Bharat Dynamics Ltd.
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ISIN No INE171Z01018 52Wk High (Rs.) 425 BV (Rs.) 106.74 FV (Rs.) 10.00
Bookclosure 27/03/2019 52Wk Low (Rs.) 225 EPS (Rs.) 28.82 P/E (X) 10.20
Mkt Cap. (Rs. Cr.) 5,384.80 P/BV (X) 2.75 Div Yield (%) 2.48 Mkt Lot 1
2018-03

Dear Members,

The Directors have pleasure in presenting the 48th Annual Report together with the audited financial statements of the Company for the year ended 31 March 2018.

1. HIGHLIGHTS OF OPERATIONS

- Your Company has achieved highest sales turnover of Rs.4576 Crore (exclusive of taxes) during the fiscal year under report registering marginal increase of around 1% over that of previous year

- Your Company successfully completed its Initial Public Offer and became a listed company with effect from 23 March 2018 by listing its equity shares on National Stock Exchange of India Ltd and BSE Ltd.

- 5 MW Solar Photo Voltaic Power Project commissioned at BDL, Bhanur

2. FINANCIAL RESULTS AND PERFORMANCE HIGHLIGHTS

2.1 Performance of the Company in financial terms is summarized below:

Rs in Crore

% of

Particulars

2016-17*

2017-18

Increase/ (Decrease)

Revenue from Operations (Gross)

4887

4588

(6)%

Less:

Duties & taxes

351

11

-

Revenue from Operations (Net)

4536

4576

0.89%

Value of Production

4660

4630

(0.65)%

Profit Before Tax

803

774

(3.61)%

Profit After Tax

524

528

0.78%

Value Added

1528

1715

12.23%

Earnings per share#

24.51

26.65

-

* Regrouped figures as per IND-AS;

# EPS has been calculated based on profits excluding the other comprehensive income. EPS for previous year is adjusted for Bonus issue made during the year. Since there is a splitting of shares during the year from face value of Rs.1000/- to Rs.10/- each, the previous year figures are revised accordingly.

2.2 Following data reflect the financial position of the Company:

Rs in Crore

% of

Particulars

2016-17*

2017-18

Increase/ (Decrease)

Gross Block

681

856

25.69%

Depreciation

84

136

61.90%

Net Block

596

720

20.63%

Working Capital

1570

1086

(30.83)%

Capital Employed

2327

1954

(16.02)%

Net Worth

2195

1956

(10.87)%

*Regrouped figures as per IND-AS

2.3 During the year under review your Company has achieved profit before tax of Rs.774 Crore as compared to Rs.803 Crore achieved in the previous year. Profit after tax is at Rs.528 Crore as against Rs.524 Crore in the previous year. The reduction in profits is due to reduction in interest income, however compensated by increase in operating profit by Rs.81 Crore. The interest income in 2016-17 was Rs.189 Crore whereas in 2017-18 it is Rs.82 Crore.

2.4 There has been improvement in value of sales (net) and decrease in value of production during the year compared to the previous year by around 1% and 1% respectively. This year your Company made an operating profit of Rs.682 Crore as against Rs.601 Crore in the previous year indicating a significant improvement in operational performance. Major orders executed during the year for the Armed forces include Akash Weapon system, ATGMs and other products including refurbishments.

2.5 The working capital of the Company has come down to Rs.1086 Crore as compared to previous year of Rs.1570 Crore due to operational efficiency.

2.6 The Networth of the Company was reduced to Rs.1956 Crore due to buyback of 30546875 equity shares held by Government of India (representing 25% of paid-up capital of the Company) at a price of Rs.147.49 per share for an aggregate amount of Rs.547.34 crore (including taxes).

2.7 The order book position of the Company as on 01 April 2018 is around Rs.8889 Crore comprising mainly of Akash, MR-SAM, ATGMs, Export of LWT and other products.

3. FIXED DEPOSITS FROM PUBLIC:

The Company did not accept any fixed deposits from Public during the year, and there was no outstanding Fixed Deposits at the beginning/end of the year. Accordingly, there was no default in payment of deposits/interest thereon.

4. DIVIDEND & TRANSFER TO GENERAL RESERVE:

4.1 Your Company has a consistent track record of Dividend Payment. The Board has recommended a Final Dividend of Rs.7.29/- per equity share of Rs.10/each amounting to Rs.133.61 Crore for the year 2017-18. Further your Company has paid interim dividend of Rs.25 Crore in March 2018 before listing of Company’s equity shares.

4.2 An amount of Rs. 230 Crore is being transferred to General Reserve for the year 2017-18

5. CAPITAL STRUCTURE:

5.1 During the year 2017-18, your Company, in compliance with the Guidelines on Capital Restructuring of CPSEs issued vide Office Memorandum No.F.No.5/2/2016 of Ministry of Finance, Government of India dated 27 May, 2016, completed the Buyback of shares and Issue of Bonus Shares. The Company purchased 25% of issued and paid-up share capital amounting to Rs.547.34 Crore (including taxes) from the Government of India in September 2017. Further, the Company issued bonus shares in the ratio of 1:1 (one fully paid up equity share of Rs.10 each for every one equity share held) to the Shareholders on 15th February, 2018.

5.2 As a consequence, the paid up capital of the Company as on 31st March, 2018 at the end of financial year stood at Rs.183.28 Crore (18,32,81,250 equity shares of Rs.10/- each). The Authorized Capital of the Company has been increased from Rs.125 Crore to Rs.200 Crore during the year 2017-18.

5.3 Initial Public Offer

During the year, Government of India (GOI) decided to disinvest 12.25% of GOI’s shareholding out of their 100% shareholding in the Company through an offer for sale to the public and employees of the Company. Consequently, your Company converted from private limited to public limited with effect from 27 October, 2017 and successfully completed its Initial Public Offer of 22,451,953 equity shares of face value of Rs.10/- each (representing 12.25% of the 100% paid-up capital held by Govt. of India) through offer for sale by Government of India and listed its equity shares on the stock exchanges (i.e. BSE Limited and National Stock Exchange of India Limited) on 23 March, 2018. The issue received good response from the public and it was oversubscribed by 1.3 times as a whole.

6. PERFORMANCE AGAINST MoU:

Your Company signs a Memorandum of Understanding (MoU) every year with the Ministry of Defence, Government of India. The performance of the Company for the year 2016-17 has been rated “Very Good”. The MoU rating for the year 2017-18 is under evaluation. The MoU for the financial year 2018-19 was finalized with the Ministry, with a Net Sales target fixed at Rs.4600 Crore. Your Company is well poised to achieve the targets fixed in the MoU.

7. modernization AND UPGRADATION:

Manufacturing Capacities of ATGMs and other products are being ramped up. Civil infrastructure is being created and modernization/upgradation of plant and machinery are under process. During the year, an amount of Rs.140 Crore has been earmarked for Capital Expenditure (CAPEX) towards modernization of Plant & Machinery and other Infrastructure development programme.

The following Key Technology Upgradation projects were taken up for implementation during the financial year 2017-18:

a) 320 KV X-Ray machine

b) High temperature pit furnace

c) Infrastructure facilities at Ibrahimpatnam

d) 2D-vision Measuring System

e) 5 MW solar power systems

Your Company is putting up determined efforts towards increasing indigenization contents in the manufacture of ATGMs with the objective of increasing self-reliance, reduction of Foreign Exchange out flow and achieving cost reduction. Indigenization of products like Konkurs-M, Invar, Milan-2T has been achieved upto 90%, 78.6% and 71% respectively.

8. RESEARCH & DEVELOPMENT

Your Company recognizes that Research & Development is a thrust area for design and development of various products for Indian Armed Forces. R&D facilities like Computational Fluid Dynamics, Spectro-Radiometer, Advanced Structural and Thermal Analysis software, 3D Scanner, Rapid Prototyping and Reliability software and other development tools have been established. Your Company has already developed a launcher for Anti-Tank Guided Missile and Test Equipment, Outdoor Simulator, Infrared Interference Indicator (IRII), Counter Measures Dispensing System (CMDS) etc. as import substitutes.

Your Company has identified various products to meet the requirement of Indian Armed Forces and currently its research and development is focusing in the following missions:

Amogha-I:- It is a Semi-Automatic Command to line of Sight (SACLOS) Anti-Tank Guided Missile (ATGM) for infantry. Missile design has been validated by conducting test firings. Missiles are being manufactured for further trails and qualification. Your Company has received Hon’ble Raksha Mantri’s Award for Excellence for Amogha-I AntiTank Guided Missiles in Innovation category on 30 May 2017.

Amogha-II:- It is a Radio Frequency guidance, SemiAutomatic Command to line of Sight (SACLOS) ATGM for mechanized infantry. The development of the missile is under progress. Test firing of Amogha-II from Ground launcher was successful on 14th October, 2017.

Amogha-III:- It is a 3rd generation fire and forget, IIR seeker based ATGM. System configuration has been finalized. Design of sub-systems is under progress.

The Company is also working on the design and development of avionics systems such as Counter Measures Dispensing System (CMDS) for Indian Air Force. CMDS and its Test Equipment for various platforms are being developed as import substitutions. There is a substantial export market for CMDS.

The following table shows the recent trend in in-house R&D expenditure:

(Rs. in Crore)

2014-15

2015-16

2016-17

2017-18

Sales Turnover (Gross)

2800

4160

4887

4588

R&D expenditure

22.72

29.43

34.71

40.22

In addition to the in-house R&D activities, your Company has entered into MoUs with DRDO labs for co-development of various missiles with a substantial financial commitment and manpower support from the Company. This will further enhance the R&D efforts of BDL to strengthen Government of India’s Make in India programme.

9. PROCUREMENT FROM MSMEs

Your Company has been providing increased thrust on procurement from Micro, Small & Medium Enterprises (MSMEs) as per the guidelines/notifications issued by the Ministry of MSMEs.

Your Company being a weapons manufacturing Company has been granted exemptions vide MSME Notification No.F.No.21(1)/201 I-MA Dated 23 March 2012. However, your Company would endeavor to procure general items from SMEs. A list of 358 items was reserved in the Company’s IMM manual for procurement from SMEs.

As per Government of India guidelines issued from time to time your Company extends various facilities/concessions to vendors registered with NSIC under its Single Point Registration Scheme such as

a) Issue of Tender documents free of cost.

b) Exemption from payment of EMD.

c) Price Preference of 15% over the quotation of large-scale units. In case the SME happens to be within 15% range above the L1 price who is not an SME, SME unit shall be provided with a counter price to reduce to L1 price. A quantity of up to 20% shall be ordered on SME on acceptance of L1 price.

d) Pre-qualification experience is relaxed for Start-ups (whether MSMEs or otherwise), as per guidelines of Govt. of India subject to the meeting of quality and technical specifications as per clarification given by Ministry of Finance, Department of Expenditure (DoE).

e) Interest free advance is also being paid to MSMEs and startups against Bank Guarantee for 110% of order value.

f) Vendors registered in other Defence PSUs will be considered as Deemed Registered. This Deemed registration will enable the vendors to participate in all future tenders of DPSUs for similar category of goods/services subject to fulfillment of other eligibility criteria indicated in the RFQ.

g) Providing Test facilities to MSMEs/Start-Up vendors.

10. EXHIBITIONS:

Senior Executives and Directors participated in National and International Exhibitions during the year 2017-18. Such platforms are used to gain awareness in advanced technologies, interact with experts and share knowledge. Visiting the pavilions of other countries and understanding the systems available with them enables your Company to draw up its own future business plans effectively.

Your Company participated in the DEFEXPO-2018 exhibition held on April 11, 2018 to April 14, 2018 at Chennai.

11. EXPORTS

With the recent changes in the Export policy of the Department of Defence Production, Ministry of Defence, Government of India, your Company is now focused more into export markets. Your Company is exploring the markets for potential exports and try every possible course of action to succeed in this strategy leaving no stone unturned. In this process your Company has signed a contract for its first export order worth USD 21.5 Million for the supply of Light Weight Torpedoes to a friendly country. During the year, your company started executing the said export order contract. Further, your Company also secured order worth USD.14.33 million during the current financial year 2018-19 towards supply of light weight torpedoes

Your Company envisages lot of potential for exporting its products to friendly foreign countries. This assessment is based on the MoU target for export order during 2018-19, which is Rs.250 Crore.

12. BOARD OF DIRECTORS:

The Board of Directors of the Company comprises Functional Directors, Government Nominee Directors and Independent Directors who are appointed by the Government of India from time to time. Further, the tenure and remuneration of Functional Directors including Chairman and Managing Director are decided by the Government of India through Public Enterprises Selection Board / Search Committee. The Government communication also indicates the detailed terms and conditions of their appointment including a provision for the applicability of the relevant rules of the Company.

The Government Nominee Directors are not entitled to any remuneration/ sitting fee. The Independent Directors are entitled to sitting fees for attending the Board/Committee meetings as duly approved by the Board considering the government directives, statutory acts, rules and regulations Appointment of Independent Directors In order to fulfil the requirement of SEBI (LODR) Regulations, 2015, Government of India vide its letter No.H-62011/2/2016-D(BDL) dated 13 September, 2017 appointed three new Independent Directors viz., Shri Ajay Nath, Shri KS Sampath and Smt. Latha Narasimha Murthy as Part-time Non-Official Directors w.e.f 13 September 2017 for a period of three years or until further orders whichever is the earliest. With the induction of above three Independent Directors, your Company is complying with the SEBI Regulations as well as Companies Act, 2013 for the year ended 31 March, 2018.

(i) Statement on declaration by Independent Directors:

Independent Directors have given declarations u/s 149(7) of the Companies Act, 2013 that they meet the criteria of independence as laid down u/s 149 (6) of the said Act.

(ii) Change of Directors:

During the financial year, your Board has nominated Shri.S. Piramanayagam, Director (Finance) as Director (Finance) & CFO of the Company in compliance with the provisions of Companies Act, 2013 and also Listing Regulations.

Further, Government of India vide its Office Memorandum No.62011/6/2016-D(BDL)Pt.1 dated 01st May 2018 conveyed the appointment of Dr.G. Satheesh Reddy, DG(MSS)/DRDO as Part-Time Official Director (i.e. Government Nominee Director) on the Board of your Company.

In terms of provisions of section 152 of the Act, Shri.S. Piramanayagam, Director (Finance) & CFO retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment.

(iii) Number of Meetings of Board:

During the year 2017-18, Eleven (11) Board Meetings were held on 08 May, 2017, 03 August 2017, 18 September 2017, 20 November 2017, 26 December 2017, 15 February 2018, 28 February 2018, 01 March 2018, 05 March 2018, 16 March 2018 and 21 March 2018.

(iv) Performance Evaluation

The provisions of Section 134(3)(p) of the Companies Act, 2013 relating to evaluation of Board/ Directors do not apply to your Company since necessary exemptions are provided to all government companies.

Further, similar exemptions were granted to your Company by Securities Exchange Board of India (SEBI) under the provisions of SEBI (Listing Obligations and Disclosure Requirements {LODR}) Regulations, 2015 vide their letter No.SEBI/HO/CFD/DIL1/ OW/P/2018/1679/1 dated January 17, 2018. The Company initiated correspondence with SEBI for further clarity in this regard.

13. DIRECTORS’ RESPONSIBILITY STATEMENT:

As per Section 134(5) of the Companies Act, 2013 as amended, the Directors state:

(i) that in the preparation of the annual accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures

(ii) that the selected accounting policies have been applied consistently and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31 March 2018 and of the profit of the Company for the year ended on that date.

(iii) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(iv) that the annual accounts have been prepared on a going concern basis.

(v) that the Company has devised proper internal financial controls and that such internal financial controls were adequate and operating effectively.

14. EVENTS SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS:

Material changes and commitments affecting the financial position of the company which have occurred between 31 March 2018 and date of signing of this Report are - Nil.

15. MANPOWER AND RESERVATION OF POSTS FOR SCs/STs:

The Company has been following Presidential Directives of the Government with regard to reservation of posts for SCs/STs in recruitments.

Total manpower strength as on 31 March 2018 is at 3095 (including four functional directors) out of which the number of persons on temporary rolls was 60. Of the total strength, 79 are ex-servicemen, 586 are of Schedule Caste and 217 are of Scheduled Tribes. The percentage of Scheduled Caste and Scheduled Tribes in respect of Employees was at 18.93% and 7.01% respectively.

Number of persons on temporary rolls as on 31 March 2018 is 60, out of which 18 belong to Scheduled Caste and 01 belong to the Scheduled Tribes category.

The No. of Scheduled Caste and Scheduled Tribes in various categories of posts as on 31 March 2018 is given below:

Number of Employees

Category

Total Strength

Scheduled Castes

Scheduled Tribes

31-03-2017

31-03-2018

31-03-2017

31-03-2018

31-03-2017

31-03-2018

Group-A

829

856

138

153

84

86

Group-B

60

17

14

2

04

01

Group-C

1940

1892

348

342

110

111

Group-D

277

266

74

71

19

18

Temporary

72

60

18

18

2

1

Total

3178*

3091*

592

586

219

217

* excluding four functional directors.

Recruitment of employees of Scheduled Caste and Scheduled Tribes during 2017-18 is given below:

Classification of posts

Total Vacancies Released

Total Recruitment

Reservation of posts (out of Col.3)

Recruitment made during the year 2017-18

(1)

(2)

(3)

(4)

(5)

SCs

STs

SCs

STs

Group-A

15

15

6

0

6

0

Group-B

0

0

0

0

0

0

Group-C

14

14

0

1

0

1

Group-D

1

1

0

0

0

0

Total

30

30

6

1

6

1

16. employment OF WOMEN:

As per the recommendation No.51, Para (ii)(a) of the National Commission for Women (NCW) in its Annual Report for the year 1995-96, the employment position of Women as on 31 March 2018 is given below as directed by the Ministry of Defence, vide their letter Nos. 39(6)/99/D(B&C), dated 27 August 1999.

I. Executives

Grade

No. of Employees

Women

Percentage

I

17

3

17.65%

II

214

30

14.02%

III

209

33

15.79%

IV

126

14

11.11%

V

88

11

12.50%

VI

167

7

4.19%

VII

40

0

0.00%

VIII

11

1

9.09%

IX

1

0

0%

Functional Directors

3

-

0%

CMD

1

-

0%

Total

877

99

11.29%

II. Non-Executives

Grade

No. of Employees

Women

Percentage

WG-0

2

0

0.00%

WG-1

13

2

15.38%

WG-2

132

15

11.36%

WG-3

207

24

11.59%

WG-4

347

42

12.10%

WG-5

147

30

20.41%

WG-6

261

34

13.03%

WG-7

29

4

13.79%

WG-8

130

7

5.38%

WG-9

17

0

0.00%

WG-10

59

3

5.08%

WG-11

184

9

4.89%

WG-12

630

51

8.10%

Total

2158

221

10.24%

17. PERSONS WITH DISABILITIES (PWD) AS ON 31 MARCH 2018:

The total number of Physically Challenged employees as on 31 March 2018 was 103 and its percentage to total employees works out to 3.33%.

HI

LD

VI

Total

Group-A

0

12

5

17

Group-B

0

1

0

1

Group-C

18

46

8

72

Group-D

4

5

4

13

Total

22

64

17

103

HI- Hearing Impaired, LD-Locomotive Disability, VI-Visually Impaired.

18. HUMAN RESOURCE DEVELOPMENT:

During the year under review the Company has conducted training programmes for 658 Executives and 530 Non Executives to impart training on knowledge based, development oriented and need based topics. Such training programmes were organized in-house and at premises of external agencies to cover the present and future requirements of the Company.

Apart from regular training programmes, your Company organized the following activities/ programmes during the year:

(a) Management Development Programmes (MDPs):

Your Company sponsored 49 Senior Executives (in Grade V & above) for Management Development Programmes (MDPs) conducted by premier Institutes in India like IIM-Ahmedabad, IIM-Calcutta and XLRI Jamshedpur during the year 2017-18.

(b) Advanced Management Programmes (AMP):

Your Company sponsored 03 principal Executives at General Manager level for the Advanced Management Programme (AMP) conducted by ASCI Hyderabad in collaboration with SDA Bocconi School of Management, Milano.

(c) Project Management Professional (PMP) Programme:

As a part of institutionalizing the Project Management principle in the Company, Projects were assigned to the PMP/IPMA Level-D Certified Executives in the Company so that they can apply their learning to live projects in progress.

As on date 65 Executives have registered themselves with PMI USA and 19 Executives have successfully cleared the PMP certification exam.

05 PMP Certified Executives were sent for national conference on Project Management in Hyderabad (PMIC).

19. PARTICULARS OF EMPLOYEES

There were no employees of the Company who received remuneration in excess of the limits prescribed under Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Further, in accordance with Ministry of Corporate Affairs notification no. GSR 463(E) dated June 05, 2015, Government Companies are exempt from Section 197 of the Companies Act, 2013 and its rules thereof

20. FOREIGN VISITS:

Your Company incurred an expenditure of around Rs.68.52 lakh during the year under report towards foreign travel for business trips and also for on the Job-Training of personnel.

21. INDUSTRIAL RELATIONS AND EMPLOYEE WELFARE:

Your Company continues to enjoy cordial and harmonious Industrial relations throughout the year with recognized Trade Union, other Unions and Associations. All Statutory Committees such as Works Committee, Safety Committee, Canteen Management Committee and other participative forums have extended their Co-operation to maintain discipline at all levels.

Compliance on statutory welfare provisions are followed meticulously. The Company has been taking care of medical needs of employees and their family members as per BDL Medical Rules. Further, in line with DPE guidelines, Company has framed Pension Scheme and Post-Retirement Medical Benefit Scheme for the Executive and Non- Executives of the Company.

During the year your Company successfully implemented 3rd Pay Revision for the Executives as per the DPE guidelines. Further both the Management and the recognized Union i.e. (BDEU) with the support of Conciliations Officer cum Asst. Labour Commissioner (Central) Hyderabad arrived at a settlement of Wage Revision for Non-Executives on 28 March 2018.

22. SECURITY:

Central Industrial Security Force (CISF) is providing Security and Fire Services in both Kanchanbagh and Bhanur Units. During the year under report, CISF has played a vital role in the Security and safeguarding of property of the Company. CISF team adopted robust security measures combining physical measures with technology to keep the highly sensitive installations secure.

The Plant Security Council is in place to review the security arrangements and implementation of IB guidelines. Regular Security review meetings are being conducted both by Management and CISF to beef up security.

Biometric Access Control System has been installed in addition to Computerized Photo Identity Cards to prevent unauthorized entry and CCTV Cameras have been installed all over the factory premises to cover more area under CCTV surveillance. Door Frames, Metal Detectors, X-ray baggage machines are also in use. Barricades, Boom Barriers and Mochas are provided to strengthen physical security measures.

Regular programmes on Security awareness were conducted besides observing Security Week/Fire Week. Employees are sensitized on the security threat and action to be taken in case of emergency and fire accidents.

23. Safety:

Safety, Health and Environment (SHE) is strictly followed in your Company. The two Corporate Committees I.e. Industrial Safety Committee, which is statutory and Explosive Safety Committee are functioning to meet the needs of the Company. Safety committee meetings are held at regular interval for monitoring Safety, Health and Environment as per the statutory requirement. The works are carried out in compliance with the Factories Act 1948, and Explosive safety strictly adhering to the Storage & Transport of Explosive Committee (STEC) regulations. Annual explosive safety audit is conducted by Centre for Fire, Explosive & Environment safety (CFEES) New Delhi and the observations made by the audit team have been complied with. Regular medical check-ups are carried out for employees working in hazardous areas.

Training programmes are arranged by HRD Department through National Safety Council (NSC), Central Labour Institute (CLI), Regional Labour Institute (RLI) and Centre for Fire, Explosive & Environment Safety (CFEES) to inculcate safety consciousness and to establish a safe working environment among the employees.

During the year Safety officers of the BDL Safety Engineering Department conducted classes on both Industrial Safety and Explosive Safety as a part of an induction programme for new entrants in coordination with ISTM-HRD. Safety Engineering Department has organized guest lectures by experienced persons with expertise in the field on Explosive safety and Industrial Safety to educate the employees of the Company.

Fire mock drills are conducted at regular intervals to ensure firefighting preparedness.

Safety Day/Week was celebrated during the Month of March, 2018. On this occasion, Safety pledge was administered to all the employees and various competitions and programmes were conducted by Safety Engineering Department to bring awareness and employees were awarded to boost their interest towards safety.

24. ANNUAL RETURN:

In accordance with the provisions of the Companies Act, 2013, Company is required to attach an extract of Annual Return for the year under report and the same is placed as Annexure-1.

25. ENVIRONMENT AND POLLUTION CONTROL:

Your company contributes in all aspects for clean and green environment by systematically integrating best practices to bring in cleaner technologies and greening the environment through recycle, reuse and reduce approach. Effluent treatment plant, Sewage treatment plant are being operated. Various environmental activities such as water conservation, tree plantation, disposal of hazardous waste and metal scrap, planting of flower bearing trees and landscaping, utilizing treated effluent water, have been carried out. Company has been reviewing status of various types of pollutions through core team meeting, internal audits and management review meetings at regular intervals.

The following steps have been taken for controlling and preventing pollution in all respects:

I) Consent for operation:

Bhanur and Vizag units are having valid consent for operation. Renewal of the consent for Kanchanbagh Unit was applied in the month of Feb 2018 before expiry of the current validity and it is under process at (Telengana state polustion control board (TSPCB).

ii) Waste management:

All food waste generated from canteen is being given for animal feeding and composting. The hazardous waste, e-waste and biomedical waste is being given to the agency registered with the pollution control board. The lead acid batteries are being given to the authorized recyclers/dealers on buy back. Metal scrap is disposed through M/s MSTC Ltd (A Govt. of India Undertaking).

iii) Testing of environmental parameters:

The environment parameters like ambient air quality, wastewater from sewage treatment plant and effluent treatment plant, air quality of diesel generator set and Venturi scrubber are tested at all the three units through certified agency at regular intervals and results are within the prescribed limits of Pollution Control Board.

iv) Celebration of world environment day 2017

World Environment Day 2017 was celebrated in all the three units of BDL. On this occasion, with the theme “Connecting people to nature”, banners were put up in prominent locations. On this occasion, tree plantation was carried out. Competitions like multi-lingual essay, slogan writing and quiz etc. were conducted and the winners have been presented with prizes. Guest lecturers were arranged on the above theme.

Sri. Udaya Bhaskar, Chairman & Managing Director inaugurated tree sapling plantation followed by Sri. S. Piramanayagam, Director (Finance), Sri. K. Divakar, Director (Technical) and GMs at Kanchanbagh Complex on 05 June 2017. Senior executives and employees also participated in the plantation programme. A variety of about 40 saplings were planted.

26. QUALITY:

Your Company manufactures products which are single shot in nature. These products require stringent Quality standards and high degree of reliability. In pursuit of this objective, BDL has adopted International Quality Management system practices by way of obtaining ISO certification for the last 22 years. Presently CP-IGMP, Electronics Division and D&E divisions have been certified to ISO 9001:2008 Quality Management System standard. MILAN, Akash Division & Bhanur Unit have been certified to AS 9100D Aerospace standard. Remaining ISO certificated divisions are also planning to upgrade to AS 9100D during FY 2018-19.

Electrical measured values have traceability to National or International standards which are achieved through calibrating the Electronics equipment in ISO/IEC 17025:2005 (NABL) accredited Labs of Milan Division and Bhanur Unit.

All the three units of BDL at Kanchanbagh, Bhanur and Vizag have been certified with ISO 14001:2004 Environmental Management System (EMS).

Your Company has been certified with ISO 27001:2013 (Information Security Management System) Standard. Material Testing Lab of Bhanur Unit has been accredited with ISO / IEC 17025: 2005 (NABL) Certification in the field of testing.

During the year, regular audits by external agencies were conducted for all the ISO/AS certified divisions. Customer satisfaction is being measured for all major products manufactured in those divisions.

Your Company is continuously striving to improve customer satisfaction through customer meets and interaction with users. Corrective actions are taken wherever necessary for improvement.

27. OFFICIAL LANGUAGE (OL) IMPLEMENTATION:

Implementation of OL Act-1963 (as amended in 1967) & Rules thereunder are being ensured in your Company. Quarterly OLIC Meetings are held regularly under the Chairmanship of CMD and Directors besides submission of Quarterly progress reports on use of OL sent to authorities concerned.

Under OL Act, 1963 and the Presidential Orders thereon, the papers laid before the Parliament, Annual Report of the Company, MoU with MoD and brief of the Company along with presentation for various delegations and Parliamentary Committees were prepared in bilingual form and submitted.

Hindi fortnight was celebrated from 01 to 19 September. On the eve of this, various competitions were organized at Kanchanbagh, Bhanur Unit and Vishakhapatnam Unit. Cash Awards were given to the winners of the competitions. Complying with the assurances given to the Parliamentary Committee on OL, Hindi film Ghazi Attack at Kanchanbagh and HOLYDAY at Bhanur Unit were shown on 10th September during the Hindi Fortnight Celebrations.

Town Official Language Implementation Committee (U) functioning is carried out by BDL Hindi Department for PSUs of twin cities consisting of 45 Organizations was awarded RAJBHASHA KIRTI PURSKAR (first place) by Govt. of India in region ‘C’ for the year 2016-17.

The award was presented by Hon’ble President of India Sri Ramnath Kovid at a function held at Vigyan Bhavan on 14 September, 2017 on the eve of HINDI DIWAS. CMD & Chairman of the Committee received the “RAJBHASHA KIRTI PURASKAR” in the form of a Shield and DGM (OL) and Member Secretary of the Committee was awarded with Commendation Certificate for outstanding contribution.

On the eve of Vigilance Awareness Week, National Safety Week, Fire Safety Week, Environment Day and observance of Quami Ekata Diwas in the Company, various competitions were conducted in Hindi, English and Telugu to involve more and more employees of the Organization and bring awareness on these subjects. On the occasions of Republic Day and Independence Day Celebrations, CMD of the organisation addressed the gathering in Hindi.

With an objective to promote, propagate Hindi and inculcate the reading habit among the Officers and Employees of the Company, various Hindi Magazines and News Papers such as (1) Hindi Milap (2) Swatrantra Vaartha (3) Anuvad (4) Sahitya Amruth (5) Avishkar (6) Yojna (7) Hindi Rozgar Samachar (8) Pratiyogita Darpan (9) Meri Saheli (10) Dakshin Samachar (11) Golconda Darpan (12) Vaak (13) Milind Patrika (14) Naya Gyanoday (15) Hans are subscribed regularly. Besides this, popular Hindi books on all subjects are also purchased annually with the same objective as per the directives of DOL.

The Website of the company prepared in Hindi is being updated from time to time in compliance with the directives from Govt. of India.

28. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO:

Your Company being a Defence PSU, the disclosure of information with respect to conservation of energy, technology absorption, foreign exchange earning and outgo under the provisions of Section 134(3)(m) read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is not required as the Ministry of Corporate Affairs vide Notification GSR No.680 (E) dated 4th September, 2015 has granted exemption to Defence Public Sector Undertakings.

Renewable Energy

Under Green Energy commitment to Hon’ble Prime Minister of India, BDL has revised the commitment to set up 10 MW Grid connected Solar PV power plants in their units. Your Company has installed 5 MW Grid connected Solar Power plant at BDL-Bhanur unit through M/s. Solar Energy Corporation of India which has become operational since September 2017. The generated solar power is being connected to Telangana state electrical power grid at Nandigama sub-station. The generated power is being used for captive consumption for BDL-Bhanur unit, which has resulted in increased savings by virtue of reduction in electricity cost.

Installation of 5MW Grid connected Solar Power plant at Ibrahimpatnam unit through M/s. Solar Energy Corporation of India is in progress which will be operational during FY 2018-19. The generated solar power would be connected to Telangana state electrical power grid at Mangalpally sub-station. The generated power will be used for captive consumption for BDL-Kanchanbagh unit.

Solar PV power system is environmental friendly producing non-polluting renewable energy. Grid connected Solar Photo Voltaic (PV) Roof Top Power Plants have been established during the year 2015-16 at the following locations

a) 100KWp Grid connected Solar PV Power Plant commissioned on the Roof Top of the Main Canteen building and it is in operation from December 2015.

b) Another 100KWp Grid connected Solar PV Power Plant commissioned on the Roof Top of the D&E building and it is in operation from February 2016.

29. VIGILANCE:

Vigilance Awareness Week-2017 was organized from 30 October 2017 to 04 November 2017.

On 30 October 2017, Shri K. Divakar, Director (Technical)/ BDL administered the Pledge and other Senior Officers read the messages of the Government authorities. Live video conference of administering the Pledge and reading of the messages took place by covering all the divisions of BDL viz., i) Kanchanbagh- Hyderabad-Telangana ii) Bhanur-Sangareddy Dist.-Telangana iii) Visakhapatnam-Andhra Pradesh and declared commencement of the Vigilance awareness week Celebrations with the Theme of “My Vision - Corruption Free India”.

On 31 October 2017 CVO, BDL inaugurated the Vigilance Awareness Week-2017 celebrations at BDL-Bhanur, Sangareddy Dist. Shri P.V.K. Ramana Prasad, Principal Chief Legal Advisor, Anti-Corruption Bureau, Telangana State delivered a guest lecture at Auditorium, BDL-Township, Bhanur.

On 01 November 2017, Ms. Anupama Jha, Ex-Executive Director, Transparency International India delivered a Guest Lecture and participated in an interactive session with the Senior Executives at “Midhani” Conference Hall, Kanchanbagh, Hyderabad as part of Vigilance Awareness Week Celebrations of 2017.

Essay writing Competitions were organized during Vigilance Awareness week. On 03 November 2017 Valedictory Function was organized wherein Justice G.V. Seethapathy, Former Judge of Andhra Pradesh High Court delivered a guest lecture on “My Vision-Corruption Free India” as part of Vigilance Awareness Week-2017 celebrations. Further, Justice G.V. Seethapathy, Former Judge of Andhra Pradesh High Court released the “Vigilance Manual”, which is compiled by the CVC consisting of vigilance circulars etc., Prizes were distributed to winners in Various Competitions “Integrity Pledge for Citizens” was administered on 30 October 2017 to all the employees of BDL-Kanchanbagh, Bhanur, Badamafi and Visakhapatnam and also to college students.

The main focus of the Vigilance department has been preventive/pro-active vigilance. System improvement suggestions were given to the Management on areas like e-tendering, recruitment and absorption of Management Trainees, Resignation, e-payment, e-procurement departmental promotions, foreign visits, merit awards to employees, civil works etc during the year under report. Online submission of Annual Property Returns through computerized system was also implemented during the year.

30. CORPORATE SOCIAL Responsibility AND sustainability DEVELOPMENT:

Pursuant to the provisions of Section 135 of the Companies Act, 2013 and The Companies (Corporate Social Responsibility) Rules, 2014 read with various clarifications / amendments issued by Ministry of Corporate Affairs and DPE guidelines, the Company has undertaken various activities as per the CSR Policy. The programmes/initiatives/projects are taken up in line with the Schedule-VII of the Companies Act-2013, which are duly incorporated in CSR policy and forms the guiding principle for all our programmes.

The Board of Directors of your Company has constituted Board Level Committee on Corporate Social Responsibility and Sustainable Development (CSR & SD) (please refer Corporate Governance Report) in line with the provisions of Section 135 of the Companies Act, 2013. The Committee has formulated and recommended CSR Policy to the Board indicating the projects/activities to be undertaken by the Company as specified in Schedule VII of the Companies Act, 2013.

The CSR and SD activities are monitored periodically by the Committee and an annual report on CSR and SD activities undertaken during the year 2017-18 is enclosed at Annexure-2.

Your Company has been very conscious about its responsibilities towards society. Your Company has also ventured into backward/ under-developed areas in Andhra Pradesh and Telangana to undertake Corporate Social Responsibility (CSR) activities by sponsoring various schemes.

The core areas of focus under CSR are Health Care, Nutrition, Education & Literacy, Skill Development & Sustainable Livelihoods, Sanitation, Safe Drinking Water etc. Your Company also adopted villages in Andhra Pradesh and Telangana States under Corporate Social Responsibility initiative and the focus is on the necessities of human life-health, water and other conveniences.

During the year 2017-18, your Company spent an amount of Rs.1839.40 lakh on CSR activities and achieved 100% CSR target amount required under the provisions of Companies Act, 2013.

CSR activities being undertaken are placed on Company’s website hhtp://www.bdl-india.in

31. AUDIT COMMITTEE:

An Audit Committee is in place as a part of good Corporate Governance. Six meetings have been held during the year 2017-18 to review internal control systems and their adequacy, including coverage of Audit Functions. Details of composition, terms of reference, etc., are covered in Report on Corporate Governance.

32. RELATED PARTY TRANSACTIONS

There are no materially significant related party transactions during the year under review which may have a potential conflict with the interest of the Company at large. Thus, disclosure in Form AOC-2 is not required. Members may refer to the notes to the accounts for details of related party transactions. The policy for related party transaction has been uploaded on the Company’s website www.bdl-india.in.

33. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS:

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statement

34. INTERNAL CONTROL SYSTEMS

Your Company had put in place all required internal controls and systems to meet the canons of financial propriety. External audit firms are appointed to ensure their adequacy and report thereon. A detailed analysis of reports of Internal Audit Firms as well as reports of Internal Audit Department of your Company are placed before the Audit Committee for its review and advice. The adequacy of internal control procedures are reviewed and reported by Statutory Auditors in their Audit Report. The necessary disclosures have been made in Notes to Accounts. Your Company being a Government Company is subject to Government Audit also.

35. AUDITORS:

M/s.S.R.Mohan & Co., Chartered Accountants, Hyderabad were appointed as Statutory Auditors of the Company for the financial Year 2017-18 by the Comptroller & Auditor General of India. The Auditors have audited the Accounts and their Report is placed as a part of the Annual Report.

36. COMMENTS OF THE COMPTROLLER & AUDITOR GENERAL OF INDIA

The Comments of Comptroller and Auditor General of India (C&AG) under Section 143 (5) of the Companies Act, 2013 on the accounts of the Company for the year ended 31 March 2018 are placed next to the Statutory Auditors Report.

37. COST AUDITORS

Your Company appointed M/s DZR & Co., Cost Accountants, Hyderabad as Cost Auditors for the FY 2017-18 in terms of Section 148 of the Companies Act, 2013, read with the Companies (Cost Records and Audit) Rules 2014.

38. SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Shri.Y.Ramesh, a Practicing Company Secretary (PCS Registration No. 7929) for the financial year 2017-18 to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed to this report as Annexure 3.

The Secretarial Auditor in his Report observed that as per Regulation 31(2) of the SEBI (LODR) Regulations, 2015, hundred percent of shareholding of promoter and promoter group shall be in dematerialized form. However, as on 31 March 2018, twelve equity shares held by six nominee shareholders of President of India, the promoter of the Company are in physical mode.

It is informed that Company has been listed on the stock exchanges recently on 23 March, 2018 and as disclosed in the IPO offer document the said nominee shares have been transferred back to the President of India after listing vide approval of the Board in its meeting held on 30 May 2018, for the purpose of dematerialisation.

39. CEO / CFO CERTIFICATION:

As per the requirements of SEBI Listing Regulations and DPE Guidelines, the CEO/CFO certificate has been obtained and placed before the Audit Committee and the Board.

40. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management Discussion and Analysis Report required under the SEBI (LODR) Regulations, 2015 and also under DPE Guidelines on Corporate Governance for Central Public Sector Enterprises (CPSEs), is attached to this Report as Annexure 4.

41. CORPORATE GOVERNANCE:

Corporate Governance is about application of best management practices, compliance of laws and adherence to ethical standards to achieve Company’s objective of enhancing stakeholders’ value and discharge of social responsibility.

The Company has a well-established, transparent and fair administrative set up to provide for professionalism and accountability.

As per the guidelines on Corporate Governance for CPSEs issued by DPE vide its OM No. 18 (8)/2005-GM, dated 14 May 2010 and in terms of the SEBI (LODR) Regulations, 2015, Report on Corporate Governance along with Certificate on compliance of conditions on Corporate Governance from a Practicing Company Secretary are attached to this report as Annexure-5.

Quarterly and Yearly compliance reports on Corporate Governance are being forwarded to Stock Exchanges and MoD in the prescribed format. Your Company received “Excellent” rating from MoD for compliance of Corporate Governance under DPE Guidelines for the year 2016-17 and compliance of Corporate Governance for the year 2017-18 is under evaluation.

42. RISK MANAGEMENT:

DPE guidelines on Corporate Governance for CPSEs - 2010 require that the Board of the Company should ensure integration and alignment of Risk Management Systems with Corporate and operational objectives and also that risk management is undertaken as a part of normal business practice and not as a separate task set at times.

In line with the above guidelines, your Company has framed Risk Management Policy of the Company which is applicable to all levels and all Units of the Company. One of the objectives of Risk Management Policy is to ensure that all current and future risk exposures of the Company are identified, assessed, quantified, appropriately mitigated and managed.

Divisional Level Committees have been formed to assess current status of Risk and identify measures to mitigate risks and also to evaluate mitigation measures so identified. Periodical Review meetings are taking place and a report being placed before the Board atleast once in a year.

In terms of SEBI (LODR) Regulations, 2015, constitution of Risk Management Committee is not applicable to your Company based on the Market Capitalization for the financial year ended 31 March, 2018.

43. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013:

In line with the provisions contained under “The Sexual Harassment of Women at the workplace (Prevention, Prohibition & Redressal) Act, 2013 your Company has put in place “Anti Sexual Harassment Policy” in line with the requirements of the above Act. During the year 2017-18, your Company has not received any Sexual harassment complaints.

44. COMPLIANCE UNDER THE RIGHT TO INFORMATION ACT, 2005.

The information required to be provided to citizens under Section 4(1)(b) of Right to Information Act, 2005 is placed on Company’s Website www.bdl-india.in. It contains general information of the Company, functions, powers and duties of employees/officers, decision making process, rules, regulations, manuals and records held by the Company, directory of the Company’s Officers, pay scales of officers/ employees and procedure for seeking information and inspection of records. The Company has nominated a Central Public Information Officer of Senior Manager level to attend to queries and appeals. Further, during the year 2017-18 the Company received 105 applications/queries and the same were disposed off.

45. VIGIL MECHANISM

Pursuant to the provisions of the Section 177(9) of the Companies Act, 2013 read with Rule (7) of the Companies (Meeting of the Board & its Power) Rules, 2014 and DPE Guidelines for CPSEs, the Board of Directors had approved the policy on Whistle Blower/Vigil Mechanism and the same was hosted on website of the Company. The policy, inter-alia, provides a direct access to the Chairman of the Audit Committee

46. BUSINESS RESPONSIBILITY REPORT

The Securities and Exchange Board of India (SEBI) has mandated inclusion of Business Responsibility Report (“BR report”) as part of the Annual Report for 500 listed entities based on market capitalization. Your Company has prepared a comprehensive policy framework for BR report after studying the SEBI (LODR) Regulations, 2015 requirements and keeping in view the business and governance environment in which BDL as a Defence PSU operates. The Company’s BR report for the year is attached to this report as Annexure-6.

47. DIVIDEND DISTRIBUTION POLICY

In terms of SEBI (LODR) Regulations,2015, the top 500 listed Companies, based on market capitalization shall formulate a Dividend Distribution Policy. As per the Market Capitalization data released by stock exchanges, the Company ranks in the list of top 500 listed Companies. Hence the said policy would be applicable to the Company from the current financial year 2018-19.

Accordingly, dividend distribution policy has been adopted to set out the parameters and circumstances that will be taken into account by the Board in determining the distribution of dividend to its shareholders and/or retaining the profit in the business. The policy is available on the BDL’s website www.bdl-india.in

48. ACKNOWLEDGEMENT

Your Directors gratefully acknowledge the valuable support and assistance received from all Government Agencies, particularly Ministry of Defence, Ordnance Factories, Department of Defence Production, DRDO Laboratories, Central Government Departments, State Governments of Telangana and Andhra Pradesh, Quality Assurance Agencies of Government of India and other PSUs for the help extended by them from time to time. The Company wishes to place on record its appreciation for the cooperation extended and guidance provided by the Comptroller & Auditor General of India, the Principal Director of Commercial Audit & Ex-officio Member, Audit Board, Statutory Auditors, Bankers and Suppliers.

The Directors take this opportunity to place on record their deep appreciation for the valuable contribution made and co-operation extended by the employees at all levels to propel the Company to greater heights and to sustain its growth path in the years to come.

For and on behalf of the Board

V Udaya Bhaskar

Chairman and Managing Director

DIN: 06669311

Place : Visakhapatnam

Date : 20 Jul 2018