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Hindustan Aeronautics Ltd.

BSE: 541154 Sector: Engineering
NSE: HAL ISIN Code: INE066F01012
BSE 00:00 | 27 May 1796.00 40.45
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OPEN 1792.00
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VOLUME 26060
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P/E 11.81
Mkt Cap.(Rs cr) 60,056
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OPEN 1792.00
CLOSE 1755.55
VOLUME 26060
52-Week high 1850.00
52-Week low 995.00
P/E 11.81
Mkt Cap.(Rs cr) 60,056
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Hindustan Aeronautics Ltd. (HAL) - Director Report

Company director report

Dear Members

Your Board of Directors takes great pleasure in presenting the 58thAnnual Report on the performance of your Company ("the Company" or"HAL") together with the Audited Financial Statements for the Financial Yearended March 31 2021 along 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 2021 aresummarised as under:

(Rs in Lakh except per equity share data)

PARTICULARS 2020-21 2019-20
Turnover 2236893 2122752
Exports 23980 21185
Profit Before Tax (PBT) 427089 393800
Provision for Tax 103793 109599
Profit After Tax (PAT) 323296 284201
R&D Expenditure 168740 123196
Earnings/ Share (in Rs) 96.68 84.99
Book Value / Share (in Rs) 459.24 394.74

During the year under review the turnover of the Company increased by5% to Rs 2236893 Lakh from Rs 2122752 Lakh of the previous year. The Profit beforeTax for the year increased by 8% to Rs 427089 Lakh from Rs 393800 Lakh in the previousyear. The Profit after Tax (PAT) increased by 14% to Rs 323296 Lakh from Rs 284201Lakh in the previous year.

PRODUCTION HIGHLIGHTS

During the year the Company has produced 44 Nos of new Aircraft andHelicopters covering Su-30 MKI LCA Tejas Dornier Do-228 ALH Dhruv Light CombatHelicopter (LCH) and Chetak helicopter in addition to the production of 102 New Enginesand Accessories.

Your Company overhauled 198 Nos of Aircraft and Helicopters. Further506 engines were also overhauled during the year under review.

OFFER FOR SALE (OFS)

During the year to meet minimum public shareholding requirement of theCompany as prescribed under Rule 19(2) (b) read with 19A of the Securities Contracts(Regulation) Rules 1957 as amended and Regulation 38 of Securities and Exchange Board ofIndia (Listing Obligation and Disclosure Requirements) Regulations 2015 as amendedGovernment of India (GoI) has made Offer for Sale (OFS) through Stock Exchange mechanismupto 15% of Paid up Equity Capital of the Company out of its shareholding of 89.97% in theCompany on August 27-28 2020. Presently GoI is holding 75.15% of the total shares in theCompany.

COVID-19 IMPACT AND MEASURES TAKEN BY THE COMPANY

In March 2020 when the COVID-19 pandemic first broke HAL in the wakeof the instruction of the Government of India and for enforcing social distancing tocontain the spread of the disease observed Lockdown in all its Units spread across theCountry except essential services. During the period the Company has manufactured &distributed aerosol enclosures provisioned masks and other Paraphernalia for medicalstaff posted at various Hospitals across the country. In addition Isolation wards havebeen created at places where HAL Divisions are located to meet the medical need and anymedical eventuality.

In line with the Guidelines issued vide MHA Order No. 40-3/2020-DM-I(A)dated April 15 2020 the Company scaled up its efforts quickly and initiated action forresumption of work at the earliest at all its locations and resumed all the Bengalurubased Divisions w.e.f. April 20 2020. Also instructions have been issued to all theUnits of the Company to assign Field Service Representatives of HAL at various CustomerBases of Defence Forces to render services for Repair and Overhauling of the Fleet. Toensure serviceability of the Fleet Field Service Representatives/ Technicians werepositioned at Customer Bases as required by the Armed Forces.

In April 2021 health crisis has deepened and the world'sattention was focused on India's response to it. In order to handle the crisis duringthe 2nd wave of the Pandemic the Company has been at the forefront to dealwith the national emergency situations. The Company has made dedicated efforts to extendall possible assistance to the Government bodies medical units and frontline workers incombating this pandemic. To combat the surge in COVID-19 cases based on the request fromBruhat Bengaluru Mahanagara Palike (BBMP) the Company has converted its GhatageConvention Centre into a 180 bed COVID Care Centre including few beds with oxygen supportand handed over to them on July 17 2020. The Centre is functioning during the 2ndwave also.

HAL has set- up a 255 bed COVID Care Hosptial in Lucknow UP with 25ICU beds and 230 beds with oxygen support. The Company has also made provision for COVIDtreatment at its existing hospitals of 180 bed at Bengaluru Karnataka; 70 bed at KoraputOdisha and 40 bed at Nashik Maharashtra. The Company is also making arrangements toprovide more ventilators and oxygen points at Bengaluru and Lucknow.

The Company in collaboration with CSIR – IIIM Jammu (Council forScientific and Industrial Research - Indian Institute of Integrative Medicine) hadestablished COVID Testing Facility at Kargil Ladakh. HAL has also signed an MoA withCSIR-CBRI Roorkee (Council for Scientific and Industrial Research – Central BuildingResearch Institute) towards establishment of one Make shift Hospital at Jammu and Kashmirfor COVID-19.

The Company has donated a total of 16 Ambulances to various GovernmentHospitals located at Bengaluru Lucknow Amethi Nashik Koraput and Hyderabad one 32-Slice Computed Tomography (CT) Scan Machine and three Haemodialysis Machines to GovernmentHospital at Bengaluru. The Company also donated 97 deep freezers (small) for storingCOVID-19 vaccines to the Department of Health and Family Welfare Government of KarnatakaBengaluru.

The COVID-19 has disrupted lives of many employees and in_icted heavyburden on their emotional wellbeing. To mitigate the negative impact team of medicalexperts of HAL hospitals and counsellors reached out to the employees and their familiesto provide psychological guidance and cope up with the situation. Further in order toimprove the wellness quotient and lessen psychological effects on the HAL families a‘Financial Assistance Scheme' for dependents of deceased employees has beenimplemented in the Company to pay a fixed amount on monthly basis. In order to mitigatethe financial hardship of family members of the deceased due to COVID-19 ex-gratiapayment of Rs 5 lakhs is being paid.

The Company has started free of cost vaccination drive for itsemployees and their dependent family members. Few other measures adopted for preventingthe spread of COVID-19 are Deployment of Manpower in staggered Shifts; Conducting ofVirtual Meetings; Declaration of Holidays to Break the Chain; Display of Posters BannersSignboards Placards Dos & Don'ts at all the prominent places announcement inthe Townships regarding COVID-19 appropriate behaviour and Closure of Common facilitieslike Schools Crche Community Halls Libraries Clubs Swimming Pools Sports AmenitiesCentres etc.

ATMANIRBHAR BHARAT

‘Atmanirbhar Bharat Abhiyan' led by the Government of Indiais giving significant impetus to self-reliance and local production which may favourablyimpact the operations of the Company as the Defence Services may demand HAL products likeLCH LUH HTT-40 LCA etc.

DIVIDEND

During the year your Company has declared and paid 1stinterim dividend of Rs 15 per share of Rs 10 each (150%) for the financial year 2020-21amounting to Rs 50158 Lakh.

Further the Company has also declared and paid 2nd interimdividend of Rs 15 per share of Rs 10 each (150%) for the financial year 2020-21 amountingto Rs 50158 Lakh.

Thus the total dividend paid by the Company for the financial year2020-21 was Rs 30 per equity share (300%) amounting to

Rs 100316 lakh.

The Board of Directors has not recommended any final dividend with aview to conserve cash for investments in business operations.

In terms of the provisions of Regulation 43A of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 [SEBI (LODR) Regulations] andthe Guidelines of Department of Investment and Public Asset Management (DIPAM) yourCompany has formulated a Dividend Distribution Policy and the same is available on theCompany's website at https://hal-india.co.in/Common/Uploads/DMS/Dividend_Distribution_Policy.pdf

RESERVES

During the year under review Rs 29599 Lakh was transferred toResearch & Development Reserve and Rs 122245 Lakh to General Reserves.

BORROWINGS

During the year Commercial Paper (CP) amounting to

Rs 600000 Lakh were issued. The outstanding amount of CP as at March31 2021 was Nil.

As on March 31 2021 the short term and long term borrowings of theCompany stood at Rs 907 Lakh and Rs NIL respectively.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

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

LOANS GUARANTEES AND INVESTMENTS

Details of Loans Guarantees and Investments as covered under theprovisions of Section 186 of the Companies Act 2013 form part of Notes to the FinancialStatements.

RELATED PARTY TRANSACTIONS

Your Company has undertaken transactions with related parties duringthe year in ordinary course of business. In line with Related Party Transactions (RPTs)Policy approval of the Audit Committee and Board as the case may be was obtained forRPTs. As per the threshold mentioned in the Policy there were no material related partytransactions with the Company's Promoters Directors Management or their relativeswhich could have had a potential conflict with the interests of the Company. Thedisclosures related to RPTs in accordance with the applicable standards are provided inClause No. 45A of the Notes to the financial statements. Details of contract(s) orarrangement(s) with related parties referred to in Section 188(1) of the Companies Actread with Rule 8(2) of the Companies (Accounts) Rules 2014 in the prescribed form AOC-2is attached to this Report as Annexure-I.

CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements of your Company and its JointVenture Companies and Subsidiary Companies for the year ended March 31 2021 have beenprepared in accordance with the provisions of Section 129(3) of the Companies Act andapplicable Accounting Standards and form part of this report.

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

SUBSIDIARY/ ASSOCIATE/ JOINT VENTURE COMPANIES

As on March 31 2021 your Company has two Subsidiaries including onewholly owned Subsidiary and fourteen Joint Venture Companies (JVCs) including twoNot-for-Profit Companies (Section 8 Companies).

Tata HAL Technologies Limited one of the Joint Venture Companies hasobtained approval of shareholders in its ExtraOrdinary General Meeting held on Tuesdaythe June 8 2021 for voluntary liquidation of the Company pursuant to the provisions ofSection 59 of the Insolvency and Bankruptcy Code 2016 read with Regulation 3 ofInsolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations 2017and appointed an Insolvency Professional as liquidator under Section 35 of the Insolvencyand Bankruptcy Code 2016.

Pursuant to the provisions of Section 134(3)(q) of the Companies Actread with Rule 8(1) of the Companies (Accounts) Rules 2014 a Report on the performanceand financial position of each of the Joint Venture Companies and Subsidiary Companies isattached to this Report as Annexure II.

SIGNIFICANT ACHIEVEMENTS

Significant achievements of the Company during the year are asfollows:-

HAL produced FOC standard LCA Tejas has been inducted into IAF Squadron‘The Flying Bullets' on May 27 2020 marking another major milestone for HAL.

Second production line for LCA aircraft has been operationalised and 2LCAs have been produced in FY 2020-21.

Two Light Combat Helicopters (LCH) were deployed for operations at highaltitude at short notice to support IAF missions on August 12 2020.

Three Light Combat Helicopters (LCH) have been produced and signalledout against the Letter of Intent of IAF.

The Company has overhauled 5 Nos of Su30-MKI aircraft within 15 monthcycle time against the stipulated ROH cycle time of 22 months.

HAL received Initial Operational Clearance (IOC) of Light

Utility Helicopter (LUH) for the Indian Army from CEMILAC at the AeroIndia 2021.

HAL received Operational Clearance from CEMILAC for

ALH Mk-III for Indian Coast Guard and Indian Navy in January 2021. TheCompany handed over three ALH Mk III to the Indian Navy and two ALH to Indian Coast Guardat the Aero India 2021.

HAL successfully demonstrated the tail boom folding operation on ALHMk-III helicopter in November 2020.

The first Upgraded ALH Mk III CIVIL helicopter has been produced inNovember 2020.

The Company has indigenously designed and developed a 60kW Gas TurbineElectrical Generator (GTEG-60) the Auxiliary Power Unit (APU) for the Military Transportaircraft AN-32 which has attained operational clearance on May 28 2020. The control unit(FADEC) of GTEG-60 is also designed and developed in-house by the Company.

The 150th Do-228 aircraft produced by HAL was handed overon November 11 2020. A digital ‘Pilot Operating Handbook (POH)' was alsoreleased as in-house efforts towards automation and ‘Digital India'.

HAL manufactured 300th Advanced Light Helicopter (ALH) wasrolled out and certified on 29th September 2020. With over 280000 _yinghours ALH has proven to be a multirole helicopter for ‘Any Mission Any Place AnyTime'.

The biggest Cryogenic propellant tank (C32 LH2) ever fabricated forISRO was delivered to ISRO on November 28 2020.

First ‘ISROSENE Propellant Tank' of semi cryo developmentalproject has been formally handed over to LPSC ISRO on February 5 2021.

Inner Ring a critical aero-engine component operating in the hot zonehas been successfully developed and manufactured through 3D printing technology with thecollaboration of Wipro Enterprises (P) Ltd. The Inner Ring has been awarded‘Airworthiness Certification' from Centre for Military Airworthiness andCertification (CEMILAC) during Aero India 2021.

Successful integration and trial of NGARM (New

Generation Anti-Radiation Missile) and Precision Guidance Kit forHigh-Speed Low Drag 500 kg bomb on Su-30MKI aircraft.

ORDER BOOK POSITION

During the year the Company has entered into a contract for supply of83 LCA Mk1A to IAF.

The Order Book position of the Company stands at Rs 8063900 Lakh ason March 31 2021.

CURRENT PROJECTS AND PROGRAMS

During the year HAL has continued to carry out the production andsupply orders of Su-30 MKI aircraft Light Combat Aircraft (LCA) Tejas Dornier Do-228Aircraft Advanced Light Helicopter (ALH) Dhruv Light Combat Helicopter (LCH) Chetakhelicopter engines accessories and aerospace structures to fulfil the requirement of ouresteemed customers.

The continued efforts of the Company to Design and Develop newplatforms/ products have resulted in achieving operational clearance for ALH MKIII Navy/CG and Light Utility Helicopter (LUH) – Army completion of User Assisted TechnicalTrial phase-I and 8 turn spin trial of HTT-40. HAL is also progressing with thedevelopment of 10 ton class Indian Multi Role Helicopter (IMRH) Turbo fan Engine HTFE-25and Turbo shaft engine HTSE-1200. These efforts are going to add new revenue lines andenhance the product mix of the Company.

In addition to above in Aero India 2021 the Company has showcased itsambitious projects Combat Air Teaming System (CATS) simulator with TEJAS–MAX cockpitas the mother-ship platform with the embedded air teaming intelligence concepts todemonstrate the fully integrated as well as autonomous wingman platforms and swarming ofdrones to engage in the mission. HAL also announced the design and development of theamphibian variant of HAL Do-228 aircraft.

DEVELOPMENT PROGRAMS

The Company has achieved significant progress in various R&D /Development Projects viz. Basic Trainer Aircraft (HTT-40) Light Utility Helicopter (LUH)Light Combat Aircraft (LCA)- MK1A Jaguar Darin III Upgrade Hawk-i and Development ofEngines. The progress achieved in respect of these projects during the year is givenbelow:-

BASIC TRAINER AIRCRAFT (HTT-40)

HTT – 40 is the Basic Trainer aircraft currently beingindigenously designed and developed by HAL. HTT-40 would be used for basic _ight trainingaerobatics instrument _ying and close-formation _ights whereas its secondary roles wouldinclude navigation and night _ying. Features of the aircraft include Air conditionedcockpit Tandem seating Zero-Zero ejection seats and Multifunction Displays. The aircrafthas the capability to be converted to armed / weaponised version at a later stage. Theprogram has been taken up with internal funding. A total of 3 prototypes have been builtwhich includes two _ying prototype and one Structural Test Specimen (STS).

In the FY 2020-21 the aircraft has successfully completed 8-turn spincapability on both RH and LH side with gantry. It has also successfully completed 6 turnspin (both sides LH & RH) without Anti Spin Parachute System (ASPS). HTT-40participated in Flying display during Aero India 2021. In February 2021 RFP for HTT-40aircraft received from IAF and response has been submitted in April 2021.

LIGHT COMBAT AIRCRAFT (LCA)Mk 1A

LCA Mk1A is a variant of indigenously developed LCA MK1 presently beingdeveloped by HAL. It is a single engine light weight highly agile multi-role supersonic_ghter. It has quadruplex digital _y-by-wire Flight Control System (FCS) with associatedadvanced _ight control law and with extensive use of advanced composites in the airframegives a high strength to weight ratio long fatigue life and low radar signatures. It hasadditional features and improvements such as Self Protection Jammer (SPJ) ActiveElectronically Scanned Array(AESA) RADAR Beyond Visual Range(BVR) Missile andmaintainability improvements etc.

LIGHT UTILITY HELICOPTER (LUH)

The LUH is a single engine 3 Ton weight class helicopter having GlassCockpit with Multi-Function Displays. The LUH will be deployed for Reconnaissance andSurveillance role. The helicopter will be capable of _ying at 220 Kmph; service ceiling of6.5 Km and a range of 350 Km with 500 kg payload. Three _ying prototypes have been builtand were extensively _ight tested.

During the year LUH successfully demonstrated Two Segment BladeFolding and completed user trial such as engine relight trials Slope landing NightFlying test and Hot & High Altitude User evaluation Flight trials at Leh. HAL hassuccessfully achieved Initial Operation Clearance (IOC) for LUH Army in February 2021.

During the year the customer has issued Letter of Intent for LUH.

LIGHT COMBAT HELICOPTER (LCH)

The LCH is a dedicated combat helicopter indigenously designed anddeveloped by HAL. LCH has the distinction of being the first attack helicopter to landSiachen at a height of 4700 mtrs. Four Technology Demonstrators (TDs) have been built andwere extensively _ight tested. LCH has achieved Operational Clearance for IAF and the Armyvariants having completed all the test including weapon trials and is ready foroperational induction awaiting orders.

Two Light Combat Helicopters (LCH) were deployed for operations at highaltitude at short notice to support IAF missions on August 12 2020. Three Light CombatHelicopters (LCH) have been produced and signalled out against the Letter of Intent ofIAF.

HAL has submitted quotation against RFP for supply of initial batch of15 LCH in March 2018 against which order is awaited.

25 kN TURBOFAN ENGINE (HTFE-25)

Design and development of a 25kN thrust class turbofan enginewhich can be used on Basic/ Advanced military trainers on small business jets and alsolarge UAV applications is under progress at HAL. The engine can be used on a 5-ton weightclass aircraft in single engine con_guration and on aircraft of up to nine- ton weightclass with twin-engine con_guration. Two core engines have been produced so far and areundergoing development trials. Sea level trials completed on the Core engine andperformance was found to be satisfactory.

1200 kW TURBOSHAFT ENGINE (HTSE-1200)

The 1200kW Turbo shaft engine would be used as power plant for 3 to6-ton category helicopters. One technology demonstrator of HTSE-1200 engine was built andit is presently under testing.100% speed run achieved on core engine. Sea level trials ofcore engine completed successfully.

HAL Engine Division at Koraput in association with DefenceMetallurgical Research Laboratory (DMRL) has developed Single Crystal Blade samples. HALhas also completed the manufacturing of parts and modular assemblies for Power modeengine.

HAWK-i

Hawk India (Hawk-i) is the indigenously upgraded Hawk Mk 132 aircraftwith enhanced operational and training capabilities. Hawk-i has been integrated withFlight evaluation of HAL Mission Computer (MC) Radio Altimeter (RADALT) IFF Mk-XIISolid State Digital Video Recording System (SSDVRS) Softnet Radio indigenous Smart AntiAirfield Weapon (SAAW) and VACS (Standalone Mode).

Integration of Voice Activated Command System (VACS) on Aircraftcompleted. Voice recognition algorithm is _ne-tuned for maximizing the performance. Flighttrials in standalone mode completed & satisfactory performance feedback obtained. VACShas been integrated on Indigenous Mission Computer (MC). Integration testing on rig andground integration checks completed. Implementation of full Hawk Mk 132 functionalitiesthrough RTOS completed.

BOARD AND ITS COMMITTEE MEETINGS

During the year 7 (seven) Board Meetings were held and the maximuminterval between any two meetings was not more than 120 days. The details of meetings ofthe Board and Committees thereof held during the year are furnished in the CorporateGovernance Report which forms part of this Report.

CHANGES IN BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

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

Cessation

Dr J K Bajaj ceased as Independent Director on the Board of the Companydue to completion of his tenure on September 10 2020.

Shri Anil Kumar Shri Siddharth and Shri Neelakanta Iyer

R ceased as Independent Directors on the Board of the Company due tocompletion of their tenure on March 4 2021.

COMMITTEES OF THE BOARD

As on March 31 2021 the Board has five Statutory Committees namelyAudit Committee Nomination & Remuneration Committee Corporate Social Responsibility& Sustainable Development Committee Stakeholders Relationship Committee and RiskManagement Committee.

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

DECLARATION OF INDEPENDENCE

The Company has received declarations from all the IndependentDirectors of the Company under the Companies Act confirming that they met the criteria ofindependence as prescribed under Section 149(6) of the Companies Act and Regulation 25(8)of the SEBI (LODR) Regulations and they have also complied with the Code for IndependentDirectors as prescribed in Schedule IV of the Act.

COMPANY'S POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION

The appointment tenure and remuneration of Functional Directorsincluding Chairman and Managing Director (CMD) are determined by the Government of India.The Terms

& Conditions of appointment including the period of appointmentthe Scale of Pay and other entitlements are notified by the Government of India.

Government Nominee Directors are appointed by the Department of DefenceProduction Ministry of Defence and they are not entitled to any remuneration / sittingfees.

Independent Directors are appointed by the Government of India and theyare entitled to sitting fees for attending the Board / Committee meetings as prescribed bythe Board in adherence with the statutory Rules and Regulations.

In view of the Gazette Notification No GSR 463 (E) dated June 5 2015of the Ministry of Corporate Affairs (MCA) your Company as a Government Company is notrequired to frame a Policy on Directors' appointment and remuneration includingcriteria for determining qualifications etc. under Section 134(3) (e) of the CompaniesAct.

BOARD EVALUATION

Pursuant to the Notification No. 463 (E) dated June 5 2015 issued bythe Ministry of Corporate Affairs the statement indicating the manner in which formalannual evaluation has been made by the Board of its own performance and that of itscommittees and individual directors is not required for your Company as the performanceof directors is evaluated by the Administrative Ministry.

The performance evaluation of the Independent Directors was carried outby the entire Board. The performance of non-independent directors and Board as a whole wasreviewed by the Independent Directors during the year. The Board opined that all theIndependent Directors fulfil the conditions specified in the Companies Act and SEBI (LODR)Regulations and are independent of the management.

ANNUAL RETURN

In accordance of the Companies Act 2013 the Annual Return in theprescribed format has been hosted on website of the Company athttps://hal-india.co.in/Common/Uploads/PDFS/ Form_MGT-7_20_21_for%20website.pdf

COMPLIANCE WITH SECRETARIAL STANDARDS

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

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGEEARNINGS AND OUTGO

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

OUTSOURCING

As part of the "Make in India" drive and the AtmanirbharBharat Abhiyan HAL has been nurturing & developing a vibrant indigenous aerospace& defence ecosystem. In its path of moving towards a system integrated process theCompany has been striving to develop Tier-II and gradually Tier-I suppliers over a periodof time while retaining the core areas as prime integrators. HAL has been taking upoutsourcing diligently even in the new and upcoming projects so as to turn the suppliersinto reliable business partners over time.

DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY

The Company has a Board approved Risk Management Policy in place. Thepolicy aims at elimination or reduction of risk exposures through identification andanalysis of various types of risks and facilitating timely action for taking riskmitigation measures. The policy envisages that all programs project reviews willhighlight the progress of risk mitigation plans till the closure and signing off themitigation plans.

In line with Regulation 21 of the SEBI (LODR) Regulations 2015 theBoard of Directors had constituted the Risk Management Committee for monitoring andreviewing of the risk management plan and other such functions as it may deem fitincluding cyber security in line with applicable laws.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Pursuant to the provisions of Section 135 of the Companies Act andCompanies (Corporate Social Responsibility Policy) Rules 2014 and Amendment thereof &DPE Guidelines the Company has undertaken various activities during the year as per itsCSR Policy. The projects / programmes / activities taken up are in line with Schedule VIIof the Companies Act. The thrust areas under CSR include assisting the Government Bodiesto combat against the global pandemic COVID -19 like donation of Ambulances C.T. ScanMachine Haemodialysis Machines Deep Freezers for storage of Vaccines Aerosol BoxesPersonal Protection Equipments etc. The other areas in which support was extended areSkill Development Education Employment Enhancement Sanitation Drinking WaterEnvironment Sustainability etc. The company has spent an amount of

Rs 9052 Lakhs under CSR for the Financial Year 2020-21.

The Corporate Social Responsibility Policy Composition of theCommittee and CSR Projects/ Activities of the Company is available on the Company'swebsite at https://hal-india.co.in/ investors/Corporate Social Responsibility. Salientfeatures of the Policy form part of the Annual Report.

Annual Report on CSR activities undertaken by your Company during theyear 2020-21 pursuant to Section 135 of the Companies Act 2013 read with Companies(Corporate Social Responsibility Policy) Rules 2014 as amended is attached to thisReport as Annexure-III.

BUSINESS RESPONSIBILITY REPORT

Business Responsibility Report for the year 2020-21 as stipulated underSEBI (LODR) Regulations has been prepared describing the initiatives taken by the Companyfrom an environmental social and governance perspective in the format specified andappended to this Report.

SIGNIFICANT AND MATERIAL ORDERS

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

PUBLIC DEPOSITS

Your Company has not accepted any deposit during the year. Furtherthere was no outstanding deposit and/or unpaid or unclaimed principal amount or interestagainst any deposit either at the beginning or at the end of the Financial Year 2020-21.

ISSUE OF EQUITY SHARES WITH DIFFERENTIAL RIGHTS

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

EVENTS SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS

Revision of pay scales of executives and workmen with effect fromJanuary 1 2017 was implemented in accordance with the guidance issued by DPE vide OMdated August 3 2017 for Executives and in accordance with the Wage Agreement enteredbetween Management and Employees Union representative in 2019-20 in respect of Workmen.

On an interpretation on pay re-fixation and pursuant to the directivesof the Administrative Ministry the pay fixation is being revised and the excess amountpaid is to be recovered from the employees.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

The provisions of Section 197 of the Companies Act and the relevantRules regarding particulars of employees drawing remuneration in excess of the limitsspecified 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 Governmentof India.

MOU WITH GOVERNMENT

Your Company signs annual Memorandum of Understanding (MoU) with theMinistry of Defence (MoD) Government of India (GoI).

The Company has achieved "Excellent" performance ratingagainst MoU signed with the GoI for the financial year 2019-20.

RESEARCH AND DEVELOPMENT EFFORTS

During the year HAL has continued to focus its efforts towards newplatforms development technology development and activities to enhance its capabilitywith a view to bring technological superiority to its products and in order to cope upwith the future technological challenges that require the Company to develop New Productsand go in for Product Enhancements. Towards the progress of the R&D efforts thecompany has incurred a total expenditure of Rs 168740 Lakhs for the year 2020-21 whichis 8% of the Turnover.

The company has transferred a sum of Rs 29599 Lakhs (10% of OperatingPAT) to R&D reserve for contribution to R&D corpus during the year 2020 -21.

During the year the Company has filed 104 IPR applications which makecumulative number of 1929 IPRs filed by company. Further 146 IPRs have also been grantedduring the year taking cumulative IPRs held by the organization to 464.

EXPORTS

The Company has achieved Export Sales of Rs 23980 Lakhs in 2020-21.Initiatives taken to boost Exports during the year are as under:

Global recognition of HAL platforms by responding to followingRFIs:

i. Light Combat Aircraft (LCA) Tejas was shortlisted by RoyalMalaysian Air Force (RMAF) and RFI issued to HAL. The RFI response was re-validated inJune 2020.

ii. Offered Light Combat Aircraft (LCA) as Lead in Fighter Trainer(LIFT) con_guration to Australian DoD in July 2020.

iii. Offered Light Combat Aircraft (Naval Twin seat Trainer) to US Navyin July 2020.

iv. Offered Do-228 aircraft to US Navy in July 2020 in response totheir Global RFI for Multi Engine Trainer Aircraft program.

v. Received interest from Philippines Coast Guard for procurement of 7ALH and 8 Do-228 aircraft through Government of India Line of Credit.

Progressed discussion with Mauritius side for supply of one eachALH Mk.III wheel variant and Passenger Variant Do-228 aircraft under GoI Line of Credit.

Completed price reasonability study of Do-228 Maritime aircraft forexport to Maldives and Sri Lanka by a Team of Experts comprising of Acquisition Wing arepresentative from Service Wing and HAL in March 2021.

MoU signed with M/s MMTC as channelizing partner for import of palmoil for likely countertrade for sale of LCA-Tejas to Royal Malaysian Air Force.

Progressing discussion for Co-validation of Civil Certification ofHAL Civil Do-228 by Civil Aviation Authority of Nepal for promotion in Nepal.

Enhancing engagement of Channel Partners / Registration abroad.

HAL's brand image and identity was strategically projected byshowcasing its products and capabilities while participating in leading international AirShow-Aero India 2021 and also in Sri Lanka on their Air Force day.

VENDOR DEVELOPMENT

During the year the Company has conducted 21 Vendor DevelopmentProgrammes of which four were for Micro & Small Enterprises (MSEs) owned by SC/STEntrepreneurs & two were for Women Entrepreneurs.

The Company has registered with RXIL for enabling payments throughTReDS platform to MSEs. HAL has already made payments through TReDS–RXIL platform.All efforts are made to bring the MSEs on TReDS platform. Currently several vendors areregistered with TReDS platform and efforts are being made to bring other vendors also onthe portal.

The Company has registered with MSME SAMBANDH portal and theprocurement details are being updated monthly in this Portal. The Company has alsoregistered with MSME SAMADHAAN portal and the same is being monitored regularly forresolution of payment complaints of MSEs if any.

HAL is a part of Government e-Marketplace (GeM portal). The Companyprocures commonly used items through GeM portal. All our vendors are being persuaded to onboard on the GeM portal to utilize the facilities available in the GeM portal.

The Company has registered on DPE portal and the weekly data isregularly uploaded w.r.t procurement from MSEs procurement from MSEs through GeM portaland payment to MSEs through TReDS platform.

The Company has implemented company wide e-Procurement system throughits own e-Procurement portal for all tenders valuing more than Rs 2 lakhs. A 24X7e-Procurement help desk has been established to provide information support trainingoperational issues/clarifications to the vendors.

The Company has implemented the Public Procurement (Preference to Makein India) Order 2017 and its subsequent amendments issued by Department for Promotion ofIndustry and Internal Trade(DPIIT) to encourage ‘Make in India' and promotemanufacturing and production of goods & services in India.

PROCUREMENT FROM MICRO & SMALL ENTERPRISES (MSEs)

In line with the Public Procurement Policy of the Government of Indiaas amended your Company has achieved more than the mandated procurement of 25% from MSEs(excluding specific defence procurement as per Sl.No.14 of the policy). During the yearthe total value of procurement including outsourcing made from MSEs was Rs 69424 Lakh.

INDIGENISATION

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

To support Atmanirbhar Bharat Abhiyan of Govt. of India HAL hasplanned to indigenize 2615 imported components and spares from 2020 to 2025. During theyear the Company has indigenized 1004 Nos. of items resulting in anticipated foreignexchange savings of Rs 129.9 Crores. Towards self-reliance a notable achievement has beenmade by HAL with indigenisation of 100% mandatory replacement BOF items with respect toseven LRUs of SU-30MKI. HAL has hosted the details of items available for indigenizationunder Make- in- India portal on its website. HAL has also hosted in its website more than85 types of test facilities available at HAL for utilization by industries on paymentbasis. These facilities are being extensively utilised by both government organizationsand Indian private companies.

The other major initiatives / achievements are as under:

Indigenisation through Make-II procedure:

In a notable important initiative during FY 2020-21 HAL also startedindigenization through HAL Make-II procedure. HAL's Make-II (Industry Funded)procedure is in compliance of the Make-II framework promulgated by MoD and envisages theassured order quantity after successful development of items through private vendors. HALhas identified items to be indigenized through Make-II procedure and the same is hosted inHAL's website with other details. During the FY 2020-21 Expression of Interest (EoI)for more than 700 items were issued for indigenization through Make-II procedure.

Uploading of imported items in Srijan Defence Portal:

To support Indian Industries with opportunities for Make In India inDefence MoD has developed and launched Srijan Defence Portal. HAL has also taken the leadin uploading the imported items in the portal for indigenization and uploaded more than6700 nos. of imported items in the portal during the FY 2020-21.

Organising/participation in Seminars Conferences and Exhibitions onIndigenisation / Vendor Development program

To sensitise Indian vendors for opportunities available at HAL forindigenization HAL organized and participated in number of seminars / conferences /vendor development meets through virtual mode. Participants were also briefed about theIndigenisation procedure and support provided by HAL during indigenization.

HUMAN RESOURCE DEVELOPMENT

The strength of employees as on March 31 2021 stood at 26432.

As on March 31 2021 a total of 3123 Apprentices were engaged in theCompany comprising 8.31 % of the total employee strength including contractual staff.

EMPLOYEE WELFARE

The Company continues to extend welfare benefits to the employees andtheir dependents by way of comprehensive Medical Facilities Housing Facilities CanteenFacilities (for employees only) and Educational facilities for employee's ChildrenSports Facilities etc.

In the wake of COVID-19 pandemic the Company has taken variousinitiatives to contain the spread of the virus. Standard Operating Procedures (SoPs) inline with MHA Guidelines have been put in place in the Divisions / Offices since the onsetof the pandemic and the instructions / guidelines notified by the Central / StateGovernments from time to time were adhered to. Vitamin Tablets / Immunity Booster Kit weresupplied to employees and vaccination against COVID-19 is being administered to theemployees and their dependents at the Company Hospitals / Dispensaries.

A Scheme to provide financial support to the family of deceasedemployees by payment of Ex-gratia / Compensation of an upfront amount of Rs 5 Lakhs to thedependent family members of the employees who die while in service due to COVID-19 wasintroduced in the Company during the year. Further a Group Life Insurance Policy for theemployees which provides for payment of Rs 10 Lakhs to the dependent family members dueto death of an employee for any reason other than suicide with a matching contribution /premium by the employees was also introduced during the year.

REPRESENTATION OF SC/STs

The position regarding representation of Scheduled Castes / ScheduledTribes (SC / STs) is as follows:

Representation of SC/STs in the total strength of the Company as onJanuary 1 2020 and January 1 2021

Category (Grade / Scale of Pay) Total Strength as on Number of SCs as on Number of STs as on
1.1.2020 1.1.2021 1.1.2020 1.1.2021 1.1.2020 1.1.2021
Group A (Grade – II & above ) 8281 8000 1479 1436 504 493
Group B (Grade-I) 37 25 5 3 2 2
Group C (Scale -3 to Special Scale) 19354 18620 3384 3260 1431 1393
Group D (Scales – 1 & 2 )
(i) Excluding Safai Karmacharis 7 5 1 1 - -
(ii) Safai Karmacharis - - - - - -
Total 27679 26650 4869 4700 1937 1888

Recruitments made during the period January 1 2020 to December 312020 and the SC/STs amongst them

Category (Grade / Scale of Pay) Total number of

No. of Reservations made for

No. of Posts filled by appointment of

Post filled SCs STs SCs STs
Group A (Grade – II & above ) 16 - 1 - 1
Group B (Grade-I) - - - - -
Group - C (Scale - 3 to Special Scale) 27 7 - 8 -
Group - D (Scales – 1 & 2)
(i) Excluding Safai Karmacharis - - - - -
(ii) Safai Karmacharis - - - - -
Total 43 7 1 8 1

Vacancy based Promotions made during the period January 1 2020 toDecember 31 2020 and the SC/STs amongst them

Category (Grade / Scale of Pay) Total number

No. of Reservations made for

No. of Posts filled by Promotion of

Promoted SCs STs SCs STs
Group – A (Grade – II & above ) 991 NA NA 171 74
Group – B (Grade-I) - - - - -
Group – C (Scale - 3 to Special Scale) - - - - -
Group – D (Scales – 1 & 2 )
(i) Excluding Safai Karmacharis - - - - -
(ii) Safai Karmacharis - - - - -
Total 991 - - 171 74

EMPLOYEE RELATIONS (ER) / INDUSTRIAL RELATIONS

The Employee Relations Scenario in the Company has been peaceful &cordial during the year. The recognized Trade Union of Bengaluru based Divisions of theCompany had participated in One Day Nation-wide General Strike on November 26 2020 basedon the decision taken by the Joint Action Front of Negotiating Trade Unions for Bengalurubased CPSUs. The Strike Call was not related to any issues pertaining to HAL. However theTrade Unions at other locations of the Company had not participated in the General Strikeon the said day.

Cordial relations were maintained between the Management and the Unions/ Associations by effective communication so as to eliminate any scope for conflicts& misunderstandings and thus facilitate maintenance of Industrial Harmony. In linewith Company's stated Policy of encouraging Employees Participation in Managementregular Meetings with the representatives of the Recognized Unions / Officers Associationsat the Divisional Complex & Corporate Levels were held to discuss issues. Plant Level& Shop Level Committees comprising of representatives of Management / Union arefunctioning in the Divisions to discuss & resolve production related matters. In orderto address Employee / Public Grievance / Representations Grievance Redressal Mechanismsare also in place in the Company.

RAJBHASHA IMPLEMENTATION

In accordance with the Guidelines issued by Department of OfficialLanguage Ministry of Home Affairs New Delhi constant efforts are being made by all theDivisions of the Company towards implementation of the Official Language Policy (OLPolicy). Employees are being encouraged through Monthly Incentive Scheme related toOfficial Language. Efforts have been made to make Executive Notings in bilingual in ourE-Filing System.

Hindi Fortnight was celebrated from September 14 2020 to September 282020 by all the Divisions of the Company as per directives issued by Department ofOfficial Language Ministry of Home Affairs New Delhi. Inspection of HAL Liaison OfficeDelhi was done by Committee of Parliament on Official Language on October 12 2020. Inthis inspection Liaison Office Delhi coordinated inspection visits successfully relatedto other three offices viz. NPCIL Bharat Petroleum Ltd. and Ministry of External Affairsas per responsibility assigned by the Committee of Parliament on Official Language.

E-Inspections of Helicopter and Engine Divisions Bengaluru were donesuccessfully on June 22 2020 & July 18 2020 by Dy. Director (Implementation) RIOBengaluru. Hindi Shabd Gyan Competition was conducted online by Corporate Office on August25 2020 for Bengaluru based Undertakings as per direction given by TOLIC (Undertaking)Bengaluru.

The Department of Official Language Ministry of Home Affairs haveassigned the responsibilities of Town Official Language Implementation Committee (TOLIC)to the Nashik Koraput and Lucknow Divisions of the Company and they are conducting TOLICMeetings successfully.

PROHIBITION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE

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

Internal Complaints Committees as per Section 4 of the Act have beenput in place. Information for the Financial Year 2020-21 in terms of Section 22 of theAct is as indicated below:

(i) Number of Cases pending as on 1st April 2020 - 2
(ii) Number of Complaints of Sexual Harassment received in the Financial Year 2020 -21 - 5
(iii) Number of Complaints disposed of during the Financial Year 2020-21 (iv) Number of Cases pending as on March 31 2021 & its status - 3
- 4
In 2 Cases ICC Report submitted and in 2 other cases ICC Enquiry under progress.

INFORMATION TECHNOLOGY (IT) INITIATIVES

During the year your Company has taken many IT initiatives towardsimproving digital journey. Some of the important IT initiatives during the year are asunder:

CUSTOMER RELATIONSHIP

Operationalization of HAL VAYUSENA INVENTORY

PORTAL (HAVAI)

Operationalization of HAVAI e-Portal for electronic exchange of databetween IMMOLS of IAF and IFS ERP of HAL was launched by Chief of Air Staff and CMD HALfor providing information regarding AOG RRT and RMS Orders. HAVAI Portal provides accessto authentic information on bottlenecks in the production and the supply chain processesto enable both HAL & IAF to work synergistically towards improving the production andprocurement processes while improving the production performance and liquidation rates forcritical holdups resulting better serviceability of IAF weapon systems. The Portal has anadded functionality of Online Budgetary Quote (BQ) Module where HAL would provideelectronic Budgetary Quotes against requisition placed by IAF Units.

BUSINESS EXCELLENCE

Increase in Company wide usage of e-file: Company -wide e-fileusage percentage has been increased to 95% by the year end as compared to 65% at thebeginning of the financial year 2020-21.

Digitization of Personal files: An initiative to digitize andstore all personnel records/ documents of employees securely was successfully implementedat all the Divisions. The software has provision to upload store and view documents/records by Divisional/ Complex /Corporate HR.

Office): Digitalization (Paperless Initiatives taken to make theCompany paperless organisation by 2022-23. Digital Approval Systems Digital Shop Floorand e-Documentation are being implemented in phased manner.

Central Payment Processing System: Online System for paymentadvice invoicing voucher creation/approval bank advice etc. was implemented forCentralization and Standardization of Bills Payable and Cash office function for allBengaluru based Divisions at Central Payment Processing Centre (CPPC).

Online Accounts Consolidation System: An Online AccountsConsolidation System has been successfully developed and implemented for pulling Divisionwise accounts related data and consolidation of accounts at corporate level.

Commencement of Project Parivartan: HAL & Tech Mahindra Ltd(TM) signed a contract on Project Parivartan for Company wide implementation and supportof latest ERP-IFS version which include a Company wide standardization of businessprocesses real-time collaboration with suppliers & customers and corporateperformance measurement through Key Performance Indicators (KPIs). It will also be aplatform to embrace new technologies like Internet of Things (IoT) ArtificialIntelligence (AI) and Business Analytics in future. Major milestones like projectkick-off establishment of project office as-is Study of Business processes andfamiliarization Training were completed during the year 2020-21.

CYBER SECURITY IMPROVEMENTS

Implementation of InterScan Messaging Security Virtual Appliance(IMSVA):

InterScan Messaging Security Virtual Appliance (IMSVA) System was alsoimplemented by integrating multi-tiered spam prevention and anti-phishing with antivirusand anti-spyware for protecting internet mail users.

AWARDS & RECOGNITIONS

During the year your Company received various Awards and Recognitions.Some of the important accolades conferred to the Company are as under:

HAL has been conferred with the "Aerospace and Defense

Awards – 2021" instituted by "SAP Media WorldwideLtd" under two Categories namely "Outstanding contribution in DefenceIndustry" and "Excellence in Innovation Design Technology or R&D".

HAL has been felicitated with Kaushalacharya Award in recognition ofoutstanding contribution towards engaging apprentices and adopting initiatives relating toApprenticeship Training in "Central Government & Central PSU" Categoryduring the Kaushalacharya Samadar 2020.

The COVID Care Center established by the Company at the HAL ConventionCenter Bengaluru was awarded the Skoch ‘Order of Merit' certificate under SkochAward 2020 organized by the Skoch Group.

Shri. R Madhavan CMD HAL has been conferred with

"PSU Award of the year 2019" in recognition and appreciationof the contribution made by him to the Company" by the Dalal Street InvestmentJournal.

VIGILANCE

Your Company has a well-established vigilance department headed by theChief Vigilance Officer (CVO). Vigilance Officers and Staff are posted to the CorporateOffice and all the Divisions and Complex Offices of the Company.

The major initiatives/ activities carried out by Vigilance departmentwith a focus on preventive participative vigilance are as under:

i. System studies were carried out in various areas and appropriatemeasures were suggested to streamline the procedures.

ii. Sensitisation of Vigilance: 46 sessions were conducted on varioustopics related to Vigilance issues and one day programme on ‘PreventiveVigilance' was organized.

iii. In-house Vigilance Magazine Marg Darshan: In-house Vigilancee-magazine "Marg Darshan" was released during the year. Articles from Executivesof the Organization on the theme "Integrity- A Way of Life" were published as apart of efforts towards spreading preventive vigilance concepts.

iv. Vigilance Awareness Week was conducted throughout the Organizationat nine different geographical locations from October 27 2020 to November 2 2020adhering to covid-19 guidelines laying emphasis on the theme "Satark BharatSamriddh Bharat (Vigilant India Prosperous India)" prescribed by CVC. Apart fromactivities taken up in campaign mode in-house events and outreach activities forpublic/citizens were also conducted to spread awareness about role and responsibility ofpublic in eradication of corruption.

v. System Improvements: Based on the recommendations of Vigilanceseveral system improvements have been issued by the Management in the areas of BillsPayable Service Contracts Township Administration Insurance Coverage Bank Guaranteesthrough IFS online monitoring of Gate Pass system etc.

During the year 309 complaints were handled. 545 Surprise /Routinechecks and 26 CTE (Chief Technical Examiner) Type inspections were carried out in theDivisions on corruption prone areas. Based on the outcome of checks/inspections andcomplaints 31 cases were taken up for detailed investigation after due verification.Points requiring systemic correction as noted during checks verifications system studiesand investigations were brought to the notice of the Management for needful systemicimprovements and punitive actions.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 134(3)(c) of the Companies Actyour Directors state that: (a) In the preparation of the annual accounts for the yearended March 31 2021 the applicable accounting standards have been followed along withproper explanation relating to material departures; (b) the directors have selected suchaccounting policies and applied them consistently and made judgments and estimates thatare reasonable and prudent so as to give a true and fair view of the state of affairs ofthe Company as on March 31 2021 and of the profit and loss of the Company for the yearended on that date; (c) the directors have taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of this Actfor safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities; (d) the directors have prepared the annual accounts on a "goingconcern" basis; (e) the directors have laid down internal financial controls whichare being followed by the Company and that such internal controls are adequate and areoperating effectively; (f) the directors have devised proper systems to ensure compliancewith the provisions of all applicable laws and that such systems were adequate andoperating effectively.

AUDITORS

Statutory Auditor

The Statutory Auditor of your Company were appointed by the Comptroller& Auditor General of India (C&AG). M/s. Maharaj N.R. Suresh and Co. CharteredAccountants Bengaluru was appointed as Statutory Auditors for auditing the Accounts ofthe Company for the year 2020-21 and 18 firms of Chartered Accountants were appointed asBranch Auditors. During the year the status of the Statutory Auditor of the Company hasbeen changed from partnership firm to Limited Liability Partnership (LLP). The statutoryauditor's report does not contain any qualification reservation or adverse remarks.The Auditors' Report on financial statements for the financial year 2020-21 andcomments of the Comptroller & Auditor General of India (C&AG) under Section 143(6)of the Companies Act are appended to this Report.

Cost Auditor

Your Company has appointed M/s. GNV & Associates Cost &Management Accountants as Cost Auditors for conducting the Cost Audit of the Company forthe year 2020-21. The Company maintains cost records as specified by the CentralGovernment under Section 148(1) of the Companies Act which are audited by Cost Auditors.

Internal Auditors

The Company has appointed Thirteen (13) Nos. of Chartered Accountantfirms for carrying out internal audit function of the Company for the year 2020-21.

Secretarial Auditor

In terms of Section 204(1) of the Companies Act the Company hasengaged M/s. DPSP & Associates Company Secretaries Bengaluru to conduct SecretarialAudit of the Company for the year 2020-21. The Secretarial Audit Report is annexed to thisReport as Annexure - IV and forms part of Annual Report.

On the qualification of the Secretarial Auditors with respect to thecomposition of Board of Directors under Regulation 17 of the SEBI (LODR) Regulations2015 the Board has clarified that since appointment of Independent Directors in theGovernment Company is being made by the Administrative Ministry the Company has nocontrol over such appointment. However the Company has made representations to MoD GoIfor appointment of requisite number of Independent Directors.

Annual Secretarial Compliance Report

The Company has filed the Annual Secretarial Compliance Report for theyear 2020-21 with the BSE Ltd and National Stock Exchange of India Limited. The report wasreceived from a Practising Company Secretary and filed within the stipulated time asspecified 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 March31 2021 has been prepared and annexed to this Report. The Company's SecretarialAuditor has issued a certificate on Corporate Governance which is appended to theCorporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

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

VIGIL MECHANISM

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

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

QUALITY INITIATIVES AND SAFETY

Standardization of Quality Management System across

HAL has been achieved in different areas through Corporate QualityAssurance Guidelines on Aircraft Fuel & Oil Discipline (CQAG9011) Calibration Process(CQAG9012) and Root Cause Analysis (CQAG9013) while a directive on Remote Inspection wasalso issued in concurrence with DGAQA to address Inspection issues arising out of thePandemic situation.

Documents with respect to CQAG9011 CQAG9012

CQAG9013 Manufacturing aspects on Fabrication of Composite ReferenceStandard for NDT Ultrasonic Inspection and Performing digital X-Ray inspection onHoneycomb sandwich assemblies/panels with 8 axis movements have been protected throughregistration of copyrights.

Training conducted for 75 officers from HAL and DGAQA at EngineeringStaff College of India (ESCI) Hyderabad on Quality Rating Maturity Assessment based onIAQG model for Business Process evaluation to achieve Self Certification status throughEnhanced Delegation.

Digitization of Quality Function: Establishment of Remote

Inspection online Audits inspection clearances through VCs digitaldocumentation online memo clearance Barcoded form Q423 real-time MoD status etc.

Established and upgraded various facilities at customer bases andconducted online training programs and Calibration/ Harmonization/ Repair/ OperationalTraining workshops at customer bases/field units on critical items/ systems.

IOC to FOC upgrade of first Mirage aircraft KT202 was carried outsuccessfully in September 2020. The activity was verified by DGAQA representative andaircraft is currently in service. Documentation such as Air crew Manual MaintenanceDocumentation pertaining to the upgrade were delivered to IAF.

LCA TD Helicopter and Engine Division Bengaluru have engaged ThirdParty Inspection Agencies for carrying out inspection related activities at outsourcedVendor premises. The inspection personnel of the Third Party Inspection Bodies have beendirectly approved by DGAQA based on the mandatory 96 Hrs training imparted by HAL-QAbesides their past performance and audit recommendations.

Quality department has facilitated DGAQA approval of 10

Special processes at 22 external Special process facilities for supplyof Machined components of LCA-Tejas through Outsourcing vendors.

Commissioning the state of the art "Integrated Avionics

Test Set-up (IATS)" for Pre-Installation (PI) check of 21 LRUs ofAvionics and IFCS trade has enabled LCA-Tejas Division to independently carry out PIchecks without depending on other facilities/agencies outside the Division.

ACKNOWLEDGEMENT

Your Directors acknowledge the excellent support extended by theGovernment of India in particular the Ministry of Defence Department of DefenceProduction Defence Acquisition and Defence Finance as well as other Ministries of theGovernment of India in all the endeavours of the Company.

Your Directors also places on record their sincere appreciation towardsthe Company's valued customers in particular the Defence Services for the supportand confidence reposed by them in the Management of the Company and look forward to thecontinuance of this mutually supportive relationship in the future.

The Company wishes to place on record its appreciation for thecooperation extended and services provided by the Comptroller & Auditor General ofIndia (C&AG) the Principal

Director of Commercial Audit & Ex-of_cio Member Audit BoardStatutory Auditors Cost Auditors Secretarial Auditors Bankers Collaborators JVPartners and Suppliers.

Your Directors are also thankful to the shareholders for their faithand continued support in the endeavours of the Company.

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

For and on behalf of the Board of Directors
Hindustan Aeronautics Limited
(R. Madhavan)
Chairman and Managing Director
Place : Bengaluru
Date : August 30 2021

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