Bharat Heavy Electricals Ltd Directors Report.

Dear Members,

The Board of Directors have pleasure in presenting the 55th Annual Report on the business and operations of your Company and the Audited Financial Statements for the year ended March 31, 2019.

Financial Results

(Rs Crore)

For the year ended

March 31, 2019 March 31, 2018 Growth
Turnover 29349 27850 5.4%
Revenue from operations 30349 28813 5.3%
EBIDTA 2820 2626 7.4%
Operational EBIDTA 2142 1932 10.9%
Profit before tax 2058 1585 29.8%
Profit after tax 1215 807 50.6%
Total comprehensive income 1096 890 23.1%
Dividend (including interim dividend ) paid 653 485 34.6%
EPS (in Rs) 3.35 2.20 52.3%

State of Company Affairs

Turnover in FY 2018-19 was Rs. 29349 crore against Rs. 27850 crore in FY 2017-18, a growth of 5.4% over previous year. Revenue from operations increased by 5.3% in FY 2018-19 over FY 2017-18.

EBIDTA was Rs. 2820 crore in FY 2018-19 against Rs. 2626 crore in FY 2017-18, a growth of 7.4%. The Company registered profit before tax (PBT) of Rs. 2058 crore in FY 2018-19 against Rs.1585 crore in FY 2017-18, a growth of 29.8%. Net profit (PAT) stood at Rs.1215 crore in FY 2018-19 against Rs. 807 crore in FY 2017-18, a quantum jump of 50.6%. This was achieved through operational improvements, vacation of provisions on settlement of contractual issues with customers etc.

The Company secured orders worth Rs. 23859 crore in FY 2018-19. This comprises orders worth Rs.15490 crore in power sector, Rs. 7016 crore in industry sector and Rs.1353 crore in international operations. In the Power sector, the Company continues to maintain its market leadership, and has secured the only order for main plant package of a thermal power plant which was ordered in the nation in the year. In addition, various tenders where BHEL is favourably placed are expected to be finalized in 2019-20. The order book outstanding at the end of March 31, 2019 was around Rs.109000 crore (executable order of Rs. 87000 crore) against Rs.118000 crore (executable order of Rs. 99000) as on March 31, 2018. The order book figures are inclusive of applicable taxes.

Change in Share Capital

The Board, in its meeting held on October 25, 2018 approved a proposal for the Company to buyback of its 18,93,36,645 fully paid up equity shares of the face value of Rs. 2 each representing 5.16% of the total issued and paid-up equity share capital from the eligible equity shareholders of the Company, for an amount not exceeding Rs.1628.30 crore at a price of Rs. 86 per equity share. The buyback offer size was upto 5% of both the standalone and consolidated paid-up equity share capital and free reserves of the Company for the financial year ended March 31, 2018 which was well within the statutory limit of 10% of the aggregate of the fully paid-up share capital and free reserves of the Company for the financial year ended on March 31, 2019 with record date November 06, 2018. The buyback offer opened on December 13, 2018 and closed on December 27, 2018 through tender offer route. Total equity shares of 18,93,36,645 were bought back at Rs. 86 per equity share (including premium) with total outflow of Rs.1628.30 crore paid in January 2019. Consequently, the paid-up share capital has reduced from Rs. 734.28 crore in FY 2017-18 to Rs. 696.41 crore in FY 2018-19.

Transfer to Reserve

The Company has transferred Rs. 37.87 crore to "Capital Redemption Reserve" for buyback of its fully paid-up equity shares during FY 2018-19. The Company has utilized General Reserve of Rs.1628.30 crore for the buyback of equity shares during FY 2018-19.

Dividend

Your Company has paid an interim dividend of Rs. 0.80 per equity share (@40% on equity share of Rs. 2/- each) amounting to Rs. 278.57 crore on the paid up share capital of Rs. 696.41 crore, in February 2019. Further, the Board of Directors has recommended, in its meeting held on May 27, 2019, a final dividend of Rs.1.20 per equity share (@ 60 % on equity share of Rs. 2/- each) amounting to Rs. 417.85 crore, out of profit for FY 2018-19, subject to your approval. With this, the total dividend for FY 2018-19 amounts to Rs. 696.42 crore (excluding dividend distribution tax) and Rs. 839.58 crore (including dividend distribution tax).

The Company has in place a dividend distribution policy in pursuance to the requirements of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("LODR"). Dividend distribution policy is available on the Companys website at www.bhel.com and is also provided separately in the Annual Report.

Deposits

The Company has not accepted deposits from the public falling within the ambit of Section 73 of the Companies Act, 2013 during FY 2018-19.

MoU Rating

Your Company has been rated as Excellent on MoU performance for FY 2017-18 by Government of India.

Credit Rating

The credit ratings of your Company at the end of FY 2018-19 were:

Rating Agency Date of Rating Long Term Rating Outlook Short Term Rating
CRISIL 6th Nov, 2018 CRISIL AA+ Stable CRISIL A1 +
INDIA ratings 29th Nov, 2018 IND AA+ Stable IND A1 +
CARE 15th Feb, 2019 CARE AA+ Stable CARE A1 +

CRISIL has upgraded outlook from Negative to Stable in FY 2018-19. Outlook by INDIA RATINGS and CARE remains at Stable.

Material Changes and Commitments Affecting the Financial Position

There are no material changes and commitments affecting the financial position of the Company between the end of the financial year and the date of this report of FY 2018-19.

Directors Responsibility Statement

Pursuant to section 134(5) of the Companies Act, 2013, the Board of Directors confirms that:

a) In the preparation of the Annual Accounts, the applicable Accounting Standards (Ind AS) have been followed along with proper explanations relating to material departures;

b) 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 financial year and of the profit of the Company for that period;

c) The Directors have taken proper and sufficient care for 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;

d) The Directors have prepared the Annual Accounts on a going concern basis;

e) The Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively;

f) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Management Discussion & Analysis

The Indian economy grew at a slower pace in the second half of 2018-19. The country registered GDP growth of 6.8% in FY 2018-19 compared to the projected growth of 7.4%, but macro fundamentals of the domestic economy remain strong. The governments vision of making India a US $5 trillion economy by 2024 is expected to invigorate economic activity, stimulating growth in core sectors.

Business environment at present continues to be difficult. Despite various challenges, the company has maintained its leadership in its core business. Aggressive focus on diversification initiatives in the areas of solar, transportation, defence & aerospace, e-mobility & water businesses are bearing results and are set to drive growth in the future.

In the journey of "Creating BHEL of tomorrow", which BHEL embarked on with focus on its seminal strategy framework of Survive, Revive and Thrive and their respective enabling nine elements (NEEV), many important initiatives have already been taken so far, and many others are in the pipeline. Maintaining profitable growth, asserting leadership in the core business, and diversification by harnessing emerging opportunities continue to be the cornerstone of our business strategy. For further details, please refer Annexure-I to the Boards Report.

Corporate Governance

Pursuant to Regulation 34 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, a report on Corporate Governance (including Board/Committee meeting details) together with the following, is given at Annexure-II to the Board Report

(i) Certificate of Non-Disqualification of Directors under Schedule V of the Listing Regulations.

(ii) Auditors certificate on Corporate Governance under Listing Regulations & DPE guidelines on Corporate Governance.

(iii) Secretarial Audit Report u/s 204(1) of the Companies Act, 2013.

(iv) 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 Independent Directors to the Board of Directors.

Links to Company Websites:

1. Familiarisation Programme of Independent Directors: http://www.bhel.com/index.php/ind_dir

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

http://www.bhel.com/pdf/Policy_with_regard_to_ Related_Party_Transactions_010419.pdf

3. Extract of Annual Return: http://www.bhel.com/index.php/notice_announce

Audit Committee

The Company has in place a Board Level Audit Committee in terms of the requirements of the Companies Act, 2013 read with rules made thereunder and Regulation 18 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015, the details in respect of which are given at Point 3 of the Corporate Governance Report. Further, there has been no instance where the Board of Directors have not accepted the recommendation of Audit Committee.

Compliance with Secretarial Standards

The Company has complied with applicable Secretarial Standards.

Changes in Directors & Key Managerial Personnel Appointment

Shri R. Swaminathan, who was appointed as Part-time Nonofficial (Independent) Director on December 18, 2015, ceased to be a Director of the Company on completion of his tenure on November 30, 2018. He has been re-appointed as Part-time Non-official (Independent) Director w.e.f. December 1, 2018.

Shri Manoj Kumar Varma has been appointed as Whole Time (Functional) Director w.e.f. December 19, 2018 to take charge of the office of Director (Power).

Shri Rajesh Sharma has been appointed as Part-time Non-official (Independent) Director w.e.f. February 20, 2019.

Shri Kamalesh Das has been appointed as Whole Time (Functional) Director w.e.f. March 1, 2019 to take charge of the office of Director (E, R&D).

Shri Amit Varadan, Joint Secretary, Department of Heavy Industry, Ministry of Heavy Industries & Public Enterprises has been appointed as Part-time Official Director w.e.f. March 27, 2019.

Dr. Nalin Shinghal who was appointed as Chairman & Managing Director (CMD) on July 3, 2019 has assumed charge of the post of CMD, BHEL w.e.f. July 8, 2019. Further, pursuant to DHI order dated July 1, 2019, Shri D. Bandyopadhyay, Director (HR), BHEL was entrusted with additional charge of the post of CMD in addition to his existing duties w.e.f. July 2, 2019 till the period Dr. Nalin Shinghal joined as CMD.

In accordance with Section 161 of the Companies Act, 2013 and Article 67(iv) of the Articles of Association of the Company, S/Shri Manoj Kumar Varma, Rajesh Sharma, Kamalesh Das, Amit Varadan and Dr. Nalin Shinghal, having been appointed as additional directors, shall hold directorship upto the 55th Annual General Meeting of the Company and are eligible for appointment as Directors at the Meeting. Further, pursuant to the aforementioned Section 161 and Article 67(iv) read with Section 149 (10) of the Companies Act, 2013, Shri R. Swaminathan shall hold directorship upto the 55th Annual General Meeting of the Company and is eligible for reappointment as an Independent Director at the Meeting by a special resolution.

Cessation

Shri Akhil Joshi, who was appointed as Director (Power) on August 10, 2016, ceased to be a Director of the Company on attaining the age of superannuation on September 30, 2018.

Shri Rajesh Kishore, who was appointed as Part-time Nonofficial (Independent) Director on December 18, 2015, ceased to be a Director of the Company on completion of his tenure on November 30, 2018. He was re-appointed as Part-time Non-official (Independent) Director on December 1, 2018 and subsequently ceased to be a Director due to his sad demise on December 19, 2018.

Shri Keshav N. Desiraju, who was appointed as Part-time Nonofficial (Independent) Director on December 18, 2015, ceased to be a Director of the Company on completion of his tenure on November 30, 2018.

Shri Subrata Biswas, who was appointed as Director (E, R&D) on September 24, 2015, ceased to be a Director of the Company on attaining the age of superannuation on February 28, 2019.

Shri Pravin L. Agrawal, Joint Secretary, Department of Heavy Industry, Ministry of Heavy Industries & Public Enterprises, who was appointed as Part-time Official Director on May 18, 2018, ceased to be Part-time Official Director on March 27, 2019.

Ms. Surama Padhy who was appointed as Part-time Non-official (Independent) Director on February 2, 2017, ceased to be a Director of the Company due to her resignation on March 31, 2019.

Shri Atul Sobti, who was appointed as Chairman & Managing Director on January 1, 2016, ceased to be CMD of the Company on attaining the age of superannuation on June 30, 2019.

Dr. Subhash Chandra Pandey, former Special Secretary & Financial Adviser, Department of Industrial Policy and Promotion, Ministry of Commerce & Industry, who was appointed as Part-time Director on March 31, 2016, ceased to be a Director of the Company on attaining the age of superannuation on June 30, 2019.

The Board of Directors place on record their deep appreciation for the valuable services rendered as well as advice and guidance provided by S/Shri Akhil Joshi, the late Sh. Rajesh Kishore, Keshav N. Desiraju, Subrata Biswas, Pravin L. Agrawal, Ms. Surama Padhy, and Dr. Subhash Chandra Pandey during their tenure. The Board of Directors also place on record their deep appreciation for the visionary leadership and strategic direction provided by Shri Atul Sobti during his tenure as CMD, BHEL.

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

In compliance with Regulation 36(3) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, brief resume of the Directors proposed for appointment and re-appointment alongwith the nature of their expertise in specific functional areas and names of companies in which the person also holds directorship alongwith the membership of the Committees of the Board are given in the explanatory statement/ annexure to the Notice.

Shri Rajeev Kalra was appointed as Company Secretary and Key Managerial Personnel w.e.f. December 17, 2018 consequent to the relinquishment of charge by Shri I.P. Singh.

CEO/CFO Certificate

CEO/CFO certificate as per Regulation 17(8) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 is placed at Annexure- III to the Boards Report.

Loans and Investments

Details of loans and investments covered under the provisions of Section 186 of the Companies Act, 2013 form part of financial statement. Loan of Rs. 3 crore towards working capital was given during FY 2015-16 to M/s BHEL EML, BHELs subsidiary Company, and has been already provided for impairment.

Consolidated Financial Statements

The brief on consolidated financial statements prepared pursuant to section 129 (3) of the Companies Act, 2013 and Regulation 34 of the SEBI (Listing Obligations & Disclosure Requirement) Regulations 2015, is given in para 1.5.4 under Management Discussion & Analysis.

Sustainable Development

Tenets of sustainability are ingrained in our business processes which is reflected in our mission statement "Providing sustainable business solutions in the fields of Energy, Industry & Infrastructure". BHEL is always looking for avenues to minimise the environmental footprint across the entire value chain. Development of cleaner products, reduction in consumption of natural resources in our products/ processes, sustainable waste management based on principle of reduce-recycle-reuse (3R), enriching the environment through development of greenery in our premises, managing carbon footprint responsibly through use of cleaner fuel and renewable energy, energy conservation/ efficiency measures, and promoting inclusive growth through our CSR programme are some of the approaches employed to meet the objective of sustainable development in BHEL. The details of various initiatives taken under these areas are given in Annexure - IV to the Boards Report.

Business Responsibility Report

In line with the requirement of the listing regulations, Business Responsibility Report describing the initiatives taken by the Company from environmental, social and governance perspectives is enclosed at Annexure V to the Boards Report.

Achievements of R & D and Technological Development

BHELs Innovation strategy, R&D structure and infrastructure is geared up to meet the technological challenges of present and future business requirements. The R&D expenditure of the Company for 2018-19 was Rs. 820 crore which is approx. 2.8% of the turnover. This includes expenditure incurred on R&D efforts made at manufacturing units for major modifications/ improvements in products/ designs/ against customer requirements apart from R&D projects. The Company filed 558 patent and copyright applications during the year, enhancing the Companys intellectual capital to 4561. Approx 19.6 % of the Companys turnover, amounting to Rs. 5761 crore has been achieved from its in-house developed products. Further details have been provided in Annexure-VI to the Boards Report.

Implementation of Official Language

Continuous efforts are being made for propagation and effective implementation of Rajbhasha in all units of the Company and the progress is reviewed and monitored continuously. Committee of Parliament on Official Language appreciated the efforts being made in BHEL during their inspection in various Units. Department of Heavy Industries also carried out inspection in certain units.

12 units of the Company were awarded by the Chairman and Managing Director on May 15, 2018 for excellent Rajbhasha implementation. Hindi Diwas / Week / fortnight / Month were celebrated in all the units/ divisions including Corporate Office, during which various events such as competitions, seminars, cultural programs and Kavi-sammelans were organized. Rajbhasha Ullas Parva was organized in the offices based in Delhi / NCR. In Corporate Office, Hindi Diwas function was held under the chairmanship of Director (HR) on Sept. 14, 2018. Prof. Vishnu Datt Rakesh, Vice Chancellor of Gurukul Kangadi Vishvavidyalaya, Haridwar was invited as the Chief Guest.

Your Company is playing an active role in Town Official Language Implementation Committees located in different cities. Many interesting competitions, seminars, conferences and programs are organized under the auspices of these committees. 17 magazines in Hindi are published in the Company. During the year 2018-19, 30 employees were awarded cash prize for their excellent articles published in Corporate offices Hindi magazine Arunima.

Meeting of Hindi Advisory Committee of the Ministry of Heavy Industries and Public Enterprises was held in Munnar, Kerala and Havlok, Andman & Nicobar Islands on May 18, 2018 and November 29, 2018 respectively under the chairmanship of the Minister of Heavy Industries and Public Enterprises.

Vigil Mechanism

Vigilance Department of BHEL is headed by the Chief Vigilance Officer (CVO) appointed by Department of Heavy Industry (DHI), Ministry of Heavy Industry & Public Enterprises, Govt. of India. Major manufacturing Units/ Power Sector Regions of BHEL have a vigilance set-up headed by a senior vigilance executive reporting to the CVO.

Preventive Vigilance has always remained the focus area of BHEL Vigilance. Deficiencies noticed during the inspections were shared with Management, and systemic improvements advised so as to reduce use of discretionary powers, and increase transparency. Other deviations are brought to the knowledge of Management from time to time for issuance of circular/guidelines and systemic improvements in such areas. Some of the major measures undertaken in the year were:

• Action was initiated to review and update the Policies, Guidelines and Manuals, covering all critical and important activities in order to align them with Govt. Policies and guidelines, to minimize discretionary powers and bring clarity in provisions where there is a scope for different interpretation.

• Standard Operating Procedure for adoption of Integrity Pact was reviewed as per the advice of CVC and revised procedure notified on July 16, 2018.

• Surprise inspections, routine inspections and CTE (Chief Technical Examiner) type inspections were conducted across all the units, regions and offices of the Company.

• Based on the observations and feedback, systems improvements were implemented in various areas such as revised policy on exigency engagement of retired employees on fixed tenure basis, strict following of instant guidelines while opening Letter of Credit, guidelines for issue of experience certificates, instructions regarding maintenance of Hindrance Register across all BHEL Units / Regions to avoid contractual disputes with contractors, amendment to guidelines for suspension of business dealings with suppliers/ contractors, etc.

Annual Property returns of 4524 employees were scrutinized during the financial year 2018-19.

Vigilance took up 31 cases for investigation. Wherever lapses/ irregularities directly attributable to Company officials were established by investigation, suitable disciplinary proceedings were recommended which resulted in imposition of penalties. Based on the findings in the investigations, advice was rendered by Vigilance and the respective Disciplinary Authorities imposed 34 penalties (25 minor and 9 major) during the year. Further, 18 warning/advisory letters were issued. 232 Complaints (including 03 from CVC and 02 from DHI) were received during the year and 224 complaints were d of. Recoveries of Rs. 4.49 crore have been made by BHEL from vendors/contractors on the advice of Vigilance. On the advice of Vigilance, action against 05 vendors was taken in line with Guidelines of Suspension of Business Dealings with Suppliers / Contractors. Commission forwarded 01 complaint under PIDPI Resolution on which a report was submitted within the time limit. 67 reports (3419 paras) of Internal Audit have been scrutinized for vigilance angle. In 03 paras, vigilance angle was observed and detailed investigation was recommended.

Vigilance Awareness Week was observed from 29th October to 3rd November, 2018 in the Corporate Office, manufacturing units, divisions, Power Sector regions and project sites of BHEL on the theme Eradicate Corruption - Build a New India. To spread awareness about ill effects of corruption amongst younger generation, activities such as lectures, panel discussions, debates, quiz, essay writing, slogans and poster competitions on moral values, ethics, good governance practices etc. were organized among students of 59 schools covering 6159 students and 26 colleges covering 8615 students across the country.

Training programmes/ workshops on Preventive Vigilance were conducted across the Units and Regions. In all the Management Programmes organized by Corporate Learning & Development (CLD) department of BHEL, a session on preventive vigilance is being included. During the period, about 120 training programmes/ workshops were conducted for about 2956 nonvigilance officers. With a view to creating awareness about procurement policy, rules and procedures etc., disseminating instructions and guidelines issued by CVC and Government of India from time to time, and sharing best practices and case studies, Vigilance Department publishes Quarterly e-Newsletter DISHA. Twenty-three issues of the newsletter have so far been published.

In addition, regular review meetings were conducted, and as a part of capacity building, workshops for BHEL Vigilance Officers were also organized at units and Corporate Office.

Health, Safety & Environment (HSE)

Occupational Health, Safety and Environment is a focus area for BHEL Management. Utmost importance is given to ensure a safe working environment and to inculcate safety awareness among employees and stakeholders.

BHEL has a multi-tier structure for managing occupational health, safety and environment by way of organizational set-ups at the corporate, sector, unit, division, project site and location levels. HSE related issues are reviewed in various forums like risk management committee, joint committee, plant level apex committee, central safety committee, shop councils etc.

At BHEL units and sites, integrated HSE Management system certified to HSE standards has been established, which has attained a high level of maturity. An established system of conducting internal audits by trained internal auditors as well as third party auditors is there. Height permit and height work check list are implemented to ensure safety of workers while working at heights. Adequate numbers of qualified safety officers are posted at all units/sites as per statutory rules and provisions to look after safety of men and materials.

For strict compliance & enforcement of safety norms and practices by our sub-contractors, HSE plan of site operations by sub-contractors has been established and is made a part of contracts. For enhancing and sustaining HSE awareness amongst employees and stakeholders, awareness campaigns on fire safety, road safety, general safety, health, environment, and chemical safety were held.

All townships of BHEL units eschew use of single use plastic. More than 21500 saplings have been planted in township, factory and surrounding areas during the reporting period. Campaigns such as "Swachhata Pakhwada" were observed from 16.08.2018 to 31.08.2018 and Swachhata Hi Seva from 15.09.2018 to 02.10.2018 to inculcate the culture of cleanliness and good hygiene in BHEL. A total of 9.63 Lakh man hours were contributed by BHEL employees in such efforts.

As a recognition of good safety practices and performance, BHEL has been conferred with many awards in safety, including 6 National Safety Awards (Trichy unit), Safety Innovation Award 2018 etc. Further, our EDN Bengaluru units team of artisans won the state level safety quiz for the seventh consecutive year.

Data and Cyber Security

BHEL has deployed endpoint security across its IT assets comprising of PCs, laptops and servers and the same has been integrated with its Cyber Security Operations Centre to ensure protection against advanced threats and attacks. This approach provides advanced anti-malware techniques, enabling data security for every device managed by a single console. The successful integration provides BHEL with significant benefits, including protecting the companys geographically distributed endpoints and servers under a single umbrella.

The "Cyber Swachhta Kendra, CSK" (Botnet Cleaning and Malware Analysis Centre) is a part of the Government of Indias Digital India initiative under the Ministry of Electronics and Information Technology (MeitY) to create a secure cyber space by detecting botnet infections in India and to notify, enable cleaning and securing systems of end users so as to prevent further infections. The CSK is set up in accordance with the objectives of the "National Cyber Security Policy", which envisages creating a secure cyber ecosystem in the country, and is being operated by the Indian Computer Emergency Response Team (CERT-In) under provisions of Section 70B of the Information Technology Act, 2000. Public IP range of BHEL has been integrated with the CSK.

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 to the Boards Report.

As per provisions of section 197 of the Companies Act, 2013 read with the 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 the Directors etc. in the Boards Report. However as per Notification No. GSR 463(E) dated June 5, 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, such particulars are not included as part of Boards Report.

Statement pursuant to Section 129 of the Companies Act, 2013 (Form 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 is given at Annexure-VIII to the Boards Report.

Auditors

The Statutory Auditors of your Company are appointed by the Comptroller and Auditor General of India. Three firms of statutory auditors were appointed as joint statutory auditors and five firms were appointed as branch auditors. The names of audit firms appointed for FY 2018-19 are given separately in the Annual Report.

Auditors Report on the Accounts

The Auditors Report and comments of the Comptroller & Auditor General of India on Standalone and Consolidated Financial Statements for FY 2018-19 of the Company are given at Annexure- IX to the Boards Report. There is no qualification in the Auditors report on the Financial Statements of the Company. The Comptroller & Auditor General of India has also given NIL comment on the Financial Statements of the Company after conducting supplementary audit under Section 143 (6) (a) read with Section 129 (4) of the Companies Act, 2013.

Secretarial Audit

In terms of section 204(1) of the Companies Act, 2013, the Company engaged M/s K.K. Sachdeva & Associates, Company Secretaries in whole-time practice, as Secretarial Auditors for conducting Secretarial Audit for FY 2018-19 and their report is forming part of Corporate Governance section.

The observations made by Secretarial Auditor in his Audit report is as under:

The composition of the Board of Directors is not in compliance with Regulation 17(1) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Para 3.1.4 of the DPE Guidelines on Corporate Governance as the Company did not have requisite number of independent directors on its Board.

The Managements reply on the above observation is as under:

BHEL, being a Government Company, the Independent Directors are selected by the Administrative Ministry viz., Department of Heavy Industry in consultation with the Search Committee of the Department of Public Enterprises. The Company is in constant communication with the

Department of Heavy Industry (DHI) for the appointment of requisite number of Independent Directors on its Board in order to comply with the provisions of the SEBI Listing Regulations and DPE Guidelines.

Cost Auditors

In terms of provisions of Section 148 of the Companies Act, 2013 and as per the Companies (Cost Records and Audit) Rules, 2014 and amendments thereof, the Board, on the recommendation of the Audit Committee, approved the appointment of seven firms of Cost Accountants as Cost Auditors for auditing the cost accounts of your Company for FY 2018-19. Cost accounts and records as specified by the Central Government under subsection (1) of section 148 of the Companies Act, 2013 have been properly maintained and complied with.

The details of cost auditors appointed for FY 2018-19 are given separately in the Annual Report. The Cost Audit Report for FY 2017-18 has been filed under XBRL mode on August 23, 2018, well within the due date of filling and there was no qualification in the cost audit report.

Appreciation and Acknowledgement

Your Directors gratefully acknowledge all the support and guidance extended by Ministry of Heavy Industries & Public Enterprises and all other departments and agencies of the Government of India in the Companys operations and developmental plans. The Directors also express their gratitude to the Comptroller and Auditor General of India, Chairman and Members of Audit Board, Statutory Auditors, Branch Auditors, Secretarial Auditor and Cost Auditors for constructive suggestions and continuous cooperation.

The Directors place on record their sincere appreciation towards the Companys 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 Directors also wish to place on record their appreciation for the continued cooperation received from all the technology collaborators, suppliers, contractors and for the support provided by the financial institutions, bankers and stock exchanges.

Your Directors also wish to place on record their sincere appreciation for the diligent efforts, hard work and commitment put in by all BHEL employees to take the organisation to greater heights.

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

(Dr. Nalin Shinghal)
Chairman & Managing Director
Place: New Delhi
Date: July 26, 2019