Dear Shareholders,
It gives me pleasure to share the 59th annual report of your
company, for the year 2022-23. Overall business scenario in India has been robust with the
country being one of the world's fastest-growing major economies, achieving a remarkable
growth rate of 7.2% in FY 2022-23. The industrial production also witnessed a notable
increase of 5.1% compared to the previous financial year. While the slowdown in the global
economy and the geopolitical disturbances have had some impact on businesses, the
continued expansion by domestic industries coupled with substantial investment in the
infrastructure sector presents significant growth opportunities for your company. The
company has taken a number of initiatives in the areas of business diversification,
project execution, technology development, quality, manpower development, etc., in recent
years, which, I am happy to say, have started showing results.
While financial parameters are the ultimate yardstick of an
organisation's performance, it is important to remember that the physicals are the
actual drivers for the financials. Further, it is essential for any organisation,
especially a large one, to build for the future, by putting in place suitable enablers for
long term sustainable growth. To this end, one of the most important changes that your
company has seen in recent times is the change in operations ideology from being
"Revenue Centric" to "Project Centric". The company has taken up
focussed efforts in the area of project execution, including implementation of an
Integrated Project Management System (IPMS), sequential despatches, advance engineering
planning & action, enhanced delegation to project directors, site data digitization,
etc., which have started paying off.
At the macro level, this can be seen from the fact that the company has
achieved a doubling of erection tonnage at project sites over a period of three years
(achieved 5.41 lakh MT in FY 2022-23) despite a declining order book and ‘NIL'
thermal ordering over three years between Aug'19 to Sep'22. Further, the
increase in liquidation against current year billing from 59% in FY 2018-19 to 86% in FY
2022-23 is proof of the quality of the output & billing. At a micro level, recent
successes in two major projects Maitree and North Karanpura are specific cases
demonstrating the outcome of these efforts. The Unit 1 of Maitree Thermal power project in
Bangladesh was synchronised in August 2022 (in an overall period of 64 months, despite two
waves of COVID and mass airlift of manpower from project site in between, as well as
numerous border and visa related challenges). More recently, the synchronisation of Unit 2
of Maitree project was achieved on 28th June, ahead of the commitment given at
a high level G2G meeting, which was accepted to be a very tough target, even at the time
it was being given. Nearer home, Unit 1 of North Karanpura fix660 thermal power plant was
synchronised in Oct'22 and Unit 2 is moving towards synchronisation in Oct'23.
This plant is the first utility scale power plant with Air Cooled Condensers for reducing
water consumption and will result in saving of 30,500 million litres of water annually
when all the three units are functioning, (this saving equals the annual need of around
1.5 million people). This ACC was commissioned by BHEL engineers despite the absence of
OEM experts due to COVID related issues.
Key performance highlights for FY 2022-23 Coming to our performance
for the year gone by :
• The company achieved revenue from operations of I23,365 Crore as
against I21,211 Crore during the previous year, an increase of 10% and made a profit after
tax (PAT) of I448 Crore against a PAT of I410 Crore in the previous year.
• Despite increase in total receivables by nearly 9% during FY
2022-23—primarily on account of execution of projects with adverse payment terms,
there is a reduction in terms of number of days of Revenue from Operations from 571 days
last year to 567 days in current year and the Trade Receivables in terms of number of days
of Revenue from Operations, have reduced to 102 days as against 107 days during FY 2021-22
• The company secured orders worth I23,548 Crore, excluding taxes,
which is the highest in the last five years. The reporting of order book has been done
excluding taxes for better understanding of all stakeholders, and is in line with the
reporting of revenue numbers. Industry sector segment order booking is at I9,537 Crore
– highest in last 13 years with highest-ever orders in the defence sector, which also
includes the order for 20 upgraded SRGMs (main gun on Indian warships) for which BHEL is
the sole supplier in the country.
• The company won the only thermal EPC order—2x660 MW, NTPC
Talcher Thermal Power Plant, awarded in the last four years, reasserting its market
leadership position in the segment.
• The company recorded over 25% growth in the Spares &
Services Business.
• The total outstanding order book as on 31st March
2023 stands at I91,336 Crore, net of taxes (PY I90,084 Crore). With the receipt of the
prestigious order for 80 nos. "Vande Bharat" trainsets in April 2023, the total
outstanding order book has crossed I1 Lakh Crore (excluding taxes), which is the highest
in last 4 years. In recent years, the company has twice won the ICAI Award for
‘Excellence in Financial Reporting' in the ‘Infrastructure and Construction
Sector' category, reflecting the quality of accounting/ reporting practices.
Going forward
Various initiatives taken at the national level, in the areas of
infrastructure development and technology self-reliance, in tune with the growing
aspirations of 1.4 billion people, create a range of opportunities in the capital goods as
well as energy sectors for your company. The AatmaNirbhar Bharat initiative launched by
our Hon'ble Prime Minster is one such initiative opening up multiple opportunities
and your company has been working relentlessly to capitalise on these emerging
opportunities. In the conventional (power) sector, we are seeing a consensus emerging
that, for economic development and for meeting the aspirations of our people as well as
from an energy security perspective, thermal power cannot be phased out. This has brought
around a revival in the thermal power sector – albeit for short to medium
term—this is a breather which will further enable your company to diversify into new
& futuristic businesses.
Expanding business scope in the thermal related areas, the company has
made substantial progress in successfully developing in-house solution for flexible
operation of coal-fired power plants (an imperative for integrating RE in the grid). The
company has demonstrated the target performance parameters in the company's first
order and further four orders have already been received. Issue of guidelines, for
implementing flexiblisation capabilities in existing thermal sets by CEA, is expected to
generate further business in this area. Spares and Services business is also picking up
with focussed efforts, including long term agreements (for supply as well as services)
with customers, advance procurement action/ stocking to reduce delivery times, and efforts
to improve service deliveries. E_orts are on to focus on Nuclear business with MoU being
signed with NPCIL and developmental efforts initiated in the area of Small Modular
Reactors. The dispatch of BHEL's 44th nuclear steam generator for GHAVP
(Gorakhpur Haryana Anu Vidyut Pariyojana) demonstrates our capability in this domain. The
company continues to maintain its lead position in Hydro power with the capability to
design, engineer and manufacture custom-made hydro turbines & generators of various
sizes up to 400 MW and offer customized R&M solutions for the vast fleet of ageing
hydro turbo-generators. As far as diversification is concerned, the company is targeting
at least 50% of its business to be from non-coal businesses. The company has achieved some
notable successes in this area with industry segment order book going up to 40% of total
order booking in the last year with highest-ever orders in defence sector including orders
for upgraded SRGM, Heat Exchangers for fighter aircraft, maiden order for supply of Li-ion
batteries for AMCA (making BHEL the sole Indian supplier of Li-ion batteries for next
generation aircraft), etc. Further, BHEL continues to expand its role as a reliable
partner for design, engineering and manufacturing of critical equipment for the strategic
sectors with range of equipment including heat exchangers, control systems, turbines,
motors, generators, etc.
One of BHEL's largest orders—for supply and 35 years' maintenance
of 80 Vande Bharat trainsets—received in Apr'23 in consortium with M/s TRSL, is
a landmark success which will open the way for future rail business, where huge expansion
and modernisation plans are being rolled out – including in areas like semi-high
speed trainsets, locomotives, signalling etc.
Yet another successful business initiative has been on the coal
gasification front. The need for the country to utilise its vast coal reserves (in absence
of any substantial gas/ oil reserves) has been recognised at various levels. At the same
time, it is also accepted that, from a climate change perspective, the country will have
to adopt clean coal technologies in a major way. BHEL has leveraged on its indigenously
developed coal gasification technology—the world's first proven technology for
gasification of high ash Indian Coals—and completed design & engineering of the
gasifier for 2,000 TPD commercial scale plant. Further process of setting up a JV with
Coal India Ltd, for setting up a Coal to Ammonium Nitrate plant is in advanced stages.
This will open up a major business area for BHEL under the National Coal Gasification
mission announced by our Hon'ble Prime Minister.
In line with the ‘National Hydrogen Mission', your company is
geared up and exploring various areas in the green hydrogen value chain and is setting up
a Centre of Excellence, at Varanasi. These efforts will pave the way for future scalable
businesses in this area. These diverse initiatives collectively set the ground for BHEL's
long-term growth prospects in the non-coal segment. They also demonstrate your
company's commitment to sustainability, reduction of carbon footprint, and
contribution towards global efforts in mitigating climate change.
The company has further signed technology agreements with M/s General
Electric Technology GmbH Switzerland for enhanced rights of existing /uprated and new gas
turbines models, M/s Sumitomo SHI-FW for subcritical and supercritical Circulating
Fluidised Bed Combustion (CFBC) Boilers capable of firing a wide range of fuels, and M/s
ABB for underslung propulsion equipment for rail segment which will provide the twin
benefit of garnering orders in diversified businesses from domestic and international
markets as well as help make BHEL self-sufficient in state-of-the-art technologies, in
times to come.
Thecompanyhasalsomadenotableprogressinindigenisation and reduction on
import reliance, both in its own business areas as well as for other CPSEs. For its own
business, BHEL has developed in-house a number of equipment including for FGDs, etc., and
has further been working with industry for supporting development by its vendors/
associates. Recent successes include development of Sucker Rod Pumps – a major
requirement of the oil industry which was hitherto largely imported from China.
However, challenges still remain for the company. Rising material
costs, though moderated by multiple cost optimisation efforts, continue to hurt
profitability. This, combined with the fact that some of the orders currently under
execution have been taken at very competitive rates, is likely to continue to hurt the
bottom line in the near future. The company is continuing with strict cost control
measures to deal with this situation. Going forward, new orders where cost hikes are
factored in coupled with the company's efforts on improving project management and
engagement of PMC for specific sites would further help improve profitability. The
liquidity position of the company will continue to be constrained on account of adverse
payment terms in ongoing orders and is expected to improve as these orders are
substantially completed in the next two years. Delivery against these new orders obtained
in recent years with continued focus on timely delivery, would further aid recovery.
Quality First Initiative
Another major initiative taken by your company is the ‘Quality
First' initiative, launched in mission mode throughout the organization, for
making quality a hallmark of the company's products & services being offered to
the customers. Sustained efforts on this front resulted in BHEL being awarded the CII-EXIM
Bank's first-ever 'Special Jury Commendation for Adoption and Nurturance of Business
Excellence', reflecting your company's dedication to fostering and embracing
excellence in all aspects of operations. Additionally, BHEL units HPBP Trichy, HEEP
Haridwar, HEP Bhopal, and HPEP Hyderabad have received the prestigious
"Platinum" recognition while PEM Noida, EDN
Bengaluru, BAP Ranipet and PSNR Noida bagged "Gold Plus"
recognition in "CII EXIM Bank award for Business Excellence 2022". All 8
Quality Circle teams which participated at the 47th International Convention on
Quality Control Circles in Jakarta, won the Gold awards (highest category of award),
vindicating BHEL's position as the pioneer of the quality circle movement in India.
Developing a committed workforce & leadership pipeline
Your company has been recognized as a model employer for decades and
believes that a dedicated and committed workforce is the key to success of any
organization. A number of initiatives have been taken in this direction including
engagement of a leading consultancy organization for designing & implementing a
roadmap for HR excellence. For long term succession planning, leadership development
models through competency assessment have been created and curated individual development
plans, etc., are being implemented. A number of efforts are also being made for enhancing
employee engagement through communication initiatives, unit reach-out programs, etc.
Additionally, in view of the changing business scenario, special emphasis is being given
on continuous training, for making our workforce agile through unlearning, learning and
relearning initiatives focused on new upcoming technologies.
Green BHEL/Harit BHEL
Actions to mitigate climate change are of paramount importance across
the globe for a sustainable future, and our country has adopted the ‘Panchamrit'
goals including commitment to become Net Zero by 2070. In line with our ethos as a
sustainable company, we have undertaken a major initiative for "Making BHEL a Green
Company" with the target of achieving Net Zero by the year 2047. In addition to
making the company a model "Green Company" for the public sector, it is expected
to support business performance by reducing costs and improve availability of borrowings
& insurances, etc., in the long run. It would further help create a culture of
innovation within the company to design, engineer and manufacture environment friendly
products.
Skill Development Initiatives
Supporting the country's commitment towards skill development as
well as leveraging BHEL's capabilities and infrastructure, your company has
established a Common Engineering Facility Centre (CEFC) at Welding Research Institute
(WRI), Trichy (the leading welding research institution in the country) and extension
centres at Varanasi, Haridwar, Bhopal, Jhansi and Ranipet with support from Ministry of
Heavy Industries (MHI), to train welders. The CEFC has already trained 2,000+ welders in
the first year of its inception. This initiative will not just ensure availability of
skilled welders for
BHEL's own sites but also contribute to various sectors in the country
and the neighbourhood as well, where there is currently a shortage of skilled welders. The
endeavour has also been appreciated by Hon‘ble Minister of Heavy Industries and the
Hon‘ble Prime Minister of India.
Acknowledgement
The success of your company is only possible with the goodwill,
constant support and encouragement of our stakeholders. I express my sincere gratitude to
our valued customers as well as business partners for their persistent faith in our
capabilities, to employees for their tireless efforts, passion and perseverance, members
of Board for their guidance, and you, our esteemed shareholders, for your support and
trust in the company. I would also like to thank various Ministries of Government of
India, particularly the Ministry of Heavy Industries for their continuous support and
valuable guidance throughout.
Your company has undertaken a journey to establish itself as a
future-ready global engineering and manufacturing enterprise, and I am confident that with
your support and cooperation, we will complete the same with flying colours. With best
wishes,
|
(Dr. Nalin Shinghal) |
|
Chairman & Managing Director |
| New Delhi |
|
| July 28, 2023 |
|