiving awards for Excellence in Exports under the category "Electronics & Communication (excluding IT/ BT) - Medium and Large" from the Government of Karnataka during the last 5 consecutive years.

MoU with Government

Your Company has been signing a Memorandum of Understanding (MoU) every year with the Government of India, Ministry of Defence. Performance of BEL for the year 2014-15 has been rated as "Excellent" in terms of the MoU with the Government. The MoU rating for 2015-16 is under review by the Government.

Order Book Position

The order book of Company as on 01 April 2016 is around Rs. 3,202,182 Lakhs. The order book comprises mainly major programs like Integrated Air Command Control System, Battlefield Surveillance System, Akash Weapon System, Weapon Locating Radar, Hand Held Thermal Imager with Laser Range Finder, Ground Based ELINT, Command Information Decision Support System, Fire Control System, Gun / Tank Upgrades Communication Sets, New Generation Radars and Sonars etc.

Finance

Your company has embarked on several investment proposals which should help in maintaining a healthy growth rate in the top line. During this financial year, the company has been able to meet the incremental working capital requirements and additional funds required for capital investments entirely from internal resources without resorting to borrowing. Effective cash management and a healthy Balance Sheet has helped the company to retain the highest rating by ICRA in both short term and long term. As a measure of good corporate governance initiative, during the year, the company has transferred the amount set aside for leave encashment liability to a separate policy managed by Life Insurance Corporation of India with a view to delineate the amount from the operations of the Company.

The Inventory position (net) of the company as on 31 March 2016 was Rs. 421,324 lakhs as against Rs. 342,688 lakhs as on 31 March 2015. This works out to 208 days of value of production (DPE) as on 31 March 2016 as against 188 days as on 31 March 2015. The increase in inventory in the year end will help to meet the sales of 1st two quarters of the current financial year.

The position of Trade Receivables (net) as on 31 March 2016 was Rs. 371,190 lakhs as against Rs. 378,614 lakhs as on 31 March 2015. This works out to 180 days as against 206 days of turnover for the previous year. This has been possible due to better performance in collection of receivables.

Deposits

The Company does not have any Public Deposit Scheme at present. However, the matured past Public Deposit amount with the Company was Rs. 36.95 lakhs as on 31 March 2016. Out of these 34 deposits amounting to Rs. 36.50 lakhs are not claimed or not paid as these accounts are frozen on advice by Karnataka Lokayukta, remaining mature deposits of Rs. 0.45 Lakhs as on 31 March 2016 is unpaid due to in-sufficient documents/records produced by Depositors. The entire amount of Public Deposit outstanding as on 31 March 2016 is included in the Current Liability Note of the Balance Sheet.

Research & Development

Research and Development has been the core strength of BEL. Focused attention was given for Development of Technology modules and Products during the year 2015-16 by Planning and Review Mechanism. Apart from in-house efforts, BEL has close co-operation with DRDO, other National Research and development agencies and Academic institutions. The R&D activities have been carried out in all the business segments namely; Radars, Military Communication, Naval Systems, Missile Systems, Electronic Warfare, Avionics, C4I systems, Electro-optics, Tank Electronics, Gun up-grades, Civilian equipments & Systems and Components during this period.

Development & Engineering (D&E) Divisions attached to all the Strategic Business Units (SBUs) of BEL concentrated on the development of Products and Systems in their respective areas of business segments. Central-D&E and two Central Research Laboratories (CRLs) of the company supported all the D&E Divisions by way of developing core technology modules and software required for the development of Products and Systems. Product Development & Innovation Centre (PD&IC) has started functioning within Bangalore Complex with focus on development of certain new products.

The turnover analysis of the Company for the year 2015-16 indicates that 39% of the turnover is from in-house developed products, 47% of the turnover is from products developed in association with DRDO and other National Labs and remaining 14% is from products of foreign ToTs.

Development of New Products

R&D Divisions of BEL have completed development of several new products /system/ technology modules during 2015-16. The following are some of the new Products and System developed and introduced during 2015-16 :

- 3D Surveillance Radar operates in S-band for deployment in diverse terrains like Plains, Deserts, Mountain tops and High Altitude regions. This Radar is used by Indian air force.

- L-band 2D Air Surveillance Radar for Navy has been developed and supplied to Myanmar. The Radar is used for deployment in Large and Medium size Naval Ships and onshore establishments which provides video signals for display purposes and tracks for target track generation.

- Coastal Surveillance Radar is developed for Coastal Surveillance Phase 2 projects with a completely solid state, coherent Radar which operates in both X and S-bands.

- Man-pack Satcom Terminal is developed to support Voice/Data, SMS services to Defence Services through GSAT6 Satellite.

- Software Defined Radio- (Naval Version - NC) is a Multimode, Multiband Ship borne two channel V/UHF radios supporting secure voice/ data services, having networking capability.

- Tactical Access Switch provides support to Local / Trunk switching IP/MPLS based for Voice, Video, Data as well as aggregation and switching facility for traditional TDM Voice Switches.

- Advanced Composite Communication System (ACCS) is an IP based Voice and Data Integrated Communication System to facilitate Ship-to-Ship, Ship-to- Shore and Ship-to-Air Communications using VLF/MF/HF, V/UHF bands Radios.

- Versatile Media Secrecy Device is unified single encryption device for Voice, Data, & Super G3 Fax over IP network.

- Citizen Verification Device is a handheld device designed for Data collection and Survey by Registrar General of India. This is used for Sample Survey Registration System.

- Integrated Sonar Suite for S3/S4 Platform consists of Passive Sonar, Active Sonar, Intercept Sonar, Obstacle Avoidance Sonar, Own noise measurement system and Underwater Communication System. The system is mounted on submarine for underwater surveillance purpose.

- IAC MOD O/C Reference System is a common reference developed for testing older version as well as new IAC MOD C. It has interfaces with sensors like Sonar, Radar, GPS. This system carries out Contact Motion Analysis and generates fire control solutions for designated targets.

- Integrated EW System for Mountainous Terrain has COM and Non-COM segments as well as satellite interception, is configured with man portable units for ease of deployment on mountainous terrain.

- Laser Warning System can detect incoming laser threat and calculate angle of arrival to enable the protection counter measure.

- Gunner Sight for T90 is an independent surveillance Sight with Enhanced Range capability to facilitate tank gunner to detect, acquire, and its destruction during day and night.

- Driver Sight for MBT Arjun/Arjun Cataput Driver Sight is a State-of-the-art real time Thermal imaging Camera using uncooled IR detector to give Stereoscopic Vision with depth perception for driver comfort. It provides clear vision and all weather driving capability.

Scientists from Central Research Laboratories and other R&D divisions of BEL have contributed 98 Technical Papers in the national and international journals during the year.

Following awards have been received by R&D teams during the year :

- SODET (Gold, Silver, Bronze) Awards for Technology Development and SODET (Gold) for Technology innovation for the year 2014-15.

- Young Scientist Award from IETE for CRL Scientist and D&E Engineer of MR SBU for the year 2015.

- RM Awards (2012-13)

a) Indigenization :

- Design & Development of Retrofit Security Solution for SHAKTI

- Indigenization of AK 630 GUN Drive

b) Design Effort :

- L-70 Gun Up gradation

- Systems of IACCS Networks

- RM Awards (2013-14)

a) Indigenization :

- Configuration, Development and Engineering Weapon Control Modules (WCM 176) for AK 176 Gun Mount

- Bharani Radar

b) Design Effort :

- EO FCS-U1 for Control and Medium Caliber 76 mm Gun Mount and High Rate of Fire AK 630 Gun mounts

New facilities established during the year

Company has been continuously modernizing its infrastructure to be in tune with the changing needs of the technology / products. Specific groups in all the units scan the technology changes that are taking place and identify new processes in the world market for acquisition. This enables the company to maintain its infrastructure on par with international standards. During the year 2015-16, company has spent Rs. 525 Crores on investments (including Rs. 362 as part of CAPEX investment towards Modernization of Plant & Machinery, Test Instruments, R&D investments, infrastructure up-gradation etc). The expenditure is fully met through internal accruals. Following are some of the major facilities established during the year.

- Additional Integrated Test Bed Facility at Bengaluru Unit for Missile & Weapon System Integration.

- Near Field Test Range and EMI/EMC Test Facilities for High Tech Radars at Ghaziabad Unit.

- State-of-the-art Additive Manufacturing Facility set up at Bengaluru Unit for product development with reduced cycle time.

- X-Ray Inspection facility at Chennai Unit for Testing/ Troubleshooting of high-end/complex Printed Circuit Boards (PCBs).

- Environmental Stress Screening (ESS) Chamber at Chennai Unit used for Testing High/Low Temperature, Damp Heat for various projects.

Quality

Your Company is focussing on its fundamental principles of enhancement in Quality, Technology and Innovation. The Quality, being first and foremost principle of business, plays a vital role in all areas of operations. Quality initiatives are being taken for improvement in operational and business performance parameters related to product design, on-time-delivery, process cycle time etc. The control on these factors result in enhancement in product quality and services rendered to the customer.

The regular customisation of SAP ERP system for programming new transaction codes to use data as per the requirements of stakeholders is playing an important role in managing process parameters resulting in growth of the company. The dedicated Customer Relation Module (CRM) and Supplier Relation Module (SRM) in SAP are enabling to enhance customer services and procurement efficiencies.

The Company is committed for improvement through process approach in line with world-class Quality Systems. All Units / Strategic Business Units / Common Services Groups are certified to ISO9001 Quality Management System (QMS) since early nineties. Seven Units/SBUs are certified for Aerospace standard, AS 9100.

All Units of Company are committed to Environment Management System through ISO 14001 Certification. The Ghaziabad Unit and Engineering Services of Bengaluru Unit are accredited to OHSAS (Occupational Health Safety and Assessment Series) 18001.

The ISO 9001:2008 version for QMS and ISO 14001:2004 version for EMS have been revised to 2015 versions in September 2015. In order to upgrade these certifications in BEL, the awareness training programmes, conversion programme, and Lead Auditor training programmes are being conducted for various SBUs/Units personnel.

The calibration and maintenance departments of Bangalore Complex, Ghaziabad and Panchkula Units are certified by National Accreditation Board for Testing and Calibration Laboratories (NABL) in accordance with the standard ISO/IEC 17025 standards. The Pune unit manufacturing X-ray tubes is certified for ISO 13485 standard for medical devices. The Bharat Electronics Software Technology Centre (BSTC) at Bangalore Complex is CMMI level 5 certified. The ''D&E NCS and CRL'' of BEL Ghaziabad are certified for CMMI level 3.

The EFQM (European Foundation of Quality Management) model for Business Excellence is being followed since year 2002 in BEL as another process approach for overall strategic and operational excellence leading to enhancement in competitiveness in meeting and exceeding needs & expectations of stakeholders. Its deployment status was assessed in the company through participation in ''CII-EXIM Bank Award for Business Excellence''. All Unit/SBU of BEL have ''Commendation for Strong Commitment to Excel'' status. The Bengaluru and Ghaziabad Unit are at next higher level of Award i.e. ''Commendation for Significant Achievement''.

The continual improvements in product and processes are brought out through various approaches. One of such approaches is through Six Sigma methodology. Middle and senior level executives select Six Sigma projects from different areas of concern related to product and processes and bring about breakthrough improvements. In order to effectively implement Six Sigma methodology and to bring culture of improvement through analytical approach, selected senior executives (14 numbers this year) from each Unit are regularly trained as ''Black Belt'' by Indian Standard Institute, Bengaluru. These Black Belts guide other executive (Green Belts) in their Six Sigma projects. Around 380 Six Sigma projects were completed in financial year 2015-16. Forty two Six Sigma projects were nominated for national level competitions/seminars and have won various categories of awards. One of the Six Sigma case studies represented BEL at the International Conference for Quality Control Circle (ICQCC) 2015, held at South Korea and was conferred with "Gold Award Certificate".

The organization creates impetus towards involvement of non-executives in the quality movement through Quality Control Circles (QCC). In the year 2015-16, 738 presentations for improvement in product and processes were made by various QCCs. Twenty Five QC circles were nominated to participate in national competitions/conventions and all were adjudged for higher category awards. One of the QCC, who is CMD''s Rolling Shield Winner in Inter Unit QCC competition, represented BEL in international convention, ICQCC 2015, held at South Korea and bagged "Gold award".

Another approach for Quality Improvement is through Suggestion Scheme, wherein employees from non executive to executive level (up to manager) are eligible to apply for suggestion and are suitably awarded on implementation of suggestion. Around 3000 suggestions were given by employee this year. Selected BEL employees participated in national contest, "Excellence in Suggestion Scheme Contest 2015", conducted by Indian National Suggestion Schemes'' Association (INSSAN) and bagged Second Place, also won prizes in "Slogan contest in Hindi, English" and "Poster Contest". The Awards were distributed during 26 Annual National Convention of INSAAN held on 8 & 9 January 2016, at Pune.

BEL has put in special programs for enhancement of competency of its executives in professional fields. BEL had nominated its engineers for programs like Certified Reliability Engineer (CRE) (11 Nos.), Certified Quality Engineers (CQE) (39 Nos.) and Certified Manager for Quality and Organisation Excellence (CMQ-OE) (17 Nos.). These programs were conducted by American Society for Quality (ASQ). Similarly training on Project Management Programs (PMP) (84Nos.) was also conducted by the Project Management Institute (PMI). Besides this, customised training programs on Quality were also conducted during the year.

During the year Company has adopted "Components Conditional Process for Laser Applications" and "Soldering Process for Advanced Radar Application" in order to meet the International Standards.

To assess the customer satisfaction an independent Customer Satisfaction Survey was organised through an external agency, M/s. Market Insight Consultants (MIC) NOIDA, to capture the customers'' perception on quality of BEL product. Sixteen products from various Units/SBUs were offered for survey. The customer satisfaction index of 83% has come out in survey.

Human Resources

Your Company employed 9,848 persons as on 31 March 2016 as against 9,703 persons as on 31 March 2015. Of these employees, 4,594 were engineers / scientists and 2,019 were women employees as on 31 March 2016. A total of 492 executives and 173 non-executives were inducted during the year. 117 employees belonging to SC, 30 employees belonging to ST, 220 employees belonging to OBC and 23 employees belonging to the minority community were recruited during the year.

Your Company has been implementing the Government Directives on Reservation. The particulars of SC/ST and other categories of employees as on 31 March 2016 are as under :

Executives Non-Executives

Category of Employees Group A Group B Group C Group D

Scheduled Caste 972 25 745 50

Scheduled Tribe 320 1 147 21

OBC 1142 34 833 44

Ex-Servicemen 96 7 283 72

Physically Challenged 95 3 126 14

Various Training programs were conducted during the year to enhance competencies in Technical, Functional, Managerial and leadership areas. Structured Executive Development Programs were conducted regularly with premier Institutes to meet the evolving training needs of executives as they progress through various grades.

The training programs are designed to enhance competencies in various areas like Technical, Functional and Managerial/ Leadership.

A detailed write up on Company''s HR philosophy and specific HR initiatives during the year is provided separately in the Management Discussion and Analysis Report attached.

Disclosure under Sexual harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Company is an equal opportunity employer and consciously strives to build a work culture that promotes dignity of all employees. As required under the provisions of Sexual Harassment of Woman at Workplace (Prevention, prohibition and Redressal) Act and Rules framed thereunder, the Company has implemented the policy on prevention, prohibition and redressal of sexual harassment at the workplace, which has been uploaded on the Company''s intranet portal. All women, permanent, temporary or contractual including those of the service providers are covered under the policy.

An internal Complaints committee has been constituted in each of the nine constituent units including Corporate Office to redress complaints relating to sexual harassment. During the year, the Company received 2 complaints on sexual harassment. The complaint has been investigated and appropriate action has been taken. There were no complaints pending for more than 90 days.

Awareness programs were conducted across the Company to sensitize the employees and uphold dignity of their colleagues at workplace, particularly with respect to prevention of sexual harassment.

Awards and Recognitions

Your Company continues to be a highly trusted for the quality of its products, innovation and renovation of its products based on strong consumer insights and the ability to engage with consumers across the country. During the year your Company has received various Awards and Recognitions. Some of the important accolades received during the year by your Company include :

- Raksha Mantri Award in the category of institutional, best performing division, indigenization, design effort for the years 2012-13 and 2013-14.

- ELCINA-EFY award for excellence in Electronic hardware manufacturing and services in Quality and Exports category.

- "Leadership Award - Embedded/VLSI Industry" for the year 2015 under the category of Best Electronic System Design & Manufacturing (ESDM) in the Government Sector. The award was conferred by "Mentor Graphics and Silicon India" on 6 November 2015 at Bengaluru.

- "Gold Award" in the ICQCC (International Convention of Quality Control Circle) held at Changwon, Korea for the case study on "Testing of Tx/Rx Sub-Modules".

- BEL won Four Awards instituted by Society of Defence Technologists (SODET) for the year 2014-15 in the categories of Technology Development and Technology Innovation.

- BEL had been conferred with the ''Dun & Bradstreet India''s Top PSUs Award 2015'' in the Electrical & Electronics Sector by Dun & Bradstreet (D&B), the world''s leading provider of global business information, knowledge and insight.

Environment Management

Your Company has long been integrating sustainability in its operations systematically with best practices. On the lookout for sustainable development, sets in clean and green surroundings. All the Units of the Company have committed for maintaining an environmental friendly work processes and strongly believes that environmental sustainability results in designing economically viable and reliable products. BEL sets objectives in compliance to DPE guidelines, further approaches towards adopting breakthrough technology for enhancing environmental performances of the products right from design to disposal. BEL looks beyond its boundary for compliance to environmental impacts. In all the Units of BEL, practicing of conservation of natural resources like energy conservation, water conservation and reduction in waste generation is inculcated as a routine approach. BEL looks beyond obvious opportunities available for improvising the performance against environmental commitments.

The Sustainability Report annexed to this report contains further details on environment management and sustainable development initiatives.

Subsidiaries and Joint Ventures

BEL Optronic Devices Ltd (BELOP), engaged in the business of manufacturing of Image Intensifier Tubes, has become wholly owned subsidiary of BEL during the year on acquisition of the remaining shares from M/s. Specified Undertaking of the Unit Trust of India (SUUTI). Your Company has made further investment to the tune of Rs. 44.88 Crores (19,51,385 equity shares of Rs. 100/- each at a premium of Rs. 130/- per share) in the equity shares of BELOP by subscribing to rights issue made by BELOP.

During the year BELOP acquired the upgraded XR-5 technology under ToT agreement to upgrade the technology for manufacturing Image Intensifier Tubes. BELOP achieved a turnover of Rs. 10,663.55 lakhs for the year as against Rs. 10,264.93 lakhs in the previous year. The profit after tax (PAT) for the year was Rs. 242.77 lakhs as against Rs. 366.69 lakhs in the previous year.

The Joint Venture Company (JVC) with General Electric, USA, viz., GE BE Pvt Ltd., continues to perform well. This JVC manufactures CT Max and other latest version X-Ray Tubes. BEL supplies some parts required for the products manufactured by this JVC. GE BE Pvt Ltd recorded a turnover of Rs. 79523 lakhs for the year as against Rs. 72,564 lakhs in the previous year. The profit after tax (PAT) was Rs. 12669 lakhs for the year as against Rs. 11,752 lakhs in the previous year. The JVC declared 200 % dividend for the year 2015-16 and BEL will receive Rs. 5,200 lakhs as dividend from this JVC on BEL''s share of investment for the financial year 2015-16.

M/s. BEL-THALES Systems Limited (BTSL), a subsidiary, was formed for design, development, marketing, supply and support of civilian and select defence radars for Indian and global markets. Your Company holds 74% of the equity capital of BTSL. Your Company has made further investment to the tune of Rs. 9.47 Crores by subscribing to 9,47,200 equity shares of Rs. 100/- each during the year. During the second year of its operation, it incurred a loss of Rs. 247.16 Lakhs.

In pursuant to provisions of section 129(3) of the Companies Act, read with Rule 5 of Companies (Accounts) Rules, 2014, the statement containing salient features of the financials statement of Subsidiaries / Associate / Joint Ventures is attached to the financial statements.

Consolidated Financial Statements

Consolidated Financial Statements of your Company and its Subsidiaries and Joint Venture Companies are attached to this Report.

Vigilance

The Company''s Vigilance Organization is headed by a Chief Vigilance Officer (CVO), an IAS Officer. Permanent Vigilance Officers were posted in each of the Units and in the SBUs. Vigilance Committees were formed in each of the Units to look after the Vigilance Administration in the Units and SBUs and the Unit/SBU heads are also designated as Chairman of the Vigilance Committee. Apart from this, there exists a Vigilance Committee at the Corporate, where Chairman & Managing Director is the Chairman the Committee and the CVO is the Member secretary. Preventive Vigilance has been the thrust area of the Vigilance Organisation and the same received focused attention during the current year. The Vigilance Department examines procurement contracts/ sub-contracts and processes on continual basis, conducts regular and surprise inspections and investigates instances of any suspected transactions referred to it. Any employee or third parties can refer any suspected transaction to the notice of CVO for investigation which are examined as per the Complaint Handling Policy of the Company. Online complaint management system has been made operational and online complaints can be filed through accessing the Vigilance Portal in BEL web site.

During the year 2,663 Purchase Orders/ Contracts have been reviewed. CTE Type intensive examination has been restructured with the formation 5 IE teams. Intensive Examination of 17 High value Procurements and 20 Works Contracts has been taken up during the year. Regular and surprise checks/inspection has also been conducted by the field Vigilance Officers. During the year, 82 Complaints, including the 11 Complaints referred by CVC/MOD/CBI were received and 69 Complaints including 8 Complains referred by CVC/MOD/CBI were disposed. Disciplinary action and System/ process Improvement has been recommended in some cases where lapses were observed. Two Complaints are pending with CBI for investigation.

During the year 322 Probationary Engineers at the induction level, 307 Executives and 662 Non Executives were given Basic awareness program on Vigilance. Apart from this, 360 Senior Executives were given Customised Training Program on Vigilance, Cyber Crimes and Preventive Vigilance measures. 64 Executives & 29 Non Executives working in sensitive areas for more than 3 years have been job rotated and the percentage coverage is 95%.

In lines with the CVC''s guidelines on Leveraging Technology, to ensure transparency through effective use of website, the following information has been made available on Company''s website :

- E-Procurement-about 92% of the procurements excluding the ToT procurement, long term rate contract and repeat orders, were procured under e-procurement mode.

- Online registration of Vendors.

- Vendor Payment Information System.

- E Payment to Vendors.

- Details of awarded contracts / Purchase Orders valuing more than Rs. 10 lakhs in respect of works contracts, service contracts, capital items and non-production items.

- Details of awarded Contracts/Purchase Orders issued on nomination / single tender basis value exceeding Rs. 5 lakhs.

- Purchase procedures, sub contract procedures and works manual.

- Complaint handling policy and Whistle Blower Policy.

- Corruption Risk Management Policy is framed and issued for implementation.

- Vendors'' Directory, after removing defunct vendors.

- File Life cycle Management System has been implemented across the company and the coverage is about 52% of the total files generated in the Company.

- On line filing APRs is implemented for all the Executives and the Executives have filed their Annual declaration of Assets and Liabilities (APR) in SAP for the year 2014 and 2015.

Vigilance setup in BEL has been continuously endeavoring to bring transparency, fairness and equity in all transactions and processes of the company through creating sense of awareness on System and Procedures through awareness campaign and training program. Some of the key activities that have been carried out during the year are :

1) Vigilance Awareness Week 2015 was marked with special address by eminent personalities including Justice M N Venkatachalaiah, former Chief Justice of India and Shri A S Kiran Kumar, Chairman, ISRO.

2) Vigilance awareness week 2015 was observed during October 2015. The observance of the Week was marked with Walkathon and Cycle rally by BEL School Children, Tree plantations and distribution of saplings, unveiling of Vigilance Slogan Boards, Screening of Inspirational flms for the School Children and series of lecture by distinguished personalities and Competitions.

3) Training programs were organised for Vigilance Officers through Guest lectures by faculties from CBI, Bengaluru, Cyber Security Council of India, Data Security Council of India.

4) Two days training program on "Promoting Transparency in Public Procurement and Integrity Pact" was organized by Vigilance in association with Transparency International India which was inaugurated by CMD of BEL and the key note address was delivered by R Srikumar, former Vigilance Commissioner, Vigilance Commission.

5) About 2600 BEL employees have successfully completed the Online Certified Program on Public Procurement organized by World Bank.

6) The Vigilance News letter "JAGRITI" was revived with the fourth volume released on 30-06-2015. The Improvised 9 Volume of "JAGRITI" was released on 31 March 2016.

Integrity Pact

One of the recent initiatives of the Central Vigilance Commission (CVC) to eradicate corruption in procurement activity is introduction of the Integrity Pact in large value contracts in Government Organizations. In line with the directives from Ministry of Defence and the Central Vigilance Commission, your Company has adopted Integrity Pact with all vendors / suppliers / contractors / service providers for all Orders / Contracts of value Rs. 2,000 lakhs and above, initially. This threshold value was reduced to Rs. 1,000 lakhs from March 2013 and further reduced to Rs. 500 lakhs from May 2014. The Pact essentially envisages an agreement between the prospective vendors / bidders and the Principal (BEL), 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 the contract. Any violation of the same would entail disqualification of the bidders and exclusion from future business dealings.

The tenure of Mr N K Sinha, IAS (Retd), former Secretary, Planning Commission and former Chairman, PESB as an Independent External Monitor (IEM) expired on 12.04.2015. As recommended by the CVC, the Company has appointed Mr M D Paliath, IDAS (Retd) and Mr Shankar Narayan, Dy CAG (Retd) for monitoring implementation of Integrity Pact in the Company. During the financial year 2015-16 the IEMs reviewed 98 contracts and held structured meetings with the Chairman & Managing Director.

Procurement from MSMEs

Your Company has been providing increased thrust on enhancing procurement from MSMEs and is implementing Public Procurement Policy for Micro, Small & Medium Enterprises (MSMEs) as per the guidelines / notification issued by the Ministry of MSMEs. Out of the total procurement during 2015-16, 20.17% was sourced from MSME vendors.

In order to facilitate MSMEs, the company is deploying all efforts to classify the existing vendors into Micro, Small & Medium Enterprises in the company''s procurement system through web-based real time centralized ERP System (SAP). Online Vendor registration forms are available in the Company''s official website (www.bel-india.com). Industry Promotion and Nodal Officers are nominated to assist vendors regarding Procedure for Registration, understanding the requirements of BEL, report grievances, if any, etc. Some of the other initiatives include uploading of company''s procurement plan for MSMEs based on the production plan, with periodic update and details of Unit / SBU specific Industry Promotion Officers in the company''s official website, participation in various vendor development programmes like exhibitions, workshops, establishment of industrial estate to give maximum encouragement to ancillaries etc. During the year, Five Training programmes were conducted for MSME and 782 new indigenous vendors were added.

Implementation of Official Language Policy

Your company is committed to adhere to the OL policies of the Government of India. During 2015-16, efforts made towards implementation of Official Languages include :

Committee of Parliament on Official Language conducted OL inspections of CRL/GAD (20.05.2015) and Bangalore Complex (20.01.2016). MoD officials conducted OL inspections of Chennai Unit (20.11.2015) and CRL/BG (14.03.2016). Corporate OL Audit team conducted OL inspections at Panchkula, Chennai, Machilipatnam, Pune Units and Regional Offices at Vizag and Mumbai. CMD attended Hindi Salahkar Samiti Meeting of Dept. of Defence Production, MoD under the chairmanship of Raksha Mantri held on 17.02.2016.

Company has achieved the targets prescribed in the Annual Program 2015-16 issued by Dept. of OL, MHA, GoI to transact official work in Hindi. Hindi Month was observed in all the Units and Offices of the Company. During Hindi month, employees and officers participated enthusiastically in various programs / competitions. Employees of various Units / Offices and Corporate Office bagged prizes in the Inter Organization TOLIC Competitions. Hindi workshops for those having working knowledge in Hindi were conducted during the year. Training on Unicode is being imparted for all Executives and Employees. A program on Professional Papar Presentation in Hindi was organized by BEL/CO under the agies of TOLIC (Undertakings) Bengaluru on 25.02.2016.

During the year, CRL/BG was notified by GoI under rule 10(4) of OL rules indicating that 80% or more staff have working knowledge in Hindi and individual orders were issued under rule 8(4) of OL Rules for those having proficiency in Hindi to do their Official work in Hindi. Thus, number of notified Units/Offices of company reaches to 14. OL Portal is in place to facilitate OL implementation across the company and to provide latest inputs pertaining to OL and is being updated. Hindi language has been enabled in SAP. Most of the Units have uploaded data pertaining to OL Training Roster on SAP. Company''s website is available in Hindi and English and efforts are on to progressively have the entire website in bilingual. Efforts are on to ensure the progressive use of Hindi in all spheres of activities of the Company.

Implementation of RTI Act

The information required to be provided as per Section 4(1)(b) of the Right to Information Act, 2005 has been posted on the website of the Company www.bel-india.com. The Information posted on the website contains general information about the Company, powers and duties of employees, decision making process, rules, regulations, manuals and records held by BEL, a directory of the Company''s officers, pay scales, procedure for requesting additional information about the Company by citizens and associated request formats.

During the year 2015-16 the Company received and attended 1070 requests for information under RTI Act. Most of the requests were for information related to recruitment, service related matters, third party and commercial secrets information.

Board Meetings / Change in Directors and Key Managerial Personnel

During the year 5 Board meetings were held, the details of which form part of the Corporate Governance Report.

Following are the details with regard to the Directorate and Key Managerial Personnel of your Company during the financial year :

Sl. Desig- Date of Date of Name of the Director No. nation appointment cessation

1 Mr J Rama Krishna Rao Director 03.11.2014 26.08.2015

2 Mrs Kusum Singh Director 26.08.2015 NA

3 Dr Bhaskar Ramamurthi Director 02.12.2015 NA

4 Dr R K Shevgaonkar Director 02.12.2015 NA

5 Mrs Usha Mathur Director 23.12.2015 NA

6 Mr Sharad Sanghi Director 07.01.2016 NA

7 Mr S M Acharya Director NA 25.03.2016

8 Lt Gen V K Mehta (Retd) Director NA 25.03.2016

9 Mr Vikram Srivastava Director NA 25.03.2016

There was no change in the Key managerial Personnel of the Company viz., Mr S K Sharma, Chairman & Managing Director, Mr P R Acharya, Director (Finance) & Chief Financial Officer and Mr S Sreenivas, Company Secretary.

The following Additional Directors are being appointed as Directors on terms as set-out in the Notice of the 62 Annual General Meeting ;

Mrs Kusum Singh, Dr Bhaskar Ramamurthi, Dr R K Shevgaonkar, Mrs Usha Mathur, Mr Sharad Sanghi, Mr Girish Kumar and Mr Nataraj Krishnappa.

Mr M L Shanmukh, Director (HR) retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment.

Directors'' Responsibility Statement :

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors in terms of Sections 134(3)(c) & 134(5) of the Companies Act, 2013 state that :

a) in the preparation of the annual accounts, the applicable accounting standards had 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 as at 31 March 2016 and of the profit of the Company for the year ended on that date;

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

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

e) proper internal financial controls were in place and such financial controls were adequate and were operating effectively

f) systems to ensure compliance with the provisions of all applicable laws were in place and same were adequate and operating effectively.

Significant and material orders

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.

Events Subsequent to the Date of Financial Statements :

Material changes and commitments affecting the financial position of the company which have occurred between 31 March, 2016 and date of signing of this Report are NIL.

Related Party Transactions

There were no materially significant related party transactions with the Company''s Promoters, Directors, Management or their relatives, which could have had a potential conflict with the interests of the Company. Transactions with related parties that were entered into during the financial year were on an arm''s length basis and were in the ordinary course of business. All Related Party Transactions are placed before the Audit Committee as also the Board for approval, if required. Members may refer to the notes to the accounts for details of related party transactions. The policy for related party transaction has been uploaded on the Company''s website www.bel-india.com. Information 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 1.

Corporate Social Responsibility

Pursuant to the provisions of Section 135 of the Companies Act, 2013 and The Companies (Corporate Social Responsibility) Rules, 2014 read with various clarifications / amendments issued by Ministry of Corporate Affairs & DPE guidelines, the Company has undertaken various activities as per the CSR Policy. The programmes / initiatives / projects are taken up in line with the Schedule-VII of the Companies Act-2013, which are duly incorporated in CSR policy and forms the guiding principle for all our programmes.

The Corporate Social Responsibility policy of the Company is posted on the Company''s website, www.bel-india.com

Pursuant to the requirement under the Companies (Corporate Social Responsibility) Rules, 2014, as amended, a report on CSR activities for financial year 2015-16 is annexed to this report as "Annexure 2".

Auditors

Statutory Auditors

Pursuant to Section 139(5) of the Companies Act 2013, the Comptroller and Auditor General of India appointed M/s. Badari, Madhusudhan & Srinivasan, Chartered Accountants, Bengaluru, as Statutory Auditors for the financial year 2015-16 for audit of accounts of Bengaluru, Hyderabad, Chennai Units and Corporate Office. M/s. Ved & Company, Chartered Accountants, Ghaziabad were appointed as Branch Auditors of Ghaziabad, Panchkula and Kotdwara Units for the financial year 2015-16. M/s. Malani Somani Chandak & Associates, Chartered Accountants, Pune were appointed as Branch Auditors for Pune and Navi Mumbai Units for the financial year 2015-16. M/s. Rao & Narayan, Chartered Accountants, Vijayawada were appointed as Branch Auditors for Machilipatnam Unit for financial year 2015-16.

Cost Auditors

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014 (as amended), the cost records maintained by the Company in respect of its Manufacturing activities are required to be audited by the Cost Auditor. Your Directors had, on the recommendation of the Audit Committee, appointed M/s. PSV & Associates, Cost Accountants, Bengaluru, as Cost Auditors of the Company for the financial year 2015-16 for conducting the audit of cost records of the Company.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr Thirupal G, Practicing Company Secretary (PCS Registration No. 6424) for the financial year 2015-16 to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed to this report as "Annexure 3".

The Secretarial Auditor in his Report observed that the Company is yet to appoint the adequate number of Independent Directors as per the requirements of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. During the Audit period, the Company was required to appoint a women Director on the Board w.e.f 1 April 2015. However, the said appointment was made w.e.f 26 August 2015. It is informed that the appointment of Directors is done by Govt. of India and filling up of vacancies of the said Independent Directors is also pending with the appointing authority namely Government of India.

Auditors'' Report

Auditors'' Report on the Annual Accounts for the financial year 2015-16 and "Nil" Comments of the Comptroller & Auditor General of India under Section 143(6)(b) of the Companies Act, 2013 on the Annual Accounts are appended to this report.

Extract of Annual Return

In accordance with Section 134(3)(a) of the Companies Act, 2013 an extract of the annual return in the form MGT-9 is annexed to this report as "Annexure 4".

Risk Management

Pursuant to the Reg. 21 of SEBI (LODR) Regulations, 2015, the Company has constituted a Business Risk Management Committee. The details of Committee and its terms of reference, risk management policy etc. are set out in the Corporate Governance Report and a detailed note on Risk Management is provided in the Management Discussion and Analysis Report.

Remuneration Policy and Board Evaluation

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration, Board Evaluation etc. The details are set out in the Corporate Governance Report.

Vigil Mechanism / Whistle Blower Policy

The Company has a vigil mechanism named Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the policy are set out in the Corporate Governance Report.

Declaration from Independent Directors

The Company has received necessary declaration from each Independent Director of the Company under Section 149(7) of the Companies Act, 2013 that the Independent Directors of the Company meet with the criteria of their Independence laid down in Section 149(6) of the Companies Act 2013.

Management Discussion and Analysis Report

Management Discussion and Analysis Report required under SEBI (LODR) Regulations, 2015 as also under the Government (DPE) Guidelines on Corporate Governance for Central Public Sector Enterprises (CPSEs), is attached to this Report as "Annexure 5".

Particulars of Loans, Guarantees & Investments

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

Internal Financial Controls

The Company has in place adequate internal financial controls with reference to financial statements. A detailed note on Internal Financial controls is provided in the Management Discussion Analysis Report.

Composition of Audit Committee

The Audit Committee comprises of Independent Directors viz., Mrs Usha Mathur, Chairman of the Committee, Dr R K Shevgaonkar, Dr Bhaskar Ramamurthi and Government Director Mrs Kusum Singh as its members. All the recommendations made by the Audit Committee were accepted by the Board.

Corporate Governance Report

DPE guidelines on Corporate Governance for CPSEs provide that CPSEs would be graded on the basis of their compliance with the guidelines. DPE has graded BEL as "Excellent" for 2014-15. In terms of Regulation 34 of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and DPE Guidelines, a Report on Corporate Governance along with Compliance Certificate issued by Statutory Auditors of the Company is attached to this report as "Annexure 6".

Sustainability Report

The DPE guidelines on Sustainable Development for CPSEs mandate CPSEs to disclose their Sustainable Development efforts in a ''Standalone Report'' or as a separate chapter in the Annual Report. Pursuant to this requirement, a Report on your Company''s efforts on "Sustainable Development" is attached to this Report as "Annexure 7".

Business Responsibility Report

The Securities and Exchange Board of India (SEBI) has mandated inclusion of Business Responsibility Report ("BR report") as part of the Annual Report for top 500 listed entities based on market capitalization. This SEBI mandate is also inserted as Regulation 34(2)(f) of SEBI (LODR) regulation 2015. The SEBI (LODR) Regulations 2015 provide a format for BR reports. It also contains a list of nine Key Principles and various core elements under each principle to assess compliance with Environmental, Social and Governance norms. Listed companies are required to prepare policies based on these nine Key principles and core elements, put in place a framework to integrate and embed the policies into business activities and a mechanism to measure and report the achievements as BR report.

Your Company has prepared a comprehensive policy framework for BR report, after studying the SEBI (LODR) Regulations 2015 requirements and keeping in view the business and governance environment in which BEL as a Defence PSU operates. Highlights of this policy are posted on the Company''s website www.bel-india.com. The Company''s BR report for the year is attached to this Report as "Annexure 8".

Other Disclosures

Information required to be disclosed in accordance with Section 134(3)(m) of the Companies Act 2013 read with the Companies (Accounts) rules, 2014 regarding conservation of energy, technology absorption and foreign exchange earnings and outgo, is given at "Annexure 9".

Acknowledgement

Your Directors place on record their deep appreciation and gratitude for the valuable support received from all the customers, particularly the Defence Services and the para- military forces and look forward to their continued support and co-operation in future. Your Directors also place on record their gratitude for the support received from various Ministries of the Government of India, especially the Ministry of Defence, Department of Defence Production. Your Directors express their gratitude to the Defence Research and Development Organisation and the various Research Laboratories under DRDO for the support it received, particularly in the joint development programmes and new products brought out with the help of them. Your Directors express their sincere thanks to the Comptroller and Auditor General of India, Chairman, Members and employees of the Audit Board, Statutory Auditors, Branch Auditors, Cost Auditors, Secretarial Auditor, Company''s Bankers, collaborators and vendors. Your Directors appreciate the sincere efforts put in by the employees at all levels, which enabled the Company to achieve the good performance during the year. Your Directors express their appreciation and gratitude to all the shareholders/investors for the trust and confidence reposed in the Company and look forward to their continued support and participation in sustaining the growth of the Company in the coming years.

For and on behalf of the Board

Bengaluru Sunil Kumar Sharma

28 July 2016 Chairman & Managing Director


Mar 31, 2015

Dear Members,

I have great pleasure in presenting to you, on behalf of the Board of Directors, the 61st Annual Report of Bharat Electronics Limited and the Audited Accounts for the financial year ended 31 March 2015 together with the reports of the Statutory Auditors and the Comptroller and Auditor General of India thereon.

Financial Results and Performance Highlights

A summary of the Company's financial results is given below :

(Rs. in Lakhs)

Particulars 2014-15 2013-14

Value of Production 665,854.35 612,689.97

Turnover (Gross) 669,456.53 617,423.25

Profit Before Depreciation, Finance Cost and Tax 162,203.54 132,024.01

Finance Cost 138.38 339.61

Depreciation & Amortisation 15,396.49 14,210.45

Profit before tax 146,668.67 117,473.95

Provision for Tax 29,944.58 24,311.77

Profit After Tax 116,724.09 93,162.18

Add : Balance brought forward from previous year 296,682.52 265,778.32

Balance available for Appropriation 413,406.61 358,940.50

Interim Dividend paid 4,800.00 4,800.00

Proposed Final Dividend 18,560.00 13,840.00

Tax on Dividend 4,738.10 3,167.87

Transfer to General Reserve 40,000.00 40,000.00

Transfer to Capital Reserve - 450.11

Other appropriation(s) 1,846.87 -

Reserves & Surplus 780,502.89 693,723.77

Net Worth 788,502.89 701,723.77

Earnings Per Share (in Rs.) 145.91 116.45

Book Value Per Share (in Rs.) 985.63 877.15

Distribution of Value of Production for 2014-15 is given below :

Particulars (Rs. In lakhs) Percentage

Materials 374,453.15 56.24

Employee Cost 126,345.08 18.97

Other Expenses (Net) 2,990.96 0.45

Depreciation & Amortisation 15,396.49 2.31

Provision for Tax 29,944.58 4.50

Profit After Tax 116,724.09 17.53

Total 665,854.35 100.00

Company's turnover for the year 2014-15 has increased to Rs. 669,456.53 Lakhs from Rs. 617,423.25 Lakhs in 2013-14, registering a growth of 8.43%. Profit after Tax for the year is Rs. 116,724.09 Lakhs as against Rs.93,162.18 Lakhs in the previous year. Turnover from indigenously developed products is 80%. Supplies to the defence contributed to 87% of turnover as against 83% in 2013-14.

Dividend

The Board has recommended a Final Dividend of 232% (Rs. 23.20 per share), Rs. 18,560 Lakhs for the year 2014-15. An interim dividend of 60% (Rs. 6 per share), Rs. 4,800 Lakhs has already been paid for the year 2014-15. Thus, the total dividend for the year 2014-15 is 292% (Rs. 29.20 per share), Rs. 23,360 Lakhs (excluding corporate dividend tax) as against 233% (Rs. 23.30 per share), Rs. 18,640 Lakhs paid in the previous year.

Provision of Rs. 3,778.38 Lakhs has been made for corporate dividend tax on the final dividend proposed. Corporate dividend tax of Rs. 959.72 Lakhs has already been paid on the interim dividend paid for the year 2014-15.

Amount Transferred to Reserves

An amount of Rs. 40,000 Lakhs is transferred to General Reserves for the financial year 2014-15.

Major Orders Executed

Major projects executed during the year for tri services & non - defence customers include : Akash Missile Systems (Army, Airforce), Schilka Gun Tank Upgrade to Army, Passive Night Vision Devices (PNVD) to Army, 3 Dimensional Tactical Control Radar to Army, Communication sets, Combat Management System to Navy, Stabilized Optronic Pedestal to OFB, Mobile Communication Terminal to NTRO, Missile Warning System to Army, Laser Range Finder to Army, New generation Sonars to Navy & exports, Shipborne EW systems - Sanket variants to Navy / Shipyards, Advanced Composite Communication Systems to Navy, Radar for Air Warning in L-band, Fire Control Systems to Navy, Central Acquisition Radar to Airforce, Low Level Light Weight Radar (Bharani / Aslesha) to Army / Airforce, Electronic Voting machines (EVMs) to ECI, Simulators to Army, RAWL 02 MK II, Lynx U1 MOD, HUMSA X etc.

Some of the significant achievements during the year :

* Successful test firing of Akash Missile System, an Air-Defence Weapon System to defend Vulnerable Area / Vulnerable Point against medium range targets penetrating from low, medium and high altitudes.

* Handing over of Schilka Air Defence Weapon System with an upgraded Display system, engine automotive & air conditioning, NBC protection, Integrated Fire Suppression System & totally electronically modernised drives, etc.

* Commissioning of NC3I an independent network which would interlink the Coastal Stations of Indian Navy & Coast Guard with the Joint Maritime Operation Centres and the Headquarters.

* Inauguration of Chain of Static Sensors (CSS) at Seychelles by Hon'ble Prime Minister of India.

* Installation of 1st L Band Radar and new generation sonar for Myanmar Navy completed.

* Incorporation of JV with Thales for Civilian Radars & select Defence Radars.

* Inauguration of newly built Software Development Center by Hon'ble Vice President of India.

* Akash Simulator successfully developed & supplied.

Exports

Your Company has been giving an increased thrust towards harnessing the export potential of defence electronics products and systems, which represent its core area of business. BEL has been exporting various products and systems to potential friendly countries of India. Apart from this, BEL is interacting with electoral commissions of various democratic countries to market Electronic Voting Machines.

BEL achieved an all time high export sales of US$ 57.85 Million registering a growth of 37.7% over the previous year's export turnover of US$ 42.0 million. BEL has an export order book of US$ 200 million as on 1 April 2015 which includes offset order book of US$ 45 million. The targeted export sales for the year 2015-16 is US$ 65 million. The long term export plan of BEL is to reach sustained export sales to total sales turnover ratio of 10% from the current level of 5.3%.

BEL for the first time exported indigenously developed Unit Level Switch Board ULSB MK-III. Customised EVMs supplied by BEL were successfully used in presidential and national Assembly elections in Namibia. Indigenously developed Directing Gear and Dome, which are part of Sonar system were exported and were successfully installed. Other major range of products exported during the year includes Ship Sonar, Surveillance Radar, Radar Warning Systems, Radar Finger Printing Systems, Communication equipment, Casings, Stators, Electro Mechanical parts etc.

BEL is also anticipating sizable export orders on account of the "Offset" policy in Defence Procurements. In this regard BEL is interacting with all the major foreign companies for possible offset business arising out of various RFPs issued by MoD India. BEL has already signed MoUs with these companies.

BEL participated in four International Exhibitions in the year 2014-15 to showcase its products & capabilities. Having established a coastal surveillance radar system for a couple of countries, BEL is interacting with Ministry of External affairs on a regular basis for supply of these systems to other friendly countries of India. BEL has been receiving awards for Excellence in Exports under the category "Electronics & Communication (excluding IT / BT) - Medium and Large" from the Government of Karnataka during the last 5 consecutive years.

MoU with Government

Your Company has been signing a Memorandum of Understanding (MoU) every year with the Government of India, Ministry of Defence. Performance of BEL for the year 2013-14 has been rated as "Excellent" in terms of the MoU with the Government. The MoU rating for 2014-15 is under review by the Government.

Order Book Position

The order book of Company as on 01 April 2015 is around Rs. 2,161,699 Lakhs. The order book comprises mainly major programs like Weapon Systems for Air Force & Army, Battlefield Surveillance System, Command Information Decision Support System, Fire Control System, Gun/Tank Upgrades Communication Sets, New Generation Radars, Electronic Warfare Systems, etc.

Finance

During the Financial Year 2014-15, your Company has been able to meet the incremental working capital requirements and additional investments on Capital equipments out of internal resources. Borrowing has been avoided scrupulously through close monitoring of cash flows. The effective and efficient cash management and healthy cash balances has helped your Company to retain the highest rating by ICRA for both short term and long term sanctioned bank limits. This rating will help in retaining the best rates for the various services availed from the Consortium Banks.

The Inventory position (net) of the Company as on 31 March 2015 was Rs. 342,687.83 Lakhs as against Rs. 337,014.08 Lakhs as on 31 March 2014, this works out to 188 days of the value of production (DPE) as on 31 March 2015 as against to 202 days as on 31 March 2014.

The position of Trade Receivables (net) as on 31 March 2015 was Rs. 378,614.33 Lakhs as against Rs. 412,853.69 Lakhs as on 31 March 2014, this works out to 206 days of turnover for the year 2014-15 with the corresponding position at 244 days as at the end of the previous year. This has been possible due to meticulous follow up of collection and receivables throughout the year.

Deposits

The Company does not have any Public Deposit Scheme at present. However, the matured past Public Deposit amount with the Company was Rs. 36.95 Lakhs as on 31 March 2015. Out of these 34 deposits amounting to Rs. 36.50 Lakhs are not claimed or not paid as these accounts are frozen on advice by Karnataka Lokayukta, remaining mature deposits of Rs. 0.45 lakh as on 31 March 2015 is unpaid due to in-sufficient documents / records produced by Depositors. The entire amount of Public Deposit outstanding as on 31 March 2015 is included in the Current Liability Note of the Balance Sheet.

Research & Development

Research and Development has been the core strength of BEL and continued to receive focused attention during the year for planning and reviewing of development of Technology modules and products. Apart from in-house efforts, BEL R&D engineers had close co-operation with DRDO, other National Research and Development agencies and academic institutes. The R&D activities have been carried out in all the business segments namely Radars, Military Communication, Naval Systems, Missile Systems, Electronic Warfare, Avionics, C4I systems, Electro-optics, Tank Electronics, Gun up-grades, Civilian Equipments & Systems and Components during the year 2014-15.

Development & Engineering (D&E) Divisions attached to all the Strategic Business Units (SBUs) of Bengaluru and Other Units, located outside Bengaluru concentrated on the development of Products and Systems in their respective areas of business segments. Central-D&E and two Central Research Laboratories (CRLs) of the company supported the D&E Divisions of all the units by way of developing core technology modules and software required for the development of Products and Systems.

The analysis of turnover of the company for the year 2014-15 indicates that 38% of the turnover is from BEL developed products, 42% of the turnover is from products, developed in association with DRDO and other National Labs and remaining 20% is from products for which technologies were acquired through foreign ToTs.

Development of New Products

During 2014-15, the R&D Divisions of BEL have completed development of several new products / systems / technology modules. Some of such new products / systems introduced during the year include the following :

* Surface Surveillance Radar

Surface Surveillance Radar is a Surveillance Radar for detection and tracking of sea surface targets. This radar provides target Designation data to Surface to Surface Missile (SSM) System.

* Lynx U1-MOD

It is a Naval Fire Control System designed to acquire, track and engage low flying high speed targets. It is capable of tracking accurately air / surface targets. The system has been configured to meet requirement of P16A, P1241 RE and P25 class of ships. It controls SRGM & AK630 gun mounts.

* Export Version of ULSB MKIII

Unit Level Switch Board MKIII is an Automatic Telephone Exchange designed to meet the communication requirements of Army at unit level. It employs TDM Switching concept and it is of non-blocking type.

* SMARTPLUS

SMARTPLUS is a secure data communication terminal used for data over voice links of HF, VHF, UHF / analogue telephone lines.

* ACCS for Submarine

Advanced Composite Communication System (ACCS) is fourth generation voice and data integrated system for fulfilling external communication needs of Modern submarine in VLF / HF / V / UHF frequency bands.

* Test bed for ADC & RS

Test Bed for Air Defence Control and Reporting System integrates various components viz sensors, Fire control Radars and Tactical control Radars to detect and provide all aerial activity as Air Situation Pictures (ASP) to Control Centre.

* Ground Control Station

Ground Control Station is a Shelter based System that facilitate the control and monitoring of the UAV and the exploitation of the information provided by the RUSTOM UAV.

* X band TR module

A Transreceive module in this band is designed for use in high power Active Electronically steered array Radars.

* Simulator for Akash Missile System

This simulator is developed for training Army personnel on the usage of operational sequence of Akash Weapon System. Two Versions viz., 1) Vehicle Version and 2) Class Room Version have been developed.

* Secure Phone

Secure Phone without camera is designed as per Army requirement for making secure calls and SMS.

* Hand held Digital Compass

Compass provides stable heading information for infantry soldier. It gives the user an accurate bearing information of the targets, storing and recalling of target angles.

* Commander TI Sights for AFV

Commander TI Sights for AFV for T72 & T90. It is also provided with LRF for accurate ballistic estimation.

* EO system for Integrated Coastal Surveillance System

EO System is developed with indigenous TI and CCD mounted on Pan and Tilt for effective surveillance in azimuth and elevation for Coastal Surveillance System.

* Under Vehicle Scanning System

Under Vehicle Scanning System scans / inspects and digitally records the underside image of any four wheelers in real time.

Scientists from Central Research Laboratories and other R&D divisions of BEL have contributed 52 Technical Papers in the National and International journals during the year. 64 papers have been published in in-house journals.

Following awards have been received by R&D teams during the year :

* SODET GOLD Award for R&D in Innovation category for the project 'Radar VEXT (Video Extractor and Tracker) for the year 2013-14.

* Young Scientist Award for one CRL Scientist from IETE for the year 2014.

* Two Young Engineers Awards for two engineers from Institute of Engineers, India (IEI) for the year 2014.

* Best contributor Awards in EW from Indian public sector units for Two Senior executives have been awarded by AoC India Chapter.

* Award for Indigenisation of Aeronautical Equipment from Aeronautical society of India for EW&A SBU for the year 2014-15.

* Two projects, EVM and Table PC were shortlisted for Common wealth Association of Public Administration and Management (CAPAM) international awards.

New facilities established during the year

Company has been continuously modernizing its infrastructure to be in tune with the changing needs of the technology / products. Specific groups in all the units scan the technology changes that are taking place and identify new processes in the world market for acquisition. This enables the company to maintain its infrastructure on par with international standards. During the year 2014-15, company has spent Rs. 282.26 Crores as part of CAPEX investment towards Modernisation of Plant & Machinery, Test Instruments, R&D investments, infrastructure up-gradation etc. The expenditure is fully met through internal accruals. Following are some of the major facilities established during the year.

* State-of-the-art production Infrastructure for Airborne Applications at Bengaluru Unit. The facility has SMT line designed to suit the Airborne applications which is established by replacing the Manual / Semi-Automatic SMT facility with Automatic SMT facility.

* Optical Transmission Measurement System at Machilipatnam Unit used in production of Electro Optic systems such as Passive Night Vision Devices (PNVD), Hand Held Thermal Imagers (HHTI) etc. Transmittance Measurement is one of the prime requirement to test the transmission parameters of Optical elements & Optical assemblies.

* EMI receiver for EMI / EMC Applications at Bengaluru Unit for testing of Electronic Equipments as per MIL- STD-461 C, D, E & F.

* Implemented Cyber Security components viz., IPS (Intrusion Prevention Systems) and SIEM (Security Incident Event Management) tool etc., at Intranet Gateways of all Units of the Company to improve the Wide Area Network (WAN) gateway security.

* Civil Works for Transducer Manufacturing Facility at Bengaluru Unit, an Integrated facility for Transducer Production and Calibration to Enhance the Production of various types of Ship and Submarine transducer items.

* EMI / EMC Chamber for Electronic Warfare applications at Hyderabad Unit to Test / Evaluate various types of subsystems / LRUs / Equipment of Electronic Warfare (EW) applications.

* Communication Chip evaluation facility at Kotdwara unit used for achieving telephony functionality like transcoding, packetisation / depacketisation, echo cancellation, noise suppression etc.

* Compact Environmental Stress Screening Test Station installed at Chennai Unit to carry out vibration and thermal cycling tests for CoMPASS project.

* New Transit Accommodation consisting of 12 Rooms (Eight rooms in Ground floor & Four rooms in first floor), Dining Hall & Recreation Hall facility established at Chennai Unit.

Quality

The Company's Vision of becoming a "World-class Company in Professional Electronics" is being achieved by giving thrust on three attributes - Quality, Technology and Innovation. Corporate Quality takes initiatives which encompass control and monitoring of all critical operational and business performance parameters like On Time Delivery, Process Cycle Time, Manufacturing Yield, Statistical Process Control, Complaint Resolution, Reliability -resulting in enhancement of product quality and in exceeding customer needs and expectations. These factors are monitored through well established 'SAP' enterprise resource planning system across all Strategic Business Units, regional, marketing and purchase offices of the company in India and abroad. The dedicated CRM (Customer Relation Module) and SRM (Supplier Relation Module) in SAP are able to enhance customer services and improvement in procurement efficiency of the company respectively.

The Company is committed to establish internationally recognised systems through process approach. All Units / Strategic Business Units / Common Services Groups are accredited to ISO 9001 to its latest versions of Quality Management System (QMS) since early nineties. Seven Units / SBUs - Ghaziabad, Panchkula, Kotdwara, Hyderabad, Military Communication, Electronics Warfare & Avionics, Export Manufacturing, have upgraded their QMS to Aerospace standard, AS 9100. Calibration and maintenance departments of Bengaluru Complex, Ghaziabad and Panchkula Units are accredited by NABL to ISO 17025 standards. The Pune unit manufacturing X-ray tubes is certified for ISO 13485 standard for medical devices. The Central Software Department Group at Bengaluru is CMMi level 5 certified.

All Units of Company are committed to Environment Management System through ISO 14001 Certification.

The Ghaziabad Unit and Engineering Services of Bengaluru Unit are accredited to Occupational Health Safety and Assessment Series, OHSAS 18001.

The EFQM (European Foundation of Quality Management) model for Business Excellence is being followed since year 2002 in BEL as another process approach for overall strategic and operational excellence leading to enhancement in competitiveness in meeting and exceeding needs & expectations of stakeholders. Its deployment status is assessed through participation in 'CII-EXIM Bank Award for Business Excellence'. Every year BEL Units are participating for this award in phased manner. In year 2014, Ghaziabad Unit participated for this award and were conferred for 'Commendation for Significant Achievement' (Level - II). In year 2015, Ghaziabad unit again participated for CII-EXIM Bank Award for Business Excellence and were conferred with next higher level i.e. "Significant Achievement". At present all Units / SBU are at 'Commendation for strong commitment to Excel' (Level - I) except Bengaluru Unit and Ghaziabad, which is at next higher level of Award i.e. 'Commendation for Significant Achievement' (Level - II).

The continual improvements in product and processes are brought out through various approaches. Middle and senior level executives select Six Sigma projects from different areas of concern related to product and processes and bring about breakthrough improvements. In order to effectively implement six-sigma methodology and to bring culture of improvement through analytical approach, 10 Black Belts were trained and certified by ISI, Bengaluru during the year. A total of 311 Six Sigma projects have been completed. 17 six sigma projects were nominated for national level competitions. One of the case studies represented the organisation at the international competition, ICQCC 2014, held at Sri Lanka. All Six sigma case studies were adjudged either in Excellence or in Par Excellence in their respective categories.

Through another approach employees (all non-executives and executives up to the level of managers) bring about improvement through Suggestion Scheme. A total of 1,571 suggestions have been implemented by respective individuals under the suggestion scheme and have been suitably recognised for their contribution.

The organisation creates impetus towards involvement of non-executives in the quality movement through Quality Control Circles. In year 2014-15, 745 presentations for improvement in product and processes were made by various Quality Control Circles. Twenty Five QC circles were nominated to participate in national competition / conventions and all were adjudged for higher category awards. One circle represented the organisation in international convention, ICQCC 2014, held at Sri Lanka and bagged excellence award in its category.

BEL has nominated its D&E engineers for Certified Reliability Engineer (CRE) program conducted by American Society for Quality (ASQ). The CRE certification is a training program followed by stringent exam to ensure proper grasping of the subject. 41 D&E engineers were professionally certified for CRE in year 2014-15.

The operating level Quality engineers in respective SBUs / Units were certified for "Certified Quality Engineers" (CQE) programs by the American Society for Quality (ASQ). 29 CQE have been certified. Awareness program on Reliability and Maintainability by developing in-house faculty was also conducted. 107 D&E engineers were covered under this program. Revision of existing BEL Quality Manual to latest quality standard including Business Excellence and also covering topics like Evaluation of Vendors, Corporate Quality Audit of all Units / SBUs, and determination of Quality Index were also taken up during the year 2014-15.

A Customer Satisfaction Survey was organised by BEL through external agency, Indian Market Research Bureau (IMRB), to capture the customers' perception on quality of BEL product. Sixteen products from various Units / SBUs were offered for survey.

Human Resources

Your Company employed 9,703 persons as on 31 March 2015 as against 9,952 persons as on 31 March 2014. Of these employees, 4,045 were engineers / scientists and 1,997 were women employees on 31 March 2015. A total of 212 engineers, scientists and other professionals were inducted during the year. 55 employees belonging to SC, 15 employees belonging to ST, 114 employees belonging to OBC and 12 employees belonging to the minority community were recruited during the year.

The Company has been implementing the Government Directives on Reservation. The particulars of SC / ST and other categories of employees as on 31 March 2015 are as under :

Executives Non - Executives Category of Employees Group Group 'B' Group Group 'D' 'A' 'C'

Scheduled Caste 917 28 777 54

Scheduled Tribe 300 1 141 22

OBC 1007 35 827 50

Ex-Servicemen 101 2 274 81

Physically Challenged 87 4 129 14

Various Training programs were conducted during the year to enhance competencies in Technical, Functional, Managerial and leadership areas. Structured Executive Development Programs were conducted regularly with premier Institutes to meet the evolving training needs of executives as they progress through various grades.

Apart from this, 360-degree feedback and leadership Development programs were conducted to equip our senior managers with Leadership competencies. Four batches of senior executives underwent the program during the year. "Strategy Building and Competitive Intelligence" program was organised through the faculty of premier Management Institute and forty four senior executives attended the program.

The training programs are designed to enhance competencies in various areas like Technical, Functional and Managerial / Leadership.

A detailed write up on Company's HR philosophy and specific HR initiatives during the year is provided separately in the Management Discussion and Analysis Report.

Awards and Recognitions

Your Company continues to be a highly trusted for the quality and innovation of its products based on strong consumer insights and the ability to engage with consumers across the country. During the year your Company and its employees have received various Awards and Recognitions. Some of the important accolades received during the year by your Company and its employees include :

* SCOPE Meritorious Award for the year 2012-13 for Best Practices in Human Resources Management from Hon'ble President of India.

* Prime Minister Shram Shree Award for BEL employee for the year 2013.

* India Today Group PSU Awards contest for the 'Most Eco-Friendly Company' and 'Best in R&D Innovation'.

* Mentor Graphics Silicon India Leadership Award 2014 for Best VLSI / Embedded Design in Defence / Aerospace Sector.

* BEL Ghaziabad Unit was accredited with the 2nd Level of recognition in CII-EXIM Award for Business Excellence - "Commendation for Significant Achievement".

* SODET Gold Award for the year 2013-14 in 'Technology Innovation' category for the project 'VEXT for Coastal Surveillance Application'.

* 'IETE - IRSI Young Scientist' Award for two BEL Engineers for the year 2014 and 'IEI Young Engineers' Award for the year 2014-15 in Electronics and Telecommunication Engineering.

Environment Management

Bharat Electronics Ltd has long been integrating sustainability in its operations systematically with best practices. On the lookout for sustainable development, sets in clean and green surroundings. All the Units of BEL have committed for maintaining an environmental friendly work processes and strongly believes that environmental sustainability results in designing economically viable and reliable products. BEL sets objectives in compliance to DPE guidelines, further approaches towards adopting breakthrough technology for enhancing environmental performances of the products right from design to disposal. Looks beyond its boundary for compliance to environmental impacts. In all the Units of BEL, practicing of conservation of natural resources like energy conservation, water conservation and reduction in waste generation is inculcated as a routine approach. BEL looks beyond obvious opportunities available for improvising the performance against environmental commitments.

The Sustainability Report annexed to this report contains further details on environment management and sustainable development initiatives.

Subsidiaries and Joint Ventures

Your Company's subsidiary at Pune, BEL Optronic Devices Ltd. (BELOP) manufactures Image Intensifier Tubes (I.I. Tubes). These Tubes are supplied to the Defence customers and also used in the Night Vision Devices manufactured by BEL. BELOP achieved a turnover of Rs. 10,264.93 Lakhs as against Rs. 17,147.34 Lakhs in the previous year. The Profit After Tax for the year was Rs. 366.69 Lakhs as against Rs. 496.19 Lakhs in the previous year.

The Joint Venture Company (JVC) with General Electric, USA, viz., GE BE Pvt Ltd., continues to perform well. This JVC manufactures CT Max and other latest version X-Ray Tubes. BEL supplies some parts required for the products manufactured by this JVC. GE BE Pvt Ltd recorded a turnover of Rs. 72,564 Lakhs as against Rs. 60,685 Lakhs in the previous year. The Profit After Tax was Rs. 11,752 Lakhs as against Rs. 6,268 Lakhs in the previous year. The JVC declared 150% dividend for the year 2014-15 and BEL received Rs. 390 Lakhs as dividend from this JVC on BEL's share of investment for the financial year 2014-15.

The other JVC, viz., BEL Multitone Pvt Ltd., jointly promoted by BEL and Multitone Electronics plc, UK was set up to supply, install and service Private Paging Systems and Pagers. As this JVC was not performing well, it was decided to wind up this company. The JVC Board and the shareholders passed the voluntary winding up resolutions and appointed a Liquidator. As on 31 March 2015, all the assets of the Company have been disposed of and all dues settled. Approval for closure of winding up procedure has been accorded by its Members at General Meeting held on 31 March 2015. The liquidator has sent the report to Registrar of Companies & Official Liquidator for issuance of winding up order.

BEL formed a Joint Venture Company (JVC) with Thales Air Systems SAS, France and Thales India Pvt Ltd (TIPL) for design, development, marketing, supply and support of civilian and select defence radars for Indian and global markets. The JVC has been incorporated on 28 August 2014 with the name BEL-THALES Systems Limited (BTSL), with an authorised capital of Rs. 8,000 Lakhs and with a subscribed capital of Rs. 960 Lakhs. The Company has been operating from Bengaluru and has its registered office at CNP Area, BEL Industrial Estate, Jalahalli, Bengaluru - 560013 (premises on lease from BEL). Since BEL is holding 74% of the equity capital in the JVC, it becomes a subsidiary company of BEL and is a Government Company as defined in the Companies Act, 2013. During the first year of its operation, it incurred a loss of Rs. 162.45 Lakhs.

In pursuant to provisions of section 129(3) of the Companies Act, read with Rule 5 of Companies (Accounts) Rules, 2014, the statement containing salient features of the financials statement of Subsidiaries / Associate / Joint Ventures is attached to the financial statements.

Consolidated Financial Statements

Consolidated Financial Statements of your Company and its Subsidiary and Joint Venture Companies are attached to this Report.

Vigilance

Your Company's vigilance Organisation is headed by an Independent Chief Vigilance Officer (CVO). During the year, separate preventive, inspection and technical wing were established in Corporate Vigilance with posting of Vigilance Officers, who assists the CVO in Preventive Vigilance and the technical aspects in the investigation process. Permanent Vigilance Officers are posted in each of the Units and in the SBUs. Vigilance Committees are formed in the each of the Units and SBUs and the Unit / SBU heads are also designated as Chairman of the vigilance Committee. Apart from this, there exists a Vigilance Committee at the Corporate, where Chairman and Managing Director is the Chairman of the Committee and the CVO is the Member Secretary. Preventive Vigilance has been the thrust area of the Vigilance Organisation and the same received focused attention during the year.

The Vigilance Department examines procurements, contracts and processes on continual basis, conducts regular and surprise inspections and investigates instances of any suspected transactions referred to it. Any employee or third parties can refer any suspected transaction to the notice of CVO for investigation. Online complaint management system has been made operational. Online complaints can be filed by logging on to BEL web site.

Important activities of Vigilance Department during the year includes : 1,700 Purchase Orders / Contracts and 648 high value Orders / Contracts have been reviewed. CTE Type intensive examination has been restructured with the formation of 5 IE teams. 47 High value procurement and works contracts has been taken up for Intensive examination. Regular and surprise checks / inspection has also been conducted by the field Vigilance Officers. During the year, 40 Complaints, including the complaints referred by CVC / MOD / CBI were disposed. Disciplinary action and System/process Improvement has been recommended in some cases where lapses were observed. One case is pending with CBI for investigation. 22 Executives have been trained on the Principles of Natural Justice & Domestic Enquiry Training Programme (for Dy. Mgrs. & above). 291 Executives and 329 Non-Executives have taken part in Vigilance Awareness Training Programme. 74 Executives & 54 Non Executives working in sensitive areas for more than 3 years have been job rotated and the percentage coverage is 95.5%.

In terms of CVC's guidelines on Leveraging Technology to ensure transparency through effective use of website, the following information has been made available on BEL website :

* E-Procurement percentage improved to 95%.

* Online registration of Sub-contractors / Vendors.

* Details of awarded contracts / Purchase Orders valuing more than Rs. 10 Lakhs in respect of works contracts, service contracts, capital items and non-production items.

* Details of awarded Contracts / Purchase Orders issued on nomination / single tender basis value exceeding Rs. 5 Lakhs.

* Vendor Payments Information System.

* Purchase Procedures, Sub Contract Procedures and Works Manual.

* Complaint Handling Policy and Whistle Blower Policy.

* Corruption Risk Management Policy.

* Vendors' Directory, after removing defunct vendors.

* File Life cycle Management System has been implemented across the company and about 8,000 files has been created in the System as on 31 March 2015.

* On-line filing APRs has been developed and demonstrated to the users and planned to be implemented from 01 April 2015.

Vigilance setup is continuously endeavouring to bring transparency, fairness and equity in all transactions and processes of the company. Some of the key activities that has been carried out during the year are :

1) Vigilance Awareness Week was marked with special address by former Justice N. Santhosh Hegde on 30 October 2014.

2) Vigilance awareness week were observed during November 2014, with Cycle rally by BEL School Students, Tree plantations, Friendly Cricket Match between the Senior Executives of BEL and series of lecture programs.

3) Training programs were organised for Vigilance Officers through Guest lectures by faculties from CBI, Acadamy. Director (Vigilance) / MoD / DDP and CVO and Senior executives from other PSUs and organisations.

4) Bharat Electronics Limited, Bengaluru in association with MSME Development Institute, Bengaluru organised National Vendor Development Programme - 2014 (MSME Sector) and Industrial Exhibition on 27 & 28, December 2014 at BEL Kalakshetra, Bengaluru. Shri B. H. Anil Kumar, IAS, Joint Secretary, Ministry of MSME, New Delhi was the Chief Guest for Inauguration Function.

5) Vigilance training programs were organised for two batches of Probationary Engineers and one batch of newly joined Accounts Officers.

6) Manual for Intensive examination of Contracts has been drafted and released for the benefit of the Intensive Examination teams which has been carrying out the intensive examination of high value contracts.

Diversification

In August 2014 BEL established a Joint Venture Company with Thales, France to address business of Civilian and select defence Radars.

BEL entered into selective IT and Networking businesses in the Non-Defence sector and successfully implemented projects like Wide Area Network for Cabinet Secretariat and LAN-WAN Project for BSF (multiple phases).

Though supplies to Defence constitute a majority share in BEL's turnover, company realizes that, to grow in the years to come, it has to diversify into other areas. Some of the major areas of diversification are Homeland Security, Telecommunication, Smart cards, etc.

Integrity Pact

One of the recent initiatives of the Central Vigilance Commission (CVC) to eradicate corruption in procurement activity is introduction of the Integrity Pact in large value contracts in Government Organisations. In line with the directives from Ministry of Defence and the Central Vigilance Commission, your Company has adopted Integrity Pact with all vendors / suppliers / contractors / service providers for all Orders / Contracts of value Rs. 2,000 Lakhs and above, initially. This threshold value was reduced to Rs. 1,000 Lakhs from March 2013 and further reduced to Rs. 500 Lakhs from May, 2014. The Pact essentially envisages an agreement between the prospective vendors / bidders and the Principal (BEL), 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 the contract. Any violation of the same would entail disqualification of the bidders and exclusion from future business dealings.

As recommended by the CVC, the Company has appointed Mr N K Sinha, IAS (Retd), former Secretary, Planning Commission and former Chairman, PESB as an Independent External Monitor (IEM) for monitoring implementation of Integrity Pact in the Company. During the financial year 2014-15 the IEM reviewed 25 contracts and held structured meetings with the Chairman & Managing Director.

Procurement from MSMEs

Your Company has been providing increased thrust on enhancing procurement from MSMEs and is implementing Public Procurement Policy for Micro, Small & Medium Enterprises (MSMEs) as per the guidelines / notification issued by the Ministry of MSMEs. Company is in the process of broadening the vendor base. In order to facilitate MSMEs, the company is deploying all efforts to classify the existing vendors into Micro, Small & Medium Enterprises in the company's procurement system through web-based real-time centralised ERP System (SAP). Vendor registration forms are available in the Company's official website (www.bel-india.com). Industry Promotion Officer is nominated to assist vendors regarding Procedure for Registration, understanding the requirements of BEL, report grievances,

if any, etc. Some of the other initiatives include uploading of company's procurement plan for MSMEs based on the production plan, with periodic update and details of Unit / SBU specific Industry Promotion Officers in the company's official website, participation in various vendor development programmes like exhibitions, workshops, establishment of industrial estate to give maximum encouragement to ancillaries etc.

BEL participated in the National Vendor Development Programs organised by Ministry of MSME at Bengaluru on 12th and 24 March 2015. BEL also showcased some of the input materials viz., Electronic, Electro-mechanical, Mechanical parts for procurement from MSMEs.

Implementation of Official Language Policy

Your Company is committed to adhere to the OL policies of the Government of India. During 2014-15, efforts made towards implementation of Official Languages include :

OL inspection of Ghaziabad Unit was conducted on 9 May 2014 by the officials of Dept. of OL, MHA. During the year under review, Corporate OL Audit team conducted OL inspections at Ghaziabad, Kotdwara Units, CRL-Ghaziabad and RO Delhi.

Incentive Schemes for working in Hindi has been extended to the children of employees and to the society as a whole. These attractive and innovative schemes have been named after famous authors of Hindi Literature. Corporate Panel for English to Hindi translation has been extended. Hindi Month was observed in all the Units and Offices of the Company. During Hindi month, employees and officers participated enthusiastically in various programs / competitions. Employees of various Units / Offices and Corporate Office bagged prizes in the Inter Organisation TOLIC Competitions. Hindi workshops for those having working knowledge in Hindi were conducted during the year. Training on Unicode is being imparted for all Executives and Employees.

13 Units / Offices have been notified under rule 10(4) of OL rules indicating that 80% or more staff have working knowledge in Hindi in these Units / Offices and orders have been issued under rule 8(4) of OL Rules for those having proficiency in Hindi to do their Official work in Hindi. Govt. of India notified CRL-Ghaziabad under Rule 10(4) of OL rules during the year.

OL Portal is in place to facilitate OL implementation across the company and to provide latest inputs pertaining to OL and is being updated. Hindi language has been enabled in SAP. Most of the Units have uploaded data pertaining to OL Training Roster on SAP. Company's website is available in Hindi and English and efforts are on to progressively have the entire website in bilingual.

Efforts are on to ensure the progressive use of Hindi in all spheres of activities of the Company.

Implementation of RTI Act

The information required to be provided as per Section 4(1) (b) of the Right to Information Act, 2005 has been posted on the website of the Company www.bel-india.com. The Information posted on the website contains general information about the Company, powers and duties of employees, decision making process, rules, regulations, manuals and records held by BEL, a directory of the Company's officers, pay scales, procedure for requesting additional information about the Company by citizens and associated request formats.

During the year 2014-15 the Company received and attended 874 requests for information under RTI Act. Most of the requests were for information related to recruitment, service related matters, third party and commercial secrets information.

Board Meetings/ Change in Directors and Key Managerial Personnel

During the year 5 Board meetings were held, the details of which form part of the Corporate Governance Report.

Following changes took place in the Directorate and Key Managerial Personnel of your Company during the financial year :

Sl. Name of the Desig- Date of Date of No. Director(s)/KMP nation appointment cessation

1 Lt Gen Narendra Singh Director 01.10.2013 30.04.2014

2 Lt Gen C A Krishnan Director 01.05.2014 Not Applicable

3 Mr Manmohan Handa Director 24.06.2014 Not Applicable

4 Mr P K Mishra Director 01.01.2013 19.09.2014

5 Mr J Rama krishna Rao Director 03.11.2014 Not Applicable

6 Mr S Sreenivas Company 01.04.2014 Not Applicable Secretary

Mr P R Acharya, Director (Finance) & Lt Gen C A Krishnan, Government Director, retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

Mr J Rama Krishna Rao, Additional Director is being appointed as Director on the terms as set-out in the Notice of the Annual General Meeting.

Directors' Responsibility Statement :

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors in terms of Section 134(3)(c) of the Companies Act, 2013 state that :

a) in the preparation of the annual accounts, the applicable accounting standards had 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 as at 31 March 2015 and of the profit of the Company for the year ended on that date;

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

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

e) proper internal financial controls were in place and such financial controls were adequate and were operating effectively;

f) systems to ensure compliance with the provisions of all applicable laws were in place and same were adequate and operating effectively.

Significant and material orders

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future.

Events Subsequent to the Date of Financial Statements :

Material changes and commitments affecting the financial position of the Company which have occurred between 31 March 2015 and date of signing of this report are nil.

Changes to Authorised Share Capital and Bonus Issue

The Board of the Company has in its meeting held on 24 July 2015, approved the proposal for :

a) increase in the authorised share capital from Rs. 100 Crores to Rs. 250 Crores.

b) Issue of 2 bonus shares for every share held by the existing shareholders of the Company.

The said proposals are subject to approval of the Members at the ensuing Annual General Meeting of the Company.

Corporate Social Responsibility

Pursuant to the provisions of Section 135 of the Companies Act, 2013 and The Companies (Corporate Social Responsibility) Rules, 2014 read with various clarifications issued by Ministry of Corporate Affairs & DPE Guidelines the Company has undertaken various activities as per the CSR Policy. The programmes / initiatives / projects are taken up in line with the Schedule-VII of the Companies Act, 2013, which are duly incorporated in our revised CSR policy and forms the guiding principle for all our programmes.

The Corporate Social Responsibility policy of the Company is posted on the Company's website, www.bel-india.com.

Pursuant to the Rule 8 of The Companies (Corporate Social Responsibility) Rules, 2014 a report on CSR activities for financial year 2014-15 is annexed herewith as "Annexure 1".

Auditors

Statutory Auditors

Pursuant to Section 139(5) of the Companies Act, 2013, the Comptroller and Auditor General of India appointed M/s Badari, Madhusudhan & Srinivasan, Chartered Accountants, Bengaluru, as Statutory Auditors for the financial year 2014-15 for audit of accounts of Bengaluru, Hyderabad, Chennai Units and Corporate Office. M/s Ved & Company, Chartered Accountants, Ghaziabad, were appointed as Branch Auditors of Ghaziabad, Panchkula and Kotdwara Units for the financial year 2014-15. M/s Malani Somani Chandak & Associates, Chartered Accountants, Pune were appointed as Branch Auditors for Pune and Navi Mumbai Units for the financial year 2014-15. M/s Rao & Narayan, Chartered Accountants, Vijayawada were re-appointed as Branch Auditors for Machilipatnam Unit for financial year 2014-15.

Cost Auditors

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014 (as amended), the cost records maintained by the Company in respect of its manufacturing activities are required to be audited by the Cost Auditor. Your Directors had, on the recommendation of the Audit Committee, appointed M/s PSV & Associates, Bengaluru, as Cost Auditors of the Company for the financial year 2014-15 for conducting the audit of cost records of the Company.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr Thirupal Gorige, Practicing Company Secretary (PCS Registration No. 6424) for the financial year 2014-15 to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith as "Annexure 2".

The Secretarial Auditor in his Report observed that Company is yet to appoint adequate number of Independent Directors and Woman Director on the Board. Your Directors state that the Company being a Government Company, the appointment of the Directors on the Board of the Company is made by the Government of India and same is under consideration of the Government.

Auditors' Report

Auditors' Report on the Annual Accounts for the financial year 2014-15 and "Nil" Comments of the Comptroller & Auditor General of India under Section 143(5) of the Companies Act, 2013 on the Annual Accounts are appended to this report.

Extract of Annual Return

In accordance with Section 134(3)(a) of the Companies Act, 2013, an extract of the annual return in the form MGT-9 is annexed herewith as "Annexure 3".

Risk Management

Pursuant to the requirement of Clause 49 of the Listing Agreement, the Company has constituted a Risk Management Committee. The details of Committee and its terms of reference, risk management policy etc. are set out in the Corporate Governance Report.

Remuneration Policy and Board Evaluation

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration, Board Evaluation etc. The details are set out in the Corporate Governance Report.

Vigil Mechanism / Whistle Blower Policy

The Company has a vigil mechanism named Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the policy are set out in the Corporate Governance Report.

Declaration from Independent Directors

The Company has received necessary declaration from each Independent Director of the Company under Section 149(7) of the Companies Act, 2013 that the Independent Directors of the Company meet with the criteria of their Independence laid down in Section 149(6) of the Companies Act, 2013.

Management Discussion and Analysis Report

Management Discussion and Analysis Report required under the Listing Agreements with the Stock Exchanges on which BEL's shares are listed as also under the Government (DPE) Guidelines on Corporate Governance for Central Public Sector Enterprises (CPSEs), is attached to this Report as "Annexure 4".

Related Party Transactions

There were no materially significant related party transactions with the Company's Promoters, Directors, Management or their relatives, which could have had a potential conflict with the interests of the Company. Transactions with related parties that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. All Related Party Transactions are placed before the Audit Committee as also the Board for approval, if required. Members may refer to the notes to the accounts for details of related party transactions.

The Board of Directors of the Company has, on the recommendation of the Audit Committee, adopted a policy to regulate transactions between the Company and its Related Parties, in compliance with the applicable provisions of the Companies Act 2013, the Rules thereunder and the Listing Agreement.

This Policy was considered and approved by the Board at its Meeting held on 23 January 2015. The policy has also been uploaded on the Company's website www.bel-india.com.

Particulars of Employees

During the financial year there were no employees in the Company who were employed throughout the financial year and were in receipt of the remuneration, in aggregate of more than Rs. 60 Lakhs per annum or employed for part of the financial year and were in receipt of the remuneration, in aggregate of more than Rs. 5 Lakhs per month.

Information required pursuant to Section 197 read with Rule, 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, is attached to this Report as "Annexure 5".

Loans / Guarantees / Investments

Particulars of loans, guarantees and investments under section 186 of the Companies Act, 2013 are nil.

Internal Financial Controls

The Company has in place adequate internal financial controls with reference to financial statements.

Composition of Audit Committee

The Audit Committee comprises of Independent Directors viz., Mr S M Acharya, Chairman of the Committee, Mr Vikram Shrivastava, Mr V K Mehta and Government Director Mr J Ramakrishna Rao as its members. All the recommendations made by the Audit Committee were accepted by the Board.

Corporate Governance Report

DPE guidelines on Corporate Governance for CPSEs provide that CPSEs would be graded on the basis of their compliance with the guidelines. DPE has graded BEL as "Excellent" for 2013-14. A report on Corporate Governance along with a Compliance Certificate from the Auditors as prescribed under the Listing Agreements with the Stock Exchanges as well as the DPE Guidelines is attached to this Report as "Annexure 6".

Sustainability Report

The DPE guidelines on Sustainable Development for CPSEs mandates CPSEs to disclose their Sustainable Development efforts in a 'Stand Alone Report' or as a separate chapter in the Annual Report. Pursuant to this requirement, a Report on your Company's efforts on "Sustainable Development" is attached to this Report as "Annexure 7".

Business Responsibility Report

The Securities and Exchange Board of India (SEBI) has mandated inclusion of Business Responsibility Report ("BR report") as part of the Annual Report for listed entities. This SEBI mandate is also inserted as Clause 55 in the Stock Exchange Listing Agreement. The SEBI guidelines / Clause 55 of Listing Agreement provide a format for BR report. It also contains a list of nine Key Principles and various core elements under each principle to assess compliance with Environmental, Social and Governance norms. Listed Companies are required to prepare policies based on these nine Key principles and core elements, put in place a framework to integrate and embed the policies into business activities and a mechanism to measure and report the achievements as BR report.

Your Company has prepared a comprehensive policy framework for BR report, after studying the SEBI guidelines and keeping in view the business and governance environment in which BEL as a Defence PSU operates.

Highlights of this policy are posted on the Company's website www.bel-india.com. The Company's BR report for the year is attached to this Report as "Annexure 8".

Other Disclosures

Information required to be disclosed in accordance with Section 134(3)(m) of the Companies Act 2013 read with Rule 8(3) of the Companies (Accounts) rules, 2014 regarding conservation of energy, technology absorption and foreign exchange earnings and outgo, is given at "Annexure 9".

Acknowledgement

Your Directors place on record their deep appreciation and gratitude for the valuable support received from all the customers, particularly the Defence Services and the para-military forces and look forward to their continued support and co-operation in future. Your Directors also place on record their gratitude for the support received from various Ministries of the Government of India, especially the Ministry of Defence, Department of Defence Production. Your Directors express their gratitude to the Defence Research and Development Organisation and the various Research Laboratories under DRDO for the support it received, particularly in the joint development programmes and new products brought out with the help of them. Your Directors express their sincere thanks to the Comptroller and Auditor General of India, Chairman, Members and employees of the Audit Board, Statutory Auditors, Branch Auditors, Cost Auditors, Secretarial Auditor, Company's Bankers, collaborators and vendors. Your Directors appreciate the sincere efforts put in by the employees at all levels, which enabled the Company to achieve the good performance during the year. Your Directors express their appreciation and gratitude to all the shareholders / investors for the trust and confidence reposed in the Company and look forward to their continued support and participation in sustaining the growth of the Company in the coming years.

For and on behalf of the Board

Bengaluru Sunil Kumar Sharma 24 July 2015 Chairman & Managing Director


Mar 31, 2014

To the Members,

I have great pleasure in presenting to you, on behalf of the Board of Directors, the 60th Annual Report of Bharat Electronics Limited and the Audited Accounts for the financial year ended 31 March 2014 together with the reports of the Statutory Auditors and the Comptroller and Auditor General of India thereon.

Performance Highlights

A summary of the Company''s financial results is given below :

(Rs. in lakhs)

2013 - 14 2012 - 13

Value of Production 612,689.97 628,990.56

Turnover (Gross) 617,423.25 601,189.93

Profit Before Depreciation, Finance 132,024.01 124,608.42 Cost and Tax

Finance Cost 339.61 78.17

Depreciation and Amortization 14,210.45 13,071.04

Provision for Tax 24,311.77 22,475.93

Profit After Tax 93,162.18 88,983.28

Add : Balance brought forward 265,778.32 240,900.14 from previous year

Balance available for Appropriation 358,940.50 329,883.42

Interim Dividend paid 4,800.00 4,800.00

Proposed Final Dividend 13,840.00 13,040.00

Tax on Dividend 3,167.87 2,994.83

Transfer to General Reserve 40,000.00 40,000.00

Transfer to Capital Reserve 450.11 3,270.27

Reserves & Surplus 693,723.77 622,369.46

Net Worth 701,723.77 630,369.46

Earnings Per Share (in Rs.) 116.45 111.23

Book Value Per Share (in Rs.) 877.15 787.96

Distribution of Value of Production for 2013-14 is given below :

Amount Percentage (Rs.in lakhs)

Materials 358,355.91 58.49%

Employee Cost 103,042.56 16.82%

Other Expenses (Net) 19,607.10 3.20%

Depreciation and Amortization 14,210.45 2.32%

Provision for Tax 24,311.77 3.97%

Profit After Tax 93,162.18 15.21%

Total 612,689.97 100.00%

Company''s sales turnover for the year 2013-14 has increased to Rs. 617,423.25 lakhs from Rs. 601,189.93 lakhs in 2012-13, registering a growth of 2.70%. Profit after Tax for the year is Rs. 93,162.18 lakhs as against Rs. 88,983.28 lakhs in the previous year. Turnover from indigenously developed products is 85%. Supplies to the defence contributed to 83% of turnover as against 85% in 2012-13.

Dividend

The Board has recommended a Final Dividend of 173 % (Rs. 17.30 per share), Rs. 13,840 lakhs for the year 2013-14. An interim dividend of 60% (Rs. 6 per share), Rs. 4,800 lakhs has already been paid for the year 2013-14. Thus, the total dividend for the year 2013-14 is 233 % (Rs. 23.30 per share), Rs. 18,640 lakhs (excluding corporate dividend tax) as against 223% (Rs. 22.30 per share), Rs. 17,840 lakhs paid in the previous year.

Provision of Rs. 2,352.11 lakhs has been made for corporate dividend tax on the final dividend proposed. Corporate dividend tax of Rs. 815.76 lakhs has already been paid on the interim dividend paid for the year 2013-14.

Major Orders Executed

Major projects executed during the year for the Army, Navy, Air Force, Coast Guard and non - defence customers include : Akash Missile Systems (Army & Air Force), Passive Night Vision Devices (PNVDs), Low Level Light Weight Radar, Missile Warning System (MWS), Hull mounted Sonar, Shipborne EW system, Central Acquisition Radar, Low Level Transportable Radar (LLTR), Coastal Surveillance System, Electronic Voting machines (EVMs), National Population Register (NPR), etc.

New Products

Some of the important new products introduced during the year include :

- Bharani - a Low Level Light weight Radar (LLLR). It is a battery powered Compact Sensor providing two Dimensional Surveillance solution to alert Air defence Weapon System against hostile targets at low and medium altitudes.

- Hull Mounted Sonar - for detecting, localizing and tracking surface & sub-surface targets in both active and passive modes. The sonar is designed to meet the naval requirements.

- Electronic Voting Machine - with new specification including digital certification and tamper evidence feature.

- Voter Verifiable Paper Audit Trail (VVPAT) - a Printing attachment to the Electronic Voting Machine (EVM) to facilitate comparison of votes in the event of a dispute.

- Radio for LIC EW system - Radio system for providing reliable back bone data communication.

Other significant developments / achievements during the year 2013-14

- Successful test firing of indigenously developed ''Akash'' Missiles from the Integrated Test Range (ITR) at Chandipur, off the Odisha coast.

- Ministry of Defence approval and FIPB approval received for BEL -Thales Joint Venture. This JVC is being established for Design, Development, Marketing, Supply & Support of Civilian and select Defence Radars.

- "Futuring Work Shop" by American Society for Quality (ASQ) Inc., USA to company''s senior management. The workshop is focused on Scenario Planning and evolving strategies to face future challenges.

- The turnover from Indigenous technology is around 85% for the year 2013-14 as against 78% of 2012-13.

- Around 1.23 lakh Electronic Voting Machines (EVMs) supplied in record time, during the year 2013-14.

Exports

Your Company achieved an all time high export sales of US$ 42 million registering a growth of 28% over the previous year''s export turnover of US$ 32.78 million. The Company has an export order book of US$ 194 million as on 01 April 2014 which includes offset order book of US$ 28.45 million. The targeted export sales for the year 2014-15 are US$ 59.75 million. The long term export plan of BEL is to reach export sales to total sales turnover ratio of 7% from the current ratio of 4% by 2018-19.

BEL for the first time exported state-of-the-art Sonar systems. Other major range of products exported during the year includes Automatic Identification System, Radar Warning Systems, Radar Finger Printing System, Casings, Stators, Electro Mechanical parts etc. BEL has successfully established itself as a supply chain partner of global players like Boeing & Hamilton Sunstrand. During the year, BEL has successfully commenced manufacturing of aircraft cable looms for M/s Pilatus of Switzerland.

BEL participated in three International Exhibitions in the year 2013-14 to showcase its products & capabilities. Having established a coastal surveillance radar system for a couple of countries, BEL is interacting with Ministry of External Affairs on a regular basis for supply of these systems to other friendly countries of India.

BEL is also anticipating sizable export orders on account of the "Offset" policy in Defence Procurements. In this regard BEL is interacting with many foreign companies, like Elbit Systems, Boeing, Lockheed Martin, Raytheon, Northrop Grumman, BAE Systems, SAAB, Thales, IAI for possible offset business arising out of various RFPs issued by MoD India. BEL has already signed MoUs with these companies.

MoU with Government

Your Company has been signing a Memorandum of Understanding (MoU) every year with the Government of India, Ministry of Defence. Performance of BEL for the year 2012-13 has been rated as "Very Good" in terms of the MoU with the Government. The MoU rating for 2013-14 is under finalisation by the Government.

Order Book Position

The order book of Company as on 01 April 2014 is Rs. 2,345,200 lakhs. The order book comprises mainly major programs like Weapon Systems for Air Force & Army, Battlefield Surveillance System, Command Information Decision Support System, Fire Control System, Passive Night Vision Devices and some of the new generation Radars, Sonars, Electronic Warfare Systems, etc. However, taking into account the delivery schedule, customer requirements, site / platform readiness, etc., the orders available for execution during 2014- 15 is Rs. 590,000 lakhs.

Finance

During the financial year 2013-14, your Company has been able to meet out of internal resources, the fund requirements towards incremental working capital and additional investments on Capital equipments. Borrowing has been avoided through close monitoring of cash flows and efficient cash management. Your company has retained the highest rating by ICRA for both short term and long term sanctioned bank limits. This rating will help in securing the best rates for the various services availed from the consortium banks. Based on the user requirements, several changes have been carried out in the online ERP to help in better information flow and control.

The inventory position of your Company as on 31 March 2014 was Rs. 337,014 lakhs (Net), as against Rs. 327,108 lakhs (Net) as on 31 March 2013. The inventory as on 31 March 2014 works out to 202 days of the Value of Production (DPE) for the year 2013-14 as against the corresponding position at 191 days as on 31 March 2013. During the year, several committees were formed to examine inventory management and based on the feedback comprehensive guidelines have been issued to streamline inventory management.

The position of Trade Receivables as on 31 March 2014 was Rs. 412,854 lakhs (Net) as against Rs. 333,467 lakhs (Net) as on 31 March 2013. This works out to 244 days of turnover for the year 2013-14 with the corresponding position at 202 days in the previous year. The increase in Trade Receivables as at the end of the financial year is mainly due to the following reasons :

(a) Higher proportion of sales in the last quarter, particularly in March 2014;

(b) Non realization of bills due to budgetary constraints of the Customers which had started as early as Nov 2013 during the current financial year;

(c) Payment terms in the sale contracts where the release of money is linked to certain specific milestones, even after delivery of the items like Harbor Acceptance Trials / Sea Acceptance Trials, etc.

The Realization of Trade Receivables will be closely monitored to ensure speedy collection during the current financial year which should improve the position by the end of the year 2014-15.

The Company does not have any public deposit scheme at present. However, the matured past public deposits amount with the company was Rs. 36.95 lakhs as on 31 March 2014. Of these, 34 deposits amounting to Rs. 36.50 lakhs are claimed but not paid as these accounts are frozen on advice by Karnataka Lokayukta. Remaining matured deposits of Rs. 0.45 lakhs as on 31 March 2014 is unpaid. The entire amount of public deposits outstanding as on 31 March 2014 is included in the current liabilities, Note No. 8 of the Balance sheet.

Research & Development

Research and Development continued to be a focus area of BEL during the year 2013-14. In-house R&D efforts during the year encompassed all the business segments of the Company, viz. Radars, Military Communication, Naval Systems, Missile Systems, Electronic Warfare, Avionics, CI systems, Electro-optics, Tank Electronics, Gun up-grades, Civilian equipments & systems and Components.

BEL R&D engineers had close co-operation with DRDO, other national research and development agencies and academic Institutes.

Development & Engineering (D&E) Divisions attached to all the Strategic Business Units (SBUs) of Bangalore and Other Units concentrated on the development of Products and Systems in their respective areas of Business Segments. Central-D&E and two Central Research Laboratories (CRLs) of the company supported the D&E Divisions of all the units through development of core technology modules and software required for the development of Products and Systems.

The analysis of turnover of the company for the year 2013-14 indicates that 41% of the turnover is from BEL developed products, 44% of the turnover is from products developed in association with DRDO & other National Labs and remaining 15% is from products for which technologies were acquired through foreign ToT.

Development of New Products

During the year 2013-14, different R&D Divisions completed several development projects leading to new products, systems and technology modules. The Company was also able to bring out many new products through joint development efforts with Defence Research and Development Organisation (DRDO).

New Products developed jointly with DRDO

Bharani - a Low Level Light Weight, Compact, Surveillance Radar (LLLR), powered by a battery for use in Army Air Defence Weapon System against hostile targets like UAV RPV, hovering Helicopters and fixed wing Aircrafts at low and medium altitudes. This product was developed jointly with LRDE.

EO System for Integrated Coastal surveillance system - Developed jointly with IRDE as an indigenous EO solution for integrated Coastal Surveillance System.

EW system - Developed jointly with DLRL.

HMS-X - Developed jointly with NPOL, HMS-X is a Sonar which is capable of performing operation in both active and passive modes.

New Products developed by BEL through in-house R&D effort

Radio for LIC EW system - is a back bone data communication system for Short Distance Direction Finding (SDFS) sub system of LIC EW.

VCCS - The Voice Communication Switching System (VCCS) which is based on IP architecture signaling within own network when interfaced with Legacy Networks and other interfaces available.

Electronic Voting Machine with Voter Verifiable Paper Audit Trail - Electronic Voting Machine is designed as per new specification of Election Commission with additional features like digital certification, tamper evidence on opening of cover and improved diagnostic features. Voter Verifiable Paper Audit Trail is an attachment to the existing Electronic Voting Machine. It is capable of providing a printed paper after each vote is casted by the voter to confirm that printed record matches the electronic ballot.

Scientists from Central Research Laboratories and other R&D divisions of BEL have contributed 86 Technical Papers in the national and international journals during the year. The Company filed 9 new applications for Patents during the year 2013-14, for Patents and related Intellectual Property Rights.

Quality

Your Company''s Vision of becoming a ''World-class company in Professional Electronics'' is being achieved by giving thrust on three attributes - Quality, Technology and Innovation. Corporate Quality Division takes initiatives which encompass control and monitoring of all critical operational and business performance parameters like On Time Delivery, Process Cycle Time, Manufacturing Yield, Statistical Process Control, Complaint Resolution, Reliability - resulting in enhancement of product quality and in exceeding customer needs and expectations. These factors are monitored through well established ''SAP'' enterprise resource planning system across all Strategic Business Units, regional, marketing and purchase offices of the company in India and abroad. The dedicated CRM (Customer Relation Module) and SRM (Supplier Relation Module) in SAP are able to enhance customer services and improvement in procurement efficiency of the company respectively.

The company is committed to establish internationally recognised systems through process approach. All Units / Strategic Business Units / Common Services Groups are accredited to ISO 9001 to its latest versions of Quality Management System (QMS) since early nineties. Seven Units / SBUs - Ghaziabad, Panchkula, Kotdwara, Hyderabad, Military Communication, Electronic Warfare & Avionics, Export Manufacturing, have upgraded their QMS to Aerospace standard AS 9100. Calibration and maintenance departments of Bangalore Complex, Ghaziabad and Panchkula units are accredited by NABL to ISO 17025 standards. The Pune unit manufacturing X-ray tubes is certified for ISO 13485 standard for medical devices. The Central Software Development Group at Bangalore is certified to CMMi level 5.

All Units of the Company are committed to Environment Management System through ISO 14001 accreditation. The Ghaziabad Unit and Engineering Services of Bangalore Unit are accredited to OHSAS (Occupational Health Safety and Assessment Series) 18001.

The EFQM (European Foundation of Quality Management) model for Business Excellence is being followed since year 2002 in BEL as another process approach for overall strategic and operational excellence leading to enhancement in competitiveness, in meeting and exceeding needs & expectations of stakeholders (Government, shareholders, customers, employees, partners and society). During the year 2013-14, four Units - Ghaziabad, Hyderabad, Machilipatnam and Navi-Mumbai participated for this award and were conferred for ''Commendation for Strong Commitment to Excel''. At present all Units / SBU are at this level except Bangalore Unit, which is at next higher level of Award i.e. ''Commendation for Significant Achievement''.

The continual improvements in product and processes are brought out through various approaches. Middle and senior level executives select Six Sigma projects from different areas of concern related to product and processes and bring about breakthrough improvements. In order to effectively implement six-sigma methodology and to bring culture of improvement through analytical approach, 10 Black Belts were trained and certified by ISI, Bangalore during the year. A total of 621 six sigma projects have been completed so far, of which 200 projects were completed during the year 2013-14. 17 six sigma projects were nominated for national level competitions. One of the case studies represented the organization at the international competition, ICQCC 2013, held at Taipei, Taiwan. All Six sigma case studies were adjudged either in Excellence or in Par Excellence in their respective categories.

The organization creates impetus towards involvement of non-executives in the quality movement through Quality Circles. In the year 2013-14, 545 presentations for improvement in product and processes were made by various Quality Circles. Twenty Five QC circles were nominated to participate in national competition / conventions and all were adjudged for higher category awards. One circle represented the organization in international convention, ICQCC 2013, held at Taipei, Taiwan and bagged excellence award in its category.

BEL has nominated its D&E engineers for Certified Reliability Engineer (CRE) program conducted by American Society for Quality (ASQ). The CRE certification is a training program followed by stringent exam to ensure proper grasping of the subject. 64 D&E engineers were professionally certified for CRE in year 2013-14.

The year 2013-14 was declared as "Year of Quality" by Ministry of Defence. A twelve point comprehensive program on Quality with defined target was initiated during the year. Under this program, 73% of lower and middle level engineers were exposed on Fundamentals of Quality. The Heads of Quality and the operating level Quality engineers in respective SBUs / Units were certified for Certified Manager on Quality / Organisational Excellence (CMQ/OE) and Certified Quality Engineers (CQE) programs by the American Society for Quality (ASQ). A total of 18 CMQ/OE and 36 CQE have been certified. Awareness program on Reliability and Maintainability by developing in-house faculty was also conducted. 1156 D&E engineers were covered under this program. Revision of existing BEL Quality Manual to latest quality standard including Business Excellence and also covering topics like Evaluation of Vendors, Corporate Quality Audit of all Units / SBUs, determination of Quality Index were also taken up during Year of Quality.

During the year 2013-14, BEL engineers have won 36 Quality Awards in external competitions, including National and International conventions.

A Customer Satisfaction Survey was organised by BEL through external agency, Indian Market Research Bureau (IMRB), to capture the customers'' perception on quality of BEL product. Fourteen products from various Units / SBUs were offered for survey. The average Customer Satisfaction Index was found as 81%.

ERP Implementation

Your Company has implemented SAP as a centralized system for all BEL-units and offices in 22 locations. Initially, the core ERP system was implemented first in Bengaluru Complex in 2005. Later on it was rolled out to all other units and offices by 2008. Subsequently, new dimension modules. (eProcurement using Supplier Relationship Management, Customer Relationship Management, Business Intelligence, Business Objects, Knowledge Management using Cfolders and Enterprise Portal) were implemented.

In 2013-14 BEL has upgraded its ERP hardware with Enterprise Class servers which use blade server technology and virtualization for high availability, SAN storage with solid state drives and mission critical support. This was followed by SAP technical upgrade to the latest versions of SAP and Oracle RDBMS. The latest version of SAP has support for the Official language Hindi. The hardware infrastructure at the Disaster Recovery site in Chennai has also been replaced.

SAP Functional upgrade which is directed towards business benefits, with focus on implementing the most valuable functions of the latest SAP software, is planned during FY 14 - 15. WAN up gradation for the entire network is planned during 2014-15. File Life cycle Management (FLM) from SAP, which enables all processes related to files in a digitized manner, is also planned for 2014 -15. FLM encompasses processes such as file creation, movement tracking, noting, review and approval as well as Daak management. It further leverages technology for ensuring better transparency in business processes and administration.

Human Resources

Your Company employed 9,952 persons as on 31 March 2014 as against 10,305 persons as on 31 March 2013. Of these employees, 3,991 were engineers / scientists and 2,080 were women employees on 31 March 2014. A total of 243 engineers, scientists and other professionals were inducted during the year. 57 employees belonging to SC, 39 employees belonging to ST, 83 employees belonging to OBC and

9 employees belonging to the minority community were recruited during the year.

The Company has been implementing the Government Directives on Reservation. The particulars of SC / ST and other categories of employees as on 31 March 2014 are as under :

Executives Non - Executives

Category of Employees Group ''A'' Group ''B'' Group ''C'' Group ''D''

Scheduled Caste 889 28 833 65

Scheduled Tribe 290 2 142 24

OBC 956 42 832 45

Ex - Servicemen 98 4 299 63

Physically Challenged 88 6 141 14

Various training programs were conducted during the year to enhance competencies in Technical, Functional and Managerial / Leadership areas. Structured Executive Development Programs were conducted regularly with premier Institutes to meet the evolving training needs of executives as they progress through various grades.

Employee relation continued to be smooth and harmonious across the Company. Regular interactions took place among the management, executives and the workmen through the apex forums, viz. the Joint Standing Committee consisting of Negotiating Trade Unions and Apex Joint Council consisting of Officers Associations and TC Cadre Associations and also separately with respective Trade Unions and Officers Associations.

Various welfare programmes were organized for the benefit of employees and their families, which included programmes addressing specific needs of sections of employees, such as, SC / ST employees, differently abled employees and women employees. Various cultural programmes were organized by the Fine Arts Clubs in the Units for recreation of employees and their families. Various summer camps / sports programmes were organized for the employees'' children.

A detailed write up on Company''s HR philosophy and specific HR initiatives during the year is provided separately in the Management Discussion and Analysis Report attached.

Accolades

Important accolades received during the year by your Company and its employees include :

- BEL received prestigious Raksha Mantri Awards for "Excellence 2011-12" in the category of Best Performance in Exports, Indigenization, Innovation and Design Efforts.

- BEL has won the SCOPE Meritorious Award for the year 2012-13 for Best Practices in Human Resource Management.

- BEL secured Society of Defence Technologists (SODET) Awards for outstanding contributions by way of technology development and innovation in the area of defence applications for the year 2011-12 & 2012-13.

- Four Units of BEL — Ghaziabad, Hyderabad, Machilipatnam and Navi Mumbai — have won the ''Strong Commitment to Excel'' recognition this year in the CII-EXIM Bank Award for Business Excellence (2013).

- BEL bagged 12 Gold Medals for Six Sigma Projects in the Competition conducted by Quality Circle Forum of India (QCFI)

- BEL has been conferred "Karnataka State Export Excellence" Award in the product category Electronics and Communication - Medium and Large Enterprise, for the years 2011-12 and 2012-13.

Environment Management

Your Company has long been integrating environmental sustainability in its operations systematically, for which it has earned a name. Set in clean and green surroundings, all the units of BEL maintain an environment-friendly work process and strongly believe that environmental sustainability is economically viable. Setting up objectives as per the sustainable development guidelines issued by DPE, BEL further enhances its performance-levels towards building a clean future. Even as well-established process controls keep pollution in check for all manufacturing operations, the Company strives continually to look for impacts beyond the boundary and reduce them by conservation of resources, mainly in the use of energy, water and hazardous materials in an organised way. This goes a long way in creating a sustainable future.

Our pristine environment is home to many species of birds that are at the top end of the eco-chain fostering bio-diversity in flora and fauna supporting the insects and other life forms. This picture of harmony has been built on the foundation of strong environmental management practices that are deep rooted and based on International Standards such as ISO14001(2004), pollution prevention measures, energy and water conservation, use of eco-friendly materials and processes, reduction, reuse and recycling of waste, reduction of hazardous waste and sustenance of zero discharge. The company has now measured its carbon footprint and is planning to move towards a Carbon Neutral status by use of green renewable energy for its operations. Several capacity building programmes have been conducted to increase environmental awareness among the workforce and promote a pollution-free environment.

The Sustainability Report annexed to this Report contains further details on environment management and sustainable development initiatives.

Subsidiary / Joint Ventures

Your Company''s subsidiary at Pune, BEL Optronic Devices Ltd (BELOP) performed well during the year. BELOP manufactures Image Intensifier Tubes (I.I. Tubes). These Tubes are supplied to the Defence customers and also used in the Night Vision Devices manufactured by BEL. BELOP achieved a turnover of Rs. 17,147.34 lakhs as against Rs. 14,700.87 lakhs in the previous year. The Profit After Tax for the year was Rs. 496.19 lakhs as against Rs. 575.83 lakhs in the previous year.

The Company has availed the general exemption under Section 212(8) of the Companies Act 1956 granted vide Ministry of Corporate Affairs Circular No. 5 / 12 / 2007-CL-III dtd. 8 February 2011. Hence, Annual Accounts of BELOP are not attached to the Balance Sheet of BEL. BELOP Annual Accounts and the related information will be made available upon request by any member of BEL or BELOP. The Annual Accounts of BELOP are kept for inspection by investors at the registered office of BEL and BELOP. Any investor interested to inspect the same may please contact the Company Secretary of BEL or BELOP. A statement as per Section 212 of the Act, together with the information required to be disclosed as per the directions contained in the MCA Circular No. 5 / 12 / 2007-CL-III dtd. 8 February 2011, is annexed to this report.

The Joint Venture Company (JVC) with General Electric, USA, viz., GE BE Pvt Ltd., continues to perform well. This JVC manufactures CT Max and other latest version X-Ray Tubes. BEL supplies some parts required for the products manufactured by this JVC. GE BE Pvt Ltd recorded a turnover of Rs. 60,685.00 lakhs as against Rs. 51,996.00 lakhs in the previous year. The Profit After Tax was Rs. 6,268 lakhs as against Rs. 7,117.00 lakhs in the previous year. The JVC declared 100 % dividend for the year 2013-14 and BEL received Rs. 260 lakhs as dividend from this JVC on BEL''s share of investment.

The other JVC, viz., BEL Multitone Pvt Ltd., jointly promoted by BEL and Multitone Electronics plc, UK was set up to supply, install and service Private Paging Systems and Pagers. As this JVC was not performing well, it was decided to wind up this company. The JVC Board and the shareholders passed the voluntary winding up resolutions and appointed a Liquidator. Liquidation process is on.

Consolidated Financial Statements

Consolidated Financial Statements of your Company and its Subsidiary and Joint Venture Companies are attached to this Report.

Vigilance

Your Company''s Vigilance Organization is headed by an Independent Chief Vigilance Officer (CVO). Each Unit of the Company has a Vigilance set up headed by a Senior Vigilance Executive, reporting to the CVO. Preventive Vigilance has been the thrust area of the Vigilance Organisation and the same received focussed attention during the year. The Vigilance Organisation peruses procurement / sub-contract processes and contracts, conducts surprise inspections and investigates instances of any suspicious transactions referred to it. Any employee or third parties can refer any suspected transaction to the notice of CVO for investigation.

Important activities of the Vigilance Department during the year included : 1653 Purchase Orders / Contracts and 625 high value Orders / Contracts reviewed / scrutinised and found to be in order. 2 teams for Inspection of Works Contracts and 2 teams for Inspection of Purchase Orders have been constituted. 9 Works Contracts and 16 high value POs were inspected by in- house inspection teams. 3207 Regular / Surprise inspections were conducted. 9 Vigilance cases were handled during the year. There is no CBI case. 213 Executives have been trained in the Principles of Natural Justice & Domestic Enquiry Training Programme (for Dy. Mgrs. & above). 373 Executives and 121 Non-executives have taken part in Vigilance Awareness Training Programme. 92 Executives & 72 Non Executives working in sensitive areas for 3 years and above have been moved to different posts. 82% of Job Rotation completed for the Year 2013 - 14.

In terms of CVC''s guidelines for Leveraging Technology to ensure transparency through effective use of website, the following information has been made available on BEL website :

- Application forms for online registration of Subcontractors / Vendors.

- Applications for recruitment.

- Details of awarded Contracts / Purchase Orders valuing more than Rs. 10 lakhs in respect of works contracts, service contracts, capital items and non-production items.

- Details of awarded Contracts / Purchase Orders issued on nomination / single tender basis value exceeding Rs. 5 lakhs.

- Details of awarded Purchase Orders / Sub Contract Orders for production items with a threshold value of Rs. 100 lakhs and above.

- Vendor Payments Information System.

- CVC circulars and guidelines.

E - Procurement

E-procurement at BEL has been implemented on SAP SRM 7.0 platform having Public Sector procurement features. It has been implemented at all 9 Units of BEL for both Purchase and Sub-contract. The system is integrated with ERP system with the latest security such as Web Access Firewall, Reverse proxy and encryption of data from the client side upto the Server in place. Second level authentication through Digital Signature for both publishing the bid and submission of response from the Vendor has been enabled. Six types of procurement have been configured in the system. As per CVC circular No. 010 / VGL / 035 dt. 12.01.2012, action has been taken for certification of e-procurement system.

Integrity Pact

One of the recent initiatives of the Central Vigilance Commission (CVC) to eradicate corruption in procurement activity is introduction of the Integrity Pact in large value contracts in Government Organizations. In line with the directives from Ministry of Defence and the Central Vigilance Commission, your Company has adopted Integrity Pact with all vendors / suppliers / contractors / service providers for all Orders / Contracts of value Rs. 2,000 lakhs and above, initially. This threshold value was reduced to Rs. 1,000 lakhs from March 2013 and further reduced to Rs. 500 lakhs from May, 2014. The Pact essentially envisages an agreement between the prospective vendors / bidders and the Principal (BEL), 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 the contract. Any violation of the same would entail disqualification of the bidders and exclusion from future business dealings.

As recommended by the CVC, the Company has appointed Mr N K Sinha, IAS (Retd), former Secretary, Planning Commission and former Chairman, PESB as the Independent External Monitor (IEM) for monitoring implementation of Integrity Pact in the Company. The IEM would review independently and objectively, whether and to what extent parties have complied with their obligations under the Pact. IEM will take stock of the ongoing tendering processes on quarterly basis. The IEM conducts this review once in every quarter. In case of a complaint arising out of tendering process, the matter shall be examined by the IEM, who would look into the records, conduct an investigation, and submit recommendations to the management. During his visits to the Corporate Office every quarter, the IEM holds structured meetings with the Chairman & Managing Director. So far, 78 Orders / Contracts are covered under Integrity Pact.

Procurement from MSMEs

Your Company has been providing thrust on enhancing procurement from MSMEs and has implemented the Public Procurement Policy for Micro, Small & Medium Enterprises (MSMEs) as per the guidelines/notification issued by the Ministry of MSMEs. In order to facilitate MSMEs, the company is classifying the existing vendors in Small Scale Industries (SSI) segment into Micro, Small & Medium Enterprises in the company''s procurement system through web-based real-time centralized ERP System (SAP). Vendor registration forms are available in the company''s official website (bel-india.com). Industry Promotion Officer is nominated to assist vendors regarding Procedure for Registration, understanding the requirements of BEL, report grievances, if any, etc. Some of the other initiatives include uploading of company''s procurement plan for MSMEs based on the production plan, with periodic update and details of Unit/SBU specific Industry Promotion Officers in the company''s official website, participation in various vendor development programmes like exhibitions, workshops, establishment of industrial estate to give maximum encouragement to ancillaries etc.

With enhanced focus & emphasis on MSMEs the company is confident of achieving the objectives of the Public Procurement Policy in the coming years. Company has been increasing its procurement from MSMEs year on year.

Implementation of Official Language Policy

Your company is committed to adhere to the OL policies of the Government of India. During 2013-14, efforts made towards implementation of Official Language include :

OL Vision and Mission of the company have been adopted. OL Portal was brought out to facilitate OL implementation across the company and to provide latest inputs pertaining to OL. Incentive Schemes for working in Hindi has been extended to the children of employees. These attractive and innovative schemes have been named after famous authors of Hindi Literature. The Premchand, Jayashankar Prasad Yojana for working in Hindi, the Kabir Puraskar for Divisional Heads as motivators and Tulsidas Puraskar for doing entire work in Hindi. Apart from this, there are social awards and awards for children of employees. Hindi language has been enabled in SAP. Company''s website is available in Hindi and English and efforts are on to progressively to have the entire website in bilingual. Work on OL training roster is under progress on SAP. Employees of various Units / Offices and Corporate Office bagged prizes in the Inter Organization TOLIC Competitions. Corporate panel for English to Hindi translation has been extended. Hindi Month was observed in all the Units and Offices of the Company. During Hindi month, employees and officers participated enthusiastically in various programs / competitions. Hindi workshops for those having working knowledge in Hindi were conducted during the year. Training on Unicode is being imparted for all Executives and Employees. 12 Units / Offices have been notified under rule 10(4) of OL rules indicating that 80% or more staff have working knowledge in Hindi in these Units / Offices and orders have been issued under rule 8(4) of OL Rules for those having proficiency in Hindi to do their Official work in Hindi. Efforts are on to ensure the progressive use of Hindi in all spheres of activities of the Company.

Implementation of RTI Act

The information required to be provided to citizens under Section 4(1) (b) of the RTI Act 2005 has been posted on the website of your Company, viz. www.bel-india.com. It contains general information about the Company, the powers and duties of employees, information about decision making process, rules, regulations, manuals and records held by BEL, a directory of the Company''s officers, pay scales, procedure for requesting additional information about the Company by citizens and associated request formats. During the year 2013-14 the Company received and attended to 295 requests for information under RTI Act. Most of the requests were for information related to Human Resources, particularly recruitment and service related matters.

Directorate

Following changes took place in the Directorate of your Company since the last report. Mr P C Jain was appointed as Director (Marketing) with effect from 01 September 2013 in place of Mr H N Ramakrishna, who retired on attaining the age of superannuation on 31 August 2013. Mr P R Acharya assumed charge as Director (Finance) on 2 September 2013. Government appointed Lt Gen Narendra Singh, AVSM, SM, VSM, ADC, Deputy Chief of Army Staff (P&S) as one of the Government Directors w.e.f. 01 October 2013, in place of Lt Gen S P Kochar. Government appointed Lt Gen C A Krishnan, UYSM, AVSM, Deputy Chief of Army Staff (P&S) as one of the Government Directors w.e.f. 01 May 2014 in place of Lt Gen Narendra Singh, who retired on 30 April 2014. Three part-time Independent Directors, viz. Mr N Sitaram, Prof Anurag Kumar and Prof (Dr) R Venkata Rao exited BEL Board on completion of their three year tenure of appointment on 20 December 2013. Mr Sunil Kumar Sharma assumed charge as Chairman & Managing Director on 01 January 2014 in place of Mr Anil Kumar, who retired on attaining the age of superannuation on 31 December 2013. Mr Manmohan Handa has assumed charge as Director (Bangalore Complex) on 24 June 2014. Government nominated Vice Admiral K R Nair AVSM, VSM, Chief of Material, Indian Navy as Permanent Special Invitee to all the Board Meetings, w.e.f. 01 April 2014 in place of Vice Admiral N N Kumar. Government on 12 June 2014 nominated Mr S S Sundaram, Director General Electronics & Communication Systems, DRDO as special invitee to all the Board Meetings. Government on 25 July 2014 nominated Air Marshal R K Sharma, PVSM, AVSM, VM, ADC, Vice Chief of the Air Staff as special invitee to all the Board Meetings.

Directors'' Responsibility Statement

Pursuant to the provisions under Section 217(2AA) of the Companies Act, 1956 your Directors state :

(i) that in the preparation of the annual accounts, the applicable Accounting Standards have been followed and in respect of Accounting Standard 17, necessary explanation for departure has been given in Note No. 30(13) of the Notes to Accounts;

(ii) that the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and a fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the year;

(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 on a going concern basis.

Auditors

Pursuant to Section 619(2) of the Companies Act 1956, the Comptroller and Auditor General of India appointed M/s Badari Madhusudhan & Srinivasan, Chartered Accountants, Bangalore, as Statutory Auditors for the year 2013-14 for audit of accounts of Bangalore, Hyderabad and Chennai Units and Corporate Office. M/s. Mittal Gupta & Co., Chartered Accountants, Lucknow, were re-appointed as Branch Auditors of Ghaziabad, Panchkula and Kotdwara Units for 2013-14. M/s M B Bafna & Co., Chartered Accountants, Pune were re-appointed as Branch Auditors for Pune and Navi Mumbai Units for 2013-14. M/s Rao & Narayan, Chartered Accountants, Vijayawada were re-appointed as Branch Auditors for Machilipatnam Unit for 2013-14.

The Central Government vide order No GSR No 430 (E) dated 3 June 2011 notified The Companies (Cost Audit) Rules 2011. These Rules are applicable to BEL from financial year 2012-13. As per these Rules, the Cost Audit report duly signed by the Cost Auditor (s) has to be submitted to the Central Government within 180 days from the end of the Financial Year. Accordingly the Cost Audit report for the year 2013-14 will be submitted on or before 27 September 2014. Pursuant to Section 233B(2) of the Act, BEL Board of Directors appointed M/s PSV & Associates, Bangalore, as Cost Auditors of the Company for the financial year 2013-14 after due approval of the Central Government.

Auditors'' Report

Auditors'' Report on the Annual Accounts for the financial year 2013-14 and ''Nil'' Comments of the Comptroller & Auditor General of India under Section 619(4) of the Companies Act, 1956 on the Annual Accounts are appended to this report.

Management Discussion and Analysis Report

Management Discussion and Analysis Report required under the Listing Agreements with the Stock Exchanges on which BEL''s shares are listed as also under the Government (DPE) Guidelines on Corporate Governance for Central Public Sector Enterprises (CPSEs), is attached to this Report as

Annexure 1.

Corporate Governance Report

DPE guidelines on Corporate Governance for CPSEs provide that CPSEs would be graded on the basis of their compliance with the guidelines. DPE has graded BEL as "Excellent" for 2012-13. A report on Corporate Governance along with a Compliance Certificate from the Auditors as prescribed under the Listing Agreements with the Stock Exchanges as well as the DPE Guidelines, is attached to this Report as

Annexure 2.

Sustainability Report

The DPE guidelines on Sustainable Development for CPSEs mandates CPSEs to disclose their Sustainable Development efforts in a ''Stand Alone Report'' or as a separate chapter in the Annual Report. Pursuant to this requirement, a Report on your Company''s efforts on "Sustainable Development" is attached to this Report as Annexure 3.

Business Responsibility Report

The Securities and Exchange Board of India (SEBI) has mandated inclusion of Business Responsibility Reports ("BR reports") as part of the Annual Reports for listed entities. This SEBI mandate is also inserted as Clause 55 in the Stock Exchange Listing Agreement. The SEBI guidelines / Cl 55 of Listing Agreement provide a format for BR reports. It also contains a list of nine Key Principles and various core elements under each principle to assess compliance with Environmental, Social and Governance norms. Listed companies are required to prepare policies based on these nine Key principles and core elements, put in place a framework to integrate and embed the policies into business activities and a mechanism to measure and report the achievements as BR reports.

Your Company has prepared a comprehensive policy framework for BR report, after studying the SEBI guidelines and keeping in view the business and governance environment in which BEL as a Defence PSU operates. Highlights of this policy are posted on the Company''s website www.bel-india.com. The Company''s BR report for the year is attached to this Report as Annexure 4.

Other Disclosures

Information required to be disclosed in accordance with Section 217 (1)(e) of the Companies Act 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules 1988 regarding conservation of energy, technology absorption and foreign exchange earnings and outgo, is given at Annexure 5.

Statement pursuant to Section 212 of the Companies Act, 1956, relating to the Subsidiary Company is given at

Annexure 6.

As per Notification No. GSR 289(E) dated 31 March 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 lakhs or more per annum, if employed throughout the financial year or Rs. 5 lakhs or more per month, if employed for part of the financial year. As your Company is a Government company, the information has not been included as part of the Directors'' Report.

Acknowledgement

Your Directors place on record their deep appreciation and gratitude for the valuable support received from all the customers, particularly the Defence Services and the para- military forces and look forward to their continued support and co-operation in future. Your Directors also place on record their gratitude for the support received from various Ministries of the Government of India, especially the Ministry of Defence, Department of Defence Production. Your Directors express their gratitude to the Defence Research and Development Organisation and the various Research Laboratories under DRDO for the support it received, particularly in the joint development programmes and new products brought out with the help of them. Your Directors express their sincere thanks to the Comptroller and Auditor General of India, Chairman, Members and employees of the Audit Board, Statutory Auditors, Branch Auditors, Cost Auditors, Company''s Bankers, collaborators and vendors. Your Directors appreciate the sincere efforts put in by the employees at all levels, which enabled the Company to achieve the good performance during the year. Your Directors express their appreciation and gratitude to all the shareholders/investors for the trust and confidence reposed in the Company and look forward to their continued support and participation in sustaining the growth of the Company in the coming years.

For and on behalf of the Board

Bangalore Sunil Kumar Sharma

05 August 2014 Chairman & Managing Director


Mar 31, 2013

To the Members,

The behalf of the Board of Directors, I have great pleasure in presenting to you the 59th Annual Report of Bharat Electronics Limited and the Audited Accounts for the financial year ended 31 March 2013 together with the reports of the Statutory Auditors and the Comptroller and Auditor General of India thereon.

Performance Highlights

A summary of the Company''s financial results is given below :

(Rs. in lakhs)

2012-13 2011-12

Valueof Production 629,018.73 579,358.25

Turnover (Gross) 601,218.61 570,363.36

Profit Before Depreciation, 125,245.87 120,010.31 Finance Cost and Tax

Finance Cost 78.17 60.01

Depreciation 13,071.04 12,079.89

Provision for Tax 22,475.93 24,495.03

Profit After Tax 88,983.28 82,989.78

Add : Balance brought forward from 240,900.14 217,306.59 previous year

Balance available for Appropriation 329,883.42 300,296.37

Interim Dividend paid 4,800.00 8,000.00

Proposed Final Dividend 13,040.00 8,640.00

Tax on Dividend 2,994.83 2,699.42

Transfer to General Reserve 40,000.00 40,000.00

Transfer to Capital Reserve 3,270.27 56.81

Reserves "&" Surplus 622,369.46 554,221.01

Net Worth 630,369.46 562,221.01

Earnings Per Share (in Rs.) 111.23 103.74

Book Value" Per"share"(in"Rs.) 787.96 702.78

Distribution of Value of Production for 2012 - 13 is given below :

Amount (Rs. in lakhs) Percentage

Materials 408,493.18 64.94%

Employee Cost 111,078.87 17.66%

Other Income (15,083.57) (2.40%) (Net of other Expenses)

Depreciation 13,071.04 2.08%

Provision for Tax 22,475.93 3.57%

Profit After Tax 88,983.28 14.15%

Total 629,018.73 100%

Company''s sales turnover for the year 2012 - 13 has increased to Rs. 601,218.61 lakhs from Rs. 570,363.36 lakhs in 2011- 12, registering a growth of 5%. Profit after Tax for the year is Rs. 88,983.28 lakhs as against Rs. 82,989.78 lakhs in the previous year. Turnover from indigenously developed products is 78%. Supplies to the defence contributed to 85% of turnover as against 73% in 2011 - 12.

Dividend

The Board has recommended a Final Dividend of 163% (Rs. 16.30 per share), Rs. 13,040.00 lakhs for the year 2012 - 13. An interim dividend of 60% (Rs. 6 per share), Rs. 4800 lakhs has already been paid for the year 2012 - 13. Thus, the total dividend (excluding corporate dividend tax) for the year 2012 - 13 is 223% (Rs. 22.30 per share), Rs. 17,840.00 lakhs as against 208% (Rs. 20.80 per share), Rs. 16,640 lakhs paid in the previous year.

Provision of Rs. 2,216.15 lakhs has been made for corporate dividend tax on the final dividend proposed. Corporate dividend tax of Rs. 778.68 lakhs has already been paid on the interim dividend paid for the year 2012 - 13.

Major Orders Executed

Major products supplied / projects executed during the year for the Army, Navy, Air Force, Coast Guard and non - defence customers include : Mobile Cellular Communication System (under execution); Mobile Ground Based Electronic Intelligence System; Passive Night Vision Devices; Drivers for AK630, Stabilizer, Automatic Loading Gear & Mounting items for T - 90 Tanks; Digital Radio Trunking System; Crypto Products; Battlefield Surveillance Radar - Medium Range; Board Lorros Mast; National Command Control Communication and Intelligence Network; Weapon System for Armed Forces; Upgradation of Satcom Air Defence Ground Environment System (under execution); Integrated Communication Network System for Naval Ships; Sub - Systems for Mirage Upgrade; Central Acquisition Radar Systems; Fire Control System; Coastal Surveillance System; National Population Register; Electronic Voting Machine and Tablet PC.

New Products

Some of the important new products introduced during the year include :

National Command Control Communication and Intelligence Network (NC3I) - NC3I is an independent network which would interlink the Coastal stations with the Joint Maritime Operation Centers and the Headquarters of the customers. The system comprises of Networks, VSAT system, Decision Support Software, Information Management & Analysis Centre.

Mobile Cellular Communication System (MCCS) - The MCCS Network provides voice and high data communication facilities using CDMA technology. The system comprises of Mobile Switching Centre, Base Trans - receiver Station and Repeaters.

Integrated Mobile System (IMS) - The IMS is a multilayer communication system for voice and data connectivity with integrated Launch Control Facility. The mobile system is self contained with built - in Power System and the system is Biological Chemical protected including EMP protection.

Passive Night Vision Devices (PNVD) with XD4 technology - The PNVD is a lightweight, durable, water - proof and compact Night Vision Device for performing surveillance, patrolling and reconnaissance operations during night. It can be attached to flip - up type face mask enabling hands free and convenient operation during driving, weapon firing, etc.

Exports

Your Company achieved export sales of US $ 32.78 million during the year as against US $ 38.45 million in the previous year. The decline in export sales during the year was mainly due to LLTR energy system planned under offset programme later becoming domestic sales and some of the products and systems planned for order acquisition and dispatch not materializing during the year. Export sales during the year included offset business to the extent of US $ 7.65 million. The Company has an export order book of US $ 94.08 million as on 01 April 201 3, including offset order book of US $ 13 million. The targeted export sales for the year 2013 - 14 is US $ 38 million.

The range of products exported during the year include Electronic Voting Machines, Coastal Surveillance Radar System, Radar Warning Receiver, RL Mount, Fitted up Shelters and bare shelters, Cable Harness, PCB Assembly, Electronic Assembly, Casing, Stators, Electromechanical parts and components.

During the year, the Company participated in 3 international exhibitions to show case its products and systems capabilities. Countries in Africa, Latin America, Southeast Asia, SAARC, Middle East and CIS continue to be the markets for export of BEL Products and systems. BEL has also identified contract manufacturing (both build to print and build to specs) as one of the new areas to address the emerging opportunities with OEMs. BEL is closely working with various major foreign Aerospace and Defence companies to secure business under the mandatory Offset Clause in the RFPs for Indian Defence Procurement. Further, efforts are being made to establish long - term supply chain relationships with global players.

MoU with Government

Your Company has been signing a Memorandum of Understanding (MoU) every year with the Government of India, Ministry of Defence. Performance of BEL for the year 201 1-12 has been rated as "Very Good" in terms of the MoU with the Government. The MoU rating for 2012-13 is under finalisation by the Government.

Order Book Position

The order book of your Company as on 01 April 201 3 is around Rs. 2,494,900 lakhs. The order book comprises mainly major programs like Weapon Systems for Air Force & Army, Battlefield Surveillance System, Command Information Decision Support System, Fire Control System, Passive Night Vision Devices and some of the new generation Radars, Sonars, Electronic Warfare Systems, etc. However, taking into account the delivery schedule, customer requirements etc., the orders available for execution during 2013 - 14 is around Rs. 545,000 lakhs.

Finance

During the financial year 2012 - 13, your Company has met all its fund requirements towards additional investments on Capital equipments and incremental working capital needs without any borrowing. This has been achieved through efficient cash management thereby ensuring that the Company continues to be debt free. The Company has been able to retain the highest rating by ICRA for both short term and long term sanctioned bank limits, which will help in continuing to secure the best rates for any of the services, availed from the consortium banks. Based on the user requirements many changes have been incorporated in the online ERP system which should help in better information flow to all concerned.

The inventory position of the Company as on 31 March 201 3 was Rs. 327,108.32 lakhs (Net), as against Rs. 279,181.81 lakhs (Net) as on 31 March 2012. The inventory as on 31 March 2013 works out to 191 days of the Value of Production (DPE) for the year 2012 - 13 as against the corresponding position at 178 days as on 31 Mach 2012. The increase in inventory is because of certain projects like BSS, CIDSS where further progress of the projects has been kept in abeyance by the customer due to technical reasons. Further, there is an element of inventory build up by way of accretion to work - in - progress and finished goods to increase the sales during the 1st half of the current financial year 2013 - 14. Efforts will be made during the current year to reduce the inventory levels without compromising the production plan for the year.

The position of Trade Receivables as on 31 March 2013 was Rs. 333,467.08 lakhs (Net) as against Rs. 268,686.29 lakhs (Net) as on 31 March 2012. This works out to 202 days of the Sales for the year 2012 - 13 with the corresponding position at 172 days as on 31 March 2012. The increase in Trade Receivables as at the end of the financial year is mainly due to the following reasons :

(a) Higher sales in the last quarter, particularly in March 201 3;

(b) Non realization of bills due to budgetary constraints of the Customers;

(c) Payment terms in the sale contracts where the release of money is linked to certain specific milestones, even after delivery of the products due to activities like Harbor Acceptance Trials / Sea Acceptance Trials, etc.

Realization of Trade Receivables continues to be monitored to ensure speedy collection and this will be pursued to achieve a reduction in Trade Receivables in number of days of sales by the end of 2013 - 14.

The Company does not have any public deposit scheme at present. However, the matured past public deposits with the Company was Rs. 36.95 lakhs as on 31 March 201 3. Of these, 34 deposits amounting to Rs. 36.50 lakhs are claimed but not paid as these accounts are frozen on advice by Karnataka Lokayukta. Remaining matured deposits of Rs. 0.45 lakhs as on 31 March 201 3 is unpaid. The entire amount of public deposits outstanding as on 31 March 2013 is included in the current liabilities, Note No. 8 of the Balance Sheet.

Research & Development

Research and Development has been the core strength of your Company and R&D received focused attention during the year. R&D activities were carried out with special attention for planning and reviewing of development of technology modules and products in all the business segments, viz. Radars,

Military Communication, Naval Systems, Missile Systems, Electronic Warfare, Avionics, C4I Systems, Electro - optics, Tank Electronics, Gun up - grades, Civilian Equipments & Systems and Components. Apart from in - house efforts, BEL R&D engineers had close co - operation with DRDO, other national research and development agencies and academic institutions.

Development & Engineering (D&E) Divisions attached to all the Units / Strategic Business Units (SBUs) concentrated on the development of products and systems in their respective areas of business segments. Central - D&E and the two Central Research Laboratories (CRLs) of the Company supported the D&E Divisions of the Units through development of core technology modules and software required for the development of products and systems.

The analysis of turnover of the Company for the year 2012 - 13 indicates that 78% of the turnover came from BEL developed products and products developed in association with DRDO & other National Labs and remaining 22% is from products for which technologies were acquired through foreign ToT.

Scientists from Central Research Laboratories and other R&D divisions of BEL have contributed 60 Technical Papers in the national and international journals during the year. BEL has filed 12 new applications for Patents and related Intellectual Property Rights during the year 2012 - 13.

Significant achievements of BEL R&D during the year 2012 - 13 include :

- Completion of Internal evaluation of Rugged Laptop used for processing, storage and computation of tactical data in various Tactical Communication Systems.

- RCI, Hyderabad accepted the first off model of Identification of Friend or Foe (IFF) for Medium Range Surface to Air Missile (MR - SAM) project.

New Product Development

During the year 2012 - 13, different R&D Divisions completed several projects leading to new products / systems / technology modules, including the following :

Identification of Friend or Foe (IFF) for Medium Range Surface - to -Air Missile (MRSAM) -The IFF is a secondary Surveillance Radar used for identification of targets fitted with compatible transponder. The IFF Mk XII comprises of interrogator decoder, transponder & crypto unit. The new version Mark XII also has the addition of secure positive friendly identification.

Gunners Main Sight Mk II -This is one of the four sub systems of the Integrated Fire Control System. The system provides day and night surveillance and night fighting capability. The system has capability to fire Laser Guided Missile.

Point to Multipoint Radio-This Radio is an intra - communication system providing communication between the Command Post and the Firing Unit (FU). The Point to Multi Point Radio or the intra FU wireless communication system enables data and voice communication between Field Vehicle - mounted shelters in terrestrial deployment. The Intra Firing Unit Communication (IFUC) systems are installed at the Command Post and Mobile Launcher Systems enabling point to point and point to multi point communication.

Mast for LORROS-The hydraulically operated Telescopic Mast is designed to support Long Range Reconnaissance and Observation System (LORROS) which can be elevated to get better range and good Line Of Sight (LOS).

All Electric Drive (AED) for AK630- It will replace the existing Electro - Hydraulic drive in Azimuth and Elevation by a Brushless Electric Drive System. AED offers a completely indigenous and state - of - the - art drives based on brushless motors with superior dynamics and reliability. It also offers an improved maintainability, low acoustic noise with easy installation and tuning.

AGCS for NISHANT UAV-Advanced Ground Control Station (AGCS) for NISHANT UAV facilitates operation of UAV from Ground Station. The functional requirements of AGCS include Communication, Mission Planning, Air Vehicle Control, Payload Management, Payload Video Processing and Recording, Flight Data Recording, Post Flight Analysis and Replay.

Quality

All the manufacturing Units / SBUs / Divisions of your Company are certified for ISO 9001 Quality Management System and ISO 14001 Environment Management System. Seven Units / SBUs (Ghaziabad, Panchkula, Kotdwara, Hyderabad, Military Communication, Electronics Warfare & Avionics and Export Manufacturing) are certified for AS 9100 Aerospace Standards. The Central Software Development group of the Company is certified to CMMi Level 5.

BEL adopted the Total Quality Management (TQM) philosophy in the year 1990 under the acronym "TORQUE" which stands for Total Organizational Quality Enhancement. TORQUE is based on the premise that the quality of products and services is not only the responsibility of the production / shop floor personnel, but other support services also who have a role to play in meeting and exceeding customers'' expectations through supply of quality products and services. Some of the critical operational performance indicators like first time pass, on time delivery, process cycle time, manufacturing yield, customer complaints, quality cost, mean time between failure, etc are monitored on monthly basis through SAP and corrective actions are initiated for continual improvement.

The Company adopted EFQM Excellence Model since 2002 to improve its overall strategic and operational excellence. Adoption of this Model has helped the Company in understanding the expectations of various stakeholders and in enhancing their satisfaction level. All the Units of the Company, except one, have achieved ''Commendation for Strong Commitment to Excel'' under the CII - EXIM Bank Business Excellence Award scheme. Bangalore Unit has reached the next higher level in the Award i.e. ''Commendation for Significant Achievement''. The Company has also built a large pool of trained Business Excellence Assessors to drive excellence in the organization.

During the year 2012 - 13, five Units applied for the ''CII - EXIM Bank Award for Business Excellence''. Bangalore Unit achieved Level - II recognition i.e. ''Commendation Certificate for Significant Achievement''. Remaining four i.e. Ghaziabad, Panchkula, Hyderabad and Machilipatnam Units received ''Commendation Certificate for Strong Commitment to Excel'' under this Award scheme. This is the second time in succession that Bangalore Unit has received the ''Commendation Certificate for Significant Achievement''.

The Company adopted the ''Six Sigma'' methodology about a decade back for achieving breakthrough improvements. During the year 2012 - 13, 160 Six Sigma projects were completed, resulting in cost reduction, process improvement and customer satisfaction. BEL has also won laurels by winning 30 awards in all India Six Sigma competitions conducted by CII, Indian Statistical Institute, QCFI & Symbiosis Institute of Management. Quality Institute of Bharat Electronics has been imparting training on ''Six Sigma'' since July 1999 and has trained 2322 officers so far. At present there are 38 certified Six Sigma black belts in the Company.

Reliability & Maintainability are essential features of a well designed product. Application of the principles of R&M at design stage can ensure robustness of the product during its entire life cycle. Keeping this in mind the Company embarked on getting its key design engineers certified as reliability engineers from reputed institutions. 62 BEL engineers have received the ''Certified Reliability Engineer'' certification after undergoing the examinations conducted by these institutions.

During the year, a total of 1051 QCC projects were completed. In order to provide encouragement to the QCC movement, the team members of the best QCC project of last year were sponsored to the International Convention on Quality Circles held in Kuala Lumpur in Oct 2012. The team won the 3 Star (highest category) award at the International Convention.

As a part of its efforts to enhance customer satisfaction level, the Company has been conducting customer satisfaction survey through an independent external agency. During the year customer satisfaction survey was conducted for 8 products, covering full spectrum of our customers. The overall customer satisfaction level was found to be 75%.

ERP Implementation

Your Company has implemented SAP Business Suite across all Units and Offices. Implementation of core SAP R / 3 including Payroll, Product Lifecycle Management module was completed in a phased manner by July 2008. New dimension modules like Supplier Relationship Management with e - Procurement, Customer Relationship Management, Knowledge Management System have also been implemented. SAP system has been further improved by incorporating checks and validations in the processes in line with the Company''s business requirement.

During the year 2012 - 13, the Company has rolled out the following modules : Employee Self Service with e Performance Management System, Travel Management and Provident Fund Module. In addition, C - Project for Project Management has also been taken up for implementation. This will be rolled out in 2013 - 14.

As part of its plans to upgrade its IT hardware and software to tap the potential of latest advancements in these technologies, the Company has undertaken an initiative to do a partial refresh of its IT infrastructure and upgrade SAP from version 5.0 to 6.0, which will be completed in 2013 - 14.

Growth in volume of SAP transactions has necessitated the augmentation of WAN bandwidth. The Company has augmented WAN bandwidth for three of the Units which have improved the system response. In addition, redundant leased lines have also been set up with two of the Units with alternate service providers to improve the reliability and system response.

The Company has also undertaken an initiative to get ISO 27001 certification for some of its SBUs in 2012 - 13. In this direction, preparation and internal audit has been completed and audit by external agencies shall be conducted in 2013 - 14.

Human Resources

Your Company employed 10,305 persons as on 31 March 2013 as against 10,791 persons as on 31 March 2012. Of these employees, 3,869 were engineers / scientists and 2,156 were women employees on 3 1 March 2013. A total of 295 engineers, scientists and other professionals were inducted during the year. 23 candidates belonging to the minority community were recruited during the year.

The Company has been implementing the Government Directives on Reservation. The particulars of SC / ST and other categories of employees as on 31 March 2013 are as under :

Executives Non - Executives Category of Employees Group ''A'' Group ''B'' Group ''C'' Group ''D''

Scheduled Caste 849 45 947 73

Scheduled Tribe 259 4 139 23

OBC 908 48 888 45

Ex - Servicemen 100 5 320 63

Physically Handicapped 84 6 152 15

Various training programs were conducted during the year to enhance competencies in Technical, Functional and Managerial / Leadership areas. Structured Executive Development Programs were conducted regularly with premier Institutes to meet the evolving training needs of executives as they progress through various grades.

Employee relation continued to be smooth and harmonious across the Company. Regular interactions took place among the management, executives and the workmen through the apex forums, viz. the Joint Standing Committee consisting of Negotiating Trade Unions and Apex Joint Council consisting of Officers Associations and TC Cadre Associations and also separately with respective Trade Unions and Officers Associations.

Various welfare programmes were organized for the benefit of employees and their families, which included programmes addressing specific needs of sections of employees, such as, SC / ST employees, differently abled employees and women employees. Various cultural programmes were organized by the Fine Arts Clubs in the Units for recreation of employees and their families. Various summer camps / sports programmes were organized for the employees'' children.

A detailed write up on Company''s HR philosophy and specific HR initiatives during the year is provided separately in the Management Discussion and Analysis Report attached.

Accolades

Important accolades received during the year by your Company and its employees include :

- Raksha Mantri''s Awards 2010 - 1 1 - BEL won seven of the Raksha Mantri''s Awards across all categories : (a) ''Excellence in Performance'' in the ''Institutional Category'', (b) ''Best Performance in Export'', (c) ''Best Performing Division of DPSUs'' by Military Radar Strategic Business Unit (SBU) of Bangalore Unit, (d) ''Import Substitution'' for the development of Low Power Jammer Antennae System by Hyderabad Unit, (e) ''Import Substitution'' for the indigenous development of Weapon Locating Radar (Swathi) as a substitute for ANTPQ 37 Radars by Military Radar SBU of Bangalore Unit, (f) ''Design Effort'' for Combat Management System - SNF by Network Centric Systems SBU of - Ghaziabad Unit, and (g) ''Innovation'' for the capability enhancement of Tarang Display Unit to NVG compatibility by Electronic Warfare & Avionics SBU of Bangalore Unit.

- HR Leadership Award at the India Human Capital Awards Summit 2012.

- International Aerospace Awards - ''Most Influential Company of the Year'' and ''Excellence in Exports'' at the second International Aerospace Awards organized by International Aerospace magazine.

- India Pride Award - Gold prize in the Heavy Industries category of the DNA - Dainik Bhaskar India Pride Awards 2010 for ''''Excellence in PSUs''''.

- Business World International Business Award in the Electricals, Electronics & Machinery Category.

- Corporate Governance Award - Institute of Public Enterprises (IPE)''s CSR Corporate Governance Award for 2012. The award is endorsed by the World CSR Congress, CMO Asia and Asian Confederation of Business.

- Dun & Bradstreet - Rolta Corporate Award 2011 on being the top Indian Company in the Electrical & Electronic Equipment sector.

- ELCINA - EFY Awards for ''Excellence in Electronics Hardware Manufacturing & Services (2011- 12)'' in two categories : ''Research & Development'' and ''Environment Management''.

Environment Management

Your Company has long been integrating environmental sustainability systematically in its operations through which it has gained a reputation of its own. Set in clean and green surroundings, all the manufacturing Units of BEL effectively maintain environmental friendly work processes. The Company strongly believes that environmental sustainability brings in economic viability as well. By setting up objectives as per the sustainable development guidelines issued by the Government of India, Department of Public Enterprises, BEL further enhances its performance level towards building a clean future. Even as well - established process controls keep pollution in check for all manufacturing operations, the Company continues to put in sustained efforts to look for impacts beyond the boundary and reduce them by conservation of resources, mainly in use of energy, water and hazardous materials in an organized way that goes a long way in creating a sustainable future. BEL''s commitment to clean environment is reflected in the awards and accolades it received during the year including the prestigious CII award for best practices in water management and first prize for Excellence in Environment Management by ELCINA - EFY 201 1 - 12.

The Sustainability Report annexed to this Report contains further details on environment management and sustainable development initiatives.

Subsidiary / Joint Ventures

Your Company''s subsidiary at Pune, BEL Optronic Devices Ltd (BELOP) performed well during the year. BELOP manufactures Image Intensifier Tubes (I.I. Tubes). These Tubes are supplied to the Defence customers and also used in the Night Vision Devices manufactured by BEL. BELOP achieved a turnover of Rs. 14,700.87 lakhs as against Rs. 6,273.92 lakhs in the previous year. The Profit After Tax for the year was Rs. 575.83 lakhs as against Rs. 81 5.69 lakhs in the previous year.

The Company has availed the general exemption under Section 212(8) of the Companies Act 1956 granted vide Ministry of Corporate Affairs Circular No. 5 / 12 / 2007 - CL - III dtd. 8 February 2011. Hence, Annual Accounts of BELOP are not attached to the Balance Sheet of BEL. BELOP Annual Accounts and the related information will be made available upon request by any member of BEL or BELOP. The Annual Accounts of BELOP are kept for inspection by investors at the registered office of BEL and BELOP. Any investor interested to inspect the same may please contact the Company Secretary of BEL or BELOP. A statement as per Section 212 of the Act, together with the information required to be disclosed as per the directions contained in the MCA Circular No. 5 / 12 / 2007 - CL - III dtd. 8 February 2011, is annexed to this report.

The Joint Venture Company (JVC) with General Electric, USA, viz., GE BE Pvt Ltd., continues to perform well. This JVC manufactures CT Max and other latest version X - Ray Tubes. BEL supplies some parts required for the products manufactured by this JVC. GE BE Pvt Ltd recorded a turnover of Rs. 51,996.00 lakhs as against Rs. 42,931.00 lakhs in the previous year. The Profit After Tax was Rs. 7,117.00 lakhs as against Rs. 5,034.00 lakhs in the previous year. The JVC declared 100% dividend for the year 2012 - 13 and BEL received Rs. 260 lakhs as dividend from this JVC on BEL''s share of investment.

The other JVC, viz., BEL Multitone Pvt Ltd., jointly promoted by BEL and Multitone Electronics plc, UK was set up to supply, install and service Private Paging Systems and Pagers. The JVC is presently in shell stage and it had no business transaction during the year. It has been decided to close down this Company as there are no business prospects for paging systems in the country.

Consolidated Financial Statements

Consolidated Financial Statements of your Company and its Subsidiary and Joint Venture Companies are attached to this Report.

Vigilance

Your Company''s Vigilance Organization is headed by an Independent Chief Vigilance Officer (CVO). Each Unit of the Company has a Vigilance set up headed by a Senior Vigilance Executive, reporting to the CVO. Preventive Vigilance has been the thrust area of the Vigilance Organization and the same received focussed attention during the year. The Vigilance Organization peruses procurement / sub - contract processes and contracts, conducts surprise inspections and investigates instances of any suspicious transactions referred to it. Any employee or third parties can refer any suspected transaction to the notice of CVO for investigation.

Important activities of the Vigilance Department during the year included : 1 139 Purchase Orders / Contracts and 538 high value Orders / Contracts reviewed / scrutinized and found to be in order. As per the CVC / CTE Guidelines, 2 teams for Inspection of Works Contracts and 2 teams for Inspection of Purchase Orders were constituted. 9 Works Contracts and 19 high value POs were inspected by the inspection teams. 2359 Regular / Surprise inspections were conducted. 72 Executives were trained in the Principles of Natural Justice & Domestic Enquiry. 248 Executives and 242 Non - executives took part in Vigilance Awareness Training Programme. 56 Executives & 33 Non Executives working in sensitive are as for 3 years and above were moved to different posts. 17 Vigilance cases were handled by the Vigilance Department during the year.

In terms of CVC guidelines for Leveraging Technology to ensure transparency through effective use of website, the following information is made available on BEL website :

- Application forms for online Registration of Sub - contractors / Vendors

- Applications for recruitment

- Details of awarded Contracts / Purchase Orders valuing more than Rs. 10 lakhs in respect of works contracts, service contracts, capital items and non - production items

- Details of awarded Contracts / Purchase Orders issued on nomination / single tender basis value exceeding Rs. 5 lakhs

- Details of awarded Purchase Orders / Sub Contract Orders for production items with a threshold value of Rs. One Crore and above

- Vendor Payments Information System.

E - Procurement

E - procurement at BEL has been implemented on SAP SRM 7.0 platform having Public Sector procurement features. It has been implemented at all 9 Units of BEL for both Purchase and Sub - contract. The system is integrated with ERP system with the latest security such as Web Access Firewall, Reverse proxy and encryption of data from the client side upto the Server in place. Second level authentication through Digital Signature for both publishing the bid and submission of response from the Vendor has been enabled. Six types of procurement have been configured in the system. As per CVC circular No. 010 / VGL / 035 dt. 12.01.2012, action has been taken for certification of e - procurement system.

Integrity Pact

One of the recent initiatives of the Central Vigilance Commission (CVC) to eradicate corruption in procurement activity is introduction of the Integrity Pact in large value contracts in Government Organizations. In line with the directives from Ministry of Defence and the Central Vigilance Commission, your Company has adopted Integrity Pact with all vendors / suppliers / contractors / service providers for all Orders / Contracts of value Rs. 2,000 lakhs and above. This threshold value is further reduced to Rs. 1,000 lakhs from March 201 3. The Pact essentially envisages an agreement between the prospective vendors / bidders and the Principal (BEL), 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 the contract. Any violation of the same would entail disqualification of the bidders and exclusion from future business dealings.

As recommended by the CVC, the Company has appointed Mr N K Sinha, IAS (Retd), former Secretary, Planning Commission and former Chairman, PESB as the Independent External Monitor (IEM) for monitoring implementation of Integrity Pact in the Company. The IEM would review independently and objectively, whether and to what extent parties have complied with their obligations under the Pact. IEM will take stock of the ongoing tendering processes on quarterly basis. The IEM conducts this review once in every quarter. In case of a complaint arising out of tendering process, the matter shall be examined by the IEM, who would look into the records, conduct an investigation, and submit recommendations to the management. During his visits to the Corporate Office every quarter, the IEM holds structured meetings with the Chairman & Managing Director. So far, 62 Orders / Contracts are covered under Integrity Pact.

Procurement from MSMEs

Your Company has been providing increased thrust on enhancing procurement from Micro, Small & Medium Enterprises (MSMEs) and has implemented the Public Procurement Policy for MSMEs issued by the Ministry of MSMEs. All Units / SBUs of the Company are advised to explore every possibility for proper identification of MSMEs among the vendors / suppliers of BEL. Efforts are on to classify the existing vendors into Micro, Small & Medium Enterprises through SAP. With enhanced focus & emphasis on MSMEs the Company is confident of achieving the objectives of the Public Procurement Policy in the coming years. During the year 2012 - 13, the Company has reached the set targets for MSME procurement.

Implementation of Official Language Policy

Your Company undertook a series of initiatives during the year to promote and propagate Rajbhasha in official communication. "Monitoring of Implementation of OL Policies" has been included as one of the KPAs of Heads of Units and Offices. 12 Units / Offices have been notified under rule 10(4) of OL rules indicating that 80% or more staff have working knowledge in Hindi in these Units / Offices and orders have been issued under rule 8(4) of OL Rules for those having proficiency in Hindi to do their Official work in Hindi. Standards were issued for giving Hindi / Indian names for all the BEL Products and to have the names and descriptions in "Devnagari " Training on Unicode is being imparted for all Executives and Employees. Hindi workshops were conducted for those having working knowledge in Hindi. Efforts are on to ensure progressive use of Hindi in all spheres of activities of the Company.

Implementation of RTI Act

The information required to be provided to citizens under Section 4(1) (b) of the RTI Act 2005 has been posted on the website of your Company, viz. www.bel-india.com. It contains general information about the Company, the powers and duties of employees, information about decision making process, rules, regulations, manuals and records held by BEL, a directory of the Company''s officers, pay scales, procedure for requesting additional information about the Company by citizens and associated request formats. During the year 2012 - 13 the Company received and attended to 282 requests for information under RTI Act.

Directorate

Following changes took place in the Directorate of your Company since the last report. Dr Ajit T Kalghatgi was appointed as Director (R&D) with effect from 01 September 2012 in place of Mr I V Sarma, who retired on attaining the age of superannuation on 3 1 August 2012. Government on 11 October 2012 appointed Mr Manoj Saunik, Joint Secretary (ES), Ministry of Defence as one of the part - time Government Directors in place of Mr Satyajeet Rajan, ex - Joint Secretary (ES). Subsequently, on 01 January 2013, Mr P K Mishra, Joint Secretary (ES), Ministry of Defence was appointed as part - time Government Director in place of Mr Manoj Saunik. Dr S N Dash, part - time Independent Director resigned and exited the Board on 01 October, 2012. Three part - time Independent Directors, viz. Mr M S Ramachandran, Prof V K Bhalla and Mr Anil Razdan exited the Board on completion of their three year tenure of appointment on 22 November 2012. Government on 26 March 2013 appointed : (i) Mr S M Acharya, IAS (Retd), ex - Secretary to Government of India, (ii) Lt Gen (Retd) Vinod Kumar Mehta, ex - Director General Quality Assurance, Ministry of Defence, (iii) Rear Adm (Retd) K C Sekhar, AVSM, VSM, ex - CMD, GRSE Ltd, and (iv) Mr Vikram Srivastava, IPS (Retd), ex - DG CRPF & ITBP as part - time Independent Directors filling up four out of the six vacancies of Independent Directors which arose during the year. Rear Adm (Retd) K C Sekhar resigned and exited BEL Board on 30 July 2013. Government nominated Vice Admiral N N Kumar AVSM, VSM, Chief of Material, Indian Navy as Permanent Special Invitee to all the Board Meetings, with effect from 30 October 2012 in place of Vice Admiral B Kannan.

Directors'' Responsibility Statement

Pursuant to the provisions under Section 2I7(2AA) of the Companies Act, 1956 your Directors state :

(i) that in the preparation of the annual accounts, the applicable Accounting Standards have been followed and in respect of Accounting Standard I7, necessary explanation for departure has been given in Note No. 3I.I2 of the Notes to Accounts;

(ii) that the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and a fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the year;

(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 I956 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 on a going concern basis.

Auditors

Pursuant to Section 619(2) of the Companies Act 1956, the Comptroller and Auditor General of India re - appointed M/s R G N Price & Co., Chartered Accountants, Bangalore, as Statutory Auditors for the year 2012 - 13 for audit of accounts of Bangalore, Hyderabad and Chennai Units and Corporate Office. M/s Mittal Gupta & Co., Chartered Accountants, Lucknow, were re - appointed as Branch Auditors of Ghaziabad, Panchkula and Kotdwara Units for 2012 - 13. M/s M B Bafna & Co., Chartered Accountants, Pune were appointed as Branch Auditors for Pune and Navi Mumbai Units for 2012 - 13. M/s Rao & Narayan, Chartered Accountants, Vijayawada were appointed as Branch Auditors for Machilipatnam Unit for 2012 - 13.

The Central Government vide order No GSR No 430 (E) dated 3 June 201 I notified The Companies (Cost Audit) Rules 2011. These Rules are applicable to BEL from financial year 2012 - 13. As per these Rules, the Cost Audit report duly signed by the Cost Auditor(s) has to be submitted to the Central Government within I80 days from the end of the Financial Year. Accordingly the Cost Audit report for the year 2012 - 13 will be submitted on or before 27 September 2013. Pursuant to Section 233B(2) of the Act, Board of Directors appointed M/s PSV & Associates, Bangalore, as Cost Auditors of the Company for the financial year 2012 - 13 after due approval of the Central Government.

Auditors'' Report

Auditors'' Report on the Annual Accounts for the financial year 2012 - 13 and ''Nil'' Comments Certificate of the Comptroller & Auditor General of India under Section 619(4) of the Companies Act, I956 on the Annual Accounts are appended to this report.

Management Discussion and Analysis Report

Management Discussion and Analysis Report required under the Listing Agreements with the Stock Exchanges on which BEL''s shares are listed as also under the Government (DPE) Guidelines on Corporate Governance for Central Public Sector Enterprises (CPSEs), is attached to this Report as Annexure 1.

Corporate Governance Report

DPE guidelines on Corporate Governance for CPSEs provide that CPSEs would be graded on the basis of their compliance with the guidelines. DPE has graded BEL as "Excellent" for 2012 - 13. A report on Corporate Governance along with a Compliance Certificate from the Auditors as prescribed under the Listing Agreements with the Stock Exchanges as well as the DPE Guidelines, is attached to this Report as Annexure 2.

Sustainability Report

The DPE guidelines on Sustainable Development for CPSEs mandates CPSEs to disclose their Sustainable Development efforts in a ''Stand Alone Report'' or as a separate chapter in the Annual Report. Pursuant to this requirement, a Report on your Company''s efforts on "Sustainable Development" is attached to this Report as Annexure 3.

Business Responsibility Report

The Securities and Exchange Board of India (SEBI) has mandated inclusion of Business Responsibility Reports ("BR reports") as part of the Annual Reports for listed entities. This SEBI mandate is also inserted as Clause 55 in the Stock Exchange Listing Agreement. The SEBI guidelines / Cl 55 of Listing Agreement provide a format for BR reports. It also contains a list of nine Key Principles and various core elements under each principle to assess compliance with Environmental, Social and Governance norms. Listed companies are required to prepare policies based on these nine Key principles and core elements, put in place a framework to integrate and embed the policies into business activities and a mechanism to measure and report the achievements as BR reports.

Your Company has prepared a comprehensive policy framework for BR report, after studying the SEBI guidelines and keeping in view the business and governance environment in which BEL as a Defence PSU operates. Highlights of this policy are posted on the Company''s website www.bel-india. com. The Company''s BR report for the year is attached to this Report as Annexure 4.

Other Disclosures

Information required to be disclosed in accordance with Section 217 (l)(e) of the Companies Act 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules l988 regarding conservation of energy, technology absorption and foreign exchange earnings and outgo, is given at Annexure 5.

None of the Company employees drew remuneration in excess of the limits prescribed under Section 2l7(2A) of the Companies Act l956, read with the Companies (Particulars of Employees) Rules, 1975, during the year 2012 - 13.

Statement pursuant to Section 2l2 of the Companies Act, l956, relating to the Subsidiary Company is given at Annexure 6.

Acknowledgement

Your Directors place on record their deep appreciation and gratitude for the valuable support received from all the customers, particularly the Defence Services and the para - military forces and look forward to their continued support and co - operation in future. Your Directors also place on record their gratitude for the support received from various Ministries of the Government of India, especially the Ministry of Defence, Department of Defence Production. Your Directors express their sincere thanks to the Comptroller and Auditor General of India, Chairman, Members and employees of the Audit Board, Statutory Auditors, Branch Auditors, Cost Auditors, Company''s Bankers, collaborators and vendors. Your Directors appreciate the sincere efforts put in by the employees at all levels, which enabled the Company to achieve the good performance during the year. Your Directors express their appreciation and gratitude to all the shareholders / investors for the trust and confidence reposed in the Company and look forward to their continued support and participation in sustaining the growth of the Company in the coming years.

For and on behalf of the Board

Bangalore Anil Kumar

01 August 2013 Chairman & Managing Director


Mar 31, 2012

The Directors are pleased to present the 58 Annual Report of the Company, together with the Audited Accounts for the financial year ended 31 March 2012.

Performance Highlights

A summary of the Company's financial results is given below :

(Rs. in lakhs)

2011-12 2010-11

Value of Production 579,358.25 552,080.34

Turnover (Gross) 570,363.36 552,969.32

Profit Before Depreciation, 119,624.71 128,392.23

Finance Cost and Tax

Finance Cost 60.01 73.37

Depreciation 12,079.89 12,204.23

Provision for Tax 24,495.03 29,967.78

Profit After Tax 82,989.78 86,146.85

Add : Balance brought forward 217,306.59 191,303.51 from previous year

Balance available for Appropriation 300,296.37 277,450.36

Interim Dividend paid 8,000.00 4,800.00

Proposed Final Dividend 8,640.00 12,480.00

Tax on Dividend 2,699.42 2,821.79

Transfer to General Reserve 40,000.00 40,000.00

Transfer to Capital Reserve 56.81 41.98

Reserves & Surplus 554,221.01 490,570.65

Net Worth 562,221.01 498,570.65

Earnings Per Share ( in Rs.) 103.74 107.68

Book Value Per Share ( in Rs.) 702.78 623.21

Distribution of Value of Production for 2011-12 is given below :

Amount (Rs.in lakhs) Percentage

Materials 366,903.48 63.33%

Employee Cost 108,123.05 18.66%

Finance Cost 60.01 0.01%

Depreciation / Amortisation 12,079.89 2.09%

Other Income -15,292.99 -2.64% (Net of other expenses)

Provision for Tax 24,495.03 4.23%

Profit After Tax 82,989.78 14.32%

Total 579,358.25 100%

Company's sales turnover for the year 2011 - 12 has increased to Rs. 570,363.36 lakhs from Rs. 552,969.32 lakhs in 2010 -11, registering a growth of 3.15 %. The growth in sales turn over is marginal due to the inability of the Company to execute a few orders for reasons such as delay in Bulk Production Clearance of new products, partial receipt of items from Consortium Partners, delay in customer trials and evaluation of certain products, etc. Profit After Tax for the year was Rs. 82,989.78 lakhs as against Rs. 86,146.85 lakhs, lower by Rs. 3,157.07 (3.66%) over previous year. The main reasons for lower profits are : Lower value addition - Rs. 32,928.00 lakhs and Increase in Employee cost - Rs. 3,936.87 lakhs. These are, however, compensated partly by increase in other income - Rs. 39,051.00 lakhs. The lower value addition is mainly on account of high material content in some major products supplied / projects executed during the year, such as, Radio Trunking System, AKASH Missile System, Coastal Surveillance System, TABLET PC, National Population Register and Socio Economic Caste Census, Passive Night Vision System, etc.

Dividend

Your Company paid 216% dividend (Rs. 21.60 per share) for 2010 - 11. For the year 2011 - 12, the Company paid 100% interim dividend (Rs. 10 per share) in February 2012. Subject to approval by the Shareholders in the ensuing Annual General Meeting, it is proposed to pay 108% (Rs. 10.80 per share) as final dividend, which would mean a total dividend of 208 % (Rs. 20.80 per share) for the year 2011 - 12.

Other Highlights

- Turnover from indigenously developed products is 81 percent.

- Supplies to the defence contributed to 73 percent of turnover as against 80 percent in 2010 - 11.

- User trials of Weapon Locating Radar (WLR) were successfully completed.

- On Board Acceptance Test successfully completed for Combat Management System.

- 6 lakhs Tablet PCs were developed and supplied in record time to the Ministry of Rural Development. This is used for conducting Socio Economic Caste Census to identify Below Poverty Line families.

- The Prime Minister of Mauritius inaugurated the Coastal Surveillance Radar System in Mauritius during April 2011.

- Major progress in Socio Economic Caste Census and National Population Register.

- Customer Co - ordination Cell was inaugurated at Bangalore. This facility will serve as single point window for complaint registration on wide range of BEL products and maintain status of complaints online.

- E - procurement was implemented during the year.

Major Orders Executed

Some of the significant supplies made against major orders during the year 2011- 12 include : Akash Weapon System, Central Acquisition Radar, Digital Radio Trunking System, Mobile Communication Terminal, Coastal Surveillance System, Mobile Ground Based Elint, Sonar Systems, Ship borne EW Systems, Passive Night Vision Devices, Strategic Communication Network, Navy Net, T90 Stabilizer Items, Instant Fire Detection Suppression System, Communication Radio Sets - Combat Net Radio, Radio Relay F (Low Band), UHF Hand - held Radio, HF Radio Set, V / UHF Transceiver, Tablet PC, Socio Economic Caste Census and National Population Register.

These have been supplied to a wide range of customers like the Army, Navy, Air Force, Coast Guard, Defence PSUs, Paramilitary, Ministry of Home Affairs, Ministry of Rural Development and others.

Among the many projects executed during the year, the following merit needs special attention :

Akash Weapon System - It is a medium - range, surface - to - air missile system, which provides air defence against a variety of multiple air threats. It employs command guidance, real - time multi - sensor data processing and threat evaluation and relies on phased array radar to guide the missile.

Central Acquisition Radar (Rohini) - It is a 3 - D surveillance radar in S band. It has an integrated IFF (Identification of Friend or Foe) with co - mounted antenna and has been developed jointly with LRDE.

Digital Radio Trunking System - I t is a TETRA (Terrestrial Trunked Radio) based 4 channel Radio, operating in the UHF band, supporting secure voice, data and message communication. Each channel can be trunked into 4 slots, thereby totally 16 slots can be supported.

Socio Economic Caste Census - A consortium of Central Public Sector Undertakings led by BEL and including Electronics Corporation of India Limited and ITI Limited, has been awarded the work of conducting the Socio Economic Caste Census by the Ministry of Rural Development, using the Tablet PC manufactured by BEL. The Census will cover the entire population of approximately 122 crore people.

National Population Register - As part of the National Population Register Project of the Registrar General of India, Ministry of Home Affairs, Government of India, bilingual data entry of the demographic details of each individual across 9 coastal States, 4 coastal Union Territories, Manipur and Nagaland is being undertaken. The population covered will be around 57.62 Crores. BEL has completed data digitisation of 21 Crore records and 50 lakh biometric enrolments for this project.

Exports

Your Company's export turnover during the year 2011- 12 was US $ 38.45 million as against the previous year export of US $ 41.53 million.

The range of products exported include Coastal Surveillance Radar System, Radar Finger Printing System, HF communication sets, Radar Warning Receiver, Fitted - up Shelters, Electronic Voting Machines, X - Ray tubes, electro - mechanical parts (like Stators, Casing, etc.) and electronic assemblies.

During the year, the Company participated in 5 international exhibitions to show case its products and systems capabilities. Countries in Africa, Latin America, Southeast Asia, SAARC, Middle East & CIS countries are the markets for export of BEL products and systems. BEL has also been interacting with the Ministry of External Affairs on a regular basis to supply Coastal Surveillance Radar System to Indian friendly countries under the Government of India one time aid.

Apart from the export of products and services, BEL is focusing on the opportunities in the areas of offset obligations of vendors in the various RFPs of Ministry of Defence. BEL has also identified contract manufacturing (both build to print and build to specs) as one of the new areas to address the emerging opportunities with OEMs. BEL is closely working with various major foreign Aerospace and Defence companies to secure business under the mandatory Offset Clause in the RFPs for Indian Defence Procurement. Further, efforts are being made to establish long - term supply chain relationships with global players. BEL has successfully completed supply of first off sample for flight panel for Boeing, USA. This is expected to result in a business of about US $ 2 Million every year.

The Company received the following Exports Awards during the year:

(i) Award for Outstanding Achievement in Export of Electronic Products from ELCINA - EFY for the year 2010 - 11; and

(ii) Award for Excellence in Export (Gold) from Karnataka State for the year 2009 - 10 and 2010 - 11.

Order Book Position

Order book of the Company as on 01.4.2012 is Rs. 2,574,800 lakhs. The order book mainly comprises of major programs like Akash Weapon Systems for Airforce & Army, Battle Field Surveillance System, Command Information Decision Support System, Tactical Control Radar, Passive Night Vision Devices etc., for which the delivery dates are spread across next 2 to 4 years. Taking this in view, the orders available for dispatch plan of 2012 - 1 3 is around Rs. 565,000 lakhs.

Your Company has an export order book of US $ 40.5 million as on April 1 2012. This includes an offset order book of US $ 9.9 million.

Finance

During the financial year 2011- 12, your Company has met its fund requirements towards incremental working capital and additional investments on Capital equipments from internal resources. Borrowing has been avoided through close monitoring of cash flows and efficient cash management. Your Company has retained the highest rating by ICRA for both short term and long term sanctioned bank limits. During the year, your Company inducted three more banks in the consortium of banks, which will help in securing the best rates for the various services availed from the consortium banks. Based on the user requirements, changes continue to be carried out in the online ERP system which should help in better information flow to all concerned. The accounts for the year 2011- 12 have been prepared in accordance with requirements of the Revised Schedule VI notified by the Ministry of Corporate Affairs.

The inventory position of your Company as on 31 March 2012 was Rs. 279,181.82 lakhs (Net), as against Rs. 246,031.74 lakhs (Net) as on 31 March 201 1. The inventory as on 31 March 2012 works out to 178 days of the Value of Production (DPE) for the year 201 1- 12 as against the corresponding position at 164 days as on 31 March 2011. The increase in inventory levels at the year end is to meet the higher sales targets of the year 2012 - 1 3.

The position of Trade Receivables as on 31 March 2012 was Rs. 268,723.27 lakhs (Net) as against Rs. 289,680.69 lakhs (Net) as on 31 March 2011. This works out to 172 days of Turnover for the year 2011- 12 with the corresponding position at 191 days in the previous year. The realisation of Trade Receivables will continue to be closely monitored to ensure speedy collection which should result in further reduction in Trade Receivables in number of days of Turnover by the end of 2012 - 13.

Your Company does not have any public deposit scheme at present. However, the matured past public deposits with the Company was Rs. 38.55 lakhs as on 31 March 2012. Of these, 34 deposits amounting to Rs. 36.50 lakhs are claimed but not paid as these accounts are frozen on advice by Karnataka Lok Ayukta. Remaining past deposits of Rs. 2.05 lakhs as on 31 March 2012 are claimed and pending settlement for want of valid documentation.

Research & Development

Research and Development is the core strength of BEL and focused attention was given during the year for planning and reviewing of development of technology modules and products. Apart from in - house efforts, BEL R & D engineers had close co - operation with DRDO, other national research and development agencies and academic institutes. R & D activities were carried out during the year 2011 - 12 in all the business segments, namely Radars, Military Communication, Naval Systems, Weapon Systems, Electronic Warfare, Avionics, C I Systems, Electro - optics, Tank Electronics, Gun up - grades, Civilian Equipments & Systems and Components.

Development & Engineering Divisions attached to all the Strategic Business Units of Bangalore and Other Units concentrated on the development of products and systems in their respective areas of business segments. Central - D&E and two Central Research Laboratories of the Company supported the D & E Divisions of all the units by way of developing core technology modules and software required for the development of products and systems.

The analysis of turnover of the Company for the year 2011- 12 indicates that 54% of the turnover is from BEL developed products, 27% of the turnover is from products developed in association with DRDO and other National Labs and remaining 19% is from products for which technologies were acquired through foreign ToTs.

New Product Development

During 2011- 12, different R&D Divisions of BEL have completed development of varieties of new products / systems / technology modules. Some of the new products / systems introduced during the year include the following :

Coastal Surveillance System - It is a major system under supply to the Indian Coast Guard. It is a chain of static sensors (Radar, Electro - optics and Meteorological) located along the Indian coast for monitoring the movement of ships, vessels and small boats. The images, captured through Radar and Electro - optic sensors are transmitted to the Control Centre through a hierarchical reporting system.

Tablet PC - BEL designed and manufactured Tablet PC for the Ministry of Rural Development for use in enumeration for the Socio Economic Caste Census. The Tablet PC was designed and developed in a record time of four months. It is a hand - held, low cost computing device. It has a 7" TFT LCD with touch screen, Internet connectivity through Ethernet, USB, Mini SD Card Slot, Headphone Jack and 2 GB Memory card. The next model with enhanced features is under development.

Integrated Anti Submarine Warfare Complex - It is a ship - based Fire Control System for control of launch of rockets and torpedoes to engage surface and sub - surface targets. The system interfaces with sonar systems and other ship borne systems like COTS radar, ship data network, ship house - hold data and computes the target's motion parameters and controls the launch of rockets and torpedoes suitably. The system has consoles for interfacing with ASW Sonar Systems and

External System Interfaces and two Fire Distribution Units for rocket launching and torpedo launching. This is done in collaboration with Naval Science and Technological Laboratory, Vishakhapatnam.

Advanced Torpedo Defence System - It is a ship - based system capable of passive detection of surface and submarine targets and torpedoes and active deception of torpedoes through decoys. The system consists of Sonar sub - system with towed transducer array and on - board electronics for target detection and a fire control sub - system with decoy launchers for expendable decoys. This is done in collaboration with Naval Physical and Oceanographic Laboratory, Kochi and Naval Science and Technological Laboratory, Vishakhapatnam.

Digital Radio Trunking System - It is a TETRA based 4 channel Radio, operating in the UHF band of 380 to 400MHz, supporting secure voice, data and message communication.

Upgraded Indigenous Forward Observer Simulator - It is used to train Forward Observers for indirect firing, using guns of various range capabilities. This is a computer - based system with projection displays for presentation of various images. This is interfaced with models of Integrated Observation Equipment and Laser Designator and Range Finder.

Electro Optic Fire Control System - It is used for surveillance, tracking and engagement of sea / air targets. The system is interfaced with the existing gun of NOPV for engagement of targets.

Integrated Radio Line Modem - It is a frequency hopping Radio modem, operating in UHF band and integrated with Line modem, as standby for providing redundant data communication. This system is used for providing highly reliable data communication between elements of the weapon system.

Remotely Operated Vehicle - This is used for detection of Improvised Explosive Device and diffusion by remote control. The product is engineered based on DRDO technology. This features multiple cameras on - board with pan, tilt and zoom, Six axis Manipulator Arm with versatile geometry, changeable 3 finger and parallel jaw grippers, touch screen and joystick control and stair climbing capability.

Thermal Imaging Camera for Flycatcher Radar - This provides thermal image of targets, which supplements the radar picture of the Flycatcher. It is co - mounted with the antenna for simultaneous viewing of thermal image along with the radar image. The Thermal Imager is a cooled, 3rd Gen Camera, operating in 3 - 5m band and has been completely developed in - house at BEL.

Scientists from Central Research Laboratories and other R & D divisions of BEL have contributed 55 Technical Papers in the national and international journals during the year.

Quality

Your Company adopted the Total Quality Management (TQM) philosophy in the year 1990 under the acronym "TORQUE" which stands for "Total Organisational Quality Enhancement". TORQUE is based on the premise that the quality of products and services is not only the responsibility of the production / shop floor personnel, but other support services also who have a role to play in meeting and exceeding customer's expectations through supply of quality products and services. Some of the critical operational performance indicators like first time pass, OTD (On Time Delivery), process cycle time, manufacturing yield, customer complaints, quality cost, etc., are monitored on monthly basis through SAP and corrective actions are initiated for continual improvement.

From early nineties, all Units / SBUs / Divisions of the Company have been certified for ISO 9001 Quality Management System and ISO 14001 Environment Management System. Seven Units / SBUs (Ghaziabad, Panchkula, Kotdwara, Hyderabad, Military Communication, Electronics Warfare & Avionics and Export Manufacturing) are also certified for AS 9100 Aerospace Standards. Company's Pune Unit manufacturing X - Ray tubes is also certified to ISO 13485 standard for medical devices. The Central Software Development group of the Company is certified to CMMi Level 5.

The Company adopted the CII - EXIM Bank Business Excellence Model to improve its overall strategic and operational excellence. Adoption of this Model since 2002 has helped the Company in understanding the expectations of various stakeholders and enhancing their satisfaction level. Most of the Units / SBUs of the Company have achieved 'Commendation for Strong Commitment to Excel' under the CII - EXIM Bank

Business Excellence Model and two Units have climbed to 'Commendation for Significant Achievement'. The Company has also built a large pool of trained Business Excellence Assessors to drive excellence in the organisation.

During the year 2011 - 12, five BEL Units participated in the 'CII - EXIM Bank Award for Business Excellence'. Bangalore Unit achieved Level - II recognition i.e. 'Commendation Certificate for Significant Achievement'. Remaining four Units namely Kotdwara, Ghaziabad, Chennai and Panchkula received 'Commendation Certificate for Strong Commitment to Excel' under this Award scheme.

'Six Sigma' methodology was adopted by the Company about a decade back for achieving breakthrough improvements. Bharat Electronics Quality Institute has been imparting training on 'Six Sigma' since July 1999 and has trained 1467 officers so far. At present there are 37 Certified Six Sigma Black Belts in the Company.

155 Six Sigma projects were completed during the year, resulting in cost reduction, process improvement and customer satisfaction. All the seven Six Sigma case studies, which were presented at the National Convention organised by QCFI - Hyderabad, bagged "Par - Excellence Award", the highest ever achieved by any Company in Six Sigma.

BEL Executives won two Prizes, one in Manufacturing Category and one in LEAN & DFSS Category, in the Six Sigma case study competitions organised by Indian Statistical Institute, Bangalore.

All the key and special manufacturing processes in the Company are being brought under SPC which is an on - line process monitoring, control and improvement technique. During the year, 25 processes were identified and brought under SPC. Process capability studies and control charts of these processes have been implemented.

Reliability & Maintainability are essential features of a well designed product. Application of the principles of R & M at design stage can ensure robustness of the product during its entire life cycle. Keeping this in mind the Company has embarked on getting its design engineers certified as reliability professional from Centre for Reliability, STQC Directorate, Chennai. During the year, a total of 38 engineers were certified as Reliability Professionals by the Centre for Reliability.

Customer satisfaction survey was conducted during the year for six products from different Units / SBUs. In the survey, overall customer satisfaction was found to be 81.33%. As part of the customer satisfaction initiatives during the year, the Company organised a Technology Seminar for the Naval customers.

Information Systems

SAP implementation - BEL has undertaken SAP Business Suite implementation across all the Units and Offices. Implementation of SAP R/3 including Payroll, Product Lifecycle Management module at all Units and Offices of BEL was completed in a phased manner by July 2008. Most of the SAP modules have now been implemented and stabilised. Further improvements in the system have been made based on users feedback by incorporating checks and validations in the processes mapped in SAP. BEL has won SAP ACE Award for Public Services 2012 for BEST RUN PUBLIC SECTOR UNDERTAKING category.

During the year 2011-12, BEL has rolled out the following modules :

- Supplier Relationship Management 7.0 with Procurement for Public Sector

- Customer Relationship Management

- Strategic Enterprise Management

- Business Objects Reporting Tool

- Knowledge Management System (Collaboration Folders)

In order to tap the potential of the advancements in the hardware and software technology environment, BEL has planned to upgrade its hardware platform and SAP ECC version from 5.0 to 6.0. The hardware upgradation and SAP version change work shall be carried out in 2012 - 13 and 2013 - 14.

Network Security - Measures such as Firewall and Intrusion Prevention Systems have been implemented to secure Data Centre and Disaster Recovery Site which are in BEL's Intranet. Similarly, security measures, such as Web Application Firewall, Reverse Proxy Firewall, Intrusion Prevention System and SSL (Secured Socket Layer) security during transmission are implemented for securing internet hosted applications like

SRM (Supplier Relationship Module) and CRM (Customer Relationship Module), which are accessed by vendors and customers. Setting up of SRM / CRM Disaster Recovery Site and its security is under progress.

Database Security - Database servers are on Unix OS, which is less vulnerable to virus attacks. Database is accessed only through SAP application. Roles and Authorisations in SAP restrict access to data. In SAP everything that is not explicitly allowed is forbidden. Except designated database administrators, direct access to OS and Database to all others is restricted at network security.

Human Resources

Your Company's employee strength as on 31 March 2012 is 10,791 persons as against 11,180 as on 31 March 2011. Of this, 3,696 were engineers / scientists. Women employees were 2,254 as on 31 March 2012. A total of 322 executives consisting of engineers, scientists and other professionals were inducted during the year. During the year 2011- 12, 5.57% of the candidates recruited belonged to the minority community.

Your Company has been implementing the Government Directives on Reservation. The particulars of SC / ST and other categories of employees as on 31 March 2012 are as under :

Executives Non - Executives Category of Employees Group 'A' Group 'B' Group 'C' Group 'D'

Scheduled Caste 820 56 1048 92

Scheduled Tribe 250 5 141 25

OBC 854 73 944 54

Ex - Servicemen 103 77 328 80

Physically Handicapped 79 11 146 17

In order to address the learning and organisation development needs, various management development programmes as well as technology programmes were organised during 2011 - 12 through premier training institutions for all grades of executives. The Company - wide per capita training man - days for the year 2011 - 12 was 3.52 as against 3.37 in 2010 - 11. The MoU score for HRD for the year was "Excellent" at 1.28. The composite score is arrived at based on per capita training mandays, percentage of people trained and feed back index. The e - PMS module in SAP has been implemented from the year 2011- 12 onwards. The PMS process will be done online in respect of executives upto the grade of E - VIA. A detailed write up on Company's HR philosophy and specific HR initiatives during the year is provided separately in the Management Discussion and Analysis Report attached.

BEL has been conferred with "Organisation with Innovative Practices, 2012" Award by Institute of Public Enterprises, Hyderabad. The IPE HR Leadership Awards are given to companies which have an outstanding performance record and foster innovation in HR Practices with exemplary learning and development initiatives in place.

Employee Relations & Welfare

Employee relations in all Units continued to be smooth and harmonious throughout the year. Regular interactions took place among the management, executives and the workmen through the apex forums, viz., the Joint Standing Committee consisting of Negotiating Trade Unions and Apex Joint Council consisting of Officers Associations and TC Cadre Associations and also separately with respective Trade Unions and Officers Associations.

Various welfare programmes were organised for the benefit of employees and their families, which included programmes addressing specific needs of sections of employees, such as, SC / ST employees, differently abled employees and women employees. Differently abled employees are provided free transport facility for commuting to the factory and back to residence, provided grace time for registering attendance, ramps at ATM counter etc. BEL Bangalore complex received the National Award for "Empowerment of Persons with Disabilities" under the "Best Employer" category. Programmes conducted in the Units included health and safety awareness / improvement, vigilance awareness, etc. Various cultural programmes were organised by the Fine Arts Clubs in the Units for recreation of employees and their families. Various summer camps / sports programmes were organised for the employees' children.

Your Company's comprehensive medical scheme covers all employees, their spouses, dependent family members as well as retired employees and their spouses. BEL Hospital at Bangalore extends outpatient medical treatment to the residents of neighbouring villages and employees of BEL associate institutions / societies in addition to its own employees, their dependents and retired employees / their spouses.

Educational institutions run by the Company for education of children of employees and also of neighboring villages, performed well during the year.

Awards & Recognition

Important awards and recognitions received during the year by your Company and its employees include :

- Standing Conference of Public Enterprises (SCOPE) Award for R&D, Technology Development and Innovation for the year 2010 - 1 1, from the Hon'ble President of India.

- Raksha Mantri's Awards for 2009 - 10 in the categories of Best Performance in Exports, Best Performing Division, Import Substitution and Design Effort & Innovation.

- Best Employer of Persons with Disabilities National Award for 2011.

- PSE Excellence Award 2011 for R&D, Technology, Development & Innovation by the Department of Public Enterprises, Government of India, and Indian Chamber of Commerce in the Navratna category.

- Gold Prize in the Defence sector category of the DNA - Dainik Bhaskar India Pride Awards (2011) for Excellence in PSUs.

- Mr I V Sarma, Director (R & D), received the Association of Old Crows (AOC)'s Award for the 'Best Contributor in Electronic Warfare (EW) from Indian PSUs.'

- Two of our employees have received the prestigious Prime Minister's Shram Ratna and Shram Devi Awards for 2008 and 2009, respectively.

Environment Management

Your Company has been maintaining a clean and green environment at all its nine manufacturing Units, which are all ISO 14001 certified. Clean surroundings, green environment, clean technology, stringent pollution control measures, waste water treatment, zero effluent discharge, rainwater harvesting, energy conservation, water conservation, systematic management and disposal of hazardous and other forms of wastes and several other endeavors have become a part of the well - established Environmental Management System. Bangalore Complex and Ghaziabad Unit are certified for OHSAS 18001 : 2007. Disposal of scrapped and hazardous material is done through e - auction. Municipal solid waste is sent for scientific disposal.

BEL has received the Certificate of Merit for Excellent Energy Conservation from the Union Ministry of Power for 2010 - 11 and the Certificate of Merit for Energy Conservation from KREDL, Government of Karnataka, for 2009 - 10.

The Sustainability Report separately attached to the Directors' Report contains further details on Environment Management.

Subsidiary / Joint Ventures

Your Company's subsidiary at Pune, BEL Optronic Devices Ltd (BELOP) recorded a turnover of Rs. 6,273.92 lakhs as against the turnover of Rs. 5,236.06 lakhs in the previous year. BELOP achieved Profit After Tax of Rs.815.69 lakhs as against Rs. 445.23 lakhs in the previous year. BELOP manufactures mainly Image Intensifier Tubes (I.I. Tubes). These Tubes are supplied to the Defence customers and also used in the Night Vision Devices manufactured by BEL.

The Company has availed the general exemption under Section 212(8) of the Companies Act 1956 granted vide Ministry of Corporate Affairs Circular No. 5/12/2007 - CL - I II dated 8 February 2011. Hence, Annual Accounts of the Subsidiary Company, BEL Optronic Devices Ltd., are not attached to the Balance Sheet of BEL. A copy of the Annual Accounts of BELOP and the related information will be made available upon request by any member of BEL or BELOP. The Annual Accounts of BELOP are kept for inspection by investors at the registered office of BEL and BELOP. Any investor interested to inspect the same may please contact the Company Secretary of BEL or BELOP. A statement as per Section 212 of the Act relating to the Subsidiary Company, BELOP, is annexed to this report. Further, the information required to be disclosed as per the directions contained in the MCA Circular No. 5/12/2007 - CL - III dated 8 February 2011 is also provided in this Annual Report.

The Joint Venture Company (JVC) with General Electric, USA, viz., GE BE Pvt Ltd., manufacturing CT Max and other latest version X - Ray Tubes continues to perform well. BEL supplies some parts required for the products manufactured by this JVC. GE BE Pvt. Ltd. achieved a turnover of Rs. 42,931 lakhs as against Rs. 44,240 lakhs in the previous year. The Profit After Tax was Rs. 5,034 lakhs as against Rs. 5,755 lakhs in the previous year. The JVC declared 100 % dividend for the year 2011- 12 and accordingly BEL received Rs. 260 lakhs as dividend from this JVC on BEL's share of investment.

The other JVC, viz., BEL Multitone Pvt. Ltd., jointly promoted by BEL and Multitone plc, UK was set up to supply, install and service Private Paging Systems and Pagers. The JVC is presently in shell stage and it had no business transaction during the year. It has been decided to close down this Company as there are no business prospects for paging systems in the country.

Consolidated Accounts

Consolidated Financial Statements of your Company and its Subsidiary and Joint Venture Companies are attached to this Report.

Vigilance

Performance of the Vigilance Department during the year has been satisfactory. 99.6% of the executives of the Company have filed their Annual Property Returns. 1 188 Purchase Orders / Contracts and 623 high value Orders / Contracts have been reviewed / scrutinised during the year and found to be in order. As per the CVC / CTE Guidelines, 2 teams for Inspection of Works Contracts and 2 teams for Inspection of Purchase Orders have been constituted. During the year, 8 Works Contracts and 10 high value POs have been inspected by in - house inspection teams. 2570 Regular / Surprise inspections were conducted. During the year, there were totally 2 Vigilance cases, both carried over from the previous year. At the end of the year, there are no cases pending under investigation.

150 executives have been trained in the Principles of Natural Justice & Domestic Enquiry Training Programme (for Dy. Mgrs. & above). 702 Executives and 284 Non - executives have taken part in Vigilance Awareness Training Programme. 45 Executives & 34 Non - executives working in sensitive areas for 3 years and above have been moved to different posts.

In terms of CVC's guidelines for leveraging technology to ensure transparency through effective use of website, the following information has been made available in the BEL website :

- Application forms for Registration of Subcontractors / Vendors online for being included in the Approved Vendors List and applications for recruitment.

- Details of awarded Contracts / Purchase Orders valuing more than Rs. 10 lakhs in respect of works contracts, service contracts, capital items and non - production items.

- Details of awarded Contracts / Purchase Orders issued on nomination / single tender basis value exceeding Rs. 5 lakhs.

- Details of awarded Purchase Orders / Sub Contract Orders for production items with a threshold value of Rs. 100 lakhs and above.

- Vendor Payments Information System.

E - Procurement

E - procurement at BEL has been implemented on SAP SRM

7.0 platform having Public Sector procurement features. It has been implemented at all 9 Units of BEL for both Purchase and Sub - contract. The system is integrated with ERP system with the latest security such as Web Access Firewall, Reverse proxy and encryption of data from the client side upto the server in place. Second level authentication through Digital Signature for both publishing the bid and submission of response from the Vendor has been enabled. Six types of procurement have been configured in the system. As per CVC circular No. 010 / VGL / 035 dated 12.01.2012, action has been taken for certification of e - procurement system.

Integrity Pact

One of the latest initiatives of the Central Vigilance Commission to eradicate corruption in procurement activity is introduction of the Integrity Pact in large value contracts in all Government Organisations. In line with the directives from Ministry of Defence and the Central Vigilance Commission, BEL has adopted Integrity Pact with all vendors / suppliers / contractors / service providers for all Orders / Contracts of value Rs. 2,000 lakhs and above. The pact essentially envisages an agreement between the prospective vendors / bidders and the Principal (BEL), 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. In other words, entering into this Pact is a preliminary qualification. Integrity Pact, in respect of a particular contract, would be operative from the stage of invitation of bids till the final completion of the contract. Any violation of the same would entail disqualification of the bidders and exclusion from future business dealings.

As per recommendation by the Central Vigilance Commissioner, BEL has appointed Shri N K Sinha, IAS (Retd.), former Secretary, Planning Commission and former Chairman, PESB as the Independent External Monitor (IEM) for monitoring implementation of Integrity Pact in BEL. The IEM would review independently and objectively, whether and to what extent parties have complied with their obligations under the Pact. IEM will take stock of the ongoing tendering processes on quarterly basis. The IEM conducts this review once in every quarter. In case of a complaint arising out of tendering process, the matter shall be examined by the IEM, who would look into the records, conduct an investigation, and submit recommendations to the management. During his visits to the Corporate Office every quarter, the IEM holds structured meetings with the Chairman & Managing Director. So far, 52 Orders / Contracts are covered under Integrity Pact.

Implementation of Official Language

Your Company is committed to adhere with the Official Language policies of the Government of India. During the year, the Committee of Parliament on Official Language visited the Company's Corporate Office on 06.05.2011 and Panchkula Unit on 08.02.2012. Ministry of Home Affairs officials inspected the Corporate Office on 12.05.2011. Hindi workshops for those having working knowledge in Hindi were conducted. Action is in progress for Unicode activation on all the PCs Company-wide and training on Unicode covering all Executives and Employees. Company's website is available in Hindi and English and efforts are on to progressively have the entire website in bilingual.

12 Units / Offices have been notified under rule 10(4) of OL rules indicating that 80% or more staff have working knowledge in Hindi in these Units/Offices and orders have been issued under rule 8(4) of OL Rules for those having proficiency in Hindi to do their Official work in Hindi. Standards have been issued for giving Hindi / Indian names for all the BEL Products and to have the names and descriptions in Devanagari. Corporate Office bagged the Second Prize for excellent performance in OL implementation by TOLIC (Undertakings), Bangalore. Efforts are on to ensure the progressive use of Hindi in all spheres of activities of the Company.

Implementation of RTI Act

The information required to be provided to citizens under Section 4(l)(b) of the RTI Act 2005 has been posted on the website of Company, www.bel - india.com. The information posted on the website contains general information about the Company, powers and duties of employees, information about decision - making, rules, regulations, manuals and records held by BEL, directory of the Company's officers, pay scales, procedure for requesting additional information about the Company by citizens and associated request formats. During the year 2011- 12 the Company received and attended to 331 requests for information under RTIA. Most of the requests were information related to Human Resources, specifically recruitment and service related matters.

Directorate

Following changes took place in the Directorate of your Company since the last report. Mr Anil Kumar was appointed as Chairman & Managing Director with effect from 1 October 201 1 in place of Mr Ashwani Kumar Datt, who retired on attaining the age of superannuation on 30 September 2011. Mr Sunil Kumar Sharma was appointed as Director (Bangalore Complex) with effect from 1 September 201 1 in place of Mr H S Bhadoria, who retired on attaining the age of superannuation on 31 August 2011. Government appointed Lt Gen S P Kochhar, Bar to AVSM, SM, VSM, ADC, Signal Officer - in - Chief and Senior Colonel Commandant, Corps of Signals, Army HQs as one of the part - time Government Directors with effect from September, 2011 in place of Lt Gen (Retd) P Mohapatra, PVSM, AVSM, ADC. Government terminated the Board Membership of Mr G Madhavan Nair with effect from 16 April 2012. Lt Gen (Retd) G Sridharan, Part - time Independent Director exited the Board on completion of his three year tenure of appointment on 17 May 2012. Mr M G Raghuveer, Director (Finance) retired on attaining the age of superannuation on 31 May 2012.

Mr Amol Newaskar was appointed as Director (Other Units) w.e.f. 24 May 2012. Government nominated Air Marshal K K Nohwar, PVSM, VM, ADC, Vice Chief of Air Staff, as Permanent Special Invitee to BEL Board Meetings, with effect from 27th September, 2011 in place of Air Marshal N A K Browne, PVSM, AVSM, VM, ADC. Government nominated Vice Admiral B Kannan, AVSM, VSM, Chief of Material, Indian Navy as Special Invitee to all BEL

Board Meetings in place of Vice Admiral Ganesh Mahadevan, PVSM, AVSM, VSM. Government nominated Air Marshal D C Kumaria, PVSM, AVSM, VM, VSM, ADC, Vice Chief of Air Staff as Special Invitee to all BEL Board Meetings in place of Air Marshal K K Nohwar.

Directors' Responsibility Statement

Pursuant to the provisions under Section 2l7(2AA) of the Companies Act, 1956 your Directors state :

(i) that in the preparation of the annual accounts, the applicable Accounting Standards have been followed and in respect of Accounting Standard 17, necessary explanation for departure has been given in Note No. 31.12 of the Notes to Accounts;

(ii) that the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and a fair view of the state of affairs of the Company at the end of the financial year and of the Profit of the Company for the year;

(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 on a going concern basis.

Auditors

Pursuant to Section 619(2) of the Companies Act 1956, the Comptroller and Auditor General of India re - appointed M/s R G N Price & Co., Chartered Accountants, Chennai as Statutory Auditors for the year 2011 - 12 for audit of accounts of Bangalore Complex, Hyderabad and Chennai Units and Corporate Office. M/s Mittal Gupta & Co, Chartered Accountants, New Delhi, were re - appointed as Branch Auditors of Ghaziabad, Panchkula and Kotdwara Units for 2011- 12. M/s G D Apte and Co., Chartered Accountants, Pune were appointed as Branch Auditors for Pune and Navi Mumbai Units for 2011- 12. M/s N Koteswara Rao & Co., Chartered Accountants, Guntur were reappointed as Branch Auditors for Machilipatnam Unit for 2011 - 12.

Auditors' Report

Auditors' Report on the Annual Accounts for the financial year 2011 - 12 and 'Nil' Comments of the Comptroller & Auditor General of India under Section 619(4) of the Companies Act, 1956 on the Annual Accounts are appended to this report.

Management Discussion and Analysis Report

Management Discussion and Analysis Report required under the Listing Agreements with the Stock Exchanges on which BEL's shares are listed is annexed to this Report.

Corporate Governance

A report on Corporate Governance along with a Compliance Certificate from the Auditors as prescribed under the Listing Agreements with the Stock Exchanges on which BEL's shares are listed as well as Government Guidelines on Corporate Governance for Central Public Enterprises, is annexed to this Report.

Sustainability Report

As required under the Guidelines on "Sustainable Development" issued by the Dept of Public Enterprises, Govt of India, a separate chapter on the Company's efforts on "Sustainable Development" is annexed to this Report.

Other Disclosures

Information required to be disclosed in accordance with Section 217(1)(e) of the Companies Act 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules 1988 regarding conservation of energy, technology absorption and foreign exchange earnings and outgo, is attached to this Report.

The particulars of employees to be given as per Section 2l7(2A) of the Companies Act 1956, read with the Companies (Particulars of Employees) Rules, as amended, are "Nil" for the year 2011 - 12.

Acknowledgement

Your Directors place on record their deep appreciation and gratitude for the valuable support received from all the customers, particularly the Defence Services and the Department of Defence Production and look forward to their continued support and co - operation in future. Your Directors also place on record their gratitude for the support received from various Ministries of the Government of India, especially the Ministry of Defence. Your Directors express their sincere thanks to the Comptroller and Auditor General of India, Chairman, Members and Employees of the Audit Board, Statutory Auditors and Branch Auditors, Company's Bankers, Collaborators and Vendors. Your Directors appreciate the sincere efforts put in by all the employees at all levels, which enabled the Company to achieve the good performance during the year. Your Directors express their appreciation and gratitude to all the shareholders / investors for the trust and confidence reposed in the Company and look forward to their continued support and participation in sustaining the growth of the Company in the coming years.

For and on behalf of the Board

Bangalore Anil Kumar

1 August 2012 Chairman & Managing Director

 
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