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RAdm L V Sarat Babu, NM, IN (Retd)
Chairman & Managing Director


It gives me immense pleasure to welcome you to the 65th Annual General Meeting of the Company and update you on its performance during the year 2016-17. I am delighted to state that HSL has posted operating profit of Rs 38 Cr this year after almost three decades. Improvement in Productivity, strict austerity measures and enhanced morale of employees contributed towards the company’s rapid progress in FY 2016-17.

The Company’s Accounts for the year ended 31 Mar 2017 along with Boards' Report, Auditor’s Report and Nil Comments of C&AG have already been circulated to all concerned. Before I enumerate various aspects of company’s performance, progress, modernization, future scope and other issues related to employee welfare, let me briefly highlight the ship building industry scenario which has significant effect on our company.

Shipbuilding Scenario

India’s shipbuilding industry mainly consists of five PSU shipyards and a few large private shipyards such as Reliance Defence (erstwhile Pipavav Shipyard), L&T Shipbuilding and ABG Shipyard. Due to the reduction in demand for commercial shipbuilding orders in the global market, Indian Shipbuilders largely depend on defence shipbuilding orders. With amendment to Defence Procurement Policy, the Defence Shipbuilding is now open to all shipbuilders (i.e. both PSU shipyards and Private shipyards). This has thrown challenges to your company to be more competitive while adhering to the PSU guidelines. I assure all shareholders that the existing management is making all out efforts to make our organisation more competitive in order to grow in a competitive environment. I now move on to the performance and other aspects of our Company during the period under review. 

Company Performance

It is indeed my privilege to report that our Company has further strengthened its performance during the last fiscal year despite a very low order book. During the year 2016-17 our Company achieved a total income of Rs 650.08 Cr and a Value of Production of Rs 629.04 Cr. The value of the production has been the highest since inception of the company and the total income has been one of the best during the last five years. The company has achieved Profit After Tax (PAT) of Rs 53.77 Cr after many challenging years and without any financial grant from the Government. The operational indices i.e. Value of Production, man-hour per CGT, VoP per employee, employee cost as a percentage of VoP during the year under review have also improved significantly. Now these parameters are comparable with any other Defence Shipyards. Therefore, it is a great moment for me to share with you that our company has posted profits for consecutively two financial years and sustained its performance. The Company now positively looks forward for a turnaround from the negative net worth status in the coming years.
The accumulated losses and negative net worth of the company has also been reduced to Rs 1252.50 Cr and Rs. 750.51 Cr respectively.
Execution of shipbuilding & Ship Repair Projects
It is with great satisfaction that I highlight some of the major productivity linked achievements during the financial year 2016-17:
(a) During the year, our company has delivered three ships i.e. one Inshore Patrol Vessels for Indian Coast Guard and one 25 Ton Bollard Pull Tugs for Indian Navy and one 50 Ton Bollard Pull Tug for Kandla Port Trust.
(b) Other ongoing Naval Shipbuilding Projects have been satisfactorily progressed during the year under review.
(c) Post successful completion of refit of a Naval Submarine, Indian Navy has awarded Normal Refit of another submarine. The Submarine arrived at HSL on 14 Jul 2017. Necessary Contracts with Russians have been signed and the refit work has commenced.
(d) Seven vessels of various kinds have been repaired during the year 2016-17.
Financial Status
The financial position of the company continues to be challenging. Despite the fact that the company has posted profit during the FY 2016-17, many legacy issues have affected the company’s financials adversely. This has resulted primarily due to imposition of LD on delayed construction of vessels and protracted arbitrations.
Order Book Position
As on date, the balance order book value for ship construction is about Rs 405.25 Cr. All efforts are in hand to complete the exiting orders by 31 Mar 2018. Concurrently, that yard is also putting in considerableefforts to bag various shipbuilding orders. Besides this, various short term business avenues are being explored in order to tide over the situation. Good results have yielded during the year under review.
The yard has requested MoD to reassign the 08 IPVs orders with a benchmark price on nomination basis and to place the order for cadet training ships for Indian Navy. It is understood that the proposal of the yard is under positive consideration with the Ministry of Defence.
MoU Grading
The Performance of the company for the year 2016-17, based on the self-appraisal is “Good” in terms of the MoU signed with the Ministry of Defence. 
Awards & Recognition
I am delighted to share with you that your company has received Raksha Mantri’s award for excellence in Innovation for Shafting work, development of new welding techniques and Rudder Carrier Bearing modification for the year 2015-16.
Further, your company has also won two Society for Defence Technologist (SODET) excellence awards for Technology Development & Innovation i.e. silver medal in the category of Technology Development for Engine Exhaust and Bronze medal in the category of Technology Innovation for installation of major sensor and a complex dome on the ship.
I would like to appreciate the commendable efforts put forth by concerned employees. This indeed has given a boost to the morale of our employees and we would try to further hone our skills to become the best shipyard in the country. 
Corporate Governance
Our Company constantly endeavors to adopt and maintain highest standards of ethics in all spheres of its business activities. The company firmly believes that its business role is based on adherence to fundamental principles of Corporate Governance like honesty, integrity, accountability, adequate disclosures, legal & statutory compliances, and to protect, promote and safeguard interests of all stakeholders. It also strives to carry out its business obligations with good corporate values duly discharging its duties for maximum level of transparency in decision making to avoid conflicts of interests. The Company continues to comply with the guidelines on Corporate Governance for CPSEs 2010 issued by Department of Public Enterprises, Government of India. The Company is expected to achieve “Excellent” grading for Corporate Governance for the financial year 2016-17 in terms of the said guidelines.
Yard Modernization
Presently, the first phase of the modernisation i.e. the Refurbishment and replacement of Machineries and Infrastructure (RRMI) is under progress with financial support from Govt. of India. As on 31 Mar 2017, orders worth Rs 154.83 Cr have been placed. Out of which work for Rs 119.79 Cr has been completed. Tenders valued at Rs 20.24 Cr are under progress.
The yard has received Rs 200 Cr as relief for extensive damages suffered due to Hudhud Cyclone, which would be used to restore the facilities. Besides this an ‘Intergovernmental MoU for defence industry cooperation in shipbuilding’ has been signed between Secretary (Defence Production), India and Minister of Defence Acquisition and Program Administration (DAPA), RoK on 21 Apr 2017 for technical assistance and supervision for up-gradation of HSL’s infrastructure to be at par with world class shipbuilding industries. 
Future Business Prospects
As brought out in my previous speech during the last  Annual General Meeting, the yard has been nominated for construction of five Fleet Support Ships and two special operation vehicles for Indian Navy. The Company has also been awarded with the Normal Refit of an EKM Submarine i.e. INS Sindhuvir, the refit of which has been commenced w.e.f Aug 2017. The SOV project is in its initial stage and a suitable design collaborator for the project is under finalisation. In case of FSS project, HSL has been nominated from the Indian side by the Ministry of Defence in connection with the ‘Inter-governmental MoU for defence industry cooperation in shipbuilding’ signed between Secretary (Defence Production), India and Minister of Defence Acquisition and Program Administration (DAPA), RoK on 21 Apr 2017. The Korean counterpart has nominated HHI shipyard for collaboration with HSL for FSS Project.
Though, the future of the yard appears to be bright, all nominated shipbuilding orders would materialise commencing FY 2019-20. Therefore, the yard is endeavouring to bag some shipbuilding orders through competitive bidding or nomination to tide over the leanperiod during the coming financial year i.e. 2018-19. 
Skill Development
The yard’s initiatives in the field of skill development include training of Trade, diploma & degree apprentices as well as vocational trainees. 135 ITI apprentice trainees, 84 engineering graduates and 39 Diploma Trainees were trained in their respective streams during the year 2016-17. On the job training and project work was also extended to 1777 students of various engineering colleges, management institutions and marine institutes.
As a part of skill development initiative, HSL has adopted Govt. ITI, Kancharapalem of Govt. of India, with an objective of providing free Industrial training to the students of the ITI for improving their employability. They would further be trained in life skills, IT skills and spoken English, etc. HSL has also donated industrial equipment to the ITI.
Corporate Social Responsibility
As per DPE guidelines and Companies Act 2013, considering average net profit for the immediately preceding three financial years, our shipyard is exempted from earmarking dedicated funds for CSR even if the company has earned profit in the current year. Notwithstanding our current financial position, our company has identified some of the need-based CSR initiatives for the betterment of the local people with limited financial commitment. During the Year 2016-17, an amount of Rs.8 lakhs was spent towards various CSR Related activities ie., International Coastal Clean-up Day, Swatch Bharat day, Free Medical Camp, Renovation of Schools & Colleges under the control of HSL. Apart from these, free electricity & water provided to six educational institutions operated in HSL colony for the benefit of the students of surrounding areas.
Swatch Bharat Campaign
Your company is fully committed to Hon’ble Prime Ministers call for Swatch Bharat movement to bring a behavioural change among all employees and residents of nearby area. Several cleanliness drives were organised during the year to sensitise our employees, residents of the township and nearby area. Apart from the above, thrust was also given for creating a green shipyard by way of plantation of saplings at various places in the shipyard and its township. Swatchhata Pakhwada was organized twice during the year i.e. from 01 May 2016 to 11 May 2016 and 19 Sep 2016 to 03 Oct 2016.
Indigenisation & Make-in-India Campaign
Your Company is contributing to the Make-in-India Campaign in a bigway. It has set-up a Make-in-India cell and launched Make-in-India portal in its website for vendors, with an objective of ensuring maximum indigenisation. Your company has also entered into a strategic partnership with Republic of Korea aimed at developing HSL Yard at par with world class shipbuilding giants through skill and technological transfers as a part of its Make-in-India and Make-in-HSL efforts. Keeping in view of the changed indirect tax regime, our Company has implemented the GST compliances as per the statutory requirement. 
Industrial Relations
The Company maintains harmonious industrial relations with the work force. The recognised and the supporting trade unions of the shipyard are constructive in their contribution towards improvement of the company. Periodical interaction of C&MD with all the employees is being held for enabling them to be aware of the ongoing company affairs and to avoid communication gaps. 
Morale, Motivation & Welfare Measures
(a) In order to increase the morale of “L” series staff & workmen (Fixed Tenure Contract Employees), management has increased 30% of the base wage from 01 Apr 2016 and also a subsequent increase of 20% from 19 Jan 2017.
(b) The outstanding dues of wage revision of staff & workmen is being cleared in a phased manner. First of such instalment has been paid during the year.
(c) Promotion policy has been revised in order to motivate young Officers.
(d) A Compassionate Appointment policy has been implemented to provide employment on compassionate grounds to the dependent family members of the HSL employees who die in harness.
(d) Workers Canteen has been renovated with an aesthetic look to create a neat and tidy space to eat.
(e) Coffee Castle has been set up for its employees to have a refreshment break in the long working hours.
(f) International Women’s Day was celebrated to recognize the stellar role being played by our dedicated women employees.
(g) Inter- Departmental sports events were organized for employees.
(h) Cultural Programs like Musical Night, and Kala Natyam Program were organized attracting active participation from HSL Employees.
(i) A Children’s park was opened in the colony for children.
(j) 150 Residential Quarters have been taken up for renovation in a phased manner. Out of the 150 quarters, renovation of 62 quarters have been completed in first phase. 
I would like to place on record our gratitude and appreciation for the assistance, 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 Integrated Headquarters (Navy)/MoD, the Indian Coast Guard, Comptroller & Auditor General of India, Controller of Defence Accounts (Navy), Government of Andhra Pradesh, Flag Officer, Eastern Naval Command and look forward to their continued support in the future. I acknowledge with gratitude the continued patronage and support received from the Company’s clients, OEMs and Vendors. I also thank the Classification authorities, Company’s Bankers and Auditors for their help and cooperation. I thank all my colleagues on the Board for their harmonious support and immense encouragement. My special appreciation to the collective efforts of the entire HSL Team working tirelessly to make the company profitable.
Thank You,