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Company Information

Home » Market » Company Information

Bharat Electronics Ltd.

Mar 20, 03:20
93.40 -3.00 ( -3.11 %)
 
VOLUME : 962053
Prev. Close 96.40
Open Price 96.90
TODAY'S LOW / HIGH
93.10
 
 
 
97.65
Bid PRICE (QTY.) 93.35 (1635)
Offer PRICE (Qty.) 93.45 (1825)
52 WK LOW / HIGH
72.55
 
 
 
152.00
Mar 20, 03:09
93.35 -3.35 ( -3.46 %)
 
VOLUME : 16323343
Prev. Close 96.70
Open Price 96.65
TODAY'S LOW / HIGH
93.10
 
 
 
97.65
Bid PRICE (QTY.) 93.30 (533)
Offer PRICE (Qty.) 93.35 (4693)
52 WK LOW / HIGH
72.50
 
 
 
152.00
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Market Cap. ( ₹ ) 22745.60 Cr. P/BV 2.84 Book Value ( ₹ ) 32.90
52 Week High/Low ( ₹ ) 152/73 FV/ML 1/1 P/E(X) 15.89
Bookclosure 20/03/2019 TTM EPS ( ₹ ) 0.00 Div Yield (%) 2.19
NOTES TO ACCOUNTS
You can view the entire text of Notes to accounts of the company for the latest year
Year End :2018-03 

Note 1

i. Freehold Land consists of 2064.29 acres (2064.29 acres) and Leasehold Land consists of 290.26 acres (290.26 acres).

ii. Freehold Land includes 7.11 acres (7.11 acres) leased to commercial/religious organisations and in their possession.

iii. Lease Hold land includes land taken on Lease at Kochi for 90 Years and capitalised in the year 2008-09.

iv. Additions during the year includes, Rs.1,982 (Rs.1,089), Rs.15 (Rs.5) and Rs.222 (‘ Nil) in respect of the assets of Central Research Laboratories, Pune and Hyderabad Unit respectively, R&D assets accounted under natural code heads.

v. Electronic Equipment value includes POS machines valuing

vi. Site Restoration Obligation

Refer Note 21 for Site Restoration Obligation in respect of Wind Mill & Solar Power Plants.

Gross Block Value of Plant & Machinery includes Site Restoration Obligation of

vii. Contractual Commitment

Refer Note 30(7) for outstanding Contractual Commitment.

viii. Deemed Cost

On transition to Ind AS (01.04.2015), the company has elected to continue with the carrying value of all its property, plant and equipment as at 1 April 2015 measured as per previous GAAP and use that carrying value as the deemed cost of the Property, Plant & Equipment.

ix. Estimation of Useful Life of Assets

The management has estimated the useful life of the various categories of tangible assets (which are different from the useful life indicated in Schedule II to the Companies Act, 2013) after taking into consideration, factors like expected usage of assets, risk of technical and commercial obsolescence, etc.

x. Depreciation / Amortisation

Depreciation is calculated on a straight-line basis over the estimated useful lives of the Assets.

Leased Assets are amortised on a straight-line basis over their estimated useful lives or their respective lease term whichever is shorter.

xi. Method of Accounting Depreciation

Depreciation / Amortisation has been calculated as per the Accounting Policy No. 8 of the Company and recognised as expenses in the Statement of Profit and Loss. Amount of Depreciation recognised as part of Cost of Other Asset is Nil (Nil).

xii. Impairment of Assets

Refer Note 30(5).

xiii. Compensation from third parties

Nil (Nil).

xiv. Refer Note 12 in respect of Unadjusted Capital Advance paid towards Property Plant & Equipment.

xv. Land acquired free of cost from the Government in some units has been accounted in line with provisions of

Ind AS 101.

xvi. Details of Registration, Pending Litigation etc.,

a. Deeds containing the terms of transfer / grant of land from State Governments / State Undertakings have been registered during the FY 2014-15 in respect of 86.60 acres (86.60 acres) valuing Rs.197 (Rs.197) pertaining to Panchkula Unit. However, rectification of land area held by BEL for Township from 30.00 acres (30.00 acres) to 28.60 acres (28.60 acres) in records of HUDA and Registration Authority is in process. The title deed in respect of land measuring 0.30 acres (0.30 acres) is under litigation.

b. Pending execution of title / sale deeds and handing over of physical possession of land allotted to BEL Hyderabad Unit by Andhra Pradesh Industrial Infrastructure Corporation (APIIC) in respect of land measuring 5.60 acres (5.60 acres) in Mallapur, Hyderabad and the matter being under litigation, no provision towards registration and other cost has been made in the books of accounts. Cost of land paid to APIIC amounting to Rs.65 (Rs.65) is included in Capital Advances.

c. Based on the Memorandum of Understanding reached with the Defence authorities, assets constructed on the land allotted to BEL and in possession of BEL are capitalised under the respective heads for setting up of the Hyderabad Unit. Pending finalisation of the terms and conditions by the appropriate authorities, the cost of land measuring 25.11 acres (25.11 acres) has not been accounted in the books of accounts.

d. Land admeasuring to 122.82 acres (122.82 acres) at Ibrahimpatnam alloted by APIIIC / TSIIC possession is given for which sale deed is pending [Hyderabad Unit]. Sale deed is pending for finalisation fo the land admeasuring to 913.99 acres (913.99 acres) at Palasamudram, Ananthapur Dist. AP [BG Complex]. Sale deed is pending for finalisation/ execution for the land admeasuring to 12.50 acres (12.50 acres) [Kotdwara Unit].

e. A demand of Rs.256 (Rs.256) being 50% of the compensation amount decreed by City Civil Court, Hyderabad has been received towards additional compensation from TSIIC dated 31.01.2015 for Land of 22.375 acres (22.375 acres) which is part of free hold land mentioned above. The demand is under dispute and hence, no provision in respect of the same has been made in the books of accounts.

f. Free hold Land to the extent of 1.22 acres (1.22 acres) which was allotted by Government Authorities in return for handing over of Land measuring 1.24 acres (1.24 acres) is under litigation (Bangalore Complex Unit).

g. The Company has installed Windmill Generator at three locations. Windmill Generator-I capitalized in the year 2006-07 on Lease Land. Upfront Lease rent is Nil and Lease Agreement for the land is pending finalization. Windmill Generator-II is capitalized in the year 2007-08 on the leased land by paying upfront lease rent of Rs.36 which being an operating lease classified as Other assets. Lease Agreement for the land is pending finalization. Windmill Generator-III is capitalized in the year 2015-16 on the leased land by paying upfront lease rent of Rs.161 which being an operating lease classified as Other assets.

Note 2

i. Civil Construction mainly comprises of Production related building, R&D building & Employee Quarters.

ii. Borrowing costs of Rs.378 (Rs.1) [net of interest income] has been included in Capital WIP in respect of employee quarters under construction. The capitalisation rate is 8.15% p.a.

iii. Refer Note 30(7) in respect of Contractual Commitment.

iv. Refer Note 12 in respect of Unadjusted Capital Advance paid towards Property, Plant & Equipment.

iv. Land comprises of Free Hold Land of 1.36 acres (1.36 acres) in Bengaluru.

v. Estimation of Fair Value

The company has estimated the fair value of the Investment Property based on the Government Guidance Value (municipal value) of the similar properties in the investment property’s location. All resulting fair value estimates for the investment properties are included in Level 2.

vi. Deemed Cost

On transition to Ind AS (01.04.2015), the company has elected to continue with the carrying value of all its investment property as at 1 April 2015 measured as per previous GAAP and used that carrying value as the deemed cost of the investment property.

vii. Estimation of Useful Life of Assets

The management has estimated the useful life of the various categories of tangible assets (which are different from the useful life indicated in Schedule II to the Companies Act, 2013) after taking into consideration, factors like expected usage of assets, risk of technical and commercial obsolescence, etc. The estimated useful life of Tangible Asset is as follows :

viii. Depreciation

Depreciation is calculated on a straight-line basis over the estimated useful lives of the Assets.

The amount of Depreciation has been recognised as expense in the Statement of Profit and Loss.

ix. Method of Accounting Depreciation

Depreciation has been calculated as per the Accounting Policy No. 8 of the Company and recognised as expenses in the Statement of Profit and Loss.

x. Impairment of Assets

As the fair value of the Investment Property is higher than its carrying value, there is no indication of impairment.

xi. Restrictions on the realisability of Investment Property

The land is alloted by Government of India.

xii. Related Party Transactions

Investment Property includes Building and land measuring 0.31 acres (0.31 acres) given under cancellable operating lease to Subsidiary Company BEL Thales System Ltd. Also Refer Note 31.

xiii. Details of Registration Pending Litigation etc.,

Nil (Nil).

Note 3

i. Deemed Cost

On transition to Ind AS (01.04.2015), the company has elected to continue with the carrying value of all its other intangible assets as at 1 April 2015 measured as per previous GAAP and used that carrying value as the deemed cost of other intangible assets.

ii. Estimated useful life

The estimated useful lives of the Other Intangible Assets is as follows :

iii. Amortisation

Amortisation is calculated on a straight-line basis over the estimated useful lives of the Assets.

The amount of amortisation has been recognised as expense in the Statement of Profit and Loss.

iv. Method of Accounting Amortisation

Amortisation has been calculated as per the Accounting Policy No. 8 of the Company and recognised as expenses in the Statement of Profit and Loss.

v. Refer Note 30(7) for Contractual Commitment.

vi. Impairment of Assets Refer Note 30(5).

vii. The restriction on the title of the assets is governed by the terms of agreement.

viii. Refer Note 30(8) for the aggregate amount of research and development expenditure recognised as an expense during the period.

Note 4

i. The company has invested its Leave Encashment & ”BEL Retired Employees’ Contributory Health Scheme” (BERECHS) liabilities in LICs New Group Leave Encashment Plan & New Group Superannuation Cash Accumulation Plan respectively [Refer Note 21].

ii. Refer Note 33 for classification of financial instruments.

iii. a. The Company has designated investment in equity shares of M/s Mana Effluent Treatment Plant Ltd., at FVOCI because these equity shares represent investments that are intended to be held for long-term for strategic purposes. Fair Value of the Investment based on Net Asset Value Method is given below :

b. Company has not received any dividend so far on these Investments.

c. No strategic investments were disposed off during 2017-18, and there were no transfers of any cumulative gain or loss within equity relating to these investments.

iv. Unrecognised Deferred Tax (Assets) / Liabilities

There are no temporary differences on which Deferred Tax (Assets)/Liability have not been recognised for the year ended 31 March 2018 & 31 March 2017.

v. Tax Losses carried forward

There are no Tax Losses on which Deferred Tax Asset has been recognised for the year ended 31 March 2018 & 31 March 2017.

Note 5

i. Raw Materials and Components include Rs.9,756 (Rs.13,023) being materials with sub-contractors, out of which Rs.409 (Rs.177) of materials is subject to confirmation and reconciliation. Against Rs.409 (Rs.177), an amount of Rs.408 (Rs.177) has been provided for.

ii. Stock verification discrepancies for the year are as follows : Shortages of Rs.473 (Rs.1,609) and surplus of Rs.367 (Rs.1,254). Pending reconciliation, an amount of Rs.107 (Rs.399) has been provided for.

iii. Valuation of Inventories has been made as per Company’s Accounting Policy No. 18.

iv. a. The United Nations Climate Change Secretariat has granted 15856 (15856) TON CO2EQ carbon credit during earlier years, for the 2.5MW BEL Grid Connected Wind Power Project Davangere District, Karnataka for the verification period from 05.11.2007 to 31.03.2012. The carbon Credits are included under Finished Goods at a value of Rs.2 (Rs.2). The CER is valued at cost as required by Guidance Note on CER issued by ICAI.

b. CER under Certification : Nil (Nil) CERs.

c. Depreciation & Operation Cost of Emission Reduction Equipments during the year :

v. Security, Hypothecation etc

Refer Note 35.

vi. Amount recognised in Statement of Profit & Loss

Write-down of inventories to net realisable value amounted to Rs.5,938 (Rs.2,662) has been recognised in the statement of profit and loss.

vii. No reversal of write down of inventories has been made during the year, which were recognised as an expenses in the previous year.

viii. Impairment of Assets

Provisions for inventory has been made in line with Accounting Policy No. 18 of the Company.

ix. Materials amounting to Rs.12,968 (Rs.5,066) are located physically at Customer Premises.

Note 6

i. Buyback :

a. The board of directors at their meeting held on 30 January 2018 has unanimously approved a proposal for the buyback of 20397780 equity shares of Rs.1 each from the eligible shareholders representing 0.83% of the total number of equity shares of the company (as on record date of 2 September 2018). The buyback was offered at the rate of Rs.182.50 per share on propotionate basis, through “Tender Offer”. The buyback was concluded on March 23 2018 with a buyback of 20397780 shares with a cash outflow of Rs.37,226.

In accordance with Section 69 to the Companies Act, 2013, the company has transferred a sum of Rs.204 to “Capital Redemption Reserve” being the nominal value of the shares bought back as an appropriation from the General Reserve.

b. 16637207 numbers of equity shares with face value of Rs.10 was bought back for Rs.1,305 per share at a premium of Rs.1,295 per share, resulting into a total cash outflow of Rs.217,116 during the FY 2016-17. In accordance with Section 69 to the Companies Act, 2013, the company has transferred a sum of Rs.1,664 to “Capital Redemption Reserve” being the nominal value of the shares bought back as an appropriation from the General Reserve.

ii. During the previous five years the company has not allotted any shares as fully paid up pursuant to contract without payment being received in cash.

iii. Terms, Rights, preferences and restrictions attaching to each class of shares

a. The Company has only one class of shares viz, Equity Shares.

b. Each holder of Equity Shares is entitled to one vote on show of hands and in poll in proportion to the Number of shares held.

c. Each Shareholder has a right to receive the dividend declared by the Company.

d. On winding up of the Company, the equity shareholders will be entitled to get the realised value of the remaining assets of the Company, if any, after distribution of all preferential amounts as per law. The distribution will be in proportion to the number of equity shares held by the shareholders.

b. Nature and purpose of Reserves

i. Capital Reserve

Capital Reserve is created by transfer from Retained earnings an amount equal to capital profit earned by the company. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.

ii. Capital Redemption Reserve

Capital Redemption Reserve is created by transfer from General Reserve an amount equal to face value of the Shares bought back. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.

iii. Equity Investment through Other Comprehensive Income (OCI)

The company has elected to recognise changes in fair value of certain equity investments in other comprehensive income. The change in fair value is accumulated in this reserve. If and when the investment is derecognised the accumulated amount will be transferred to Retained earnings.

iv. Other Comprehensive Income (OCI)

Other comprehensive income are those gains or losses which are not yet realised and excluded from the statement of profit and loss. It mainly consists of remeasurement of the net defined benefit liability/asset (net of tax).

ii. Nature of security

Refer Note 35.

iii. Terms of repayment

Repayable in 12 quarterly installments commencing from Quarter ending June 2017 and ends on the Quarter ending March 2020.

iv. Rate of Interest

8.15% p.a. subject to revision based on RBI / SBI guideline and risk rating of the company.

v. Period and amount of default as on Balance Sheet Date

Nil

* Includes amount shown under Note 20.

** Interest includes INR 3,278 [represents absolute figure] which is rounded off.

Note 7

i. During the period INR 43,339 [represents absolute figure] (Rs.8) of provisions made in Previous year has been reversed, since on subsequent verification, the amount was found to be not payable.

ii. The information has been given in respect of such suppliers to the extent they could be identified as Micro & Small Enterprises on the basis of information available with the Company and have been relied upon by the Auditors.

iii. Financial Instruments

Refer Note 33 for classification of financial instruments.

iv. Related Party Disclosure

For Related Party Disclosures refer Note 31.

v. The company’s exposure to currency and liquidity risk related to Trade Payables is disclosed at Note 34.

ii. Provision for Warranties - as per Accounting Policy No. 20 of the Company.

Provision for warranties is made in respect of products whose normal warranty period is outstanding. As the warranty provision period varies from product to product, provision is made at Strategic Business Unit (SBU) level based on average period of warranty period. Provision is made based on trend based estimate of the likely expenses to be incurred. The provision is measured at the present value of the estimated cost of Warranty.

iii. Provision for Site restoration obligation - as per Accounting Policy No. 23 of the Company.

In accordance with the terms and conditions of the Lease agreement entered into with Lessor, the company is required to return the land in its original condition. Accordingly provision in respect of Site restoration obligation has been made. The provision required is reviewed and required adjustment made at each year end. The provision is measured at the present value of the best estimate of the cost of restoration.

iv. Provision for Onerous contracts - as per Accounting Policy No. 5 & 23 of the Company.

In respect of certain contracts entered into by the company, it is expected that the likely cost to complete the contract would exceed the Revenue received / receivable against the contract. In such cases, provision in respect of the expected losses has been made. The provision required is reviewed and required adjustment made at each year end. The provision is measured at the present value of the best estimate of loss likely to be incurred.

v. Amount debited to opening provision.

vi. An amount of Rs.8,030 (Rs.8,016) has been debited against Natural Code Heads wrt Warranty Cost.

An amount of Nil (Nil) has been debited against Natural Code Heads wrt Site Restoration Obligation.

* Represents excess of plan asset over obligation as on 31 March 2018.

(A) POST EMPLOYMENT BENEFIT OBLIGATION

(i) Gratuity :

The Company provides gratuity to employees in India as per payment of Gratuity Act, 1972. The Company has a Gratuity Scheme for its employees, which is a funded plan. Every year, the Company remits fund to the Gratuity Trust to the extent of shortfall of the assets over the fund obligations, which is determined through actuarial valuation. As per the Gratuity Scheme, gratuity is payable to an employee on the cessation of his employment after he has rendered continuous service for not less than five years in the Company. For every completed year of service or part thereof in excess of six months, the Company shall pay gratuity to an employee at the rate of fifteen days salary based on the last drawn basic & dearness allowance.

The following table summarises the components of net benefit expense recognised in the Statement of Profit & Loss and amounts recognised in the Balance Sheet and the movement in the net defined benefit obligation over the years as per Actuarial valuation are as follows :

(ii) BEL RETIRED EMPLOYEES CONTRIBUTORY HEALTH SCHEME (BERECHS) :

The Company has a contributory health scheme for its retired employees “BEL Retired Employees’ Contributory Health Scheme” (BERECHS), which is non-funded scheme. The primary objective of the scheme is to provide medical facilities to employees retiring on attaining the age of superannuation, or on VRS. Benefits under the Scheme shall be available to the employees who become members and their spouses only. The company takes insurance cover for inpatient treatment. In addition to the annual insurance premium, the Company bears 60% of the medicine cost and 75% of the cost of diagnostic tests for outpatient treatment and for the treatment of specified diseases, the Company bears the full cost of treatment, over and above the insurance coverage.

The following table summarises the components of net benefit expense recognised in the Statement of Profit & Loss and amounts recognised in the Balance Sheet and the movement in the net defined benefit obligation over the years as per Actuarial valuation are as follows :

(iii) EMPLOYEES PROVIDENT FUND [INTEREST SHORTFALL]

Employees Provident Fund is managed by Provident Fund Trust of the company. The Company contributes Managements’ contributions payable towards Employee Provident Fund to the Trust.

Company has determined on the basis of Actuarial Valuation carried out as at 31 March 2018, that there is no liability towards the interest shortfall on valuation date (having regard to terms of plan that there is no compulsion on the part of the Trust to distribute any part of the surplus, if any, by way of additional interest on PF balances).

B. Long Term Compensated Absence

The Company has a Long Term Compensated Absence Scheme for its employees, which is a Non-Funded Scheme. The employees of the Company are entitled to two types of Long Term Compensated Absences : Annual Leave (AL) & Half Pay Leave (HL) in case of Executives and Annual Leave (AL) & Sick Leave (SL) in case of Non-Executives. The Scheme provides for compensation to employees against the unavailed Leave (AL & HL in case of Executives and AL & SL in case of Non-Executives) on attaining the age of superannuation, VRS, or death. AL can also be encashed during service or at the time of resignation.

The following table summarises the components of net benefit expense recognised in the Statement of Profit & Loss and amount recognised in the Balance Sheet for the plan as furnished in the disclosure report provided by the Actuary :

C. Pension Scheme

The Company has got a defined contribution pension benefit plan for the benefit of its employees in respect of which contribution is made on an annual basis to a Trust setup for this purpose.

The benefit under the scheme are available for the employees as per the rules laid down in this regard.

A narrative description of the specific or unusual risks arising from a defined benefit plan (i.e. Gratuity and BERECHS)

The specific risk relating to defined benefit plans are as follows :

Movement in long term government bond rate between two reporting periods which will impact discount rate and consequently the present value of obligations.

Risk of higher / lower salary escalation / benefit as considered for valuation vis-a-vis the actual experience through the Financial Year.

However, both the risks are mitigated on a regular basis i.e. yearly as valuations are done after every year based on updated assumptions.

A narrative description of any asset-liability matching strategies.

The gratuity plan of the company is a funded plan. The assets backing this plan are predominantly insurer-managed funds. Hence the company has limited flexibility in terms of implementing asset-liability matching strategies for this plan.

The post retirement medical plan of the company is an unfunded plan. Hence asset-liability matching strategies are not relevant for this plan.

A description of the funding arrangements and funding policy.

The Gratuity plan of the company is a funded plan. 93.89% (87.97%) of the plan assets backing this plan are insurer managed assets and 3.25% (7.03%) of the plan assets are invested Central and State Government Securities. The annual contribution to the fund is normally set equal to the deficit as disclosed by the preceding actuarial valuation of the benefit obligations.

The post-retirement medical plan [BERECHS] is an unfunded plan.

NOTE 8

General Notes to Accounts

1. Earning per Equity Share

a. From continuing operations

Basic earning per share [INR]

Diluted earning per share [INR]

b. Amounts used as the numerators in calculating basic and diluted earnings per share

c. Weighted average number of equity shares used in computing basic and diluted earnings per share

2. Statement of Compliances

The standalone financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) [as notified under section 133 of the Companies Act, 2013 (the “Act”) read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015, as amended.] and other relevant provision of the Act.

The Company’s standalone financial statements up to and for the year ended 31 March 2016 were prepared in accordance with the Companies (Accounting Standards) Rules, 2006, notified under Section 133 of the Act and other relevant provisions of the Act.

3. Operating Cycle

As per the requirement of Schedule III to the Companies Act, 2013, the Operating Cycle has been determined at Strategic Business Unit (SBU) / Unit level, as applicable.

5. Impairment of Assets

The Company has analysed indications of impairment of assets of each geographical composite manufacturing unit considered as Cash Generating Units (CGU). On the basis of assessment of internal and external factors, none of the Unit has found indications of Impairment of its Assets and hence no provision is considered necessary.

6. Short Term Borrowings

a. The Company has been sanctioned working capital limit of Rs.400,000 by Consortium Bankers (SBI Lead Bank). The sanctioned limit includes fund based limit of Rs.50,000 and non fund based limit of Rs.350,000.

b. The interest rate payable on fund based limit is linked to SBI 1 year MCLR Rate. [ Interest rate payable as on 31.03.2018 is 8.15% p.a. (8.25%) ].

c. The amount utilised is repayable on demand. Utilisation as on 31.03.2018 is Nil (Nil).

d. The above sanction limit is secured by hypothecation of Current Assets of the Company.

11. Confirmation of Balances

Letters requesting confirmation of balances have been sent in respect of Trade Receivables, Trade Payables, Advances and Deposits. Wherever replies have been received, reconciliation is under process and provisions / adjustments are made wherever considered necessary.

12. Labour Disputes

In respect of Labour matters, as the matters are yet to be adjudicated, the liability, if any, is not ascertainable. However, such liability is not expected to be material.

13. Excise Duty

“Excise Duty - Others” represents incremental provision of Excise Duty on Finished Goods, Excise Duty on Sale of Scrap, etc.

14. Consequent to introduction of Goods and Service Tax (GST) with effect from 1 July 2017, Excise Duty is no longer leviable on manufacture of goods and hence is not part of Gross Turnover w.e.f 1 July 2017.

15. Segment Reporting

Ministry of Corporate Affairs vide Notification no. 463 (E) dated 5 June 2015 as amended has exempted the Companies engaged in Defence Productions from the requirement of Segment Reporting.

16. Retention Sales

The Value of Retention Sales (i.e., Goods retained with the Company at the Customers’ request and at their risk) included in Gross Turnover during the year is Rs.76,400 (Rs.104,791).

Out of the above the Value of Ex-work Sales is Rs.37,110 (Rs.93,526).

17. Foreign Exchange Exposure

Pursuant to the announcement of the ICAI requiring the disclosure of “Foreign Exchange Exposure”, the major currency-wise exposure as on 31 March 2018 is given below. [Foreign Currencies are shown in Lakhs] (Previous year figures are shown in brackets).

* includes exposures relating to outstanding Letters of Credit and Capital Commitments.

During the FY 2017-18, the Company has not entered Forward Contracts to cover Foreign Currency fluctuations in respect of Firm Commitments. There are no outstanding Forward Contracts as on 31.03.2018.

18. Disclosure relating to CSR Expenditure

a. Gross amount required to be spent by the Company during the FY 2017-18 is Rs.3,475 (Rs.2,972).

b. Amount spent during the FY 2017-18 :

Above expenses includes CSR Administration Overhead of Rs.65 (Rs.129) which is grouped under Employee Benefit Expenses.

19. Non Cancellable Operating Lease Disclosure :

a. As a Lessor :

The future minimum Lease Rent Receivable

The company has Leased out few portion of Land to different organizations under non-cancellable operating Lease. The leases have various terms, escalation clause, lease renewal rights etc. On renewal, the terms of the lease are renegotiated.

The company has not recognized any income as contingent rent.

b. As a Lessee :

The future minimum Lease Rent Payable

The company has taken land on lease under non-cancellable operating Leases. The leases have various terms, escalation clause, lease renewal rights etc. On renewal, the terms of the lease are renegotiated.

The company has not recognized any expenses as contingent rent.

20. Chennai Unit was affected by floods during December 2015. Insurance policy taken by the company with United India Insurance Company Limited covers flood related losses. An amount of Rs.1,581 (Rs.1,000) was received as final settlement & has been recognised in statement of profit and loss. In addition, an amount of Nil (Rs.32) was received towards claim settlement wrt scrap items.

21. Dividend not recognised at the end of the reporting period

The directors have recommended a final dividend of INR 0.40 (INR 1.05) per share [represents absolute figure].

The proposed dividend is subject to approval of shareholders in the ensuing Annual General Meeting and if approved would result in cash outflow of approximately of Rs.11,750 (including Dividend Distribution Tax).

22. Figures in brackets relate to Previous years.

23. All figures in financial statement are rounded off to nearest Lakhs unless otherwise mentioned.

24. The standalone Ind AS financial statements were approved for issue on 29 May 2018 by the Board of Directors.

* Represents amount of Nil (INR 7,763) [represents absolute figure] which is rounded off.

d. All transactions dealt with related parties are on arm’s length basis. In respect of loan to subsidiary (BELOP) refer note “g” below.

e. All Outstanding balances are Unsecured. All Outstanding balances (Other than loan) is repayable in cash within next 6 months. For Outstanding balance of loans refer note “g” below.

f. The Company has entered into an Agreement with BELOP in April 2013 to temporarily fund the amount of Rs.10,416 [Rs.26,040 less Rs.15,624] for enabling BELOP to make payment towards ToT for XD-4 II Tubes, pending receipt of balance amount from MoD. As on 31.03.2018, an amount of Rs.9,851 (Rs.9,503) has been paid to BELOP, out of which an amount of Rs.7,109 (Rs.6,401) has been received from MoD. The balance amount of Rs.2,742 (Rs.3,102) has been shown under Other Financial Assets -Non Current. (Refer Note 9).

As per the Agreement, an amount of Rs.221 (Rs.273) has been recovered during the financial year from BELOP towards the cost of funds.

g. Loans to Related Parties

1. The Company has entered into an agreement with BELOP in July 2015 to temporarily fund its Working Capital requirement to the maximum extent of Rs.5,000 which was fully disbursed by 31.03.2016 and an amount of Rs.1,872 is outstanding as on 31.03.2018. As per the terms and conditions :

i) The balance amount will be repaid in quarterly installments with effect from July 2016.

ii) Interest will be charged on the outstanding loan amount, on monthly basis, at BEL’s rate of yield on its deposits.

2. The Company has entered into an agreement with BELOP in August 2016 to fund a Term Loan of Rs.4,600 out of which Rs.1,531 has been disbursed as on 31.03.2018. As per the terms and conditions :

i) The principal amount will be repaid in 36 equal installments with effect from August 2019.

ii) Interest will be charged on the outstanding loan amount, on monthly basis, at BEL’s rate of yield on its deposits or the interest rate yield on a five year Government of India Bond, whichever is higher.

3. ** Loan outstanding does not include Rs.63 (Rs.70) adjusted on account of loan given to subsidiary (BELOP) at below market rate.

h. Management Contracts including deputation of Employees

Two Official of BEL has been deputed to BELOP (Subsidiary) and Eight Officials of BEL have been deputed to BEL-THALES Systems Limited (Subsidiary) and their Salary and Other Costs is paid by BELOP and BEL-THALES System ltd. respectively during the year as per terms and conditions of employment.

i. Transaction with Government and Government Related Entities

As BEL is a government entity under the control of Ministry of Defence (MoD), the company has availed exemption from detailed disclosures required under Ind AS 24 wrt related party transactions with government and government related entities. However as required under Ind AS 24, following are the individually significant transactions :

1. Buyback of 11945469 (13828771) number of Shares during FY 2017-18.

2. 151745884 (120028420) number of Bonus Shares were Issued in the FY 2017-18.

3. An amount of Rs.42,221 (Rs.44,735) was Paid as Dividend during the FY 2017-18.

In addition to the above, around 85% (90%) of the Company’s Turnover, around 99% (76%) of Trade Receivables and around 84% (70%) of Customer’s Advance is with respect to government and government related entities.

j. Investment in Equity with respect to BELOP includes fair valuation of loan.

Level 1 : Level 1 hierarchy includes Financial instruments measured using quoted prices.

Level 2 : The fair value of Financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity specific estimates.

Level 3 : If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. This is the case of unlisted equity shares.

3 Valuation technique used to determine Fair Value :

a. LIC Investment - (Level 2)

Based on valuation report of the Scheme provided by LIC.

b. Mana Effluent Treatment Plant Ltd - (Level 3)

BEL has invested in equity securities of Mana Effluent Treatment Plant Ltd. which is an unlisted company. The Company’s cost of investment in Mana Effluent Treatment Plant Ltd is only Rs.5 (out of issued Share Capital of Rs.163). The company has opted for Net Asset Value method for fair valuation.

NOTE 9

Financial risk management

i) Risk Management framework and policies

The Company is broadly exposed to credit risk, liquidity risk and market risk (fluctuations in exchange rates, interest rates and price risk) as a result of financial instruments.

Board of Directors has the overall responsibility for the establishment, monitoring and supervision of the Company’s risk management framework. The Board has set up a Risk Management Committee, for this purpose, which is responsible for developing and monitoring the risk management policies. The Company has an established Risk Management Policy that outlines risk management structure and provides a comprehensive frame work for identification, evaluation, prioritization, treatment of various risks associated with different areas of finance and operations.

The company has a centralized Treasury function which is responsible to undertake appropriate measures to mitigate financial risk in accordance with the policies and procedures formulated by the Board. Hedging transactions are undertaken by a team with appropriate skills and experience in consultation with an external expert. The Company does not trade in derivatives for speculation.

ii) Market Risk

Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

The Company’s activities expose it primarily to the financial risks of changes in foreign exchange rates and interest rate movements (refer to notes below on currency risk and interest risk).

Currency Risk

BEL is exposed to foreign exchange risk arising from foreign currency transactions primarily relating to purchases and sales made in foreign currencies such as US Dollar, Euro, Great Britain Pound and Swiss Franc. Foreign exchange risk arises from existing and future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Company’s functional currency (INR).

The Company has a Board approved currency risk management policy implemented by a Risk Management Committee that reviews the Company’s exposure to this risk on a regular basis. The Risk Management Policy recommends hedging upto 50% of the open foreign currency exposure. However the decision to enter into a hedging arrangement is made by the Risk Management Committee based on the relevant data inputs and the advice of the external specialist consultant retained for this purpose.

The Company’s export proceeds are realized mostly by remittance into an Export Earners Foreign Currency account (EEFC) which is then utilised for payments to be made in foreign currency, thereby mitigating the currency risk on exports. Imports to the extent of around 25% (30%) of annual foreign exchange outgo are not covered by the Exchange Rate Variation (ERV) clause in the related customer contract and hence are open to currency risk. These imports are benchmarked as per the policy and appropriate decision on covering the risk is taken on a case to case basis. The Company’s currency risk policy advocates forward contract hedging for mitigating risk wherever required.

As on 31 March 2018, there are no outstanding forwards contracts. The company has not entered into any forward contracts during the financial year 2017-18.

Foreign Currency Sensitivity

The sensitivity of profit or loss to changes in the exchange rate arises mainly from foreign currency denominated financial instruments. The sensitivity to variations in respect of major currencies is given below. This analysis assumes that all other variables remain constant.

Interest rate risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing instruments will fluctuate because of fluctuations in market interest rates.

Variable Rate Borrowing :

The company has been sanctioned a Term Loan of Rs.10,000 on 31.03.2017 [Outstanding as on 31 March 2018 is Rs.6,666 (Rs.5,000) ]. Interest payable on this loan is based on SBI’s Minimum Commercial Lending Rate - MCLR. [SBI is eligible to reset the interest charged on yearly basis]. There would be an additional outflow of cash of Rs.67 if the interest rate goes up by 1% and saving of Rs.67 in cashflow if interest rate goes down by 1%. There would however be no impact on profit as the interest component is capitalized since the borrowing is towards capital expenditure.

In addition the company has been sanctioned a working capital limit of Rs.400,000. The sanctioned limit includes fund based limit of Rs.50,000 and non fund based limit of Rs.350,000. The fund based limit of Rs.50,000 has not been utilised during the year [ Outstanding as on 31 March 2018 is nil (31 March 2017 is Nil) ]. The outstanding balance as on 31.03.2018 with respect to non fund based limit is Rs.175,565 (Rs.165,376). The interest is payable based on SBI’s 1 year MCLR rate. As the borrowing is nil there is no impact on likely change in interest rates.

Equity Price Risk

The company’s exposure to equity price risk is negligible as its equity investment (other than in subsidiaries and Associate) is negligible.

iii) Liquidity Risk

Liquidity Risk is the risk that a Company could encounter if it faces difficulty in meeting the obligations associated with financial liabilities by delivering cash and other financial asset or the risk that the Company will face difficulty in raising financial resources required to fulfill its commitments. The Company’s exposure to liquidity risk is very minimal as it has a prudent liquidity risk management process in place which ensures maintaining adequate cash and marketable securities to pay its liabilities when they are due. To ensure continuity of funding, the Company has access to short-term bank facilities in the nature of bank overdraft facility, cash credit facility and short-term borrowings to fund its ongoing working capital requirements and growth needs when necessary.

The Company meets its liquidity requirement mainly through internally generated cash flows which is monitored centrally by treasury. There is an established process of rolling cash forecasts from various operating units which form the basis for mapping expected cash inflows, to meet the liabilities.

iv) Credit Risk

Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Company. Credit risk arises from credit exposures from customers, cash and cash equivalent with banks, security deposits and loans.

The credit risk of the Company is managed at a corporate level by the risk management committee which has established the credit policy norms for its customers and other receivables. Significant amount of trade receivables are due from Government / Government Departments, Public Sector Companies (PSUs) consequent to which the Company does not have a credit risk associated with such receivables. In case of non Government trade receivables, sales are generally carried out based on Letter of Credit established by the customer thereby reducing the credit risk.

In a few cases credit is extended to customers based on market conditions after assessing the solvency of the customer and the necessary due diligence to determine credit worthiness. Advance payments are made against bank guarantee which safeguards the credit risk associated with such payments. Impairment losses on financial assets (representing mainly liquidated damages leviable for delayed deliveries and other disallowances) have been made after factoring contractual terms, etc and other indicators.

The cash and cash equivalent with banks are in the form of short term deposits with maturity period of upto 1 year. The Company has a well structured Risk Mitigation Policy whereby there are preset limits for each bank based on its net worth and earning capacity which is reviewed on a periodic basis. The Company has not incurred any losses on account of default from banks on deposits.

The credit risk in respect of other financial assets is negligible as they are mostly due from government department / parties.

Loan of Rs.3,420 (Rs.4,445) is outstanding [as on 31.03.2018] from BELOP [100% subsidiary company]. The subsidiary company has been regular in repayment of its dues (Interest and Principal) and no credit risk is expected in terms of repayment of the loan amount.

v) Capital Management

The Company’s Capital Management objective is to maintain a strong capital base to provide adequate returns to the shareholders and ensure the ability of the company to continue as a going concern. The Company has a conservative approach for raising capital through debt but reserves the right to leverage this alternative at an appropriate time to fuel growth and maintain optimal capital structure.

As part of this overall objective, the company has expanded capital base by issuing bonus shares in financial year 2015-16 & 2017-18 and bought back shares in financial year 2016-17 & 2017-18 [Refer Note 16]. The Company has a well defined Dividend Distribution Policy which lays the framework for payments of dividend and retention of surplus for future growth and enhancing shareholders wealth. The company has borrowed an amount Rs.10,000 from Bank for construction of quarters. [Outstanding as on 31 March 2018 is Rs.6,666 (Rs.5,000) ] [Refer Note 18 & 20]. The Company has been sanctioned borrowing limits with banks to the tune of Rs.400,000.

NOTE 10

Critical estimates and judgments

While preparing the financial statements, management has made certain judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.

Judgments made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements and Estimates that have a significant risk of resulting in a material adjustment are as under :

i) Research and Development Expenditure - Accounting Policy No. 10 - (Refer Note No. 5)

Developmental expenditure incurred with respect to No Cost No Commitment (NCNC) Projects and Joint developmental projects which are not fully compensated by the development partner are carried forward till the completion of project.

ii) Estimation of defined benefit obligation - Key actuarial assumptions - (Refer Note No. 21)

iii. Estimation of provision for warranty claims - (Refer Note No. 21)

Warranty provision computation involves estimation of average warranty cost based on trend based analysis. If the estimations made varies, the same will impact the expense recognised.

iv. Pay Revision Provision - (Refer Note No. 21)

Pay Revision in respect of Non executive is due with effect from 01.01.2017. Provision in respect of revised pay has been made based on a reasonable estimate of expected liability for the period 01.04.2017 to 31.03.2018 during the financial year 2017-18.

v. Recognition of Revenue - (Refer Note No. 23)

Percentage-of-completion method involves estimation of Stage of completion based on actual costs incurred to the estimated total costs expected to complete the contract. If the estimations made varies, the same will impact the Revenue recognised.

NOTE 11

Recent accounting pronouncements

A. Ind AS 115- Revenue from Contracts with Customers :

On 28 March 2018, Ministry of Corporate Affairs (“MCA”) has notified the Ind AS 115, Revenue from Contracts with Customers. This standard shall apply for accounting periods beginning on or after 1 April 2018. The standard permits two methods of transition.

1. Retrospectively to each prior reporting period presented in accordance with Ind AS 8, accounting policies, changes in accounting estimates and errors.

2. Retrospectively with the cumulative effect of initially applying the Standard recognised at the date of initial application.

The Company will adopt this standard on 1 April 2018 retrospectively with the cumulative effect of initially applying the Standard as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) of the accounting period. The company is evaluating the effect of this amendment on the financial statements.

B. Appendix B to Ind AS 21, Foreign currency transactions and advance consideration :

On 28 March 2018, Ministry of Corporate Affairs (“MCA”) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 to Ind AS 21 (The Effects of Changes in Foreign Exchange Rates) with effect from 1 April 2018. This amendment clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date when an entity has received or paid advance consideration in a foreign currency. The Company is evaluating the effect of this amendment on the financial statements.

Corporate Information

The accompanying financial statements comprise the financial statements of Bharat Electronics Limited (the Company). The Company is a public company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. Bharat Electronics Limited’s shares are listed on two recognised stock exchanges in India. The registered office and principal place of business of the Company is located at Bengaluru, Karnataka, India.

The Company is a public sector enterprise under the administrative control of the Department of Defence Production, Ministry of Defence. Bharat Electronics Limited manufactures and supplies electronic equipment and systems to defence sector. Other than defence sector, the Company has also got a limited presence in the civilian market.