BGR Energy Systems Ltd Management Discussions.




In the Power business segment, during FY 2019-20 the Company was successful in securing a prestigious EPC contract for construction of the 1 x 660 MW Supercritical Power Project at Ennore, Chennai, Tamil Nadu from TANGEDCO. This project contract is valued at Rs 4,443 Crores and is expected to be completed in 36 months.

The Company has achieved the completion of 2X660 MW Solapur and 2X660 MW Meja Super Critical Steam Generators and 2x800 MW Lara Super Critical Steam Turbines and Generators projects successfully.

The BOP, EPC and Construction segment has achieved turnover of Rs. 2307 crores and the Capital Goods Segment achieved turnover of Rs. 384 crores.

Air Fin Cooler Division (AFC) achieved sizeable share of business in offshore sector. The division executed orders in higher/special metallurgy and achieved major break through with global upstream market AFC division continued its efforts in expansion in international markets and achieved significant breakthrough in the year under review.

In FY 2019-20 Environmental Engineering Division (EED) commissioned 45 MLD tertiary treatment sewerage plant in Chennai. This proven competency is expected to bolster the Companys market standing in water treatment sector. The Company secured further contracts for lake water and sewerage treatment. The Company is executing number of water projects and is poised to be major player in water industry. In the Deaerator segment, though market was sluggish in the first half of the year, EED focussed refinery sector and nuclear power.

Oil and Gas Equipment Division (OGED) booked orders of Rs.25 Crores during the year and the order backlog was Rs. 75 Crores for the FY2020-21. This includes the EPC project of gas compressor station and crude oil storage tank terminal with allied facilities. The Company added Gas dehydration unit in its product profile. OGED added three new clients in FY 2019 - 20. These companies are leaders in their businesses in specific areas of Oil & Gas globally.

Electrical Project Division (EPD) captured significant market share in T&D segment and amongst orders are from Nuclear Power Corporation Limited (NPCIL) for Control & Instrumentation package for KKNPP 3 & 4 Project and 220 kV AIS Switchyard Extension at Tarapur atomic Power Station for supply, installation, testing and commissioning of 3 Nos. 132/33 kV (New) GIS Substations at Sundarnagar, Sarath and Chattarpur on Turnkey basis funded by world bank, for 400 kV AIS SS with 2 Nos. 500 MVA 400/230 kV Transformers, 3 Nos. 200 MVA 400/110

kV Transformers and 2 Nos. 125 MVAR, 400 kV Reactors at Edayarpalayam, Coimbatore turnkey basis and an order from Nuclear Power Corporation of India (NPCIL). The contract deliveries in T&D segment has witnessed traction and the Companys EPC capability has become robust.


The last few years has seen a depressed investment in the core sectors such as Power, Steel, Automotive, Refining and Petrochemicals, downstream allied chemical industry and the manufacturing sectors due to a subdued demand and decreasing growth over the previous years. There has been a virtual deceleration in the capex investments in the private sector which has forced the Governments both at the Centre and the States to increase the Capex spending on certain high intensive sectors other than Power such as Roads, Water Treatment & Distribution, Power Transmission, Medical Infrastructure. The capital expenditure by both the State and Central Governments in the above mentioned sectors are expected to accelerate to keep the economy and the key sectors such as Cement, Steel and the construction to sustain for the next few years until the investments by the private enterprises are stepped up owing to increased demand.

The AMRUT program embarked by the Water Resources Ministry of the Central Government to make available basic drinking water to the remotest corners of the country similar to the last mile connectivity of electricity to the remotest villages, Rejuvenation of River Ganga, interlinking of major rivers across the country has opened large business opportunity for companies in Water sector.

Similarly, integration of the electricity transmission network across the country to enable easy transmission of electricity in the short term across various regions is seeing major investment in the transmission lines and substation expansion and renovation. This again is a good opportunity for the company as the Company is well established in both the water treatment as well as the electrical transmission and distribution sectors to capitalize on the forthcoming opportunities.


The Governments lay huge thrust on drinking water sector and the Company is fully geared up to tap sizeable water projects and sewerage treatment plants in the municipal sector in domestic market. 2-4 Desalination Plants in the South and West coast of India to be finalised in FY 202021. Recycling of sewage water initiative by government offers huge business potential. There is huge surge of tenders from State Governments for piped water supply. There has been a renewed focus to tap export market for deaerator backed by strong advantage in technology, cost competitiveness and quality.

For Oil and Gas Division, in the upstream and midstream sector, Ministry of Petroleum and Natural Gas recently awarded blocks through Open Acreage Licensing Policy for enhancing domestic exploration and production of Oil and Gas to leading exploration companies. This policy opened huge market potential for OGED to supply process packages and also to spread its foot paths in high value EPC projects. The Company is active to seize opportunities in UAE, Vietnam, Nigeria, and Qatar to supply process equipment. In the downstream (refinery) sector, PSU oil majors have already initiated their projects under their expansion policy and BS VI up-gradation policy and biorefinery projects. These potential bring up new market potential in O&G sector.

In the backdrop of emphasis on renewable energy and a stagnating economy, the capacity utilization of the thermal power plants is hovering around 50~52%. In addition, the decreasing price trend of renewable energy generation discovered through the reverse auctions by the Ministry of Power in the last year has ensured the idling or lower capacity utilization of many thermal plants due to their higher cost of generation. The capacity addition in the thermal power Sector in the last 2 years has been nearly half of the capacity added in the renewable energy sector and this trend is expected to continue in the near future.

The annual demand for electricity also having reduced in the last 3 years owing to reduced offtake of energy by the manufacturing sector caused by the sustained low demand and recession, witnessed a lower plant load factor of the most operating thermal plants. This and the increasing emphasis on installation of green power has stalled expansion plans of coal based power projects across the country. With global shift towards green power, the world is slowly seeing a distinct shift towards cleaner sources of power generation from the conventional fossil/ coal based power which was the dominant source of energy the world over.

The shift towards renewable sources of energy has also witnessed a gradual alignment of the financial lending agencies across the globe towards renewables over conventional fossil based power projects. This phenomenon has also affected India as can be seen from the decreasing levels of lending by these financial institutions reluctance to the thermal power sector.


In the backdrop of challenges in thermal power sector in India and global markets as well, your Company initiated number of strategic initiatives and engaged an Internationally renowned business consulting firm to advise on growth strategy. The Company identified critical need for shift from current business segments

and following sectors being key drivers for growth in the medium term:

To diversify into adjacent business sectors to which public and private investments are planned by macro policy directions and where the companys current track record and competencies could be leveraged for growth. These segments include:

(i) Water

(ii) Transmission & Distribution

(iii) Transport infrastructure (Metro, Railways and Highways)

(iv) Civil construction; and

(v) Oil & Gas

The Company would continue to be significant market player in thermal generation sector, being selective in order booking and would leverage its competencies in focusing and seeking orders from Nuclear power projects which are expected to witness capacity addition of 20 GW. In capital goods / manufacturing businesses, the Company has taken aggressive steps to expand the geographical market reach in international markets and has also identified key opportunities for expanding the product portfolio.

These strategies enabled the Company to address market opportunities of over Rs.10 Lakh Crore and with special focus on Rs,2,50,000 Crore markets over next three years. The Company is gearing up its capabilities and resources to seize these growth momentum.




FY 18-19 FY 19-20
Income from Operations


3229 2692


338 207


10.5% 7.7%


41 (64)


29 14


1406 1417
PBT Ratio


1.3% -2.4%
PAT Ratio


0.91% 0.50%
Return on Networth


2.1% 1.0%
Employee Cost to Turnover


7.0% 7.2%
Overheads Cost to Turnover


1.95% 2.71%
Interest Cost to Turnover


8.4% 10.4%
Debtors Turnover


455 450

FY 18-19

FY 19-20
Debtors Turnover (Excluding Retention) Days


Inventory Turnover Days


Interest Coverage Ratio Times


Current Ratio Times


Debt Equity Ratio Times



The Operating margin for the year 2019-20 was lower due to lower turnover due to COVID - 19 and Product mix. There is no significant changes in other key financial ratios as compared with previous year.

The Company has opted for new section 115 BAA of the Income Tax Act 1961 in the current year. Accordingly (a) the provision for current year and deferred tax has been determined at the rate of 25.17 %, (b) the deferred tax liabilities as on April 1, 2019 has been restated at the rate of 25.17 %, which resulted in the reversal of deferred tax liabilities (net) by Rs. 8479 lakhs.


The COVID-19 pandemic has hit the operations hard, and revenue and profitability are adversely impacted and project execution have come to a standstill. The normalisation of operations depends on the return of labourers and resumption of supply chain cycle.

The companys project sites remained closed from March 23, 2020 due to lockdown and partially reopened with effect from May 04, 2020.However the execution has not gained traction so far.

The Company has addressed its customers for suitable time and cost impact and compensation. The revised time lines are under discussion with customers.

Due to lockdown, the Company is going through liquidity crunch with mismatch of cash flow and is finding it difficult to meet its working capital requirements on time. The management is closely monitoring the cash inflow and outflow and are in discussion with banks for support.

The company has restarted project operations at a few project sites with a small portion of the workforce, as is

available due to migration, since May 4, 2020, adhering to the safety norms prescribed by the Government of India and respective State Governments.


I. Proven track record of successful execution of large turnkey EPC, BoP and LSTK contracts

II. In-house design and engineering capability

III. In-house capability to undertake and execute BoP packages.

IV. Capability to manage multiple projects simultaneously

V. Professional management and expertise in project management

VI. Cost Competitiveness

VII. Well experienced and motivated employees with a good balance of young talent and experienced leadership team.


As part of the audit system, the company has in-house experienced system and works auditor. Experienced external firm of auditors carries out internal audit. The detailed audit plan is well documented and audit scope is reviewed every year to include key processes that need improvements and address new compliance requirements. The detailed audit plan approved by the Audit Committee is rolled out at the beginning of each year. In addition, all payments to vendors are subjected to pre-audit by an external audit team. The statutory auditors carry out the required audit and compliance checks and review the control systems. The Chairman of audit committee, key project personnel and the finance team review the audit reports of the internal auditors, pre auditors and in-house auditors in detail every quarter and a time bound action plan is initiated to address the key audit issues that need improvement and resolution. A summary of key audit observations, action taken to fix the gaps and the status is reviewed by the Audit Committee members in the quarterly audit committee meeting. The present internal control and audit systems are considered to be adequate.


The business of the Company encompasses design at offices, manufacturing at factories and project sites, civil and mechanical construction, erection and commissioning of equipments / packages. The company has a well- documented Standard Operating Systems and Procedures (SOSP). The SOSP mandates concerned officers of the company to review, identify and take timely steps to manage these risks on an ongoing basis. A detailed review and up gradation of the existing SOSP was undertaken during the year and is expected to be implemented soon. Delegation of Authority is reviewed each year to ensure that

the adequate controls are in place and required flexibility is available for effective operations at work site and the commitments made to customers and vendors are met on time. Periodic review of procedural checks and balances are undertaken with a view to improve operational controls and productivity matrix. An experienced team of contract specialists in the Company review all contractual documents with the customers and the vendors in detail to ensure that all risks associated with the terms of contract are fully understood, documented and reviewed for ensuring effective implementation of the contracts.

The Companys activities are exposed to various financial risks like market risk, foreign exchange risk, credit risk and liquidity risk. These financial risks have a bearing on the operating profit of the Company. The Companys Senior Management oversees the management and mitigative measures of these risks. The Audit Committee regularly reviews the effectiveness of the risk identification and mitigative process and the steps taken by the Company to identify, address and mitigate key operating, compliance and financial risks on a timely manner.


Employees are integral to the ongoing success of the company, the company is "Employee oriented” it cares about the employees and invested in their success. The individuals are respected and their suggestions are valued.

This year the main agenda of HR was involving people in transforming the company into a world class organization. In line with same, the Company embarked on LEAP -Lean Efficient Agile Program - a change management initiative. The employees across the Company provided valuable suggestions to bring paradigm change. Through the interactions the Company garnered valuable suggestions and a Steering Committee and Sub Committees taken up the implementation. The suggestions are at various levels of implementation in transforming the Company into truly world - class.

The another key agenda of HR this year was optimization of the workforce. Careful study was done on the workforce taking into consideration the criticality, the supply demand in the market and the growth of the company. By this study the company could optimize 10% of the manpower. The manpower of the company on 31st March 2020 was 1813.

Building capability in technical area was a key suggestion received, the Company set up technical training wing. This wing devised training modules, identified trainers and conducted training in building the skill inventory for the future. The other areas were on behavioural, safety and awareness programs.

"Employee oriented” companies acknowledge achievements and celebrate through recognitions. In line with the same, employees were recognized through

‘Spot recognitions, ‘Employee of the month and ‘Annual Star Performer Awards for their achievements.


The Company treats EHS as its core to carry on and grow the business on a sustained basis. The Company has adopted a structured approach towards implementation of EHS policy and plans to integrate EHS with critical operating processes so as to continually improve the environment in which the Company operates as well as the safety and health of all employees, workmen, general public and the society. The Company established EHS structure for developing, implementing and improving EHS Management Systems. These systems are so designed to imbibe and enhance safety culture and to mitigate high potential risks among the employees and contractors through appropriate intervention and guidance.

During FY 2018-19, the Company took up many EHS initiatives viz., monitoring and control of air, noise and water pollution, fitness of all employees premedical screening, regular health awareness camps, blood donation, AIDS awareness at project sites, safety orientation to all new employees and contractors men before engaging at work, hazard identification and risk assessment for all critical activities, safety evaluation of contractors and adoption of EHS code of Practices by contractor, enhancement of behavior based safety programs, on spot motivation to safety conscious worker and recognition of best EHS performance by contractor.

COVID-19 brought number of health issues and risks. The Company took action well in time and constituted task forces and Marshalls so as to ensure the effect of pandemic is controlled on the employees and the organisation.