DIRECTORS' REPORT

Your Directors are pleased to present the 62^nd Annual Report
on the business and operations of your Company, including
the Audited Financial Statements for the fiscal year ended
March 31, 2026.

The financial and operational performance during the
year reflects the Company's resilience, strong business
fundamentals and sustained focus on enhancing execution.
As India's leading engineering and manufacturing enterprise,
BHEL remains committed to supporting the nation's priorities
of energy security, infrastructure development, technological
self-reliance and clean energy transition. With a strong order
book, improved execution momentum and a diversified
business portfolio, the Company is well placed to enhance
BHEL's contribution to the vision of Viksit Bharat while
creating sustainable and long term value for all stakeholders.

Financial Performance Highlights

( I Crore)

The key financial performance highlights of the Company for
the financial year 2025-26 are presented below:

• Revenue Growth - The Company achieved a growth
of 19% in Revenue from Operations (RFO), driven by
enhanced utilisation of shop capacities by 25% and a
strong order book position.

• Profitability - Driven by improved operational and
financial performance, EBITDA increased by 83% to
13,189 Crore, while Profit After Tax (PAT) more than
tripled to 11,578 Crore over the previous year.

• Cash Realisation - The Company maintained a strong
focus on cash realisation against dispatches which
resulted in an increase of 41% over previous year. Total
cash collection from customers stood at 146,425 Crore
which is 143% of Revenue.

• Trade Receivables - The Company's thrust on receivables
management, resulted in significant improvement during
FY 2025-26. Trade receivables as number of days of RFO
reduced to 100 days after absorbing the impact of 19%
increase in RFO, which is the best in the last 10 years.

• Trade Payables - The company's focus on accelerating
execution by enabling the supply chain, resulted in

reduction in trade payables in terms of number of days to
165 days in FY 2025-26 from 201 days in the previous year.

• Liquidity management - The Company generated cash
from operations of 15,827 Crore during the year, i.e. an
increase of 176% over previous year reflecting efficient
working capital management.

A comprehensive analysis of the Company's financial
performance, including its financial results, financial position,
fund position, key financial ratios and segment-wise
performance for FY 2025-26, is contained in Section 1.4 of
Annexure-I to this Report.

State of Company's Affairs

The Company continued to strengthen its business position
during FY 2025-26 through sustained order inflows, improved

project execution, enhanced operational efficiency and robust
financial performance. Backed by a diversified business
portfolio and strong execution capabilities, the Company
maintained healthy business momentum across its key sectors.
The significant developments relating to the Company's affairs
during the year are presented hereunder which may be read
in conjunction with Annexure -I.

Order Book

The Company's strong order inflows during FY 2025-26 further
strengthened its order book, providing healthy revenue visibility
and a robust foundation for future business growth.

The status of the Company's order book as on 31 March 2026
is summarised in the graphs shared on page 21.

The Company continued its strong order inflow momentum
during FY 2025-26, with orders worth 175,916 Crore secured
during the year, including export orders of 1209 Crore. The
company has been successful in receiving several prestigious

orders in core thermal power business, as well as in Transmission,
Transportation, Defence & Aerospace, Coal to Chemical
segments, reflecting its sustained efforts towards diversification.

In FY 2025-26, BHEL secured orders from BCGCL worth
~18,300 Crore (excl Taxes) for its 2000 TPD ammonium
nitrate plant, namely LSTK1 package for Coal Gasification &
Raw Syngas Cleaning Plant and LSTK2 package for Syngas
Purification Plant, strengthening its presence in the coal
gasification sector.

BHEL is strategically diversifying into new-growth sectors to
drive sustainable growth, enhance profitability, and reduce its
dependence on the conventional thermal power business.
Leveraging its core engineering, manufacturing and project
execution capabilities, the Company has secured significant
business opportunities across emerging and strategic non¬
thermal sectors.

As on 31 March 2026, the Company's outstanding order
book of 12,39,057 Crore includes non-thermal orders of

over 166,000 Crore, reflecting the robust diversification of
its business portfolio. This demonstrates BHEL's growing
presence across sectors such as Hydro and Nuclear
Power, Coal-to-Chemicals, Rail Transportation, Defence
and Aerospace, Power Transmission, Oil & Gas, Industrial
Products, and renewable energy businesses.

The Company's all-time high order book supports higher
volumes of operations, enabling potential for enhanced
operating leverage and profitability.

Project Execution and Delivery

The Company continued to undertake focused initiatives
during FY 2025-26 to strengthen project execution capabilities,
improve delivery performance and ensure timely completion
of projects. During FY 2025-26, the Company successfully
commissioned/synchronised ~8.9 GW of power generation
capacity across various projects reflecting the Company's strong
project execution capabilities and continued contribution to
strengthening the country's power generation capacity.

To further reinforce execution, the Company adopted
advance manufacturing initiatives, calibrated outsourcing
and targeted capacity augmentation to align manufacturing
capabilities with project requirements, reduce lead times
and improve execution efficiency. In addition, streamlined
decision-making mechanisms were introduced to expedite
procurement, facilitate faster resolution of critical issues and
support timely project execution across business segments.

Operational Excellence and Cost Leadership

The Company continued to implement strategic initiatives
to enhance operational efficiency and improve cost
competitiveness across its business segments. These
included aggregation of procurement requirements through
centralised procurement and subcontracting to leverage
economies of scale, optimisation of manufacturing capacities
and continuous improvement in operational processes.

These initiatives contributed to improved execution
efficiency, enhanced capacity utilisation, reduced lead times

and sustained cost optimisation, thereby strengthening the
Company's overall operational performance.

Working Capital and Liquidity Management

The Company has implemented a structured and system-
driven mechanism for monitoring receivables across projects
and business segments, resulting in enhanced collection
efficiency and accelerated realisation of outstanding dues.
During FY 2025-26, focused receivables management
enabled the Company to achieve a 41% year-on-year increase
in customer collections against dispatches, with overall
collections reflecting at 143% of Revenue. This significantly
strengthened the Company's liquidity position and reduced
its dependence on short-term external borrowings.

Consequently, Trade Receivables improved from 115
days of Revenue from Operations in the previous year to
100 days during FY 2025-26, reflecting sustained focus
on working capital management, disciplined receivables
monitoring, effective cash realisation and improved contract
management.

Supported by improved collection efficiency and disciplined
financial management, the Company streamlined payment
mechanism for procurements, representing an increase of
approximately 28% over the previous year, thereby facilitating
accelerated project execution.

The Company's Trade Payables as number of days reduced
to 165 days during FY 2025-26 from 201 in the previous
year, reflecting the emphasis on supply chain enablement
to accelerate execution. This has strengthened supplier
confidence, enhanced supply chain reliability and supported
faster project execution.

As part of prudent treasury and liquidity management,
intermittently available surplus funds were deployed in
fixed deposits to optimize returns, while ensuring adequate
liquidity for operations. For meeting short-term operational
and working capital requirements, the company continued
to utilize various borrowing instruments such as Working
Capital Demand Loans (WCDLs), loans against Fixed Deposits
and listed Commercial Papers.

The combined benefits of improved working capital
management, lower financing costs, and enhanced
execution support are expected to create a virtuous cycle
of faster project execution, improved cash generation, and
higher profitability.

Capital Expenditure

During FY 2025-26, company incurred 1671 Crore
(1536 Crore during previous year) towards capital expenditure
on modernization and rationalization of existing facilities,
with a focus on enhancing operational efficiency, supporting
productivity, and aligning operations with evolving business
needs. The company primarily met its capital expenditure
requirements through internal accruals.

Dividend

The Board of Directors, in its meeting held on May 4, 2026
has recommended a final dividend @70% on the paid-up
equity share capital (11.40 per equity share of the face value
of 12 each), amounting to 1487.49 Crore, out of profit for
FY 2025-26, subject to approval of shareholders.

The Company has formulated a Dividend Distribution policy
in pursuance of the requirements of Regulation 43A of the
Securities and Exchange Board of India (Listing Obligations
and Disclosure Requirements) Regulations, 2015 (“LODR").
Dividend distribution policy is available on the Company's
website at the weblinkhttps://www.bhel.com/sites/default/
files/Board Approved%20Dividend%20Distribution%20
Policy.pdf.

The dividend recommended is in accordance with the
company's dividend distribution policy.

Transfer to Reserves

The company has not transferred any amount to the Reserves
during FY 2025-26.

Deposits

The Company did not accept any public deposits as defined
under Chapter V of the Companies Act, 2013 during
FY 2025-26.

Loans, Guarantees and Investments

There is no transaction relating to loans or advances
covered under section 186 of the Companies Act 2013
in FY 2025-26. Further, as per Note 5 on 'Financial Assets-
Investment', of Audited Annual Accounts 2025-26 of the
company. The Corporate Guarantee issued by the Company
in FY 2024-25 on behalf of its joint venture, M/s Bharat Coal
Gasification and Chemicals Limited, without charging any
fee/consideration, continues to remain in force. The Fair
Value of providing the Corporate guarantee has been initially
recognised as a deemed investment with a corresponding
recognition of a financial liability in accordance with Ind AS
109. The aforesaid deemed investment and liability are being
subsequently measured and accounted for in accordance
with the applicable Ind AS framework and are appropriately
disclosed in the financial statements of the Company.

Credit Rating

The credit ratings of your Company are as follows:

Material Changes and Commitments affecting the
Financial Position

There have been no material changes and commitments affecting
the financial position of the Company which have occurred
between the end of FY 2025-26 and the date of this report.

No significant or material orders were passed by any regulator,
court, tribunal, or other authority during the financial year
under review and up to the date of this Report which may

impact the going concern status of the Company or materially
affect its future operations.

There was no change in the principal nature of the business
of the Company during FY 2025-26. The Company continued
to carry on its existing business activities, including the
diversified business operations undertaken in earlier years.

Suspension of Trading

The shares of the Company were not suspended from trading
during FY 2025-26 and until the date of the Report.

Directors' Responsibility Statement

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

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

b) The Directors have selected such accounting policies
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 financial year and of the profit & loss of the
Company for that period;

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

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

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

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

Management Discussion and Analysis

Your company maintained its growth momentum with focus
on the core business as well as diversification, strengthening
operations and supply chain, and accelerating project
execution. For further details, please refer Annexure-I to the
Board Report.

Corporate Governance

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

i. Certificate of Non-Disqualification of Directors under

Schedule V of the SEBI Listing Regulations.

ii. Auditors certificate on Corporate Governance under
SEBI Listing Regulations and Department of Public
Enterprises (DPE) Guidelines on Corporate Governance.

iii. Secretarial Audit Report under Section 204 (1) of the
Companies Act, 2013 and Regulation 24A of the SEBI
Listing Regulations.

Declaration of Independence

Declaration under Section 149 of the Companies Act, 2013
& Regulation 25 (8) of SEBI Listing Regulations, pertaining to
criteria of independence was given by Shri Ramesh Patlya
Mawaskar, Independent Director, to the Board of Directors.
Shri Ramesh Patlya Mawaskar is registered on the online
database of the Indian Institute of Corporate Affairs (IICA),
notified under Section 150 of the Companies Act, 2013 and
has also qualified the online proficiency self-assessment
test conducted by IICA. In the opinion of the Board, the
Independent Director possesses integrity, necessary expertise
and experience.

No Independent Director has resigned from the Company
before the expiry of his tenure during FY 2025-26.

Compliances

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

• To attain the highest standard of Corporate Governance,
integrity in operations is maintained alongside ethical
and transparent functioning.

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

• Being a listed company, compliance with the SEBI (Listing
Obligations and Disclosure Requirements) Regulations,
2015 is ensured. There is no adverse comment from
SEBI for the FY 2025-26 on any financial matter.

• The Company has complied with all the applicable
secretarial standards for FY 2025-26.

• For preparation of financial statements, the company
ensures compliance to the Indian Accounting Standards
(Ind AS), Guidance Notes and other authoritative
literature issued by the ICAI, Companies Act 2013 and
other applicable statutes.

The continuous endeavour of your Company to constantly
enhance transparency in presentation and disclosures in
its Financial Statements reflects a strong commitment to
compliances and good corporate governance.

Contribution to the Exchequer

The Company, over the years, has been consistently making
significant contribution to the Exchequer, and maintaining
high standards of integrity with respect to tax compliances.
For FY 2025-26, the company's contribution to the exchequer
was 17,098 Crore.

Audit Committee

Upto March 27, 2026, the Company had in place a Board
Level Audit Committee in terms of the requirements of the
Companies Act, 2013 read with rules made thereunder, DPE
Guidelines and SEBI Listing Regulations, the details in respect
of which are given in the Corporate Governance Report
(Annexure-II). All the issues were fairly and transparently
deliberated in the meetings which were held at regular
intervals. The views and suggestions of the Board Level
Audit Committee members were taken into account and
imbibed into the Company's processes. Further, there was
no instance where the Board of Directors had not accepted
the recommendation of the Board Level Audit Committee.
However, w.e.f. March 28, 2026, the compliances pertaining
to quorum as per the SEBI Listing Regulations could not
be met due to lack of Independent Directors on the Board
of the company. Accordingly, since March 28, 2026, the
proposals for recommendation/ review/ approval of the
Audit Committee are being directly submitted to the Board
for its review/ approval.

Details of changes in Directors and Key Managerial Personnel
Appointment

Ms. Nigar Fatima Husain, Additional Secretary & Financial
Advisor, Ministry of Heavy Industries has been appointed as
Part-time Official Director w.e.f. April 27, 2026.

In accordance with applicable statutory provisions and
Article 67(iv) of the Articles of Association of the Company,
Ms. Nigar Fatima Husain, having been appointed as an
additional director, shall hold directorship upto the 62^nd
Annual General Meeting of the Company and is eligible for
appointment as Director at the Meeting.

Further, pursuant to Section 152 of the Companies Act, 2013
and Article 67(i) of the Articles of Association of the Company,
Shri Rajesh Kumar Dwivedi and Shri S M Ramanathan will
retire by rotation at the Annual General Meeting and being
eligible, offer themselves for re-appointment.

Cessation

Ms. Arti Bhatnagar, former Special Secretary & Financial
Advisor, Ministry of Commerce & Industry, who was appointed
as Part-time Official Director on February 14, 2023, ceased
to be Part-time Official Director on attaining the age of
superannuation on September 30, 2025.

Shri Krishna Kumar Thakur, who was appointed as Director
(HR) on July 4, 2023, was relieved of the charge w.e.f. March
19, 2026 (F/N) to enable him to assume the charge of the
post of Director (Personnel), NMDC Ltd, pursuant to Ministry
of Heavy Industries order dated March 18, 2026.

Shri Ashok Aseri and Shri Aashish Chaturvedi, who were
appointed as Part-time Non-official (Independent) Directors
on March 29, 2025, ceased to be Directors of the Company
on completion of their tenure on March 27, 2026.

Shri Asit Gopal, Special Secretary & Financial Advisor, Ministry
of Commerce & Industry, who was appointed as Part-time
Official Director on February 3, 2026, ceased to be Part-time
Official Director on April 27, 2026.

Shri Ramesh Patlya Mawaskar, who was appointed as Part¬
time Non-official (Independent) Director on June 8, 2023,
ceased to be Director of the Company on completion of his
tenure on June 1, 2026.

The Board of Directors places on record its deep appreciation
for the valuable services rendered as well as advice and guidance
provided by Ms. Arti Bhatnagar, Shri Krishna Kumar Thakur, Shri
Ashok Aseri, Shri Aashish Chaturvedi, Shri Asit Gopal and Shri
Ramesh Patlya Mawaskar, during their respective tenures on
the BHEL Board.

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

CEO/ CFO Certificate

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

Consolidated Financial Statements

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

Sustainable Development

In today's industrial landscape, sustainability has become
a strategic imperative for BHEL. The company integrates
environmental protection into its core operations through
Harit BHEL . This program targets Net Zero

emissions by 2047, positioning BHEL as a model Green PSU
with defined milestones and transparent reporting.

BHEL adopts best practices to minimize environmental impact
while enhancing efficiency, including renewable energy
expansion, low-emission technologies, waste management,
water optimization, and zero-effluent discharge. Efforts also
encompass sapling plantations, green cover protection,
water bodies revival, biodiversity promotion, and circular
economy principles (reduce-reuse-recycle) across all activities.
Townships maintain Single Use Plastic Free certification through
strict enforcement, while manufacturing units pursue
GreenCo Ratings.

These initiatives, detailed in Annexure-IV to the Board's
Report, safeguard the planet while creating enduring value
for stakeholders and future generations.

Health, Safety and Environment (HSE)

BHEL upholds the highest standards in Health, Safety, and
Environment (HSE), grounded in the principle that all incidents
are preventable and healthy and safe working environment is
essential to long-term success. Employee, contractor, and

community well-being remains paramount, fostered through
a shared safety culture, rigorous training, proactive risk
management, and zero-incident goals aligned with laws and
best practices.

Environmental stewardship is integral to operations—from
planning to closure—focusing on emission and energy
reductions, responsible waste management, resource

conservation, biodiversity protection, and pollution prevention.
HSE performance is continually reviewed to drive accountability,
learning, and innovation.

Further details are in Annexure-IV to the Board's Report,
Section 4.3.

Business Responsibility and Sustainability Report (BRSR)

In line with the requirement of the listing regulations, Business
Responsibility and Sustainability Report providing disclosures
in environmental, social and governance perspectives is
enclosed at Annexure-V to the Board's Report. A guide for
understanding the ESG disclosure and BRSR mapping with
five Global Reporting Framework (GRI, SDG, TCFD, CDP and
SASB) is available atNSE website.

Achievements of R&D and Technological Development

BHEL has always been consistent with the innovation and
development of technologies in alignment with 'Atmanirbhar
Bharat'. The Company is engaged in new technology
development and its commercialization in sectors like Coal
to Chemicals, high efficiency Thermal Power Plants, Rail
Transportation, Transmission, Nuclear Power, Defence &
Aerospace, Downstream Oil and Gas, Green Hydrogen,
e-Mobility etc. Further, company is continuously working
towards upgrading its current technology and product lines.

In FY 2025-26, BHEL has incurred an expenditure of around
1822 Crore towards R&D activities, which is around 2.4%

of its revenue from operations. This includes expenditure
incurred on R&D projects taken up for development of new
products, processes and systems, as well as efforts made for
modifications/ improvements in products and designs. BHEL
has filed 428 Intellectual Property Right (IPR) applications
during the year, enhancing the company's intellectual capital
to 6068 numbers. Around 14% of the company's revenue,
amounting to ~?4,693 Crore, has been achieved from in-house
developed products, systems and services. Further details of
major developments have been provided in Annexure-VI to
the Board's Report.

Data and Cyber Security

BHEL prioritizes cybersecurity within its risk management
framework, by operating an Information Security Management
System (ISMS) aligned with global standards and regulatory
requirements. A key milestone in FY 2025-26 was transitioning
to ISO/IEC 27001:2022 and upgrading IT and cybersecurity
infrastructure. Beyond technical defences, BHEL fosters
a security-aware culture through structured training and
CERT-In compliance. Furthermore, the Company has initiated
critical steps toward DPDP Act, 2023 compliance to safeguard
personal data. This integrated approach to technology,
processes, and people ensures robust cyber resilience and
the protection of vital information assets. Further details have
been included in Annexure-I, Section 1.12 of the Board Report.

Other disclosures

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

As per provisions of section 197 of the Companies Act,
2013 read with the Rule 5 of the Companies (Appointment
and Remuneration of Managerial Personnel) Rules, 2014,

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

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

Implementation of Official Language

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

Vigil Mechanism

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

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

Proceedings under Insolvency and Bankruptcy Code

No applications against BHEL under Insolvency and
Bankruptcy Code, 2016 (IBC) have been admitted during the
year and no proceedings against BHEL under IBC are pending
as on March 31, 2026.

Valuation Difference between Loan Sanction and one-time
settlement

The difference between amount of the valuation done at the
time of one time settlement and the valuation done while
taking loan from the Banks or Financial Institutions - Not
Applicable to the Company.

Compliance to the provisions under Maternity Benefit Act

The Company is in compliance with the applicable provisions
relating to maternity benefits as prescribed under Maternity
Benefit Act 1961

Statutory Auditors

The Statutory Auditors of your Company are appointed by
the Comptroller and Auditor General of India. Two firms of
statutory auditors were appointed as joint statutory auditors
and five firms were appointed as branch auditors. The
names of audit firms appointed for FY 2025-26 are given at
Annexure-X.

Auditors' Report on the Accounts

The Auditors' Report on Standalone and Consolidated
Financial Statements for FY 2025-26 of the Company are
given at Annexure-XI to the Board's Report. There is
no qualification in the Auditors report on the Financial
Statements of the Company. The Supplementary Audit
report under section 143(6) read with section 129(4) of the
Companies Act, 2013 issued by the Comptroller & Auditor
General of India also forms part of Annexure-XI.

Secretarial Auditor

In terms of Section 204(1) of the Companies Act, 2013, and
Regulation 24A of the SEBI Listing Regulations, the Company
engaged M/s Akhil Rohatgi & Co., Company Secretaries in
whole-time practice, as Secretarial Auditors for conducting
Secretarial Audit for FY 2025-26 and their report forms part
of Corporate Governance section.

Secretarial Auditor in his Audit Report has observed that:

i) During the period under review, the number of independent
directors on the Board were less than half of the total strength
of the Board as required under Regulation 17(1) of the SEBI
Listing Regulations, Para 3.1.4 of the DPE Guidelines on
Corporate Governance and Section 149 (4) of the Companies
Act, 2013. Further, the Company did not have an independent
woman director as also required under Regulation 17 (1) of
the SEBI Listing Regulations; and

ii) During the time period from 28.03.2026 to 31.03.2026,
composition of the Audit Committee and the Nomination
& Remuneration Committee were not in accordance with
Regulations 18 (1) and 19 (1) respectively of the SEBI Listing
Regulations, Paras 4.1.1 and 5.1 respectively of the DPE
Guidelines on Corporate Governance and Sections 177 (2)
and 178 (1) respectively of the Companies Act, 2013, due
to only one independent director being on the Board of
the Company.

The Secretarial Auditor has also noted in his report the
explanation given by the Company that BHEL, being a
Government Company, all the directors are appointed by
the President of India, acting through the administrative
ministry and as such appointment of requisite number of
independent directors is beyond the control of the Company.
Further, the Company has been in constant communication
with its administrative ministry requesting for appointment
of independent directors on its Board so as to ensure
compliance with corporate governance norms enunciated
under the SEBI Listing Regulations, DPE Guidelines on
Corporate Governance and Companies Act, 2013.

The Management noted the observation regarding vacancies
of Independent Director and mentioned that the matter
of filling up of the same is under process at the end of
Government of India.

During FY 2025-26, the Company ensured timely implementation
of all applicable corporate actions in accordance with the
prescribed statutory and regulatory timelines. There were no
delays or deviations in the implementation of such corporate
actions during the year.

Cost Auditors

Pursuant to the provisions of Section 148 of the Companies
Act, 2013 read with the Companies (Cost Records and Audit)
Rules, 2014, the Company is required to maintain cost
records and have such records audited. The Company has
duly maintained the prescribed cost records and accounts
in respect of its applicable products, and the same are
being regularly reviewed for compliance with the applicable
statutory requirements.

Based on the recommendation of the Audit Committee, the
Board of Directors had approved the appointment of seven
firms of Cost Auditors, including a Lead Cost Auditor, for
conducting the audit of the cost records of the Company's
14 manufacturing units for the financial year 2025-26. The
names of audit firms appointed for FY 2025-26, duly ratified
by the shareholders, are given at Annexure-X. The total
remuneration to be paid to the cost auditors is 115.76 Lakhs.

The Cost Audit Report for the financial year 2024-25 was
filed with the Central Government within the prescribed time
and did not contain any qualification, reservation, adverse
remark or disclaimer.

The Cost Audit for the financial year 2025-26 is under progress
and, upon completion thereof, the Cost Audit Report shall
be filed with the Central Government within the prescribed
time limit as stipulated under the applicable provisions of the
Companies Act, 2013 and the rules made thereunder.

Details of the Cost Auditors for conducting the cost audit of
the FY 2026-27 and the remuneration proposed to be paid to
them (subject to the ratification by the shareholders) are set
out in the Explanatory Statement forming part of the Notice
convening the ensuing Annual General Meeting.

Appreciation and Acknowledgements

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

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

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

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

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

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

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

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

fag?

K. Sadashiv Murthy

Chairman & Managing Director

Place: New Delhi
Date: July 07, 2026