DIRECTORS’ REPORT  - 2015-16.

To,

The Shareholders,                                  

Mazagon Dock Shipbuilders Limited.

Dear Shareholders,                                                                             

     On behalf of the Board of Directors I have great pleasure in presenting the 83rd Annual Report on the performance and achievements of Mazagon Dock Shipbuilders Limited for the financial year ended 31 Mar ‘16 together with Audited Statement of Accounts and Auditors Report.

1.                 IMPORTANT EVENTS

1.1             Undocking of a   submarine “Kalvari” on Pontoon was undertaken on 06 Apr’ 15  at  the hands of Hon’ble Raksha Mantri Shri Manohar Parrikar & Chief Minister of Maharashtra, Shri Devendra Fadnavis.

1.2            One  Destroyer Class Ship “Vishakhapatnam” , was launched on  20 Apr ‘15 at the hands of Mrs Minu Dhowan, w/o Admiral     R K Dhowan, Chief of Naval Staff.

1.3            The Keel of  another  Destroyer class ship  was laid on 04 Jun’ 15 by RAdm R K Shrawat,CMD.

1.4            A Make in India workshop-cum-seminar was organized on 22 Jun ‘15 on Vendor Development & Import substitution in warship building at Mumbai.

1.5            Contract for Know How Provider (KHP) for Technology Upgradation & Capability Enhancement (TUCE) for facilitating integrated construction of the next generation Frigate ships signed.

1.6            A Destroyer Class ship “Kochi” was delivered to the Indian Navy on 30 Sep’15.

1.7            Submarine “Kalvari” was launched on 28 Oct ’15 by Smt Ritu Shrawat w/o  RAdm R K Shrawat .

1.8            150 years completion of Ritchie Dry Dock was celebrated on 17 Dec ‘15.

1.9            A Tribal village Kharade in Maharashtra was adopted under CSR on                  29 Dec ‘15.

1.10       A  Mini Marathon was organized by MDL at Mumbai on 24 Jan ’16.

1.11       Parliamentary Committee on Estimates visited MDL on 04 Feb ‘16.

1.12       MDL participated in the International Fleet Review Exhibition  held at Vishakhapatnam on 06 and 07 Feb ‘16.

1.13       MDL participated in the Make in India – 2016 Exhibition held at Mumbai during        13 to 18 Feb ‘16.

1.14       54 Toilet blocks built at Valsad Gujarat under Swachh Vidyalaya Campaign  were handed over to schools on 21 Mar ‘16.    

2.                 FINANCIAL HIGHLIGHTS

Your company achieved the highest ever VOP of Rs.4121.65 crore in FY 2015-16  an increase of 14.73% over the previous year’s VOP of Rs. 3592.60 crore. The Profit before tax is Rs. 957.33 Crore for 2015-16 as against Rs.746.00 Crore in the previous year, an increase of 28.33%. Your Company has thus achieved the highest ever VOP, PBT, PAT and the Networth .

2A  CONSOLIDATED FINANCIAL STATEMENT

Section 129(3) of the Companies Act,2013 requires your Company to prepare Consolidated Financial Statement [Consolidation of Financial Statements of  Mazagon Dock Shipbuilders Ltd (MDL) & its Associate Company , Goa Shipyard Ltd (GSL)] alongwith Standalone Financial Statements. Your Company has prepared Consolidated Financial Statements of MDL & GSL, placed together with the Standalone Financial Statements and forms part of this Report. 

3.                 CAPITAL STRUCTURE

         The Authorized Equity Share Capital and Preference Share Capital of the Company as on 31 Mar ‘16 stood at Rs. 200 Crore and Rs. 123.72 Crore respectively. The Paid-up Equity Share Capital as on 31 Mar ‘16 remained at Rs.199.20 Crore. During the year there was no increase in the Authorized or Paid up Equity Share Capital.

4.                  DIVIDEND

The Board of Directors recommended a Final  Dividend at 100 % on the Equity Share Capital amounting to Rs. 199.20 Crore including the  interim dividend amounting to Rs.100 Crore paid for the FY 2015-16.

5.                  CONTRIBUTION TO CENTRAL EXCHEQUER

Your Company’s contribution during 2015-16  to the Central Exchequer by way of Income Tax, Service Tax, Custom Duty, Excise Duty & Dividend was         Rs. 551.75  crore.

6.                 OPERATIONS FOR THE YEAR 2015-16  VIS-À-VIS THE PREVIOUS TWO YEARS

6.1     The results of the Company’s operations for the year 2015-16 and the comparative figures for the previous two years are summarized below:

6.2   Income Distribution for the year 2015-16 as against previous year is summarized as under:-

DIVISION-WISE PERFORMANCE

7.       SHIPBUILDING DIVISION

7.1   The Shipbuilding Division of your Company recorded a Value of Production of          Rs. 1068.71  crore for 2015-16 as against Rs.1141.68 crore of the previous year.

7.2   MDL is  handling three Shipbuilding  projects for the Indian Navy comprising of seven  destroyers and four frigates. A Destroyer has been delivered during the year. Another Destroyer is at an  advanced stage of sea trials and is expected to be delivered in the near future  . A Destroyer Class Ship was launched during the  year and the launch of another ship  is tentatively planned in the middle of F.Y. 2016-17 and  construction of  another Destroyer  is in progress. The contract for construction and delivery of frigates was signed during the previous year.  Preparatory work and detailed design activities for the same are  in progress.

8.       SUBMARINE & HEAVY ENGINEERING DIVISION

    8.1     The Value of Production on account of Submarine Construction was Rs.3052.94 crore for 2015-16 as against Rs.2450.92 crore of the previous year.

8.2     Six Scorpene class submarines are presently in series Production at MDL. A Boat was launched successfully during the year and is undergoing Sea Trials prior commissioning.   The concurrent construction of all six Submarines are progressing well.

8.3   State-of-the-art Crew Training Centre “EKLAVYA” has been set up in the premises of your company for conducting of Crew Training.

9.                MAZDOCK MODERNISATION PROJECT

9.1 Your Company successfully completed the augmentation of its infrastructure through Mazdock Modernisation Project (MMP) which comprises of  a new Wet Basin, Heavy Duty Goliath Crane, Module Workshop, Cradle Assembly Shop, Store Building and associated ancillary structures. All these facilities have been put to use for production.

9.2 To enhance its existing facilities, your company has planned augmentation of Extension of Goliath Crane Rail Track,  in order to effectively optimize the utilization of Goliath Crane. The work at site is near completion. This will facilitate access of Gantry Crane for lifting/shifting of heavy components directly from vessel/barges.  Feasibility study for Deepening of a Dry Dock to facilitate smooth docking of deeper draft vessels is also in progress. The tendering process for award of works contract is expected to commence shortly.

10.     OTHER INFRASTRUCTURE PROJECTS

10.1  The new Submarine Assembly Workshop is being developed and is in an advanced stage of construction. It comprises of two bays and is equipped with two levesl of EOT cranes as well as semi-goliath crane. The entire project along with office building and other ancillary structures is expected to be formally commissioned in the first quarter of the next financial year. 

11.     RESEARCH & DEVELOPMENT

11.1 Your company had promulgated an  R&D policy in the year 2013 and the        R & D Plan  for five (05) years from 2014-15 to 2018-19 depicting the R&D activities that the Company intends to take up during the period. As per this macro-level plan for five financial years, approximately 15 projects are intended to be taken-up and completed. The R&D initiatives have taken a two pronged approach. There would be in-house projects as well as projects in collaboration with academic institutions of repute like IIT, NID, etc. The thrust of the R&D is to develop practices and processes that can reduce build periods of warships and submarines. Further ‘Industry best practices’ will also be imbibed, customized and adopted for the key processes of warship building.  A R&D team headed by Director (Shipbuilding) has been set-up and General Manager (Design) is also one of the members in the team. Eight specialists groups consisting of 40 executives are functioning under GM(Design)  with domain area of Structural analysis, Ergonomics & HFE, Noise & Vibration Control, RCS Management, Propulsion System Integration, Materials and HVAC.  

11.2    The amount spent on R&D during the year ended       31 Mar ‘16 amounts to Rs. 63.83 crores. The various projects undertaken under R&D have been elaborated in Appendix ‘F’.

12.     MASTER DEVELOPMENT PLAN (MDP)

12.1   Your company has appointed a consultant for drawing up a Master Development Plan (MDP) for the entire organisation.  The MDP is envisaged to provide specific recommendations for optimum utilization of yard’s real estate for its core functions apart from leveraging maximum Floor Space Index (FSI) for future development of the yard.  The future development will be carried out in a planned manner based on the recommendations and road map that would be drawn-up by the consultant.

13.    INDIGENISATION & “MAKE IN INDIA”

13.1 Your Company took early lead and set-up a dedicated ‘Department of Indigenisation’ in Nov ‘15, to provide focused impetus to the Hon’ble Prime Minister’s “Make-in-India” initiative. The department has drawn up a Road Map for Indigenization, which is part of MDL’s Long Term Perspective Plan, for the next 15 years. The indigenization Road Map spells out in detail MDL’s efforts to encourage indigenization, provides a flow chart depicting the entire process of indigenization and also includes a list of systems/equipment/items along with the necessary technical details that MDL intends to indigenize. A separate link for “Make-in-India" has been created in the Company’s  Website, which has all the relevant details as described above.

13.2 Some of the major items  taken up for indigenization  include Gas Turbine & Gear Box; Ship Installed Chemical Agent Detection System; Pressure Reducing Stations; Welding Electrodes for Submarines and Magazine Fire Fighting System. Indigenization of Sonar Dome has been successfully completed with the assistance from a consortium of M/s BEL, Bengaluru,  R&D Engineers, Pune and   a private sector manufacturer.

13.3    It is pertinent to note that your Company has continuously strived to enhance the indigenous content in the successive deliveries of ships and submarines. It is evident from the fact that the indigenous content has increased from 42% in ships built in 1990’s to approximately 59% in ships currently being built. Further, the indigenization content is expected to further increase to about 72%-75% in the future ships. Similarly, MDL plans to achieve indigenization content to the tune of 47% (of the maximum possible indigenisable content) in the construction of the Submarines.

13.4   Your company has also introduced an Indigenization Clause in all tenders where in bidders have to indicate their progressive indigenization plan.  Further, provision to give purchase preference for higher indigenous content  is also part of this new commercial procedure.

13A     CHANGE OF NAME OF THE COMPANY

During the year 2015-16, your company has changed its name from ‘Mazagon Dock Limited’ to ‘Mazagon Dock Shipbuilders Limited’ w.e.f. 28 May ‘15 . This change was effected to ensure that your company’s business activities are correctly reflected in the name of the Company.

14.         AWARDS AND RECOGNITIONS

14.1 Three (03) Quality Control Circle teams participated in ICQCC-2015 held at Gyeongnam, South Korea from 05 Oct’15 – 08 Oct ‘15. Prabal QC of EY-Hull and Rainbow QC of P&A Shop (SY) got Gold Illumination Award, and Phoenix QC of SB-Design (structural) got Silver Illumination Award.

14.2   12 Quality Circle teams of MDL participated in National Convention on Quality Concepts (NCQC-2015) hosted by M/s Quality Circle Forum of India, at Chennai from 18 Dec’15 to 21 Dec ‘15. 9 QC teams won Par Excellence (1st Rank) Awards and     03 QC teams won Excellent (2nd Rank) Awards.

14.3   Twenty Eight (28) Quality Circle teams of MDL  participated in 29th Annual Chapter Convention on Quality Concepts (CCQC-2015) hosted by M/s Quality Circle Forum of India, Mumbai Chapter at IES College, Bandra (W), Mumbai on 12 Sep ‘15 and won 21 GOLD and 07 SILVER Awards.

14.4   Your company was adjudged ‘Runners Up’ in the BML Munjal Award for Business Excellence through Learning & Development.  The award is one of the most prestigious one in the field of Learning & Development organized by Hero Corp.

14.5   MDL half yearly Hindi Magazine ‘Jaltarang’ has been awarded ‘Kirti Purashkaar’ – 1st Prize in ‘B’ region by the H’ble President of India, Shri Pranab Mukherjee on the occasion of ‘Hindi Diwas’ on 14 Sep ‘15.

14.6           SPECIAL AWARDS WON BY MDL QC TEAMS:

14.6.1                   Prabodhan Quality Circle of SB-PSC Department has won the Special Award for “Best Case Study of Convention”.

14.6.2                   Ganaji Quality Circle of Production & Assembly Shop (SY) has won the Special Award for “Best QC Team of the Day”.

14.6.3       Shri Vikas Gogate of Rainbow Quality Circle, SB-Welding has won the 1st Rank in the Poem Competition in CCQC-2015.

14.6.4         Shri Rajendra Bhagat of Phoenix Quality Circle, SB-Design-Structural has won the Ist Rank in the Poster Competition in CCQC-2015.

15.       FUTURE OUTLOOK

15.1    Your Company  continues to concentrate in meeting the demands of the Indian Navy in line with Maritime Capabilities Perspective Plan.  Substantial growth in the Value of Production of the Company is envisaged with the launching of a Destroyers and commencement of activities on production of  the Frigates. Your Company as a shipyard shall align itself to the indigenisation plan of the Indian Navy.

15.2 Public Private Sector Partnership : Your Company will be leveraging spare capacities available in the Private Sector within the country for liquidating MDL’s tasks in hand and for ensuring timely completion of projects. Outsourcing of mega blocks has already been initiated in this front and it is envisaged that this step will result in a win-win situation for the DPSU and the private shipyards. The outsourcing content is only likely to increase in the future, as MDL would be executing a number of projects concurrently.

15.3 In order to enhance productivity and meet the delivery timelines, the Company has undertaken steps to further augment the infrastructure and  up-grade technology.

15.4   MDL has spare facilities & capacity for fabrication of Pressure hull subsections. Based on the advice of MoD, preliminary studies for building additional submarines  is presently being progressed.

15.5 Through a Modernization project, MDL has augmented necessary infrastructure for submarine construction viz. New Submarine Section Assembly (SSA) shop, Cradle Assembly Shop (CAS) & New Wet Basin. For the ongoing Submarine Project , high level of skill has been imparted in MDL workforce and at the same time local vendors have been developed for complex and high quality construction. These skilled  workforce of MDL and vendors are ready to take on new challenges in submarine construction. Post infrastructure augmentation, MDL’s Submarine building capacity has been enhanced substantially.

15.6 Construction of two SSK submarines, refit & modernization of four SSK submarines and present construction of  ongoing submarine project  have enhanced MDL’s capability to handle construction of varied types of conventional submarines.  With sound knowledge in various aspects of Submarine construction and with the augmentation of submarine construction facilities, MDL has also positioned itself for the construction of additional submarines.

16.    SWACHH BHARAT INITIATIVES

16.1.  Your Company fully adheres to the Prime Minister’s call for Swachh Bharat movement so as to bring about lasting behaviour change. The Swachh Bharat initiative is being undertaken at four levels; i) within the shipyard, ii) adjacent areas, iii) building of toilets for schools and iv) rural areas.

16.2.  Your Company has initiated instilling cleanliness awareness among employees through posters, signage, boards, standees, and essay & painting competitions. Shramdaan is being carried out by all employees of the Shipyard daily for half an hour. Identification and removal of obsolete records, e-waste, heavy debris, repairs of drainage lines, renovation of toilet blocks, procurement & regular use of road sweeping vehicle is also undertaken regularly. 1450 mtrs. of internal road has been repaired and 350 mtrs. of road newly constructed.

16.3.  Your Company has appointed  NGOs who are carrying out daily cleaning of adopted roads surrounding MDL. The local post office and police chowky situated within MDL surroundings have been refurbished. A garden has been developed and beautified opposite MDL main gate. NOC has been obtained for providing galvanum sheds for all shops of Babu Genu Market. Action is in hand to construct three toilet blocks at Jay Bhim Nagar and Lakda Bandar slums and the same will be completed  shortly.

16.4.  Construction of 54 toilet blocks comprising of 63 WC and 158 urinals has been already completed, which was taken up as part of Swachh Vidyalaya Mission. As part of rural efforts, we have adopted villages Kharade and Changyacha Pada in Thane District to transform them into a clean “model village” by providing clean drinking water, setting renewable energy and construction of individual toilets

17.     QUALITY CIRCLES

17.1  Your company continues its participation in Quality Circles competitions.  During the year your company’s quality control Teams participated in (1) ICQCC-2015 held at South Korea (2) NCQC-2015 held at Chennai  (3) CCQC-2015 held at Mumbai won many accolades for the Company.

18.              5S (Work Place Management System)

18.1   5S-Work place management system was successfully implemented in 02 workshops/Stores (EY-ALY Workshop and SB-Electrical & Electronics stores) for the Year 2015-16. Your Company is committed to progressively implement 5S all over the Yard.

19.           ISO 9001:2008 Quality Management Systems:

19.1   The 1st Surveillance Audit as per ISO 9001:2008 Quality Management Systems (QMS) of Shipbuilding Division for the scope of Design, Development, Construction and Servicing of Warships, Merchant Ships and Floating crafts was verified on 04 & 05 Feb ‘16 by M/s IRQS and “Certificate of Approval to the Management System has been recommended to be continued”. The ISO 9001:2008 QMS certificate for Shipbuilding Division is valid up to 22 Apr ‘18.

19.2   The ISO Standard was revised from ISO 9001:2008 to ISO 9001:2015 (fourth edition) on 04 Sep ’15.  IRQS gave a presentation on 18 Mar ’16. All the ISO Lead Auditors, Internal Auditors and core team members of the company will be trained according to the revised standard.

19.3       The 2nd surveillance audit of ISO 9001:2008 QMS was successfully conducted with ’NIL NCs’ on 18 and  19 May ’15 for “Design, Development and Construction of Submarine”.

20.     Quality Week-2015

20.1    Quality Week was observed in the company from 07 to 11 Dec ‘15. Chief Guest Shri Shasi Nath Mishra, Head IRQS inaugurated the Quality week by lighting the lamp. He addressed all employees on Quality Management Systems and its advantages to the Manufacturing Industries. An additional Guest lecture by external faculty (M/s IRQS) was also arranged on 08 Dec ‘15 on ISO 9001:2015 (fourth edition) to spread awareness among MDL employees on this revised ISO standard.

20.2   During the Quality Week,  various competitions like Essay, Slogan, Quiz, Model display by QC teams, Internal QC competitions and  walk by employees in various shops where 5S is implemented were held. All employees enthusiastically participated in the Quality week programme.

21.     INFORMATION TECHNOLOGY

21.1   The upgrade of SAP to enhanced pack 6 has been completed.  Security information and Event management (SIEM) have been implemented for centralized log management of IT Systems, which was also the MOU Target for FY 2015-16.  Desktops having Windows XP (310 nos) have been replaced with new Desktops to comply with the security recommendations.

22.     ENVIRONMENTAL DEVEOPMENT

 22.1     Your company understands the importance of environmental development, Sustainable Development and Energy Conservation.  Harnessing of solar energy and implementation of energy saving measures were the two areas where your company had focused in the report year.

22.2      Your company installed 350KWp Grid interactive Solar Power Plant on the roof top of one of the work shops.  By installing this Power Plant, your company has achieved  a cumulative capacity of 740 KWp Solar Power Plant in the company premises.  Your company has also given a commitment to achieve 1.85 MWp by end of FY 2018-19.  With an installed cumulative capacity of 740 KWp, the  Solar Power Plant will generate 10 lakhs units of energy per annum.  The unit cost of energy generated by Solar Power Plant is much less than the cost of energy purchased from the power distribution company.

22.3   Energy saving is  the other area where your company has focused.  To identify various energy saving measures that can be implemented, your company has carried out an energy audit in the reporting year. 

22.4  To achieve energy saving, your company has commenced replacement of  existing conventional lighting system into LED Lighting system.  4000 Nos of 110 V  60W incandescent lamps used during the construction of the ships, have been replaced by 110V, 9W LED lamps.  As a result, your company could achieve annual saving of 9,79,200 units of energy.

22.5   Your company has also fulfilled statutory requirements of Central and State Pollution Central Board in all spheres of operation.

23.     INDUSTRIAL RELATIONS

23.1 Industrial relations  during the year  were cordial and harmonious.  There were no man-hours lost on account of industrial conflict. In the absence of a recognized Union, efforts were made to resolve issues of mutual concern through deliberations with the Unions on the Bargaining Council.  A supplementary MoS was signed with the 5 (Five) Unions on the Bargaining Council for extending the Pension benefit to the Non-Executives.

24               WELFARE ACTIVITIES

Your Company values its human resources the most. To keep their moral high, apart from statutory welfare measures, your company extends several other welfare activities.

i)       Life Insurance Coverage:

Your Company has arranged various Group Savings Linked Insurance Schemes, which provide financial assistance in case of untimely death (accidental/illness) of an employee while on duty.  Besides, Group Personal Accident Insurance Scheme has also been in place, which provides 24 hours coverage for compensation in the event of an accident of an employee resulting in death or permanent / partial disability. 

ii).      Medical Scheme:

All the serving employees, including their dependent family members, are covered under the Medical scheme.  Hospitalization claims of around         Rs. 19.95 Crore were disbursed towards treatment to the employees and their dependent family members during the FY 2015-16.

iii)   Other Welfare Activities:

Your Company also provides a number of welfare measures viz., On site Dispensary and Occupational Health Centre, Hospitalization, Wellness Centre, Onsite Gym & Club, Uniform, Monsoon Gears, thoroughly subsidized Canteen Facility, Scholarship to Unemployed Wards of Employees etc.

25.     POST RETIREMENT MEDICAL SCHEME (PRMS)

25.1   In order to provide medical facilities to the retired employees and their spouses, your company has Post Retirement Medical Scheme in place. The same is being regulated through Group Mediclaim policy taken from an Insurance Company. Your Company has an annual insurance coverage to the extent of Rs. 2.00, 3.00 & 4.00 Lac for self and spouse in case of Executives.  In addition to the above, there is a provision for reimbursing additional hospitalization expenses involving Seven (7) critical diseases.  In case of Non-executives, onetime coverage of Rs. 2.5 lac for self and spouse (each) is also extended.  In addition, Executives are also entitled to Outpatient/Domiciliary Medical Expenses to the tune of Rs. 15000/-, 20000/- & 25000/- every year.

26.     EXECUTIVES’ SUPERANNUATION (PENSION) SCHEME:

26.1   Your Company has introduced a Defined Contributory Superannuation Pension Benefit Scheme to the Executives w.e.f. 01 Jan ‘07.The company contributes 7% of basic pay + DA towards the corpus of the pension scheme for each  eligible executive of the company w.e.f. 01 Jan ‘07.

27.     HUMAN RESOURCE DEVELOPMENT

27.1  Your Company has been putting emphasis on the overall development of Human Resources and is committed to continue its relentless efforts in updating the competencies of its executives through exposure to various Learning and Development programs organized by premier management institutions viz IIM, XLRI & ISB and through sponsoring function based Conferences / workshops. Besides, in order to ensure smooth supply of skill sets for Company’s requirement and shipbuilding industry, various training programs viz. trainings of Trade Apprentices under the Apprentices Act, 1961, Graduate Apprentices, Engineering Diploma holders and Marine Engineering students at the Company’s run Apprentice Training School, have regularly been organized.  For adequate and uninterrupted supply of skillsets towards facilitation of ‘Make in India’, your company has increased the capacity of its Apprentice Training School by  inducting 200 additional Trainees.

27.2  This year, a program on ‘Leadership and Team Building’ was organized by IIM Kozhikode for senior level executives.  48 executives have benefitted.

27.3 A customized Two (2) weeks Management Development Program was also organized by IIM, Indore for both senior and middle level executives from 26 Oct ‘15 to 07 Nov ‘15 as part of Vision 2024, where 30 executives participated.

27.4  The Performance Management System (PMS) already in place for executives, has been providing meaningful inputs for individual development as well as  taking care of their promotional aspiration as well.

28.              GRIEVANCE REDRESSAL COMMITTEES FOR SCs/STs/WOMEN

28.1  Weaker sections of the society are given adequate protection in the form of just and equitable treatment at the hands of employer.  To ensure the same, a separate "Grievance Redressal Cell" has been constituted for SC / ST employees. A quarterly meeting of representatives of SC/ST is held with Director (CP&P) wherein grievances related to SC/ST are discussed and resolved.

28.2 Your company has formulated a policy on ‘Sexual Harassment of Women’ at workplace in accordance with Sexual harassment of women at work place (Prevention, Prohibition and Redressal) Act 2013. Pursuant to the said policy, an Internal Complaint Committee (ICC) has been constituted to deal with Sexual Harassment of women at workplace.  In the FY 2015-16, no case was filed before the said committee.

29.     RESERVATION OF POSTS FOR SCs/STs/OBCs

29.1 Your company has been observing all the Government directives and instructions issued from time to time on reservation of posts for SCs / STs / OBCs.  All the rosters of  SC / ST / OBC / PWD are maintained, which is inspected by the respective Liaison Officer from time to time and perused by the SC/ST Unions also . Detailed statistics regarding the total number of employees, number of women employees, recruitment made during the calendar year ‘15 and the representation of SCs / STs / Ex-servicemen as on 01 Jan ‘16 are given at Appendices A, B & C to this Report.

30.       OFFICIAL LANGUAGE IMPLEMENTATION      

30.1 Your Company has been adhering to the directives issued by the Govt. of India from time to time for extensive use of Hindi for official purposes.  To monitor and enhance the progressive use of Hindi, quarterly meetings were regularly held under the chairmanship of Chairman & Managing Director.  The sub-committees for Hindi implementation under the chairmanships of respective Directors have also been constituted in each Division.  These sub-committees meet every quarter. This has helped effective and progressive use of Hindi language.  To incentivize  extensive use of Hindi, a Reward scheme is in place. Workshops on Hindi were conducted every quarter for developing awareness and use in the working knowledge of Hindi.  Hindi software viz. Shivaji and Unicode have been installed in almost all Personal Computers. To develop an awareness for Hindi language among the employees, Digital Boards have been installed at the entrance of Main Buildings and at conspicuous places for displaying "Aaj ka Shabd" & “Suvichar". This effort has helped employees to understand the meaning of Hindi words used in day to day working and to learn and use the ‘Quote’ of great personalities.

30.2 On the occasion of Hindi fortnight, ‘Hindi Diwas’ and “Hindi Pakhwada” were celebrated from 07 Sep to 28 Sep ‘15.  Various competitions on Hindi viz. Typing, Translation, Essay Writing, Debate, Poem and the most popular Singing competition were organized.  In these competitions, a large number of Executives and Non-Executives  participated enthusiastically.  The winners were felicitated by the Chairman & Managing Director. Hindi books worth  Rs. 50,000/- were purchased for the library during the FY 2015-16.   

31.   VIGILANCE  ACTIVITIES

31.1     As an extended arm of the Central Vigilance Commission, the Vigilance Department takes appropriate action to carry out preventive and punitive vigilance. It promotes transparency and fairness in various activities including procurement, outsourcing, recruitment etc.  The Vigilance Department also recommends systemic improvement and ensures that integrity is maintained in all domains of the Company’s functioning.

31.2     During the period 01 Apr ‘15 to 31 Mar ‘16, Vigilance Department received 46 complaints. Investigation of 15 complaints were pending from 2014–15. Investigation were completed for 36 complaints and investigation is under progress for the rest. 

31.3   As part of Preventive Vigilance activities CTE type (i.e. as conducted by Central Technical Examiner, CVC), intensive examination of Purchase / Subcontracts / Outsourcing orders are taken to verify compliance to prescribed procedures and statutory      norms / regulations.  During the period 01 Apr ‘15 to      31 Mar ‘16, six (06) such CTE type examinations were carried out.

31.4   Surprise Spot checks were also conducted and 08 nos. Spot checks / inspections have been conducted and suggestions/corrective measures were recommended for system improvement.  The pending Disciplinary proceedings against delinquent executives were closely monitored by Vigilance Department. As a preventive measure Property Returns of a sizeable population of executives were scrutinized every year.

31.5   Vigilance Awareness Week was (VAW) observed from 26 Oct ‘15 to            31 Oct ‘15  during which In-house Vigilance journal ‘ SUCHARITA’ Vol. XVIII was released and in the same function CMD MDL administered oath to Directors, Executive Directors and Senior Executives. All other employees were administered oath by respective HOD or senior most executive.  A speech by eminent guest speaker Shri Edassery Sebastian, Director/ Financial Advisory of Deloitte TTI Ltd, Bangalore, on the subject was arranged during the Week. A Suppliers’ Meet of contractors / suppliers along with Vigilance & Sr. executives of MDL was also arranged on  28 Oct ‘15.The following activities were conducted during the Vigilance Awareness Week:

·         Slogan & Essay completions on vigilance related topics in Hindi, Marathi & English were conducted for employees and their family members  to spread Vigilance Awareness. A poster making competition on vigilance matters was also held during the week. Additionally, Slogan, Essay & Extempore competitions were organized amongst students of class 9th and 10th standards  of a nearby school namely Rosary High School & the response was very good.

·         An online Quiz contest on Vigilance related topics was held.

·         The winners in all the above competitions were awarded with prizes at a prize distribution ceremony  held on 24 Feb ‘16.

32.    BUSINESS PROMOTION

32.1   MDL participated in three International & six National Exhibitions during the year. The exhibitions immensely helped in showcasing MDL’s capabilities and technical strength in warship building and submarine construction. The exhibitions were successful in projecting the image and capabilities of India in the Defence Production Sector in general and Warship / Submarine building capabilities in particular.

32.2   During the exhibitions,  MDL displayed posters and translites  on indigenization and also issued a booklet on MDL’s indigenization programme. This effort was noted and appreciated by the local/ indigenous material suppliers at all the exhibitions.

33.  CONSERVATION OF ENERGY

33.1 Information required under Section 134(3)(m) of the Companies Act 2013,  pertaining to Conservation of Energy, Technology Absorption and Foreign Exchange earnings and outgo is given in Appendix ‘D’ to this Report.

34.   PARTICULARS OF EMPLOYEES

Particulars of information in respect of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(i) of the Companies Act (Appointment and Remuneration of Managerial Personnel) Rules 2014 is Nil

35.   PUBLIC GRIEVANCE COMMITTEE

35.1   Your Company constituted a Public Grievance Committee in MDL headed by an officer of the rank of General Manager. The Committee examined and disposed grievances based on their merit.

36.   CORPORATE GOVERNANCE

Your Company is complying with the Guidelines on Corporate Governance for CPSEs 2010 issued by the Department of Public Enterprises (DPE) .  Necessary disclosures have been made in this regard in the Corporate Governance Report. A separate report on Corporate Governance as stipulated under the Guidelines forms part of the Annual Report along with the Certificate from the Practising Company Secretary, confirming compliance of conditions of Corporate Governance is placed at Appendix E .

37. CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY DEVELOPMENT

37.1   Corporate Social Responsibility and Sustainability Development is Company’s commitment to its stakeholders to conduct business in an economically socially and environmentally sustainable manner.

37.2.  Your Company is committed to undertake various programs for integrating social and business goals in a sustainable manner to create social impact through inclusive growth activities to bring about visible impact on people in particular and society at large. In this regard, your Company has adopted Corporate Social Responsibility and Sustainability Policy as part of its compliance of Section 135 of the Companies  Act, 2013 and the Rules framed there under.

37.3   Your Company has spent Rs. 1169.00 lac towards CSR activities during FY 2015-16 and an amount of Rs. 147.00 lac remained unspent as a number of projects / programs   could    not          commence         due       to various reasons viz. Non-receipt of requisite approval from Govt.,
Non-submission  of Scope of Work by NGO and Delay in selection of NGOs etc.

37.4   The CSR committee has certified that the implementation and monitoring of the CSR Policy is in compliance with CSR objectives and policy of the Company.

37.5  The annual report on CSR containing the particulars specified in the Companies Act, 2013 is placed at Appendix H.

38.     MANAGEMENT DISCUSSION AND ANALYSIS REPORT

38.1   The Management Discussion and Analysis Report on the operations of the Company in line with the guidelines issued by the DPE is provided in a separate section and forms a part of this Report placed  at Appendix F.

39.   IMPLEMENTATION OF RTI ACT, 2005

39.1  Under the Right to Information (RTI) Act, 2005, to facilitate provision of information to the citizens requesting for the same, your Company has evolved necessary structure by designating Officers as Assistant Public Information Officer, Public Information Officer and Appellate Authority for the purpose of implementation of the Right to Information Act in the Company. During the year, the Company received 143 applications and 8 appeals. The information / replies sought for were duly furnished. Quarterly and Annual Return for the year to be submitted to Central Information Commission (CIC) had been duly filed and uploaded in RTI - MIS updation system.

40.     CHANGES IN THE BOARD

40.1   Shri Prem Kumar Kataria Ex-Addl FA(K) & JS and Bharat Khera Ex Joint Secretary (NS), MOD  ceased to be a Members of the Board w.e.f. 30 Sep ’15 and 27 jul 2016 respectively The Board placed on record its appreciation for the valuable support, contribution and guidance provided by them during their tenure with MDL.

40.2  The Board welcomed   the  appointment  of part time non official (Independent)  directors,  Prof. S.L. Bapat and Mrs. Usha Sankar w.e.f. 27 Nov. ‘15 and VAdm Sanjeev Bhasin (Retd) w.e.f 07 Jan ’16 and part time official (Govt.) Director Shri Vijayendra, Joint Secretary (NS), NOD w.e.f. 04 Aug 2016.

41.      EXTRACT OF ANNUAL RETURN

 41.1   The extract of Annual Return in the form No.MGT 9 in terms of Section 92(3) of the Companies Act 2013 and Rule No.12(i) of the Companies (Management & Administration)Rules 2014 has been appended as Appendix ‘G’ to this report. 

42.     DIRECTORS’ RESPONSIBILITY STATEMENT

42.1   As required under Section 134(5) of the Companies Act, 2013 the Directors’ Responsibility Statement is given as under, that:-

(a)       In the preparation of the Annual Accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b)       The Directors had selected such accounting policies and 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 the financial year and of the Profit and Loss of the company for that period;

(c)       The Directors had taken proper and sufficient care for the 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 had prepared the Annual Accounts on a going concern basis;

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

43.     STATUTORY AUDITORS AND THEIR REPORT 

43.1  The Comptroller and Auditor General of India under Companies Act 2013, appointed M/s. Ford, Rhodes, Parks & Co., Mumbai, as the Statutory Auditors of the Company for the year 2015-16. The Auditors have certified the Accounts and their Report is placed as a part of Annual Report.

43.2 The statutory auditors observations on internal financial control based on recording of transactions during FY 2015-16 have been addressed by the Company and Company’s internal financial control over financial reporting were operating effectively as on 31 Mar’ 16.

44.     COMMENTS OF THE COMPTROLLER & AUDITOR GENERAL OF INDIA

44.1 The Comments of the Comptroller and Auditor General of India under     Section 143 of the Companies Act 2013 have been received and placed as a part of Annual Report.

45    ACKNOWLEDGEMENTS

45.1 Your Directors wish to place on record their sincere appreciation for the consistent support, co-operation and guidance received by the Company from various Ministries of the Government of India especially the Ministry of Defence, Department of Defence Production, the Indian Navy, Greater Mumbai Municipal Corporation, Mumbai Port Trust, Principal Controller of Defence Accounts (Navy), the Departments of Customs, Income Tax, Excise, Service Tax and Sales Tax. The Directors also express their gratitude to the clients, who have extended patronage to the Company. Your Directors also place on record their appreciation for the assistance extended by the Company’s Bankers viz. State Bank of India and Canara Bank, the valuable advice rendered and co-operation extended by the Statutory Auditors, M/s. Ford, Rhodes, Parks & Co., Mumbai, and the officers of the Principal Director of Commercial Audit and Ex-officio Member of the Audit Board, Bengaluru. Your Directors also have pleasure in placing on record their appreciation for the hard work and commitment of each and every employee of the Company.

FOR AND ON BEHALF OF THE BOARD OF DIRECTORS

       RAdm  R K SHRAWAT, AVSM (Retd)            Chairman & Managing Director

Place: Mumbai

Date: 30 Aug’ 16

APPENDIX 'A' TO THE DIRECTORS REPORT

STATEMENT SHOWING POSITION REGARDING REPRESENTATION OF SCHEDULE CASTES AND SCHEDULE TRIBES IN VARIOUS CATEGORIES OF POST ON

01 JAN ‘15 AND 01 JAN ‘16

* Includes Board level executives

APPENDIX 'B' TO THE DIRECTORS REPORT

PARTICULARS OF RECRUITMENT MADE DURING THE CALENDAR YEAR 2015. THE NUMBER FILLED BY MEMBERS OF SC’S / ST’S, REASON FOR SHORTFALL AND STEPS TAKEN TO IMPROVE THE POSITION

* Suitable SC, ST candidates were not available, hence Reserved vacancies could not be filled. These were carried forward to the year 2016.

APPENDIX 'C' TO THE DIRECTORS REPORT

STATEMENT SHOWING REPRESENTATION OF EX-SERVICEMEN IN GROUP ‘C’ & ‘D’ AND NUMBER OF WOMEN EMPLOYEES AS ON 01ST JAN ‘16

APPENDIX 'D ‘' TO THE DIRECTORS REPORT                   

ADDITIONAL  INFORMATION UNDER SECTION 134(3)(m) OF THE COMPANIES ACT 2013.

1.   CONSERVATION OF ENERGY

1.1 Expenditure incurred by your Company on environmental upgradation, pollution control and energy conservation during the year 2015-16 was as under:

2.       TECHNOLOGY ABSORPTION, ADAPTION AND INNOVATION

2.1.    ThE Destroyer Class of ships under construction have several new design features incorporated in the original design. These ships have significant stealth features and have changes in weapon payload. It incorporates modern weapons and sensors having advanced information warfare suite, an auxiliary control system with sophisticated power distribution architecture and modular crew quarters.

2.2.    Future Destroyers constructed at MDL would have more advanced weapon and sensor package.  

2.3.      MDL is in the process of changing over from its traditional construction wherein Yard will graduate from 40-55T structural hull units to significantly pre-outfitted 250T mega-blocks for future projects.  A new improved design by IHQ MOD (N) / DND and detailed design tailored to Integrated Construction with the help of a modern experienced shipyard (Know How Provider, KHP) are being arranged for ensuring this change over. 

3.     Foreign Exchange Earnings  and Outgo. The foreign exchange earning during the year is NIL. The information in respect of foreign exchange outgo is contained in paras 2.23.3 of Notes to the Accounts

Appendix ‘ E ’ to Directors Report

1.                 CORPORATE GOVERNANCE

1.1     PHILOSOPHY ON CORPORATE GOVERNANCE

Fairness, accountability, disclosures and transparency are the four strong pillars supporting the foundation of your Company’s philosophy of Corporate Governance. Responsible governance is imbibed in your Company’s work culture which has enabled it to achieve sustainable growth on its journey to continued success, thereby meeting stakeholder’s expectations.

Your Company is committed to sound principles of Corporate Governance with respect to all its procedures, policies and practices. Comprehensive disclosures, structured accountability in exercise of powers, adhering to best practices and commitment to compliance with regulations and statutes in letter as well as spirit have enabled your Company to enhance shareholder value. In fact, this has become an integral part of the way the business is done.

2.                 COMPOSITION OF BOARD OF DIRECTORS

The Board of Directors of the company as on 31 Mar ‘16 consisted of Chairman & Managing Director (CMD), four functional directors and one part time official director and three part time non official directors. The Directors as on 31 Mar ‘16 were as under:

2.1    WHOLE TIME DIRECTORS

RAdm R K Shrawat (Retd)         - Chairman & Managing Director

Cdr  P R Raghunath(Retd)        - Director (Shipbuilding)

Cmde   R Anand  (Retd)            - Director(Corporate Planning &  Personnel)    

Capt  R Lath (Retd)                   -Director (Submarine & Heavy Engineering)

Shri Sanjiv Sharma                   - Director (Finance) w.e.f 01 Jun ‘15

         Shri M Selvaraj- D(F)   retired on superannuation w.e.f. 31 May ‘15.

2.2    PART-TIME OFFICIAL DIRECTORS:

Shri Bharat Khera, Joint Secretary (NS), Ministry of Defence.

Shri Prem Kumar Kataria, Addl. FA (K) & Jt. Secretary, Ministry of Defence – upto 30 Sep ‘15

2.3            PART-TIME NON OFFICIAL DIRECTORS:

Prof. S.L.Bapat wef 27 Nov ‘15

Mrs. Usha Sankar wef 27 Nov ‘15

VAdm. Sanjeev Bhasin(Retd) wef 07 Jan ‘16

3.            ATTENDANCE  OF DIRECTORS IN THE MEETINGS OF BOARD AND SHARE HOLDERS

During the financial year ended 31 Mar ‘16 five meetings of the Board of Directors were held i.e. on 13 May ‘15, 15 Jul ‘15, 10 Sep ‘15, 19 Nov ‘15 and 12 Feb  ‘16. The Annual General Meeting was held on 04 Sep ‘15. Details of attendance of the Directors at the Board Meeting & Annual General Meeting during 2015-16 are given below:

SUB-COMMITTEES OF BOARD OF DIRECTORS

4       AUDIT COMMITTEE

4.1  The Audit Committee consisted of following Directors till 30 Sep ‘15:

Shri Prem Kumar Kataria           - Chairman

Cdr  P R Raghunath (Retd)       - Member

Cmde   R  Anand (Retd)                     - Member

4.2 The Board at its meeting held on 12 Feb ‘16 re-constituted the Audit Committee with the Independent Directors. It consisted of following Directors as on 31 Mar ‘16.

Mrs. Usha Sankar                      - Chairperson

Prof S.L.Bapat                          - Member

Cmde   R  Anand (Retd)          - Member

4.3   During the financial year ending 31 Mar ‘16, the Audit Committee met  four times i.e 14 Jul ‘15,  10 Sep ‘15, 19 Nov ‘15 & 08 Feb ‘16. The attendance of Chairman and Members of the Audit Committee in these meetings was as follows:-

4.4     The Terms of Reference to the Audit Committee, inter-alia, include the following:-

(a)       Oversee of the Company’s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible.

(b)       Recommend to the Board, the fixation of audit fees.

(c)       Approve payment to statutory auditors for any other services rendered by the statutory auditors.

(d)      Review the annual financial statements before submission to the Board for approval.

(e)       Reviewing performance of internal auditors, and adequacy of the internal control systems.

(f)        Discuss with internal auditors and / or auditors any significant findings and follow up thereon.

(g)      Discuss with statutory auditors before the audit commences, about the nature and scope of audit as well as post audit discussion to ascertain any area of concern.

(h)      Review the follow up action on the audit observations of the C&AG audit.

5.       Two Chartered Accountant firms have been appointed to conduct internal audit of specific areas of the company’s operations. These are in addition to the in-house Internal Audit department. Audit reports given by Internal Auditors were reviewed by Audit Committee and necessary directives were issued. The Company had initiated suitable actions on the said directions.

6.        PROCUREMENT SUB COMMITTEE (PSC)

6.1  The Procurement Sub Committee consisted of following Directors till 12 Feb ‘16:

RAdm R K Shrawat (Retd)                   - Chairman

Cdr P R Raghunath (Retd)                  - Member

Shri M  Selvaraj upto 31May ‘15         - Member

Cmde  R Anand (Retd)                       - Member

Capt  R Lath (Retd)                            - Member

Shri Sanjiv Sharma wef 01 Jun ‘15     - Member

6.2     The Board at its meeting held on 12 Feb ‘16 re-constituted the Procurement Sub Committee with the Independent Director. It consisted of following Directors as on 31 Mar ‘16.

        RAdm R K Shrawat (Retd)           - Chairman

Cdr P R Raghunath (Retd)        - Member

Cmde  R Anand (Retd)              - Member

Capt  R Lath (Retd)                  - Member

Shri Sanjiv Sharma                             - Member

Prof. S.L.Bapat In his absence Mrs. Usha Sankar or

Vice Admiral Sanjeev Bhasin (Retd)

6.3     The Procurement Sub-Committee (PSC) of the Board of Directors reviews and approves the procurement proposals as per the powers delegated by the Board. During the year PSC had 9 meetings. The minutes of the meetings of PSC are placed before the Board for information.

7.      HR & REMUNERATION COMMITTEE

7.1     The Board at its meeting held on 12 Feb ‘16 re-constituted the HR and Remuneration Committee with the Independent Directors. It consisted of following Directors as on 31 Mar ‘16.

a.  Prof. S.L.Bapat

b.  Mrs. Usha Sankar

c.  Vice Admiral Sanjeev Bhasin(Retd)

7.2     The HR and Remuneration Committee of the Board of Directors reviews proposals related to HR issues before the same are placed for approval of Board.

8.       INVESTMENT COMMITTEE

8.1     A Sub Committee of Board of Directors for investment of company’s short term surplus funds was constituted by the Board and the following Directors were the Members of the committee as of 31 Mar ‘16.

RAdm  R K Shrawat (Retd)                  - Chairman

Shri Sanjiv Sharma                             - Member 

Cmde  R Anand (Retd)                        - Member

8.2     The Committee has been delegated powers to invest short term surplus funds as per DPE guidelines and within the limits prescribed by the Board. The committee meets as and when the available surplus funds are required to be invested.

9.      COMMITTEE ON CORPORATE SOCIAL RESPONSIBILITY (CSR) AND SUSTAINABLE DEVELOPMENT (SD)

9.1   The CSR & SD Committee consisted of following Directors till 12 Feb ‘16:

RAdm  R K Shrawat (Retd)        - Chairman

Cdr  P R Raghunath (Retd)       - Member

Cmde  R Anand (Retd)              - Member

9.2     The Board at its meeting held on 12 Feb ‘16 re-constituted the  CSR & SD Committee with the Independent Directors. It consisted of following Directors as on 31 Mar ‘16.

Vice Admiral Sanjeev Bhasin(Retd) – Chairman

Prof. S.L.Bapat                                   - Member

         Cdr  P R Raghunath (Retd)                  - Member

         Cmde  R Anand (Retd)                        - Member

The CSR & SD committee oversees the CSR & SD activities and implementation in compliance with the Companies Act, 2013 and the DPE Guidelines on the subject.

10.     ANNUAL GENERAL MEETINGS

Details of last three Annual General Meetings are as follows:

11.     CODE OF BUSINESS CONDUCT AND ETHICS

The Board of Directors of your company has laid down a Code of Business Conduct & Ethics for all Board Members and Senior Management of the Company. The Board Members and Senior Management Executives have affirmed the compliance with the Code of Business Conduct and Ethics.

12.    WHISTLE BLOWER POLICY

The company has framed Whistle Blower Policy and the same has been approved by the Board.  The policy has been promulgated.

13.     RISK MANAGEMENT POLICY

Risk Management Plan framed by your Company has been approved by the Board of Directors and promulgated. It provides risk management implementation framework for MDL. Risk Management Plan, as a supporting document, establishes MDL's risk management philosophy, risk management policy, risk management strategy, risk management structure, risk categorization, risk assessment, risk treatment, risk monitoring, review and reporting.

Risks are identified and categorized. Identified risks are analyzed based on their assessed impact and likelihood. Risk treatment plan for high risks, perceived as per their composite risk index, is brought out and implemented. Risk occurrences are monitored to evaluate the effectiveness of the controls and treatment plan.

14.    REMUNERATION OF DIRECTORS

MDL being a Central Government Public Sector Undertaking, the appointment, tenure and remuneration of Directors of the Company is decided by the Government of India.  Part-time Non-official (Independent) Directors are paid only sitting fees for attending meetings of the Board of Directors and Committees thereof. The Independent Directors are paid sitting fees of Rs.15,000/- per meeting of the Board or Committee thereof attended by them.  In case more than one meeting of the Board or Committee thereof is held on the same day, the sitting fees payable is  Rs.15,000/- for the first meeting and Rs.10,000/- for every additional meeting on the same day attended by the independent Director.  The company does not pay any commission to its Directors.  Part-time official (Government) Directors are not paid sitting fees or any other remuneration.

15.    DISCLOSURE

15.1   There were no cases of non-compliance of applicable laws by the company and no penalties/strictures were imposed on the company by a Statutory Authority on any matter related to any guidelines issued by any Government during the last three years.

15.2   The company has complied with Presidential Directives issued by the Central Government.

15.3   There were no items of expenditure debited in books of Accounts, which are not for the purpose of the business.

15.4   The expenses incurred which are personal in nature and incurred for the Board of Directors and Top Management were NIL.

15.5   The company has not entered into any transactions with any Directors that may have potential conflict with the interest of the company at large.  The members of the Board, apart from receiving Directors’ remuneration (wherever applicable), do not have any material or pecuniary relationship or transaction with the company which in the judgment of the Board may affect independence of judgment of the directors.

 15.6  During the financial year 2015-16 NIL case was filed under Sexual Harassment of women at work place (Prevention, Prohibition and Redressal)       Act 2013.

16.        DECLARATION

As provided under the guidelines on Corporate Governance for CPSEs 2010 issued by Department of Public Enterprises, Government of India, it is hereby declared that all Board Members and Senior Management Executives had affirmed compliance with the code of conduct for Directors and Senior Management Executives of Mazagon Dock Limited, for the year ended 31 Mar ‘16.

                                                             RAdm  R  K  SHRAWAT, AVSM (Retd)   

     Chairman & Managing Director

Place : Mumbai

30 Aug’ 16CERTIFICATE

To

The Members

Mazagon Dock Shipbuilders Limited

          We have examined the compliance of conditions of corporate governance by Mazagon Dock Shipbuilders Limited (formerly known as Mazagon Dock Limited), for the year ended on 31 Mar ‘16, as stipulated in the Department of Public Enterprises (DPE) Guidelines on Corporate Governance for Central Public Sector Enterprises (CPSEs) 2010 issued by the Government.

          The compliance of conditions of corporate governance is the responsibility of the Management.  Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance.

          In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the aforesaid Guidelines on Corporate Governance.

          We state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the Management has conducted the affairs the Company.

For Ragini Chokshi & Co.

Company Secretaries

Sd/

Mrs. Ragini Chokshi

Partner            

CP No. 1436

FCS No. 1290

Tel: 22831120, 22831134

Place : Mumbai

Date :04 Aug’16

Appendix ‘ F

MANAGEMENT DISCUSSION AND ANALYSIS REPORT 2015-16

  The Management of your Company is pleased to present below its analysis on the Performance of the Company for the financial year 2015-16 and its vision for the future.

(A)      NATURE AND SCOPE OF THE SHIPBUILDING INDUSTRY

1.                 Your Company, incorporated in the year 1934, is a Public Sector Undertaking under the administrative control of the Department of Defence Production, Ministry of Defence, Government of India. The Company is predominantly in the defence shipbuilding segment catering to the needs of the Indian Navy.

1.1            Rapidly changing global geopolitical,  cross-border scenario and terrorism, require every country in the world to maintain strong defence capabilities. India’s geo-strategic location from the global perspective, its territorial borders of over 15000 kms and its coastline of about 7,500 kms make it critically important to keep defence preparedness up at all times and create requisite infrastructure that completely safeguard our national interests. From this perspective, the Government of India has remained committed to strengthening defence capabilities of the country.

1.2            Approximately 90% of India’s overall trade in terms of volume and 77% in terms of total value takes place through the sea.  The Indian ocean region has become the focus of strategic attention with instabilities and threats that can jeopardize economic activities.  A stronger Navy has become all the more imperative considering the security concerns of the region.

1.3            The Indian Navy has prided itself to be a builders Navy.  Your company has played a key role in fulfilling the blue water aspirations of the Indian Navy as well as a major indigenous builder of frontline warships and submarines.

1.4            Your company possesses unique capabilities for building conventional submarines.  Warship building industry requires very high capital investment, labour with exceptional skill sets and high technology to meet the strategic mission requirements of the Indian navy, the end-user of these combat platforms. The Merchant shipbuilding on the other hand is driven by market economy and by its very nature is highly volatile and cyclic in nature. There are host of variables that decides the trajectory that Commercial Shipbuilding traces. Macro and micro-economic developments at the global level nationally impact the shipbuilding arena. Extant Government  policies, taxation structure, oil prices, demand-supply matrix etc are some of the factors influencing global market for merchant ships. Warship building in contrast is primarily driven by the maritime security requirements of the nation and the threat perceptions that are current and futuristic. Warships are high-technology platforms that can engage with the enemy multi-dimensionally. Submarines are also an inevitable and important component in the fleet adding teeth to the blue water capability of the Navy. Defence technology as such is very dynamic in nature and to catch-up and keep pace with the technological advancement is indeed a real challenge. Construction of Naval platforms is inherently technology intensive and requires substantial investment of time, money and human resources.

1.5        Frontline warships like Frigates, Destroyers and Submarines typically have long gestation for build owing to its complexity. The design and procurement maturities available at the time of commencement of production is a key factor in the build period. Design of warships built by your Company are indigenously developed. Your Company has modernized the basic infrastructure and this affords handling of fully pre-outfitted grand assemblies paving way for practising global best practices like Integrated Construction. If follow-on ships that too with more number of vessels in a series are built, will essentially provide high take-off levels in terms of design maturity and availability of material and will definitely result in reduced build period. The Indian shipbuilding industry comprise of both public and private sector yards. The new Defence Procurement Procedure promulgated by the  MoD   envisions  more   private   participation  in  defence  production.  Your Company will need to step-up its multi-faceted capabilities to remain buoyant in a highly competitive environment.

1.6     Your company has a rich legacy of building world class hi-tech warships and have consciously adopted the motto of “Deliver quality ships on time”. The modernization program initiated by the Yard has been almost completed. The infrastructure upgrade now available has brought your Company into the league of yards that can handle mega blocks and adopt integrated construction. The modernized infrastructure is being gainfully leveraged for current build programs of Destroyer ships  and the Scorpene Class submarines.

1.7     Despite our inherent strengths, the Indian shipyards need to go a long way to graduate commercially and technically to the level of shipyards in developed nations. The best practices in the industry abroad are to be imbibed and ruthlessly implemented for ensuring long-term dividends.

1.8     Your Company as the leading defence shipyard in the country will remain poised to continue to cater to the maritime capability of our nation. With huge requirement for ships of various types to meet the requisite force levels of the Indian Navy, your Company is expected to be major player and contributor in the coming decades to enhance our blue water capability. Your company, therefore, will continue to make efforts to maintain the growth momentum by securing orders from its major customer, viz. the Indian Navy.

(B).  SWOT ANALYSIS

2.     STRENGTHS

2.1     Ability to design sophisticated vessels in-house: Your Company is the only defence public sector shipyard, capable of constructing conventional submarines. The personnel associated with the Submarine construction have already seen the learning curve and with the ToT from a leading European Shipyard, they are now adept with the nuances of submarine technology to global standards. This unique position gives the company an advantage over other defence shipyards in the future submarine induction plan of the Indian Navy.

2.2     Your Company is located at Mumbai, the commercial capital of India and the headquarter of the largest Navy and Coast Guard Fleet which facilitate close association with the customers for ready feedback to help and improve performance. Further, access to a host of ancillary industry in Mumbai is an added advantage.

2.3   The rich heritage and tradition of your company are the major drivers in its sustained position as the lead shipyard in warship construction, in the country. The number of ships built by the yard and the wide range of product-mix proves that your Company is a centre of excellence in the warship building arena.

2.4     Competent and Highly skilled human resource at all levels and strong management with ability to absorb and adopt improvements/new technologies: The industrious, highly skilled versatile workforce of the Company is capable of adapting to emerging changes in technologies. With increased outsourcing, we have been able to inject more young blood into the system and this step is envisaged to yield long-term returns in terms of availability of skilled manpower adept with warship and submarine building.

2.5     Fully computerized network covering the entire gamut of operations is enabling your company to monitor production activities closely and process other activities faster. Your Company has implemented SAP / ERP and other administrative and management reforms in tune with state-of-the-art practices in shipbuilding.

2.6     Your Company is certified with ISO 9001-2008 Quality Certificate.

2.7     A number of new initiatives have been embarked upon by the company to ensure overall improvement. Research and Development policy and plan have been promulgated. Your company has already tied up with academic institutions of repute for R&D projects. Industry  Academy participation is envisaged to exploit the knowledge bank available in these institutions for mutual benefit.

2.8  Good industrial relations.

2.9  Excellent in house capability for ship design, system integration and project management.

2.10  Long standing relationships with the main customer viz. Indian Navy.

3.       OPPORTUNITIES

3.1     Growing maritime defence needs of the country: With the increased thrust on maritime and coastal security, there will be good business opportunities for shipbuilding companies across the country, including your company.

3.2     Your Company as the lead shipyard for construction of frontline warships and submarines could be assured of a major chunk of the Indian Navy’s acquisition plan.

3.3     The submarine acquisition plan of the Navy lays emphasis on indigenization. Considering the high scope of technology transfer in the ongoing submarine construction programme, your Company will be front runner to win orders for additional submarine construction.

3.4     Modernization of the Yard usher in better capabilities to cut down build periods.

3.5     Emergence of private shipyards all around the coast provide an opportunity to enter into Joint Venture for non-core technologies and cut down the overall build time.

3.6     Coastal states are on the lookout to set up ship building infrastructure and will approach your Company considering its longstanding reputation.

3.7     SAP/ERP when used effectively should usher in sound business practices.

3.8     The spare capacities available in private and DPSUs could be utilized by way of outsourcing for current projects.

3.9   Your company can facilitate the ‘Make In India’ initiative promulgated by the GoI, for some of the critical ship-borne systems/ equipment in close liaison with OEMs.

3.10   There is export potential that could be leveraged for mutual benefit.

4.       WEAKNESSES

4.1     The land area available to the company is limited to 75 acres, which restricts operations of large scale shipbuilding.

4.2     The layout of production facilities, constrained by availability of limited land area, hinders optimized production flow.

5.       THREATS

5.1     The Defence procurement procedure adopted by the Government of India, which focuses on “Make Indian. Buy Indian”, has encouraged the domestic private sector to invest and participate in defence production.  Your company will have to prepare for an era beyond the “nomination” era as private sector ship builders would like the government to introduce competitive bidding for warship building. The new Defence Procurement Procedure promulgated by the MoD also encourages private sector participation in acquisition of defence assets.

5.2  Losing skilled manpower to private sector

5.3  Changing preference of defence customers by moving away from single source to multiple sources.

5.4     It may not be commercially viable to continue with telescopic designing of warship. Frozen design which ensures design and procurement maturities become inevitable for honoring contractual timelines and price-lines.

5.5     Stiff competition from established foreign players

There is stiff competition from various private sector shipyards in the international markets such as China, Japan and South Korea. Based on their stronger market positions, competitive labour cost, government supports and larger production capacities, these shipyards may compete vigorously on price. However, we believe that customers consider, among other things, the technical capabilities, quality and efficiency of vessels constructed by us.

C.    RISKS AND CONCERNS

6.   Risks and Concern are an integral part of the business of the Company and giving impetus to address these risks with appropriate risk management practices is the main focus. These risks can affect the operating performance, cash flows, financial performance, management performance and sustainability. Your Company has developed an appropriate risk management framework to strategize, monitor, identify, assess and mitigate risks that may potentially impact the Company’s performance and barriers to success.

The risks that may affect the Company include:         

6.1   The volatile nature of prices and non-availability of critical imported raw material in the international market coupled with exchange rate fluctuation, play adversely on the competitive edge of the Company. The exact prediction of timing and the price at which most economic buying can be resorted to has become highly volatile.

6.2  Meeting customers stringent and dynamic technical specifications:

Company’s aim is to achieve its customers stringent and dynamic technical specifications with innovative activities and improvements in processes, products, product applications, etc with technological excellence and expertise.

6.3    Horizontal and vertical integration of company’s activities with the activities of its major customers and suppliers is another area where management has continued its efforts during the year under review for better performance.

6.4   Timely Deliveries : Ensuring timely deliveries has been the main area of attention of Management. In order to expedite deliveries and cut down the incidence of contractual penalties and damages for delayed deliveries,  strategic decisions like outsourcing of some of the company’s operations to premier shipyards were resorted to in the non-core area of functioning of the Company wherever such facilities are cost effective and faster.

 (D)   CORPORATE INITIATIVES FOR ENSURING SUSTAINED PERFORMANCE AND     GROWTH

7.       INFRASTRUCTURE MODERNISATION

7.1    Your Company successfully completed the augmentation of its infrastructure through Mazdock Modernization Project (MMP) which comprises of the new Submarine Section Assembly Workshop,  new Wet Basin, Heavy Duty Goliath Crane, Module Workshop, Cradle Assembly Shop, Store Building and associated ancillary structures. Introduction of these facilities will augment the shipyards capacity & effectively reduce construction period of warships/Submarines.

The Company has already put all these facilities to intended use for production.

8.       INFORMATION TECHNOLOGY            

8.1   The company has institutionalized SAP / ERP to support its operations. The details are provided in the Directors’ Report.

9.      MARKETING AND BUSINESS DEVELOPMENT

9.1     The company has participated in various  Naval/ Defence related exhibitions in India as well as abroad in order to project its capability and to assimilate the product range.

10.     HUMAN RESOURCE DEVELOPMENT

      Your company has taken a number of initiatives on the HRM front.  Some of the initiatives are as below:

(a) For optimal utilization of human resources, Manpower Assessment Study was carried out paving the way for a scientific way of forecasting future manpower requirement through electronic means,

(b) Assuring and ensuring financial assistance to the next of kith & kin of the employee in the event of his/her death in harness, 

    (c)      Encouraging and incentivizing employees to acquire higher and additional   qualification,

   (d)      The long standing demand of Unions for extending Pension to the non-executive category has been fulfilled by way of entering a supplementary Memorandum of Settlement (MoS) with the Union post Board’s approval.  Similarly, the Pension scheme for executives is also implemented. 

11.     CORPORATE SOCIAL RESPONSIBILITY

       A snapshot of MDL’S CSR activities with the mission of sustainable community development is given as under:

11.1   CHILDREN’S AID SOCIETY (CAS):

      Your Company has been providing educational support to the mentally challenged children at Mankhurd Children’s Home run by Children’s Aid Society (CAS). The Project primarily aims at providing vocational training and training on personal hygiene to the mentally challenged children (both boys and girls), who are in the age of six years and above. These children are admitted through Juvenile court and Child Welfare Committee. MDL has been supporting this Home in terms of providing Qualified and trained Medical, Teaching and support staff in order to take care of the health, education, skill and personality development of the children.

Your Company has also made endeavour to facilitate vocational training in terms of providing equipments to upskill the children. These equipments are Envelope and File making Machines, which enable those children to earn livelihood by making envelope and greeting card. A total number of 300 children have been benefited from this endeavour of your Company.

11.2   CSR ACTIVITIES NEAR NIRDESH, CALICUT:

        Your Company has also extended its CSR arms for NIRDESH to take care of children belonging to below poverty line by way of augmenting facilities & refurbishing nearby Anganwadis and also organizing medical camps in Chaliyam, Kozhikode district in the vicinity of NIRDESH premises.

11.3   MAHAROGI  SEWA SAMITI :

       Your Company has been engaged to serve lepers and mentally & physically challenged patients. It has installed an Elevator in Sewagram hospital, Wardha. A solar power generating system of 12 KW has also been installed for Computer Laboratory in an NGO run school in Bhamragad, Gadhchiroli District during this financial year.

11.4   RENOVATION OF NICU AT KEM HOSPITAL, MUMBAI:

       Your Company has funded the total renovation of Neonatal Intensive Care Unit of Municipal Corporation of Greater Mumbai’s King Edward Memorial Hospital, at Parel, Mumbai and provided the latest equipments also. The hospital now has 33 beds and 4 ventillators for the infants from the marginalised population, who come here for treatmentas an  initiative in providing tertiary care health facilities in Government run hospitals.

11.5   DONATION TO GOVT FUNDS:

      In accordance with the provision as enshrined under the Schedule VII of the Companies Act 2013, your Company has donated @ Rs 1.0 crore each to the “Clean Ganga Fund” and “Swachh Bharat Kosh” set up by Government of India during this financial year.

11.6   CLEAN SHIP PROGRAM AROUND MDL:

     As part of Swachh Bharat Abhiyaan, your Company has engaged a few NGOs to undertake a long term clean ship and awareness programme in and around MDL.  It has been meticulously undertaking to monitor the work done by these NGOs on a daily basis and also participate in ShramDaan activities in the areas periodically.

11.7   SWACHH BHARAT VIDYALAYA:

       Your Company has constructed and delivered 54 toilet blocks in various Primary Schools in Valsad District of South Gujarat under `Swachh Vidyalaya Mission’ by Sarva Shiksha Abhiyan, Government of Gujarat.  These toilets were constructed by conventional brick and mortar methodology and as per design, drawings and specifications given by Sarva Shiksha Abhiyaan, Govt of Gujarat. The mission has benefitted 3168 girls and 3607 boys studying in these Primary Schools.

11.8  ADOPTION OF TRIBAL GIRLS SCHOOL:

      ABM Samaj Probodhan Sanstha, Kalyan, started the residential school in 1999 for the girls from Kathkari Community at Changyachapada of Kharade Village since 2003. In Apr ‘14, the said school became non-operational due to lack of funds and some administrative issue. There were around 80 girls admitted to the school, during that period.

      This school is for the girls of Kathkari community, who are categorized as one of the primitive schedule tribes and are predominantly found in districts of Raigad, Palghar, Thane, Pune, Nashik, Ratnagiri. The Kathkari community is a migrating community due to lack of employment and ownership of land. Your Company in association with Karve Institute of Social Sciences (KInSS) had conducted feasibility study and identified interventions for the said school.

        The school has been adopted by your Company as its CSR project. At present, about 100 girls of this community are enrolled in this residential school. It bears total recurring cost of the girls studying in this residential school. It’s intervention has given a new life to the school and the girls studying in this school.

11.9   BAL ASHRAM TRUST:

        Your Company has undertaken setting up of 10 Bal Mitra Gram in Association with Bal Ashram Trust over a period of 3 years. Bal Ashram Trust was co founded by none other than the noble laureate Shri Kailash Satyarthi. The main objectives of the setting up of the Bal Mitra Gram are:

Withdrawing of Children from Economic activities.

Enrollment of Children to Schools.

Formation of Bal panchayat.

Recognition of Bal panchayat by village Panchayat.

The NGO conducted preliminary survey of the 20 villages in May ‘15 and identified prevailing issues in the villages, which seriously effect the child rights as well as development of the village. Out of the 20 villages surveyed, 10 villages are chosen for implementation of various program. Thereafter, 10 villages were selected which were having high number of dropouts, child marriage, absence of education and village infrastructure etc.

11.10   SKILL DEVELOPMENT INITIATIVES:

Your Company has adopted three routes for contributions towards Skill India:

·            Through the Company run Apprentice Training School

·            Through adoption of ITIs  and Polytechnics

·            Skill development through Vocational Training Centres.

11.10.1   Skilling through the Company run Apprentice Training School(ATS):

a.        Earlier your Company was imaparting training to 425 apprentices and the same has now been enhanced to 625 numbers  of Apprentices per year.

 b.   Financial outgo on account of increase of 200 apprentices is approximately  Rs. 100 lac per annum.

11.10.2         Additional skilling is being undertaken by MDL as follows:

a.        Skill development of 1000 persons with Disability (PWD) candidates is being undertaken through National Handicap Finance and Development Corporation (NHFDC) at a cost of
Rs. 133.68 Lac per annum.

b.        Skill development of 80 candidates has beien undertaken through Central Institute of Plastic Technology (CIPET) at a cost of Rs. 32 Lac per annum.

11.11    ADOPTION OF KHARADE VILLAGE FOR OVERALL DEVELOPMENT:

        Your Company, under its CSRPolicy, has adopted Kharade village, a remote hamlet near Shahapur in Thane District for its overall development in the next three years. Adoption of the Village was envisaged based upon the clarion call of the Hon’ble Prime Minister for creation of ‘Adarsh Gram Yojana’.  The process includes Health Awareness, Swachh Bharat Mission, Solid Waste Management, forming of a Farmers Club, providing clean Drinking Water and Quality Education, Skill Development, facilitating Women Empowerment etc. MDL CSR Team is working over a year in this village and preparing plan to make it a model village. The project was inaugurated on 29 Dec. ‘15 by CMD, MDL in presence of Shri V. Giriraj, Principal Secretary, Rural Development, Maharashtra State and other digntaries. Karve Institute of Social Service, Pune,(KInSS) an eminent NGO, is assisting it in this project.

      Kharade Grampanchayat comprises of two revenue villages viz. Chandgaon and Kharade and 10 Padas (hamlets) with a population of 3008 persons residing in 590 households. The inhabitants of these Padas mainly belong to tribal community and lack basic amenities and livelihood means.

                     Following projects will be carried out in Kharade Village:

           Projects to be directly undertaken by KInSS:

MDL –KInSS Community Development And Resource Centre

NGO–Capacity Building

Development of Zilla Parishad Schools & Anganwadis

Health Awareness  Programme in Collaboration with Government  of Maharashtra

Veterinary Camp in Collaboration with Government of Maharashtra

Swachh Bharat Abhiyaan and Waste Management  Programmes

Formation of Farmers Club for Generation of Livelihood

Toilet Constructions and Awareness for villagers participation

Provide Safe Drinking Water.

 Projects to be undertaken by KINSS through partner NGOs:

Quality Education Programme

Health , Water & Sanitation Programme

Skill Development & Vocational Training Centre

Sports and Training Academy for training rural youth for recruitment in Police And Defence Services 

Adoption of existing ITI (for Tribal Girls) at Shenave Vilage.

Women Empowerment Programme

Agricultural Development and Watershed Management  Programme with Partner NGOs

11.12          DISTRIBUTION CAMP OF ASSISTIVE AIDS TO DIFFERENTLY ABLED PERSONS THROUGH ALIMCO:

        Your Company had signed an MoU with Artificial Limbs Manufacturing Company Limited (ALIMCO), a CPSU, to asses and to distribute Assistive / rehabilitation Aids to the differently abled persons in and around MDL, at a cost of Rs.49 lac approx.  Assessment camps were conducted in Mumbai City from          14 Mar ‘16 to 16 Mar ‘16 to assess the needy differently abled persons. Based on the said assessment done in these camps the assistive aids were to be distributed. These items included Motorized Tricycle, Wheel chairs, Hearing aids, Crutches, Walking sticks, MSIED kits, Rotator and smart cane etc.

        The Distribution camp was organized through M/s. ALIMCO, on
11 Apr ‘16 at Mazagon Dock Recreational Club premises at Mazagon, Mumbai.  On this occasion, varieties of Assistive Aids were distributed to 180 beneficiaries.

           Your Company has also entered into an MoU with ALIMCO for conducting 20 cochlear operations for children with hearing disability. Till the end of the financial year, ALIMCO had conducted operations of 12 children.

11.13          INSTALLATION OF SPV LIGHT THROUGH REIL IN RURAL PARTS OF INDIA:

      Your Company has installed 500 SPV lights each in Badhoi District of Uttar Pradesh and Pali region of Rajasthan through Rajasthan Electronics Instruments Ltd.

    In the current financial year in addition to the above, it has set an ambitious target of Rs. 30.00 Crore to be invested on various sectors viz. Education, Health, Sanitation, Women Empowerment, Drinking Water, Village Development, Art & Culture and Swachh Bharat etc.

12.     RESEARCH  &  DEVELOPMENT

12.1     The various initiatives/projects undertaken by your company under R&D are listed as under:

12.1     MoU with IIT Kharagpur: A MoU between MDL and IIT, Kharagpur was signed on 31 Dec ‘13 and seed money was released to the Institute for commencement of the MoU on 22 May ‘14. MDL Crane Pontoon re-design assigned to IIT Kharagpur was completed during the year as a project as per the R&D plan.

12.2            Ergonomics in Ship Detailed Design- NID Ahmedabad: Ergonomics studies and Human Factors Engineering in the context of warships was studied and report was submitted by NID. It is under implementation in ships under construction.

12.3           NIRDESH: A list of potential R&D projects is being spearheaded by NIRDESH. The following proposals are being pursued for implementation by MDL.

12.3.1  Development of Feedback ANC algorithm for Noise Reduction in 

HVAC Systems which is suitable for HVAC and validation for                implementation at design stage.

12.3.2  Ceramic Solid Solutions as an Alternate to Ceramic Wool to Develop, test, optimize an alternate to ceramic wool as heat insulating material

12.4         Naval Architectural Projects-IIT Madras, Chennai: MoU with IIT Madras, Chennai was  agreed and signed during the previous year.

12.5       Project for creation of navigational channel- CWPRS Pune: Feasibility study for creation of a dedicated navigation channel is underway. A preliminary report on the feasibility study has been submitted.  Monsoon & non-monsoon data collection has been completed and the same shall be analysed for arriving at an optimum alignment of the channel.

12.6       Research activities in welding- Welding Research Institute Trichy:  MoU was  signed with WRI (Trichy) on 04 Dec ‘14 for research areas in one of the MDL’s key production processes – welding. Projects will be taken up in due course of time.

12.7    In-house projects: In-house projects have been taken up by   R&D teams at MDL for different verticals (Eight specialists groups) that are functioning in the Design Department under General Manager (Design). 

 12.8. Development of methodology for lifting 100 T to 250 T Mega Blocks was completed on 05 Mar’15.

12.9.     Technology adaptation for warship design optimisation by leveraging virtual reality laboratory. The LOI is a crucial stage in the construction phase as outfitting consumes almost 80% time of the overall construction period of the ship. The VR facility has helped company to save substantial time on  the Destroyer Class Projects. The 3D cross checks that happen prior to the actual execution of the work allows sufficient number of iterations in the virtual environment thus enhancing the quality of layouts, ergonomic enhancements, better HFE features.

13      INTERNAL CONTROL SYSTEM

13.1   The Company has an adequate system of internal controls implemented towards achieving effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations. The system comprises of well defined organization structures, pre-identified authority levels and procedure issued by management covering all vital and important areas of activities, viz. Budget, Purchase, Materials control, Works, Finance & Accounts, Personnel, etc. The Company has an Internal Audit Department, which monitors compliances of Company’s procedures, and policies with well defined annual audit programme and significant audit observations are reported to the Audit Committee of Board of Directors. The Internal Audit function is headed at the level of Addl. General Manager who is reporting directly to the Chairman & Managing Director13.2        The implementation of SAP / ERP system has helped to strengthen the Internal Control Systems with its in-built checks and balances at various levels of operations.  The Audit Committee reviews the internal control systems. The adequacy of internal control procedures is reviewed and reported by the Statutory Auditors in their Audit Report. Your Company, being a Government Company, is subject to Government audit also.

    1.           FINANCIAL HIGHLIGHTS   Your company achieved the highest ever VOP of Rs.4121.65 crore in FY 2015-16  an increase of 14.73% over the previous years VOP of Rs. 3592.60 crore. The Profit before tax is Rs. 957.33 Crore for 2015-16 as against Rs.746.00 Crore in the previous year, an increase of 28.33%. Your Company has thus achieved the highest ever VOP, PBT, PAT and the Networth .   2A  CONSOLIDATED FINANCIAL STATEMENT   Section 129(3) of the Companies Act,2013 requires your Company to prepare Consolidated Financial Statement [Consolidation of Financial Statements of  Mazagon Dock Shipbuilders Ltd (MDL) & its Associate Company , Goa Shipyard Ltd (GSL)] alongwith Standalone Financial Statements. Your Company has prepared Consolidated Financial Statements of MDL & GSL, placed together with the Standalone Financial Statements and forms part of this Report.        1.           OPERATIONS FOR THE YEAR 2015-16  VIS-À-VIS THE PREVIOUS TWO YEARS   6.1     The results of the Company’s operations for the year 2015-16 and the comparative figures for the previous two years are summarized below: (Rs. in Crore)   2013-14 2014-15 2015-16 Value of Production 2865.51 3592.60 4121.65 Profit before Tax 587.57 746.00 957.33 Net Profit after Tax 397.61 491.59 637.82 Capital Employed 1776.91 2198.65 2532.98 Gross Block 375.20 493.37 594.20 Net Block 176.12 265.81 344.59 Working Capital 1600.79 1932.84 2188.39 Net Worth 2083.68 2442.51 2827.42 Value Added 1337.09 1312.16 1267.81 Interest 0.09 0.03 0.07     6.2   Income Distribution for the year 2015-16 as against previous year is summarized as under:- INCOME DISTRIBUTION                                     % %   2014-15 2015-16 Raw Material 49.97 54.41 Salaries & Wages 16.75 15.24 Expenses related to Projects 7.34 4.17 Sub-Contract 3.64 2.76 Other Expenses 2.62 2.49 Interest 0.00 0.00 Power & Fuel 0.60 0.58 Depreciation 0.74 0.64 Provisions made 0.54 0.77 Previous Year's Adjustment -0.01 -0.65 Transfer to Fixed Assets -0.03 0.00 Income Tax 6.08 6.54 Profit Retention 11.76 13.06 Total 100.00 100.00      

 22.     ENVIRONMENTAL DEVEOPMENT  22.1     Your company understands the importance of environmental development, Sustainable Development and Energy Conservation.  Harnessing of solar energy and implementation of energy saving measures were the two areas where your company had focused in the report year. 22.2      Your company installed 350KWp Grid interactive Solar Power Plant on the roof top of one of the work shops.  By installing this Power Plant, your company has achieved  a cumulative capacity of 740 KWp Solar Power Plant in the company premises.  Your company has also given a commitment to achieve 1.85 MWp by end of FY 2018-19.  With an installed cumulative capacity of 740 KWp, the  Solar Power Plant will generate 10 lakhs units of energy per annum.  The unit cost of energy generated by Solar Power Plant is much less than the cost of energy purchased from the power distribution company. 22.3   Energy saving is  the other area where your company has focused.  To identify various energy saving measures that can be implemented, your company has carried out an energy audit in the reporting year.  22.4  To achieve energy saving, your company has commenced replacement of  existing conventional lighting system into LED Lighting system.  4000 Nos of 110 V  60W incandescent lamps used during the construction of the ships, have been replaced by 110V, 9W LED lamps.  As a result, your company could achieve annual saving of 9,79,200 units of energy. 22.5   Your company has also fulfilled statutory requirements of Central and State Pollution Central Board in all spheres of operation.   33.  CONSERVATION OF ENERGY 33.1 Information required under Section 134(3)(m) of the Companies Act 2013,  pertaining to Conservation of Energy, Technology Absorption and Foreign Exchange earnings and outgo is given in Appendix ‘D’ to this Report.     1.   CONSERVATION OF ENERGY   1.1 Expenditure incurred by your Company on environmental upgradation, pollution control and energy conservation during the year 2015-16 was as under:       Sustainable Development Projects SR NO ITEM DESCRIPTION ORDER VALUE 1. Installation of 350 KWp solar Power Plant on Roof Top of Submarine Workshop Rs. 246.22  lakhs     Energy Conservation Projects under Sustainable Development 2. Carried out an Energy Audit of all the yards of MDL Rs. 13.68  lakhs 3. Replacement 110 volt, 60W incandescent lamps by 110 volts 9 W LED Bulbs Rs. 5.99 lakhs C.      Major Renewable Energy Investment Plan   As per the directive from Department of Defence Production, a consortium of BEL, MDL and HAL is being formed for setting up of 150 MW Solar Power Plant at various factory units of Ordnance Factory Board with an investment ratio of 50:25:50 by BEL, MDL and HAL.        

  33.  CONSERVATION OF ENERGY 33.1 Information required under Section 134(3)(m) of the Companies Act 2013,  pertaining to Conservation of Energy, Technology Absorption and Foreign Exchange earnings and outgo is given in Appendix D to this Report.  2.      TECHNOLOGY ABSORPTION, ADAPTION AND INNOVATION   2.1.    ThE Destroyer Class of ships under construction have several new design features incorporated in the original design. These ships have significant stealth features and have changes in weapon payload. It incorporates modern weapons and sensors having advanced information warfare suite, an auxiliary control system with sophisticated power distribution architecture and modular crew quarters.   2.2.    Future Destroyers constructed at MDL would have more advanced weapon and sensor package.     2.3.      MDL is in the process of changing over from its traditional construction wherein Yard will graduate from 40-55T structural hull units to significantly pre-outfitted 250T mega-blocks for future projects.  A new improved design by IHQ MOD (N) / DND and detailed design tailored to Integrated Construction with the help of a modern experienced shipyard (Know How Provider, KHP) are being arranged for ensuring this change over.     

  3.     Foreign Exchange Earnings  and Outgo. The foreign exchange earning during the year is NIL. The information in respect of foreign exchange outgo is contained in paras 2.23.3 of Notes to the Accounts   2.23.3 Value of Imports on CIF basis:                 Raw materials including machinery, equipment for construction of ships, submarine, repairs and other production jobs. 184525       97473  

 42.   DIRECTORS’ RESPONSIBILITY STATEMENT 42.1   As required under Section 134(5) of the Companies Act, 2013 the Directors’ Responsibility Statement is given as under, that:- (a)     In the preparation of the Annual Accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; (b)     The Directors had selected such accounting policies and 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 the financial year and of the Profit and Loss of the company for that period; (c)     The Directors had taken proper and sufficient care for the 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 had prepared the Annual Accounts on a going concern basis; (e)     The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.