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Letter to Shareholders:
The past year has been a defining one for your company BHEL as we became a 'Maharatna' company, crossed Rs. 50,000 Crore turnover mark and achieved the highest ever addition of 10,340 MW to India's electricity generation capacity while navigating through one of the most difficult economic and business environment of our times. Despite a challenging environment for Indian industry, your company has not lost its focus on creating shareholders' value. The following outlines the milestones we have achieved during the year 2012–13:
1. BHEL has achieved the highest ever turnover of Rs. 50,156 Crore during 2012–13 registering a growth of 1% despite adverse business conditions. With the Net Profit of Rs. 6,615 Crore, we were able to maintain the level of previous five years (2007–12) average profit margins of 14% on the back of strong focus on manufacturing efficiencies.
2. Recognising the consistent performance over a longer period of time, your company has been bestowed with the coveted 'Maharatna' status by Govt. of India, resulting in further empowerment of the Board for greater business agility.
3. A total of Rs. 31,650 Crore of orders were received by your company, which was an increase of 43% over 2011–12. It included 8 nos. of TG, 9 nos. of Boilers and 7 nos. of ESP packages for supercritical sets. Interestingly with market share of 67% in power sector, BHEL continues to maintain its leadership position in Indian market despite rising intensity of competition.
4. Various initiatives taken by your company in recent past for accelerated project execution have started fetching results. We were able to synchronise/ commission all time high 10,340 MW of power plant equipment including 9,328 MW in utility segment. Your company successfully commissioned India's first indigenously manufactured subcritical set of 600 MW rating on EPC basis at North Chennai.
5. With the objective of becoming an innovative developer of clean, efficient, reliable and affordable products, systems and technologies, we continue to relentlessly strengthen our technology and innovation capabilities. BHEL invested Rs. 1,252 Crore in R&D during the year. The highest ever 385 patents and copyrights were filed raising the intellectual capital of BHEL to 2,170.
6. Your company has signed MoU with Indian Railways for setting up a green field coach factory for Mainline Electric Multiple Unit at Bhilwara, Rajasthan. This is a significant step in our diversification endeavours.
Positioning for Future
We are at a critical juncture in our history as we endeavour to sustain growth momentum, increase shareholder wealth and fulfil our vision of becoming a global engineering enterprise. We are proud of the work your company has done to augment manufacturing capacity, enhance pace of project execution, strengthen engineering and technology capabilities, and people development.
1. The Company has adopted its Strategic Plan 2012–17. The plan attempts to steer the company towards becoming a global engineering enterprise. Key drivers of our success are expanding our offerings in Power Sector by building EPC capability, focus on Industry businesses, expansion of spares & services and adoption of collaborative approach.
2. Power sector will continue to remain major contributor in our top line with transportation and transmission emerging as next big business verticals. Strategies are in place to strengthen our presence in Nuclear, Renewable and Water segments.
3. Efforts are being made to make supply chain agile and accelerate project execution through sustained focus on vendor base expansion, scaling up procurement through technology initiatives, advanced manufacturing action, global sourcing etc.
4. We are working towards developing lower rating sets with supercritical parameters providing alternatives to the Utilities to take advantage of this eco–friendly and fuel efficient technology.
5. To expand our nuclear energy portfoilo, efforts to increase scope by offering products beyond conventional island in Nuclear business are under way.
6. BHEL's collaborative initiatives to address the growing demand potential in Railway Transportation including Metro & Suburban Railways include initiative with Indian Railways for setting up a greenfield Mainline Electrical Multiple Unit (MEMU) Coach Factory in Rajasthan.
7. Considering the National Action Plan on Climate Change targeting 15% of electricity generation from renewables by 2020, BHEL is looking towards expanding its capacity to manufacture photo voltaic modules & cells.
8. We have constituted R&M Systems Group (RMSG) to address emerging opportunities in Renovation and Modernisation of Power Plants.
9. In a bid to address the aspirations of the company to become a preeminent supplier of Industrial Boiler, Nuclear Steam Generator & supplier of equipment for process Industries, merger of BHPV Vizag with BHEL is under way. Further, in a bid to make headway in new product areas like Alternators for Traction applications etc. facilities of BHEL–EML Kasargod, a joint venture of BHEL and Kerala Govt., are being leveraged.
10. 'Engineering and Technology' is our strength. To uphold our reputation for excellence in our core capability, we will continue to upgrade existing products to contemporary levels and develop new products through continuous in–house efforts as well as through acquisition of new technologies.
Looking ahead, the Board and Management of your company will continue to execute various strategies to develop existing assets, optimize business portfolio through diversification, strengthen financial performance and drive operational efficiencies throughout the organization. I am confident that our strategic endeavours would generate sustainable growth, stronger cash flows, and better returns on capital and greatly improve shareholder wealth.
I would like to thank my fellow Directors and members of the Management Committee for their wisdom and support. I would also like to extend a special thanks to each and every shareholder of BHEL, whose trust and confidence have been the motivating force in all our endeavours. I thank all our customers and business associates in India and abroad for their unstinted loyalty and steadfast patronage of our products and services. Various Ministries of GoI, particularly the Department of Heavy Industry, have been providing valuable guidance and support in our efforts. Finally, a word of thanks to more than 48,000 employees of BHEL who are making these successes happen. I am extremely proud of their outstanding performance over this period and have full confidence in their ability to deliver even greater success going forward.
With all the ingredients of success, dedicated people, engineering and technological excellence and right business strategies in place, your company is well positioned to meet the demands of a growing industry and deliver the type of consistent results for which this company is known for.
I look forward to your unwavering support while continuing the growth momentum in coming years too.
With best wishes,
(B. Prasada Rao)
Chairman & Managing Director
Place: New Delhi
Date: August 14, 2013