BEML Ltd

Dear Shareholders,

I am delighted to present the FY 2023-24 Annual Report, which captures our company's journey and achievements over the past year. As Chairman & Managing Director of BEML Limited, I am pleased to share that our company has continued to advance and reach significant milestones during these transformative times.

Despite global uncertainties, the Indian economy has demonstrated remarkable resilience, achieving robust growth rates driven by strong performance across Manufacturing, Services, Information Technology, and Agriculture. As the 5th largest economy with a projected growth rate of around 7%, India offers a wealth of opportunities. Government initiatives such as the Atmanirbhar Bharat Mission, along with efforts in Indigenization, Innovation, and Technology, have created a favorable environment for growth. Having weathered the challenges of COVID-19 and geopolitical turbulence, BEML is now positioned to thrive in the coming years.

In this demanding environment, BEML has exhibited steadfast strength and delivered a

resilient performance. Your continued trust and support have been instrumental in our pursuit of excellence, and for this, I extend my heartfelt gratitude.

On behalf of the Board of Directors, I am pleased to present the Company's Annual Report for the fiscal year 2023-24 for your review and approval at the upcoming Annual General Meeting.

Let me start by highlighting the exceptional performance of our Rail & Metro Business Group, which contributed 39% to our sales last year, up from 27% in 2022-23. This group achieved its highest-ever turnover, with an impressive 46% growth compared to the previous year. Notably, we secured a prestigious order for 160 Vande Bharat sleeper trainsets and another for 318 cars for the Bangalore Metro. We're

excited to announce that deliveries for these major projects will begin this year.

Our Defence Business Group also demonstrated remarkable performance, contributing 19% of our total sales despite facing supply chain challenges. The group saw a significant 7.47% increase in the value of production over the previous year and ended the year with a robust order book of Rs 4,790 crore.

The Mining & Construction (M&C) Business Group contributed around 42% to our sales. This strong performance was bolstered by our Spares & Service group, which played a crucial role, contributing over 50% of M&C sales and achieving record-high sales during the year.

Your Company faced several challenges, including supply chain disruptions, rising raw material costs, and increased logistics expenses, which led to delays in projects and supplies. To address these issues, we made strategic decisions to maintain financial stability and manage costs effectively. Our teams thoroughly analyzed our operations, pinpointed areas for efficiency improvements, and optimized supply chain processes. These efforts included streamlining administrative workflows and implementing advanced technologies.

Through these diligent efforts, we achieved significant savings and made sustainable decisions that support long-term growth. Our commitment to prudent financial management has enabled us to navigate uncertainties while continuing to invest in critical areas for the company's future.

The results of these initiatives are reflected in our financial performance. We are proud to report a Profit Before Tax (PBT) of Rs. 383 crore, marking the highest PBT in the last 15 years. This milestone demonstrates our ability

to adapt and excel despite external pressures, underscoring our strong financial health and strategic vision.

Our financial discipline has positioned us well to seize new opportunities, ensuring BEML remains competitive and forward-thinking. As we move ahead, we will continue to build on this solid foundation and strive for excellence in all areas of our business.

Our exports reached Rs. 1,066 crore, with expansion into new markets like Somaliland. As of April 1, 2024, our order book stands at Rs. 11,872 crore, a 39% increase in order bookings. Additionally, the value added per employee has risen to Rs. 39 lakh, up from Rs. 33 lakh in 2022-23, and sales per employee have increased to Rs. 82 lakh, compared to Rs. 74 lakh the previous year.

Despite intense competition across all business verticals, your Company achieved 77% of its sales through competitive means. We have successfully maintained a strong market presence in Dump Trucks, Dozers, and Metro Cars.

Our Research & Development (R&D) efforts have been crucial in driving innovation, growth, and sustainability. In a rapidly evolving industry landscape, our commitment to R&D has remained unwavering, reinforcing our position as a leader. Over the past year, we have introduced new products and upgraded existing ones across all business verticals.

Our dedication to R&D highlights our investment in both physical assets and intellectual capital. We recognize that the knowledge and expertise gained through R&D are essential to our long-term competitive edge. This year, we

were granted 119 Intellectual Property Rights (IPRs), a significant increase from 43 last year. Notably, we secured 92 patents, marking our highest annual total since inception and representing more than an eightfold increase compared to 2022-23.

I am pleased to report that over 87% of our business was generated through in-house developed products, showcasing our robust R&D capabilities. Our R&D expenditure for the year accounted for 2.17% of total sales and 31% of Profit After Tax.

We will continue to invest in top talent, cutting- edge technologies, and innovative ideas, driven by our belief that sustained innovation is crucial to our ongoing success.

In a dynamic global environment, self-reliance fosters independence and innovation. It empowers us to shape our own future and drives us to explore new ideas and develop creative solutions without external constraints.

Utilizing the Government of India's Srijan Portal for indigenization, we have achieved over 96% indigenization for High Mobility Vehicles (HMV) 8x8, and efforts are underway to increase indigenization levels for HMV 6x6, HMV 12x12, and Armoured equipment. For other Defence products, the current indigenization level exceeds 95%.

In Mining & Construction, we have achieved indigenization levels of over 90% for most equipment. For Metro Cars, the indigenization level stands at 65%, with ongoing efforts to further increase it. In Rail equipment, all products have achieved indigenization levels above 95%.

This year, we successfully indigenized 267 items, resulting in an imported value reduction

of approximately Rs. 130 crore. Additionally, we have listed 133 major aggregates/Line Replaceable Units (LRUs) in the Positive Indigenization Lists 1, 2, & 3 published by the Ministry of Defence, with 33 items already indigenized.

Your Company is embracing a comprehensive digital transformation strategy to enhance business processes across all three verticals.

In 2023-24, we implemented several key digital transformation (DT) initiatives that have positively impacted our operations, driving improvements in both top and bottom lines while aligning seamlessly with our people and processes. Our focus areas included:

• Cyber Security: Enhanced protection with Antivirus and Data Loss Prevention (DLP) systems.

• Infrastructure Upgrades: Refresh of endpoint and network devices.

• Collaboration Tools: Upgrades to video conferencing facilities.

• Application Enhancements: Improvements in both SAP and non-SAP applications.

• Cyber Security Awareness: Daily tips to keep our teams informed and vigilant.

These initiatives collectively contributed to a more secure, efficient, and integrated work environment, supporting our commitment to operational excellence and innovation.

We believe that our company's true strength lies in its people. Our employees are not merely workers but innovators, collaborators, and ambassadors of our values.

Our Human Resources department has been pivotal in fostering people-centric policies that reflect our commitment to employee growth and well-being. Recognizing that the company's success is closely tied to employee development, our HR initiatives for 202324 focused on transitioning from traditional practices to a modern, dynamic approach.

• Talent Development: Training programs, mentorship, and leadership development to empower our team members.

• Performance Improvement: Strategies

designed to enhance individual and team performance.

• Welfare Programs: Comprehensive support to ensure employee well-being and job satisfaction.

These efforts have enabled our workforce to excel, drive innovation, and contribute

significantly to our company's success.

In 2023-24, our vigilance activities were executed comprehensively, encompassing prevention, detection, and enforcement.

• Surprise and Periodic Checks: Regular inspections and audits to ensure compliance and integrity.

• Contract and Claims Scrutiny: Detailed examination of purchase orders, contracts, travel allowances, medical reimbursements, and annual property returns.

• In-House Inspections: Conducted eight CTE-type inspections and eight system studies to maintain rigorous standards.

These vigilance initiatives are crucial in upholding transparency and accountability within our operations, ensuring that our processes remain robust and effective.

The year 2024-25 has commenced on a promising note with a major order from Northern Coal Fields Limited for dump trucks. With an impressive order book exceeding Rs. 10,000 crore, we have set an ambitious goal to achieve a quantum jump in the top line as compared to last year.

BEML is transforming its operations with the introduction of 11 Strategic Business Units (SBUs) and 2 Micro SBUs, moving away from traditional business verticals. This restructuring is designed to drive growth in emerging markets and harness future opportunities. Each SBU Head now has enhanced authority, promoting agile decision-making and financial autonomy.

To align with our goal of becoming a world- class technology company, we've redefined our Research & Development (R&D) strategy into three distinct layers:

• Embedded R&D: Integrated within each SBU, focusing on regular product upgrades.

• Advanced R&D: Dedicated to new product development and exploring innovations related to existing products.

• Corporate R&D: Concentrated on acquiring cutting-edge technologies and facilitating technology transfers with strategic partners.

Our primary focus this year includes consolidating and simplifying through digitalization, managing unpredictability, and increasing operational efficiency. We are committed to vigilant cost management to

sustain and enhance our financial performance, creating value for stakeholders. Our cost control measures are strategically aligned with our long-term objectives, reinforcing our commitment to sustainable growth.

The government's proactive efforts to strengthen indigenous design, development, and manufacturing of defence equipment are poised to generate substantial opportunities for the domestic sector. The push for Atmanirbhar Bharat and the Positive Indigenisation List are accelerating our journey towards self-reliance.

Key developments on the horizon include increased defence modernization plans and procurement of Armoured vehicles by the Ministry of Defence. We are exploring new business areas such as overhauling Armoured Recovery Vehicles and High Mobility Vehicles, supplying platforms for gun systems, and developing strategic equipment like Futuristic Wheeled and Armoured Combat Vehicles.

A recent milestone for BEML is the successful design and development of India's indigenous 1500 HP engine prototype for New Generation Main Battle Tanks (NGMBTs). This achievement underscores our engineering excellence and commitment to self-reliance. We aim to continue developing engine variants to meet diverse Defence Service requirements, reinforcing our position as a leader in defence production.

Our development of high-powered engines is also driving advancements in Futuristic Combat Vehicle programs in India. This includes designing engines for various military vehicles and exploring partnerships with global OEMs for indigenous battle tank development.

In the Aerospace sector, we anticipate securing orders for aircraft and helicopter components,

missile components, and space program aggregates. With our state-of-the-art facilities in place, BEML is well-positioned to expand its presence in the aerospace industry. We are collaborating with Defence Public Sector Undertakings (DPSUs) and private sectors on missile and aerospace programs, including GHEs & GSEs for Aerospace Projects and light alloy structure manufacturing for ISRO's Launch Vehicle Mk-III (LVM-3).

Additionally, we are establishing world-class facilities at Aero SEZ Park, Bengaluru, to manufacture aerospace components for global OEMs and provide warehousing and allied services.

BEML is at the forefront of meeting the burgeoning demands for Vande Bharat coaches and maintenance equipment. The first prototype of the Vande Bharat Sleeper train set is currently in production, with rollout expected within this year. Significant orders for these train sets are anticipated, poised to drive substantial revenue growth. Additionally, we are strategically positioning ourselves to cater to the emerging needs for semi-high-speed train sets and aluminum coaches for Indian Railways.

We have secured an impressive order for 318 cars for the Bangalore Metro, valued at Rs. 3,177 Crores. The delivery of the first train set is slated to begin in June 2025. As Metro Rail networks extend into Tier-II cities across India, we are optimistic about capturing additional Metro Car projects.

The rising demand for suburban trains— including Electric Multiple Units, RRTS, and upcoming tenders for maintenance vehicles like RBMV and UTV—presents a robust revenue opportunity. To establish a global

footprint, BEML is actively bidding for metro and rail projects internationally. Our expertise in manufacturing and advanced technologies will be leveraged to optimize operations and expand our market presence globally.

In response to the Government of India's push to reduce import dependency and enhance coal production, we are intensifying efforts to boost output. The current geopolitical landscape has also prompted CIS countries to seek collaborations with Indian companies for their mining needs.

Given the surge in coal production and infrastructure development, alongside increased export efforts, the demand for Mining & Construction equipment is expected to remain strong. BEML is strategically positioned to capitalize on this growth, with comprehensive plans to expand our product portfolio. We are developing high-capacity Motor Graders, Tyre Handlers, and Loaders to capture a larger share of the high-capacity mining sector. In the construction sector, new product innovations and variants are on the horizon to enhance market penetration.

Underground mining remains vital for extracting valuable minerals like coal, zinc, and uranium in India. With substantial reserves and a rich geological landscape, there is a pressing need for advanced and efficient underground mining techniques. BEML is forging partnerships with technology providers to adopt modern equipment such as Continuous Miners, Surface Miners, and High Walls. Our goal is to drive improvements in productivity, safety, and environmental sustainability through state-of- the-art mechanization and practices.

Diversification Strategy: To enhance our

competitive edge and adaptability, BEML is advancing into the Maritime sector. This diversification strategy aims to capitalize on emerging opportunities and foster indigenous development of marine systems. Our focus will be on designing and developing innovative products, including:

• Hydrogen Aspirated Kits

• Hydrogen Engines

• Hydrogen Fuel Cells

• Stern Drives for Boats

• Non-magnetic Engines for Deep Sea Mining

We plan to invest significantly in the maritime business this year through various joint ventures and development projects.

Strategic Expansion: Exports are poised to play a crucial role in BEML's growth trajectory. Expanding our global presence, we view exports as a strategic avenue for value creation and market diversification. Key developments include:

• Secured orders from Africa, Central Asia, Indonesia etc for Mining & Construction equipment, with supplies beginning and execution planned for this year.

• Pursuing opportunities valued at Rs. 2,000 crore across all three business verticals.

Commitment to Excellence: BEML is dedicated to maintaining the highest standards of Corporate Governance, adhering to the guidelines set by the Department of Public Enterprises (DPE)

We are humbled and honoured to have received

several notable accolades:

• CEO of the Year - PSU (Defence & Aerospace) and Most Sustainable & Innovative Manufacturing Practices at the 32nd World HRD Congress.

• Governance Now 10th PSU CMD Leadership Award for Excellence, recognizing our outstanding contribution in leadership.

• "GOLD" Award in the 3rd edition of the EEPC India Quality Awards.

• Rajbhasha Shield awarded to BEML Limited, Corporate Office, Bangalore, by the Town Official Language Implementation Committee (PSU), Bangalore, for our commendable performance in Hindi implementation during 2022-23.

I extend my heartfelt gratitude to the

Government of India, particularly the Ministry

of Defence, the Department of Defence

Production, Ministry of Housing and Urban

Affairs, Ministry of Coal, Ministry of Railway, Prime Minister Office, Coal India Limited, Defence PSUs, Indian Railways and other allied Administrative Departments of the Government of India. Your unwavering support and encouragement have been invaluable.

I also wish to thank my fellow Board members, our clients, partners, employees, and all stakeholders for their trust and confidence. As we look towards the future, we are driven by a deep sense of commitment and excitement. We embrace upcoming challenges with enthusiasm, confident in our collective ability to adapt, innovate, and seize new opportunities.

As we move forward, I am inspired by Socrates' wisdom: "The secret of change is to focus all of your energy, not on fighting the old, but on building the new." This quote resonates deeply with our company's philosophy. Together, we will strive to make this year a remarkable success for BEML Limited and our country.

With dreams in our hearts and determination in our actions, we are poised to achieve great things. Jai Hind!