Your Directors have pleasure in presenting the 60^th Annual Report on the business and operations of your Company, and the Audited Financial Statements for the year ended March 31, 2024.

Performance Highlights

( 1 Crores)

*Restated owing to change in Accounting Policy State of Company's Affairs

The year 2023-24 has been momentous in terms of order inflows which reached its zenith at 177,907 Crores, with the company receiving several prestigious orders, not only in its core thermal power business but also in diversified segments of transportation, defence etc. The company has maintained its leadership position in thermal main power plant business in the country. The Industry segment also witnessed the highest ever order inflow of 121,951 Crores. A major milestone during FY 2023-24 was achieved by securing one of the largest order for the supply of 80 numbers Vande Bharat Trains in consortium as Lead Partner. The total outstanding Order Book as on March 31, 2024 stands at 11,31,598 Crores (net of taxes), with the executable Order Book being 11,23,916 Crores.

ORDER RECEIVED ORDER BOOK OUTSTANDING

' Crores ' Crores

Making a head start in Coal Gasification area, the company entered into Joint Venture agreement with Coal India Ltd in February 2024 for setting up a Coal to 2,000 TPD Ammonium Nitrate Plant using BHEL's indigenously developed PFBG (Pressurized Fluidized Bed Gasification) technology - a step towards Aatmanirbhar Bharat. The Joint Venture Company “Bharat Coal Gasification and Chemicals Limited" has been incorporated as a Private Limited Company in May 2024.

In FY 2023-24, the company posted a revenue of 122,921 Crores and Profit After Tax of 1260 Crores with an EBITDA of 11,201 Crores. With reasserted focus on project execution and significant order inflows, higher volumes are expected in the forthcoming years.

The company maintained gross margins at the similar levels of previous year despite moderate corrections in metal prices and restrictions on global procurements, especially from land border sharing countries. The Company is taking multipronged measures for cost reduction including targeting benefits of bulk procurement through centralized procurement/ sub-contracting, enhancing vendor base etc.

The profitability during the year has also been impacted by change in accounting policy w.r.t. Expected Credit Losses (ECL) on Contract Assets and change in estimate w.r.t. Contractual obligation provisioning. The company has adopted the changed accounting policy with respect to factoring time value of money while calculating Expected Credit Losses (ECL) in respect of Contract Assets in line with the opinion of Expert Advisory Committee obtained during the year from ICAI.

Your Company accords highest priority for liquidation of receivables. During the year cash collection from customers increased by ~13,000 Crores (13%) over the previous year. However, to enable faster execution of Projects, significant cash outflows, primarily on materials/ sub-contracting, resulted in net overdraft at the end of March 2024. Nevertheless, liquidity shall improve in FY 2024-25 with the progressive achievement of major milestones in key projects and liquidation of outstanding receivables.

Increase in Trade Receivables to 122 days at the end of FY 2023-24 from 102 days at the end of previous year (18,010 Crores as compared to previous year level of 16,544 Crores) is mainly on account of short term liquidity constraints of certain large customers. It is also notable that the payment terms are comparatively better in recently received project contracts, which would eventually ease the pressure on liquidity.

Transfer to Reserve

The company has not transferred any amount to the Reserves during FY 2023-24.

Dividend

The Board of Directors, in its meeting held on May 21, 2024 has recommended a final dividend @12.5% on the paid-up equity share capital (10.25 per share of 12 each), amounting to 187.05 Crores, out of profit for FY 2023-24, subject to your approval.

The Company has a dividend distribution policy in place in pursuance of the requirements of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR"). Dividend distribution policy is available on the Company's website at https://www.bhel.com/dividend-distribution-policv-bhel-0. Furthermore, Total Return to Shareholders during the year was 253%.

Deposits

The Company has not accepted deposits from the public falling within the ambit of Section 73 of the Companies Act, 2013 during FY 2023-24.

Capital & Finance

During FY 2023-24, the company has met its CAPEX and operating fund requirements largely through internal accruals. However, due to higher cash outflows, primarily on materials / sub- contracting required for expeditious project execution, the company was in a net overdraft position as at the end of March 2024. The company invests any intermittent available surplus funds to maximize the interest income to the company. To meet any operational fund requirement, shortterm borrowing options are used by the company including WCDL, Loan against FDs, Commercial Papers (listed on NSE and BSE) etc.

Loans and Investments

There is no transaction relating to loans or advances covered under section 186 of the Companies Act 2013 in FY 2023-24. Further, it is clarified that investment, if any, is as per Note 5 Investment of Audited Annual Accounts 2023-24 of the company.

Credit Rating

The credit ratings of your Company are as follows:

Material Changes and Commitments affecting the Financial Position

There are no material changes and commitments affecting the financial position of the Company between the end of FY 2023-24 and the date of this report. There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future.

Suspension of Trading

The Equity Shares of the company are listed on NSE & BSE. The shares of the company were not suspended from trading during FY 2023-24.

Directors' Responsibility Statement

Pursuant to section 134(5) of the Companies Act, 2013, the Board of Directors confirm that:

a) In the preparation of the Annual Accounts, the applicable Accounting Standards (Ind AS) have been followed along with proper explanations relating to material departures;

b) The Directors have selected such accounting policies & applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of financial year and of the profit of the Company for that period;

c) The Directors have taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) The Directors have prepared the Annual Accounts on a going concern basis;

e) The Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively;

f) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Management Discussion & Analysis

Your company has continued to focus on regaining growth, strengthening the core business, expediting execution and taking concrete steps towards diversification including enhancing business in non-coal areas being critical enablers for long term sustainable growth. For further details, please refer Annexure-I to the Board's Report.

Corporate Governance

Pursuant to Regulation 34 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, a report on Corporate Governance (including Board & Committee Meetings details) is given at Annexure-II to the Board Report together with the following,

a) Certificate of Non-Disqualification of Directors under Schedule V of the SEBI Listing Regulations.

b) Auditors certificate on Corporate Governance under SEBI Listing Regulations & Department of Public Enterprises (DPE) guidelines on Corporate Governance.

c) Secretarial Audit Report under Section 204 (1) of the Companies Act, 2013.

Declaration of Independence

Declaration under Section 149(6) of the Companies Act, 2013 pertaining to criteria of independence has been given by the Independent Directors to the Board of Directors. All the Independent Directors have registered themselves on the online database of the Indian Institute of Corporate Affairs (IICA), notified under Section 150 of the Companies Act, 2013. In the opinion of the Board, the Independent Directors possess integrity and necessary expertise & experience.

Compliances

Your company continuously reviews and strengthens its compliance of systems and processes.

• Company maintains integrity in its operations and functions in ethical & transparent manner to attain the highest standard of Corporate Governance.

• To ensure compliances a quarterly legal compliance report on the Applicable Laws/ Acts is reviewed by the Board of Directors.

• Being a listed company, compliance with the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 is ensured. There was no adverse comment from SEBI for the FY 2023-24 on any financial matter.

• The Company has complied with all the applicable secretarial standards.

• For preparation of financial statements, the company ensures compliance to the Indian Accounting Standards

(Ind AS), Guidance Notes and other authoritative literature issued by the ICAI, Companies Act 2013 and other applicable statutes.

Contribution to the Exchequer

The Company, over the years, has been consistently making significant contribution to the Exchequer, and maintaining high standards of integrity with respect to tax compliances. During the current year, the company's contribution to exchequer stood at over 14,102 Crores (inclusive of ITC utilised).

Audit Committee

The Company has in place a Board Level Audit Committee in terms of the requirements of the Companies Act, 2013 read with rules made thereunder and Regulation 18 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015, the details in respect of which are given in the Corporate Governance Report. All the issues are fairly and transparently deliberated in the meetings which are held at regular intervals. The views and suggestions of the Board Level Audit Committee members are taken into account and imbibed into the Company's processes. Further, there has been no instance where the Board of Directors have not accepted the recommendation of the Board Level Audit Committee.

Details of changes in Directors & Key Managerial Personnel Appointment

Shri K. Sadashiv Murthy has been appointed as Chairman & Managing Director (CMD) w.e.f. November 1, 2023 and has taken charge as CMD.

Shri Tajinder Gupta has been appointed as Whole Time (Functional) Director w.e.f. September 20, 2023 and has taken charge as Director (Power).

Ms. Bani Varma has been appointed as Whole Time (Functional) Director w.e.f. October 9, 2023 and has taken charge as Director (Industrial Systems and Products).

Shri Rajesh Kumar Dwivedi has been appointed as Whole Time (Functional) Director w.e.f. June 19, 2024 and has taken charge as Director (Finance).

Shri K. Sadashiv Murthy, CMD with additional charge of Director (Finance) was designated as Chief Financial Officer (CFO) of the Company w.e.f. April 25, 2024 in place of Shri Jai Prakash Srivastava, Director (E, R&D) who had been earlier designated as CFO w.e.f. May 26, 2023. Subsequently, Shri Rajesh Kumar Dwivedi, Director (Finance) has been designated as Chief Financial Officer (CFO) of the Company w.e.f. June 19, 2024.

In accordance with applicable statutory provisions and Article 67(iv) of the Articles of Association of the Company, S/ Shri Tajinder Gupta, Ms. Bani Varma, K. Sadashiv Murthy and Rajesh Kumar Dwivedi, having been appointed as additional directors, shall hold directorship upto the 60^th Annual General

Meeting of the Company and are eligible for appointment as Directors at the Meeting.

Further, pursuant to Section 152 of the Companies Act, 2013 and Article 67(i) of the Articles of Association of the Company, Ms. Arti Bhatnagar and Shri Krishna Kumar Thakur, Directors will retire by rotation at the Annual General Meeting and being eligible, offer themselves for re-appointment.

Cessation

Dr. Nalin Shinghal, who was appointed as CMD on July 8, 2019, ceased to be CMD of the Company on attaining the age of superannuation on October 31, 2023.

Ms. Renuka Gera, who was appointed as Director (Industrial Systems & Products) on December 1, 2020, ceased to be a Director of the Company on attaining the age of superannuation on August 31, 2023.

Shri Upinder Singh Matharu, who was appointed as Director (Power) on March 21, 2022, ceased to be a Director of the Company on attaining the age of superannuation on August 31, 2023.

Dr. Lekhasri Samantsinghar who was appointed as Part-time Non-Official (Independent) Director on November 9, 2021, ceased to be a Director of the Company consequent to her resignation on April 12, 2024 from BHEL's Board of Directors. Dr. Samantsinghar tendered her resignation as she was contesting the Lok Sabha Elections from Odisha. Further, she also confirmed that there were no other material reasons other than those provided by her for resignation.

The Board of Directors places on record their deep appreciation for the valuable services rendered as well as advice and guidance provided by S/Shri Dr. Nalin Shinghal, Ms. Renuka Gera, Upinder Singh Matharu and Dr. Lekhasri Samantsinghar during their respective tenure on the BHEL Board.

In compliance with Regulation 36(3) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, brief resume of the Directors proposed for appointment/re-appointment containing nature of their expertise in specific functional areas and names of companies in which the person holds directorship along with the membership of the Committees of the Board are given in the explanatory statement/ annexure to the Notice.

Dr. Yogesh R Chhabra has been appointed as Company Secretary & Compliance Officer in terms of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 w.e.f. July 11, 2024 consequent to the relinquishment of charge by Shri Rajeev Kalra on July 10, 2024.

CEO/ CFO Certificate

CEO/CFO certificate as per Regulation 17(8) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 is placed at Annexure- III to the Board's Report.

Consolidated Financial Statements

The brief on consolidated financial statements prepared pursuant to section 129 (3) of the Companies Act, 2013 and Regulation 34 of the SEBI (Listing Obligations & Disclosure Requirement) Regulations 2015, is given in section 1.4.3 under Management Discussion & Analysis (Annexure - I).

Sustainable Development

BHEL's Mission Statement - Providing sustainable business solutions in the fields of Energy, Industry & Infrastructure - duly reflects the company's focus on sustainability. Since inception, the company has been conscious about its responsibility towards protection and conservation of environment encompassing issues such as prevention and control of pollution, conservation of natural resources, reducing-reusing-recycling of waste, plantation and creation of green covers, water harvesting etc. These practices are now one of the core company's ethos and organisational culture.

The company launched (HARIT BHEL) initiative

for transforming BHEL into a Green Company with the target of achieving Net Zero by the year 2047 and making the company a model “Green PSU".

The company has enhanced its focus on the areas; such as responsible material and natural resource consumption, energy conservation/efficiency, water conservation, protecting the existing plantation and augmenting the same, promoting biodiversity, reducing carbon emission, reduce/ recycle/reuse of waste etc. in all its business processes. The brief of some of these activities that help us move towards a sustainable future are given in Annexure-IV to the Board's Report.

Health, Safety & Environment (HSE)

BHEL is committed to sustainability, prioritizing the safety & well-being of employees and associates, as well as environmental considerations in operations.

Internal audits, surveillance audits by certifying bodies, and periodic reviews of HSE performance are rigorously conducted, facilitating continual improvement in the company's safety and environmental performance. Additionally, the Corporate HSE team conducts audits of manufacturing units and project sites to further ensure adherence to these high standards.

During the year, the company remained focused towards its goal of “Zero Harm" to employees and people working for the company and launched ^ftff (HARIT BHEL)

initiative for transforming BHEL into a Green Company with an objective of achieving Net Zero by 2047. Further details are provided in Annexure-VIII to the Board's Report.

Business Responsibility and Sustainability Report

In line with the requirement of the listing regulations, Business Responsibility and Sustainability Report providing disclosures in environmental, social and governance perspectives is

enclosed at Annexure-V to the Board's Report. A guide for understanding the ESG disclosure and BRSR mapping with five Global Reporting Framework (GRI, SDG, TCFD, CDP and SASB) is available at NSE website.

Achievements of R&D and Technological Development

BHEL, in line with country's vision towards net zero carbon emissions by 2070 for a sustainable future has realigned its innovation ecosystem for development of cleaner technologies. The company is working towards development of products and systems in new business areas such as coal to chemicals, high efficiency thermal power plants, rail transportation, nuclear power, defence & aerospace, downstream oil & gas, hydrogen value chain, etc.

In FY 2023-24, BHEL has incurred an expenditure of ' 698 Crores towards R&D activities, which is more than 2.5% of the revenue. BHEL has filed 543 Intellectual Property Right (IPR) applications during the year, enhancing the company's intellectual capital to more than 5650 numbers. Approx. 18% of the company's revenue, amounting to '4,249 Crores has been achieved from its in-house developed products, systems and services. Further details of major developments have been provided in Annexure-VI to the Board's Report.

Implementation of Official Language

BHEL is dedicated to promoting the use of 'Hindi' as the Official Language in compliance with the Government of India's Rajbhasha Policy to promote Rajbhasha 'Hindi'. The Company has ensured the implementation of Rajbhasha Policy and taken various initiatives, further details have been provided in Annexure-VIII to the Board's Report.

Vigil Mechanism

BHEL upholds the principles of Good Governance, Transparency, Probity, and Ethics to ensure integrity in operations. The company has put in place a robust Vigil Mechanism to ensure probity and integrity in operations. The Company encourages reporting of unfair & unethical practices and in terms of Regulation 22 of SEBI (LODR) Regulations, 2015 and Section 177 of the Companies Act, 2013, the Company has put in place a Whistle Blower Policy which provides adequate safeguard to the complainant against victimization.

The “Board Level Audit Committee" (BLAC) reviews the functioning of the Whistle Blower / Vigil Mechanism, and annual review of the Vigilance function is also done by CMD / Board of Directors. Further, details are provided in Annexure-VIII to the Board's Report.

Data and Cyber Security

In the contemporary interconnected landscape, the emphasis on data and cyber security holds paramount importance. Company has instituted security protocols to shield its IT assets and data from cyber threats. These protocols encompass a multi-faceted defence system integrating state-of-the-art technologies across data centers, networks, applications, and end-user devices. Moreover, proactive measures are consistently undertaken to augment cyber

security. Further details have been included in Section 1.12 of the Board Report.

Other disclosures

Information in accordance with the provisions of Section 134(3)(m) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 regarding conservation of energy, technology absorption and foreign exchange earnings and outgo is given at Annexure-VII to the Board's Report.

As per provisions of section 197 of the Companies Act, 2013 read with the Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, every listed company is required to disclose the details of the remuneration of the Directors etc. in the Board report. However, as per Notification No. GSR 463(E) dated June 5, 2015 issued by the Ministry of Corporate Affairs, Government Companies are exempted from complying with provisions of section 197 of the Companies Act, 2013. BHEL being a Government Company, such particulars are not included as part of Board's Report.

Statement pursuant to Section 129 of the Companies Act, 2013 (Form AOC-1) relating to subsidiary companies & joint ventures and Form AOC-2 pursuant to section 134(3)(h) of the Companies Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014 is given at Annexure-IX to the Board's Report.

Proceedings under Insolvency and Bankruptcy Code

No applications against BHEL under Insolvency and Bankruptcy Code, 2016 (IBC) have been admitted during the year and no proceedings against BHEL under IBC are pending as on March 31, 2024.

Auditors

The Statutory Auditors of your Company are appointed by the Comptroller and Auditor General of India. Three firms of statutory auditors were appointed as joint statutory auditors and four firms were appointed as branch auditors. The names of audit firms appointed for FY 2023-24 are given separately in the Annual Report.

Auditors' Report on the Accounts

The Auditors' Report on Standalone and Consolidated Financial Statements for FY 2023-24 of the Company are given at Annexure- X to the Board's Report. There is no qualification in the Auditors report on the Financial Statements of the Company. The Supplementary Audit report under section 143(6) read with section 129(4) of the Companies Act, 2013 issued by the Comptroller & Auditor General of India also forms part of Annexure-X.

Secretarial Audit

In terms of section 204(1) of the Companies Act, 2013, the Company engaged M/s Akhil Rohatgi & Co., Company Secretaries in whole-time practice, as Secretarial Auditors for

conducting Secretarial Audit for FY 2023-24 and their report forms part of Corporate Governance section.

Secretarial Auditor in his Audit report has observed noncompliance during the year under review, as the number of independent directors on the Board was less than half of the total strength of the Board as required under Regulation 17 (1) of the Securities and Exchange Board of India (Listing Obligations & Disclosure Requirements) Regulations, 2015 and Para 3.1.4 of the DPE Guidelines on Corporate Governance. The Secretarial Auditor has also noted in his report the explanation given by the Company that BHEL, being a Government Company, all the directors are appointed by the President of India, acting through administrative ministry and as such appointment of requisite number of independent directors is beyond the control of the Company. Further, the Company has been in constant communication with its administrative ministry requesting for appointment of independent directors on its Board so as to ensure compliance with corporate governance norms enunciated under the Securities and Exchange Board of India (Listing Obligations & Disclosure Requirements) Regulations, 2015 and DPE Guidelines on Corporate Governance.

The Management noted the observation and explained that the matter of filling up of the vacancies of the Independent Directors is under process at the end of the Government of India.

Cost Auditors

In terms of provisions of Section 148 of the Companies Act, 2013 and as per the Companies (Cost Records and Audit) Rules, 2014 and amendments thereof, the Board, on the recommendation of the Audit Committee, approved the appointment of seven firms of Cost Accountants as Cost Auditors for auditing the cost accounts of your Company for FY 2023-24. Cost accounts and records as specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013 have been properly maintained and complied with.

The details of cost auditors appointed for FY 2023-24 are given separately in the Annual Report. The Cost Audit Report for FY 2022-23 with Nil qualification has been filed under XBRL mode, within due date.

Appreciation and Acknowledgements

Your Directors gratefully acknowledge with deep sense of appreciation, the co-operation and guidance received from the Government of India, particularly the Ministry of Heavy Industries in various spheres of the company's operations and strategic initiatives.

We are deeply appreciative of and thankful to various ministries and statutory authorities/ departments of the Government of India for their valuable support and continuous cooperation.

The Directors place on record their sincere appreciation towards the Company's valued customers in India and abroad for their co-operation in addressing various issues faced in complex long gestation construction contracts.

The Directors also express their gratitude to the Comptroller and Auditor General of India, professional bodies, Statutory Auditors, Branch Auditors, Secretarial Auditor and Cost Auditors for their constructive suggestions and continuous cooperation.

The Directors place on record their sincere appreciation towards the company's esteemed shareholders for the support and confidence reposed by them in the management of the company and look forward to the continuance of in future.

The Directors also wish to place on record their appreciation for the continued cooperation received from all the technology collaborators, suppliers and contractors. The support provided by the financial institutions, bankers and stock exchanges are also acknowledged and appreciated.

Last but not the least, your Directors wish to place on record their sincere appreciation for the diligent efforts, hard work and commitment put in by all BHEL employees, who have worked day and night, to meet the company's commitments.

For and on behalf of the Board of Directors of BHARAT HEAVY ELECTRICALS LTD.

K. Sadashiv Murthy

Chairman & Managing Director

Place: New Delhi Date: July 27, 2024