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Directors Report of Bharat Heavy Electricals Ltd.

Mar 31, 2015

To the Members,

The Directors are delighted to present the 51st Annual Report on the business and operations of the Company and the statement of accounts for the year ended March 31, 2015.

Financial Performance

Financial Year Figures (in Rs. Crore except 2014-15 2013-14 per share data)

a) Turnover (Gross) 30947 40338

b) Revenue from operations (Net) 29542 38389

c) Other Operational Income 641 720

d) Operating expenses 28094 34595

e) Operating profit 2089 4514

f) Add : Other income 1220 1616

g) Profit before depreciation, finance cost & tax expense 3309 6130

h) Less: Depreciation 1077 983

i) Less: Finance costs 92 133

j) Profit before tax 2140 5014

k) Less: Tax expense 721 1553

l) Profit after Tax 1419 3461

m) Add: Balance brought forward from the previous year 1171 1102

n) Profit available for appropriation 2590 4563

i) Adjustment pursuant to Amalgamation 0 81

ii) Depreciation Adjustment 41 0

iii) Dividend (including interim dividend) 284 693

iv) Corporate Dividend tax (incl. on interim dividend) 57 118

v) Amount transferred to General Reserve 1000 2500

o) Balance in Statement of Profit & Loss 1208 1171

p) Earnings per Share (Rs.) 5.80 14.14

q) NAV per share (Rs.) 139.26 135.02

Despite various issues relating to power projects like fuel linkages, fund constraints, land acquisition etc., BHEL recorded turnover of Rs. 30947 Crore in the year 2014-15. Net worth of the company has gone up by 3.14 %.

Performance of BHEL for the year 2013-14 has been rated as Good'' in terms of MoU signed with the Government of India. BHEL has been awarded the MoU Composite score of 3.131''.

Details of changes in Market Capitalisation

Description As at 31st March Increase/ Decrease 2015 2014 in %

Market Capitalization (Rs. in Crore) 57604.27 47985.20 20.05

Price - Earnings Ratio 40.58 13.86 192.78

Note: Data based on share prices quoted on NSE.

Percentage increase over/ decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer- BHEL has not offered shares to the public at large in an IPO.

Dividend

The Board has recommended a Final Dividend of 31 % (Rs. 0.62 per share), Rs. 151.75 Crore, for the year 2014-15. An interim dividend of 27 % (Rs. 0.54 per share), Rs. 132.17 Crore, on share capital of Rs. 489.52 Crore, has already been paid for the year 2014-15. Thus the total dividend (exclusive of dividend tax) for the year 2014-15 is Rs. 283.92 Crore (Rs. 1.16 per share) as against Rs. 692.68 Crore (Rs. 2.83 per share) paid in the previous year.

Provision of Rs. 30.89 Crore has been made for Corporate Dividend Tax on the Final dividend proposed. Corporate Dividend Tax of Rs. 26.43 Crore has already been paid on the interim dividend.

Orders Received

Despite operating in a subdued but healthy competitive business environment, the company secured orders worth Rs. 30814 Crore during the year. Sector-wise orders booked are as follows:

(Rs. in Crore)

2014-15 2013-14

Power Sector 24873 20433

Industry Sector* 5221 5007

International Operations 720 2567

Total Orders Booked 30814 28007

Order Book outstanding at the end of the year 101000 101500

*excludes inter sectoral orders

Events Occurring after the Balance Sheet Date

There were no significant events occurring after the Balance sheet date.

Directors'' Responsibility Statement

Pursuant to Section 134(5) of the Companies Act, 2013, it is hereby confirmed that:

(i) In the preparation of the annual accounts for the financial year ended March 31, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures;

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

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

(iv) The directors have prepared the annual accounts on a going concern basis;

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

(vi) The directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively;

Management Discussion and Analysis

A report on Management Discussion and Analysis is placed at Annexure – I.

Board of Directors

Appointment

Shri Rajesh Kumar Singh, Joint Secretary, Department of Heavy Industry, Ministry of Heavy Industries & Public Enterprises, has been appointed as Part-time Official Director w.e.f. 22.12.2014.

Shri T.N. Veeraraghavan has been appointed as an Additional Director w.e.f. 07.01.2015 to take charge of the office of Director (E,R&D).

Shri D. Bandyopadhyay has been appointed as an Additional Director w.e.f. 01.08.2015 to take charge of the office of Director (HR).

In accordance with Section 161 of the Companies Act, 2013 and Article 67(iv) of the Articles of Association of the Company, Shri Rajesh Kumar Singh and Shri D. Bandyopadhyay shall hold their directorships up to the 51st Annual General Meeting of the Company and is eligible for appointment as Director at the Meeting.

Cessation

Shri Ambuj Sharma, Additional Secretary, Department of Heavy Industry, Ministry of Heavy Industries & Public Enterprises, consequent to DHI order No. 1(2)/1995- PEXI dated 17th December, 2014 has relinquished his position as Part-time Official Director on 21.12.2014.

Shri P.K. Bajpai, who was appointed as Director (Finance) w.e.f. 01.07.2011 ceased to be a Director of the Company on attaining the age of superannuation on 31.05.2015.

Shri T.N. Veeraraghavan, who was appointed as Director (E,R&D) w.e.f. 07.01.2015 ceased to be a Director of the Company on attaining the age of superannuation on 30.06.2015.

Shri R. Krishnan, who was appointed as Director(HR), w.e.f. 01.04.2012 ceased to be a Director of the Company on attaining the age of superannuation o n 31.0 7. 2 015 .

The Board of Directors place on record their deep appreciation of the valuable services rendered as well as advice and guidance provided by S/shri Ambuj Sharma, P.K. Bajpai, T.N. Veeraraghavan and R. Krishnan during their tenure.

Further, pursuant to Section 152 of the Companies Act, 2013 and Article 67(i) of the Articles of Association of the Company, Shri Atul Sobti and Shri S.K. Bahri will retire by rotation at the Annual General Meeting and being eligible, offers themselves for re-appointment.

In compliance with Clause 49(VIII)(E)(1) of the Listing Agreement, brief resumes of the Directors proposed for appointment and re-appointment along with requisite details are given in the Explanatory Statement/ Annexure to the Notice.

No Director has given resignation during the year.

CEO/CFO Certificate

CEO/CFO certificate {as per Clause 49(IX) of Listing Agreement} is placed at Annexure – II.

Sustainable Development

Sustainability is just a natural extension of the way BHEL sees itself and its responsibilities. For almost fifty years of its existence, the company has been leveraging technology and innovations for providing products, systems and services to its customers enabling them to use resources with better efficiency and productivity which is also reflected in its Mission Statement – "Providing

Sustainable Business solutions in the fields of Energy, Industry & Infrastructure".

BHEL has ingrained the triple bottom line approach for Sustainable Development in its business processes. It has been creating value for its stakeholders since inception. Its R&D efforts have always been directed towards development and diffusion of technologies which are having reduced environmental footprints. Its structured CSR programme is directed towards bringing prosperity to the society and is aligned to the efforts being made by Government of India towards inclusive growth.

BHEL has undertaken numerous CSR initiatives and more than 300 such CSR projects/activities implemented during 2014-15 covered majorly all Units/ Regions. In addition, company has undertaken many environmental sustainability initiatives which falls broadly in the areas of renewable energy generation, material and natural resource management, energy management, water & bio-diversity management and carbon management. The details of all such sustainability initiatives are provided in Annexure-III.

Business Responsibility Report

In line with the requirement of clause 55 of the listing agreement, Business Responsibility Report describing the initiatives taken by the company from an environmental, social and governance perspective as per the suggested format is enclosed at Annexure -IV.

R&D and Technological Achievements

Continuous product development is the cornerstone of strategy for meeting the challenges in today''s environment. BHEL places strong emphasis on innovation and creative development, which are the important drivers of BHELs R&D programmes for achieving growth. The R&D efforts of the company are not only aimed at improving the performance and efficiency of the existing products, but also developing new products using state-of-the-art technologies and processes.

BHEL has recorded significant achievements during the year. The R&D expenditure of the company for the current financial year is Rs. 1018.59 Crore which is 3.29% of the turnover. This also includes the expenditure incurred on R&D efforts gone into major modifications/ improvements in product/ designs against customer requirements which are not covered in R&D projects. The company filed 453 patent and copyright applications filed during the year 2014-15, enhancing the company''s intellectual capital to 3010.

It is imperative to focus on newer areas to meet the challenges of a changing business scenario while continuing development in traditional areas of business. To meet this objective, BHEL has taken several technology development initiatives covering various business verticals viz. Power, Transportation, Transmission, Solar, Water, Defence and other areas. Company will continue to pursue various projects undertaken in recent years with focus on low-carbon path technologies including faster assimilation of Supercritical Technology development of Advanced Ultra Super Critical Technology, IGCC Technology commercialization, Carbon capture, Solar PV & Thermal, 765/1200 kV Transmission System, GIS up to 765 kV, ±800 kV HVDC system, IGBT based Propulsion Systems for higher rating Locos, EMU, Metro coaches on mission mode. The company is also engaged in development of emerging technologies like Fuel Cells for distributed environment friendly power generation, development of new materials with addition of Nano-/micro-particles for improving characteristics, and superconducting application in Transformers, Generators, Motors, etc. Further details are given in Annexure-V.

Official Language Implementation

Continuous efforts were made for propagation and effective implementation of Rajbhasha in the company. Inspection of 12 Units/Divisions was done to monitor and review the progress in this area. Committee of Parliament on Official Language appreciated the efforts being made in this area during the inspection of Corporate Office o n 16 .01.15 .

More than 900 non Hindi speaking employees were imparted training under Hindi teaching scheme of Govt. of India. Training for using latest version of Unicode Hindi on computer was also imparted to more than 5000 employees of all the Units/Divisions. 70 Hindi workshops were organized to motivate employees to work in Hindi covering more than 1800 employees. In addition, 1 Translation Training Programme was conducted with the help of Central Translation Bureau, Rajbhasha Vibhag, Ministry of Home Affairs.

Under Inter Unit Rajbhasha Shield Scheme, 13 Units were given award for excellent Rajbhasha Implememtation. 03 executives were awarded for Hindi Book writing under Hindi Book Award Scheme. In addition, 350 employees who do their work in Hindi were also awarded with cash awards.

All the Units/Divisions of the company, including Corporate Office, celebrated Hindi Divas and Hindi Week/ Fortnight/Month during which various competitions, Seminars, Cultural Programme and Kavi Sammelan were held.

BHEL is playing an active role in Town Official Language Implementation Committees constituted in various cities. Many interesting competitions, Seminars and programmes are conducted under auspices of these committees. This year 15 Units/ Divisions of BHEL were awarded by the TOLICs for various achievements in this area.

A handbook "Rajbhasha Sahayika" has been prepared as helping material for doing work in Hindi. It is being distributed to employees in Hindi workshops and it has been uploaded on Corporate intranet also.

13 Hindi Magazines are being published all over the Company to motivate the employees for Hindi writing and these are getting awards from various institutes. "Arunima" from Corporate Office was awarded with Second Prize by TOLIC (PSU), Delhi for excellent House Journal.

All BHEL Rajbhasha Coordinators Meet was held on 9th & 10 th October, 2014 at EPD, Bengaluru. 35 employees from various Units/Division of the Company attended the Meet.

Vigilance

The Vigilance organization of BHEL is headed by a Chief Vigilance Officer (CVO) appointed by the Ministry. All major manufacturing Units / Power Sector Region of BHEL have vigilance set up, headed by senior vigilance executive reporting to the CVO.

Preventive vigilance remained the focus area of BHEL Vigilance, with special emphasis on systemic improvements. To strengthen the vigilance administration, Whistleblower Policy of the company was issued. Further, action was initiated for review of Works policy, Works Account Manual and HR Manual.

Public Awareness is an important cornerstone for good governance. An enlightened employee not only can contribute in achieving the organizational goal but also in system improvements. Training programmes / sessions were conducted to update employees about Company''s policies, rules and procedures in various BHEL Units and Regions. In addition, interactive sessions were held with line executives representing different functional areas to sensitize them about the risk prone areas.

With a view to create awareness about procurement and works policy, rules and procedures etc., to disseminate the instructions/ guidelines issued by CVC and Government of India from time to time and to share best practices and case studies, a quarterly e-Newsletter DISHA is being published by Corporate Vigilance.

Corporate Vigilance teams inspected 9 Units. The issues observed during inspections were discussed in interactive sessions with the respective Unit Managements. It was impressed upon officials to focus on the aspects of estimation and price reasonability while dealing with procurement to remain competitive in the market. The interactive sessions helped BHEL officials to appreciate the role of Vigilance in promoting a strong, viable and competitive organization.

The critical review of tender conditions was also undertaken with a view to increase competition and check cartel formation. Due to proactive action of Vigilance, savings to the tune of Rs. 37.03 Crore (approx.) have been achieved.

BHEL Vigilance prepared a detailed Corruption Mitigation Action Plan in respect of potential areas of corruption, which has been taken up for implementation by all Units.

Routine / Surprise Inspections were carried out by Unit / Corporate Vigilance to verify the compliance of rule and procedures. Instructions/Guidelines were issued concerning following issues for further improvement in the system:

a) Deficiencies in Tendering Process of Transportation Contracts

b) Clarification on clause 4.0 of Guidelines on Suspension on Business Dealings with Suppliers / Contractors

c) Prequalification Criteria (PQ)

d) Receipt and Opening of Tenders

e) Deficiency in Quality Inspections

f) Reasonableness of Rates

Some specific areas concerning Estate Management, Stores Management, Procurement were identified and Unit Managements were advised to initiate action in these areas:

- Recovery of outstanding dues on account of rent and allied charges from the allottees of quarters/ shops in Townships.

- Identification/ segregation of surplus / usable stores/ scrap material from the stores lying outside the workshops in the premises of units and not used/ disposed of for very long time.

- Installation of Bio-metric Attendance System linked with pay system.

- Procurement through open tender route particularly for high value packages and review of PMDs to weed out inactive suppliers.

To improve record management, Guidelines for Retention / Weeding out of Old Records in Vigilance Department issued on 20.08.2014.

To enhance the skills of Vigilance Officers, a workshop for Vigilance Officers was organized from 27.08.2014 to 29.08.2014 at BHEL, Bhopal

BHEL is committed to bring transparency in day to day operations of the Company by leveraging technology. The information regarding procurement related matters like status of purchase orders and Contracts, Vendor registration along with their current status is hosted on the Company website. In addition, e-tendering route is being promoted for procurement and e-payment system has been implemented to reduce vendor interface. Further, steps have been taken to promote e-procurement in the Company. The percentage of e-procurement increased from 25% to 37% and around 26% of tenders (value wise) were decided through Reverse Auction during 2014-15.

Vigilance examined 144 complaints and investigated 30 complaints during the year.

Safety & Security

Though BHEL has an established and mature Safety Management System accredited to OHSAS 18001: 2007, BHEL''s management has further enhanced its focus on building a strong safety culture. To reinforce the organisation setup for safety and to improve our safety practices safety performances and other safety related issues are now reviewed in MCM on quarterly basis.

The result of efforts to improve safety are gradually becoming visible as there has been a marked improvement in safety statistics in recent past. It is reflected in data related to fatalities and man-days lost for the calendar year 2013 and 2014. At project sites, there was approximately 45% reduction in incidences of fatalities and 50 % reduction in the man-days lost due to various types of accidents during calendar year 2014 in comparison to calendar year 2013.

Dedicated Safety and Occupational Health Centres are being run in the factory premises taking care of safety and health issues at the work place. Some of the initiatives taken in our units to build and maintain safety and health culture at work place during the year are:

- Sponsoring BHEL officials for 1 year advanced Diploma course in Industrial Safety conducted by Central / Regional Labour institute at Mumbai, Kanpur, Kolkata, Chennai and Faridabad

- Periodic health and safety awareness campaigns

- Regular health and safety related training programmes

- Display of posters and safety instructions

- Safety pledge & Tool box meetings

- Regular Plant Safety Inspections

- Encouraging use of Personal Protective Equipment

- Mock Drills in identified hazardous areas at specified frequency

- Publication of in-house magazines and hand books on various safety topics

- Work Permit system for carrying out critical activities

- Conducting periodic safety drills, Internal audits & 3rd party audits

- Job Safety Analysis for identified activities

- Monthly departmental Safety Committee meetings and plant safety committee meetings

- Scheduling preventive maintenance of machine/ equipment

- Periodic maintenance & testing of material handling equipment (including cranes, hoists, lifting tackles, forklifts, pallets); all pressure vessels/ air receivers, power presses

- Making available Material Safety Data Sheet (MSDS) for all the hazardous chemicals and safe work procedures are followed

- Developing operation control procedures (OCPs) and providing it to the concerned for effective implementation

Further, Annual Safety Heads Meet was conducted at Corporate Office on 16th & 17th Sep, 2014 for sharing of experience amongst the people directly involved in ensuring safety at their respective workplaces.

The Companys security mechanism is sufficient to provide security to each Plant/Unit. Security of most of the plants of the company is being managed by the CISF except for in some smaller plants where the company has its own security. Also, in some plants, Corporate Office and Regional Offices, the security is being looked after by the private agencies sponsored by Directorate General Resettlement, Govt. of India or Ex-Servicemen Corporations.

Adequate measures have been taken for security of computers. Department of Electronics, Govt. of India (SRAC) has also carried out audit/review of our software security mechanism and their suggestions have been implemented.

Security audit of major plants is being done by the Intelligence Bureau periodically and the additional requirements, wherever pointed out by them, are immediately complied with by the concerned units. Review of security is done internally also from time to time. Monthly report on theft/ pilferage and fire incident compiled by Corporate Security Department along with quarterly reports on various security related issues as per the decisions taken in the meetings of HR & Security Heads.

Adequate measures have been taken by installation of CCTV''s and SOP in many plants and offices to mitigate any security threats.

The Management, security staff and employees of company are sensitized to the security needs of the company.

Corporate Governance

As per the requirements of Clause 49 of the Listing Agreement a detailed report on Corporate Governance (including Board/Committee meeting details) together with the following is given at

Annexure - VI:

(i) Auditors certificate on Corporate Governance (CG) under clause 49 of Listing Agreement & DPE guidelines on Corporate Governance.

(ii) Secretarial Audit Report u/s 204(1) of the Companies Act, 2013 and Management reply thereon.

(iii) Extracts of Annual Return pursuant to section 92(3) of the Companies Act, 2013 read with rule 12(1) of the Companies (Management and Administration) Rules, 2014.

Declaration under section 149(6) of the Companies Act, 2013 pertaining to criteria of Independence has been given by the Independent Directors to the Board of Directors.

Other Disclosures

Information in accordance with the provisions of Section 134(3)(m) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 regarding conservation of energy, technology absorption and foreign exchange earnings and outgo is given at

Annexure-VII.

As per provisions of section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, every listed company is required to disclose the details of the remuneration of directors etc. in the Directors Report. However as per Notification No. GSR 463(E) dated 5th June, 2015 issued by the Ministry of Corporate Affairs, Government Companies are exempted from complying with provisions of section 197 of the Companies Act, 2013. BHEL being a Government Company, therefore, such particulars have not been included as part of Directors'' Report.

Statement pursuant to Section 129 of the Companies Act, 2013 (AOC-1) relating to Subsidiary Companies & Joint ventures and Form AOC-2 pursuant to section 134(3)(h) of the Companies Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014 are given at Annexure-VIII.

Links to Company Websites

1. Familiarisation Programme of Independent Directors, Weblink :

http://www.bhel.com/investorrelations/pdf/ familiriazationprogrmforIDs.pdf

2. Policy Determining Material Subsidiaries and Policy Dealing with Related Party Transactions, Weblink :

http://www.bhel.com/pdf/Policywithregard toRelatedPartyTransactions.pdf

Auditors

The Auditors of your Company are appointed by the Comptroller and Auditor General of India. The names of auditors appointed for the year 2014-15 are printed separately in the Annual Report.

The details of cost auditors appointed for the year 2014-15 and Cost Audit details are printed separately in the Annual Report.

The Auditors'' Report and Comments of the Comptroller and Auditor General of India are given at Annexure - IX.

Acknowledgements

The Board places on record its sincere appreciation towards the Company''s valued customers in India and abroad and esteemed shareholders for the support and confidence reposed by them in the management of the company and look forward to the continuance of this mutually supportive relationship in future.

The Board also gratefully acknowledges the support and guidance received from various Ministries of the Government of India, particularly the Department of Heavy Industry, in Company''s operations and developmental plans. The Directors express their grateful thanks also to the Comptroller and Auditor General of India, Chairman and Members of Audit Board, Statutory Auditors, Branch Auditors, Secretarial Auditors and Cost Auditors. The Company also wishes to place on record its appreciation for the continued co-operation received from all the Technology Collaborators and Suppliers and support provided by the Financial Institutions and bankers. Last, but not the least, the Board wishes to place on record its deep gratitude to all BHELites whose enthusiasm, team efforts, devotion and sense of belongingness has made this great company proud.

For and on behalf of the Board of Directors of

BHARAT HEAVY ELECTRICALS LTD.

B. Prasada Rao

Chairman & Managing Director

Place : New Delhi

Dated : 06.08.2015


Mar 31, 2014

To the Members,

The Directors feel privileged to present the 50th Annual Report on the business and operations of the company and the statement of accounts for the year ended March 31, 2014.

Financial Performance

Financial Year

Figures (in Rs. Crore except 2013-14 2012-13 per share data)

a) Turnover (Gross) 40338 50156

b) Revenue from 38389 47618 operations (Net)

c) Other Operational 720 807 Income

d) Operating expenses 34595 39037

e) Operating profit 4514 9388

f) Add : Other income 1616 1122

g) Profit before 6130 10510 depreciation, finance cost & tax expense

h) Less: Depreciation 983 953

i) Less: Finance costs 133 125

j) Profit before tax 5014 9432

k) Less: Tax expense 1553 2817

l) Profit after Tax 3461 6615

m) Add: Balance brought 1102 1031 forward from the previous year

n) Profit available for 4563 7646 appropriation

i) Adjustment 81 pursuant to Amalgamation

ii) Dividend (including 693 1323 interim dividend)

iii) Corporate 118 221 Dividend tax ((incl. on interim dividend)

iv) Amount transferred 2500 5000 to General Reserve

o) Balance in Statement 1171 1102 of Profit & Loss

p) Earnings per Share (Rs.) 14.14 27.03

q) NAV per share (Rs.) 135.02 124.38

Despite various issues relating to power projects like fuel linkages, fund constraints, land acquisition etc., BHEL recorded a turnover of Rs. 40338 Crore in the year 2013-14. Net worth of the company has gone up by 8.55 %.

Performance of BHEL for the year 2012-13 has been rated as ''Very Good'' in terms of MoU signed with the Government of India. BHEL has been awarded MoU Composite score of ''2.49''.

Dividend

The Board has recommended a final dividend of 76 % (Rs. 1.52 per share), Rs. 372.04 Crore, for the year 2013-14. An interim dividend of 65.5 % (Rs. 1.31 per share), Rs. 320.64 Crore, on share capital of Rs. 489.52 Crore, has already been paid for the year 2013-14. Thus the total dividend (exclusive of dividend tax) for the year 2013-14 is Rs. 692.68 Crore (Rs. 2.83 per share) as against Rs. 1323 Crore (Rs. 5.41 per share) paid in the previous year.

Provision of Rs. 63.23 Crore has been made for Corporate Dividend Tax on the final dividend proposed. Corporate Dividend Tax of Rs. 54.49 Crore has already been paid on the interim dividend.

Orders Received

Despite operating in a subdued but healthy competitive business environment, the company secured orders worth Rs. 28007 Crore during the year. Sector-wise orders booked are as follows:

(Rs. in Crore)

2013-14 2012-13

Power Sector 20433 25560

Industry Sector* 5007 4086

International

Operations 2567 2004

Total Orders

Booked 28007 31650

Order Book outstanding at the end of the year 101500 115100

*excludes inter sectoral orders

Events Occurring after the Balance Sheet Date

There were no significant events occurring after the Balance sheet date.

Directors'' Responsibility Statement

Pursuant to Section 217(2AA) of the Companies Act, 1956, it is hereby confirmed:

(i) that in the preparation of the annual accounts for the financial year ended 31st March, 2014 the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

(ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at the end of the financial year 2013-14 and of the profit of the company for that period;

(iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act,1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts for the financial year ended 31st March, 2014 on a going concern'' basis.

Management Discussion and Analysis

A report on Management Discussion and Analysis is placed at Annexure -

I. Board of Directors

Appointment

Shri Atul Sobti has been appointed as an Additional Director w.e.f. 01.12.2013 to take charge of the office of Director (Power).

Pursuant to DHI letter no. 1(18)/2011-PEXI, dated 31.12.2013, the term of Shri B. Prasada Rao, CMD, has been extended by the President of India for a period of two years w.e.f. 01.01.2014.

Shri S.K. Bahri, Additional Secretary & Financial Adviser, Department of Industrial Policy & Promotion, Ministry of Commerce & Industry has been appointed as Part-time Official Director w.e.f. 31.03.2014.

Ms. Harinder Hira has been appointed as Part-time Non-official Director w.e.f. 08.05.2014.

In accordance with Section 161 of the Companies Act, 2013 and Article 67(iv) of the Articles of Association of the company, Shri Atul Sobti, Shri S.K Bahri and Ms. Harinder Hira shall hold their directorships upto the 50th Annual General Meeting of the company and are eligible for appointment as Directors at the Meeting.

Cessation

Shri Trimbakdas S. Zanwar who was appointed as Part-time Non-Official Director w.e.f. 12.11.2010 ceased to be a Director of the company on completion of his tenure on 11.11.2013.

Shri Atul Saraya, who was appointed as Director (Power) w.e.f. 01.10.2009 ceased to be a Director of the company on attaining the age of superannuation on 30.11.2013.

Ms. Kusumjit Sidhu, IAS, former Additional Secretary & Financial Adviser, Ministry of Commerce & Industry, consequent upon her appointment as Secretary, Department of Public Enterprises, has relinquished her position as Part-time Official Director w.e.f. 01.01.2014.

Shri S. Ravi who was appointed as Part-time Non- Official Director w.e.f. 10.03.2011 ceased to be a Director of the company on completion of his tenure on 09.03.2014.

The Board of Directors place on record their deep appreciation for the valuable services rendered as well as advice and guidance provided by Shri Trimbakdas S. Zanwar, Shri Atul Saraya, Ms. Kusumjit Sidhu and Shri S. Ravi during their tenure.

Further, pursuant to Section 152 of the Companies Act, 2013 and Article 67(i) of the Articles of Association of the company, S/shri R. Krishnan and W.V.K Krishna Shankar will retire by rotation at the Annual General Meeting and being eligible, offer themselves for re-appointment.

In compliance with Clause 49(IV)(G)(i) of the Listing Agreement, brief resumes of the Directors proposed for appointment and re-appointment along with the nature of their expertise in specific functional areas and names of companies in which the person also holds directorship along with the membership of the Committees of the Board are given at Annexure-II forming part of the Directors'' Report.

Sustainable Development

The concept of sustainability is ingrained in the DNA of BHEL which is evident from the mission statement- "Providing Sustainable Business solutions in the fields of Energy, Industry & Infrastructure". BHEL is committed to be an environment friendly company in all its areas of activities, products and services and providing a safe & healthy work environment.

The company is putting in efforts to reduce the carbon footprint of its organisational activities and also its customers by adopting sustainable business practices. Various projects and initiatives are being undertaken in the areas of Renewable Energy Generation, Material and Natural Resource Management, Energy Management, Water & Bio- Diversity Management and Carbon Management.

BHEL has always been endeavouring to act as a responsible corporate citizen committed to the welfare of society through inclusive growth aimed at capacity building, empowerment of communities, environment protection and development of backward regions and upliftment of the marginalised & under-privileged sections of the society.

During 2013-14, BHEL spent 1.64% of PAT of the year 2012-13 towards CSR & Sustainability activities. company has supported various social initiatives across the country by undertaking projects in diversified areas like Community Development, Health & Hygiene, Education, Environment Protection, Disaster Management, and Talent up gradation/Skill development. Further details are given in Annexure–III.

In line with the requirement of clause 55 of the listing agreement, Business Responsibility Report describing the initiatives taken by the company from an environmental, social and governance perspective as per the suggested format is enclosed at Annexure - IV.

R&D and Technological Achievements

BHEL''s products and systems are technology intensive and thus, BHEL has adopted R&D and technology development as the central driver for implementing its strategy and fulfilling its endeavour to become a global engineering enterprise. As part of Strategic Plan 2012-17, the company is transforming its R&D and innovation in a structured and focused manner through five pronged approach consisting of Strategic Direction, Portfolio Management, Partnerships & Alliances, Knowledge Management and Enablers to improve the performance of existing products and develop new product for meeting global benchmarks.

The R&D expenditure of the company during 2013- 14 was Rs. 1114 Crore which was 2.76% of the turnover as against 2.49% for the previous year. This also includes the expenditure incurred on R&D efforts gone into major modifications / improvements in products/designs against customer requirements which are not covered in R&D projects. Similarly, the IPR capital of the company has grown by 19% as compared to 2012-13, taking the total to 2589.

Further, investments in R&D are being intensified to enhance capabilities in Product Development & Engineering. Company will continue to pursue various projects undertaken in recent years with focus on low-carbon path technologies including faster assimilation of supercritical technology, development of Advanced Ultra Super Critical Technology, IGCC Technology commercialisation, Carbon capture, Solar (PV, Thin Film, CSP), 765/1200 kV Transmission System, GIS up to 765 kV, ±800 kV HVDC system, IGBT based Propulsion Systems for higher rating Locos, EMU, Metro coaches on mission mode. Further details are given in Annexure-V.

Official Language Implementation

Continuous efforts were made for propagation and effective implementation of Rajbhasha in the company. All the Units and Divisions have Hindi cells for assistance in fulfilling the Rajbhasha requirements. Quarterly Meetings of Official Language Implementation Committee were conducted on regular basis to monitor and review the progress made in achieving the targets fixed in Annual Programme for 2013-14.

More than 600 non Hindi speaking employees were imparted training under Hindi teaching scheme of Govt. of India. Training for using Unicode Hindi on computer was also imparted to employees of all the Units/Divisions. To motivate employees to work in Hindi 80 Hindi workshops were organized covering more than 2000 employees. In addition, 2 Translation Training Programmes were conducted with the help of Central Translation Bureau, Rajbhasha Vibhag, Ministry of Home Affairs.

Inter Unit Rajbhasha Scheme has been introduced to increase the competition amongst the Units and Divisions in this area. Under the scheme, 12 Units were given award for excellent Rajbhash Implementation. Two executives were awarded for Hindi Book writing under Hindi Book Award Scheme.

All the Units/Divisions of the company, including Corporate Office, celebrated Hindi Divas and

Hindi Week/ Fortnight/Month during which various competitions, Seminars, Cultural Programme and Kavi Sammelan were held.

Twelve wards of employees who obtained B-2 grade or above in Hindi subject at Board level examinations were given awards.

Our company is playing an active role in Town Official Language Implementation Committees constituted in various cities. Many interesting competitions, seminars and programmes are conducted under auspices of these committees. This year 10 Units/ Divisions of BHEL were awarded by the TOLICs for various achievements in this area.

Vigilance

The Vigilance organisation of BHEL is headed by a Chief Vigilance Officer (CVO) appointed by the Ministry. Major manufacturing Units / Power Sector Region of BHEL have a vigilance set up headed by a senior vigilance executive reporting to the CVO.

Preventive vigilance has remained the focus area of BHEL Vigilance all through the years. During 2013-14 emphasis was on systemic improvements. Based on system studies carried out, suggestions towards system improvements were rendered for incorporation in the policies / guidelines. Consequently policies / guidelines were revised during the year:

Purchase Policy

Reverse Auction Guidelines

Guidelines for Suspension of Business

Dealings with Vendors

Amendments to Vendor Registration Procedures

- SEARP, 2010.

Public Awareness is an important corner stone for good governance. An enlightened employee not only can contribute in achieving the organisational goal but also in system improvements. Training programmes were conducted to update employees about companys policies, rules and procedures. 104 such programmes were organized during the year 2013-14 in various BHEL Units and Regions. In addition, interactive sessions were held with line executives representing different functional areas to sensitise them about the risk prone areas.

To create awareness about the procedures of procurement in BHEL, to disseminate the instructions issued by Statutory Authorities and to share the case studies, quarterly e-Newsletter "DISHA" is being published.

The Vigilance Awareness Week was observed from 28th October to 2nd November, 2013 in Corporate Office, Manufacturing Units, Power sector Regions and Project Sites of BHEL. Observance of Vigilance Awareness Week commenced with the PLEDGE of Integrity by the employees.

Interactive sessions/discussions on the theme "Promoting Good Governance-Positive Contribu- tion of Vigilance", were organized at Corporate Office and in Units/Regions. Lectures and interactions with various eminent personalities, expert speakers on relevant topics varying from RTI, Fraud Risk Management to Ethics and Values etc. were also organized across the organisation during Vigilance Awareness Week.

During 2013-14, Vigilance emphasised on procure- ment through open tender route particularly for high value packages. Tender conditions related to rate contracts were studied and suitable terms and conditions were incorporated to thwart cartelisation by vendors. Further, quality inspections and utilization of BHEL T&Ps in sub-contracted/ outsourced works were selected as focus area for enhancing the end quality of products and productivity.

Corporate Vigilance teams inspected 6 Vigilance Units of BHEL. The findings were discussed in interactive sessions with the Unit Managements. It was impressed upon officials to focus on the aspects of estimation and price reasonability while dealing with procurement to remain competitive in the market. The interactive sessions helped

BHEL officials to appreciate the role of Vigilance in promoting a strong, viable and competitive organisation.

BHEL is committed to bring transparency in day to day operations of the company by leveraging technology. The information regarding procurement related matters like status of purchase orders and Contracts, vendor registration along with their current status is hosted on the company web site. In addition, e-tendering route is being promoted for procurement and e-payment system has been implemented to reduce vendor interface.

Safety & Security

Dedicated Safety and Occupational Health Centers are being run in the factory premises taking care of safety and health issues at the work place. Various measures like periodic health and safety awareness campaigns, mock drills in identified hazardous areas once in 6 months, job safety analysis for identified activities, periodic maintenance & testing of material handling equipment, monitoring of quality of food & water etc. are being taken to ensure best possible safe working environment. Most of the manufacturing units and other entities have been accredited to Environmental Management Systems (ISO 14001:2004) and Occupational Health & Safety Management Systems (OHSAS 18001:2007).

The company''s security mechanism is sufficient and geared up to provide security to each Plant/Unit. Installation of CCTV''s and SOP have been installed in many of the plants. Security audit of major plants is being done by the Intelligence Bureau periodically and the additional requirements, wherever pointed out by them, are immediately complied with by the concerned units. The Management, security staff and the employees of company are sensitised to the security needs of company.

Adequate measures have been taken for Security of computers and software. Department of Electronics, Govt. of India (SRAC) has also carried out audit/ review of our software security mechanism and their suggestions have been implemented.

Corporate Governance

As per the requirements of Clause 49 of the Listing Agreement a detailed report on Corporate Governance together with the following is given at

Annexure - VI:

(i) CEO/CFO Certificate [as per Clause 49(V)] and

(ii) Certificate from the company''s Auditors [as per Clause 49(VII)].

Other Disclosures

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

As per Notification No. GSR 289(E) dated March 31, 2011 issued by the Ministry of Corporate Affairs, amending the provisions of the Companies (Particulars of Employees) Rules, 1975 issued in terms of Section 217(2A) of the Companies Act, 1956, it is not necessary for Government companies to include the particulars of employees drawing salaries of Rs. 60 lakh or more per annum, employed throughout the financial year or Rs. 5 lakh per month, if employed for part of the financial year. The company being a Government company, the information has not been included as a part of the Directors'' Report. However such particulars will be made available to any member on receiving a specific request in this regard during the course of Annual General Meeting.

Statement pursuant to Section 212 of the Companies Act, 1956 relating to Subsidiary Companies is given at Annexure-VIII.

Auditors

The Auditors of your company are appointed by the Comptroller and Auditor General of India. The names of auditors appointed for the year 2013-14 are printed separately in the Annual Report.

The detail of cost auditors appointed for the year 2013-14 and Cost Audit details are printed separately in the Annual Report.

The reply to the point referred to in the Auditors Report and Comments of the Comptroller and Auditor General of India are given at Annexure - IX.

Acknowledgements

The Board places on record its sincere appreciation towards the company''s valued customers in India and abroad and esteemed shareholders for the support and confidence reposed by them in the management of the company and look forward to the continuance of this mutually supportive relationship in future.

The Board also gratefully acknowledges the support and guidance received from various Ministries of the Government of India, particularly the Department of Heavy Industry, in company''s operations and developmental plans. The Directors express their grateful thanks also to the Comptroller and Auditor General of India, Chairman and Members of Audit Board, Statutory Auditors, Branch Auditors and Cost Auditors. The company also wishes to place on record its appreciation for the continued co-operation received from all the Technology Collaborators and Suppliers and support provided by the Financial Institutions and bankers. Last but not the least the Board wishes to place on record its deep gratitude to all BHELites whose enthusiasm, team efforts, devotion and sense of belongingness has made this great company proud.

For and on behalf of the Board of Directors of BHARAT HEAVY ELECTRICALS LTD.

B. Prasada Rao

Chairman & Managing Director

Place : New Delhi Dated : July 14, 2014


Mar 31, 2013

To the Members,

The Directors are delighted to present the 49th Annual Report on the business and operations of the Company and the statement of accounts for the year ended March 31, 2013.

Financial Performance

Financial Year

Figures 2012-13 2011-12 (in Rs. Crore except per share data)

(a) Turnover (Gross) 50156 49510

(b) Revenue from operations 47618 47228 (Net)

(c) Other Operational Income 807 751

(d) Operating expenses 39037 38092

(e) Operating profit 9388 9887

(f) Add : Other income 1122 1266

(g) Profit before depreciation, 10510 11153 finance cost & tax expense

(h) Less: Depreciation 953 800

(i) Less: Finance costs 125 51

(j) Profit before tax 9432 10302

(k) Less: Tax expense 2817 3262

(l) Profit after Tax 6615 7040

(m) Add: Balance brought forward 1031 812 from the previous year

(n) Profit available for 7646 7852 appropriation

i) Dividend (including 1323 1567 interim dividend)

ii) Corporate Dividend tax 221 254 (incl. on interim dividend)

iii) Amount transferred to 5000 5000 General Reserve

(o) Balance in Profit & Loss 1102 1031

(p) Earnings per Share (Rs.) 27.03 28.76

(q) NAV per share (Rs.) 124.38 103.67

(r) Economic Value Added (Rs. Crore) 2657 4032

Financial Highlights

During 2012-13, BHEL recorded its highest-ever turnover of Rs. 50156 Crore. Profit before tax is Rs. 9432 Crore and Profit after tax is placed at Rs. 6615 Crore.

Net worth of the company has gone up from Rs. 25373 Crore to Rs. 30444 Crore registering an increase of 19.9%. Net asset value (NAV) per share has been placed at Rs. 124.38 in 2012-13 as against Rs. 103.67 in 2011-12.

Dividend

The Board has recommended a Final Dividend of 164.5% (Rs. 3.29 per share), Rs. 804.11 Crore, for the year 2012-13. An interim dividend of 106% (Rs. 2.12 per share), Rs. 518.89 Crore, on share capital of Rs. 489.52 Crore, has already been paid for the year 2012-13. Thus the total dividend (exclusive of dividend tax) for the year 2012-13 is Rs. 1323 Crore (Rs. 5.41 per share) as against Rs. 1566.47 Crore (Rs. 6.40 per share) paid in the previous year.

Provision of Rs. 136.66 Crore has been made for Corporate Dividend Tax on the Final dividend proposed. Corporate Dividend Tax of Rs. 84.18 Crore has already been paid on the interim dividend.

Orders Received

Orders worth Rs. 31650 Crore were received during the year as against Rs. 22096 Crore in 2011-12. Sector-wise orders booked are as follows:

(Rs. in Crore)

2012-13 2011-12

Power Sector 25560 14012

Industry Sector* 4086 7850

International Operations 2004 234

Total Orders Booked 31650 22096

Order Book outstanding at the end of the year 115100 135300

*excludes inter sectoral orders

Rating of BHEL vis-a-vis MoU Targets

Performance of BHEL for the year 2011-12 has been rated as ''Excellent'' in terms of MoU signed with the Government of India. BHEL has been awarded the MoU Composite score of Rs.1.085''.

Maharatna Status

Consistent performance in a highly competitive environment enabled BHEL attain the coveted ''Maharatna'' Status and be counted among seven select PSU''s having this status.

Management Discussion and Analysis

A report on Management Discussion and Analysis is placed at Annexure -I.

Board of Directors Appointment

Smt. Chandra Iyengar has been appointed as Part-time Non-official Director w.e.f. 01.04.2013.

Ms. Kusumjit Sidhu, IAS, Additional Secretary & Financial Adviser, Department of Industrial Policy & Promotion, Ministry of Commerce & Industry has been appointed as Part-time Official Director w.e.f. 10.05.2013.

Shri W.V.K. Krishna Shankar has been appointed as an Additional Director w.e.f. 01.08.2013 to take charge of the office of Director (IS&P).

In accordance with Section 260 of the Companies Act, 1956 and Article 67(iv) of the Articles of Association of the Company, Ms. Kusumjit Sidhu and Shri W.V.K. Krishna Shankar shall hold their directorships upto the 49th Annual General Meeting of the Company and are eligible for appointment as Directors at the Meeting.

Cessation

Shri V.K. Jairath who was appointed as Part-time Non-official Director w.e.f. 12.11.2009 ceased to be a Director of the Company on completion of his tenure on 11.11.2012.

Shri Vijay S. Madan, IAS, former Additional Secretary & Financial Adviser, Ministry of Commerce & Industry, consequent upon his appointment as Officer on Special Duty in the Unique Identification Authority of India has relinquished his position as Part-time Official Director w.e.f. 22.03.2013.

Smt. Chandra Iyengar, Part-time Non-official Director, consequent upon her appointment as Member on the Maharashtra Electricity Regulatory Commission, has resigned from the BHEL Board on 29.05.2013.

Shri O.P. Bhutani, who was appointed as Director (E,R&D) w.e.f. 24.12.2009 ceased to be a Director of the Company on attaining the age of superannuation on 31.05.2013.

Shri M.K. Dube, who was appointed as Director (IS&P) w.e.f. 25.06.2011 ceased to be a Director of the Company on attaining the age of superannuation on 31.07.2013.

The Board of Directors place on record their deep appreciation of the valuable services rendered as well as advice and guidance provided by Shri V.K. Jairath, Shri Vijay S. Madan, Smt. Chandra Iyengar, Shri O.P. Bhutani and Shri M.K.Dube during their tenure.

Further pursuant to Sections 255 and 256 of the Companies Act, 1956 and Article 67(i) of the Articles of Association of the Company, S/Shri P.K. Bajpai and Atul Saraya will retire by rotation at the Annual General Meeting and being eligible, offer themselves for re- appointment.

In compliance with Clause 49(IV)(G)(i) of the Listing Agreement, brief resumes of the Directors proposed for appointment and re-appointment along with the nature of their expertise in specific functional areas and names of companies in which the person also holds the directorship along with the membership of the Committees of the Board are given at Annexure-II forming part of the Directors'' Report.

Official Language Implementation

1. Corporate Office was awarded first prize by Town Official Language Implementation Committee (Undertaking), Delhi for excellent implementation of Official Language.

2. RC Puram, Hyderabad won first prize for excellent O.L. implementation from TOLIC, Hyderabad.

3. PS-WR got third prize from TOLIC, Nagpur for excellent editing of their Hindi Magazine ''Tarangini''.

4. PS-ER was awarded second prize for excellent editing of their Hindi Magazine ''Poorvabha'' by TOLIC, Kolkata.

5. PS-WR got award of Active Member of TOLIC, Nagpur from TOLIC, Nagpur.

6. With a view to create favourable atmosphere for usage of Hindi in the Company, all the Units/ Divisions of the company, including Corporate Office, celebrated Hindi Divas and Hindi Week/Fortnight/Month during which various competitions were held. 11 Hindi competitions were held by Corporate Office. 230 participants participated in the competitions and 85 of them were given cash awards.

7. In addition, wards of the employees of various Units/Divisions, who secured minimum 60% in class XII exam and B2 grade in class X exam in Hindi subject were given cash prize.

8. ''Hindi Shabdakosh Jnan'' competition was held by Corporate Office under auspices of TOLIC (Undertaking), Delhi. Various Hindi competitions and programmes were also conducted by the Units/Divisions under auspices of TOLIC existing at their cities.

9. 13 Hindi magazines were published by Units and Divisions of the company during the year. Corporate Office also brought out 2 issues of its half yearly Hindi magazine ''Arunima'' during the year.

10. 40 Translation Assistants (FTA) and 14 Typing Assistants (FTA) were recruited in various Units/ Divisions of the company during the year. 6 days Rajbhasha Orientation Programme was oraganized for Translation Assistants.

Participation in the Global Compact of the United Nations

BHEL is an environment friendly company in all its activities, products & services, besides providing safe and healthy working environment to all its stakeholders and it has made United Nations Global Compact (UNGC) programme as part of the Company''s strategy, culture and day-to-day operations.

BHEL continues to be a member of the United Nations Global Compact (UNGC) Programme and stands commited to the core values enshrined in its principles on human rights, labour standards, and environment and anti corruption. BHEL is now a Lifetime Corporate member of Global Compact Network, India.

Vigilance

The Vigilance organisation of BHEL is headed by a Chief Vigilance Officer (CVO) appointed by the Ministry. Each manufacturing Unit / Power Sector Region of BHEL has a vigilance set up headed by a senior vigilance executive reporting to the CVO.

In addition to preventive vigilance which has remained the focus area of BHEL Vigilance all through the years, additional impetus was also given for effective vigilance administration through leveraging technology during 2012-13. This has helped in proactive and predictive Vigilance Management.

Training programmes were conducted to update employees on Company''s policies, rules and procedures. 119 such programmes were organized during the year 2012-13 in various Units, Regions and offices of BHEL. Interactive sessions were held with line executives representing different functional areas, in order to sensitize employees and to enhance their knowledge of the Company''s rules, procedures and policies.

To create awareness about the procedures of procurement in BHEL, to disseminate the instructions issued by Statutory Authorities and to share the case studies, the inaugural issue of quarterly e-Newsletter "DISHA" was published on 01.07.2013.

With a view to making systems more effective and transparent, Vigilance had carried out system studies during the year 2012-13 based on which suggestions towards system improvement have been rendered. Some of the major areas where suggestions for improvement were given are:

- Purchase Policy

- Amendments to ''Vendor Registration Procedures - SEARP, 2010''.

- Systemic changes in ''Reverse Auction Guidelines''.

- Amendments to certain provisions in ''Guidelines for Suspension of Business Dealings with Vendors''.

- Formulation of Common Loading Criteria in evaluation of tenders.

With a view to restructure the mechanism for effective and timely disposal of complaints a ''Complaint Handling Policy'' was issued on 24.06.2013 wherein the complaints received by Vigilance can be dealt in a consistent manner, in accordance with the extant instructions issued by the CVC.

A workshop was organized at Corporate Office on 29.05.2013 wherein senior executives of major PSUs- SAIL, ONGC, IOCL, EIL, NLC, RINL, BPCL, participated to share the best practices being followed by various PSUs for Reverse Auction (RA). The inputs will be helpful while revising the RA guidelines of BHEL.

As per the directions of the Central Vigilance Commission (CVC), the Company has taken many initiatives to make available all relevant information on the web on real time basis. Following have been ensured to make available all relevant information on the web:

- Status of Purchase Orders, Works Contracts concluded every month, as per CVC format, is being uploaded by all Units.

- Procedure and forms related to Vendor registration are hosted on the Company web site.

- Status of vendor registration applications is hosted on the web and can be viewed by vendors.

- E-payment of vendor bills is being implemented throughout the organization and principle of first in first out is being followed as a rule in payment of vendor bills.

- Status of bill payment can be viewed by the vendors on-line.

- Indents are being raised on-line in most of the Units.

- Information relating to Rules/Procedures of the Company is available on the BHEL/Units websites.

- This year the Company has initiated uploading of project documentation on VIGEYE GPMS, an initiative taken up by the CVC, with a view to raise alerts on probable inconsistencies during project execution.

Security

The Company''s Security mechanism is sufficient and geared up to provide security to each Plant/Unit. Whereas, the security of the most of the Plants of the Company is being managed by the CISF, in some smaller plants, the Company has its own Security. In other Plants, Corporate Office and Regional Offices, the security is being looked after by the private agencies sponsored by Directorate General Resettlement, Govt. of India or Ex-Servicemen Corporation.

Adequate measures have been taken for Security of computers. Department of Electronics, Govt. of India (SRAC) has also carried out inspection of our software security mechanism and their suggestions have been implemented.

Security audit of major plants is being done by the Intelligence Bureau periodically and the additional requirements, wherever pointed out by them, are immediately complied with by the concerned Units. Review of Security is done internally also from time to time. Monthly report on theft / pilferage and fire incidents is being compiled by Corporate Security Department along with quarterly reports on various security related issues as per the decisions taken in the meetings of HR & Security Heads.

CCTV''s are being installed and standard operating procedures (SOP) are being prepared to deal with any security threat.

The Management, security staff and the employees of Company are sensitized to the security needs of Company.

Sustainability

The concept of Sustainability has been ingrained in the DNA of BHEL which is evident from the Mission Statement - "Providing Sustainable Business solutions in the fields of Energy, Industry & Infrastructure". Sustainability is an integral part of the company''s strategy.

BHEL is committed to be an Environment friendly company in all its areas of activities, products and services while providing a safe and healthy working environment. In line with the company''s strategy, Environment Improvement Projects (EIP) / Sustainable Development (SD) Projects and Community Development Programmes are being given special thrust.

BHEL has defined its Sustainable Development (SD) policy keeping in view the scale & nature of organization''s activities, products & services. The SD projects undertaken in 2012-13 were in the areas of Rain water harvesting, afforestation, captive power generation based on solar energy, use of renewable energy, energy efficiency & conservation, and responsible waste disposal. A broad strategic management framework has also been developed for ensuring Sustainable Development in BHEL through its product and services as well as in-house activities. Through these initiatives, organization is directing its efforts to minimize the carbon footprint of the organizational activities. Further it is also helping the customer to reduce the carbon footprint in their operations as well through development of cleaner technologies.

In keeping with the commitment to promote the use of renewable power in manufacturing units, the company has installed 250 KWp Solar power plant at Bhopal unit and Roof Top Solar power plant of 20 KWp at Trichy unit in 2012-13. Company also installed more than 1200 Turbo ventilators across its units to encourage energy conservation. As a part of Energy Efficiency more than 20 energy efficiency projects were completed at the units. Total expenditure incurred on such activities taken under Sustainable Development Projects for the year 2012-13 was Rs. 8.16 Crore against target of Rs. 7.44 Crore.

All manufacturing Units/ Regions of the company are accredited to international standards viz. ISO-14001 certification for environmental management and OHSAS-18001 certification for occupational health and safety management systems.

BHEL has been awarded with the prestigious "Golden Peacock Award for Sustainability" 2012.

EPD Bangalore was honored with the "Gold Award" during 2012 for its outstanding achievement in the Safety Management by M/s Greentech Foundation.

BHEL, EPD-Bangalore & BHEL, Trichy units received "CII-ITC Sustainability Award 2012" for being India''s, ''one of the most Sustainable organization''.

Directors'' Responsibility Statement

Pursuant to Section 217(2AA) of the Companies Act, 1956, it is hereby confirmed:

(i) that in the preparation of the annual accounts for the financial year ended 31st March, 2013 the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

(ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year 2012-13 and of the profit of the company for that period;

(iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts for the financial year ended 31st March, 2013 on a ''going concern'' basis.

Corporate Governance

As per the requirements of Clause 49 of the Listing Agreement a detailed report on Corporate Governance together with the following is given at Annexure - III:

(i) CEO/CFO Certificate [as per Clause 49(V)] and

(ii) Certificate from the Company''s Auditors [as per Clause 49(VII)].

Other Disclosures

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

None of the employees have drawn remuneration in excess of the limits prescribed under section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of employees) Rules, 1975 during the year 2012-13.

Statement pursuant to Section 212 of the Companies Act, 1956 relating to Subsidiary Companies is given at Annexure-V.

Events Occurring After The Balance Sheet Date

There were no significant events occurring after the Balance sheet date.

Auditors

The Auditors of your Company are appointed by the Comptroller and Auditor General of India. The names of auditors appointed for the year 2012-13 are printed separately in the Annual Report.

The detail of cost auditors appointed for the year 2012-13 and Cost Audit details are printed separately in the Annual Report.

The reply to the point referred to in the Auditors'' Report and Comments of the Comptroller and Auditor General of India are given at Annexure - VI.

Acknowledgements

The Board places on record its sincere appreciation towards the Company''s valued customers in India and abroad for the support and confidence reposed by them in the management of the company and look forward to the continuance of this mutually supportive relationship in future.

The Board also gratefully acknowledges the support and guidance received from various Ministries of the Government of India, particularly the Department of Heavy Industry, in Company''s operations and developmental plans. The Directors express their grateful thanks also to the Comptroller and Auditor General of India, Chairman and Members of Audit Board, Statutory Auditors, Branch Auditors and Cost Auditors. The Company also wishes to place on record its appreciation for the continued co-operation received from all the Technology Collaborators and Suppliers and support provided by the Financial Institutions and bankers. Last but not the least the Board wishes to place on record its deep gratitude to all BHELites whose enthusiasm, team efforts, devotion and sense of belongingness has made this great company proud.

For and on behalf of the Board of Directors of

BHARAT HEAVY ELECTRICALS LTD.

Place : New Delhi (B.Prasada Rao)

Dated : August 3, 2013 Chairman & Managing Director


Mar 31, 2012

The Directors are delighted to present the 48th Annual Report on the business and operations of the Company and the statement of accounts for the year ended March 31,2012.

FINANCIAL PERFORMANCE

Financial Year

Figures (in Rs. crore except per share data) 2011-12 2010-11

(a) Turnover (Gross) 49510 43337

(b) Revenue from operations (Net) 47228 41566

(c) Other Operational Income 751 680

(d) Operating expenses 38092 33663

(e) Operating profit 9887 8583

(f) Add : Other income 1266 1021

(g) Profit before depreciation, finance cost & tax expense 11153 9604

(h) Less: Depreciation 800 544

(i) Less: Finance costs 51 55

(j) Profit before tax 10302 9005

(k) Less: Tax expense 3262 2994

(l) Profit after Tax 7040 6011

(m) Add: Balance brought forward from the previous year 812 575

(n) Profit available for appropriation 7852 6586

i) Dividend (including interim dividend) 1567 1525

ii) Corporate Dividend tax (incl. on interim dividend) 254 249

iii) Amount transferred to General Reserve 5000 4000

(o) Balance in Profit & Loss 1031 812

(p) Earnings per Share (Rs.) @ 28.76 24.56

(q) NAV per share (Rs.) @ 103.67 82.34

(r) Economic Value Added (Rs. crore) 4032 3793

@ Calculated on post-split on number of shares for 2010-11 on like to like basis.

FINANCIAL HIGHLIGHTS

During the year, the company witnessed growth in Turnover by 14.2% to Rs. 49510 crore from Rs.43337 crore in the previous year. The Revenue from operations (Net) increased by 13.6% from Rs. 41566 crore in 2010-11 to Rs. 47228 crore in 2011-12. Profit before Tax for the year 2011-12 is placed at Rs. 10302 crore as against Rs. 9005 crore during 2010-11, a growth of 14.4% as compared to previous year. Profit after Tax is placed at Rs. 7040 crore as against Rs. 6011 crore during 2010-11, a growth of 17.1% over previous year.

Excluding impact of change in policy related to warranty obligation for earlier years in 2010-11, the turnover, PBT and PAT were Rs.41299 crore, Rs. 8487 crore and Rs. 5665 crore respectively, an increase of 19.9%, 21.4% and 24.3% respectively in 2011-12 as compared to 2010-11.

The company has registered a significant growth in turnover, profit and other financial parameters during the year 2011-12.

During the year company has sub-divided existing equity shares of face value of Rs. 10/- into 5 equity shares of face value of Rs. 2/- each and the record date was fixed October 04, 2011.

Net worth of the company has gone up from Rs. 20154 crore to Rs.25373 crore registering an increase of 25.9%. Net asset value (NAV) per share has been placed at Rs. 103.67 in 2011-12 as against Rs. 82.34 (post-split) in 2010-11.

The company had filed Draft Red Herring Prospectus (DRHP) dated 28.09.2011 with Securities and Exchange Board of India (SEBI) on 30.09.2011 for disinvestment of 5% of the paid up equity capital out of Government of India's shareholding. Consequent upon the receipt of 'no-objection' for withdrawal of DRHP for FPO, from Department of Heavy Industry/ Department of Disinvestment, the Board of Directors in its meeting held on April 03, 2012 has approved the withdrawal of DRHP filed by the company with SEBI.

DIVIDEND

The Board has recommended a Final Dividend of 184% (Rs. 3.68 per share), Rs. 900.72 crore, for the year 2011-12. An interim dividend of 136% (Rs.2.72 per share), Rs. 665.75 crore, on share capital of Rs. 489.52 crore, has already been paid for the year 2011-12. Thus the total dividend (exclusive of dividend tax) for the year 2011-12 is Rs.1566.47 crore (Rs. 6.40 per share) as against r 1524.85 crore paid in the previous year.

Provision of Rs. 146.12 crore has been made for Corporate Dividend Tax on the Final dividend proposed. Corporate Dividend Tax of Rs. 108 crore has already been paid on the interim dividend.

ORDERS RECEIVED

Orders worth Rs.22096 crore were received during the year as against Rs. 60507 crore in 2010-11. Sector-wise orders booked are as follows:

(Rs in Crore) 2011-12 2010-11

Power Sector 14012 46393

Industry Sector* 7850 10375

International Operations 234 3739

Total Orders Booked 22096 60507

Order Book outstanding at the end of the year 135300 164145

* excludes inter sectoral orders

The decrease in order book is mainly due to sharp slow down witnessed in the Indian power sector. The developers are facing numerous constraints like coal allocation, gas allocation, environment clearance, land acquisition, legal issues, financing and fund tie-ups etc.

As a result bidding process of many projects was delayed and many projects, including those for which the bids have been opened in last financial year, could not be concluded for one or more of the above issues. Further, the year 2011-12 witnessed unforeseen turmoil in various parts of the globe influencing BHEL's international business prospects.

RATING OF BHEL VIS-A-VIS MOU TARGETS

Performance of BHEL for the year 2010-11 has been rated as 'Excellent' in terms of MoU signed with the Government of India. BHEL has been awarded the MoU Composite score of '1.02'.

The MoU rating for 2011-12 is under finalisation by the Government of India. However, company's own assessment places performance of the company in 'Excellent' category for Financial Year 2011-12.

MANAGEMENT DISCUSSION AND ANALYSIS

A report on Management Discussion and Analysis is placed at Annexure -I.

BOARD OF DIRECTORS

Appointment

Shri Trimbakdas S. Zanwar has been re-appointed as Part-time Non-Official Director w.e.f. 11.10.2011.

Shri R. Krishnan has been appointed as an Additional Director w.e.f. 01.04.2012 to take charge of the office of Director (HR).

Shri Vijay Shankar Madan, IAS, Additional Secretary & Financial Advisor Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry has been appointed as Part-time Official Director w.e.f. 19.07.2012.

In accordance with Section 260 of the Companies Act, 1956 and Article 67(iv) of the Articles of Association of the Company, S/Shri Trimbakdas S. Zanwar, R. Krishnan and Vijay Shankar Madan shall hold their directorships upto the 48th Annual General Meeting of the Company and are eligible for appointment as Directors at the Meeting.

Cessation

Shri Trimbakdas S. Zanwar who was appointed as Part- time Non-Official Director w.e.f. 12.11.2010 had resigned and ceased to be a Director of the Company w.e.f. 20.09.2011.

Shri Anil Sachdev, who was appointed as Director (HR) w.e.f. 01.09.2007 ceased to be a Director of the Company on attaining the age of superannuation on 31.03.2012.

Shri Saurabh Chandra, IAS, former Additional Secretary & Financial Advisor, Ministry of Commerce & Industry, consequent upon his appointment as Secretary, Department of Industrial Policy & Promotion has relinquished his position as Part-time Official Director w.e.f. 17.04.2012.

Shri Ashok Kumar Basu, Shri M.A. Pathan and Smt. Reva Nayyar who were appointed as Part-time Non-Official Directors w.e.f. 22.06.2009 ceased to be Directors of the Company on completion of their tenure on 21.06.2012.

The Board of Directors place on record their deep appreciation of the valuable services rendered as well as advice and guidance provided by S/Shri Anil Sachdev, Saurabh Chandra, Ashok Kumar Basu, M.A. Pathan and Smt. Reva Nayyar during their tenure.

Further pursuant to Sections 255 and 256 of the Companies Act, 1956 and Article 67(i) of the Articles of Association of the Company, S/Shri V.K. Jairath, O.P Bhutani and S. Ravi will retire by rotation at the Annual General Meeting and being eligible, offer themselves for re-appointment.

In compliance with Clause 49(IV)(G)(i) of the Listing Agreement, brief resumes of the Directors proposed for appointment and re-appointment along with the nature of their expertise in specific functional areas and names of companies in which the person also holds the directorship along with the membership of the Committees of the Board are given at Annexure-II forming part of the Directors' Report.

OFFICIAL LANGUAGE IMPLEMENTATION

The company continued its thrust on official language implementation in line with Govt. of India's policy. Other important activities undertaken during the year for the compliance of Official Language policy of Govt. of India are as under:

1. In order to remove hesitation among the employees, and give necessary impetus to work in Hindi, Hindi workshops and Hindi computer training programmes were organised in all the Units/Divisions including Corporate Office.

2. With a view to create favourable atmosphere for usage of Hindi in the Company, all the Units/ Divisions of the company, including Corporate Office, celebrated Hindi Divas on 14.09.2011 and organised various Hindi competitions during the celebration of Hindi Week/ Fortnight/Month in the month of September, 2011.

3. BHEL Hindi Coordinators Meet was held on 11th & 12th October, 2011 in Cochin, Kerala to discuss the various issues relating to the Official Langauge implementation.

4. Various Hindi competitions and programmes were organised by most of the Units/Divisions including Corporate Office for member organisations under the auspices of Town Official Language Implementation Committees during the year.

5. All national level functions e.g Republic Day, Independence Day, International Women's Day etc. were conducted in Hindi in Corporate Office and major Units of the Company.

6. All the major Units and some of the Divisions of the Company published 12 Hindi magazines namely, BHEL Chandan by EDN, BHEL Darpan by EPD,BHEL Kiran by Tiruchi, Surya Kiran by ISG, BHEL Yashasvi by RC Puram, Hyderabad, BHEL Bharati by Bhopal, BHEL Ganga by Haridwar, Srijan by Jhansi, Shakti Punj by Power Sector (Hq), Abhivyakti by Power Sector-NR, Poorvabha by Power Sector-ER and Tarangini by Power Sector- WR during the year. Corporate Office also brought out issues of its half yearly Hindi Magazine "Arunima" during the year.

7. A Hindi Booklet 'Rajbhasha Digdarshika' was published consolidating the various provisions regarding Official Langauge and useful information's for the employees for Hindi work e.g. English-Hindi glossary and notings, Manak Vartani, bilingual addresses of the Units/Divisions, incentive schemes etc.

8. Many awards were received by the employees of major Units/divisions in various Hindi Competitions organised under the auspices of Town Official Language Implementation Committee.

9. Haridwar unit was awarded third prize by the Town Official Language Implementation Committee for active contribution in Official Langauge implementation. In addition, Town Official Language Implementation Committee, Haridwar constituted and being operated under the Chairmanship of our Haridwar Unit received second prize from Deptt. of Official Langauge, Ministry of Home Affairs.

10. Committee of Parliament on Official Language inspected our Industry Sector, Power Sector-SR, ROD-Hq. during the year and appreciated the efforts being made in implementing Official Language Policy of the Govt. of India, while taking a few assurances from us to enhance the use of Hindi in official work.

11. BHEL Units/Divisions were inspected by Corporate Rajbhasha Implementation Group for facilitating them to make progressive use of Hindi as per the Govt. policy.

PARTICIPATION IN THE GLOBAL COMPACT OF THE UNITED NATIONS

BHEL is an environment friendly company in all its activities, products & services, besides providing safe and healthy working environment to all its stakeholders and has made UNGC programme as part of the Company's strategy, culture and day-to-day operations.

BHEL reiterates its commitment to United Nations Global Compact (UNGC) Programme and set core values enshrined in its principles on human rights, labour standards, and environment and anti corruption.

Company intends to advance GLOBAL COMPACT (GC) principles, as a responsible corporate citizen. BHEL has taken a lead role in promoting GC principles in other Indian organization through Global Compact Network (GCN) - an apex level nodal agency, formed by the leading Indian organizations. BHEL continued to remain in the forefront of all activities of the network as Secretary/GCN being BHEL nominee. Noteworthy activities of the year were participating in the national Convention and holding of monthly meetings of the Network through case studies/ organizational experience sharing, addressing the Global Compact principles in Indian context.

In recognition of BHEL's contribution in support of Global Compact programme and its outstanding Communication on Progress (COP), UNGC continued to place BHEL under 'Notable COP' category.

VIGILANCE

The Vigilance organisation of BHEL is headed by the Chief Vigilance Officer (CVO). Each Unit/Region of BHEL has a vigilance set up headed by a senior vigilance executive reporting to the CVO.

Preventive vigilance has been the thrust area of BHEL Vigilance throughout all the years and the same received focused attention during the year. A climate of preventive vigilance was generated to sensitize officials at all levels about the ill effects of corruption and malpractices.

Apart from the above, an attitudinal shift was made to inculcate greater seriousness in observance of rules / procedures / guidelines. Awareness amongst employees of the organization was generated by organizing training programmes. 83 such programmes were organized during the year 2011-12 in various Units, Regions and offices of BHEL. Interactive sessions were held with line executives representing different functional areas, in order to create vigilance awareness and to enhance their knowledge of the Company's rules, procedures and policies.

With a view to making systems more effective and transparent, Vigilance had carried out regular surveillance checks and system studies during the year 2011-12. Many suggestions towards system improvement have been rendered. Some of the major areas where suggestions for improvement were given are:

- Customer approval of vendors

- Expanding vendor base in single vendor/ two vendor categories

- Guidelines for appointment of agents for export contracts

In addition, suitable recommendations were made for correction in certain provisions of the following procedures:

- Supplier Evaluation, Approval & Review Procedure

- Purchase Policy

- Reverse Auction Guidelines

- Criteria for financial loading of commercial offers, received during the tendering process

- Suspension of Business Dealings with suppliers / contractors

As per CVC directions, the Company has taken many initiatives to make available all relevant information on the web on real time basis. One of the major initiatives was to start pilot implementation of e-procurement in select Units of BHEL. In addition, periodic checks are undertaken to ensure that :

- Status of Purchase Orders, Works Contracts concluded every month, as per CVC format, is being uploaded by all Units.

- Procedure and forms related to Vendor registration are hosted on the Company web site.

- Status of vendor registration applications is hosted on the web and can be viewed by vendors.

- List of banned firms is uploaded on Company web site.

- E-payment of vendor bills is being implemented throughout the organization and principle of first-in, first-out is being followed as a rule in payment of vendor bills.

- Status of bill payment can be viewed by the vendors on-line.

- Indents are being raised on-line in most of the Units.

- Information relating to Rules/Procedures governing the issue of license, permissions, clearances etc., is available on the BHEL/Units websites.

SECURITY

The Company's security mechanism is sufficient and geared up to provide security to each Plant / Unit. Whereas the security of most of the Plants of the Company is being managed by the CISF, in some smaller Plants, the Company has its own security. In other Plants, Corporate Office and Regional Offices, the security is being looked after by the private agencies like M/s EATS sponsored by Directorate General Resettlement, Govt. of India or Ex-Servicemen Corporations.

Adequate measures have been taken for security of computers Department of Electronics Govt. of India (SRAC) have also carried out inspection of our software security mechanism and their suggestions have been implemented.

Security audit of major Plants is being done by the Intelligence Bureau periodically and the additional requirements, wherever pointed out by them, are immediately complied with by the concerned Units. Review of security is done internally also from time to time. Monthly report on theft/ pilferage and fire incident is being complied by Corporate Security Department alongwith quarterly reports on various security related issues as per the decision taken after meeting of HR & Security Heads on 20th March, 2012. Quarterly meetings have also been envisaged and likely to take place in the month of July 2012.

The Management, Security Staff and the employees of Company are sensitized to the security needs of Company.

SUSTAINABILITY

Sustainability is an integral part of the company's strategy. BHEL is committed to be an Environment friendly company in all its areas of activities, products and service, providing safe and healthy working environment.

In line with the company's strategy, Environment Improvement Projects and Community Development Programmes are given special thrust. Some of the major EIPs executed in the past at BHEL plants and townships included tree plantation drives, installation of rain harvesting plants, efficient water and energy management, reduction in noise level, improvement in chemical storage and handling systems etc.

The Department of Public Enterprises (DPE) has issued guidelines on Sustainable Development on 23rd Sept. 2011. In conformance to the guidelines, a Board-Level Committee for Corporate Social Responsibility & Sustainable Development (BLC for CSR & SD), has been constituted. BHEL has defined its SD policy in keeping in view the scale & nature of activities, products & services.

The SD projects will have thrust on the projects in the fields of Rain water harvesting, afforestation, captive power generation based on Solar energy, use of renewable energy, energy efficiency & conservation and waste disposal.

All manufacturing Units/ Regions of the company are accredited to international standards viz. ISO-14001 certification for environmental management and OHSAS-18001 certification for occupational health and safety management systems.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, it is hereby confirmed:

(i) that in the preparation of the annual accounts for the financial year ended 31st March, 2012 the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

(ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year 2011-12 and of the profit of the company for that period;

(iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act,1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv)that the Directors have prepared the annual accounts for the financial year ended 31st March, 2012 on a 'going concern' basis.

CORPORATE GOVERNANCE

As per the requirements of Clause 49 of the Listing Agreement a detailed report on Corporate Governance together with the following is given at Annexure - III:

(i) CEO/CFO Certificate [as per Clause 49(V)] and

(ii) Certificate from the Company's Auditors [as per Clause 49(VII)].

OTHER DISCLOSURES

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

None of the employees have drawn remuneration in excess of the limits prescribed under section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of employees) Rules, 1975 during the year 2011-12.

Statement pursuant to Section 212 of the Companies Act, 1956 relating to Subsidiary Companies is given at Annexure-V.

EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

There were no significant events occurring after the Balance sheet date.

AUDITORS

The Auditors of your Company are appointed by the Comptroller and Auditor General of India. The names of auditors appointed for the year 2011-12 are printed separately in the Annual Report.

The detail of cost auditors appointed for the year 2011-12 and Cost Audit details are printed separately in the Annual Report.

The replies to the points referred to in the Auditors' Report and to the Comments of the Comptroller and Auditor General of India are given at Annexure - VI.

ACKNOWLEDGEMENTS

The Board places on record its sincere appreciation towards the Company's valued customers in India and abroad for the support and confidence reposed by them in the management of the company and look forward to the continuance of this mutually supportive relationship in future.

The Board also gratefully acknowledges the support and guidance received from various Ministries of the Government of India, particularly the Department of Heavy Industry, in Company's operations and developmental plans. The Directors express their grateful thanks also to the Comptroller and Auditor General of India, Chairman and Members of Audit Board, Statutory Auditors, Branch Auditors and Cost Auditors. The Company also wishes to place on record its appreciation for the continued co-operation received from all the Technology Collaborators and Suppliers and support provided by the Financial Institutions and bankers. Last but not the least the Board wishes to place on record its deep gratitude to all BHELites whose enthusiasm, team efforts, devotion and sense of belongingness has made this great company proud.

For and on behalf of the Board of Directors of

BHARAT HEAVY ELECTRICALS LTD.

B.Prasada Rao

Chairman & Managing Director

Place : New Delhi

Dated : July 26, 2012


Mar 31, 2010

We are delighted to present our 46th Annual Report on the business and operations of the Company for the year ended March 31, 2010.

FINANCIAL PERFORMANCE

Financial Year

(In Rs. Crore except per share data) 2009-10 2008-09

(a) Turnover 34154 28033

(b) Profit before depreciation, 7083 5214 interest & tax

(c) Less: Depreciation 458 334

(d) Less: Interest & Finance charges 34 31

(e) Profit before tax 6591 4849

(f) Less: Provision for Taxes 2280 1711 (including deferred tax & Fringe benefit tax)

(g) Profit after Tax 4311 3138

(h) Add:/(less) Statutory appropriation 1 1

(i) Distributable Profit 4312 3139

(j) Add: Balance brought forward from the previous year 595 430

(k) Balance available for appropriation 4907 3569

i) Dividend (including interim dividend) 1141 832

ii) Corporate Dividend tax (incl. on interim dividend) 191 142

iii) Amount transferred to General Reserve 3000 2000

(l) Balance in P&L account to be carried forward 575 595

(m) Earnings per Share (Rs.) 88.06 64.11

(n) NAV per share (Rs.) 325.16 264.32

(o) Economic Value Added (Rs. crore) 2670 2008

FINANCIAL HIGHLIGHTS

During the year, the company witnessed a healthy growth in Turnover by 21.83% to Rs. 34154 crore from Rs. 28033 crore in the previous year. The Turnover (net of excise duty) increased by 25.37% from Rs. 26212 crore in 2008-09 to Rs. 32862 crore in 2009-10. Profit before Tax for the year 2009-10 is placed at Rs. 6591 crore as against Rs. 4849 crore during 2008-09, a growth of 35.92% as compared to previous year. Profit after Tax is placed at Rs. 4311 crore as against Rs.3138 crore during 2008-09, a growth of 37.38% over previous year.

Increase in turnover coupled with savings in material cost over previous year have contributed to the better financial performance during the year.

The changes in estimated contract revenue and estimated contract cost for AS 7 (R) contracts under execution in 2008-09 and continuing in 2009-10 is (+) 0.62% and (-) 2.43% respectively, with the consequential impact on turnover.

The wage revision settlement with employees has been finalised during the year. The arrears due from 01.01.2007 to 31.03.2009 amounting to Rs. 2087.51 crore (Net of Rs. 798.59 crore Ad-hoc and 50% DA merger impact accounted up to 31.03.2009) have been charged to Profit and Loss Account and provision available up to 31.03.2009 amounting to Rs. 1749.34 crore has been withdrawn in the Profit and Loss Account.

Net worth of the company has gone up from Rs. 12939 crore to Rs. 15917 crore registering an increase of 23.02%. Net Asset Value(NAV) per share has increased from Rs. 264.32 in 2008-09 to Rs. 325.16 in 2009-10.

DIVIDEND

The Board has recommended a Final Dividend of 123% (Rs. 12.30 per share), Rs. 602.11 crore, for the year 2009-10. An interim dividend of 110% (Rs. 11 per share), Rs. 538.47 crore, on share capital of Rs. 489.52 crore, has already been paid for the year 2009-10. Thus the total dividend payment for the year 2009-10 is

Rs. 1141 crore (exclusive of dividend tax) as against Rs. 832 crore paid in the previous year.

Provision of Rs. 100 crore has been made for Corporate Dividend Tax on the Final Dividend proposed. Corporate Dividend Tax of Rs. 91 crore has already been paid on the interim dividend.

ORDERS RECEIVED

Orders worth Rs. 59037 crore were received during the year as against Rs. 59678 crore in 2008-09. Sector- wise orders booked are as follows:

(Rs. in Crore) 2009-10 2008-09

Power Sector 41982 47167

Industry Sector * 13484 9245

International Operations 3571 3266

Total Orders Booked 59037 59678

Order Book outstanding at the end of the year 144300 117000

* Excludes Inter Sectoral Orders

RATING OF BHEL VIS-A-VIS MOU TARGETS

Performance of BHEL for the year 2008-09 has been rated as Good in terms of MoU signed with the Government of India. BHEL has been awarded the MoU Composite score of 2.64. Two major aspects that impacted the companys performance during 2008-09 were: enhancement in provisioning for wage revision and steep increase in cost of input material procured by the company. However, except in 2008-09, BHEL was rated "Excellent" every year from 2001 -02 onward.

The MoU rating for 2009-10 is under finalisation by the Government of India. However, companys own assessment places performance of the company in Excellent category for F.Y. 2009-10.

MANAGEMENT DISCUSSION AND ANALYSIS

A report on Management Discussion and Analysis is placed at Annexure-1.

BOARD OF DIRECTORS

Appointment

Shri B. Prasada Rao, the then Director (IS&P), BHEL was appointed as Chairman & Managing Director, BHEL w.e.f. 01.10.2009 vide Order No. 1(4)/2008-PE.XI. Pursuant to Orders from DHI, Shri B.P. Rao is holding additional charge of the post of Director (IS&P) w.e.f.

01.10.2009 and of the post of Director (Finance) w.e.f.

10.06.2010 till the appointment of regular incumbents.

Shri B. Prasada Rao also held the additional charge of the post of Director (E.R&D), BHEL for the period 01.10.2009 to 23.12.2009.

Shri Atul Saraya, has been appointed as Additional Director to take charge of the office of Director (Power), BHEL w.e.f. 01.10.2009.

Shri V.K. Jairath has been appointed as Part-time Non- Official Director w.e.f. 12.11.2009.

Shri Shekhar Datta has been appointed as Part-time Non-Official Director w.e.f. 27.11.2009.

Shri O.P. Bhutani has been appointed as Additional Director to take charge of the office of Director (E.R&D) w.e.f. 24.12.2009.

In accordance with Section 260 of the Companies Act, 1956 and Article 67(iv) of the Articles of Association of the Company, S/Shri Atul Saraya, V.K. Jairath and O.P. Bhutani shall hold their directorships upto the 46th Annual General Meeting of the Company and are eligible for appointment as Directors at the Meeting.

Cessation

Shri K. Ravi Kumar was appointed as Director (Power) w.e.f. 16.05.2005 and was holding additional charge of the post of Chairman & Managing Director from 01.03.2008. On completion of his tenure, he laid down the office of Director (Power) and Chairman & Managing Director on 30.09.2009.

Shri OS. Verma, Director (Finance), consequent upon his appointment as Chairman, SAIL, has relinquished the charge of the post of Director (Finance) and was relieved from the services of BHEL on 10.06.2010. Shri Shekhar Datta, who was appointed as Part-time Non-Official Director on 27.11.2009, has since resigned and ceased to be a Director of the company w.e.f. 23.04.2010.

The Board of Directors place on record their deep appreciation of the valuable services rendered as well as advice and guidance provided by Shri K. Ravi Kumar, Shri C.S. Verma and Shri Shekhar Datta during their tenure.

Further pursuant to Sections 255 and 256 of the Companies Act, 1956 and Article 67(i) of the Articles of Association of the Company, S/Shri S. Ravi, A.K. Basu and M.A. Pathan will retire by rotation at the Annual General Meeting and being eligible, offer themselves for re-appointment.

In compliance with Clause 49(IV)(G)(i) of the Listing Agreement, brief resumes of the Directors proposed

for appointment and re-appointment along with the nature of their expertise in specific functional areas and names of companies in which the person also holds the directorship along with the membership of the Committees of the Board are given at Annexure -2 forming part of the Directors Report.

OFFICIAL LANGUAGE IMPLEMENTATION

The Company continued its thrust on Official Language implementation in line with Govt, of Indias policy. Important activities undertaken during the year are as under:

- Hindi workshops and Hindi computer training programme in prescribed numbers were organised in all the Units/Divisions including Corporate Office.

- All the Units/Divisions of the company, including Corporate Office, celebrated Hindi Divas on 14/9/2009 and organised various Hindi competitions during the celebration of Hindi Week/ Fortnight/ Month in the month of September, 2009.

- 04 employees of the Company were given cash award for writing books in Hindi under Hindi Pustak Lekhan Puraskar Yojana.

- A five day Refresher Course was organised in the month of October,2009 for Rajbhasha Officers and Translators working in the Company.

- All BHEL Hindi Coordinators Meet was held in the month of January, 2010 in Udaipur,Rajasthan to discuss the various issues relating to the official language implementation.

- With a view to create interest towards Hindi among the employees,all the Units/Divisions including Corporate Office spent the required amount on purchase of Hindi books during the year.

- All the major Units and some of the Divisions of the Company published annual Hindi magazine and Corporate Office brought out 04 issues of its quarterly Hindi Magazine "Arunima" during the year.

- Committee of Parliament on Official Language inspected our Varanasi, Tiruchy, EPD Units during the year and appreciated the efforts being made in implementing Official Language Policy of the Govt. and took some assurances from us to enhance the use of Hindi in official work.

- Power Sector-ER bagged Third Prize from the Department of Official Language,Ministry of Home Affairs, Govt, of India for excellent performance in the area of Official Language Implementation among the PSUs located in Kolkata.

- Many awards were received by the employees of major Units including Corporate Office in various Hindi Competitions organised under the auspices of Town Official Language Implementation Committee.

- 12 BHEL Units/Divisions were inspected by Corporate Rajbhasha Implementation Group.

- All the functions e.g Republic Day, Independence Day, International Womens Day etc. were conducted in Hindi in Corporate Office and major Units of the Company located in Region A.

PARTICIPATION IN THE GLOBAL COMPACT OF THE UNITED NATIONS

BHEL reiterates its commitment to United Nations Global Compact (UNGC) Programme and set of core values enshrined in its ten principles on human rights, labour standards, environment and anti corruption.

Company intents to advance GLOBAL COMPACT (G.C.) Principles as a responsible corporate citizen. BHEL has taken a lead role in promoting G.C principles in other Indian organizations through Global Compact Network (GCN) - an apex level nodal agency, formed by the leading Indian organizations. BHEL continued to remain in the forefront in all activities of the Network as Secretary/GCN being BHEL nominee. Notable activities of the year were organizing National Convention, Asia Pacific Regional Conclave and holding of monthly meetings of the Network through case studies/ organizational experience sharing, addressing the Global Compact principles in Indian context.

In recognition of BHELs contribution in support of Global Compact programme and its outstanding Communication on Progress (COP), UNGC continued to place BHEL under Notable COP category.

BHEL is an environment friendly company in all its activities, products & services, besides providing safe and healthy working environment to all its stakeholders and has made UNGC programme as part of the Companys strategy, culture and day-to-day operations.

VIGILANCE

The vigilance organisation of BHEL is headed by the CVO. Each Unit / Region of BHEL has a vigilance set up headed by a senior vigilance executive reporting to the CVO.

As in earlier years, preventive vigilance was one of the thrust areas of BHEL Vigilance during 2009-10. Inadequate awareness or wrong interpretation of the Companys policies, rules and procedures often leads to lapses / irregularities. This awareness amongst employees of the organization is generated by organizing training programmes. 76 such programmes were organized during the year 2009-10 in various Units, Regions and offices of BHEL.

During the year 2009-10 Vigilance Heads of all Units / Regions have carried out system studies with a view to make systems more effective and transparent. Some of the major areas where suggestions/recommendations were made to the Management are as under:

- Preparation of estimates for Civil and Structural Works with special focus on Bill of Quantity (BOQ) descriptions, preparation and basis of estimates

- Vendor Registration procedure (SEARP, 2010)

- Purchase Policy

- Uniform Loading / evaluation criteria in tenders

- Parking of BHEL PF funds with the Arrangers

- Guidelines for dealings with Indian Agents of Foreign Principals

Transparency in various areas of Company operations, especially those requiring interface with customers and suppliers helps instill confidence in the stakeholders and achieve vigilance objectives. Some of these successfully implemented measures include:

- Tender notifications are uploaded on web.

- Purchase Orders, Works Contracts, procedure and forms related to Vendor registration are also being hosted on the web site.

- E-payment of vendor bills is being implemented throughout the organization and principle of first come first served is being followed as a rule in payment of vendor bills.

SECURITY

The companys security mechanism is sufficient and gear up to provide security to each plant/unit. Whereas the security of most of the Plants of the company is being managed by the CISF, in some Plants, the company has its own security. In other Plants, Corporate Office and Regional Offices, the security is being looked after by the private agencies like M/s EATS sponsored by Directorate General Resettlement, Govt, of India or Ex-Servicemen Corporations.

Adequate measures have been taken for security of computers. Deptt. of Electronics, Govt of India(srac) have also carried out inspection of our software security mechanism and their suggestions have been implemented.

Security audit of major plants is being done by the Intelligence Bureau periodically and the additional requirements, wherever pointed out by them, are immediately complied with by the concerned units. Review of security is done internally also from time to time.

The Management, security staff and the employees of company are sensitized to the security needs of company.

SUSTAINABILITY

Sustainability is an integral part of companys strategy. BHEL is committed to be an Environment friendly company in all its areas of activities, products and services, providing safe and healthy working environment. In fact, this aspect has become an integral part of the companys business performance. Significantly, BHEL has also taken initiatives on Clean Development Mechanism (CDM) projects to reduce green house gas emissions in a more focused way and vigorous efforts are being made to achieve milestones in this area.

In line with the companys strategy, BHEL undertakes a lot of Environment Improvement projects and Community Development Programmes. Some of the major EIPs executed in the past at BHEL plants and townships included tree plantation drives, installation of rain harvesting plants, efficient water and energy management, reduction in noise level, improvement in chemical storage and handling systems etc.

BHEL scheme on Corporate Social Responsibility has evolved over the years and has been endorsed by the top management as a policy statement, on the underlying principal that BHEL is a Committed

Corporate Citizen and its Corporate Social Responsibility is not only to build synergy between business and Corporate Social Responsibility but is an integral part of business strategy.

A journal is also published for wider circulation on Health, Safety and Environment.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, it is hereby confirmed:

(i) that in the preparation of the annual accounts for the financial year ended 31st March, 2010 the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

(ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year 2009-10 and of the profit of the company for that period;

(iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts for the financial year ended 31st March, 2010 on a going concern basis.

CORPORATE GOVERNANCE

As per the requirements of Clause 49 of the Listing Agreement a detailed report on Corporate Governance together with the following is given at Annexure-3:

(i) CEO/CFO Certificate [as per Clause 49(V)] and

(ii) Certificate from the Companys Auditors [as per Clause 49(VII)].

OTHER DISCLOSURES

Information in accordance with the provisions of Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 regarding conservation of energy, technology absorption and foreign exchange earnings and outgo is given at Annexure-4.

The detail of the employees who are drawing remuneration in excess of the limits prescribed under section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of employees) Rules, 1975 is given at Annexure-5.

Statement pursuant to Section 212 of the Companies Act, 1956 relating to Subsidiary Company is given at Annexure-6.

AUDITORS

The Auditors of your Company are appointed by the Comptroller and Auditor General of India. The names of auditors appointed for the year 2009-10 are printed separately in the Annual Report.

We are glad to inform that there is no qualification in the Auditors Report and there is no comment of Comptroller and Auditor General of India on the Annual Accounts of the Company for the year 2009-10. The reports are given at Annexure-7.

ACKNOWLEDGEMENTS

The Board places on record its sincere appreciation towards the Companys valued customers in India and abroad for the support and confidence reposed by them in the organisation and looks forward to the continuance of this mutually supportive relationship in future.

The Board also gratefully acknowledges the support and guidance received from various Ministries of the Government of India, particularly the Department of Heavy Industry, in Companys operations and developmental plans. The Directors express their grateful thanks also to the Comptroller and Auditor General of India, Chairman and Members of Audit Board, Statutory auditors, Branch auditors and Cost auditors. The Company also wishes to place on record its appreciation of the continued co-operation received from all the Technology Collaborators and Suppliers and support provided by the Financial Institutions and bankers. The Board wishes to record its deep gratitude to all members of the BHEL family whose enthusiasm, dedication and co-operation has made the continued achievement of an excellent performance possible.

For and on behalf of the Board of Directors of BHARAT HEAVY ELECTRICALS LTD.

B. Prasada Rao

CHAIRMAN & MANAGING DIRECTOR

Place : New Delhi Dated : July 23, 2010



 
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