BEML Ltd

1. Company's philosophy on code of governance:

BEML continues to pursue long term corporate goals based on the values of financialdiscipline, high ethical standards, transparency and complete trust. 'Attainment of thehigher results through right means' summarises BEML's way of Corporate Governance. ForBEML Corporate governance is not destination, but a journey, a journey wherein we seek toperpetually improve the conscience of the well balanced interests of all the stakeholdersas we walk the miles, spend the years, do more diversifications and spread our presencethrough continents to touch more and more lives. Balancing the interests of all thestakeholders, comprising shareholders, lenders, customers and suppliers, is a challengethat we constantly face in this marathon. Endeavours have been made to follow the bestpractices in all the functional areas in discharging responsibilities towards thecommunity, the Government and all other concerned/dealt with by BEML.

2. Board of Directors:

a) As on 31^st March, 2011, the Board consisted of Sixteen Directors of whichsix, including the Chairman & Managing Director, were Whole-time/Executive Directors,while two were Non-executive Government Directors from the Ministry of Defence and EightNon-Executive Independent Directors.

b) During the financial year 2010-11, Six Board Meetings were held on 30.04.2010,15.05.2010, 28.05.2010, 13.08.2010, 12.11.2010 and 08.02.2011.

c) Constitution of Board of Directors and related information:

1. Appointed as Govt. Nominee Director w.e.f. 09.11.2010

2. Appointed as Independent Director w.e.f. 09.11.2010

3. Appointed as Director w.e.f. 18.03.2011

4. Ceased to be Govt. Nominee Director w.e.f. 09.11.2010

5. Ceased to be Director w.e.f. 28.02.2011

Non-Executive Directors do not have any material pecuniary relationship or transactionwith the Company, its management or its subsidiaries and do not receive any remunerationfrom the Company and they do not hold any shares of the Company.

d) Code of Conduct: A certificate from the Chairman & Managing Director oncompliance with the code of conduct laid down for all Board members and Senior Managementfor maintaining standards of business conduct and ensure compliance with legalrequirements is furnished separately. Code of conduct adopted by the Board of Directors& Senior Executives of the Company is put on the website of the Company.

e) CEO / CFO Certification : CEO / CFO Certification confirming the compliance withthe terms of Clause 49(V) of the Listing Agreement has been given by Chairman &Managing Director and Director (Finance) is also furnished separately.

3. Audit Committee:

Constitution of the Audit Committee and related information:

2 Appointed as Member w.e.f. 08.02.2011

The terms of reference are as per the guidelines set-out in the Listing Agreement readwith Section 292A of the Companies Act, 1956.

During the financial year 2010-11, Four Audit Committee meetings were held on28.05.2010, 12.08.2010, 12.11.2010 and 08.02.2011.

4. Remuneration of Directors:

The remuneration payable to Whole-time Directors and their terms of service are fixedby the Central Government. The remuneration paid to Whole-time Directors for the financialyear 2010-11 were as follows:

(in Rs.)

Part-time Directors are not paid any Remuneration/Commission except sitting fee paidfor attending Board or its Committee Meetings which are as under:

Part-time Directors do not hold any shares in the Company.

5 (a) Share Transfer Committee:

Share Transfer Committee is constituted with the following members:

1) Dr. M Nellaiappan, Chairman

2) Shri M Poongavanam, Member

3) Shri M Pitchiah, Member

Share Transfer Committee held 13 Meetings during the year. Shares lodged for transfer,transmission, transposition, etc., are completed within the stipulated period.

(b) Investors' Grievance Committee:

Investors' Grievance Committee consists of :

1) ShriMBN Rao, Chairman

2) Dr. M Nellaiappan, Member

3) Shri M Pitchiah, Member

Number of complaints received: 70 Number of complaints resolved: 70

(c) Remuneration Committee:

Pursuant to the provisions of Chapter 5 of the 'Guidelines on Corporate Governance forCentral Public Sector Enterprises' the Remuneration Committee of the Board is constitutedas under:

1) Shri MBN Rao, Chairman

2) Shri Kanwal Nath, Member

3) Prof. S Sadagopan, Member

4) Shri M Pitchiah, Member

5) Dr. M Nellaiappan, Member

6. Annual General Meetings:

a) The last three Annual General Meetings were held as under :

b) During the last 3 years, no special resolutions were passed, and

c) No resolutions were put through postal ballot subsequent to last AGM and no postalballot is contemplated before the ensuing AGM.

7. Disclosures:

a) During the year, there were no transactions of material nature with the Promoters,Directors or the Management, Subsidiary or Relatives that had potential conflict with theinterests of the company.

Disclosure of related party transactions as per Accounting Standard-18 issued by theInstitute of Chartered Accountants of India is given in Item No.B-7 of Schedule 23 of theNotes forming part of Annual Accounts. All the transactions covered under related partytransactions were fair, transparent and at arms length.

b) There were no non-compliance remarks by Stock Exchange or SEBI or any statutoryauthority on any matter relating to capital markets during the last three years.

c) The Company has complied with mandatory requirements to the extent stated aboveexcept in respect of Composition of Board under Clause 49(IA) of the Listing Agreement.However, the composition is made fully complied with effect from 09.11.2010 with theappointment of five more independent directors.

8. Means of Communication :

a) Quarterly Results are submitted to the Stock Exchanges at which the Company's Sharesare listed and is given wide publicity by publishing in a leading English newspaper havingwide circulation and also in a local daily.

b) Quarterly financial results are displayed on the Company's Website www.bemlindia.comand the quarterly results together with shareholding pattern is filed with Stock Exchangesperiodically and displayed on the web-sites of the stock exchanges.

c) BEML NEWS & BEML BLITZ, News journals brought out periodically are sent to theStock Exchanges.

d) Corporate announcements and press releases are notified to the Stock Exchanges atwhich the Company's shares are listed.

e) Presentations are made periodically to Institutional Investors, Analysts andBrokers.

a. Industry structure and developments:

The Company is a Mini Ratna Category-I Public Sector Undertaking under theadministrative control of Ministry of

Defence, operates in three distinct business segments namely, Mining &Construction, Defence, and Metro & Rail.

Organization

The Business verticals are headed by a Director, who acts as CEO of the business. TheTechnology Division provides end-to-end technology solutions in Auto, Aero, Defence andMetro & Rail related areas and the Trading Division deals in non-company products. TheInternational Division exports products manufactured by all the three verticals to about58 countries. Strategic Business Units (SBUs) and Product Heads are also set up under eachof the above business to increase organizational effectiveness. The Company's manpowerstrength stands at 11,798 as of end March, 2011.

Production Units

The Company has nine fully integrated manufacturing units located at Bangalore, KolarGold Fields (KGF), Mysore and Palakkad including a subsidiary steel Foundry in Tarikere,Chikmagalur District.

Bangalore Complex: The Bangalore Complex manufactures various types of railwayproducts such as Railcoaches, AC EMUs, OHE Cars, etc., for Indian Railways. The Companyhas manufactured state-of-the-art stainless steel Metro Coaches and supplied to DMRCagainst the first order. The Complex also manufactures Defence products such as HighMobility Tatra Trucks and variants used for various applications such as tanktransportation, transportation and launching of guided missiles, radar mounting, fieldartillery tractor and crash fire tender, pontoon bridges, tank transportation trailers,ejector & air cleaner assemblies, mil-rail coaches and military wagons.

KGF Complex: Earth Moving Equipment Division and Heavy Fabrication Unit located inKGF produce a wide range of equipment such as Bulldozers, Hydraulic Excavators, WheelLoaders, Dozers, Pipe Layers, Tyre Handlers, Hydraulic Cranes, Walking Dragline, ElectricRope Shovel, Engineering Mine Ploughs, Heavy Recovery Vehicles, Armoured RecoveryVehicles, etc. Hydraulics and Power line Division manufactures Transmissions, Axles,hydraulic aggregates and allied assemblies for all the manufacturing units of BEML. RailUnit-II manufactures Rail Coaches and wagons.

Mysore Complex: The Truck Division at Mysore produces off-highway Rear Dump Trucks,Motor Graders, Water Sprinklers and Tatra Trucks. The Engine Division produces a widerange of Diesel Engines powering BEML's product range. The Aerospace ManufacturingDivision established at Mysore manufactures Air Craft Towing Tractor, Crash Fire Tender,Weapon Loading Trolley (Bheema), etc., for Defence and civilian applications, in additionto precision manufactured items such as gears for aircraft industry. BEML's EngineDivision and Aerospace Manufacturing Division have been accredited AS9100B certification.

Palakkad Complex: The Palakkad Complex manufactures products for Defence Businessand Metro & Rail Business such as High Mobility Tatra

Trucks, Sarvatra Bridge and Railcoach aggregates/parts.

Technology Division: BEML's Technology Division has received CEMILAC Certificationfor Design, Development of CAD & CAE Applications to Aircraft Engine & AirframeComponents for Airborne Applications.

Subsidiary Unit: Vignyan Industries Limited (VIL), Tarikere, was taken over by BEMLin 1984 as a subsidiary unit. VIL supplies quality steel and alloy castings to variousmanufacturing units of BEML. To meet the increased demand for steel castings, the Companyhas modernized the plant and augmented the capacity by installing new foundry equipment.

Marketing: BEML's products are sold and serviced through its large marketingnetwork comprising 10 Regional Offices, 4 Zonal Offices, 17 District Offices, ActivityCentres, Service Centres and Dealers. The Company established Global Service CentreHeadquarters at Nagpur to cater to customer requirement at short notice.

International Business: BEML has established its global foot-print in about 58countries including Syria, Tunisia, UAE, Jordan, Suriname, South Africa, Kenya, Mali, UK,Sri Lanka, Bangladesh, etc. Company has its overseas offices in Malaysia, Brazil, Chinaand Indonesia.

Developments & Performance during 2010-11

During 2010-11 India's economy grew at an estimated growth rate of 8.6%. The estimatefor the year end March 31, 2011 was based on growth rates of more than 8% in key sectorssuch as manufacturing, construction, finance, real estate and business services. However,India's mining sector saw a slowdown in growth to 5.9% in the 2010-11 fiscal compared to agrowth of 9.9% in 2009-10.

BEML registered a growth of about 2% in sales during 2010-11 over the previous year.Metro & Rail business had yet another impressive growth in sales of 30% compared toprevious year's sales. The Company's exports stood at Rs. 217.50 crores against Rs. 156.25crores during 2009-10, a growth of 39% over previous year.

The Company has achieved important landmarks during the year namely:

• BEML Manufacturing facility at Palakkad Complex, Kanjikode, Kerala wasinaugurated by Hon'ble Raksha Mantri and Chief Minister of Kerala on 16^th May,2010 for manufacturing Defence products and Railway aggregates.

• MAMC Limited has been acquired by Consortium of BEML, CIL and DVC through assetsale route from the official liquidator on 8^th July, 2010 and set to beregistered for commercial production during 2011 -12.

• BEML Global Service Centre was inaugurated at Nagpur on 14^th August,2010 to coordinate prompt after-sales-service to our domestic and overseas customers.

• The Company envisaged to foray into Dredger equipment manufacturing business toencash emerging opportunities.

• Product Life Cycle Management implementation kick off ceremony was held on 11^thJanuary, 2011. CMD, BEML inaugurated the same.

• Foundation Stone for Major Fabrication Shop was laid on 7^th February,2011 at Mysore.

• The new manufacturing facility of Aerospace Manufacturing Division wasinaugurated at Mysore.

• The Company developed and launched through in-house R&D new products viz.,Standard Gauge Catenary Maintenance Vehicle, Motor Grader and upgraded many a product bydeveloping and implementing additional features in various existing products to have acompetitive edge in the market.

b. Opportunities and Threats:

Infrastructure development will be India's new growth engine helping the economy togrow at a desirable level. India is planning to invest nearly Rs. 45 lakh crores (US$1trillion) to develop infrastructure during the 12^th Plan period compared to Rs.23 lakh crores (US$ 514 billion) during 11^th plan period. The PlanningCommission is working towards a growth target between 9.0 to 9.5% during the plan period.Power continues to be the thrust area with a target of 100,000 MW capacity in 12^thPlan, of which the bulk will come from coal-fired plants. The demand for coal is going tobe met by increased production in India and the gap is expected to be imported. The Miningand Construction business is planning to cater to this growing market by introducing newproducts and meeting customer expectations through its wide service network. The PlanPanel has projected that thermal coal imports would touch a phenomenal 250 million tonnesa year in the 12^th plan and this would require the creation of additionalinfrastructure in railways and ports, thus creating new additional business opportunitiesfor rail products especially for wagons and track laying.

Indian Railways has taken up Western and Eastern Dedicated Freight Corridors (DFC) tobe completed by the end of the 12^th Plan. Further a High Speed Rail linkbetween Delhi-Mumbai and Delhi-Kolkata in the 12^th Five Year Plan have beenplanned. To improve the transport facilities in urban areas, a number of Metros throughPPPs model have been planned. In addition to metros, tier II cities like Jaipur, Ludhianaand Kochi are also going to have metro network in operation. These plans augur well withthe internal plans of Rail and Metro business for an exponential growth in the next 2years.

In the Defence segment also, business opportunities are growing with Indian Defenceprocurement estimated to rise to Rs. 1.89 lakh crore (USD 42 billion) by 2015. The IndianDefence Forces are likely to increase their indigenous procurement from the current 30% tothe target 70% over the next five years. All these will translate into more business toBEML with its concerted efforts to tie-up with foreign collaborators for technologytie-ups. The Company is making efforts to maximize the business by tapping theopportunities opened up by Defence Offsets through the Company's Technology Division andAerospace Manufacturing Division.

The major challenges faced by the Company are:

1. Increased demand for higher capacity equipment, in line with the global markettrend.

2. To meet the BS III emission norms.

3. To retain skilled manpower.

4. To maintain cost competitiveness to stay ahead in business.

5. To counter competition from MNCs by innovative marketing strategies.

6. To ensure higher share of Defence business.

7. Meet the increasing market demand in respect of Rail Coaches, AC EMUs etc.

c. Business Group-wise performance during2010-ll:

The Company has been exempt from providing segment-wise data of its business in view ofthe critical and sensitive business in which it operates.

d. Outlook:

1. Though Indian mining industry showed a dip during the last financial year due todelay in project approval, environmental clearance etc, BEML has been able to maintain itsmarket share in this segment with its increased focus on export market for this range ofequipments. The construction equipment industry is expected to grow at 19% during thecurrent year followed by 12-15% growth annually by 2015. This is due to the emphasis inthe 12^th plan on infrastructure with large proposed investments over the nextseveral years in power and infrastructure sector. To cater to this robust demand, theCompany has taken several proactive measures to increase the share of Mining &Construction business by strengthening the service setup for both international anddomestic market and expanding dealer network, introduction of new products in line withthe customer expectations.

2. The Country's Defence budget has been hiked by almost 12 percent to Rs. 1.64 lakhcrores for fiscal 2011-12. Most importantly, defence capital acquisition for the financialyear 2011-12 has been hiked to Rs. 55,000 crores, while capital expenditure for the samehas been raised by about 12% to Rs. 69,199 crores, a move that should provide a sizableboost to the ongoing military modernisation programme. The Company is planning to expandits Defence product range to meet the long term procurement plan of MoD through Technologytie-ups and R&D development. The Palakkad Manufacturing Plant is set up exclusivelyfor manufacturing Defence products apart from some rail and metro aggregates. With thisincreased capacity, the Company will be able to meet the increased demand from Defencesector. In order to increase the sales to Defence sector and also to tap theopportunities, the Company has entered into manufacture of Ground Handling/ Ground supportequipment and Toolings for Aerospace Industry through its Aerospace ManufacturingDivision. The Company has signed an MoU with Government of Karnataka to set up a GreenField Project in Aero Special Economic Zone (SEZ) near Bangalore International Airportwith an investment of Rs. 316 crores over next five years. By this MoU, Government ofKarnataka has allocated 25 acres of land to BEML in the notified SEZ near BangaloreInternational Airport, Devanahalli, Bangalore Rural District and BEML is in the process ofestablishing its unit for design and manufacture of aircraft components/sub-assemblies andMRO activities relating to Aerospace Applications.

3. Indian Railways has planned a highest ever plan outlay of Rs. 57,630 crores during2011-12. Rs. 13,820 crores has been provided for acquisition of rolling stock. To cater tothis increased demand the Company has set up an additional coach manufacturing unit at KGFwhich is rolling out rail coaches in addition to the plant at Bangalore. The Company hasan exclusive unit to manufacture Metro Coaches ramping up the production rate by adoptingmodern manufacturing techniques keeping in view the steep increase in demand for metrotrains. In addition to metro cities, Tier-II cities are also expected to go in metro wayand BEML is hopeful of bagging these orders. BEML has developed intermediate cars whichwill add further revenue to the metro business. Further orders have been received for theSS EMUs developed by BEML. Besides the above, the Company has also taken pro-active stepsto develop Aluminum and Stainless steel wagons, for high speed corridor.

4. Huge opportunities exist for all the three vehicles for exports. Your Company hasbeen encashing and enlarging the exports business in the recent past and envisagesexponential growth from overseas markets in the days to come.

The organization is more dynamic, responsive and market oriented for survival andgrowth in the changed business environment. The Company has plans to grow in each of itsvertical and is also planning to enter many more allied businesses through technologytie-ups and joint ventures. In the backdrop of such kind of emerging opportunities yourCompany has set a target of Rs. 4500 crores to achieve and excel excellent MoU rating forthe year 2011-12. The current strategic initiatives like Expansion, Diversification,Restructuring, Acquisition of Technology, Joint ventures, HR initiatives, etc., willensure the Company to increase its foot hold and market share in the existing business andprovide the necessary impetus for the take off of the business in the diversified areas,making BEML achieve Rs. 5,000 crores by 2012-13 and further aim at achieving Rs. 10,000crores in the next five years.

e. Risks and Concerns:

The Company follows a system of making all major business decisions after a thoroughdiscussion and analysis of risks and returns involved. Through this approach it strives toidentify opportunities that enhance organizational values while managing or mitigatingrisks that can adversely impact the Company's future performance. The Company has alsoengaged the services of a professional Risk Management firm to study all aspects of theCompany's business/operations, identify the risks and recommend measures to mitigate thesame.

f. Internal control systems & their adequacy:

The Company has an internal control system designed to provide high degree of assuranceregarding optimization and safeguarding of resources, quality and reliability of financialand operational information, compliance with applicable statutes and corporate policies.It is the Company's endeavour to align all its processes and controls with global bestpractices.

The internal audit process is designed to review the adequacy of internal controlchecks in the system and covers all significant areas of the Company's operations. Theinternal audit department performs risk based audits, based on an internal audit plan,which is reviewed each year in consultation with the statutory auditors and the AuditCommittee.

The Audit Committee reviews audit reports submitted by the internal auditors and followup on the implementation of corrective actions periodically.

Your Company has implemented an enterprise-wide SAP. This will accompany byre-engineering and simplification of business processes to improve agility and customerservice. Further, it has end-to-end SAP platform that provide a robust foundation toaddress several emerging business needs.

(Rs. crores)

The Company posted a turnover of Rs. 3623.52 crores, VoP of Rs. 3768.60 croresrecording a growth of 1.85% in turnover and about 1.62% in Value of Production over thelast year. The Company has recorded a Profit Before Tax of Rs. 186.75 crores as againstRs. 319.55 crores in the previous year. The reduction in profit was mainly on account ofimplementation of wage revision for employees, change in product mix propelled by themarket demand, lesser quantum of sales of spares coupled with severe competition that hadexerted pressure on margins. However, Company has initiated steps to maximize the profits.

h. Material developments in Human Resources/Industrial Relations front, includingnumber of people employed:

The Company intensified focus on training and development of manpower. Training anddevelopment at middle management levels was in focus during the year. The Companyintroduced competence management by way of a structured approach in major locations. Acompany-wide associate survey was undertaken to obtain feedback on various aspectscovering all employees. The Company intensified its communication with all levels andcategories of employees by way of different internal forums. The Company also continued toexcel in the field of training apprentices and workmen.

The industrial relations has been harmonious and cordial. The manpower strength as of31.03.2011 stood at 11,798. During the year, 13,402 employees were imparted training tosharpen their skills and update their knowledge.

Cautionary Statement - Certain statements made in the Management Discussion andAnalysis report related to the Company's objectives, projections, outlook, expectations,estimates and others may constitute 'forward looking statements' within the meaning ofapplicable laws and regulations. Actual results may differ from such expectations,projections and so on whether expressed or implied. Several factors could make significantdifference to the Company's operations. These include climatic conditions and economicconditions affecting demand and supply, government regulations and taxation, naturalcalamities and so on over which the Company does not have any direct control.

10. General Shareholder Information:

- Financial Calendar

- Date of Book Closure :

25.08.2011 to 29.08.2011 (Both days inclusive)

- Listing on Stock Exchanges

The Bangalore Stock Exchange Limited, Bangalore

The Bombay Stock Exchange Limited, Mumbai

The National Stock Exchange of India Ltd., Mumbai

- Listing fee has been paid upto-date to the respective Stock Exchanges

- Stock Code

- Market Price Data : High and Low during each month for the financial year 2010-11.

- Share Transfer Agent:

M/s. Karvy Computershare Private Limited, is the Share Transfer Agent (STA). Theaddress of the STA is as under:

M/s Karvy Computershare Private Limited

Plot No. 17-24, Vittalrao Nagar

Madhapur, Hyderabad - 500 081

: 040-44655000, Fax : 040-23420814

Toll Free No. : 1800-3454-001

E-mail : einward.ris@karvy.com

Website : www.karvy.com

- Share Transfer System :

The Company's shares are traded in compulsory demat mode and are transferable throughDepository system. Both electronic and physical modes of share transfers are handled byM/s Karvy Computershare Private Limited.

The share transfers which are received in physical form are processed and the sharecertificates are returned within stipulated time from the date of receipt, subject to thedocuments being valid and complete in all respects.

- Shareholding Pattern as on 31.03.2011:

- Distribution of Shareholdings as on 31.03.2011:

- Dematerialization of shares and liquidity:

Out of 4,16,44,500 shares, 2,25,00,000 shares are held by the Government of India(Promoter) in physical form. Of the balance 1,91,44,500 shares, 1,89,21,405 shares wereheld in dematerialised form as of 31^st March, 2011 which works out to 98.83% ofthe paid-up capital held by public.

- Outstanding GDRs / ADRs / Warrants:

Not applicable

- Plant Locations:

a. Bangalore Complex, P.B.No. 7501, New Thippasandra Post, Bangalore 560 075,

b. KGF Complex, BEML Nagar, Kolar Gold Fields 563 115,

c. Mysore Complex, Belavadi Post, Mysore 570 018 and

d. Palakkad Complex, KINFRA Park, Menon Para Road, Kanjikode East, Palakkad 678621

- Address for correspondence:

a) The address of the Registered Office of the Company is:

M/s BEML Limited

BEML Soudha,

No. 23/1, 4^th Main,

S.R. Nagar,

Bangalore 560 027

Karnataka State

b) Shareholders correspondence may be sent to the above address or to the ShareTransfer Agent, M/s Karvy Computershare Pvt. Ltd., Hyderabad and shares held in demat modemay be referred to the concerned depository participant.

Certificate of Compliance with the Code of Conduct for Board of Directors and SeniorManagement Personnel

To the Members of BEML Limited,

I, V RS Natarajan, Chairman & Managing Director of the Company, herebycertify that the Board of Directors and Senior Management personnel have affirmed thatthey will comply with the Code of Conduct of the Company.

CORPORATE GOVERNANCE COMPLIANCE CERTIFICATE

To:

The Members of BEML Limited,

We have examined all the relevant records of BEML LIMITED for the purpose of certifyingcompliance of the conditions of Corporate Governance under Clause 49 of the ListingAgreement with the Stock Exchanges for the financial year ended March 31, 2011. We haveobtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purposes of certification.

The compliance of conditions of corporate governance is the responsibility of themanagement. Our examination was limited to the procedure and implementation processadopted by the Company for ensuring the compliance of the conditions of the corporategovernance. This certificate is neither an assurance as to the future viability of theCompany nor of the efficacy or effectiveness with which the management has conducted theaffairs of the Company.

In our opinion and to the best of our information and according to the explanationsgiven to us, we certify that the Company has complied with the mandatory conditions of theClause 49 of the Listing Agreement.

The Company has adopted the following Non-mandatory requirements:

a. Tenure of the Independent Directors which do not exceed nine years, and

b. Constitution of Remuneration Committee with effect from November 12, 2010,comprising of 3 (Three) Independent Directors including Chairman and 2 (Two) ExecutiveDirectors.