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Company Information

Home » Market » Company Information

BGR Energy Systems Ltd.

Sep 18
37.15 +0.10 (+ 0.27 %)
 
VOLUME : 13175
Prev. Close 37.05
Open Price 37.45
TODAY'S LOW / HIGH
37.00
 
 
 
37.80
Bid PRICE (QTY.) 0.00 (0)
Offer PRICE (Qty.) 0.00 (0)
52 WK LOW / HIGH
18.95
 
 
 
65.10
Sep 18
37.30 +0.20 (+ 0.54 %)
 
VOLUME : 72870
Prev. Close 37.10
Open Price 37.10
TODAY'S LOW / HIGH
36.90
 
 
 
37.95
Bid PRICE (QTY.) 0.00 (0)
Offer PRICE (Qty.) 0.00 (0)
52 WK LOW / HIGH
19.00
 
 
 
65.35
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Market Cap. ( ₹ ) 269.16 Cr. P/BV 0.23 Book Value ( ₹ ) 163.37
52 Week High/Low ( ₹ ) 65/19 FV/ML 10/1 P/E(X) 0.00
Bookclosure 24/09/2015 TTM EPS ( ₹ ) -9.03 Div Yield (%) 0.00
NOTES TO ACCOUNTS
You can view the entire text of Notes to accounts of the company for the latest year
Year End :2018-03 

A. COMPANY OVERVIEW

BGR Energy Systems Limited (‘the Company’) is a public limited company incorporated under the provisions of the Companies Act, 1956. Its equity shares are listed on Bombay Stock Exchange (‘BSE’) and National Stock Exchange (‘NSE’).The Company is a manufacturer of capital equipments for Power Plants, Petrochemical Industries, Refineries, Process Industries and undertakes turnkey Balance of Plant (‘BOP’) and Engineering Procurement and Construction (‘EPC’) contracts for Power plants. The Company has been achieving its objectives through its five business units: Power projects, Electrical projects, Oil and Gas equipment, Environmental engineering and Air Fin Coolers.

1.A.(i). Cochin Project: The end client of Cochin Port Road Connectivity Project viz., Cochin Port Road Company Ltd., (SPV of NHAI) terminated the contract on May 28, 2007. Consequently, the end client encashed BGs for a value of Rs.1270 lakhs furnished by the company on behalf of MECON - GEA (JV). The main contractor viz., MECON - GEA (JV) contested the termination of the contract. The disputes after having been reviewed by the Dispute Review Board, have been determined through arbitration. The Arbitral Tribunal disposed off the matter and pronounced the award on 27.12.2015 and a sum of Rs 2673 lakhs was awarded to the JV. The recoverable amount of Rs 1654 lakhs grouped under loans and advances is covered by the arbitral award. Cochin Port Road Company Ltd., (SPV of NHAI) has challenged the award, before the Honourable Delhi High Court and is pending for adjudication.

1.b.(ii). Tuticorin Project: The end client of Tirunelveli - Tuticorin Port Connectivity Project viz., Tuticorin Port Road Company Ltd (SPV of NHAI) terminated the contract and encashed BGs for aggregate value of Rs.2652 lakhs and the same were restituted as per orders of the High Court of Madras (Madurai Bench). The disputes, including termination of contract, were reviewed by the Disputes Review Board and recommendations were granted in favour of the JV. Tuticorin Port Road Company Ltd (SPV of NHAI) challenged the recommendations before the Arbitration Tribunal.The JV and NHAI are exploring a settlement and hence arbitral proceedings remain suspended. In view of these facts, the company has identified a sum of Rs. 83 lakhs C83 lakhs) as at March 31, 2018 as recoverable advances from the end client through the JV and is grouped under other loans and advances.

Trade receivables includes retention amount of Rs.128063 lakhs (Rs. 128760 lakhs) which, in accordance with the terms of the contracts were not due for payments as at March 31, 2018.

The Company has sought confirmation of balances of major trade receivables. In cases where letters of confirmation have been received from parties, book balances have been reconciled and adjusted, if required. In other cases, balances in accounts of trade receivables have been taken as per books of account.

a) Term loan includes Corporate loan of Rs.27355 lakhs Rs.34887 lakhs) from Syndicate Bank and is secured by the specified receivables of the Company and collateral security of the subsidiary companies and other companies\persons. The loan is repayable in 16 quarterly instalments starting from 01.07.2016.

b) The balance in project specific escrow,current and EEFC accounts have been netted off against respective project’s working capital loan accounts.

c) The Company has availed working capital loan from State Bank of India on sole banking basis for its Product business. The loan is secured by hypothecation of inventories, trade receivables and movable assets of the capital goods segment of the Company. The loan from State Bank of India is further secured by First charge on land property at Panjetti Village, Tiruvallur Dist, Tamilnadu , and second charge on the fixed assets of the Company.

d) The Company has availed contract specific working capital loans from State Bank of India, IDBI Bank, Punjab National Bank, Syndicate Bank, Vijaya Bank, Indian Bank, Indian Overseas Bank , Corporation Bank, Allahabad Bank, Bank of India, Andhra Bank, Central Bank of India, Axis Bank, ICICI Bank, Kotak Mahindra Bank Ltd, Export Import Bank of India, Union Bank of India and The Karur Vysya Bank Limited. These loans are secured by hypothecation of inventories, trade receivables and movable current assets of the respective contracts. The participating banks share the securities on pari-passu basis.

Disclosure under the Micro, Small and Medium Enterprises Development Act, 2006.

On the basis of confirmation obtained from suppliers who have registered themselves under the Micro, Small and Medium Enterprise Development Act, 2006 (MSMED Act, 2006) and based on the information available with the Company, the following are the details:

As required under Section 135 of Companies Act 2013, the company is required to spend Rs.138 Lakhs (Rs.221 lakhs) towards Corporate Social Responsibility (CSR) activities. Expenses incurred during the year is Rs.84 Lakhs C16 Lakhs) and no provision is made for balance amount during the financial year 2017-18.

2. EMPLOYEE BENEFITS

As per Ind AS -19 “ Employee Benefits”, the disclosure of employee benefits are given below:

Defined benefit plan and other long term employee benefits:

Gratuity plan

The Company operates gratuity plan wherein every employee is entitled to the benefit equivalent to fifteen days salary last drawn for each completed year of service. The same is payable on termination of service or retirement whichever is earlier. The benefit vests after five years of continuous service.

The estimates of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors. The discount rate has been chosen by reference to market yields on Government bonds. The above information is certified by an actuary.

The overall expected rate of return on assets is determined based on the market prices prevailing on the date applicable to the period over which the obligation is to be settled.

Sensitivity analysis of significant actuarial assumptions

Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate and expected salary increase. The sensitivity analysis below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The results of sensitivity analysis is given below

While one of the parameters mentioned above is changed by 100 basis points, other parameters are kept unchanged for evaluating the defined benefit obligation. While there is no change in the method used for sensitivity analysis from previous period, the change in assumptions now considered are with reference to the current assumptions.

The applicable Indian statutory tax rate for fiscal 2018 and fiscal 2017 is 34.61%.

3. EXCEPTIONAL ITEMS

Exceptional item represents net write off of Rs.1119 Lakhs, being the amount of Rs. 8010 Lakhs paid, towards BG encashment by a client, after adjusting available provision of Rs.6891 Lakhs.

Fair value of mutual fund and equity investments is based on quoted price.

For loans and advances fair value is determined using discounted cash flow.

4. RISK MANAGEMENT STRATEGIES

Financial risk management:

The Company’s activities exposed to market risk, credit risk and liquidity risk. The company’s senior management oversees the management of these risks.

Market risk

Market risk is the risk of loss of future earnings or fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign exchange rates and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables. The company is exposed to market risk primarily related to foreign exchange rate risk (currency risk), interest rate risk and the market value of its investments. Thus the Company’s exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies.

Foreign currency risk

The Company has entered into various contracts in several currencies and consequently the Company is exposed to foreign exchange risk through its sales, services and purchases from suppliers in various foreign currencies. The Company holds derivative financial instruments such as foreign exchange forward contract to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the rupee and foreign currencies has changed substantially in recent years. The fluctuations in exchange rate may have an impact on Company’s operations.

For the year ended March 31, 2018 and March 31, 2017, every percentage point depreciation / appreciation in the exchange between the INR and USD, has affected the Company’s incremental operating margins by Rs. 177 lakhs (Rs. 188 lakhs) approximately 0.50% each.

The Sensitivity analysis is computed based on the change in the income and expenses in the foreign currency upon conversion into functional currency, due to exchange rate fluctuations between the previous reporting and the current reporting period.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates to the Company’s long-term debt obligations with floating interest rates.

As at the reporting date the Company’s interest - bearing financial instruments were as follows:

Interest rate sensitivity

Fair value sensitivity for fixed rate instruments

The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the company does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore a change in interest rates at the reporting date would not affect profit or loss.

Cash flow sensitivity for variable rate instruments

An decrease / increase of 50 basis points in interest rates at the reporting date (31.03.2018) would have increased / (decreased) equity and profit by Rs.1057 Lakhs

Commodity price risk

The Company is affected by the price volatility of certain commodities. Its operating activities require the ongoing purchase of Steel, Cement and other materials. Due to the significantly increased volatility of the price of the raw material, the Company also entered into various purchase contracts for supply of Steel, Cement & other material. However the Company has escalation clause in most of their client contracts for variation in the price of commodities.

Equity price risk

The Company’s listed securities are susceptible to market price risk arising from uncertainties about future value of the investment securities.

At the reporting date, the exposure to listed securities at fair value was Rs. 90 lakhs. An increase / decrease of 10% on the BSE Market index could have an impact of approximately Rs. 9 lakhs on the OCI or equity attributable to the Group.

Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments.

Trade receivables

Outstanding customer receivables are regularly monitored and any major export shipments to customers are generally covered by letters of credit. The maximum exposure to the credit risk at reporting date is primarily from trade receivables amounting to Rs.404913 Lakhs.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is limited as the Company generally invests in banks and financial institutions with high credit ratings. Other financial instruments includes primarily investment in fixed deposits.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank borrowings.

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:

Collateral risk

The Company has pledged part of its short-term deposits of Rs. 46216 lakhs to fulfil the security requirements for the contractual obligations. As at 31 March, 2018, 31 March, 2017 the fair values of the short-term deposits pledged were Rs. 46216 lakhs and Rs. 52018 lakhs respectively.

5. LEASES

Operating Leases

The Company has taken various residential / commercial premises, land and plant & equipment under cancellable and non-cancellable operating leases. These lease agreements are normally renewed on expiry. The future minimum lease payments in respect of non-cancellable leases are as follows:

* Excludes interest, penalty and self assessment tax paid.

** (1) Out of Service tax demand, for a sum of Rs. 24,482 lakhs (Rs. 24,482 lakhs) (excludes interest, penalty and self assessment tax paid), the Company has filed appeal before the Customs Excise and Service Tax Appellate Tribunal.

** (2) For a sum of Rs. 12,105 lakhs (excludes interest, penalty and self assessment tax paid), the Company is in the process of filing appeal before the Commissioner (Appeals-1) and Customs Excise and Service Tax Appellate Tribunal.

6. RELATED PARTY TRANSACTIONS

Subsidiary companies

i. Progen Systems and Technologies Limited

ii. BGR Boilers Private Limited

iii. BGR Turbines Company Private Limited

iv. Sravanaa Properties Limited

(Information provided in respect of revenue items for the year ended March 31, 2018 and in respect of assets / liabilities as at March 31, 2018)

7. Contracting Income includes an Income of Rs. 71452 lakhs C 18550 lakhs) as per terms of the agreement entered into by the Company with Hitachi, Ltd., Japan (HTC), Hitachi Power Europe GmbH, Germany (HPE) and the company’s Joint Venture companies viz., BGR Boilers Private Limited and BGR Turbines Company Private Limited.

8. During the FY 2016-17, termination notice has been served by one of the client on the Company for termination of the contract by exercising the right of termination as per of the terms of the contract on the ground of ‘Employer’s Convenience’. Pending discussions with the client, the Company has not made any adjustments to the carrying amount of advance received from customers and trade receivables.

9. IMPAIRMENT OF ASSETS

a. Cash generating units :

There is no impairment loss in cash generating units and hence no provision was made in the financial statements.

b. Other assets :

The Company has made a provision of ‘ Nil (‘ Nil) in the books of accounts towards impairment of other fixed assets based on the technicial valuation.

10. In respect to construction contracts, cost of material includes value added tax, central sales tax, works contract tax and service tax, up to the introduction of GST.

11. PROVISIONS

a) The company has made a provision / transfer of Rs. 5144 lakhs, (Rs. 4278 lakhs) towards warranty and contractual obligations on the products supplied / contracts executed by the company during the year. The expenses on account of provision for warranty is grouped under other expenses.

b) Movement in provisions

12. DISCLOSURE ON SPECIFIED BANK NOTES (SBNS)

During the previous year 2016-17, the Company had specified bank notes or other denomination notes as defined in the Ministry of Corporate Affairs notification G.S.R 308 (E) dated March 31, 2017 on the details of Specified Bank Notes (SBN) held and transacted during the period from November 8, 2016 to December 30, 2016, the denomination wise SBNs and other notes as per the notification is given below.

* For the purposes of this clause, the term “Specified Bank Notes” shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O 3407 (E), dated the 8th November, 2016.

13. Previous year figures

Figures of previous year have been regrouped / rearranged, wherever required to conform to the current year presentation.