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Hindustan Aeronautics Ltd.

BSE: 541154 Sector: Engineering
NSE: HAL ISIN Code: INE066F01012
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OPEN 1001.00
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VOLUME 23024
52-Week high 1423.55
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P/E 11.56
Mkt Cap.(Rs cr) 32,877
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Sell Price 0.00
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OPEN 1001.00
CLOSE 1007.85
VOLUME 23024
52-Week high 1423.55
52-Week low 490.00
P/E 11.56
Mkt Cap.(Rs cr) 32,877
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

The Board of Directors take great pleasure in presenting their 57th AnnualReport on the performance of your Company ("the Company" or "HAL")together with the Audited Financial Statements for the Financial Year ended March 312020 along with Reports of the Statutory Auditors and the Comptroller & AuditorGeneral of India (C&AG) thereon.

FINANCIAL HIGHLIGHTS

The financial highlights for the year ended March 31 2020 are summarised as under:

(' in Lakh except per equity share data)

PARTICULARS 2019-20 2018-19
Turnover 2121787 1982093
Exports 21185 40504
Profit Before Tax (PBT) 392835 374234
Provision for Tax 109599 139628
Profit After Tax (PAT) 283236 234606
R&D Expenditure 123196 146440
Earnings/ Share (in ') 85 70
Book Value / Share (in ') 394 361

During the year under review the turnover of the Company increased by 7% to '2121787 Lakh from ' 1982093 Lakh of the previous year. The Profit before Tax for theyear increased by 5% to ' 392835 Lakh from ' 374234 Lakh in the previous year. TheProfit After Tax (PAT) increased by 21% to ' 283236 Lakh from ' 234606 Lakh in theprevious year.

PRODUCTION HIGHLIGHTS

During the year the Company has produced 31 new Aircraft and Helicopters coveringSu-30 MKI LCA Tejas Dornier Do- 228 ALH Dhruv Cheetal Helicopter and ChetakHelicopter in addition to the production of 117 New Engines and Accessories.

Your Company overhauled 201 platforms including both fixed wing and rotary wingaircraft of various types. Further 486 aero-engines of Russian and Western origin werealso overhauled during the year under review.

The Company has signalled out Seven (7) ALHs of the current year production ahead ofschedule for Army and delivered One (1) Chetak Helicopter to the Indian Navy ahead ofschedule.

During the year the Company has commenced production of Jaguar DARIN III (FOC) Upgradeand started manufacturing of RD-33 Engines.

COVID-19 IMPACT

The World Health Organisation declared a global pandemic of the Novel Coronavirusdisease (COVID-19) on February 11 2020. In the wake of the instruction of the Governmentof India and for enforcing social distancing to contain the spread of the disease theCompany observed Lockdown in all its Units spread across the country except essentialservices. During the period HAL Divisions have manufactured aerosol enclosures masks andother Paraphernalia for medical staff posted at various Hospitals across the country. Inaddition Isolation Wards have been earmarked at places where HAL Divisions are located tomeet the medical need and any medical eventuality.

The Company in line with the consolidated revised guidelines issued vide MHA OrderNo.40-3/2020-DM-I(A) dated April 15 2020 initiated action for resumption of work atlocations classified / identified for this purpose w.e.f. April 20 2020. Alsoinstructions have been issued to all the Units of the Company to assign Field ServiceRepresentatives of HAL at various Customer Bases of Defence Forces to render services forRepair and Overhauling of the Fleet. To ensure serviceability of the Fleet Field ServiceRepresentatives/ Technicians were positioned at Customer Bases as required by the ArmedForces.

The Company has considered the possible effects that may result from COVID-19 pandemicon the carrying amounts of Property Plant and Equipment (PPE) Investments InventoriesReceivables and other Current Assets.

Impact due to COVID-19 is minimal as major portion of the Company's Revenue isgenerated from Defence Services. Further Ministry of Defence vide Letter No.4(4)(d)(ACQ/20) dated June 12 2020 have extended the contractual delivery date for aperiod of 4 months i.e. March 25 2020 to July 24 2020 due to Force Majeure. Based on thebusiness model there is no material impairment which needs to be recognized on PropertyPlant and Equipment Receivables and Inventory.

ATMANIRBHAR BHARAT

'Atmanirbhar Bharat Abhiyan' led by the Government is giving significant impetus toself-reliance and local production which may favourably impact the operations of theCompany as the Defence Services may demand HAL products like LCH LUH HTT-40 LCA etc.

DIVIDEND

During the year your Company has declared and paid interim dividend of ' 33.25 pershare of ' 10 each (330%) for the financial year 2019-20 totalling to ' 111184 Lakhexcluding dividend distribution tax of ' 22854 Lakh. No final dividend has beenrecommended by the Board for the financial year 2019-20.

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

RESERVES

During the year under review ' 25351 Lakh was transferred to Research &Development Reserve and ' 123847 Lakh to General Reserve.

BORROWINGS

During the year the Company has issued Commercial Paper (CP) for an amount of '250000 Lakh. The outstanding amount of CP as at March 31 2020 was ' 150000Lakh.

As on March 31 2020 the short term and long term borrowings of the Company stood at '427518 Lakh and ' Nil respectively.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. The Company has in place adequate internal financialcontrols for ensuring efficient conduct of its business. A detailed note on internalfinancial 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 Section186 of the Companies Act 2013 form part of Notes to the Financial Statements.

RELATED PARTY TRANSACTIONS

Your Company has undertaken transactions with related parties during the year inordinary course of business. In line with Related Party Transactions (RPTs) Policyapproval of the Audit Committee and Board as the case may be was obtained for RPTs. Asper the threshold mentioned in the Policy there were no material related partytransactions with the Company's Promoters Directors Management or their relatives whichcould have had a potential conflict with the interests of the Company. The disclosuresrelated to RPTs in accordance with the applicable standards are provided in Note No. 45 Aof the Notes to the financial statements. Details of contract(s) or arrangement(s) withrelated parties referred to in Section 188(1) of the Companies Act read with Rule 8(2) ofthe Companies (Accounts) Rules 2014 in the prescribed form AOC-2 is attached to thisReport as Annexure-I.

CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements of your Company and its Joint Venture Companiesand Subsidiary Companies for the

year ended March 31 2020 have been prepared in accordance with the provisions ofSection 129(3) of the Companies Act and applicable Accounting Standards and form part ofthis report.

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

SUBSIDIARY/ ASSOCIATE/ JOINT VENTURE COMPANIES

As on March 31 2020 your Company has two Subsidiaries including one wholly ownedSubsidiary and fourteen Joint Venture Companies (JVCs) including two Not-for-ProfitCompanies (Section 8 Companies).

Pursuant to the provisions of Section 134(3)(q) of the Companies Act read with Rule8(1) of the Companies (Accounts) Rules 2014 a Report on the performance and financialposition of each of the Joint Venture Companies and Subsidiary Companies is attached tothis Report as Annexure II.

SIGNIFICANT ACHIEVEMENTS

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

• Final Operational Clearance (FOC) for Jaguar DARIN-III upgrade was achieved onJuly 30 2019.

• First Do-228 Aircraft equipped with the state-of-the-art Glass Cockpit systemwas delivered to IAF on November 2 2019 and First Naval version of Dornier Do-228Aircraft was delivered to Indian Navy on December 14 2019.

• LCA Naval Prototype (NP1) being designed jointly by HAL and ADA successfullyperformed ski jump take-off and arrested hook landing from the ship INS Vikramaditya onJanuary 1 1 2020. It is the first indigenous aircraft which successfully took-off fromship and landed on a ship.

• The Company has received the modification document of Dornier Do-228 (Upgraded)civil aircraft for 5700 Kg All Up Weight (AUW) from DGCA on February 6 2020.

• Initial Operational Clearance for Light Utility Helicopter (LUH) was achieved onFebruary 7 2020.

• Real Time Operating System (RTOS) is a key constituent of modern Avionics andembedded control systems. The Company has indigenously designed and developed a RTOS withhighest design assurance level to support both safety critical and mission criticalsystems. The Company has handed over indigenous RTOS to the Indira Gandhi

Atomic Research Center Kalpakum to use on their hardware platform.

• First Light Combat Aircraft (LCA) in FOC standard (SP-21) took to the skies formaiden flight on March 17 2020.

• The Company has handed over the 50th set of L-40 stage of GeoSynchronous Launch Vehicle (GSLV-MKII) to ISRO.

• Successfully demonstrated hot refueling on HTT-40 while keeping the enginerunning. The HTT-40 already has the capability of running switch over wherein the pilotscan be swapped with the engine running. Along with hot refueling capability HTT-40 can beflown continuously for six hours with additional oxygen cylinder. HTT-40 will be the onlyturbo propeller trainer in the world to have features of running change over and hotrefueling.

• During the year the Company has completed Repair & Overhaul (ROH) of oneSu-30 MKI Aircraft with less than 15 months cycle time.

• Successfully developed first Directionally Solidified (DS) Turbine Blade Castingand supplied 2 Engine sets for HTSE-1200 development program.

• Indigenously developed Test Rig for combustion chamber Main manifold and GroundSupport Equipment (GSE) for IAF Bases and GU-3 Tester for Su-30 fleet.

• Preliminary design of Army/Air Force version and Naval version of the 12.5 TonIndian Multi Role Helicopter (IMRH) completed and Preliminary Project Report (PPR)forwarded to MoD. This would propel the concept of Atma Nirbhar Bharat and the entireIndian Eco-system would get largely benefitted due to numbers involved which are high.

• Gas Turbine Electrical Generator (GTEG-60) the indigenously designed anddeveloped Auxiliary Power unit cleared for operational usage up to 1.5 km altitude onAN-32 Aircraft.

• Design and Development of INS Simulator Stations completed and three unitssupplied to M/s Elbit Israel.

• Development of Solid State Weapon Control System to replace the obsoleteArmament Main Unit of Jaguar Aircraft completed.

• Helmet Mounted Display System (HMDS) Garuthma Store of DRDO indigenousVOR/ILS Software Defined Radio (SDR) and Radio Altimeter were integrated on Su-30 MKIAircraft.

• Successful completion of Flight Trials of Solid State Flight Data Recorder(SSFDR) on Cheetal Helicopter and HTT-40 Aircraft.

• Total Technical Life (TTL) of Aircraft Accessories Gear Box KSA-2 of RD-33 AeroEngine extended from 1100 hours to 1200 hours.

• Harpoon Missile modification completed on 4 Nos. of a particular type of fighterAircraft at IAF bases.

Artificial Intelligence (AI) Initiatives

• Artificial Intelligence based Voice Actuated Command System (VACS) was flighttested on Hawk-i Aircraft and cleared by RCMA for preliminary usage.

• Artificial Intelligence based Automatic Target Recognition application developedto recognize the targets from Radar ISAR image validated and certified by RCMA.

• Artificial Intelligence Based Diagnostic Algorithm for maintenance of helicoptercomponents was developed and implemented on HUMS Ground Station and provisional clearanceobtained from RDAQA (MRO/Helicopter).

ORDER BOOK POSITION

During the year the Company has entered into a contract for upgrade of 17 Do-228Aircraft of Coast Guard on February 7 2020. The Order Book position of the Company standsat ' 5296500 Lakh as on March 31 2020.

CURRENT PROJECTS AND PROGRAMS

During the year the Company has continued to carry out the production and supplyorders of Su-30 MKI Aircraft Light Combat Aircraft (LCA) Tejas Dornier Do-228 AircraftAdvanced Light Helicopter (ALH) Dhruv Cheetal Helicopter Chetak Helicopter Mirage 2000upgrade and Engines & Aerospace Structures to fulfil the requirements of our esteemedcustomers. On successful achievement of Final Operational Clearance (FOC) for JaguarDARIN-III upgrade the Company is undertaking activities for DARIN-III upgrade of JaguarDARIN-I Aircraft.

The Company also continued its endeavour to Design & Develop new platforms to addthem as the new revenue lines which could supplement the gaps going to arise in future oncompletion of the ongoing production programs. The major milestones achieved during theyear are completion of Initial Operational Clearance (IOC) of LUH completion of spintrial of HTT-40 Aircraft completion of sea level trials of HTFE-25 Engine and HTSE-1200Engine clocked its 100% speed.

DEVELOPMENT PROGRAMS

The Company has achieved significant progress in various Research & DevelopmentProjects during the year as given below:-

• BASIC TRAINER AIRCRAFT (HTT-40)

HTT-40 is the Basic Trainer Aircraft indigenously designed and developed by HAL. HTT-40would be used for basic flight training aerobatics instrument flying and close-formation flights. Its secondary roles would include navigation and night flying. Featuresof the aircraft include Air conditioned Cockpit Tandem Seating Zero-Zero

Ejection Seats and Multifunction Displays. The Aircraft has the capability to beconverted to armed / weaponised version at a later stage.

The program has been taken up with internal funding. A total of three prototypes havebeen built which include two flying prototypes and one Structural Test Specimen (STS).TheAircraft successfully demonstrated 6-turn spin capability on both RH and LH side duringflight tests in September and October 2019. The platform has demonstrated compliance toall major PSQR requirements including spin and is now moving towards certification.

The Company has successfully demonstrated the capability of hot refuelling on HTT-40and the capability of running switch over of pilots while keeping the engine running.Along with hot refuelling capability HTT-40 can be flown continuously for six hours withadditional oxygen cylinder. HTT-40 will be the only Turbo Prop Trainer in the world tohave features of running change over and hot refuelling.

• LIGHT COMBAT AIRCRAFT (LCA) Mk 1A

LCA Mk1A is a variant of indigenously developed LCA Mk1 which is presently beingdeveloped by HAL. It is a single engine light weight highly agile multi-role supersonicfighter. It has quadruplex digital fly-by-wire Flight Control System (FCS) with associatedadvanced flight control law. Extensive use of advanced composites in the airframe gives ahigh strength to weight ratio long fatigue life and low radar signatures. It hasadditional features and improvements such as Self Protection Jammer Active ElectronicallyScanned Array (AESA) RADAR Beyond Visual Range (BVR) Missile maintainabilityimprovements etc.

The Company has submitted Technical & Commercial proposal against Request forProposal (RFP) received from Air HQ. for manufacturing and supply of 83 LCA Mk1A forwhich order is awaited.

• LIGHT UTILITY HELICOPTER (LUH)

The LUH is a single engine 3 Ton weight class Helicopter having Glass Cockpit withMulti-Function Displays. The LUH will be deployed for Reconnaissance and Surveillanceroles. The helicopter will be capable of flying at 220 Kmph; service ceiling of 6.5 Km anda range of 350 Km with 500 kg payload. Three flying prototypes have been built andextensively flight tested. In 2019-20 LUH successfully demonstrated high altitudecapability in hot and high weather conditions in the Himalayas Sea level trials and Nightflying with and without Night Vision Goggles etc. The Company has successfully achievedInitial Operational Clearance (IOC) for LUH on Lebruary 7 2020.

• LIGHT COMBAT HELICOPTER (LCH)

The LCH is a dedicated combat helicopter indigenously designed and developed by HAL.LCH has the distinction

of being the first attack helicopter to land at Siachen at a height of 4700 mtrs. FourTechnology Demonstrators (TDs) have been built and were extensively flight tested. LCH hasachieved Operational Clearance for IAF and the Army variants having completed the entiretests including weapon trials and is ready for operational induction. The Company hassubmitted quotation against Request for Proposal (RFP) for supply of initial batch 15 LCH.

• 25 kN TURBOFAN ENGINE (HTFE-25)

Design & Development of a 25kN thrust class turbofan engine is under progresswhich can be used on Basic/ Advanced military trainers on small business jets and onlarge Axed wing UAVs. The engine can be used on a 5-ton weight class aircraft in singleengine configuration and on aircraft of up to nine- ton weight class with twin-engineconfiguration. The Company has produced two core engines so far and are undergoingdevelopment trials. Sea level trials have been 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 to 6 ton categoryhelicopters. One technology demonstrator of HTSE-1200 engine was built and it is presentlyunder testing.100% speed run achieved and Sea level trials of core engine completedsuccessfully.

The Company in association with the Defence Metallurgical Research Laboratory (DMRL)has developed Single Crystal Blade samples. The Company has also completed themanufacturing of parts and modular assemblies for Power mode engine.

• JAGUAR DARIN-III UPGRADE

Linal Operational Clearance (LOC) for Jaguar DARIN-III upgrade was achieved on July 302019. Implementation of Air HQ recommendations / observations related to Engine &Flight Instrumentation System (EFIS) and Attitude & Heading Reference System (AHRS)have been completed. EFIS & AHRS flight tested and found satisfactory. First JaguarDARIN III upgraded aircraft was ferried out on March 6 2020.

• HAWK upgrade

The Company has taken up the indigenous upgrade of Hawk Mk 132 Aircraft with enhancedoperational and training capabilities. Flight evaluation of HAL Mission Computer (MC)Radio Altimeter (RADALT) IFF Mk-XII Solid State Digital Video Recording System (SSDVRS)Softnet Radio indigenous Smart Anti Airfield Weapon (SAAW) and VACS (Standalone Mode)have been completed.

Integration of Voice Activated Command System (VACS) on Aircraft completed. Voicerecognition algorithm

is fine-tuned for maximizing the performance. Flight trials in standalone mode havebeen completed & satisfactory performance feedback obtained. VACS has been integratedon indigenous Mission Computer (MC). Integration testing on rig and ground integrationchecks completed. Implementation of full Hawk Mk 132 functionalities through Real TimeOperating System (RTOS) was also completed.

BOARD AND ITS COMMITTEE MEETINGS

During the year ten Board Meetings were held and the maximum interval between any twomeetings was not more than 120 days. The details of meetings of the Board and Committeesthereof held during the year are furnished in the Corporate Governance Report which formspart of this Report.

CHANGES IN BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

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

Appointment

• Shri M.S. Velpari was appointed as Director (Operations) w.e.f. August 1 2019.

• Shri Alok Verma was appointed as Director (Human Resources) w.e.f. January 12020.

Cessation

• Shri Sunil Kumar ceased as Director (Operations) on the Board of the Company dueto his superannuation on July 31 2019.

• Shri V M Chamola ceased as Director (Human Resources) on the Board of theCompany due to his superannuation on December 31 2019.

• Ms. Dipali Khanna ceased as Independent Director w.e.f January 8 2020 due tocompletion of her tenure.

COMMITTEES OF THE BOARD

As on March 312020 the Board has five Statutory Committees namely Audit CommitteeNomination & Remuneration Committee Corporate Social Responsibility & SustainableDevelopment Committee Stakeholders Relationship Committee and Risk Management Committee.

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

DECLARATION OF INDEPENDENCE

The Company has received declarations from all the Independent Directors of the Companyunder the Companies Act confirming that they met the criteria of independence asprescribed 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 Independent Directors asprescribed in Schedule IV of the Act.

COMPANY'S POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION

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

Government Nominee Directors are appointed by the Department of Defence ProductionMinistry 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 tositting fees for attending the Board / Committee meetings as prescribed by the Board inadherence with the statutory Rules and Regulations.

In view of the Gazette Notification No GSR 463 (E) dated June 5 2015 of the Ministryof Corporate Affairs (MCA) your Company as a Government Company is not required toframe a Policy on Directors' appointment and remuneration including criteria fordetermining 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 ofCorporate Affairs the statement indicating the manner in which formal annual evaluationhas been made by the Board of its own performance and that of its committees andindividual directors is not required for your Company as the performance of directors isevaluated by the Administrative Ministry.

The performance evaluation of the Independent Directors was carried out by the entireBoard. The performance of nonindependent directors and Board as a whole was reviewed bythe Independent Directors during the year. The Board opined that all the IndependentDirectors fulfil the conditions specified in the Companies Act and SEBI (LODR) Regulationsand are independent of the management.

EXTRACT OF ANNUAL RETURN

In accordance with the provisions of Section 92(3) and Section 134(3)(a) of theCompanies Act read with Rules 12(1) of the Companies (Management and Administration)Rules 2014 an extract of the Annual Return in the form of MGT-9 is annexed to thisreport as Annexure- III.

COMPLIANCE WITH SECRETARIAL STANDARDS

The Company complies with all applicable mandatory secretarial standards issued by theInstitute 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 grantedexemption vide Notification GSR No.680 (E) dated September 4 2015 from the disclosure ofinformation with respect to conservation of energy technology absorption foreignexchange earnings and outgo under the provisions of Section 134(3)(m) read with Rule 8(3)of the Companies (Accounts) Rules 2014.

OUTSOURCING

As part of the "Make in India" drive HAL has been nurturing & developinga robust indigenous aerospace & defence ecosystem. In its path of moving towards asystem integrated process HAL has been striving to develop Tier-II and gradually Tier-Isuppliers over a period of time while retaining the core areas as prime integrators. HALhas been taking up outsourcing diligently even in the new projects so as to turn thesuppliers into reliable partners over time.

DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY

The Company has a robust Risk Management Policy approved by the Board and the same isavailable on the Company's website. The policy aims at elimination or reduction of riskexposures through identification and analysis of various types of risks and facilitatingtimely action for taking risk mitigation measures. The policy envisages that all programsand project reviews will highlight the progress of risk mitigation plans till the closureand signing off the mitigation plans. The Company has constituted the Risk ManagementCommittee for monitoring and reviewing of the risk management plan and other suchfunctions from time-to-time in line with the applicable laws.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Pursuant to the provisions of Section 135 of the Companies Act and Companies (CorporateSocial Responsibility Policy) Rules 2014 & DPE Guidelines the Company has undertakenvarious 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 areasunder CSR inter-alia include Healthcare & Sanitation Education and Employmentenhancing Vocational Schemes Empowerment of women and socially backward groups etc.During the year the Company has spent ' 8200 Lakh on various CSR activities.

The Corporate Social Responsibility Policy of the Company is available on the Company'swebsite at https://hal-india.co.in/ Investors/Code and Policies. Salient featuresof the Policy form part of the Annual Report.

A separate Report on CSR activities undertaken by your Company during the year 2019-20is attached to this Report as Annexure-IV.

BUSINESS RESPONSIBILITY REPORT

SEBI (LODR) Regulations stipulate that the Annual Report shall include a BusinessResponsibility Report describing the initiatives taken by the listed entity from anenvironmental social and governance perspective in the format specified. Accordinglythe Business Responsibility Report for the year 2019-20 has been drawn up and appended tothis Report.

SIGNIFICANT AND MATERIAL ORDERS

There are no significant and material orders passed by the Regulators or Courts orTribunals impacting the going concern status and the Company's operations in the future.

PUBLIC DEPOSITS

During the year your Company has not received any deposits from the public.

MAINTENANCE OF COST RECORDS

Your Company maintains cost records as specified by the Central Government underSection 148(1) of the Companies Act.

ISSUE OF EQUITY SHARES WITH DIFFERENTIAL RIGHTS

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

EVENTS SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS

There are no material changes and commitments affecting the financial position of theCompany that have occurred between March 31 2020 and date of signing of this Report.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

The provisions of Section 197 of the Companies Act and the relevant Rules regardingparticulars of employees drawing remuneration in excess of the limits specified areexempted 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 signs the annual Memorandum of Undertaking (MoU) with the Ministry ofDefence (MoD) Government of India (GoI).

The performance of the Company for the year 2018-19 has been rated as"Excellent" in terms of the MoU with the Gol. MoU rating for the year 2019-20 isunder review by the Gol.

RESEARCH AND DEVELOPMENT EFFORTS

During the year the Company has continued to focus its efforts towards new platformsdevelopment technology development and activities to enhance its capability with a viewto bring

technological superiority to its products and in order to cope up with the futuretechnological challenges that require the Company to develop new products and itsenhancement. The Company has incurred a total expenditure of ' 123196 Lakh forthe year 2019-20 towards R&D efforts which is 6% of the turnover.

The Company has transferred a sum of ' 25351 Lakh (10% of Operating PAT) toR&D reserve for contribution to R&D corpus during the year 2019-20.

During the year the Company has filed 201 IPR applications which make cumulativenumber of 1823 IPRs filed by company. 140 IPRs have been granted during the year takingcumulative IPRs held by the organization to 318.

EXPORTS

HAL has achieved Export Sales of ' 21185 Lakh. The major Export highlightsduring the year include Mid-life up-gradation of one Do-228 aircraft of Mauritius PoliceForce supply of Structural Work Packages Forgings Castings Rolled Rings & Avionicsto major Aerospace OEMs and Spares & Repairables to foreign Customers operating HALPlatforms.

In order to boost the exports the Company has taken various initiatives during theyear. Some of the major initiatives are as under:

> Memorandum of Understanding (MOU) was signed with Rosoboronexport Russia toconclude a General Contract for export of spares & services / undertake repair &overhaul of aircraft engines and aggregates of Russian origin to friendly countries.

> In order to enhance Brand image and Identity the Company has participated inleading Air Shows/ Exhibitions during the year such as Paris Air Show 2019 MAKS-2019Moscow Dubai Air Show 2019 DEFEXPO-2020 Lucknow and Wings India 2020 Hyderabad.

> Interactive sessions with select Foreign Defence Attaches / Foreign Missions wereconducted during three different sessions in order to establish rapport / formalnetworking for gathering Business Intelligence such as the Defence Procurement ethos /Registration procedure in these countries requirement of local agents etc.

> The Company has been interacting with various global Aerospace OEMs includingBoeing SAAB Lockheed Martin Dassault Aviation Northrop Grumman etc. and also signedLetters of Intent to become their Indian Offset Partner (IOP) for discharge of theirOffset Obligations arising out of MoD GoI procurement contracts.

VENDOR DEVELOPMENT

During the year the Company has conducted 19 Vendor Development Programmes of whichfour were for Micro &

Small Enterprises (MSEs) owned by SC/ST Entrepreneurs & two were for WomenEnterprises.

The Company has registered with RXIL for enabling payments through the TReDS platformto MSEs and has already made payments through the TReDS-RXIL platform. Efforts are made tobring the MSEs on the TReDS platform and several vendors already registered with the TReDSplatform.

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

HAL is a part of Government e-Marketplace (GeM portal) and it procures commonly useditems through GeM portal. All our vendors are being persuaded to be on board in the GeMportal to utilize the facilities available in the GeM portal.

The Company has registered on DPE portal and the weekly data is being regularlyuploaded w.r.t procurement from MSEs procurement from MSEs through the Governmente-Marketplace (GeM) portal and payment to MSEs through the TReDS platform.

The Company has implemented the Public Procurement (Preference to Make in India) Order2017 and its amendments thereof to encourage 'Make in India' and to promote manufacturingof goods & services in India.

The Company has implemented Company wide e-Procurement system through its owne-Procurement portal for all tenders valuing more than ' 2 Lakh. A 24 x 7e-Procurement help desk has been established to provide information support training andclarifications to the vendors.

PROCUREMENT FROM MICRO & SMALL ENTERPRISES (MSES)

In line with the Public Procurement Policy of the Government of India as amended yourCompany has achieved more than the mandated procurement of 25% from MSEs (excludingspecific defence procurement as per Sl.No.14 of the policy).During the year the totalvalue of procurement including outsourcing made from MSEs was ' 63640 Lakh.

INDIGENISATION

The Company indigenizes various items/ components and systems of foreign origin fittedon HAL platforms through inhouse capabilities/ with the help of local vendors to reducedependence on imports and manage obsolescence thus fostering self-reliance through 'Makein India'. Obsolescence management savings in foreign exchange and cost reduction ofvarious items for manufacture and ROH of Aircraft Helicopters and Engines are theconsideration for Indigenisation. During the year the number of items indigenized is1501 and total anticipated foreign exchange saving is ' 12312 Lakh. The

Company has received an appreciation letter from IAF on successful indigenization ofSu-30 MKI brake pads ahead of schedule.

MAKE IN INDIA INITIATIVES

The Company has taken many initiatives during the year to promote Make in India. Someof the major initiatives are as under:

Implementation of HAL Make-II Procedure:

• The Company has implemented the Make-II (Industry Funded) procedure with assuredOrder with quantity specified upfront in compliance with the Framework for Make-IIpromulgated by MoD. The procedure document and items identified for indigenisation underMake-II are hosted in the Company's website.

HAL's "Make in India" Portal:

• The Company has hosted around 300 imported systems and sub systems ofmechanical electrical avionics & instrumentation categories under 'Make in India'portal in its website. More than 100 Tools Testers and Ground Equipment (TTGE) are alsohosted in the Company's website under 'Make in India' to enable private industries to takeup for indigenization.

Testing Facilities:

• The Company has hosted in its website more than 85 types of test facilitiesavailable in the Company for utilization by industries on payment basis. More than 55vendors (Indian Private and Govt Organizations) have utilised the test facilities.

HUMAN RESOURCE DEVELOPMENT

The strength of employees as on March 31 2020 stood at 27384.

During the year opportunities for Officers to build their knowledge-based competencieswere provided. Ten Officers were sponsored for M.Sc Programme at the Cranfield UniversityUnited Kingdom and one Officer was sponsored for the Ph.D Programme at IIT Kanpur.

As on March 31 2020 a total of 3594 Apprentices were engaged in the Companycomprising 9.28 % of the total employee strength including contractual staff.

EMPLOYEE WELFARE

The Company continues to extend welfare benefits to the employees and their dependentsby way of comprehensive Medical facilities Housing facilities Canteen facilities (foremployees only) Educational facilities for employee's Children Sports Facilities etc.

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 2019 andJanuary 1 2020

Category

Total Strength as on

Number of SCs as on

Number of STs as on

(Grade / Scale of Pay) 1.1.2019 1.1.2020 1.1.2019 1.1.2020 1.1.2019 1.1.2020
Group - A (Grade - II & above) 8554 8281 1516 1479 514 504
Group - B (Grade-I) 31 37 4 5 2 2
Group - C (Scale -3 to Special Scale) 19972 19354 3501 3384 1463 1431
Group - D (Scales - 1 & 2)
i. Excluding Safai Karmacharis 15 7 4 1 - -
ii. Safai Karmacharis - - - - - -
Total 28572 27679 5025 4869 1979 1937

Recruitments made during the period January 1 2019 to December 31 2019 and the SC/STsamongst them

Category (Grade / Scale of Pay) Total number of Post filled

No. of Reservations made for

No. of Posts filled by appointment of

SCs STs SCs STs
Group - A (Grade - II & above) 25 4 1 3 -
Group - B (Grade-I) 13 2 1 2 1
Group - C (Scale -3 to Special Scale) 119 23 3 20 -
Group - D (Scales - 1 & 2 ) - - - - -
i. Excluding Safai Karmacharis - - - - -
ii. Safai Karmacharis
Total 157 29 5 25 1

Vacancy -based Promotions made during the period January 1 2019 to December 31 2019and the SC/STs amongst them

Category (Grade / Scale of Pay) Total number Promoted

No. of Reservations made for

No. of Posts filled by Promotion of

SCs STs SCs STs
Group - A (Grade - II & above ) 888 NA NA 155 48
Group - B (Grade-I) - - - - -
Group - C (Scale -3 to Special Scale) - - - - -
Group - D (Scales - 1 & 2 ) i. Excluding Safai Karmacharis

-

-

-

-

-

ii. Safai Karmacharis
Total 888 - - 155 48

EMPLOYEE RELATIONS (ER) / INDUSTRIAL RELATIONS

The Employee Relations Scenario in the Company has been peaceful and cordial during theyear except for the Strike resorted to by the Recognized Trade Unions during the periodOctober 14 2019 to October 22 & 23 2019 in connection with the Wage Revision ofworkmen which was due w.e.f January 1 2017. The Strike was called-off by the Unions basedon the Interim Order of the Hon'ble High Court of Karnataka. Subsequently discussionswere held between the Management and the Recognized Unions and the Wage Settlement wasconcluded.

In line with the Company's stated Policy of encouraging Employee Participation inManagement regular Meetings with the representatives of the Recognized Unions / OfficersAssociations at the Divisional Complex & Corporate Levels were held to discussissues. Plant Level & Shop Level Committees with representatives from the Management& Workmen / Union Representatives are functioning in the Divisions to discuss andresolve production issues and other related matters. In order to address Employee / PublicGrievance / Representations Grievance Redressal Mechanisms are also in place in theCompany.

Wage Revision of Workmen w.e.f. January 1 2017

Wage Revision of Workmen was due w.e.f January 1 2017. Government vide DPE OM No.W-02/0015/2016-DPE(WC)- GL-XXIV/17 dated November 24 2017 had issued Policy Guidelinesfor conducting Negotiations with the Unions. After receipt of the Guidelines theManagement had commenced the Negotiations with the Unions during February 2018. Severalrounds of discussions / negotiations were held between the Unions & Management. As aresult of the final negotiations held during December 5 2019 to December 10 2019 aMemorandum of Understanding (MoU) was signed with the Unions on 10.12.2019 at theCorporate Level. Subsequently Memorandums of Settlement (MoS) were signed before theconcerned Labour Authorities at the unit / Division level and the revised wage structurewas implemented during January 2020.

RAJBHASHA IMPLEMENTATION

In accordance with the Guidelines issued by the Department of Official Language (OL)Ministry of Home Affairs New Delhi all out efforts are being made by all the Divisions ofthe Company for implementation of the Official Language Policy

of the Government of India. To make aware with the OL Policy &Technical Facilitiesdeveloped in the field of Official Language a one-day Training Programme on 'The updatedInformation regarding Official Language in IT Sector was organized on June 19 2019 for OLStaff of Bangalore based Divisions/Offices. In addition a one-day Training Programme on'Hindi usage in routine works' was organized for the Members of the Official LanguageImplementation Committee (OLIC) of Corporate Office.

Intensive (Special) Hindi Prabodh classes were organized for officers/workmen ofBangalore based Divisions/Office from July 2019 with the co-operation of the Central HindiTeaching Institute (CHTI) Bengaluru.

Hindi Fortnight was celebrated from 14th to 28th September 2019in all the Divisions of HAL. A large number of employees took part in various HindiCompetitions organized during the Celebrations.

The progress made towards OL Implementation by the Divisions of HAL was reviewed in theHindi Margdarshan Samiti at the Corporate Level. Decisions taken by the Apex Committee areimplemented at the Company level. Inspections of various Divisions related to OfficialLanguage have been conducted by the Department of Official Language / Ministry of Defencewith the Co-Ordination of Corporate Office during the year. Responsibilities of TownOfficial Language Implementation Committee (TOLIC) are being borne by our three Divisionsviz. HAL AMD-Nasik HAL SED-Koraput and HAL AD-Lucknow and they are conducting TOLICMeetings successfully.

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 timeto time necessary actions have been taken to prevent Sexual Harassment of Women atWorkplace. The HAL CDA Rules applicable to Officers and the Certified Standing Orders /HAL Conduct Rules applicable to Workmen have the required provisions in this regard.

Internal Complaints Committees as per Section 4 of the Act have been put in place atvarious locations of the Company. Information for the year 2019 in terms of Section 22 ofthe Act is as indicated below:

INFORMATION TECHNOLOGY (IT) INITIATIVES

During the year your Company has taken many IT initiatives towards improving digitaljourney and key focus areas are Process Improvement through Digitisation Customer Delightthrough Inter organisational processes Decision enabling through data effectiveness andMitigation of Cyber Risk through world class framework. The achievement of aboveobjectives is a continuous journey and the major outcome is in terms of change ofculture/practices however few measurable aspects are as below:

Digitisation Coefficient: Reduction of paper consumption by 33% ascompared to 2016-17 level and is expected to reach 60% during 2020-21. Source- Company'sPurchase data.

• Data Driven Enterprise: Improvement in data effectiveness to 93% as comparedto 60% in 2017. Source: Company's ERP platform

• Diffusing Cyber Attacks: By continuous upgrade in Cyber Security practicesCompany witnessed zero major incident during the year whereas File-less attacks increasedby 256% globally. Source: CSO online

Some of the major IT initiatives are:-

• Improving Business partner's delight by enhancing data driven collaboration andstreamlining partner facing processes have been an area of focus during the year.

• Online mechanism to monitor the Vendor Payment status a dashboard was madeoperational in November 2019.

• The processes in the Company have been streamlined by using various softwaretools such as Yatra portal to book Company guesthouses from any location within the HALnetwork. Tender Name Record (TNR) to reduce printing of Bids submitted by the vendorseFile program to make paperless office.

• On the infrastructure strengthening front the Company has taken the followingmeasures :

i) Complementing the existing leased lines with new technology MPLS lines(Multi-Protocol Level Switching).

ii) Up gradation of internal mailing system (GroupWise) with latest features.

(i) Number of Cases pending as on January 1 2019 - 1
(ii) Number of Complaints of Sexual Harassment received in the year 2019 5
(iii) Number of Complaints disposed of during the year 2019 - 3
(iv) Number of Cases pending as on December 31 2019 & its status - 3
1 case pending as on December 31 2019 was closed on January 8 2020. Other two cases were pending at the ICC enquiry stage

iii) State of the art Video Conferencing system to connect 20 High Definition Instancesto improve the User experience on Video Conferencing.

iv) Implementation of IT Asset Management Portal which has information of IT Assets andtheir movement.

• Cyber Security practices in your Company are being continuously improved to keeppace with the environmental changes. The Key initiatives taken by the Company with respectto Cyber Security during the year are as under:

i) Policy interventions: Standard Operating Procedures (SOP) were developed for Usageand sanitization of USBs Laptops Active Directory group policies management NetworkBaseline Document Risk Identification prioritization and Mitigation.

ii) Tools: Real time threat monitoring system was deployed for Internet facing HALServers to take proactive measures from Cyber threat attacks through a state of the artAttack Vector Dashboard. 360 degree representation of IT Security Compliance for trackingprogress on IT Security Initiative through IT Security Dashboard.

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 bagged SCOPE Corporate Communication Excellence Award 2019 (third prize)under the "Best Corporate Communication Campaign Program - ExternalCommunication" on August 3 2019.

• HAL bagged "Online Sustainability Award 2019" organized by Econaurunder Water Harvesting Category for the Kumudavathi River Rejuvenation Project under CSRon April 22 2019.

• HAL bagged the "Visvesvaraya Trade Promotion Centre (VTPC) Karnataka StateExport Award" for the year 201617 under the PSU category on September 6 2019.

• HAL was conferred with the "Governance Now 7th PSU Award"for 'Research and Innovation' on February 19 2020.

• HAL (Koraput Division)has been conferred with the "Kalinga CSR Award -2018" in recognition of its consistent contribution towards CSR & SD during thefourth National Seminar on "Corporate Social Responsibility Initiatives-2019"(Transition to Transformation - The Next Generation CSR) held at Bhubaneswar in June2019.

• HAL LCA Tejas Division was awarded the "Unnatha Suraksha Puraskar" bythe National Safety Council Karnataka Chapter as part of the Safety Awards -2019 onSeptember 9 2019.

? HAL Aircraft Division Bangalore won the 'National Safety Award' for performanceunder the category of 'Lowest Average Frequency Rate' (Winners) for the year 2017-18 inAugust 2019.

VIGILANCE

The Vigilance Department of the Company is headed by the Chief Vigilance Officer (CVO).Vigilance Officers and Staff are posted to the Corporate Office and all the Divisions andComplex Offices of the Company. The Vigilance Department has been certified as ISO 9001:2015 compliant an initiative for delivering Quality Vigilance work.

During the year 255 complaints were handled. 580 Surprise /Routine checks and 27 CTE(Chief Technical Examiner) Type inspections were carried out in the Divisions. Based onthe outcome of checks/inspections and complaints 30 cases were taken up for detailedinvestigation after due verification. Points requiring systemic corrections as notedduring the checks verifications system studies and investigations were brought to thenotice of the Management for suitable interventions.

Detailed Investigation of 34 cases were concluded and submitted out of which 7 caseswere referred for Disciplinary Action and 11 cases for Administrative Action. 5 cases wereforwarded to Management for System Improvements and 11cases were closed as nothing adversewas found during the investigation.

Final orders awarding 4 Major Penalties (including 2 dismissals) 17 Minor Penaltiesand 83 Advisory/ Counseling/ Exoneration were issued by the concerned DisciplinaryAuthorities during the period.

Preventive and Proactive Vigilance has been the thrust area of the VigilanceDepartment. Some of the major initiatives by the Department during the year were:

? System studies were carried out in various areas and appropriate measures weresuggested to streamline procedures.

? Sensitization of Vigilance: 56 sessions were conducted to sensitize HAL officialsduring this period to be vigilant and join hands in curbing corruption.

? During the year 3 Vigilance Manuals were revised/ updated.

DIRECTORS' RESPONSIBILITY STATEMENT

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

(a) In the preparation of the annual accounts for the year ended March 31 2020 theapplicable accounting standards have been followed along with proper explanation relatingto material departures;

(b) the directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as on March 31 2020 and of the profitand loss of the Company for the year ended on that date;

(c) the directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets 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 followedby 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 provisionsof all applicable laws and that such systems were adequate and operating effectively.

AUDITORS Statutory Auditors

The Statutory Auditors of your Company were appointed by the Comptroller & AuditorGeneral of India (C&AG). M/s. Maharaj N.R. Suresh and Co. Chartered AccountantsBengaluru was appointed as Statutory Auditors for auditing the Accounts of the Company forthe year 2019-20 and 18 firms of Chartered Accountants were appointed as Branch Auditors.The statutory auditors' report does not contain any qualification reservation or adverseremarks.

The Auditors' Report on financial statements for the financial year 2019-20 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

M/s. GNV & Associates Cost Accountants Bengaluru were appointed as Cost Auditorsfor conducting the Cost Audit of the Company for the year 2019-20.

Internal Auditors

The Company has appointed Seven (7) Nos. of Chartered Accountants /firms for carryingout internal audit functions of the Company for the year 2019-20.

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 theCompany for the

year 2019-20. The Secretarial Audit Report is annexed to this Report as Annexure - Vand forms part of Annual-Report. The said report does not contain any qualificationreservation or adverse remarks.

Annual Secretarial Compliance Report

The Company has filed the Annual Secretarial Compliance Report for the year 2019-20with the BSE Ltd and National Stock Exchange of India Limited The report was receivedfrom a Practising Company Secretary and filed within the stipulated time as specifiedunder Regulation 24A of the SEBI (LODR) Regulations.

CORPORATE GOVERNANCE

In terms of Regulations 34 read with Schedule V of SEBI (LODR) Regulations and DPEGuidelines a report on Corporate Governance for the year ended March 31 2020 has beenprepared and annexed to this Report. The Company's Secretarial Auditor has issued acertificate 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 Discussionand 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 and the same is madeavailable on the Company's website. The details of the Whistle Blower Policy are explainedin the Corporate Governance Report and also hosted on the website of the Company at www.hal-india.co.in/Investors/Code and Policies.

Employees are encouraged to raise any of their concerns by way of whistle blowing andnone of the employees have been denied access to the Audit Committee.

QUALITY INITIATIVES AND SAFETY

• All production units and R&D Centers of the Company continue to be certifiedto International Aerospace Standard AS9100 Rev. D and division involved in Overhaul andRepair activities has been additionally certified to AS9110C (Requirements for AviationMaintenance Organization). Many of our special processes are certified to Nadcap to meetexport requirements. Test laboratories located in the various divisions of the Company arecertified by the National Accreditation Board for Testing and Calibration Laboratories(NABL) which is an autonomous body under the Department of Science and Technology.

• The Quality Management System of all the divisions of the Company are approvedby the Directorate General of Aeronautical Quality Assurance (DGAQA) and divisionscatering to civil customers are approved by Director General

of Civil Aviation (DGCA) complied with Civil Aviation Requirements (CAR-21 andCAR-145). The R&D centers of the Company continue to hold Design Organization Approvalfrom the Centre for Military Airworthiness and Certification (CEMILAC) and are alsorecognized by the Department of Scientific and Industrial Research (DSIR) for in-houseR&D.

• Standardization of Quality Management Systems has been adopted at par with WorldAviation Industries through the formulation of Corporate Quality Assurance Guidelines. SixQuality procedures out of ten procedures have been protected so far with the Registrar ofCopyrights New Delhi. Three more guidelines are under approval for release.

• To improve the Flight Safety Culture a visit to IAF bases by HAL teams on theconcept of "Observe and Learn" was undertaken during the year. Benchmarking ofgood practices will be implemented at various divisions of the Company for improvement insafety aspects.

ACKNOWLEDGEMENT

Your Directors acknowledge the excellent support extended by the Government of Indiain particular the Ministry of Defence Department of Defence Production DefenceAcquisition and Defence Finance as well as other Ministries of the Government of India inall the endeavours of the Company.

Your Directors also places on record its sincere appreciation towards the Company'svalued customers in particular the

Defence Services for the support and confidence reposed by them in the Management ofthe Company and look forward to the continuance of this mutually supportive relationshipin the future.

The Company wishes to place on record its appreciation for the cooperation extended andservices provided by the Comptroller & Auditor General of India (C&AG) thePrincipal Director of Commercial Audit & Ex-officio Member Audit Board StatutoryAuditors Cost Auditors Secretarial Auditors Bankers Collaborators JV Partners andSuppliers.

Your Directors are also thankful to the shareholders for their faith and continuedsupport in the endeavours of the Company.

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

For and on behalf of the Board of Directors Hindustan Aeronautics Limited

(R. Madhavan) Chairman and Managing Director

Place : Bengaluru Date : August 25 2020

Form No. MGT-9

EXTRACT OF ANNUAL RETURN

As on the Financial Year ended on 31st March 2020

[Pursuant to section 92(3) of the Companies Act 2013 and rule 12(1) of the Companies(Management and Administration) Rules 2014]

I. REGISTRATION AND OTHER DETAILS:

i) CIN L35301KA1963GOI001622
ii) Registration Date 16 / 08/ 1963
iii) Name of the Company Hindustan Aeronautics Limited
iv) Category of the Company Sub-Category of the Company Public Limited Company Government Company
v) Address of the Registered office and contact details No: 15/1 Cubbon Road
PB No: 5150
Bengaluru - 560 001
Karnataka
Ph No: 080 22320001
vi) Whether listed company Yes / No
vii) Name Address and Contact details of Registrar and Transfer Agent if any M/s KFin Technologies Private Limited (Formerly known as M/s Karvy Fintech Pvt Ltd) "Karvy Selenium Tower B" Plot No 31 & 32 Financial District Nanakramguda Serilingampally Rangareddi Hyderabad - 500032 Telengana Ph No: 040-67162222 / 7961 1000

II. PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY:

All the business activities contributing 10% or more of the total turnover of thecompany shall be stated:-

Sl. No. Name and Description of main products / services NIC Code of the Product / service % to total turnover of the Company
1 Manufacture of Aircraft and Helicopters 35301 40%
2 Repair Maintenance of Aircraft and Helicopters 35308 55%

III. PARTICULARS OF HOLDING SUBSIDIARY AND ASSOCIATE COMPANIES:

SI. No. Name and Address of the Company

CIN/GLN

Holding / Subsidiary / Associate

% of shares held

Applicable Section

1 BAeHAL Software Limited Airport Lane HAL Estate Bangalore - 560 017

U72200KA1993PLC013983

Associate

HAL: 49% BAe Systems: 40% BAe HAL Employee Trust: 11%

Section 2(76) (viii)

2 Safran HAL Aircraft Engines Private Limited (formerly known as Snecma HAL Aerospace Pvt Ltd) No 140/1 Hoody Whitefield Road Whitefield Industrial Area Bangalore - 560 066

U35303KA2005PTC037539

Associate

HAL: 50% Safran Aircraft Engines: 50%

Section 2(76) (viii)

3 SAMTEL HAL Display Systems Limited No 501 5th Floor Copia Corporate Suits Plot No 9 District Centre Jasola Delhi - 1 10 025

U32204DL2007PLC158372

Associate

HAL: 40% Samtel: 60%

Section 2(76) (viii)

4 Infotech HAL Limited 5th Floor Infotech IT Park Phase-1 110A & 110B Electronics City Hosur main road Bangalore - 560 100

U29200KA2007PLC043691

Associate

HAL: 50% Infotech (renamed as Cyient Limited): 50%

Section 2(76) (viii)

5 HAL-Edgewood Technologies Private Limited 3rd Floor Old ADB Building HAL Main Factory HAL Airport Road Bangalore - 560 017

U73100KA2007PTC042634

Associate

HAL: 50% Edgewood Inc USA: 26% Edgewood India: 24%

Section 2(76) (viii)

6 HALBIT Avionics Private Limited No 15/1 Cubbon Road Bangalore - 560 001

U35303KA2007PTC042680

Associate

HAL: 50% Elbit:26% Merlinhawk Asso. Blore: 24%

Section 2(76) (viii)

7 Indo-Russian Aviation Limited No 15/1 Cubbon Road Bangalore - 560 001

U35303KA1994PLC016219

Associate

HAL: 48% ICICI Bank: 5% RAC MiG: 31% Ryazan:10% Aviazapchast: 6%

Section 2(76) (viii)

8 HATSOFF Helicopter Training Private Limited Survey No 3 & 4 Opp to ARDC Main Gate HAL Vibhuthipura Bangalore - 560037

U74999KA2008PTC044972

Associate

HAL: 50% CAE Canada: 50%

Section 2(76) (viii)

9 Tata HAL Technologies Limited Aurbis ORR #287/58/7 First Floor A Wing Devarabeesanahalli Village Varthur Hobli Bangalore - 560 034

U93000KA2008PLC046588

Associate

HAL: 50% Tata Technologies: 50%

Section 2(76) (viii)

10 Multirole Transport Aircraft Limited MTAL House HAL Senior Officer Enclave Old Madras Road Bangalore - 560 093

U29199KA2010PLC056091

Associate

HAL: 50% Russians: 50% (UAC-TA & ROE)

Section 2(76) (viii)
11 International Aerospace Manufacturing Private Limited Survey No.3 Kempapura Village VarthurHobli Bangalore East Taluk Bangalore - 560 037

U29253KA2010PTC054509

Associate

HAL: 50% Rolls Royce: 50%

Section 2(76) (viii)
12 Aerospace and Aviation Sector Skill Council HAL Technical Training Institute Surjandas Road Vimanapura Road Bangalore - 560 017

U80301KA2014NPL076367

Associate

HAL: 50% BCIC: 25% SIATI: 25%

Section 2(76) (viii)
13 Helicopter Engines MRO Pvt Ltd 2727 80ft Road HAL 3rd Stage Indiranagar Bengaluru - 560075

U74999KA2016PTC095837

Associate

HAL: 50% Safran Helicopters Engines: 50%

Section 2(76) (viii)
14 Naini Aerospace Ltd No.15/1 Cubbon Road PB No 5150 Bengaluru - 560001

U29309KA2016GOI098895

Subsidiary

HAL: 100%

Section 2(76) (viii)
15 Defence Innovation Organization Bharat Electronics Limited Campus Jalahalli Bangalore - 560013

U73100KA2017NPL102118

Associate

HAL: 50% BEL: 50%

Section 2(76) (viii)
16 Indo-Russian Helicopters Ltd No.15/1 Cubbon Road PB No 5150 Bengaluru - 560001

U35999KA2017GOI102728

Subsidiary

HAL-50.5% Russian Helicopter & Rosoboronexport: 49.5%

Section 2(76) (viii)

IV. SHAREHOLDING PATTERN (Equity Share Capital Break-up as percentage of Total Equity):

i. Category-wise Share Holding (Refer Enclosure - I)
ii. Shareholding of Promoters (Refer Enclosure - II)
iii. Change in Promoters' Shareholding (please specify i1 there is no change) - NO CHANGE
Sl No. President of India No. of shares % of total shares of the Company
At the beginning of the year 300855180 89.97
ii. Cumulative Shareholding during the year 300855180 89.97
iii. At the end of the year 300855180 89.97

iv. Shareholding Pattern of top ten Shareholders (other than Directors Promoters andHolders of GDRs and ADRs)

1. Life Insurance Corporation of India

Date

At the beginning of the year

Change in Shareholding during the year

Cumulative Shareholding % of shares
No. of shares % of shares Increase Decrease during the year
01.04.19 23407104 7.00 - - 23407104 7.00
31.03.20 - - - - 23407104 7.00

2. State Bank of India

Date

At the beginning of the year

Change in Shareholding during the year

Cumulative Shareholding during the year % of shares
No. of shares % of shares Increase Decrease
01.04.19 1565267 0.47 - - 1565267 0.47
15.11.19 - - - 3000 1562267 0.47
17.01.20 - - - 10000 1552267 0.46
31.03.20 - - - - 1552267 0.46

3. ICICI Prudential Equity & Debt Fund

Date

At the beginning of the year

Change in Shareholding during the year

Cumulative Shareholding during the year % of shares
No. of shares % of shares Increase Decrease
01.04.19 1035712 0.31 - - 1035712 0.31
05.04.19 - - 9600 - 1045312 0.31
12.04.19 - - 45413 - 1090725 0.33
19.04.19 - - 1522 - 1092247 0.33
17.05.19 - - 34 - 1092281 0.33
24.05.19 - - 17 - 1092298 0.33
31.05.19 - - 5026 - 1097324 0.33
07.06.19 - - 17580 - 1114904 0.33
14.06.19 - - 2213 - 1117117 0.33
21.06.19 - - 9437 - 1 126554 0.34
28.06.19 - - 15934 - 1142488 0.34
05.07.19 - - 17 - 1 142505 0.34
12.07.19 - - 9840 - 1 152345 0.34
19.07.19 - - 10027 - 1 162372 0.35
26.07.19 - - 20778 - 1183150 0.35
02.08.19 - - 6857 - 1190007 0.36
09.08.19 - - 281 - 1 190288 0.36
16.08.19 - - 17 - 1 190305 0.36
23.08.19 - - 12846 - 1203151 0.36
30.08.19 - - 36088 - 1239239 0.37
06.09.19 - - 4421 - 1243660 0.37
20.09.19 - - 2248 - 1245908 0.37
27.09.19 - - 12167 - 1258075 0.38
30.09.19 - - 2846 - 1260921 0.38
04.10.19 - - 26091 - 1287012 0.38
11.10.19 - - 3763 - 1290775 0.39
18.10.19 - - 2 - 1290777 0.39
25.10.19 - - 9280 - 1300057 0.39
01.11.19 - - 959 - 1301016 0.39
22.11.19 - - 17 - 1301033 0.39
27.12.19 - - 15 - 1301048 0.39
10.01.20 - - 16 - 1301064 0.39
31.01.20 - - 328 - 1301392 0.39
07.02.20 - - 16 - 1301408 0.39
14.02.20 - - 8 - 1301416 0.39
14.02.20 - - - 8 1301408 0.39
06.03.20 - - 41 - 1301449 0.39
13.03.20 - - 192 - 1301641 0.39
20.03.20 - - 299 - 1301940 0.39
27.03.20 - - 153 - 1302093 0.39
31.03.20 - - 202 - 1302295 0.39

4. Reliance Capital Trustee CO LTD-A/C Reliance ETF N

Date

At the beginning of the year

Change in Shareholding during the year

Cumulative Shareholding during the year % of shares
No. of shares % of shares Increase Decrease
01.04.19 3316 - - - 3316 -
05.04.19 - - 275 - 3591 -
12.04.19 - - 576 - 4167 -
19.04.19 - - 224 - 4391 -
26.04.19 - - 64 - 4455 -
03.05.19 - - 98 - 4553 -
10.05.19 - - - 1643 2910 -
17.05.19 - - 160 - 3070 -
24.05.19 - - 50085 - 53155 0.02
31.05.19 - - 50888 - 104043 0.03
07.06.19 - - 298192 - 402235 0.12
14.06.19 - - - 40 402195 0.12
21.06.19 - - 88 - 402283 0.12
28.06.19 - - 457643 - 859926 0.26
05.07.19 - - 249 - 860175 0.26
12.07.19 - - 104 - 860279 0.26
19.07.19 - - 234 - 860513 0.26
26.07.19 - - 96 - 860609 0.26
02.08.19 - - 11 - 860620 0.26
09.08.19 - - 5241 - 865861 0.26
09.08.19 - - - 5033 860828 0.26
16.08.19 - - 40 - 860868 0.26
23.08.19 - - 378 - 861246 0.26
30.08.19 - - 126 - 861372 0.26
06.09.19 - - 24 - 861396 0.26
13.09.19 - - 56 - 861452 0.26
20.09.19 - - 17056 - 878508 0.26
27.09.19 - - 12604 - 891112 0.27
30.09.19 - - 43 - 891155 0.27
04.10.19 - - 32 - 891187 0.27
11.10.19 - - 3357 - 894544 0.27
18.10.19 - - 10048 - 904592 0.27
01.11.19 - - 5072 - 909664 0.27
08.11.19 - - 24 - 909688 0.27
15.11.19 - - 3813 - 913501 0.27
15.11.19 - - - 89 913412 0.27
22.11.19 - - 10061 - 923473 0.28
22.11.19 - - - 100 923373 0.28
29.11.19 - - - 2143 921230 0.28
06.12.19 - - 5000 - 926230 0.28
06.12.19 - - - 383 925847 0.28
13.12.19 - - 6527 - 932374 0.28
20.12.19 - - 5506 - 937880 0.28
27.12.19 - - 5369 - 943249 0.28
31.12.19 - - 8 - 943257 0.28
03.01.20 - - 5294 - 948551 0.28
10.01.20 - - 113191 - 1061742 0.32
17.01.20 - - 62592 - 1 124334 0.34
24.01.20 - - 312 - 1124646 0.34
31.01.20 - - - 695 1 123951 0.34
07.02.20 - - 424 - 1 124375 0.34
07.02.20 - - - 8405 1115970 0.33
14.02.20 - - 73 - 1116043 0.33
14.02.20 - - - 28577 1087466 0.33
21.02.20 - - - 57214 1030252 0.31
28.02.20 - - - 25117 1005135 0.30
06.03.20 - - 240 - 1005375 0.30
13.03.20 _ _ 1360 _ 1006735 0.30
13.03.20 - - - 3757 1002978 0.30
20.03.20 - - - 34986 967992 0.29
27.03.20 - - - 7687 960305 0.29
31.03.20 - - 424 - 960729 0.29
31.03.20 - - - 382 960347 0.29
31.03.20 - - - - 960347 0.29

5. General Insurance Corporation of India

Date

At the beginning of the year

Change in Shareholding during the year

Cumulative Shareholding during the year % of shares
No. of shares % of shares Increase Decrease
01.04.19 669336 0.20 - - 669336 0.20
31.03.20 - - - - 669336 0.20

6. The New India Assurance Company Limited

Date

At the beginning of the year

Change in Shareholding during the year

Cumulative Shareholding during the year % of shares
No. of shares % of shares Increase Decrease
01.04.19 604836 0.18 - - 604836 0.18
31.03.20 - - - - 604836 0.18

7. Union Bank of India

Date

At the beginning of the year

Change in Shareholding during the year

Cumulative Shareholding during the year % of shares
No. of shares % of shares Increase Decrease
01.04.19 257261 0.08 - - 257261 0.08
31.03.20 - - - - 257261 0.08

8. Canara Bank

Date

At the beginning of the year

Change in Shareholding during the year

Cumulative Shareholding % of shares
No. of shares % of shares Increase Decrease during the year
01.04.19 244896 0.07 - - 244896 0.07
31.03.20 - - - - 244896 0.07

9. Bank of Baroda

Date

At the beginning of the year

Change in Shareholding during the year

Cumulative Shareholding during the year % of shares
No. of shares % of shares Increase Decrease
01.04.19 80640 0.02 - - 80640 0.02
12.04.19 - - 41148 - 121788 0.04
31.03.20 - - - - 121788 0.04

10. SYNDICATE BANK

Date

At the beginning of the year

Change in Shareholding during the year

Cumulative Shareholding during the year % of shares
No. of shares % of shares Increase Decrease
01.04.19 93386 0.03 - - 93386 0.03
29.11.19 - - 93386 - 186772 0.06
29.11.19 - - - 93386 93386 0.03
31.03.20 - - - - 93386 0.03

v) Shareholding of Directors and Key Managerial Personnel

V. INDEBTEDNESS

Indebtedness of the company including interest outstanding/accrued but not due forpayment

Secured Loans excluding deposits Unsecured Loans Deposits Total Indebtedness
Indebtedness at the beginning of the financial year
i) Principal Amount 415801 - - 415801
ii) Interest due but not paid - - - -
iii) Interest accrued but not due - - - -
Total (i+ii+iii) 415801 - - 415801
Change in Indebtedness during the financial year • Addition
Principal 133934 - - 133934
Interest 10 - 10
• Reduction
Principal - - - -
Interest - - - -
Net Change 133944 - - 133944
Indebtedness at the end of the financial year
i. Principal Amount 549735 - - 549735
ii. Interest due but not paid - - - -
iii. Interest accrued but not due 10 - - 10
Total (i+ii+iii) 549745

-

-

549745

i) Category-wise Share Holding

Category of Shareholders

No. of Shares held at the beginning of the year [As on 01-Apri 1-2019]

No. of Shares held at the end of the year [As on 31-March-2020]

% of Change during the year

Demat Physical Total % of Total Shares Demat Physical Total % of Total Shares
A. Promoter's
(1) Indian
a) Individual/HUF - - - - - - - - -
b) Central Govt 300855180 - 300855180 89.97 300855180 - 300855180 89.97 -
c) State Govt(s) - - - - - - - - -
d) Bodies Corp. - - - - - - - - -
e) Banks /FI - - - - - - - - -
f) Any other - - - - - - - - -
Sub-total (A) (1) 300855180 - 300855180 89.97 300855180 - 300855180 89.97 -
(2) Foreign - - - - - - - - -
a) NRIs- Individuals - - - - - - - - -
b) Other - Individuals - - - - - - - - -
c) Bodies Corp - - - - - - - - -
d) Banks /FI - - - - - - - - -
e) Any other - - - - - - - - -
Sub Total (A) (2) - - - - - - - - -
Total shareholding of 300855180 - 300855180 89.97% 300855180 - 300855180 89.97% -
Promoter (A) = A(1) + A(2)
B. Public Shareholding
1. Institutions
a) Mutual Funds / UTI 1039028 - 1039028 0.31 2264647 - 2264647 0.68 0.37
b) Banks/FI 2375891 - 2375891 0.71 2361737 - 2361737 0.71 0.00
c) Central Govt - - - - - - - -
d) State Govt(s) - - - - - - - - -
e) Venture Capital Funds - - - - - - - - -
f) Insurance Companies 24681276 - 24681276 7.38 24681276 - 24681276 7.38 0.00
g) Fils - - - - - - - - -
h) Foreign Venture Capital Funds - - - - - - - - -
i) Others (Foreign Institutional Investor) 966714 - 966714 0.29 - - - - (0.29)
Sub-total (B)(1):- 29062909 - 29062909 8.69 29307660 - 29307660 8.76 0.07
2. Non-Institutions
a) Bodies Corp. 276522 - 276522 0.08 128650 - 128650 0.04 (0.04)
b) Individuals
i) Individual shareholders holding nominal share capital upto ?1 lakh 3985074 65 3985139 1.19 3876910 65 3876975 1.16 (0.03)
ii) Individual shareholders holding nominal share capital in excess of ? 1 lakh 62123 62123 0.02 67981 67981 0.02 0.00
c) Others (NBFC's Registered with RBI) 353 - 353 0.00 - - - - -
Non Resident Indians 82378 - 82378 0.02 87686 - 87686 0.03 0.0
NRI Non -Repatriation 40354 - 40354 0.01 33353 - 33353 0.01 0.00
Overseas Corporate Bodies - - - - - - - - -
Qualified Institutional Buyers - - - - 5729 - 5729 0.00 0.00
Clearing Members 22386 - 22386 0.01 23473 - 23473 0.01 0.00
Trusts 156 - 156 0.00 813 - 813 0.00 0.00
Sub-total (B)(2):- 4469346 65 4469411 1.34 4224595 65 4224660 1.27 (0.07)
Total Public Shareholding (B)=(B)(1)+ (B)(2) 33532255 65 33532320 10.03 33532255 65 33532320 10.03 -
C. Shares held by Custodian for GDRs & ADRs - - - - - - - - -
Grand Total (A+B+C) 334387435 65 334387500 100% 334387435 65 334387500 100% -

ii) Shareholding of Promoters

SI. No. Shareholder's Name

Shareholding at the beginning of the year [As on 01-Apri 1-2019]

Shareholding at the end of the year [As on 31-March-2020]

% of Change in
No. of Shares % of total Shares of the company %of Shares Pledged/ encumbered to total shares No. of Shares %of total Shares of the company % of Shares Pledged / encumbered to total shares shareholding during the year
1. The President of India 300855180 89.97 - 300855180 89.97 - -
Total 300855180 89.97 - 300855180 89.97 - -

REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL A. Remuneration to ManagingDirector Whole-time Directors and/or Manager:

SI. Particulars of Remuneration

Name of MD/WTD/Manager

Total Amount
No. R Madhavan V M Chamola (ceased to be director w.e.f 31.12.2019) Arup Chatterjee Sunil Kumar (ceased to be director w.e.f 31.07.2019) CB Ananthakrishnan M S Velpari (Appointed as director w.e.f 01.08.2019) Alok Verma (appointed w.e.f 01.01.2020)
1. Gross salary
a) Salary as per provisions contained in sectionl 7(1) of the Income-tax Act1961** 4086124 8358871 3765935 6162836 3797384 2509075 555164 29235389
b. Value of perquisites u/s 17(2) Income-tax Act 1961 670572 1081897 608659 424587 613799 78228 89910 3567652
c. Profits in lieu of salary under section 17(3) Income-tax Act1961 - - - - - - - -
2. Stock option - - - - - - - -
3. Sweat Equity - - - - - - - -
4. Commission as % of profit - - - - - - - -
5. Others please specify - - - - - - - -
Total (A) 4756696 9440768 4374594 6587423 4411183 2587303 645074 32803041
* * Include leave encashment
Ceiling as per the Act

Exempted as per MCA notification no 463(E) dt 5

th June 2015

B. Remuneration to other Directors:

SI. No. Particulars of Remuneration

Name of Directors

Total Amount
1. Independent Directors Dipali Khanna Dr. J K Bajaj Anil Kumar Neelakanta Iyer R Siddharth DrS Malla Reddy Rear Admiral (R) K C Sekhar AVSM VSM
a) Fee for attending board & committee meetings 2.8 4.6 3.8 3.2 3.8 3.8 5 27
b) Commission - - - - - - - -
c) Others please specify - - - - - - - -
Total(1) 2.8 4.6 3.8 3.2 3.8 3.8 5 27
2. Other Non-Executive Directors Shri Chandraker Bharti* Dr Tessy Thomas*
a) Fee for attending board committee meetings - - - - - - - -
b) Commission - - - - - - - -
c) Others please specify - - - - - - - -
Total(2) - - - - - - - -
Total (B)=(1+2) 27
Total Managerial Remuneration Over all Ceiling as per the Act

Exempted as per MCA notification no 463(E) dt 5th June 2015

C. Remuneration to Key Managerial Personnel other than MD/Manager/WTD:

Sl. Particulars of Remuneration

Key Managerial Personnel

Total
N. Gross Salary Company Secretary (G V Sesha Reddy) CFO (C B Ananthakrishnan)
1 (a) Salary as per provisions contained in section 17(1) of the Income Tax Act 1961.* 2507852 2507852
(b) Value of perquisites u/s 17(2) of the Income Tax Act 1961 421274 421274
(c) Profits in lieu of salary under section 17(3) of the Income Tax Act 1961 - -
2 Stock Option - -
3 Sweat Equity - -
4 Commission as % of profit - -
5 Others please specify - -
Total 2929126 2929126

.