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Year End :2023-03

Your Board of Directors takes great pleasure in presenting their Report on the performance of the Company ("the Company" or "HAL"), and its Audited Financial Statements for the Financial Year ended March 31, 2023, together with Reports of the Statutory Auditors and the Comptroller & Auditor General of India (C&AG) thereon.

FINANCIAL HIGHLIGHTS

The financial highlights for the year ended March 31, 2023 are summarised as under:

(' in Lakh except per equity share data)
PARTICULARS	2022-23	2021-22
Turnover	26,36,056	24,36,166
Exports	29,371	16,796
Profit Before Tax (PBT)	6,49,294	5,23,115
Provision for Tax	68,177	14,465
Profit After Tax (PAT)	5,81,117	5,08,650
R&D Expenditure	2,49,433	1,96,691
Earnings/ Share (in ')	173.79	152.11
Book Value / Share (in ')	702.96	576.10

During the year under review, the turnover of the Company increased by 8% to '26,36,056 Lakh from '24,36,166 Lakh of the previous year. The Profit before Tax for the year increased by 24% to '6,49,294 Lakh from '5,23,115 Lakh in the previous year. The Profit after Tax (PAT) increased by 14% to '5,81,117 Lakh from '5,08,650 Lakh in the previous year.

PRODUCTION HIGHLIGHTS

During the year, the Company has produced 22 numbers of new Aircraft and Helicopters, covering LCA Tejas, Dornier Do-228, ALH Dhruv, Light Combat Helicopter (LCH) and Light Utility Helicopter (LUH) in addition to the production of 51 New Engines and Accessories, at its various Divisions. The Company has also overhauled 216 Aircraft / Helicopters and 535 engines during the year.

ORDER BOOK POSITION

During the year, the Company has bagged contracts for production and supply of 70 Nos. of HTT-40 Basic Trainer Aircraft on March 6, 2023 and 6 Nos. of Dornier 228 Aircraft on March 10, 2023.

The Order Book position of the Company stands at ' 81,78,400 Lakh as on March 31, 2023.

DIVIDEND

During the year, your Company has declared and paid 1^st interim dividend of '20 per share of '10 each (200 %) for the financial year 2022-23, amounting to ' 66,877.50 Lakh.

Further, the Company has also declared and paid 2^nd interim dividend of ' 20 per share of '10 each (200 %) for the financial year 2022-23, amounting to ' 66,877.50 Lakh.

The Board of Directors of the Company has recommended a final dividend of '15/- per share of ' 10 each to comply with the Guidelines of Department of Investment and Public Asset Management (DIPAM) on Capital restructuring with respect to payment of minimum dividend. The Final Dividend if approved by the shareholders, would involve cash outflow of '50,158 Lakhs.

Thus, the total dividend including final dividend for the financial year 2022-23 would be '55/-per equity share (550%), amounting to '1,83,913 Lakhs.

In terms of the provisions of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 [SEBI (LODR) Regulations] and the Guidelines of DIPAM, your Company has formulated a Dividend Distribution Policy and the same is available on the Company's website at https://hal-india. co.in/Common/Uploads/DMS/Dividend Distribution Policy.pdf

CAPEX

In order to maintain the state of the art infrastructure and technologies to meet Aerospace Standard and also to develop systems/platforms for meeting the requirements of the Defence Forces and to become Atmanirbhar Bharat, HAL has incurred Capital Expenditure (CAPEX) of '2,08,173 Lakhs in FY 202223 ( PY '1,62,174 Lakhs). The investments are mainly towards Green Field Helicopter project at Tumakuru, augmentation of facilities of LCA, ROH of SU-30, ROH of AL-31 FP Engine etc. besides the regular replacement and rationalisation of the existing facilities.

OFFER FOR SALE (OFS)

To achieve the mandatory threshold of 25% minimum public shareholding in the Company, Government of India (GoI) had offered 3.5% (1,17,03,563) equity shares of the Company to non-Retail Investors and Retail Investors on March 23-24, 2023, out of its shareholding of 75.15% in the Company, through Offer for Sale (OFS) by Stock Exchange Mechanism. Consequent to the OFS, the GoI shareholding as on March 31, 2023 stands at 71.65%.

Apart from above, as part of the OFS, GoI had also allotted 37,632 equity shares to the eligible employees of the Company during April, 2023 under Employee OFS. Consequent to the Employee OFS, the GoI shareholding stands at 71.64%.

RESERVES

During the year under review, '53,881 Lakh was transferred to Research & Development Reserve, '10,776 Lakh was transferred to Indigenization Fund Reserve and ' 3,59,576 Lakh to General Reserve.

BORROWINGS

As on March 31,2023, the short term and long term borrowings of the Company was Nil.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Company has in place adequate internal financial controls for ensuring efficient conduct of its business. A detailed note on internal financial controls is provided in the Management Discussion and Analysis Report.

LOANS, GUARANTEES AND INVESTMENTS

Details of Loans, Guarantees and Investments as covered under the provisions of Section 186 of the Companies Act, 2013 (''the Act") form part of Notes to the Financial Statements.

RELATED PARTY TRANSACTIONS

During the year, your Company has entered into transactions with related parties. In line with Related Party Transactions (RPTs) Policy, approval of the Audit Committee and Board, as the case may be was obtained for RPTs. As per the threshold mentioned in the Policy, there were no material related party transactions with the Company's Promoters, Directors, Management or their relatives, which could have had a potential conflict with the interests of the Company. The disclosures related to RPTs in accordance with the applicable accounting standards are provided in Clause No. 45A of the Notes to the financial statements. Details of contract(s) or arrangement(s) with related parties referred to in Section 188(1) of the Companies Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014, in the prescribed form AOC-2, is attached to this Report as Annexure-I.

CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements of your Company and its Joint Venture Companies & Subsidiary Companies for the year ended March 31, 2023 have been prepared in accordance with the provisions of Section 129(3) of the Companies Act and applicable Accounting Standards, and form part of this report.

Pursuant to the first proviso of Section 129(3) of the Companies Act read with Rule 5 of the Companies (Accounts) Rules, 2014, a separate statement containing salient features of the Financial Statements of Subsidiaries / Associate / Joint Venture Companies in Form AOC-1 is appended to this report, which forms part of the Financial Statements. The separate Audited Financial Statements in respect of the Subsidiaries are also available on the website of the Company at www.hal-india.co.in.

SUBSIDIARY/ ASSOCIATE/ JOINT VENTURE COMPANIES

As on March 31, 2023, your Company has two Subsidiaries including one wholly owned Subsidiary and thirteen Joint Venture Companies (JVCs) including two Not-for-Profit Companies (Section 8 Companies).

Pursuant to the provisions of Section 134(3)(q) of the Companies Act read with Rule 8(1) of the Companies (Accounts) Rules, 2014, a Report on the performance and financial position of each of the Joint Venture Companies and Subsidiary Companies is attached to this Report as Annexure-II.

SIGNIFICANT ACHIEVEMENTS

Significant achievements of the Company during the year are as follows:

• The state-of-the-art Integrated Cryogenic Engine Manufacturing Facility (ICMF) of the Company was inaugurated by Hon'ble President of India, in Bengaluru on September 27, 2022. The facility will cater to the entire Rocket Engine Manufacturing under one roof for ISRO, it will also boost self-reliance in manufacturing of Hi-thrust Rocket engines.

• HAL's New Helicopter Factory in Tumakuru was dedicated to the nation by Hon'ble Prime Minister of India on February 6, 2023.

• Successfully completed the production of 15 Light Combat Helicopters (LCH) against the 15 LCH contract ahead of contract schedule.

• Handed over the last of the 16 ALH MKIII (Maritime role) order to the Indian Coast Guard (ICG) on November 15, 2022. During the event, a Letter of Intent (LoI) for nine more helicopters was received from ICG.

• The first flight of the LCA Mk1A prototype (LCA SP-25 modified for MK1A features) was conducted on May 20, 2022, which is the major milestone towards LCA MK1A program.

• Successfully produced 4 Do-228 aircraft in advance against the contract for supply 6 Do-228 to IAF

• The maiden arrested landing and ski-jump take-off from the indigenous aircraft carrier INS Vikrant was carried out by the LCA Navy MK1 aircraft on February 6, 2023.

• Delivered the first set of hardware for Gaganyaan mission (first unmanned mission) as well as the 150^th HAL made Satellite Bus-structure to ISRO on April 4, 2022. HAL also delivered the Crew Module Fairing (CMF) and HEM-Thrust Transfer Structure (HTS) hardware for 'Human Spaceflight Program' to Indian Space Research Organization (ISRO) on August 17, 2022 in Bengaluru.

• Build of LCA Navy MK I Trainer prototype aircraft NP5 (3^rd Naval prototype) completed and engine ground run carried out on January 16, 2023.

• Design & development of Indigenous Mission Management System (MMS) integrated on DO-228 (ICG) and flight testing commenced from August 25, 2022.

• Solid State Flight Data Recorder (SSFDR) / Cockpit Voice Recorder (CVR) for Cheetah, Chetak and Cheetal helicopter has designed and developed. 'Type Approval' for this system has been accorded by CEMILAC. The 'Flight Clearance' for deployable Flight Data Recorder (FDR) and Interface Computer for DO-228 aircraft as also accorded by RCMA (Korwa).

CURRENT PROJECTS AND PROGRAMS

During the year, the Company has produced Light Combat Aircraft (LCA) Tejas, Dornier Do-228 Aircraft, Advanced Light Helicopter (ALH) Dhruv, Light Combat Helicopter (LCH), Light Utility Helicopter (LUH), engines, accessories and aerospace structures against the various customer orders. To boost the Atmanirbharta in defence, the Company has indigenously designed and developed two products namely HTT-40 Basic Trainer Aircraft and LUH Mkl. The Company has received contract for supply of 70 HTT-40 aircraft in March, 2023.

During the year, the Company has commenced manufacturing of helicopter at New Helicopter Factory, Tumakuru. The Company has also established facilities for manufacturing of semi cryogenic and cryogenic engine components at Integrated Cryogenic Engine Manufacturing Facility (ICMF). The facility will cater to the entire Rocket Engine Manufacturing under one roof for ISRO, it will also boost self-reliance in manufacturing of Hi-thrust Rocket engines.

The Company has achieved a significant milestone towards civil aviation segment and Regional Connectivity Scheme UDAN with the first commercial flight of HAL's civil Do-228 held on April 12, 2022 at Dibrugarh-Pasighat route. The Company has progressed on bringing improvements in civil Do-228 / Hindustan 228-201 aircraft and attained Type Certification with latest FAR 23 certification requirement from DGCA. Further, Hindustan 228-201LW with Maximum Take Off Weight of 5695 Kgs has also been approved by DGCA in January, 2023. With this modification, the aircraft would fall in the Sub 5700 kg aircraft category.

DESIGN AND DEVELOPMENT PROGRAMS

The Company continued to boost the "Atmanirbhar Bharat Abhiyan" of Govt. of India with its focused efforts towards design and development of products, technologies and capabilities to meet the future requirements of Indian defence forces and non-military aerospace market in India. The Company has considerably progressed towards the realization of our indigenous programmes viz. Basic Trainer Aircraft (HTT-40), Light Utility Helicopter (LUH), Light Combat Aircraft (LCA)- MK1A, Indian Multi-Role Helicopter (IMRH) and Development of Engines. The progress achieved in respect of these projects during the year is given below:

• BASIC TRAINER AIRCRAFT (HTT-40)

HTT - 40 is the Basic Trainer aircraft currently being indigenously designed and developed by HAL. HTT-40 would be used for basic flight training, aerobatics, instrument flying and close-formation flights whereas its secondary roles would include navigation and night flying. Features of the aircraft include Air conditioned cockpit, Tandem seating, Zero-Zero ejection seats and Multifunction Displays. The program was taken up with internal funding. A total of 3 prototypes have been built which includes two flying prototype and one Structural Test Specimen (STS).

During the year, HTT-40 successfully completed erect spin certification flights, and PSQR validation trials. All systems certified to PSQR and FAR 23. Airworthiness certificate for Aircraft obtained. First Inverted Spin tests was carried out in March, 2023. HAL has bagged the contract for supply of 70 HTT-40 aircraft on March 6, 2023.

• LIGHT COMBAT AIRCRAFT (LCA) Mk 1A

LCA Mk1A is an improved variant of indigenously developed LCA MK1, presently being developed by HAL. It has additional features and improvements such as Self Protection Jammer, Active Electronically Scanned Array (AESA) RADAR, Beyond Visual Range (BVR) Missile and maintainability improvements etc.

LCA Mk1A development activities are under progress. Aircraft modification completed with integration of AESA Radar, EW Suite, and upgraded Open Architecture Computer (OAC) software. Flight testing commenced on May 20, 2022.

• LIGHT UTILITY HELICOPTER (LUH)

The LUH is a single engine, 3 Ton weight class helicopter having Glass Cockpit with Multi-Function Displays. The LUH is intended to meet different role requirements including high altitude operation which is specific requirement of our Defence Services. Three flying prototypes have been built and were extensively flight tested. Initial Operational Clearance (IOC) for LUH IAF Version was accorded on February 7, 2020 and for the Indian Army Version on February 5, 2021.

Integration of Automatic Flight Control System (AFCS) is progressing and will be completed by December, 2023. HAL has produced first LUH Mk-I in July, 2022 against the Letter of Intent (LoI) for 12 helicopters.

• INDIAN MULTI ROLE HELICOPTER (IMRH)

The Company has under taken the design and development of 10-15 ton class IMRH for Indian Air Force, Indian Army and Indian Navy. The Naval variant of IMRH is christened Deck Based Multi Role Helicopter (DBMRH).

IMRH and DBMRH would be designed to meet the requirement of all the three military services and its future extension to civil market to cater to off shore operations, utility, VVIP transport etc., to enlarge the helicopter business through production as well as MRO activities.

Currently, the preliminary design activities are under progress. HAL has completed Phase 1 of wind tunnel testing of IMRH-IAF scaled model and results are satisfactory. Phase-2 of Wind Tunnel testing are under progress.

• 25 kN TURBOFAN ENGINE (HTFE-25)

Design and development of a 25kN thrust class turbofan engine, which can be used on Basic/ Advanced military trainers, on small business jets and also large UAV applications is under progress at HAL. The engine can be used on a 5-ton weight class aircraft in single engine configuration and on aircraft of up to nine- ton weight class with twin-engine configuration. Two core engines have been produced so far and are undergoing development trials.

• 1200 kW TURBOSHAFT ENGINE (HTSE-1200)

The 1200KW Turbo shaft engine would be used as power plant for 3 to 6-ton category helicopters. One technology demonstrator of HTSE-1200 engine was built and is presently under testing.

• HAWK-i

Hawk-i is the indigenously upgraded Hawk Mk 132 aircraft with enhanced operational and training capabilities. Hawk-i is now equipped with new suite of Avionics like improved Radio Altimeter (RADALT), Identification of Friend & Foe (IFF Mk XII), Solid State Digital Video Recording System (SSDVRS), Counter Measure Dispensing System (CMDS), Softnet Radio, Integrated Communication System (INCOM), Data Transfer System (DTS), Smart Anti-Airfield Weapon (SAAW), Radar Warning Receiver (RWR), Voice Activated Command System (VACS), Integrated Control Unit (ICU) & Head Up Display (HUD) .

RESEARCH AND DEVELOPMENT EFFORTS

During the year, indigenously designed and developed HTT-40 Basic Trainer Aircraft and LUH were unveiled by Hon'ble Prime Minister.

The R&D efforts of the Company have resulted in successful first flight of ALH with two segmented Main Rotor Blades and Pre-Cone Main Rotor Head developed to address the stringent stowage dimension requirement of Indian Navy, first Inverted Spin tests of HTT-40, first flight of LCA Mk1A and maiden arrested landing & ski-jump take-off by LCA Navy MK1 aircraft out from the indigenous aircraft carrier INS Vikrant.

The Company is also undertaking the development of aero engine, starter engines, avionics and accessories. Towards this, a major achievement of the Company is development of the

gas turbine starter engine GTSU-127E for ADA and successful built of a Technology Demonstrator (TD) unit. The TD unit was tested for light-up, acceleration and initial performance and the results are as anticipated in the design stage.

During the year, the Company has incurred a total R&D expenditure of '2,49,433 Lakh, which is 9.46% of the Turnover. The Company has transferred a sum of '53,881 Lakh (15% of Operating PAT) to R&D reserve for contribution to R&D corpus during the year 2022-23.

During the year, HAL has filed 192 IPR applications which make cumulative number of 2224 IPRs filed by company. Further, 116 IPRs have also been granted during the year taking cumulative IPRs held by the organization to 748. (Patents - 154, Industrial Designs - 115, Copyrights - 477, Trademark - 2).

BOARD AND ITS COMMITTEE MEETINGS

During the year, 12 (Twelve) Board Meetings were held and the maximum interval between any two meetings was not more than 120 days.

The details of meetings of the Board and Committees thereof held during the year are furnished in the Corporate Governance Report, which forms part of this Report.

COMMITTEES OF THE BOARD

As on March 31,2023, the Board has five Statutory Committees namely Audit Committee, Nomination & Remuneration Committee, Corporate Social Responsibility & Sustainable Development Committee, Stakeholders Relationship Committee and Risk Management Committee.

A detailed note on the composition, terms of reference and meetings of the Board and its Committees is provided in the Corporate Governance Report.

CHANGES IN BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

The following changes took place in the Board of Directors and Key Managerial Personnel (KMP) of your Company during the financial year:

Appointment

• Shri Deepak Abasaheb Shinde appointed as Part -Time Non-Official (Independent Director) on the Board of the Company w.e.f April 28, 2022.

• Shri Jayadeva E P appointed as Director (Operations) on the Board of the Company w.e.f June 10, 2022.

• Shri Rajeev Prakash appointed as Govt. Nominee Director on the Board of the Company w.e.f September 14, 2022.

• Dr D K Sunil appointed as Director (Engg and R&D) on the Board of the Company w.e.f September 29, 2022.

• Shri T Natarajan appointed as Govt. Nominee Director on the Board of the Company w.e.f December 23, 2022.

• Shri Shailesh Bansal appointed as Company Secretary of the Company w.e.f. March 28, 2023.

Cessation

• Shri Arup Chattterjee ceased as Director (Engg and R & D) on the Board of the Company due to his superannuation on June 30, 2022.

• Shri R Madhavan ceased as Chairman and Managing Director on the Board of the Company due to his superannuation on July 31, 2022.

• Shri Alok Verma ceased as Director (HR) on the Board of the Company due to his superannuation on November 30, 2022.

• Shri Chandraker Bharti ceased as Govt. Nominee Director on the Board of the Company due to withdrawal of Nomination w.e.f September 14, 2022.

• Shri Rajeev Prakash ceased as Govt. Nominee Director on the Board of the Company due to withdrawal of Nomination w.e.f December 23, 2022.

• Shri G V Sesha Reddy, ceased as Company Secretary of the Company due to his superannuation on October 31, 2022.

DECLARATION OF INDEPENDENCE

Declarations from the Independent Directors of the Company have been received, confirming that they met the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013 and Regulation 25(8) of the SEBI (LODR) Regulations.

COMPANY'S POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION

The appointment, tenure and remuneration of Functional Directors including Chairman and Managing Director (CMD) are determined by the Government of India. The Terms & Conditions of appointment, including the period of appointment, the Scale of Pay and other entitlements are notified by the Government of India.

Government Nominee Directors are appointed by the Department of Defence Production, Ministry of Defence and they are not entitled to any remuneration / sitting fees.

Independent Directors are appointed by the Government of India and they are entitled to sitting fees for attending the Board / Committee meetings as prescribed by the Board in line with the Companies Act and Rules made thereunder.

In view of the Gazette Notification No GSR 463 (E) dated June 5, 2015 of the Ministry of Corporate Affairs (MCA), your Company, being a Government Company, is not required to frame a Policy on Directors' appointment and remuneration, including criteria for determining qualifications etc. under Section 134(3)(e) of the Companies Act.

BOARD EVALUATION

Pursuant to the Notification No. 463 (E) dated June 5, 2015 issued by the Ministry of Corporate Affairs, the statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its Committees and individual directors is not required for your Company, as the performance of directors is evaluated by the Administrative Ministry. The performance evaluation of Independent Directors was carried out by the entire Board.

ANNUAL RETURN

In accordance with the provisions of the Companies Act, 2013, the Annual Return in the prescribed format has been hosted on website of the Company at https://hal-india.co.in/Common/ Uploads/DMS/Draft MGT 7 2022 23.pdf

COMPLIANCE WITH SECRETARIAL STANDARDS

The Company complies with all applicable mandatory Secretarial Standards issued by the Institute of Company Secretaries of India.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

As a defence Central Public Sector Enterprise (CPSE), your Company was granted exemption vide Notification GSR No.680 (E) dated September 4, 2015, from the disclosure of information with respect to conservation of energy, technology absorption, foreign exchange earnings and outgo under the provisions of Section 134(3)(m) read with Rule 8(3) of the Companies (Accounts) Rules, 2014.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Pursuant to the provisions of Section 135 of the Companies Act and Companies (Corporate Social Responsibility Policy) Rules, 2014 and Amendment thereof & DPE Guidelines, the Company has undertaken various activities during the year as per its CSR Policy. The projects / programmes / activities taken up are in line with Schedule VII of the Companies Act. The thrust areas under CSR are Healthcare, Skill Development, Education, Enhancing Employability through Training, etc. The other areas in which support extended were Environment Sustainability, Sports Development, Rural Infrastructure Development, Sanitation etc. The Company has spent an amount of '10,328 Lakhs under CSR for the Financial Year 2022-23 against the CSR budget/ obligation of ' 9,707 Lakhs.

The Corporate Social Responsibility Policy, Composition of the Committee and CSR Projects/ Activities of the Company is available on the Company's website at https://hal-india. co.in/Corporate%20Social%20Responsibility/M 412. Salient features of the Policy form part of the Annual Report.

Annual Report on CSR activities undertaken by your Company during the year 2022-23, pursuant to Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended, is attached to this Report as Annexure-III.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

In terms of amendment dated May 05, 2021 to Regulation 34(2)(f) of SEBI (LODR) Regulations, the Company has prepared Business Responsibility and Sustainability Report (BRSR) for the year 2022-23 on Environment, Social and Governance (ESG) parameters in the prescribed format and attached to this Report.

DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY

The Company has a Board approved Risk Management Policy, in place. The policy aims at elimination or reduction of risk exposures through identification and analysis of various types of risks and facilitating timely action for taking risk mitigation measures.

In line with Regulation 21 of the SEBI (LODR), Regulations, 2015, the Board of Directors had constituted the Risk Management Committee for monitoring and reviewing of the risk management plan and other such functions as it may, deem fit including ESG, Cyber Security and Business Continuity Plan, in line with applicable laws.

SIGNIFICANT AND MATERIAL ORDERS

There are no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and the operation of the Company in future.

PUBLIC DEPOSITS

Your Company has not accepted any deposit during the year. Further, there was no outstanding deposit and/or unpaid or unclaimed principal amount or interest against any deposit either at the beginning or at the end of the Financial Year 2022-23.

ISSUE OF EQUITY SHARES WITH DIFFERENTIAL RIGHTS

During the year, the Company has not issued any equity shares with differential rights as to dividend, voting or otherwise.

MATERIAL CHANGES SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS

No material changes / commitment of the Company have occurred after the end of the Financial Year 2022-23 and till the date of this report, which affect the financial position of the Company.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

The provisions of Section 197 of the Companies Act and the relevant Rules regarding particulars of employees drawing remuneration in excess of the limits specified are exempted for Government Company, in view of the Gazette Notification No. G.S.R. 463 (E) dated June 5, 2015 issued by the Ministry of Corporate Affairs, Government of India.

MOU WITH GOVERNMENT

Your Company is signing Memorandum of Understanding (MoU) every year with the Ministry of Defence (MoD), Government of India (GoI).

The Company has achieved "Excellent" performance rating with a score of 92.83 for the financial year 2021-22 against MoU signed with the Ministry of Defence, Government of India.

INDIGENISATION AND ATMANIRBHAR BHARAT

The Company has put in concerted effort on indigenisation of components, accessories and systems required to manufacture as well as repair & overhaul of aircraft, engine and associated accessories. Every year, HAL indigenizes various items/ components and systems of foreign origin fitted on HAL platforms through in-house capabilities or with the help of local vendors to reduce dependence on imports, savings in foreign exchange and manage obsolescence, thus fostering self-reliance through 'Make in India'.

In line with the Atmanirbhar Bharat Abhiyan of Govt. of India, HAL indigenised 1298 no. of items which may lead to annual foreign exchange saving of ' 160.30 Crore during the FY 2022-23. To align with national priorities and ensure inclusive growth, HAL has been also encouraging Indian private sector participation in the indigenization/ Make in India efforts to undertake various high value systems/equipment of foreign origin fitted on HAL platforms.

The other major initiatives / achievements during the year are as under:

0 Creation of a dedicated Indigenisation fund:

The Company has created a dedicated indigenization fund by transfer of 3% operating profit after tax of the Company every year from the FY 2022-23. This fund will be used for carrying out indigenization activities and will provide further impetus for indigenization.

0 Identification of critical items for indigenization and inclusion in the Positive Indigenisation Lists (PIL) issued by MoD:

In a major initiative, the Company has identified and made a comprehensive roadmap for indigenization of complex aircraft Systems, LRUs & other critical Items across its major

platforms. These items are planned to be indigenized in the next 4-5 years in a phased manner through participation of Indian Private Industries and Government Agencies involving Academia. Such 430 imported items are included in the four PILs (PIL-1: 23, PIL-2: 22, PIL-3: 360, PIL-4: 25) issued by DDP, MoD. Indigenisation of these items will be a significant milestone towards Atmanirbharta in Defence Sector.

0 Indigenisation through Company Funds (similar to Make-I concept) :

Indigenization activity at HAL has, hitherto, been primarily driven by the need to address the challenges posed by obsolescence of bought-out items pertaining to legacy fleets and supply-chain constraints arising from various geo-political events. In certain specific cases, indigenization was also taken up to counter the threat of exorbitant price increase by foreign OEMs. HAL is utilizing internal funds to address all these challenges.

In the recent years, indigenization has been actively endorsed as a strategy to increase self-reliance, in sync with the GoI policy of promoting 'Atmanirbhar Bharat'. Accordingly, some high value critical items are also being taken-up for indigenization with internal funds.

In this procedure Development cost is being borne by HAL and supply orders are placed on need basis.

0 Indigenisation through Make-II Procedure:

HAL's Make-II programme is a step towards supporting the 'Aatmanirbhar Bharat' & 'Make in India' mission. HAL's Make-II (Industry Funded) procedure is in compliance of the Make-II framework promulgated by MoD and envisages the assured order quantity after successful development of items through private vendors. HAL has identified items to be indigenized through Make-II procedure and uploaded in the Srijan Defence Portal. EoIs of these items are being issued in phased manner to take up for indigenisation under Make-II and so far, HAL has issued EoIs for around 900 items and Nil value Project Sanction order is placed for around 500 items for indigenisation under Make-II.

0 Uploading of imported items in Srijan Defence Portal:

MoD has developed and launched Srijan Defence Portal (an indigenization portal) to support Indian Industries with opportunities for Make in India in Defence. HAL has uploaded so far around 19000 nos. of imported items in the portal for information to private vendors and their likely participation in the indigenisation programmes of HAL.

0 Organising / participation in Seminars, Conferences and Exhibitions on Indigenisation / Vendor Development program

The Company has conducted / participated in more than 30 nos. of vendor development programs / seminars / exhibitions at Divisional level during the current financial year to sensitize Indian Vendors for opportunities available at HAL for indigenization and their enhanced participation in indigenization programmes.

Details of testing facilities available at HAL which could be utilized by private industries are hosted in HAL's website and can be accessed through www.hal-india.co.in.

OUTSOURCING

As part of the "Make in India" drive and the Atmanirbhar Bharat Abhiyan, HAL has been nurturing & developing a vibrant indigenous aerospace & defence ecosystem. In its path of moving towards being a lead integrator, HAL has been striving to develop Tier-II and gradually Tier-I suppliers over a period of time while retaining the core areas as prime integrators. HAL has been taking up outsourcing diligently even in the new, up and coming projects, so as to turn the suppliers into reliable business partners over time.

EXPORTS

Initiatives taken to boost Exports during the year are as under:

0 One passenger variant Do-228 (PVD) aircraft was handed over to Mauritius Police Force within a record time of 6 months from the date of signing of the contract, well ahead of the contractual delivery commitment.

0 Delivery of one ALH MKIII helicopter to Mauritius Police Force ahead of contractual delivery schedule.

0 Imparting Phase-II flying training on Chetak Helicopter for six officers of Nigerian Army Aviation.

0 Signed contract between HAL and Argentine Air Force for Engine repair and Spares support for 2 ton class helicopter.

BUSINESS DEVELOPMENT

The following Initiatives taken for Business Development during the year:

0 HAL Hindustan 228-201 aircraft attained Type Certification from DGCA. This is the first Type Certified fixed wing aircraft complying with latest FAR 23 certification requirement.

0 Received approval for type training on Civil Do-228 aircraft from Civil Aviation Authority of Nepal under NCAR147.

VENDOR DEVELOPMENT

During the year, the Company has taken several vendor development initiatives to increase the number of vendors.

During the year, the Company has conducted 35 Vendor Development Programmes, out of which, 6 were for Micro & Small Enterprises (MSEs) owned by SC/ST Entrepreneurs & Woman Entrepreneurs. The balance 29 were for across all categories. .

The Company has registered with RXIL, Mynd Solution and A TReDS Ltd. for enabling payments through TReDS platform to MSMEs. All efforts are made to bring the MSMEs on TReDS platform.

The Company has registered with MSME SAMBANDH portal and the procurement details are being updated monthly in this Portal. The Company has also registered with MSME SAMADHAAN portal and the same is being monitored regularly for resolution of payment complaints of MSEs, if any.

Your Company is a part of Public Procurement Portal, Government e-Marketplace (GeM portal) and registered as a Buyer in GeM Portal and taking up procurement of items which are available in GeM Portal. Also procuring several items which are not available in GeM Portal utilizing Custom Bid Module/ BoQ Module extensively. All our vendors are being persuaded to on board on the GeM portal to utilize the facilities available in the GeM portal.

HAL has implemented companywide e-Procurement system through its own e-Procurement portal which is adopted for tenders issued outside GeM portal. A 24X7 e-Procurement help desk has been established to provide information, support, training, operational issues/clarifications to the vendors.

HAL has implemented the Public Procurement (Preference to Make in India), Order 2017 and its amendments thereof issued by Department for Promotion of Industry and Internal Trade (DPIIT) to encourage 'Make in India' and promote manufacturing and production of goods & services in India.

PROCUREMENT FROM MICRO & SMALL ENTERPRISES (MSEs)

The Company has implemented the Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012 & its amendments thereof issued by Ministry of MSME. The Company has achieved more than the mandated procurement of 25% from MSE entrepreneurs (excluding specific defence procurement as per Sl.No.14 of the policy). During the year, the total value of procurement including\ outsourcing made from MSEs is ' 1,78,240 Lakh.

INTEGRITY PACT (IP)

Your Company has system of signing of IP with vendors for all procurement of Goods, Services & Works / contracts having value of ' 5 Crore and above. Only those Vendors / bidders, who commit themselves to IP with the HAL would be considered competent to participate in the bidding process. Further, to encourage competition in HAL procurement and to reduce processing lead time, HAL has implemented the Omnibus Integrity Pact with effect from January 1, 2018. This Omnibus IP shall be valid upto 5 years and the same can be proposed by bidder for consideration against any offers submitted by the vendor during the validity period of Omnibus IP.

HUMAN RESOURCE DEVELOPMENT

The strength of employees as on March 31, 2023 stood at 24,457.

As on March 31, 2023, a total of 3618 Apprentices were engaged in the Company, comprising 10.31 % of the total employee strength including contractual staff.

EMPLOYEE WELFARE

Company continues to extend welfare benefits to the employees and their dependants by way of comprehensive Medical Facilities, Housing Facilities, Canteen Facilities (for employees only), Educational facilities for employee's Children, Sports Facilities, etc. Further, Company had taken Group Life Insurance Policy of ' 10 Lakhs on behalf of employees and also introduced Financial Assistance Scheme to provide regular monthly monetary support ranging from ' 15,000/- p.m. to ' 50,000/- p.m. depending upon the Grade / Scale of employee, to the dependents of deceased employees.

REPRESENTATION OF SC/STs The position regarding representation of Scheduled Castes / Scheduled Tribes (SC / STs) is as follows: Representation of SC/STs in the total strength of the Company as on January 1, 2022 and January 1, 2023
Category (Grade / Scale of Pay)	Total Strength as on		Number of SCs as on		Number of STs as on
	1.1.2022	1.1.2023	1.1.2022	1.1.2023	1.1.2022	1.1.2023
Group - A (Grade - II & above )	7,843	7,602	1,396	1,369	482	473
Group - B (Grade-I)	19	13	2	2	2	1
Group - C (Scale -3 to Special Scale)	17,801	17,035	3,114	3,022	1,364	1,326
Group - D (Scales - 1 & 2 )
(i) Excluding Safai Karmacharis	5	4	1	1	-	-
(ii) Safai Karmacharis	-	-	-	-	-	-
Total	25,668	24,654	4,513	4,394	1,848	1,800
Recruitments made during the period January 1, 2022 to December 31, 2022 and the SC/STs amongst them
Category (Grade / Scale of Pay)		Total	No. of Reservations		No. of Posts filled by
		number of	made for		appointment of
		Post filled	SCs	STs	SCs	STs
Group - A (Grade - II & above )		92	13	7	15	7
Group - B (Grade-I)		-	-	-	-	-
Group - C (Scale - 3 to Special Scale)		8	1	-	4	-
Group - D (Scales - 1 & 2)
(i) Excluding Safai Karmacharis		-	-	-	-	-
(ii) Safai Karmacharis		-	-	-	-	-
Total		100	14	7	19	7
Vacancy - based Promotions made during the period January 1, 2022 to December 31, 2022 and the SC/STs amongst them
Category (Grade / Scale of Pay)		Total	No. of Reservations		No. of Posts filled by
		number	made for		Promotion of
		Promoted	SCs	STs	SCs	STs
Group - A (Grade - II & above )		1176	NA	NA	198	75
Group - B (Grade-I)		-	-	-	-	-
Group - C (Scale - 3 to Special Scale)		-	-	-	-	-
Group - D (Scales - 1 & 2 )
(i) (i) Excluding Safai Karmacharis		-	-	-	-	-
(ii) Safai Karmacharis		-	-	-	-	-
Total		1176	-	-	198	75

EMPLOYEE RELATIONS (ER) / INDUSTRIAL RELATIONS

The Employee Relations / Industrial Relations Scenario remained peaceful & cordial during the year. Effective communication between the Management and the Trade Unions / Associations paved way for smooth relations / maintenance of industrial harmony and to eliminate any scope of conflicts & misunderstandings. Meetings with the representatives of the Recognized Unions / Officers Associations at the Divisional, Complex & Corporate Levels were held periodically to discuss various issues.

Plant Level & Shop Level Committees with representatives from the Management / Union are functioning in the Divisions to discuss & resolve production related matters. In order to address Employee Grievance / Representations, Grievance Redressal Mechanisms are also in place in the Company.

RAJBHASHA IMPLEMENTATION

The Company is constantly taking efforts to implement Official Language in all the Divisions/ Offices effectively. During the year, many initiatives have been taken such as printing of all Technical Manuals, Form-Formats in bilingual.

As per directions given by First Sub-Committee, Committee of Parliament on Official Language (CPOL) during the inspections, necessary directives have been issued to all the Divisions/Offices of HAL to maintain expenditure towards the advertisements and publicity as per Official Language guidelines.

Apart from this, Employees are being motivated through publication of In-house magazine 'Nabharatna' at Corporate Office. 'HAL Connect' - a weekly e-magazine is also being issued in bilingual for encouraging the Employees to read technical literature in Hindi also. Around 15-16 In-House Hindi Magazines are also being published by the Divisions of HAL on annual basis.

Hindi Incentive Scheme has been implemented effectively. Further, Hindi roster related information pertaining to knowledge of Hindi of the Employees is being updated for the purpose of preparing time bound programme to train our Employees, who have no working knowledge of Hindi, from forthcoming training session.

The periodical reports are also being sent and uploaded as per directives issued by the Department of Official Language, Ministry of Home Affairs, New Delhi in this regard. As per the Official Language guidelines, Hindi workshops are also being conducted on various topics, so that Employees could do their routine work in Hindi effectively.

HAL website is being updated in bilingual from time to time at Corporate Office level. Inspections of various divisions related to Official Language have been done successfully during the year. The Officers from all the Divisions including Corporate Office are attending TOLIC Meetings during the year. The actions on minutes of TOLIC meetings are also carried out as per the decisions taken in the meeting.

The inspection reports pertaining to inspections of Ministry of Defence, Ministry of Home Affairs and compliance reports related to assurances given to the Committee of Parliament on Official Language are being sent to the concerned authorities/ offices in time after reviewing the report at the Corporate Office level.

The meetings of Official Language Implementation Committee in all the divisions of HAL including Corporate Office are being conducted regularly. Necessary guidelines issued by the Dept.

of Official Language, Ministry of Home Affairs, New Delhi are also being circulated to all the divisions of HAL to make aware of latest orders pertaining to implementation of Official Language.

WOMEN EMPOWERMENT:

Women Empowerment & Leadership Programs are being conducted by HAL. The main objective of the programs is to enhance the Self-Awareness & Self - Management, Managing Relationships, enhancing Business Leadership Skills, etc. Equal Opportunities are provided to Women Employees at all levels for advancement in their career. Around 60 Women Employees hold Senior Management posts i.e., above Grade VII.

HAL is a Corporate Life Member of the Women in Public Sector (WIPS) Forum. Women employees are encouraged to participate in programmes / activities of WIPS Forum. All statutory welfare amenities have been extended to women employees.

Ladies Clubs / Families Welfare Associations are also functioning at different locations to take up various philanthropic / sociocultural activities. Women's Day is celebrated on 8^th March every year.

PROHIBITION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE

The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 has been notified in the Company. In line with the Guidelines received from time to time, necessary actions have been taken to prevent Sexual Harassment of Women at Workplace. The HAL CDA Rules applicable to Officers and the Certified Standing Orders applicable to Workmen have the required provisions in this regard.

Internal Complaints Committees as per Section 4 of the said Act have been put in place. Information for the year 20222023 in terms of Section 22 of the Act, is as indicated below:

Awareness Programme on Sexual Harassment were also conducted at Divisions / Offices during the year.

INFORMATION TECHNOLOGY (IT) INITIATIVES

During the year, your Company has taken many IT initiatives towards adopting the latest technology, increasing customer satisfaction, implementing paperless processes and improving cyber security. Some of the major IT initiatives and achievements of the Company during the period are:

MRO under the convergence mission of Govt. of India.

• "IEI Industry Excellence Award 2022" under 'Engineering Manufacturing and Processing' category for demonstrating outstanding performance with a high order of business excellence.

• "Governance Now PSU Award" under the categories Nation Building and PSU IT Award (Digital PSU and Use of emerging technologies - Enterprise Security sub categories) amongst the Navratna Companies.

• "Business Standard Annual Award for Corporate Excellence 2022" under the category "Star PSU of the year".

• "ICC PSE Excellence Award" under the category "Inclusivity - Contribution of Women and differently abled in PSEs".

VIGILANCE

Your Company has a well-established Vigilance Department headed by the Chief Vigilance Officer (CVO). Vigilance Officers and Staff are posted to the Corporate Office and all the Divisions and Complex Offices of the Company.

The major vigilance activities carried out by Vigilance department are as under:

i. Preventive Vigilance:

0 During the period, 391 complaints were handled, 462 regular scrutiny/ surprise checks and 28 CTE type intensive examinations were carried out across the Company. Five system studies were carried out on various topics like scrap disposal, insourcing purchase orders, implementation of PPI order placed on class I & II vendor and check of Minimum Local Contact (MLC) certified by the vendors, procurement of shelf life items with focus on total procurement and its utilization/non utilization, study on LC payments -delivery schedule and applicability of liquidated damages etc.

0 A total of 87 awareness sessions were conducted on various topics. Key note address / talk by eminent speakers were organized to spread vigilance awareness among employees on various topics like preventive vigilance through preventive forensics, online banking transactions and related frauds, financial frauds in commercial procedure, maintaining professionalism, transparency and accountability in public procurement, PIDPI, complaint handling policy and sensitization on the ill effects of corruption etc.

ii. Vigilance Publications: Three in-house Vigilance e-magazines were published during the year, as under:

0 "Marg Darshan", a bi-annual magazine was circulated during the year on the theme "Independent India @ 75: self-reliance with integrity" and "Leveraging

• HAL TAD Kanpur, Hyderabad & Korwa divisions have received additional Nadcap certifications in 'Chemical Processing' for chromic acid anodizing, painting and chromate conversion coating respectively which will increase the process reliability and enhance business prospects for the organization.

• HAL Avionics Division, Hyderabad has been certified under the Occupational Health and Safety Management System in accordance with ISO 45001:2018 which will promote safe and environment friendly working conditions.

• Avionics Division, Korwa has obtained Production Organization Approval (POA) as per Civil Aviation Requirements (CAR-21) Subpart G from DGCA for Solid State Cockpit Voice & Flight Data Recorder and Control Unit for Hindustan 228-01 & Do-228-01 aircrafts. This will enhance the support for the Company in Civil Aviation endeavors.

AUDITORS

Statutory Auditors

HAL being a CPSE, Statutory Auditors of the Company were appointed by the Comptroller & Auditor General of India (C&AG). M/s A. John Moris & Co., Chartered Accountants, Bengaluru was appointed as Statutory Auditors for auditing the Accounts of the Company for the year 2022-23 and 17 firms of Chartered Accountants were appointed as Branch Auditors. The statutory auditors' report does not contain any qualification, reservation or adverse remarks.

The Auditors' Report on financial statements for the financial year 2022-23 and comments of the Comptroller & Auditor General of India (C&AG) under Section 143(6) of the Companies Act are attached to this Report, which is self-explanatory.

Cost Auditors

Your Company has appointed M/s GNV & Associates, Cost & Management Accountants as Cost Auditors for conducting the Cost Audit of the Company for the year 2022-23. The Company maintains cost records as specified by the Central Government under Section 148(1) of the Companies Act, which are audited by Cost Auditors.

Internal Auditors

The Company has appointed 14 (fourteen) Nos. of Chartered Accountant firms for carrying out internal audit of the Company for the year 2022-23.

Secretarial Auditor

In terms of Section 204(1) of the Companies Act, the Company has engaged M/s. DPSP & Associates, Company Secretaries, Bengaluru to conduct Secretarial Audit of the Company for the year 2022-23. The Secretarial Audit Report is annexed to this Report as Annexure - IV and forms part of Annual-Report.

The management's reply on the qualification of the Secretarial Auditor, form part of Secretarial Audit Report, which is selfexplanatory.

Annual Secretarial Compliance Report

The Company has filed the Annual Secretarial Compliance Report for the year 2022-23 with the BSE Ltd and National Stock Exchange of India Limited. The report was received from a Practising Company Secretary and filed within the stipulated time as specified under Regulation 24A of the SEBI (LODR) Regulations.

CORPORATE GOVERNANCE REPORT

In terms of Regulations 34 read with Schedule V of SEBI (LODR) Regulations and DPE Guidelines, a report on Corporate Governance for the year ended March 31, 2023 has been prepared and annexed to this Report. The Company's Secretarial Auditor has issued a Certificate on Corporate Governance, which is appended to the Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

As per Regulations 34(2)(e) of the SEBI (LODR) Regulations, the Management Discussion and Analysis Report (MDAR) forms part of the Annual Report of the Company.

VIGIL MECHANISM

The Company has a Whistle Blower Policy approved by the Board. The details of the Whistle Blower Policy are explained in the Corporate Governance Report and the same is hosted on the Company's website at www.hal-india.co.in.

Employees are encouraged to raise any of their concerns by way of whistle blowing and none of the employees have been denied access to the Chairman of the Audit Committee.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 134(3)(c) of the Companies Act, your Directors state that:

(a) In the preparation of the annual accounts for the year ended March 31, 2023, the applicable accounting standards have been followed along with proper explanation 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 as on March 31, 2023 and of the profit and loss of the Company for the year ended on that date;

(c) the directors have 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 have prepared the annual accounts on a "going concern" basis;

(e) the directors have laid down internal financial controls which are being followed by the Company and that such internal controls are adequate and are 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.

ACKNOWLEDGEMENT

Your Directors are extremely thankful and acknowledge the excellent support extended by the Government of India, in particular the Ministry of Defence, Department of Defence Production, Defence Acquisition and Defence Finance as well as other Ministries of the Government of India in all the endeavours of the Company.

Your Directors also place on record their sincere appreciation towards the Company's valued customers, in particular the Indian Defence Services, for the support and confidence reposed by them in the Management of the Company, and look forward to the continuance of this mutually supportive relationship in the future.

The Company wishes to place on record its appreciation for the cooperation extended and services provided by the Comptroller & Auditor General of India (C&AG), the Principal Director of Commercial Audit & Ex-officio Member, Audit Board, Statutory/ Internal Auditors, Cost Auditors, Secretarial Auditors, Bankers, Collaborators, JV Partners and Suppliers.

Your Directors are also thankful to the shareholders for the trust and confidence reposed in the Company and look forward to their continued support to propel the Company to greater heights.

Your Directors also wish to place on record their deep sense of appreciation for the committed services by the Company's Executives and Workmen for progress and prosperity of the Company.

For and on behalf of the Board of Directors

Hindustan Aeronautics Limited

(C B Ananthakrishnan)

Director (Finance) & CFO Chairman and Managing Director (Addl charge)

Place : Bengaluru Date : July 19, 2023