MANAGEMENT DISCUSSION AND ANALYSIS

1.1 Economic & Business Overview

The year 2014-15 witnessed improvement in macro parameters coupled with improved business and consumer confidence. Post revision of base year, GDP growth over the last three years points towards steady recovery. The combined effort on part of RBI and GoI has ensured inflation to come down to the envisaged trajectory. As a result the market is seeing interest rate cuts, a much awaited relief for industry.

On the exchange rate front, much of the relief has come from stability of Indian currency against USD. It augurs well for export oriented firms and offering a suitable destination for foreign manufacturers to set their shops here.

Industrial activity indicators, IIP and PMI, are pointing towards strong production activity. Collectively it can be said that economy is in much better shape and would expand further on the back of ongoing structural changes and clearing of stranded infrastructure projects.

1.2 Profile and Performance of Business Segments

1.2.1 Power Sector Opportunities

India is the world's second fastest-growing major economy, with growth rates averaging 7.5% over the past 10 years and has the potential to become the world's third largest economy (nominal basis) by 2020. In the next two decades, current size of economy of USD five trillion (PPP) is expected to grow four to five times as per various studies and estimates. Also, India is the second most populous country in the world, with over 1.26 billion people, more than a sixth of the world's population. All the factors indicate potential for high growth of power demand in the country.

Human Development Index(HDI), whichisa composite statistic of life expectancy, education and per capita income indicators, is directly correlated to the per capita electricity consumption. For a country like India, even a small increase in electricity use is associated with large increases in HDI. This further reinforces the importance of Power for Indian economy as well Human Development in the country.

In order to meet the growing need of electricity demand for consumers as well as for Industries, Government of India has taken various initiatives to augment capacity addition in the country. India's installed capacity base has swelled from a mere 1.3 GW in 1947 to over 271.7 GW by March 2015.

With capacity addition of 61,014 MW during the first three years of the 12th Plan (2012-15), the country has exceeded the achievement of 54,964 M during the 11th Plan (2007-12) through conventional sources, which itself was more than double that of 21,240 MW during 10th Plan (2002-07). Despite the growth, there is still further scope of accelerating the growth of capacity addition as India continues to experience shortages in energy with total deficit of 3.6% and peak deficit of 4.7% during 2014-15.

Reforms for a more efficient and competitive power sector are under way in India. hile there has been some progress in this regard, shortage of power and lack of access, which is reflected in low per capita electricity consumption in India vis­a-vis other major economies, continue to be major constraints on India's economic growth.

Considering the recent state of power generation status and in order to deliver a sustained economic growth rate of 8.0% up to 2035, various agencies such as CEA, IEA, Planning Commission and others, have estimated that India needs to increase its primary energy supply between three to four times of the current levels by 2035 translating into a CAGR of approx 7% in electricity generation. This rebrsents a need for the substantial augmentation of power generation capacity from current levels.

The recent 'Make in India' initiative of Government of India is likely to further enhance the demand for power in the country.

A capacity addition of 88.5 GW has been envisaged for the 12th Plan (2012-17). This comprises an estimated 72.3 GW of thermal power, 10.9 GW of hydro power and 5.3 GW of nuclear power. In addition, a grid interactive renewable capacity addition of about 30 G has been envisaged. This comprises wind, small hydro, biomass and solar energy.

During the first 3 years of 12th Plan (2012-15), capacity addition of 61 G has already taken place, which is 111% of the five year period of 11th Plan (2007-12) achievement. In addition, 11.3 GW of grid interactive renewable capacity was also added during 2012-15.

Apart from new capacity additions, huge opportunity exists in Renovation & Modernization (R&M) business as almost 24% of India's coal based power plants are over 25 years old, thus necessitating increasing requirement of regular equipment maintenance, lifetime extension and performance upgrades.

Current Business Environment

The power sector is currently at a crucial juncture of its evolution, with many private producers and domestic manufacturers also playing a significant role in various capacities, and greater reliance on markets, subject to regulation. The policy makers in India have aimed for ensuring energy security for the nation as well as for providing adequate energy of desired quality in various forms in a sustainable manner and at competitive prices.

Developers of Power Plants have been facing numerous constraints like coal/gas allocation, environment clearance, land acquisition, financing and funds tie-ups, etc. for last about 4 years. This has resulted in only very few new projects coming up.

Recently, Government has taken steps to propel growth in power sector. These include allocation of coal blocks to central and state govt. companies, auction of Coal Blocks for private developers, setting a target of 1 Billion Tonnes of Coal output by 2020 and the declaration of intent in the Union Budget to set up 5 UMPPs in near future, etc. This, alongwith steps like the Government decision for domestic sourcing for UMPPs and extension of CEA's advisory to Central/ State Utilities for condition of Phased Manufacturing Programme (PMP) have had a positive impact on the prospects for the sector, particularly for domestic manufacturers.

India has a huge hydro power potential of 148 GW, out of which only 42 G has been realized till date. Steps have been taken to attract investments into the hydro sector and increase the falling share of hydroelectricity in the country's installed capacity mix. Government is planning Hydropower Purchase Obligation (HPO), which will obligate the power distribution companies to purchase power from hydro power plants. This has led to signs of revival in hydro power segment. However, the Subrme Court verdict staying 23 Hydro Projects in Uttarakhand has acted as a dampener, thereby delaying the imminent revival in the sector. The Nuclear business is primarily driven by government policies, public perceptions and global dynamics.

Offerings

BHEL offers end-to-end Systems, Products and Engineering, Erection & Commissioning services for thermal power plants encompassing steam turbines, generators, boilers and matching auxiliaries up to 1000 M ratings and has supplied sets of 660/700/800 MW based on supercritical technology. BHEL has proven capabilities for executing thermal power projects on Engineering, Procurement & Construction (EPC) basis and is executing numerous brstigious projects on EPC basis including Supercritical sets of 660/700/ 800 M ratings. To make use of lignite reserves available in India, BHEL also supplies Circulating Fluidized Bed Combustion (CFBC) Boilers for thermal plants. BHEL is one of the few companies worldwide, involved in the development of Integrated Gasification Combined Cycle (IGCC) technology which would usher in clean coal technology.

The company manufactures 220/235/500/540/ 700 M e nuclear turbine-generator sets and is geared up to take higher rating nuclear sets. Custom-made conventional hydro turbines of Kaplan, Francis and Pelton types with matching generators, and pump turbines with matching motor generators up to 300 M are also engineered and manufactured by BHEL.

BHEL offers gas turbines and matching generators ranging up to 299 MW (ISO) rating, tailored to meet specific needs, for both open and combined cycle operation.

The company has proven expertise in Plant Performance Improvement through renovation, modernization and uprating of a variety of power plant equipment, besides specialized know-how of residual life assessment, health diagnostics and life extension of plants. Retrofit packages for ESP to meet the latest environmental norms, retrofit package for Control & Instrumentation for replacing obsolete technology with state-of-the-art technologies are also being offered by BHEL.

In order to overcome the current uncertainty of coal supply, BHEL has in-house developed 'Fuel Flexible Boiler', which is capable of firing entire range from 100% Indian to 100% imported mix of coal. The design has been developed by BHEL with its vast experience of over five decades of working with various coals. This will provide security against variation in design coal and the coal actually available during operation, thereby offering operational flexibility to customers to ensure un-interrupted generation of electricity.

Achievements during the Year Order Booking

Power Sector secured orders worth Rs. 24,873 Crore with market share of 72%, against brvious five years average of 64%, despite shrinking market and intense competition, reinforcing the leadership of BHEL in Indian Power Sector. It includes orders for 4 nos. of Turbines & Generators (TG) and 4 nos of Steam Generators (SG) for supercritical sets, making cumulative supercritical technology orders basket to 31 TG and 36 SG by the end of 2014-15, thus reinforcing BHEL's leadership in this segment. Share of EPC orders has also improved during the year, with EPC business in the utility segment contributing to 89%. Major highlights of the orders received during 2014-15 include:-

• Order for country's first ever EPC contract for 800 M rating Supercritical Power Project secured from GSECL for 1 x 800 MW Wanakbori for Rs. 3,536 Crore

• BHELs Second largest order worth Rs. 7,688  Crore for 2x660 M TANGEDCO Ennore SEZ  on EPC basis

• 1x800 MW TSGENCO Kothagudem, Telangana state's first supercritical order, secured on EPC basis for Rs. 3,810 Crore

• Order for Country's first 9FB Advanced Class Gas Turbine received from KPCL for Yelahanka CCPP on EPC basis for Rs. 1,202 Crore. This is the first gas-based order for domestic market, after a gap of almost last 3 years

Projects Commissioned

BHEL has continued to cross 10,000 MW mark of commissioning / synchronisation for the third consecutive year. Capacity addition by BHEL during the first 3 years of the XII Plan has exceeded the 5 year achievement of the XI Plan. In 2014-15, BHEL maintained a healthy pace of project execution. Power projects totaling 11,941 MW were commissioned/synchronized during the year, inclusive of 10,230 MW Utility sets, 1,392 MW captive sets/ industrial sets in the country and 319 M in overseas markets. BHEL commissioned utility projects aggregating to 8,230 MW, which is up by 19% against the commissioning target of 6,914 MW set by Ministry of Power.

During the year, 25 nos. of Utility sets were commissioned expanding footprint of BHEL to 398 coal based sets (including 88 sets of 490/500/525/600/660 MW rating), 395 nos. hydro utility sets and 100 gas-based sets installed in India showcasing experience and execution capabilities. Capacity addition in Hydro Utility segment aggregating to 736 M / 6 sets was highest in last decade by BHEL.

with this, installed capacity of BHEL supplied Utility sets in India went up to 1,32,293 M and company maintained its lion's share of 55% in the country's total installed capacity of 2,41,427 M comprising of Coal, Gas, Diesel, Hydro and Nuclear Sets (excluding Renewables and Up-rating/ De-rating). However, 62% of the total generation from Thermal Utility Sets (coal based) was contributed by BHEL supplied sets, testifying superior performance of

BHEL sets.

First Time Achievement

• Indigenously manufactured supercritical set of 660 MW rating commissioned by BHEL at Barh-5 successfully establishing its product under this rating

• First 800 MW set of BHEL commissioned at Krishnapatnam-1 (BHEL scope: SG package only)

• Further, commissioning of highest rating indigenously manufactured boiler in the country achieved at Krishnapatnam-2 (800 MW)

• Country's largest 1000 MW nuclear set commissioned at Kundankulam-1 (BHEL scope: E&C of TG)

• First of its kind in the country; HP1203 vertical bowl Mills with a capacity to supply coal at two elevations, erected and commissioned at Krishnapatnam (2x800 MW) (BHEL Scope: SG only)

Setting Benchmarks in Commissioning

• More than 10,000 MW Commissioned/ Synchronized - for 3rd year in succession

• BHEL joins elite club of select international companies, having installed more than 150 GW of power generating equipment cumulatively. Current installation by BHEL stands at a staggering 1,57,568 MW

• BHEL commissioned 736 MW in hydro segment - highest annual commissioning in the last 10 years. Incidentally, all hydro sets in the country which achieved capacity addition this year, were commissioned by BHEL (Parbati III - NHPC, Rampur - SJVNL and Koldam - NTPC)

• Capacity addition by BHEL during the first 3 years of 12th plan (till 31st March 2015) stands at 26,091 MW (63% of its total 12th plan target of 41,661 MW) which is more than the total commissioning of 25,385 M achieved in entire 11th Plan period (2007-12) by BHEL

• BHEL crossed 100 GW of domestic coal based utility installations in 2014-15. Current installation by BHEL stands at 1,02,000 MW towards country's coal based installed capacity

Performance of Equipment

Power Plants with BHEL supplied equipment continue to exhibit benchmark performance in respect of Plant Load Factor (PLF), Operating Availability (OA) and Outages.

• 178 BHEL supplied coal-based sets achieved PLF of over 70%. Out of these, 27 sets registered PLF of over 90% and 76 sets achieved PLF between 80% - 90%

• 181 BHEL coal based sets achieved OA higher  than 90%

•192 BHEL supplied coal-based sets clocked uninterrupted operation of more than 90 days during the year, out of which, 27 sets continuously operated for more than 200 days and 67 sets operated twice continuously for more than 90 days

• BHEL supplied Nuclear sets registered an OA of 92.3% and PLF of 83.7% in 2014-15

•12 nuclear sets clocked uninterrupted operation for more than 90 days

•Thermal Power Plants with BHEL supplied equipment recording -

PLF more than 90%:

Kakatiya, Raigarh, Talcher- NTPC, Dahanu, Budge Budge

PLF 80-90%:

Ramagundam, Sabarmati, Korba (NTPC), Amarkantak Ext-210, Bakreshwar, Neyveli MC-II, Simhadri, Korba East, Sipat, Mettur, CESC, Tuticorin, Singrauli, Unchahar, Kota, Korba (W), Vijaywada-500, Vijaywada, Tanda, Mejia-250, Rihand STG II

Customer Focus

• Capacity Addition of 100% of NTPC (4 sets/ 1,255 MW) and SJVNL (3 sets/206 MW) Projects during the year, was by BHEL.

• BHEL's share towards NTPC's total installed capacity is 72% (32,178/44,398 MW)

• All 6 Units of Rampur HEP (6x68.67 MW) of SJVNL were commissioned within a span of 9 months (March'14 to Dec'14)

• 3 Units of Amravati (5x270 MW) of M/s Rattan India Power Ltd. were commissioned within 42 days.

• Trial operation of three sets completed within a span of 5 months at JPL Raigarh (4x600 M ) -Units 1, 2 and 3.

Renovation & Modernisation

Renovation, Modernization & Uprating of following units led achievement of their full load after operating for more than 25 years of installation - a testimony to BHEL's product & service excellence.

In-situ Repairs

BHEL demonstrated its ability to carry out major repairs in-situ, thus was able to save time & cost of such repairs. Some of the repairs are:

•Trim balancing of Rotor system at Santaldih-5 & 6 of WBPDCL

•Replacement of LP inlet compensator bellow at Farakka STPS-5 of NTPC

•Refining/machining of HP/IP Rotor Fins at Budge Budge-3 of CESC

•Replacement of IP nozzle segment at Kolaghat-5 of BPDCL

•Rectification of furnace width of Boiler at Bokaro-4 of BSPGCL

• Rectification of facial run out of 'Exciter side end Shield' of Generator by machining at  Kolaghat-5 of BPDCL

• Modification/alteration of mill components by all cut machine at Muzaffarpur-2 Kanti of

KBUNL

Acknowledgement & Recognition of Excellence

Our valued customers have apbrciated efforts by BHEL towards achieving the work completion target ahead of schedule in challenging conditions, equipment performance and improvements in existing systems in the area of Erection/ Commissioning as well as SAS activities, in the form of apbrciation letters.  Some of the apbrciation letters received in various categories are-

National Awards for Meritorious Performance in Power Sector 2013-14

In June 2015, a number of power stations equipped with BHEL supplied sets, received meritorious award under 'National Awards for Meritorious Performance in Power Sector (2013-14)' by  Ministry of Power, Govt. of India for meritorious performance under different categories.

• 6 of 6 (100%) Power Plants awarded for early completion, were executed by BHEL.

Preparing for Growth

BHEL has successfully maintained its leadership in Indian Power Sector even in difficult times. The company has continuously re-calibrated its strategies for sustaining growth. Basic brmise for the strategy revolves around increasing contribution, portfolio expansion, and enhance competitiveness for creating more value propositions for customers.

BHEL has always aimed at maximizing value proposition to the customers. The company has augmented its manufacturing capacity to 20,000 MW per annum in order to cater to the Nation's requirements of accelerated capacity addition. BHEL has indigenous capabilities for various types/ ratings of power equipment, thus ensuring self reliance in power plant equipment manufacturing for the country. With the capability to manufacture Turbine-Generator, Boilers and critical auxiliaries up to the range of 1000 MW, BHEL is fully geared up for in-house manufacturing of majority of power equipment ensuring one stop optimal solution for complete power plant.

BHEL's rich and diverse experiences in Indian conditions have enabled the company to provide practical and optimal solutions to its customers. As a supplier of Boilers with world class performance over the years, BHEL symbolizes expertise in designing equipment suited for wide range of Fuel especially with High Ash Indian Coal, layout considerations for operations and maintenance, and efficient part load operations, etc.

In order to overcome the current uncertainty of coal supply, BHEL has in-house developed 'Fuel Flexible Boiler', which is capable of firing entire range from 100% Indian to 100% imported mix of coal.

BHEL has taken various initiatives to address the various challenges of the future. The existing systems & practices are being critically reviewed for improving effectiveness of operations. A number of Apex level documents/procedures are being revised/ streamlined to align with current needs and business environment. Many design improvements/ layout optimisation and improved parameters are being attempted.

Timely delivery, maintaining quality, reduced rejections/reworks, effective resource management & material utilization, enhancing EPC capabilities and creative approach towards challenges are the way forward for achieving success in project execution. Leveraging its expertise and experience in BTG segment, BHEL has strengthened its capabilities in BOP segment such as Transformers, Switchyard, Coal Handling, Ash Handling, Water Treatment, Civil orks etc. to offer to the market a combrhensive single stop solution. Further, BHEL is enlarging its scope of offer with inclusion of new products viz. Flue-Gas Desulfurization (FGD), ater Management System, Air Cooled Condenser & other BoP systems

in its power sector portfolio. Exploration of new business models with partnerships for Power Plant Developers for upcoming UMPPs and debt financing for new projects in partnership with Financial Institutions are also underway.

To further upgrade its technology, company is striving for development of Advanced Ultra Supercritical Technology, which is a pioneer project undertaken jointly by BHEL, NTPC, IGCAR and others. Company will also be introducing state-of-the-art CFBC technology suitable for wide range of fuels viz. pet-coke, Lignite & was hery-rejects etc.

In hydro power sector, BHEL has augmented its capabilities to manufacture up to 300 MW hydro sets. Developing efficient runner profiles and reducing hydro turbine weight have been instrumental in BHEL's recent successes in the field. To harness emerging opportunities for R&M in hydro power plants, necessary organization changes have been put in place. Further to harness emerging opportunities in nuclear power, company is working towards increasing its offerings in nuclear plant with focus on indigenization and entry into core-nuclear area. •

1.2.2 Industry Sector

BHEL is a leading manufacturer of a variety of Industrial Systems & Products. Industry business of the company aims at meeting the growing demand for a number of industries like Metallurgical, Mining, Cement, Paper, Fertilizers, Refineries & Petrochemicals, etc. besides Captive/ Industrial Utilities. Products and Systems supplied by BHEL include Captive Power Plants, Solar PV plants, Centrifugal Combrssors, Oil Rigs, Drive Turbines, Industrial Boilers & Auxiliaries, aste Heat Recovery Boilers, Gas Turbines, Pumps, Heat Exchangers, Valves, Heavy Castings and Forgings, Electrostatics Precipitators, ID/FD Fans, Seamless Steel Tubes, Air Separation Units, Cryogenic Systems, Locomotives, Traction Machines, Electrical Machines, Transformers, Switchgears, ater Treatment Plants, Strategic Equipment for Defence, etc.

During the year, BHEL's Industry Sector secured orders (including inter sectoral orders) worth Rs. 6,201 Crore registering a growth of 13% over the year 2013-14 for variety of products.

1,373 MW of captive power projects and 20 MW of solar PV projects were synchronized during the year.

1.2.2.1 Transportation

Business Environment & Opportunities

Government of India through its Rail Budget for 2015-16, has envisaged and investment plan of Rs. 8,56,020 Crores during the years 2015-19 to transform and modernise Railway infrastructure and passenger amenities. Major investments have been planned for rolling stock acquisitions, safety, track expansion & electrification and high speed travel. To mobilise resources, Railways has put renewed focus on execution of projects through public private partnership for setting up new production units for Diesel Electric Locomotives at Marhowrah and Electric Locomotives at Madhepura. Due to growing urbanization, Mass Rapid Transit System (MRTS) for intra-city commutation is emerging as a key focus area for various state governments.

'Make in India' initiative along with allowance of 100% FDI in Railway projects is expected to open new stream of opportunities for Indian companies in association with Global Technology Partners and  OEMs.

Offerings

BHEL provides electrical propulsion system and its controls to Indian Railways. Today, BHEL supplied & installed IGBT propulsion equipment (Traction Converter/ Auxiliary Converter/VCU) account for more than 40% of IGBT based electric locomotives in operation by Indian Railways. BHEL has also developed IGBT propulsion equipment for Air Conditioned AC EMUs for Mumbai sub-urban region. In diesel segment, BHEL has established itself as a supplier of alternators and traction motors for 3-phase DE locomotives. Development of IGBT propulsion for DEMU and DE locos has also been taken-up. Our key offerings include

• Rolling Stock

° Electric locomotives up to 5000 HP

° Diesel-Electric shunting locomotives for industry and power plants

° Special purpose Vehicles like OHE recording-cum-test car & dynamic track stabilizers

• Traction Machines

° Traction motors - Both AC & DC motors for Locos & Electrical Multiple Units

° Traction alternators - for Locos & Electrical Multiple Units

• Traction Drive System & Controls

° GTO/IGBT based Traction Power Convertor Systems for AC Locos & Electrical Multiple  Units

° Control gear equipment for AC Locomotives, EMUs, DEMU, DETC

• Traction Transformer

° Transformers - single phase & three phase for Electric Locos & EMUs

Achievements during the Year Order Receipts

• Largest value order received from Chittaranjan Locomotive Works (CLW) for 64 sets of IGBT based Traction Converters 150 Crores).

• Largest quantity order received from Railways for 99 sets 5400 kVA Traction Transformers & 300 nos. AC Traction Motors type IM4507 for 4500 HP DE locos.

Other achievements:

• Manufactured, tested and supplied 3-Phase IGBT based AC EMU propulsion equipment for India's first air conditioned AC EMU announced by Indian Railways. Main Transformer Type 1578 kVA with Air Conditioning winding of 300 kVA and 3-Phase Traction Motor Type IM3601 AZ of 285 kW rating have been developed for this project.

• Received regular supplier status for Traction Alternator type TA9901 for 4500 HP DE locos

• BHEL has developed & type tested 2x500 kVA Hotel Load Converter for 6000 HP loco. The prototype unit has been supplied to CL for installation in the locomotive.

Designed & manufactured 7775 kVA Transformer  with Hotel Load winding for 6000 HP/ AP-7 &  AP-5 Electric Loco. This transformer has been developed at BHEL Jhansi and would replace 7475 kVA transformer in future.

Preparing for Growth

Collaborative and Indigenous development - Joint development of IGBT drives for 6000 HP AC locos and AC EMUs has been carried out in association with M/s Strukton, Netherlands to meet requirements of Indian Railways. Joint development is complemented with indigenous development of traction motors, alternators and traction transformers. As a result, development of 3-phase DE locos/ AC EMUs has been completed and has been successfully put in service. Further, indigenous development of IGBT based propulsion equipment for DE locomotives and DEMU is being carried out.

Capacity Planning - To cater to the upcoming demand of locomotives emerging from Dedicated Freight Corridors, manufacturing facilities for 4,500 HP & 6,000 HP Diesel Electric locomotives at Marhowrah and 12,000 HP electric locomotives at Madhepura are being planned under Public Private Partnership mode. BHEL is joining hands with global OEMs in these projects.

BHEL is also readying itself for manufacture and supply of IGBT based WAG-9 locomotives from Jhansi works in view of expected requirement from Indian Railways.

1.2.2.2 Transmission

Business Environment & Opportunities

During 12th five year plan, an addition of 2,70,000 MVA substation capacity and 12,750 MW HVDC capacity has been planned with an investment of around Rs. 1.8 Lac Crore. Out of this 87,201 MVA substation capacity and 9,000 MW HVDC capacity is to be achieved during the balance period of 12th plan.

In a drive to strengthen transmission network in the country, plans for various large size projects and schemes are in place like 11 Nos. High capacity Power Transmission Corridor (HCPTC), 9 new UHCTC projects are proposed up to the year 2030 for catering to 199 GW Renewable Energy power generation, Desert Plan 2050 for evacuating 270 GW RE Power from Four desert areas, etc.

Offerings

BHEL has significant brsence in the field of power transmission in India with a wide range of transmission systems and products in its portfolio. The products manufactured by BHEL include Power Transformers, Instrument Transformers, Dry Type Transformers, Shunt Reactors, Vacuum and SF6 Switchgear, Gas Insulated Switchgear, Ceramic and Composite Insulators, etc. Other critical equipment such as Capacitor Banks, Control & Protection equipment and Thyristor Valves are also in its manufacturing range.

BHEL has indigenously developed and commercialized Gas Insulated Switchgear (GIS) up to 400 kV and Transformers and Shunt Reactors up to 765 kV. The company has also developed & supplied 1200 kV CVT and 1200 kV transformers for the first 1200 kV test station in the country. BHEL has additionally developed & tested 420 kN disc insulators for 1200 kV transmission lines and now has a range of disc insulators for EHV and UHV AC/ DC applications up to 1200 kV AC and +/- 800 kV DC, solid core insulators up to 400 kV and hollow porcelain insulators up to 765 kV AC.

BHEL has indigenously developed & executed schemes using FACTS devices like Fixed Series Compensation for 400 kV lines and Controlled Shunt Reactor (CSR) for dynamic reactive power management of long 400 kV transmission lines. For controlling power flow in 400 kV networks, BHEL has indigenously developed Phase Shifting Transformer. ith its strong engineering base, the company offers complete EPC solutions for EHV & UHV Substations/Switchyard (AIS & GIS type ranging from 132 kV to 765 kV); HVDC multi-terminal converter stations up to +/-800 kV; and Flexible AC Transmission Systems (FACTS) solutions to its customers.

Achievements during the Year

Order Receipts

• Secured order from POWERGRID for 765/ 400 kV substation at Agra on turnkey basis against competitive bidding. The scope of works include construction of 765/400 kV green field substation at Agra. This order will further strengthen BHEL's brsence in the EPC segment of 765 kV UHV substations

• Secured order from PGCIL for supply of 9 nos. 400 kV 125 MVAR shunt reactors along with extension of 7 nos. 400 kV substation bays at various locations under the Eastern Region  grid

• Booked orders for Power Transformers totalling more than 14500 MVA which comprises of following major orders:

° Order from UPRVUNL Anpara for  4x200 MVA and 1x250 MVA, 400 kV  Generator Transformers

° Order from TANGEDCO for 2x250 MVA 220 kV Generator Transformers

° Order from RRVPNL for 22x160 MVA, 220 kV Auto Transformers

° Orders from OPTCL for 6x160 MVA 220 kV Auto Transformers, 6x40 MVA, 220 kV Power Transformers and 14x40 MVA, 132 kV Power Transformers

° Order from WBSETCL for 9x160 MVA and 22x50 MVA, 132 kV Power Transformers

° Order from GETCO for 7x100 MVA, 220 kV Power Transformers and 1x315 MVA, 400 kV Auto Transformers

° Order from PSTCL for 3x160 MVA and 3x100 MVA, 220 kV Power Transformers

• Order from PGCIL for 400 kV Shunt Reactors

Other Achievements

• Apbrciation received from PGCIL for execution of 765/400kV Raichur substation six months ahead of contractual schedule

• During the year BHEL successfully type tested and supplied various ratings of 765 kV transformers & reactors, which include:

° 275 MVA single phase Generator

Transformers for 660 M unit of Lalitpur Power Project

° 105 MVA single phase Inter-Connecting Transformers for evacuation of power from Lalitpur Power Project

° 80 MVAr single phase Reactor for  PO ERGRID substation at ardha  BHEL is executing world's largest ±800 kV,  6,000M Multi-terminalHVDCNE-Agra  project. The construction of Valve Hall building at Agra, which is the largest size built so far in India, is complete. The DC Hall, a Pre-Engineered building having clear span of 77m and height of 40m is also erected. This is yet another engineering landmark by BHEL in the field of HVDC Engineering Kothagudem TPS, Telangana. PST improves transmission efficiency, and is an outstanding smart grid solution

•BHEL has indigenously developed and successfully type tested 400 kV GIS

• BHEL has successfully tested 26 kA IPBDs for  NTPC 800 M Kudgi Project at CPRI (Highest  rated current carrying capacity)

Preparing for Growth

• UHVAC & UHVDC Systems: BHEL has augmented its manufacturing facilities for manufacturing UHVDC equipment (i.e. Converter Transformer, Thyristor Valves, Filter Capacitors etc.) and has supplied major UHV equipment like 765 kV Transformer, 765 kV Reactor. BHEL is focussing on future market requirements in UHVAC and UHVDC segments

• Gas Insulated Switchgear (GIS):

BHEL has successfully completed the development of 400 kV GIS and has secured the first commercial order for 400 kV GIS which is under execution. BHEL is now ready to address forthcoming GIS requirements

• FACTS Solutions:

BHEL has developed, supplied & commissioned Phase Shifting Transformer at APGENCO's Kothagudem TPS. BHEL has also developed and supplied 400 kV Control Shunt Reactor, Fixed series compensation schemes for transmission utilities & STATCOMs for Industry applications and is ready to address forthcoming requirements for power quality improvement solutions

.2.2.3 Renewable Energy

Business Environment & Opportunities

The JNNSM target, has been raised five-fold to 1,00,000 M by 2022. This envisages capacity addition of 60 G through large scale deployment of grid connected Utility Scale projects and 40 G through Rooftop Projects.

The cumulative PV installations in the country have grown from 38 MW in 2010 to over 3,700 MW by end of FY15. Power generated from solar energy is gradually moving towards grid parity as a result of softening of input costs and competition. Policy initiatives such as mandatory Renewable Purchase Obligation (RPO) and grant of priority sector lending status by RBI will drive demand and investment in the sector.

Offerings

• BHEL offers EPC solutions from concept to commissioning for grid connected and standalone PV applications ranging from k to M size plants which include supply of PV modules and Balance of System (BOS),  Civil, E&C and O&M. Additionally, BHEL  manufactures space grade solar panel and space grade batteries in association with ISRO. All Indian satellites launched by ISRO are equipped with BHEL manufactured solar panels since 2002 and batteries since 2005

• BHEL is also geared up for offering Power Block on EPC basis for Concentrated Solar Thermal Power projects

Achievements during the year

Order Receipt

• Highest ever rating order for 20 M p Solar PV Plant from GEDCOL, Orissa

• Order for 10 MWp Solar PV Power Plant from KPCL, Karnataka

• Order for 10 MWp Solar PV Power Plant from NLC, Tamil Nadu

Project(s) Commissioned

• 15 MW SPV Plant for NTPC Singrauli has been commissioned in Dec'14

• 5 MW SPV plant for NEEPCO Monarchak has been commissioned in Feb'15

Preparing for Growth

BHEL is planning to ramp up PV cell & module production capacity and enhance EPC capabilities to address the domestic market demand

1.2.2.4 Water

Business Environment & Opportunities

On account of increasing water scarcity, Industries have started to opt for desalination & water recycling to meet their increasing water requirements. Policy related developments like enforcement of water discharge regulation and increase in industrial water tariff will result in stimulating the demand for water recycle and effluent treatment plants. Various government initiatives like cleaning of rivers, setting up of smart cities and developing industrial corridors will positively impact the water management business.  ater segment is an extremely competitive industry. Many new players are making their foray, conventional technology is brferred by the customers, however, market is tending towards membrane based technology owing to its advantages like less footprint area, low chemical consumption and reduced O&M requirements. EPC is a brferred project model for ater System in Power Plants. Industries brfer setting up independent water package with O&M requirement while municipalities go for projects through BOO / BOOT mostly with conventional technologies.

Offerings

Complete ater Treatment Solutions for power plants, industries and other utilities for all feed water characteristics

• Sea Water Reverse Osmosis (SWRO) plants and Demineralization (DM) Plants

• Treatment plants for Water/ Waste Water, Effluent & Sewage

• Zero Liquid Discharge (ZLD)

Achievements during the year Order Receipt

• Order for 13.5 MLD SWRO & 2.6 MLD DM plant for TANGEDCO Ennore TPP (2X660 MW)

• Order for 0.41 MLD RO-DM plant for KPCL  Yelahanka CCPP (370 M )

Project Commissioned

• 1000 cum/hr. treated water facility phase-1 commissioned at OPAL Dahej Raw ater Treatment Plant in Jan'15

Preparing for Growth

BHEL has identified water segment as a potential business area and is gearing itself to address water segment business combrhensively for Power & Industries. ith a view to enhance its brsence in the segment BHEL has already entered into a long term Manufacturing Associate Agreement (MAA) with GE India Industrial Pvt. Ltd. for membrane based technology. BHEL is also exploring the possibility of in-house development of identified critical equipment.

1.2.2.5 Defence

Business Environment & Opportunities

Through the "Make in India" initiative, government aims at promoting self-reliance, indigenization, technology up gradation and achieving economies of scale and developing capabilities for exports in the defence sector. As a step towards promoting Indian Defence Manufacturing, GOI has increased the Foreign Direct Investment (FDI) limit from 26% to 49%.

GOI is promoting the procurement of defence equipment through indigenous sources and has targeted to increase the indigenous procurement to 70% from current level of 30% over the next decade. The brsent business environment can be summarised as below:

1. Competitive bidding process initiated and MOD moving away from nomination route.

2. Private sector has started participating aggressively in defence business by entering into strategic partnerships with global defence OEMs.

Offerings

BHEL has emerged as a reliable supplier of strategic equipment and services to Indian Defence and Para-military forces for over 20 years. BHEL, in order to meet Indian Defence requirements, has set up a large infrastructure which includes dedicated engineering & manufacturing facilities at various locations. Major products being manufactured by BHEL include Super Rapid Gun Mount, Integrated Platform Management System for Naval ships, Thermo-brssed components, Turret castings for T72 tanks and other strategic equipment.

Achievements during the year Order Receipt

• Highest value order of spares for 76/62 Super Rapid Gun Mount

• Order for forgings secured from M/s Midhani for the first time

• Order for Permanent Magnet (PM) based Motors received from Ministry of Defence

Other Achievements

• 76/62 Super Rapid Gun Mount (SRGM) and Auxiliary Control System (ACS) successfully commissioned on-board INS D-63, Kolkata

Super Rapid Gun Mount (SRGM) mounted atop naval ship

Preparing for Growth

To cater to the upcoming opportunities in defence sector, long term tie-up with OEMs is being sought for Buy and Make India requirements. Further, BHEL is looking for joint working arrangement with DRDO and defence PSUs for joint development of products/ systems and business co-operation. MoU signed among BHEL, HSL & MIDHANI to address business opportunity of 06 nos. Submarines under P75 I programme of Indian Navy.

1.2.2.6 Captive Power Plants

Business Environment & Opportunities

CPP business which saw demand shrinkage in last few years is expected to witness increase in market demand with revival of industrial growth in India. New Urea policy with the objective to maximise indigenous urea production and promote energy efficiency in Urea units is providing business opportunities for CPP. Initiative by GOI for "Make in India" will also result in growth in domestic manufacturing of capital goods. Cogeneration and waste heat recovery are emerging as options for CPP as companies get the Clean Development Mechanism (CDM) benefits under this system in addition to achieving higher energy efficiency. The government has also targeted doubling of domestic coal production from current levels. Coal block auctioning has also removed the deadlock in the captive business with hopes of revival expected in this segment soon.

Offerings

• Steam turbine based captive power plants up to 200 M using coal, lignite, oil, natural gas or a combination of these fuels

• Gas turbine based captive power plants (co-generation and combined-cycle), frame size up to 126 MW

Achievements during the year

Milestones achieved in design and performance of equipment

• Improvised design resulting in improvement in Heat Rate for 2% in 120-200 MW double cylinder steam turbines

• Design of 100% Blast Furnace Gas (BFG) fired boilers without oil support

Order Receipt

• 51 MW Combined Cycle Power Plant (CCPP) from ONGC Hazira

• 22.5 MW Gas Turbine based Cogen Plant from CPCL Manali

• 1x150 TPH Utility boiler (Gas & Oil fired) from CPCL Manali

• 2x36 MW Steam Turbine package from Sarda Energy & Minerals Ltd.

• 1x50 M Steam Turbine package from Spectrum Coal & Power

• 1x30 MW Steam Turbine package, Emami Cement

Projects Commissioned

1,373 MW of captive power projects were synchronized during 2014-15.

List of Major Projects Synchronised:

• Anrak Aluminium Limited (Thyssen Krupp) Unit-3 (74.6 MW)

• Hindalco Industries Ltd. - Aditya Aluminium  Unit-3 & 4 (300 M )

• Hindalco Industries Ltd. - Mahan Aluminium Unit-4 (150 MW)

• ONGC Petro additions Ltd. GTG-1, 2 & 3 (101.25 MW)

• OPGS Kutch Gujarat Unit-1 (150 MW)

• IOCL, Paradeep Refinery GTG-1 & 2, STG-1 (232 MW)

Preparing for Growth

To maintain and enhance its brsence in captive power segment, BHEL has taken initiatives for improving the performance parameters of existing products. Thermal cycle optimisation and development of new competitive products (i.e.  150 M Single Cylinder Steam Turbine, 200 M  Two Cylinder Steam Turbine, ing walled & Cold Cyclone CFBC Boilers, etc.). Further, new business opportunities in Municipal Solid aste & ashery rejects based power plants, petcoke fired CFBC boilers, etc. are also being explored.

1.2.2.7 Industrial Products (including Oil & Gas)

Business Environment & Opportunities

In the year 2014, India's Oil Production stood at 895,000 bpd against consumption of 3.8 million bpd. To bridge this gap between demand and supply, country imported about 78% of crude oil and about 33% of Natural Gas. To reduce the quantum of huge imports, it is imperative to accelerate the exploration & production activities and realise our full potential with the appraisal of 100% of the Indian Sedimentary area from current level of 48.04% in line with India Hydrocarbon vision 2025. GOI has also adopted a multipronged strategy for providing momentum to exploration and production efforts in the country. Government is focussing on development of alternate sources of Hydrocarbon like Coal Bed Methane & Shale Gas and R&D for new sources like Gas Hydrates which are positive enablers for BHEL.

The Indian refinery Industry has established itself as a major player globally with current refining capacity of 215 MMTPA which exceeds the domestic demand. India is emerging as a refinery hub for exports. India is the largest exporter of Petroleum products in Asia since 2009. Also, upgradation of refineries to Euro-V and higher grades are expected in near future.

Combrhensive New Urea Policy 2015 for the next four financial years has the objective of maximizing indigenous urea production, thus creating good opportunities for domestic manufacturers of equipment for Fertilizer Industry. Therefore, Oil & Gas and Fertilizer industry in India hold promising growth opportunities for various value chain partners.

In Oil & Gas Upstream Sector, there is a declining trend of crude oil prices, hence subdued market position. Though there is some initial backlash in procurement of capital equipment i.e. Drilling Rigs but acquisition of new rigs is essential in view of thrust on increasing the domestic crude oil production and ageing of rig fleet of ONGC and OIL.

Also, the idea of upgrading the existing rigs to ultra­modern technology equipment has been mooted by BHEL so that the advantages of latest generation AC VFD rigs is available to customer with minimum investment.

'Make in India' initiative of Gol is likely to accrue business potential for Off shore Combrssors, Drilling Equipment and Natural gas Pipeline combrssors in oil and gas sector.

In Oil & Gas Downstream Sector, the upgradation of refineries to Euro-V norms is likely to yield business potential for combrssors, Columns & Reactors, Pressure Vessels & Heat Exchangers.

In fertilizer sector, brsent production level of Urea is 23 MTPA against demand of 31 MTPA. GoI has planned to cover up the gap by recently approving the various revival projects of Fertilizer Units viz. FCI Sindri, Ramagundam, Talcher, Gorakhpur & HFCL Barauni, and have also approved setting up of new Amonia-Urea complex at Namrup. GoI's above measures will result in new business opportunities for BHEL combrssors with suitable drives and H2 & N2 separation units.

The HT motor business of the company saw limited opportunities due to continued slowdown in its traditional markets of Power, Refineries and Cement. However demand is expected to pick up by Q3 of FY16, on the back of overall economic recovery. Potential has also been seen in the irrigation sector where there is a growing requirement for HT machines.

Offerings

• Oil Rigs - A variety of on-shore drilling rigs with AC-SCR and AC-VFD technology for drilling up to depths of 9,000 metres, work-over rigs for servicing up to depths of 6,100 metres, mobile rigs for drilling up to depths of 3,000 metres. Beside complete rig package, BHEL also supplies on-shore drilling rig equipment like draw works, rotary table, travelling block, swivel, mast & substructure, mud systems, Refurbishment and up gradation of BHEL and non-BHEL make oil rigs and rig electrics to leading oil and natural gas exploration companies of India

• Well Heads and X-mas Trees - Up to 10,000 psi, Mud Line Suspension, Choke and Kill manifold,  CBM ell heads, DSPM H-Manifold Assembly,  Mud valves, ESP hangers, Block type X-mas Trees & Landing Bases for Casing Heads

• Combrssors - Manufacturing and service of various types of multi stage Centrifugal combrssors as per API 617, flow up to 3,00,000 m3/hr & brssure up to 350 bar for application in Fertilizers, Refineries, Petro­chemicals, Pipelines, Gas processing, Steel industries, etc. BHEL has the capability to produce Centrifugal Combrssors to handle all types of process gases.

• Mechanical Packages - These include fabricated equipment like Air separation Units, Cryogenic systems, Column and Reactors, Pressure Vessels, Heat Exchangers, Fired Heaters and Purge Gas Recovery Unit.

• Electrical Machines - These include AC Squirrel cage, Slip Ring, Synchronous Motor (for safe and hazardous area application), Variable speed motors, Industrial Alternators, Special-purpose machines.

Achievements during the year

Order Receipt

• First ever order received for Centrifugal Turbo Blower Package for Blast Furnace application in Steel Plants from M/s Essar Projects India Ltd for SAIL Rourkela

• 1 No. Motor driven Booster Combrssor from M/s BPCL Kochi.

• Prestigious order for Purge Gas recovery unit received from M/s NFL Vijaipur.

• Entered into rate contract with M/s ONGC for a period of 2 years for supply of 125 Nos. Alternators.

• Entered into rate contract with M/s ONGC for a period of 3 years for supply of 850 Nos. Well Heads & 550 Nos. Xmas Trees to various assets of ONGC.

• 5 nos. 15-30 MW Synchronous motors along with Static Frequency Converter from WPIL Ltd. for Pranahita Chevella Lift Irrigation Scheme (LIS).

• 12 nos. 4.7 MW Synchronous motors along with static excitation system and spares from Megha Engineering Infrastructure Ltd for  Pattisam LIS.

Preparing for Growth

BHEL is focussing on enhancing brsence in irrigation sector which has growing requirement for motors for Lift Irrigation schemes. BHEL is also exploring new market segment in offshore drilling rig equipment. •

I.2.3 International Operations Macro opportunities

By the latest estimate of the International Monetary Fund (IMF) world, GDP growth was measured at 3.3 percent for 2014 and is likely to grow by between 2.8 and 3.8 percent in 2015-16 - about one percentage point lower than last year's forecasts. World Power Generation Scenario estimates that electricity demand will grow by 2.1% per year on average over a period of next 15 years. This would translate into increase of the brsent installed capacity from about 6000 GW to 10,700 GW by 2040. However, global power mix sees a significant transformation with renewable energy (including hydro) share to become almost half and more than that of coal & gas combined. Power systems remain one of the most important element of energy supply which underpins economic growth and prosperity of a region. Though in developed economies, demand growth is expected to be slow, Industrialization, rising incomes & expanding population are pushing rapid demand growth in emerging economies.

On the other hand, increasing geopolitical instability may become a leading risk for global growth. Also, fluctuating oil prices weigh heavily on growth prospects as well as investment sentiments. The Eurozone crisis is still continuing resulting in slow investments worldwide. Power sector structural reforms across emerging countries remain major concern.

The world is moving towards a better consensus on global warming issue and there is a renewed thrust on higher efficiency and clean coal technologies in the fossil fuel segment. Consequently, nearly one-third of the investments in energy supply is in construction of new power plants.

Current Business Environment

Global economy in the year 2014-15 remained sluggish not gaining expected pace due to various factors. Some of the factors not helping growth of infrastructure sector i.e. turmoil in parts of the Middle East, conflict between Russia and Ukraine and Greece debt crisis etc. Global energy trends not being so optimistic; challenges over the security and sustainability of energy supply are expected to still persist. This would have a major impact on our immediate business prospects.

Despite the uncertain current economic environment, focused efforts have helped BHEL in consistently enhancing its global footprints. Major generation capacity addition is planned in emerging economies to sustain high growth. South East Asia, Middle East, CIS countries and Africa are emerging as markets for BHEL. However, funding remains a challenge apart from political instability in some of these target regions. ASEAN is one of the fastest growing regions today and after China & India, Indonesia, Vietnam, Thailand and Malaysia are going to add huge amount of generation capacity in the near future. In Africa around 600 million people are without electricity and huge potential for capacity addition exists though funding remains an issue. The CIS countries (erstwhile USSR) have increasing demands for renovation and modernization of ageing power plants along with exploring the untapped hydro potential. BHEL has a strong brsence in neighboring countries and it would always remain a target market providing significant opportunities for thermal & hydro sectors. With the thrust on renewables, BHEL is also gearing up to address the potential in this field, especially solar, worldwide.

Our experience in exports

BHEL has been the flag bearer of Indian engineering enterprises across the globe for over four decades. Continuing its focus on globalization, BHEL has achieved consistent growth in its exports. Our references encompass almost the entire range of

BHEL's products and services, covering thermal, hydro and gas-based turnkey power projects, substation projects, rehabilitation projects, besides a wide variety of products like Transformers, Combrssors, Motors, Valves and Oil field equipment, Electrostatic Precipitators, Photovoltaic equipment, Insulators, Heat Exchangers, Switchgears, Castings and Forgings, etc.

The cumulative capacity of power plants with BHEL supplied equipment stands at close to 10 G in overseas market. The first large turnkey project export by an Indian company was done by BHEL in Libya (1977) and since the past few decades, BHEL has been expanding its operations in the field of exports. Currently, we have established references in 77 countries across the globe with major contributions in the power sector of various countries. iththegrowingimpetusonthe renewables sector worldwide, BHEL has reinforced its brsence in this segment with recent orders from Turkey and Nigeria.

Achievements during the year

Order Receipts:

During the year, BHEL secured the following brstigious orders:

Comoros - Entry into new country

Secured order for 18 MW HFO based Diesel Thermal Power Plant from Comoros Islands (First ever order for Diesel based power project from Africa).

Turkey - New product in existing market - Hydro

Secured first ever order from M/s EUA§, Turkey for rehabilitation of 8x183 MW Keban Hydropower project (first ever order from hydropower segment in Middle East).

Nigeria - Largest order for Solar Products

Largest order for solar products from the Kaduna State Government, Nigeria was secured for supply of 50 kVA Solar Power Mini Grid and Substation to Nigeria; which is also the first ever order for solar products from Africa.

Italy, Algeria & Trinidad & Tobago - New product in existing market

Maiden order for motors was secured from Italy. Also, secured maiden order for the supply of Transformer bushings to Algeria and to Trinidad & Tobago.

Belarus - Largest order for Capital Spares from CIS Region

Secured BHEL's largest order for export of Capital Spares from Belarus (largest in CIS).

Myanmar - Regaining customer confidence

After a gap of several years, BHEL secured orders for supply of well-heads and x-mas trees for MOGE (Myanma Oil and Gas Enterprises).

Repeat orders

Kenya - Motors

Mombasa Cement Ltd., Kenya has once again chosen BHEL with repeat orders for Motors for the 4th consecutive year.

USA - Control Equipment

Metso Automation, USA has placed a repeat order for supply of Control Equipment on BHEL for the 4th consecutive year.

After sales service

Orders have been received from across the globe for spares & after sales services, including Bangladesh ,Bhutan, Indonesia ,Iraq, Ireland, Kazakhstan, New Caledonia, New Zealand, Oman, Sri Lanka, Tanzania, UAE and Zambia.

Overseas Project Execution:

A major milestone of the year was the commissioning of power plants in Ethiopia, Oman, Rwanda and Sudan totaling to 319 M . Major projects executed during the year are:

• Rwanda - 28 MW Nyabarongo Hydro-Electric Power Project

• Sudan - 3rd unit of 125 MW Kosti Thermal Power Project

• Ethiopia - 2x20 MW Tendaho Sugar Factory power plant

• Oman - 126 MW Qarn Alam-3 Power Project

Accolades:

• BHEL successfully commissioned 2x14 MW Nyabarongo Hydro Electric Project, Rwanda. The plant was formally inaugurated by H.E. the President of Republic of Rwanda. This being biggest Hydro Electric Project in Rwanda enhanced the power capacity of the country by 21%. Both the units achieved higher performance than the guaranteed parameters

• For 24th consecutive year in succession, BHEL has been conferred the 44th EEPC India Regional Award for the 'Top Exporter for the year 2011-12, Gold Trophy (Large Enterprise)'

Preparing for Growth

Exports remain a focus area for BHEL as geo­graphical diversification is one of the key strategies of the company and thus, adequate thrust is being given to enhancing International Business. Towards this objective, detailed action plan is in place to achieve growth in overseas business with identification of the target markets. This has been instrumental in expanding successfully the brsence of BHEL in overseas markets, year by year.

The company has been successful in meeting the requirements of international markets in terms of complexity of work as well as technology, quality and other requirements. BHEL also possesses the requisite flexibility to interface and complement other international companies for large projects, and has exhibited adaptability by manufacturing and supplying intermediate products. The company has initiated several measures to fuel further growth to achieve its Strategic Plan objective of multi-fold increase in  overseas business. Major initiatives include:

• Identification and perusal of opportunities for strengthening its manufacturing and equipment servicing through formation of Joint ventures with local market players

• Targeting new opportunities by means of localisation in target countries as well as looking into mergers and acquisitions to enhance markets

• Forging opportunity-specific and market-specific alliances to attempt large projects and strengthen BHEL's role as an EPC Contractor in the International market

• Exploring and Leveraging financing options along with its proposals and offer a combrhensive solution to its customers. Efforts are being made to attain project financing vide Line of Credit through Govt. of India, project recourse financing, NEIA scheme, etc. •

.6 Human Resource Management 1.6.1 Industrial Relations

• The Industrial Relations scenario in the various Manufacturing Units and the Business Sector/ Offices of the Company remained harmonious and peaceful during the year 2014-15. No man days were lost during the year

• The thrust on participative culture and communication continued during the year. Three meetings of the apex level bipartite forum, namely "The Joint Committee for BHEL' were held during the year. There were 72 meetings of the Plant Councils and 485 meetings of the Shop Councils. In addition, meetings were also held with the rebrsentatives of Executives and Supervisors of the various Manufacturing Units including the Business Sector/Offices

• The focus of discussions in the various Fora centered don improvement of the overall performance of the Company. The main thrust was on the issues related to increasing the productivity of the employees, cost reduction, quality and sequential delivery in order to meet the customer commitments

• A two day Workshop for Rebrsentatives of Supervisors was also organized to apprise the Supervisory Association Members about the challenges being faced by the Company as also the role of the Supervisors to overcome

these challenges. The Workshop focused on evolving strategies to meet the challenges and customer commitment. The response from the Members has been overwhelming. The suggestions made during this orkshop by the Syndicate groups was sent to all the Units/ Divisions for sharing at the grass root level as well as for implementation

The employees of the company showed solidarity with their fellow citizens distressed by natural calamities which struck different parts of the country during the year by contributing the amount as mentioned below:-

a) "Devastating Floods" in - Rs. 6.09 Crores Jammu & Kashmir State

1.6.2 Human Resource Development

Human Resource Development Institute (HRDI)

The Human Resource Development Institute (HRDI) situated in NOIDA is the cornerstone of BHEL's learning infrastructure along with Advanced Technical Training Education Centre at Hyderabad and Human Resources Development Centre (HRDCs) at different units. Just as every function in the organization plays its role to contribute its best to the organizational goals, HRDI responds by keeping people in a state of "Readiness" to meet with the Business challenges.

Following seven coreareas for improvement have been identified based on the stake-holder's expectation study using surveys and focused group discussion tools in 2014-15. Road map for these areas are being developed with continuous support from cross functional teams across organization.

1. Enhancing focus on Technical Programs

2. Introduction of E-learning

3. Program Evaluation and Post Training Effectiveness

4. Training Need Identification and Nomination Process

5. Induction Training for all levels

6. Content, Methodology and Duration of Core Programs

7. Infrastructure Development of HRDI and  HRDCs

To make full use of current technologies available in the field of learning and development, the organization has made a maiden entry in the field of e-learning by launching two initiatives on leadership and project management. The company has tied up with Harvard business publishing for its brmier e-learning module on leadership titled Harvard Manage Mentor for its 1000 executives (E3-E5) who are undergoing the course. An in-house module on Project Management has been developed by Trichy in collaboration with Project Management Group for E1 & E2 across the organization. 900 executives have successfully completed the module.

An apex committee was formed consisting of GMs to identify technical training needs of the organization in line with the strategic plan, MoU and business needs. Based on the recommendation of the committee new areas in the field of technical training were identified and three programs viz. Solar Energy Technologies, W/s on Transportation System Technology and Multidisciplinary Simulation for Power plant components were conducted at HRDI, Noida. To lay consistent focus on technical training, a separate technical cell has been formed at major HRDCs and HRDI and continuous efforts have been made to strengthen these cells with the required manpower and adequate resources.

To align the core programs with the business objective of the organization the structure of the programs (content, methodology, duration and eligibility) have been reviewed. Based on the need of the hour some new programs like resilient leadership and winning together have also been designed, implemented and successfully included as a part of the core programs.

1.6.3 Manpower strength

The manpower strength of the Company as on 31.03.2015 was 44905.

1.6.4 Performance and career development

BHEL has identified People Development as the key area through Technical/ Functional and Behavioural Competency assessment to brpare and align young employees to face Company's Challenges. To enhance performance, develop potential and to encourage healthy competition BHEL is taking new initiatives like Young Executive of the quarter and High Potential Employees Scheme.

A strong need was being felt in the organisation for identification & grooming of individuals with high potential in a systematic and time bound manner. To meet the career development aspirations of Individuals and also to build a pipeline of potential candidates to feed into the Succession Planning process a scheme for High Potential employees was conceptualized and brpared at New Initiative Cell of Corporate Office.

A scheme has been designed and is being implemented during 2015-16.

Disclosure under section 134 (3)(p) of the Companies Act.

As per Section 134 (3)(p) of the Companies Act, 2013, the Board's Report of a Listed Company shall include a statement indicating the manner of formal annual evaluation of Board, individual directors etc. The MoU signed between the company and the Govt. of India details out the parameters and initiatives that the company is required to undertake during that financial year. This MoU is evaluated at the end of the year by the Govt. and a performance rating is assigned to BHEL based on its performance on the spelt out parameters. The terms of reference of Board Level Committees are approved by the Board. The minutes of Board Level Committees are placed before the Board for its perusal. Further, there is a well laid down procedure for evaluation of CMD and Functional Director's performance. Department of Public Enterprises (DPE) has designed a format and laid down a procedure for filling up and evaluation of the Director's performance. As soon as the concerned Director does self assessment, his evaluation is done next by CMD, then by Secretary, Heavy Industries and closed by the Minister-in-charge. The tenure of Functional Directors as spelt out in their Terms and Conditions of Appointment is five years or the date of their superannuation, whichever is earlier.

As per Schedule IV of the Companies Act, 2013, on the basis of performance evaluation of Independent Directors, it shall be determined whether to extend or continue their term of appointment. Since the appointment of the Independent Directors is decided by the Govt. of India and as the tenure of Independent Directors is normally for a period of three years, also as decided by the Govt. of India, the Board is not in a position to decide their continuance or otherwise on the basis of performance evaluation. Recently, MCA has vide its notification dated 5th June, 2015 notified the HYPERLINK "<http://www.mca.gov.in/Ministry/> pdf/Exemptions_to_govt_companies_05062015. pdf" Exemptions to Government Companies from the provisions of the Companies Act, 2013 which inter-alia provides that Sec. 134(3)(p) regarding statement on formal annual evaluation shall not apply to Government Companies in case the directors are evaluated by the Ministry which is administratively in-charge of the company as per its own evaluation methodology. Further, in line with above exemptions, Sub-Sections (2), (3) & (4) of Sec. 178 regarding appointment, performance evaluation and remuneration shall not apply to Directors of Government Companies.

1.6.5 Status on Presidential Directives

1.6.5.1 Directives on reservation policy for reserved category persons

Presidential Directives on reservation policy issued by Central Govt. from time to time provide for certain percentages of reservation in direct recruitment as well as promotion in specified posts and for specified reserved category of candidates, i.e SCs, STs, OBCs and Physically Challenged. Besides, the Directives also contain provision of certain concessions and relaxations in direct recruitments, promotions and reservation for housing for specified category of employees. The Presidential Directives on the subject from time to time are being strictly complied with and reservation percentages are ensured through maintenance of Post Based Roster system as brscribed by Govt. However, there is no direct impact of these guidelines on the financial position of the company.

1. Activities of the company for welfare and advancement of SCs and STs

During the year 2014-2015, various Community Development activities focused on Socio­Economic development for those below poverty line including SCs, STs OBCs and physically handicapped, have been carried out in identified areas under BHEL Scheme of Corporate Social Responsibility.

2. Rebrsentation of SC/ST employees

The overall rebrsentationof SC/ST/OBC employees in total manpower was 19.93%, 6.21% and 27.91°% for SCs, STs and OBC respectively as on 31/12/2014. However, the percentages in direct recruitment during the year are 18.39% for SCs, 6.32% for STs and 28.62% for OBCs

The Annual Statement in the brscribed format showing the rebrsentation of SCs, STs and OBCs as on 31/12/2014 and number of appointments made during the brceding calendar year, as furnished to the Government, is given at Annexure - A.

3. Manpower strength of Physically Challenged employees as on 31/12/2014

As on 31/12/2014, we have a total of 945 Physically Challenged employees in BHEL. The group wise manpower strength of Physically

Challenged employees in the Company as on 31/12/2014 is given at Annexure - B.

1.6.5.2 Safeguard of Women at Workplace

An Actto provide protection against sexual harassment of women at workplace and for the brvention and redressal of complaints of sexual harassment and for matters connected therewith or incidental thereto called "The Sexual Harassment of omen at orkplace (Prevention, Prohibition and Redressal) Act, 2013", has come into force from 9th December 2013 with notification of rules by Government of India, Ministry of omen and Child Development called "The Sexual Harassment of omen at orkplace (Prevention, Prohibition and Redressal) Rules, 2013".

The provisions of the Act and the rules thereon are being strictly complied with. In accordance with the Act, Internal Complaints Committee has been constituted in all units of BHEL and their constitution and contact details have been hosted on unit's website. A poster has been designed, which includes key provisions of the Act, Duties of the Employer, Complaints Redressal Mechanism, Action for Malicious Complaints & various misconceptions about Sexual Harassment and was circulated to all units for display at conspicuous places. Posters in Hindi, English and Regional languages have been displayed in all units. 130 orkshops / awareness programmes were conducted in units on Gender Sensitization, self defence and on awareness about the Act. 7132 employees attended these workshops of which 1316 were women and 5816 were men. The Annual Report showing details on number of complaints of sexual harassment received during the year 2014-2015 and status thereof as on 31.03.2014 is given at Annexure - C.

1.7 Right To Information Act, 2005

BHEL is a front-runner in implementing the Right to Information (RTI) Act, 2005 and has embraced the Act in true letter and spirit.

A Central Public Information Officer (CPIO) and a Central Assistant Public Officer (CAPIO) aided by a Senior Executive (Law) at the company level and 17 CPIOs at each of the major administrative units are functioning as part of the Right to Information Group.

An Appellate Committee is functioning at the Company level to dispose off first appeals filed under the RTI Act.

To assist and facilitate the citizens in obtaining information, detailed guidelines have been placed on BHEL's website, spelling out the procedure for securing access to information and filing of first appeals under the Act.

Instructions have been issued to administrative units to ensure compliance to the mandatory requirements of the Act.

Proactive disclosures have been made on BHEL's website in line with Section 4 (1) (b) of the Act, disseminating various categories of information so that citizens have minimum need to resort to the Act for the purpose of obtaining information.

BHEL is an active member of Steering Committee on RTI constituted by Standing Conference of Public Enterprises (SCOPE).

The CPIOs and the other stakeholders involved are sensitized regularly about their obligations under the Act through various trainings and workshops. BHEL organized its Annual workshop on Right to Information Act, 2005 on 21.3.2015 for the benefit of new and existing CPIOs/CAPIOs. The key note address was delivered by Prof (Dr.) M. Sridhar Acharyulu, Hon'ble Central Information Commissioner.

BHEL received 1351 RTI applications and 321 appeals during the year 2014-2015 which were dealt with as per the provisions of the Act.

1.8 Internal Control System

The company has an in-house Internal Audit Department commensurate with its size of operations. It has Internal Audit cells located at major manufacturing units, regional offices and at corporate office of the company which carry out audits as per Annual Audit Programme approved by Board Level Audit Committee. The Internal Audit department reviews & evaluates the adequacy and effectiveness of internal control system through regular audits, system reviews and provides assurance on compliance to the legal, regulatory and internal policies and procedures of the company.

The Company has well placed proper and adequate systems of internal control and documented procedures covering all financial and operating functions. Adequate internal control measures are in the form of various codes, manuals and procedures issued by the management covering all critical and important activities. Functioning of Internal Audit and Internal control systems are periodically reviewed by the Board Level Audit Committee which is supported by Unit Level Audit Committees and necessary directions are issued wherever required to further strengthen the internal control system keeping in view the dynamic environment in which the company is operating. The company continues its efforts to align all its processes and controls with global best practices.

1.9 Mergers & Acquisitions

BHEL has also been pursuing inorganic growth route of M&A for achieving its objectives of getting a strong global foothold in target markets, getting state-of-the-art technology, gaining access to new international markets and diversifying company's product portfolio in high potential growth areas like transportation and transmission.

To support its overseas M&A endeavours, BHEL has a panel of leading global investment banks, consultants and law firms as M&A advisors. The panel comprises Financial Advisors, Accounting & Tax Due Diligence Advisors and Legal Due Diligence Advisors.

1.10 Opportunities and Threats

The global economy continued to expand during 2014 across major countries and regions at a moderate but uneven pace and still shrouded in uncertainty. The recurring theme is that the global economy is struggling to generate the desired traction necessary for maintaining a consistent growth trajectory. Economy of United States, is expected to improve in 2015 with real GDP growth projected at 3.6% aided by improving labour and housing market conditions. Economic condition in Euro region remain weak although some pick-up is expected supported by lower crude prices and the debrciation in the euro as well as increased bank lending. Japan too, is still struggling with growth contraction.

Potential spillovers from Geopolitical tensions and the weaker-than-expected performance of developed economies and domestic supply-side constraints have impacted the emerging economies over the past year. Geopolitical tensions in Iraq, Libya, Yemen, the Syrian Arab Republic and Ukraine have already had economic impacts at the national and sub-regional levels. Most of the world's major oil-producing countries are still grappling with investment decisions, and subdued output despite modest rebound after the almost collapse in international crude oil prices. In this context, even with increase in oil production by the United States to render resilience to the global oil market, major downside risk due to sudden and drastic stoppage of exports by major supplier countries cannot be ruled out.

India's coal consumption was at 11.1 per cent in 2014. Even with 301 billion tonnes of coal reserves, yet, India has been struggling to increase coal supplies to meet the growing requirements of its power and other industries. Fuel availability for new projects is still a concern. E-auction / allocation of coal blocks and Govt's objective to double domestic coal production by 2020 is likely to improve the prospect of fuel availability for existing projects. Land acquisition remains a complex issue as the existing and new projects still await clearances affecting take-off. Evacuation infrastructure, another issue, is critical to meet the 1.5 billion tonnes production target by 2020.

The subdued growth of the core industries has remained a drag on industrial production. Eight core industries, constituting 38% in Index of Industrial Production, have decelerated further after registering only 3.59% Y-o-Y growth, the lowest in the last five years, due to a decline in crude oil, natural gas production and steel.

Apart from these issues, climate change is going to be one of the foremost factors impacting the industry in near future. ith the spurt in unexpected climate events across the world, global population has started experiencing its adverse impact which will compel various countries to commit to reduction of emissions. Further, acceptability of the fact that global warming is majorly human induced will provide the additional thrust to reduce the emissions further. This trend brsents a lot of opportunities for companies like BHEL and at the same time, brsents many challenges, particularly related to 'Green technology' development.

But economy is experiencing a turnaround and the initiatives initiated by the new government would act as enablers for resolution of impending issues. Allocation of Coal Blocks through e-auction, rationalization of gas prices, Single indow Concept, Coal Swapping etc. are likely to improve the fuel availability for existing power projects. Demand for electrical transmission equipment is expected to improve with more and more generation, transmission and distribution projects taking off aided by the Distribution reforms such as feeder segregation and separation of content and carriage in distribution. The Government has proposed 100 G capacity addition in solar and 60 G in wind by 2022. Transportation sector is likely to see a lot of traction in the days to come. The positive steps taken by the government are likely to translate into more business opportunities and finalization of several new opportunities in the near and medium term. Moreover, the "Make in India" initiative by the Government is poised to catapult Indian Industry into a new phase of growth trajectory by strengthening business confidence and investment climate. The opportunities have been discussed in detail in the respective chapters on Business Sectors under Annexure-1 of Management Discussion and Analysis.

The overall business scenario is improving at a moderate pace and BHEL would certainly leverage the opportunities arising out of the next phase of economic growth.

1.11 Positioning for future

with a sturdy foundation of 50 illustrious years of engineering excellence, BHEL has been the forbearer of India's success in achieving self-sufficiency in the indigenous manufacture of heavy electrical equipment. BHEL's 55% share in India's total installed capacity and 62% share in the country's total generation from thermal utility sets (coal based) as of March 31, 2015 stand testimony to its valuable contribution towards nation building.

Amidst the difficult external economic and business environment, BHEL continues to face challenges in the current year also. Nevertheless, the company has developed considerable resilience to leverage its engineering strength and manufacturing prowess to regain growth momentum in next phase of Indian economic growth. Overall business scenario is improving and the 'Make in India' initiative of Government of India is poised to drive the  manufacturing sector into a new phase of growth.

• To enhance the share of business in power sector, company has been adopting two pronged strategy; focus on EPC business and enlarging scope of offer. BHEL is expanding its portfolio by adding Flue-Gas Desulfurization (FGD), Water Management system, Air Cooled Condenser,and other Balance ofPlant (BoP) systems. Company is fully harnessing potential in Spares & Services area and forging partnerships with other value chain partners. Increasing level of indigenization in Supercritical Technology and development of Adv. Ultra Supercritical Technology are major strategies in Power Sector

• Diversification of business has been the focus of the Management in recent years so as to enhance share of Industry Segment in business-mix. BHEL has taken various initiatives in recent past to expand its brsence in Transportation (Rail), Solar, Defence and Transmission business areas, both by way of investments in existing facilities and by exploring new business models with focus on collaboration with value chain partners. BHEL has demonstrated its capability to design and offer all variants of 765 kV class Transformers and Shunt Reactors and is well positioned to capitalize on the brmium 765 kV voltage segment

• BHEL's products and systems are technology intensive and thus, the company has adopted R&D and technology development as the central driver for implementing its strategy. e have maintained R&D expenditure at plus 2.5% of the turnover for more than 5 years. Recently your company has indigenously designed and developed Fuel Flexible Boiler which is capable of blending & firing any percentage mix of imported & indigenous coals. BHEL has successfully developed, manufactured and commissioned India's first 'Phase Shifting Transformer' (PST) at Kothagudem TPS in Telangana. The PST improves transmission efficiency and is an outstanding solution for smart grid ensuring multiple benefits for transmission networks

• BHEL will continue to pursue its key strategy of accelerating project execution. Company is also focusing on intermediate milestones, delivery cycle reduction, central monitoring system and deployment of additional Tools & Plants. The significant achievements in execution include commissioning of first indigenously manufactured 660 M supercritical thermal set at NTPC Barh, commissioning of first indigenously manufactured 800 M W supercritical boiler at APPDCL Krishnapatnam. We have also commissioned 736 M of hydro projects during 2014-15. Notably, this is 100% of hydro projects commissioned in India during the year and also the country's highest in last 10 years

•To address brvailing pricing brssures, company is focusing on cost optimization measures in different areas of operations through competitive buying, increased localization, design/layout optimization, supply risk mitigation, IT applications, operations improvement and better employee productivity

•BHEL has been in the field of Photo voltaics, a strategically important area of non-conventional energy and has been contributing to the national effort for developing and promoting renewable energy based products on a sustained basis. The company has generated expertise in the critical parts of the silicon value chain, viz., Silicon  Wafer to Cell, Cell to PV Module and in EPC & O&M of MW-size Solar PV power plants offering turnkey solutions for Solar PV plants. BHEL has a dedicated R&D group in the area of semiconductor materials, Nano-and thin-film devices at their plants in Hyderabad and Gurgaon

•In line with the growing aspirations of millennial generation of the company, the People Development strategy of BHEL is focusing on developing each person's competencies in alignment with business plans through implementation of initiatives like e- learning modules for developing Leadership competencies in association with Harvard Business School, performance linked pay, career planning and succession planning

• BHEL will continue to build on its strengths through focus on Capability Enhancement, Project Execution, Cost Competitiveness & Quality, Diversification, Engineering & Technology, and People Development as envisaged in 6-Point agenda to harness the opportunities arising out of improved economic and business conditions

1.12 Risks and Concerns

BHEL has in place a Board approved Risk Management Charter & Policy (RMCP) which provides overall framework for Risk Management (RM) in the company. In line with revised Clause 49 of Listing Agreement, we have a Board Level Risk Management Committee (BLRMC) in place. The role of BLRMC is to assist the Board in the company's management of key risks as well as formulation and implementation of guidelines, policies and processes for monitoring and mitigating such risks. Further, a Risk Management Steering Committee (RMSC) is in place with responsibility for implementing the RM framework across the organization. Chief risk Officer (CRO) is the convener of RMSC and BLRMC and is responsible for periodic reporting to BLRMC/ Board based on the deliberations in RMSC.

Some of the key risks the Company faces, their impact and corresponding strategies undertaken for mitigation by the Company are discussed in the table:

For and on behalf of the Board of Directors of

BHARAT HEAVY ELECTRICALS LTD.

(B. Prasada Rao)

Chairman & Managing Director

 Place : New Delhi

Dated : 24.07.2015