beml ltd Management discussions

(i) Industry structure and developments:

The Company is Schedule-A Public Sector Enterprise under the administrative control of Department of Defence Production, Ministry of Defence, operating in three distinct business verticals namely Mining & Construction, Defence & Aerospace and Rail & Metro.

Organization

The three major Business verticals viz., Mining & Construction, Defence & Aerospace and Rail & Metro are headed each by a Business Group Director. The International Business Division exports equipment & spares and also provide services to all the three verticals. The Companys manpower strength stood at 5197 as on 31.03.2023.

Production Units

The Company has four manufacturing complexes located at Bengaluru, Kolar Gold Fields (KGF), Mysuru and Palakkad.

Bangalore Complex: Bangalore Complex manufactures Stainless Steel Metro Cars for the Delhi Metro, Bengaluru Metro, Jaipur Metro, Kolkata Metro and Mumbai Metro etc. The Complex also manufactures various types of railway products such as rail coaches, AC Electrical Multiple Units (ACEMUs), Diesel Electric Multiple Units (DEMUs), Main Line Electric Multiple Units (MEMUs), Stainless Steel Electrical Multiple Units (SSEMUs), Overhead Equipment Inspection Cars (OHE Cars)/ Diesel Electric Tower Cars (DETC), Treasury Vans, etc., for Indian Railways and Metro

Corporations. Bangalore Complex also manufactures defence products such as Military Rail coaches and Military Wagons. Apart from the above structure for GSLV, LVM3 program are also manufactured here.

KGF Complex: KGF Complex

encompasses Earth Movers Division, Hydraulics and Powerline Division, Rail Unit-II and Heavy Fabrication Unit. Earth Movers Division produces a wide range of equipment such as Bulldozers, Electrical & Hydraulic Excavators, Wheel Loaders, Wheel Dozers, Pipe Layers, Tyre Handlers, Engineering Mine Ploughs, Trailers, Hulls for Battle Tanks and Armoured Recovery Vehicles. Also, the Earth Movers Division has infrastructure to manufacture Electric Rope Shovels and Walking Draglines. Hydraulic & Powerline Division produces Transmissions, Axles, Hydraulic aggregates and allied assemblies required for the manufacturing units of BEML, Transmissions for Infantry Combat Vehicles and aggregates for battle tanks to other DPSUs. Rail Unit-II manufactures Rail Coaches, Rail Grinding Machines, aggregates for Railway EMUs and structures for Aero-bridges. Heavy Fabrication Unit manufactures fabrication of structures, assembly of equipment and manufacture of components for Mining & Construction and Defence business verticals.

Mysore Complex: Mysore Complex encompasses Truck Division, Engine Division and Aerospace Manufacturing Division. The Truck Division manufactures off-highway Rear Dump Trucks, Motor Graders and Water Sprink- lers.

The Engine Division manufactures a wide range of Diesel Engines powering BEMLs product range and air-cooled engines for High Mobility Heavy Duty Trucks for Defence applications. The Aerospace Manufacturing Division produ- ces Aircraft Towing Tractors, Ground Handling & Support Equipment, Weapon Loaders and aggregates for Missiles & Airborne structures.

Palakkad Complex: Palakkad Complex manufactures ground support equipment such as High Mobility Trucks of various combinations 12X12, 10X10, 8x8 & 6x6 as transport equipment and as Platform for Bridge Systems, Missile Carriers, Missile Launchers, Warhead Carriers, MAST System and Surveillance Radars. Also, the Company manufactures and supplies Mechanical & Pontoon Bridge Systems, Ejector & Air Cleaner assemblies and aggregates for Rail & Metro Products.

Marketing: BEMLs products are sold and serviced through its wide marketing network comprising 12 Regional Offices, 15 District Offices and 5 Service Centers across the Country. The Company also establishes temporary Activity Centers at customer locations to support and service equipment. Further, Service Training Centers at KGF Complex and Mysuru Complex are offering variety of programs, scheduled round-the-year. All the three business segments are equipped with a dedicated marketing setup which undertakes business development, tender participation and oversees project management related activities under its ambit.

International Business Division: Company exports its products through its International Business Division. The major markets are Middle East countries, African countries and South East Asian countries. During the year 2022-23, Company has exported goods and services to new Country i.e., Cameroon in addition to 69 countries supplied over the years.

Developments & Performance during 2022-23:

As per the provisional estimates of Central Statistical Organization, the growth in real GDP during 2022-23 is estimated at 7.2 percent as compared to 9.1 percent in 2021-22.

The Company achieved important landmarks during the year and some of them are mentioned here under:

Defence

• Design and Development of Assembly Fixtures and successful realization of the first structure (Strap on Base Shroud) for GSLV (LVM3), ISRO Program.

• Engineered CEV Stage-IV - compliant Higher emission norms engine for Aircraft Towing Tractor

• Received Raksha Srijan Ratn award for indigenisation during Def Expo 2022.

Mining & Construction

• Executed one of the biggest Mining & Construction exports order to Cameroon valuing around Rs. 160 crore.

• Engineered CEV Stage-IV - compliant Higher emission norms

engine for Motor Graders and Front- End Loaders.

• Honble Raksha Mantri launched AI based operator fatigue monitoring system during "AI in Defence" programme.

• Developed AI based Driver Alcohol Detection System and automation based water sparkling system which are under user trials.

• Received Equipment India Award 2022 for the Category Bestseller in Crawler Dozers.

Rail & Metro

• Indigenously Designed & Developed Driverless Metro for Mumbai Metro line 2A & 7 and the same was dedicated to Nation by Honble PM in January 2023.

• First train set of Mumbai Metro (MRS1) was inaugurated by Honble CM of Maharashtra for Revenue Service at Mumbai.

• Manufactured Rail Grinding Machine

for Indian Railways with M/s LORAM, USA as Technical Partner.

General

• Implemented Industry 4.0 in

Hydraulics & Powerline Division in Kolar Gold Fields. ^•

• Received Engineering Export

Promotion Council of India (EEPC) Quality Award for Outstanding Performance under PSU Category.

• Conferred with Governance Now 9th

PSU Awards in 2 categories a) Leadership Award and b) Research & Innovation.

• Company received Awards for the categories Diamond - Corporate Film,

• Gold - a) Best Book Production -

BEMLs Journey since 1964

b) Most creative ad and

• Silver- In-house Journal Corporate Note Book from Public Relations Council of India (PRCI).

(ii) Strengths and Weakness:

Strengths

• Established manufacturing infrastructure and knowledge base.

• Established R&D base with dedicated test facilities. Over 76% of Sales is thru R&D developed products.

• Capability to design & manufacture high-end Mining equipment.

• Expertise in Heavy Fabrication and Machining/ manufacturing of Stainless Steel Coaches, Metro Cars, EMUs, etc.

• More than 73% of Sales is achieved on Competition mode.

• Extensive Sales and Service infrastructure - Established Regional, District Office & Activity centers across India.

• Major Market Share in High- Capacity Dozers and Metro Cars in India.

• Strong relationship with Services, Defence Labs and Government agencies and PSUs.

• Green Company - Use of Renewable energy sources.

• Good Brand value, large Customer base and Work Ethics Culture.

• Long-term commitment to customers.

Weakness

• Depletion of Skilled Manpower & Ageing Workforce.

• No assured business from GoI unlike some of the other DPSUs.

• Uncertainty in orders for Rolling stock from Indian Railways.

(iii) Opportunities and Threats:

Opportunities

Defence:

• To advance and strengthen the abilities of Indian Army, the modernization budget has been increased by 48.6 per cent in 2023-24 (Budget Estimate), as against 2021-22 (Actual), from Rs 20,231 crore to Rs 30,063 crore.

• Growing opportunities in Maintenance, Repair, Overhaul and Upgrade programs.

• Make in India policy of Government of India and promulgation of four positive lists would benefit Indian defence industry boosting Indigenous production.

• Also, to reduce import dependence and modernise Defence Forces with our home-grown technology, the Government has gradually increased the domestic industrys capital procurement budget.

• MoD is embarking on procurement of major weapon platforms/ equipment for which BEML has requisite capability.

• Thrust on Exports thru LoC for Defence Products.

• Withdrawal of OEMs from select Asian countries as a manufacturing base.

Mining & Construction:

• Coal India plan to achieve 1 billion tonnes coal production by FY 202425, thereby creating requirement of higher capacity equipment

• Increased thrust by Government in infrastructure development and exports.

• Introduction of Artificial Intelligence features on Mining equipment

• Emission compliant CEV stage IV engines for construction equipment.

• Boom in construction equipment market.

• Growth in equipment rental market.

Rail & Metro:

• Indian Railways have allocated Rs. 37,581 crores for purchasing rolling stock during 2023-24 which is more than double the revised estimates of 2022-23.

• Expansion of railway network and increased demand of Electric Multiple units in suburban routes.

• Introduction of Vande Bharat trains.

• Extension of existing Metro

networks in Tier-I & Tier-II cities.

New metro projects are planned.

Light Rail Metro projects are also catching up as a revenue line which is expected to emerge from Tier-II & Tier-III cities.

New Areas:

• New Opportunities in Aerospace Business and ISRO.

• Unmanned ground vehicles.

• Unmanned Aerial Vehicles (UAVs).

• Manufacture of Fixed wing aircraft and Helicopter Aggregates.

• Demand for high end Electric Drive Dump Trucks, Excavators and BullDozers.

• AI and Robotics enabled systems.

• Medium speed EMUs and Highspeed trains.

• Emerging business opportunity for Light Rail. ^•

• New opportunities in Maintenance equipment viz. Rail Grinding machines, Track Cleaning Machine, etc.

• Export opportunities.

Threats

• Te c h n o l o g y l e a d e r s o p e r a t i n g directly in India.

• Difficulty in sourcing of few critical aggregates and technologies.

• Increasing pressure on reducing Life Cycle costs.

• Increased FDI caps in Coal & Defence sector.

• Manifold increase in competition from Indian Private industry and foreign OEMs.

(iv) Segment-wise or Product-wise performance:

SEBI vide its letter dated 21.07.2003 granted exemption to the Company from publishing segment-wise information in quarterly/ half yearly and annual audit financial results. Further, the Ministry of Corporate Affairs vide Notification dated 23.02.2018 granted exemption to the Companies engaged in defence production to the extent of application of relevant Accounting Standard on segment reporting. Hence, the Segment- wise or Product-wise performance is not appended to this report.

(v) Outlook:

Defence & Aerospace:

The steps taken by government regarding various policy actions to boost indigenous design, development and manufacture of defence equipment in the country and make a sustainable defence industrial ecosystem would undoubtedly open various opportunities for the domestic sector. The call for Atmanirbhar Bharat has provided further impetus to realise the goal of self-reliance.

With the increased defence modernization plans for 2023-24 procurement of High Mobility Vehicles for various projects is under pipeline by MoD. BEML Limited has also entered into MoUs with strategic partners for emerging Defence & Aerospace procurement opportunities. Also new areas of Business viz. overhauling of Recovery/ High Mobility Vehicles, De-mining equipment, Vehicles for gun systems, etc. will also add numbers in top-line.

Further, BEML is making all out efforts to pick up business in the areas related to its product portfolio and in overhauling business. The Company is also working with other DPSUs/ Private Sectors for supply of High Mobility Vehicles and aggregates for various Missile Programmes and Aerospace components.

Mining & Construction:

With GoI impetus on ending the import of mining equipment and increase in annual output to 1 billion tonnes by 2024, from 893 million tonnes currently, the demand for Made in India Heavy Mining equipment is on the rise. Also, India is looking to boost its coal output in the next two-to-three years by restarting closed mines and through project specific SPV & integrated planning. The construction equipment market outlook is prospering.

Also, with current geo-political situation, CIS countries are looking forward to Indian Companies in order to meet their requirement.

With the above coal production plan, infrastructure development plans and enhancement in exports, the demand for Mining & Construction equipment is expected to be robust in ensuing years. All strategies are in place to grasp the business.

Rail & Metro:

With augmented Capital expenditure earmarked by Indian Railways and upcoming requirements of Vande Bharat coaches & maintenance equipment, BEML is ready to address the requirement.

Further, Metro Rail is extending to Tier-II cities in the Country and BEML is optimistic about getting orders for upcoming Metro Car projects.

Also, the increased demand of sub-urban trains i.e. Electric Multiple Units and upcoming tenders thereon will positively contribute to Companys topline.

Exports:

On export front, major order from Cameroon for supply of construction equipment consisting of Bulldozers, Excavators, Wheel Loaders, Motor graders and Compactors. have been completed during January 2023. Further, the Company has bagged export orders from Russia for which supplies will be made in FY 2023-24. Additionally, order from Indonesia for supply for 10 number of Motor Grader has been received and will be executed during current year.

Also, the Company has received order from M/s BrahMos to supply 09 number of Prime movers for export to Philippines as part of BrahMos Missile system. BEML is part of the subject export deal and advance efforts are being made to meet the delivery requirements of M/s BrahMos.

The Company is working on various business opportunities in Defence, Mining & Construction and Rail & Metro segments in SAARC and Africa.

BEML has registered with Defence Portals of Foreign Countries like Philippines, Korea and Singapore. With above strategy, BEML is looking for opportunities to export High Mobility Vehicles, Aircraft towing tractor in the area of Defence and Rail coaches, Metro Cars, Maintenance vehicles in the area of Rail & Metro business in addition to export of Mining & Construction equipment.

(vi) Challenges, Risks and Concerns:

The major challenges to the Company are:

• Supply Chain Disruptions

• Enhancing exports

• Competitive Environment

• Dumping price strategy adopted by global player for Mining & Metro projects

• Bridging the technology gap and meeting the emerging demand for higher capacity equipment in line with global market trend

• Sustaining the market share in view of entry of more MNCs

• Support in terms of Orders from

Indian Railways

• Long process in release of Defence sale orders & clearances

• Defence business opening up to private sector

• Cybersecurity

• Retention of Talent

(vii) Internal control systems and their adequacy:

The Company has an internal control system designed to provide high degree of assurance regarding optimization and safeguarding of resources, quality and reliability of financial and operationalinformation, compliance with applicable statutes and corporate policies. It is the Companys endeavour to align all its processes and controls with global best practices.

The internal audit process is designed to review the adequacy of internal control checks in the system and covers all significant areas of the Companys operations. The internal audit department performs risk-based audits, based on an internal audit plan which is reviewed every year in consultation with statutory auditors and the Audit Committee. The Audit Committee reviews audit reports submitted by internal auditors and follow up on the implementation of corrective actions periodically.

The Statutory Auditors submit a report on internal financial controls over financial reporting along with their Audit Report on the financial statement every year. BEML being a Government Company, it is subject to audit by Comptroller and Auditor General of India also.

A comprehensive Delegation of Powers exists for smooth decision making which is being periodically reviewed to align it with changing business environment and for speedier decision making. The Company has implemented an enterprise-wide ERP. The Company has end to end SAP platform to provide a robust foundation to address several emerging business needs.

(viii) Discussion on financial performance with respect to operational performance:

( crore)

Particulars	2022-23	2021-22
a. Revenue from Operations (Incl of other operating Income)	3899	4337
b. Revenue from Operations (Sale of product & services)	3839	4143
c. Value of Production	3802	3993
d. Profit before Depreciation, Interest and Tax	389	321
e. Finance costs	46	49
f. Depreciation and amortization expense	64	66
g. Profit Before Tax	279	206
h. Tax Expense	120	71
i. Profit after Tax	159	135
j. Other Comprehensive Income	(19)	(27)
k. Total Comprehensive Income	140	108
l. Networth	2395	2307
m. Inventory	2061	2073
n. Trade Receivables (Net)	1237	1861
Total Inventory in no. of days of VoP	198	189
Trade Receivables/ Revenue from Sale of Products and services (including GST)	99	142
Profit before Tax to Revenue from operations (%)	7.15%	4.74%
Profit after Tax to Networth (%)	6.63%	5.84%

* GST on Revenue from Operations in FY 2022-23 is Rs 710 crore and in FY 2021-22 is Rs 653 crore.

Your Company achieved Revenue from Operations of ? 3899 crore as against Rs 4337 crore in the previous year, down by 10%. Value of Production is Rs 3802 crore as against Rs 3993 crore in the previous year, down by 4.78%. With increased business and continued focus on cost control, your Company registered a Profit before Tax of Rs 279 crore as against Profit before Tax of Rs 206 crore in the previous financial year, up by 35.41%.

There was no change in the nature of business of the Company during the year. Further, there was no material change/ commitment occurred affecting the financial position of the Company subsequent to the financial year ended 31.03.2023 till the date of this report.

(ix) Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefore, including:

	Key Financial ratio	2022-23	2021-22	% Change	Explanation
(i)	Debtors Turnover	2.94 times	2.56 times	14.84	--
(ii)	Inventory Turnover	1.86 times	2.05 times	-9.27	--
(iii)	Interest Coverage Ratio	7.02 times	5.17 times	35.78	Increase in profits
(iv)	Current Ratio	2.39 times	2.39 times	--	--
(v)	Debt Equity Ratio	0.15 times	0.36 times	-58.33	Decreased in borrowings
(vi)	Operating Profit Margin (%)	7.72%	5.73%	34.73	Increase in operating profit
(vii)	Net Profit Margin (%)	4.07%	3.10%	31.29	Increase in profit

(x) Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.

Key Financial ratio	2022-23	2021-22	% Change	Explanation
Return on net worth	6.64%	5.85%	13.50%	Increase in profits

(xi) Material developments in Human Resources, Industrial Relations front, including number of people employed:

Relevant information in this regard is disclosed in the Boards Report.

(xii) Environmental Protection and Conservation, Technological conservation, Renewable energy developments, Foreign Exchange conservation:

Relevant information in this regard is disclosed in the Boards Report.

(xiii) Corporate Social Responsibility and Sustainability (CSR):

Relevant information in this regard is disclosed in Annexure-VI of the Boards Report.

Cautionary Statement - Certain statements made in the Management Discussion and Analysis Report related to the Companys objectives, projections, outlook, expectations, estimates and others may constitute forward looking statements within the meaning of applicable laws and regulations. Actual results may differ from such expectations, projections and so on whether expressed or implied. Several factors could make significant difference to the Companys operations. These include climatic conditions and economic conditions affecting demand and supply, government regulations and taxation, natural calamities and so on over which the Company does not have any direct control.

For and on behalf of the Board of Directors

	Sd/-
Bengaluru	Amit Banerjee
14.07.2023	Chairman & Managing Director