Auditor Report of Hindustan Aeronautics Ltd.

Mar 31, 2025

We have audited the accompanying Standalone Financial Statements of Hindustan Aeronautics Limited ("the Company")
which comprise the Balance Sheet as at 31^st March 2025, and the Statement of Profit and Loss (including Other Comprehensive
Income), Statement of Changes in Equity and the Statement of Cash Flows for the year then ended, and Notes to the Standalone
Financial Statements, including a summary of the Material Accounting Policies and other explanatory information (hereinafter
referred to as "the Standalone Financial Statements") in which are included the returns of 29 divisions for the period ended on
that date audited by the Division Auditors of the company.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Financial
Statements give the information required by the Companies Act, 2013 ("Act") in the manner so required and give a true and fair
view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian
Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the
state of affairs of the Company as at 31^st March 2025, and its Profit, Total comprehensive income, Changes in Equity and its Cash
Flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the Standalone Financial Statements in accordance with the Standards on Auditing (SA''s) specified
under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor''s Responsibilities
for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance
with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are
relevant to our audit of the Standalone Financial Statements under the provisions of the Act and the Rules thereunder, and we
have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of Matter

(I) Attention is invited to Notes to the Standalone Financial Statements extracted below:

Note 49: Clause - 43G

Revision of pay scales of executives and workmen, with effect from 01.01.2017 was implemented in accordance with the
guidelines issued by Department of Public Enterprises vide OM dated 03.08.2017 for executives and in accordance with
the Wage Agreement entered into between Management and Employees Union representative in 2019-20 in respect of
workmen.

On an interpretation on pay refixation and pursuant to the directives of the Administrative Ministry, the pay fixation to be
revised and the excess amount paid is to be recovered from the employees. Based on the directives Company issued a Circular
dated 24.07.2021 and the communication dated 26.07.2021 for recovery of the excess amount.

While so, the Employees Union and Officers Association have filed Writ Petition with Hon''ble High Court of Karnataka to stay
recovery of excess amount of salary paid by the Company. The H''ble High court given verdict in favour of Officers Associations
by setting aside the Circular dated 24.07.2021 and the communication dated 26.07.2021 issued by the Management. The
order of the H''ble High Court in favour of Officers was put up to the Board in its 490^th Meeting held on 12.02.2025. Board
has noted the judgement of the H''ble High Court and accorded approval to abide by the Court order. Accordingly, the
differential amount withheld by the Management in respect of Ex-officers has to be released /refunded to the concerned
Ex-officers/Nominees along with applicable interest.

As per the Board approval, one increment impact amount of '' 2712 lakhs recovered from the retired/deceased/resigned
employees has been paid during 2024-25. Further, in respect of officers an amount of '' 18565 lakhs credited to salaries and
wages in the earlier years and kept under claims receivable has been reversed during 2024-25. Accordingly, employees cost
for the current year is not comparable with the corresponding previous year.

In respect of workmen, the order is awaited, hence, reduction of salaries and wages in respect of workmen continued for the year
ended 31^st March 2025 and '' 2444 lakhs effect given in the books towards this. Excess amount credited to salaries and wages
in respect of workmen has been shown under claims receivable (Gross) of '' 16390 lakhs as at 31^st March 2025 (previous year:
'' 14282 lakhs).

Based on the final verdict, decision in respect of workmen will be taken and suitable effect will be carried out in the accounts.
Note 49: Clause - 43D(ii)

Ministry vide OM dated 12.07.2023 has conveyed the approval for increasing the Company''s contribution to the Pension
Scheme of Executives from existing 7% to 10% of Basic Pay DA w.e.f. 01.01.2017. Revision of Pension contribution
from 7% to 10% of Basic Pay DA w.e.f 01.01.2017 has been made in respect of executives who are on the rolls of the
Company as on the date of implementation of the revised ceiling i.e. 01.01.2017. In respect of new incumbents who joined
the Company post 01.01.2017, it will be effective from the date of appointment.

The additional liability accruing to the Company due to the increased ceiling, is '' 21776 lakhs pertaining to the period from
1 January, 2017 to 31 March, 2024 ('' 3719 lakhs for the year ended 31 March, 2025). The total additional financial impact on
revision of pension contribution upto 31^st March 2024 has been given effect in the books of accounts during the year ended
31 March, 2024. Accordingly, employees cost for the current year is not comparable with the corresponding previous year.

In respect of workmen, Company issued Circular dated 24.04.2025 has conveyed the approval for increasing the Company''s
contribution to the Pension Scheme from existing 7% to 10% of Basic Pay DA w.e.f. 01.01.2025. Revision of Pension
contribution from 7% to 10% of Basic Pay DA w.e.f 01.01.2025 has been made in respect of workmen who were on the
rolls of the Company as on the date of implementation of the revised ceiling.

The additional liability accruing to the Company due to the increased ceiling is '' 1051 lakhs pertaining to the period from
1 January, 2025 to 31 March, 2025. The total additional financial impact on revision of pension contribution has been given
effect in the books of accounts during the year ended 31 March, 2025. Accordingly, employees cost for the current year is
not comparable with the corresponding previous year.

Note 49: Clause - 13B

Exceptional item represents '' 589 Lakhs received on 12^th September 2024 for compensation received from the Office of
Special Land Acquisition Officer, Bangalore under KIADB Act, on compulsory acquisition of 315 Sq. Mtrs (0.078 Acres) of HAL
land at Beninganahalli Village, Bangalore by M/s Bangalore Metro Rail Corporation Ltd.

Note 49: Clause - 31B

Inventory were damaged due to floods caused by rains during September 2022. Based on the internal technical assessment,
the loss of Inventory was estimated as '' 7856 lakhs. Subsequently, based on the findings as part of the exercise to submit
an insurance claim, the actual loss towards HAL owned items reassessed as ''1001 lakhs and towards Customer owned and
sister division owned items as '' 5590 lakhs. For the same, the provision was created in the books as redundancy charges
of '' 1001 lakhs and as replacement charges of '' 5590 lakhs during 2023-24. Based on the insurance claims submitted by
the division for HAL owned items, the Insurance Surveyor has assessed loss of '' 688 lakhs, for which an advance amount of
'' 250 lakhs is received as interim settlement and for the balance receivable from insurer of '' 438 Lakhs is shown under claims
receivable as at 31^st March 2025. Further, during the year, based on the feedback received from OEMs on retraival of the
items, the Company has re assessed the loss of inventory as '' 3664 Lakhs against '' 5590 lakhs assessed during 2023-24.
Hence, '' 3664 lakhs has been retained under Provision for Replacement and Future Charges and the balance provision of
'' 1926 lakhs towards inventory retrieved back has been reversed during 2024-25. Insurance claims of '' 688 lakhs admitted
by the Insurer, hence redundancy charges for the same amount has been reversed during 2024-25.

Note 49: Clause - 31E

One overhauled Su-30 Aircraft having tail no. SB-182 got crashed during a flight near Ozar, Nashik on 04^th June 2024.
HAL has taken an insurance policy for efforts and material used in overhaul, and preferred the claim with the Insurance
Company for ''14435 lakhs. An amount of '' 14071 lakhs have been advised for payment by Insurance Company after
deducting policy Administration charges. The disbursement has been received by HAL Nasik on 17^th January 2025.

Further, Brought on Charge (BOC) action of SB-182 was not completed and Aircraft was under custody & control of HAL.
Board of Investigation (BOI) has been setup for finding the exact reason for the accident of aircraft. Customer is also demanding
for the replacement of equivalent Aircraft. As there is no replacement aircraft (Cat-B) available, out of prudence, provision of
'' 84336 lakhs for new aircraft have been created during 2024-25.

Note 49: Clause - 31C

Existing FPQ (arising out of 3^rd PPRC) is up to 2022-23. 4^th PPRC is under progress, due to which the prices for the year 2023¬
24 and onwards is yet to be firmed up. Hence pending finalisation of approval for the fixation of FPQ prices for the year
2023-24 and 2024-25, sales have been recognized provisionally based on the indices provided by Air HQ.

During the year ended 31.03.2024, Divisions have recognized FPQ sales by considering the FPQ price of 2022-23, applying
indices of 2023-24. For the year ended 31.03.2025, Divisions have recognized FPQ sales by considering the provisional price
of 2023-24, and applying indices of 2024-25.

Note 49: Clause - 43C(i)

The Company has provided Performance Related Pay for the year as per the Guidelines issued by Department of Public
Enterprises.

Note 49: Clause - 43C(ii)

During the year 2011, C&AG observed that the profits earned from short term deposits is an incidental activity and not a
core activity of the Company and inclusion of the interest income from these deposits for PRP computation had led to excess
of payment of '' 4318 lakhs to its executives. Based on HAL reply on difficulties in recovery, the C&AG vide letter dated
11^th November 2024, suggested that the issue of difficulties in retrospective recovery of excess amount of '' 4318 lakhs paid
on account of PRP for the year 2009-10 to 2011-12 be placed before the Board for obtaining waiver and disclose in the
financial statements.

In compliance with the C&AG letter, the issue of difficulties in retrospective recovery of excess amount paid on account of PRP
for the year 2009-10 to 2011-12 to its Executives was placed before HAL Board in its 488^th Meeting held on 16^th December
2024.

After deliberation, HAL Board approved the waiver from recovery of '' 4318 lakhs of excess payment of PRP for the year
2009-10 to 2011-12 to its Executives. Necessary accounting treatment has been done in the accounts for the year ended
31.03.2025.

Note 49: Clause - 27

Balance shown under Trade Receivables, Trade Payable, Claims Receivable, Advance against Goods and Services, Capital
Advances, deposits and stock / materials lying with sub-contractors / fabricators are under reconciliation. Since the Company
is a Government entity under the control of Ministry of Defence (MoD), around 98% of the Company''s turnover, around 98%
of Trade receivables and Contract Assets, around 97% of Claims receivables and around 99% of the customer advances is
with respect to Government and Government related entities. The bills are raised on the customers by the divisions located
at various places and reconciliation is carried out on an ongoing basis. However, Management does not expect to have any
material financial impact of such pending confirmation / reconciliation.

Note 49: Clause - 21B

An incidence of cyber fraud in the Division was noticed by the Management where the advance payment of '' 55 lakhs
(USD 63,405.44) was transferred to a different bank account due to compromised email received from different domain
other than the original source (vendor) and the matter was referred to Cybercrime cell and was also taken up with NIC for
further investigation of any breach of NIC server. An amount of '' 55 lakhs has been transferred to Claim Receivable-Credit
Impaired (Note-19) and provision for same has been made in the books of accounts during the financial year 2024-25.
Further accounting treatment will be made based on the outcome of investigation in this regard.

Note 49: Clause - 45E(v)

A Section 8 Company has been formed (Under Companies Act 2013) in the name of "Systems Testing and Research
for Advanced Materials Foundation (STREAM)". The total project cost '' 49.68 Crs comprising of Govt. Grant-in-Aid of
'' 36.864 Crs and SPV partners contribution '' 12.816 Crs. Wherein M/s Microlab will be the lead with equity contribution
of 20%, BEML-20%, HAL-20%, Vaidheswaran Industries-10%, & TIDCO-30%. STREAM was incorporated with a vision
of creating easy access and addressing the testing needs of domestic defence industry. STREAM was incorporated on
18^th September 2024. HAL has made an investment of '' 20 lakhs towards subscription of 20000 Equity shares of '' 100 each
on 18^th November 2024. Further HAL made an investment of '' 41.25 lakhs towards subscription of 41250 Equity Shares
of '' 100 each, pending allotment, the amount of investment shown under share application money under current
financial assets.

(II) We draw attention that the Company is not complying with Regulation 17(1) of the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015, as amended, and Section 149(4) of the Companies Act, 2013 pertaining to the required
composition of its Board of Directors.

(III) We draw attention to the fact that, due to the absence of the requisite number of Independent Directors, the Company has
not been able to reconstitute the Audit Committee and the Nomination and Remuneration Committee. Consequently, the
Company is not in compliance with the provisions of Section 177 and Section 178 of the Companies Act, 2013, as well as
Regulation 18(1) and Regulation 19(1) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. This
constitutes a non-compliance with the applicable statutory requirements.

Our opinion is not modified in respect of these matters

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone
Financial Statements of the current period. These matters were addressed in the context of our audit of Standalone Financial
Statements as a whole, and in forming our opinion thereon and we do not provide a separate opinion on these matters. We have
determined the matters described below to be the key audit matters to be communicated in our report.

Key Audit Matters

Response to Key Audit Matters & Conclusion

a) Revenue recognition (Ind AS 115) The revenue standard establishes a comprehensive framework for determining whether, how much and when revenue is recognized. This involves certain key judgments relating to identification of distinct performance obligations, determination of transaction price of identified performance obligation, the appropriateness of the basis used to measure revenue recognized over a period. Additionally, the standard mandates robust disclosures in respect of revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.

Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows: • Evaluated the appropriateness of the disclosures provided under the revenue standard and assessed the completeness and mathematical accuracy of the relevant disclosures. • Evaluated the design of internal controls relating to implementation of the revenue standard. • Selected a sample of continuing and new contracts, and tested the operating effectiveness of the internal control, relating to identification of the distinct performance obligations and determination of transaction price. We carried out a combination of procedures involving enquiry and observation, reperformance and inspection of evidence in respect of operation of these controls. • Selected a sample of continuing and new contracts and performed the following procedures. • Read, analysed and identified the distinct performance obligations in these contracts.

Key Audit Matters		Response to Key Audit Matters & Conclusion
		• Compared these performance obligations with that of identified and recorded by the group. • Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue and to test the basis of estimation of the variable revenue. • Examination of the correspondence relating to price revision and ascertained the reasonableness of the estimates. • Sample of revenues disaggregated by type and service offerings was tested with the performance obligations specified in the underlying contracts. Due to detailed procedures, a portion of is recognised based on the most likely amount based on past experience and the consistent practices followed. We have verified the procedures revenue recognition including unbilled revenue.
b)	Impairment of Trade Receivables
	In respect of receivables from Government the Company does not make any impairment provision based on past experience.	We have verified the i) Effectiveness of internal controls in place and procedures followed in identifying the recoverability
	The amount involved being significant balance and	of long outstanding dues.
	management judgment we consider this as a Key Audit Matter	ii) The procedures and follow-up actions in ascertaining the impairment of receivables. Our audit procedures include evaluation of provisions made for impairment in earlier years. We also made test checks of invoice wise collection details provided made in respect of in the five preceding financial years and we concluded the Management assumption is reasonable
c)	Contract Asset	Contract Assets represents the Company''s right to receive the
	Contract asset represents the revenue recognized but yet	consideration in exchange for the Goods or Services that the
	to be invoiced to the customer.	Company has transferred to the customer, when that right is conditioned on something other than passage of time.
d)	Liquidated damages
	The Company''s contract with the customers has	We have verified the controls, period of delay, the expected
	standard clause for liquidated damages for delayed	days of delay as on 31.03.2025 and also the calculation for
	delivery. The Company''s product has extended period	the liquidated damages recognized and found the system
	of manufacturing; design approvals and inspection by customer at various stages which result in delay in certain cases leading to liquidated damages. The liquidated damages recognized being significant in the statement of profit and loss, is considered a key audit matter in our opinion.	followed and calculation to be in order.

Key Audit Matters		Response to Key Audit Matters & Conclusion
e)	Work - in - Progress (WIP) - Inventories Inventories include Work in Progress which have been physically verified by the Management based on physical verification instructions.	Our Audit Procedures generally include review of • Physical Verification instructions • Physical verification reports • Roll back procedures • Examining the basis of valuation on a test check basis
		Currently, the verification of WIP is done on annual basis. The division wise WIP inventory was submitted from Divisions and consolidated at H.O. level.
		Based on the above audit procedures we conclude that the valuation of WIP is proper
f)	Pay Refixation Revision of pay scales of executives and workmen, with effect from 01.01.2017 was implemented in accordance with the guidelines issued by Department of Public Enterprises vide OM dated 03.08.2017 for Executives and in accordance with the Wage Agreement entered into between Management and Employees Union representative in 2019-20 in respect of Workmen. On an interpretation on pay refixation and pursuant to the directives of the Administrative Ministry, the pay fixation to be revised and the excess amount paid is to be recovered from the employees. Based on the directives Company issued a Circular dated 24.07.2021 and the communication dated 26.07.2021 for recovery of the excess amount.	For Workmen revision of pay scales, we have verified the calculations, Interim Stay granted by Hon''ble High Court of Karnataka. For Executives revision of pay scales, we have verified the calculations, Order passed by Hon''ble High Court of Karnataka. There is no major observation.
	While so, the Employees Union and Officers Association have filed Writ Petition with Hon''ble High Court of Karnataka to stay recovery of excess amount of salary paid by the Company. The H''ble High court given verdict in favour of Officers Associations by setting aside the Circular dated 24.07.2021 and the communication dated 26.07.2021 issued by the Management. The order of the H''ble High Court in favour of officers was put up to the Board in its 490th Meeting held on 12.02.2025. Board has noted the judgement of the H''ble High Court and accorded approval to abide by the Court order. Accordingly, the differential amount withheld by the Management in respect of ex-officers has to be released /refunded to the concerned ex-officers/Nominees along with applicable interest.

Key Audit Matters	Response to Key Audit Matters & Conclusion
As per the Board approval, one increment impact amount of '' 2712 lakhs recovered from the retired/deceased/ resigned employees has been paid during 2024-25. Further, in respect of officers an amount of '' 18565 lakhs credited to salaries and wages in the earlier years and kept under claims receivable has been reversed during 2024-25. Accordingly, employees cost for the current year is not comparable with the corresponding previous year.
In respect of workmen, the order is awaited, hence, reduction of salaries and wages in respect of workmen continued for the year ended 31st March 2025 and '' 2444 lakhs effect given in the books towards this excess amount credited to salaries and wages in respect of workmen has been shown under claims receivable (Gross) of '' 16390 lakhs as at 31st March 2025 (previous year: '' 14282 lakhs).
Based on the final verdict, decision in respect of workmen will be taken and suitable effect will be carried out in the accounts.
g) Revision of Contribution to Pension Scheme
Ministry vide OM dated 12.07.2023 has conveyed the approval for increasing the Company''s contribution to the Pension Scheme of Executives from existing 7% to 10% of Basic Pay DA w.e.f. 01.01.2017. Revision of Pension contribution from 7% to 10% of Basic Pay DA w.e.f 01.01.2017 has been made in respect of executives who are on the rolls of the Company as on the date of implementation of the revised ceiling i.e. 01.01.2017. In respect of new incumbents who joined the Company post 01.01.2017, it will be effective from the date of appointment.	We have verified the calculations and there is no major observations.
The additional liability accruing to the Company due to the increased ceiling, is '' 21776 lakhs pertaining to the period from 1 January, 2017 to 31 March, 2024 ('' 3719 lakhs for the year ended 31 March, 2025). The total additional financial impact on revision of Pension contribution upto 31st March 2024 has been given effect in the books of accounts during the year ended 31st March, 2024. Accordingly, employees cost for the current year is not comparable with the corresponding previous year.

Key Audit Matters	Response to Key Audit Matters & Conclusion
In respect of workmen, Company issued Circular dated
24.04.2025 has conveyed the approval for increasing
the Company''s contribution to the Pension Scheme from
existing 7% to 10% of Basic Pay DA w.e.f. 01.01.2025.
Revision of Pension contribution from 7% to 10% of Basic
Pay DA w.e.f 01.01.2025 has been made in respect of
workmen who were on the rolls of the Company as on
the date of implementation of the revised ceiling.
The additional liability accruing to the Company due to
the increased ceiling is '' 1051 lakhs pertaining to the
period from 1st January, 2025 to 31st March, 2025. The
total additional financial impact on revision of Pension
contribution has been given effect in the books of
accounts during the year ended 31st March, 2025.
Accordingly, employees cost for the current year is not
comparable with the corresponding previous year.
h) Impairment Assessment of Intangible Assets and	Our audit procedures included, among others:
Intangible Assets Under Development
	•	Understanding and evaluating the Company''s
The Company has recognised significant intangible		policy and procedures for identifying and assessing
assets comprising software, documentation charges,		impairment indicators for both recognised intangible
development expenditure, and license fees. In addition, the		assets and those under development.
Company also has intangible assets under development
representing ongoing development charges. These assets	•	Reviewing the functioning and documentation of
are recognised and measured in accordance with Ind AS		the Impairment Review Committee, including its
38 - Intangible Assets and are subject to impairment		evaluation of project status, economic viability, and
testing under Ind AS 36 - Impairment of Assets.		accounting recommendations.
The assessment of impairment for both completed	•	Reviewing the basis for management''s judgments
intangible assets and those under development involves		and estimates, including technical reviews, projected
significant management judgment. This includes		benefits, and cost-to-completion assumptions for
evaluating technical feasibility, future economic benefits,		selected projects.
project viability, useful life estimations, and expected	•	Verifying whether the impairment testing
completion and commercialisation timelines for assets		methodology was in accordance with Ind AS 36 and
under development.		that capitalization criteria under Ind AS 38 were met
The Company has instituted an Impairment Review		for assets under development.
Committee, which conducts a structured evaluation of all	•	Evaluating the adequacy and appropriateness of
HAL-funded R&D projects. The review includes analysis of		disclosures in the financial statements relating to
approvals, project status, expenditure incurred, estimated		intangible assets and their impairment assessment.
completion costs, future economic benefits, and other
relevant technical and financial parameters. Based on	Based	on the audit procedures performed, we found that
this review, the Committee recommends appropriate	the impairment assessment process was reasonable, and the
accounting actions such as recognition of impairment,	judgments and estimates made by the Management were
amortisation, or deferral of costs.	suppo	ted by appropriate documentation.

Information Other than the Financial Statements and Auditor''s Report Thereon

The Company''s Board of Directors is responsible for the other information. The other information comprises the information
included in the Annual Report, but does not include the Consolidated Financial Statements, Standalone Financial Statements and
our Auditor''s Report thereon. The Company''s Annual report is expected to be made available to us after the date of this Auditor''s
Report.

Our opinion on the Standalone Financial Statements does not cover the other information and, we do not express any form of
assurance conclusion thereon.

In connection with our audit of the Standalone Financial Statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the Standalone Financial Statements or our
knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.

Responsibility of Management and Those Charged with Governance for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation
of these Standalone Financial Statements that give a true and fair view of the Financial Position, Financial Performance (including
Other Comprehensive Income), Changes in Equity and Cash Flows of the Company in accordance with the accounting principles
generally accepted in India including the Indian Accounting Standards specified under Section 133 of the Companies Act,2013.
This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for
safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and
application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design,
implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy
and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Financial Statements
that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Standalone Financial Statements, the Board of Directors is responsible for assessing the Company''s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic
alternative but to do so.

The Board of Directors is also responsible for overseeing the Company''s financial reporting process.

Auditor''s Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable
assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
Standalone Financial Statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout
the audit.

We also:

• Identify and assess the risks of material misstatement of the Standalone Financial Statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company''s internal
control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by Management.

• Conclude on the appropriateness of Management''s use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor''s report to the related disclosures in the Standalone Financial Statements or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as
a going concern.

• Evaluate the overall presentation, structure and content of the Standalone Financial Statements, including the disclosures,
and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that
achieves fair presentation.

Materiality is the magnitude of misstatements in the Standalone Financial Statements that, individually or in aggregate, makes
it probable that the economic decisions of a reasonably knowledgeable user of the Standalone Financial Statements may be
influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating
the results of our work; and (ii) to evaluate the effect of any identified misstatements in the Standalone Financial Statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings including any significant deficiencies in Internal Control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance
in the audit of the Standalone Financial Statements of the current period and are therefore the key audit matters. We describe
these matters in our auditor''s report unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matters

The Standalone Financial Statements also include the audited Standalone Financial Statements of 29 Divisions of the Company,
whose financial statements / financial information reflect the total assets of ''108,87,946 lakh as at 31^st March, 2025, total income
of '' 33,54,645 lakhs and Net profit before Tax of '' 10,82,001 lakhs for the year ended 31^st March 2025, as considered in the
Standalone Financial Statements which have been audited by the respective independent auditors.

The Independent Auditors Reports on the Standalone Financial Statements of these Divisions have been furnished to us, and our
opinion in so far as it relates to the amounts and disclosures included in respect of these Divisions, are based solely on the report
of such auditors and the procedures performed by us are as stated in paragraph above.

The standalone financial statements of the Company for the year ended March 31, 2024, quarter ended June 30, 2024, included
in these standalone financial statements, have been audited by the predecessor auditors, M/s A. John Moris & Co., Chartered
Accountants, who has expressed an unmodified opinion vide their audit reports dated 16^th May, 2024, 14^th August, 2024
respectively.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act, based on our audit we report, that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were
necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from
our examination of those books, and proper return adequate for the purpose of an audit have been received from the
branches not visited by us.

c) The reports on the accounts of the branch offices of the Company audited under section 143(8) of the Act by the branch
auditors have been sent to us and have been properly dealt with us in preparing this report.

d) The Balance Sheet, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes
in Equity and the Statement of Cash Flows dealt with by this Report are in agreement with the books of account and
with the returns received from the branches not visited by us.

e) In our opinion, the aforesaid Standalone Financial Statements comply with the Indian Accounting Standards prescribed
under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015 as amended.

f) In terms of circular NO. GSR 463(E) dated 05^th June 2015 issued by the Ministry of Corporate Affairs, Government of
India, the Company being Government Company, is exempt from the provisions of section 164(2) of the Act regarding
disqualification of Directors.

g) Ministry of Corporate Affairs vide notification no 1/2/2014-CL-V dated 23^rd February 2018 has exempted the companies
engaged in defence production to the extent of application of relevant Accounting Standard on Segment Reporting. In
view of the above, no disclosure is made by the Company as required by Ind AS 108. Subject to the above, we state that,
in our opinion, the aforesaid Standalone Financial Statements comply with the Accounting Standards specified under
Section 133 of the Act.

h) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating
effectiveness of such controls, refer to our separate Report in "Annexure A". Our report expresses an unmodified
opinion on the adequacy and operating effectiveness of the Company''s internal financial controls over financial reporting.

i) As per Notification number G.S.R. 463 (E) dated 5^th June, 2015 issued by Ministry of Corporate Affairs, section 197 of
the Act regarding remuneration to director is not applicable to the Company, since it is a Government Company.

j) With respect to the other matters to be included in the Auditors'' Report in accordance with Rule 11 of the Companies
(Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the
explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its Standalone Financial
Statements as on 31.03.2025 -Refer Note 49 (2a), 49 (2b), 49 (20), 49 (21A), 49 (21B), 49 (43G), to the Financial
Statements.

ii. The Company has made provision, as required under the applicable law or accounting standards, for material
foreseeable losses, on long-term contracts. The Company does not have any derivative contracts.

iii. There has been no delay in transferring amounts required to be transferred to the Investor Education and Protection
Fund by the Company

iv. (a) The Management has represented that, to the best of its knowledge and belief, no funds have been advanced

or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds)
by the Company to or in any other persons or entities, including foreign entities ("Intermediaries"), with the
understanding, whether recorded in writing or otherwise, that the intermediary shall, whether, directly or
indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the
Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate
Beneficiaries

(b) The Management has represented, that, to the best of its knowledge and belief, no funds have been
received by the Company from any persons or entities, including foreign entities ("funding Parties"), with
the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or
indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the
Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate
Beneficiaries; and

(c) Based on such audit procedures we have considered reasonable and appropriate in the circumstances; nothing
has come to the notice that has caused us to believe that the representations under sub-clause (i) and (ii)
contain any material misstatement.

v. (a) The final dividend paid by the Company during the year, in respect of the same declared for the previous year

is in accordance with Section 123 of the Act to the extent it applies to payment of dividend.

(b) The interim dividend declared and paid by the Company during the year and until the date of this audit report
is in accordance with Section 123 of the Act.

(c) The Company has not proposed any final dividend up to the date of our report.

vi. Based on our examination which included test checks, performed by us on the Company, the Company has used
accounting software for maintaining their respective books of account for the period ended 31^st March 2025, which
has a feature of recording audit trail (edit log) facility. The audit trail facility has been operating throughout the
period 1^st April 2024 to 31^st March 2025 for all relevant transactions recorded in the software. Further, during the
course of our audit we did not come across any instance of audit trail feature being tampered with.

Based on our examination which included test checks, performed by us on the Company, and information provided
to us, the Company is preserving the audit trail as per the statutory requirements for record retention as per proviso
to Rule 3(1) of the Companies (Accounts) Rules, 2014, as amended.

2. As required by the Companies (Auditor''s Report) Order, 2020 ("the Order"), issued by the Central Government of India in
terms of sub-section (11) of section 143 of the Companies Act, 2013 we give in the "Annexure-B" statement on the matters
specified in paragraphs 3 and 4 of the Order, to the extent applicable.

3. As required by section 143(5) of the Act, we give in "Annexure C" a statement on the matters specified by the Comptroller
and Audit General of India for the Company.

FOR GUPTA NAYAR & CO.

Chartered Accountants
Firm Reg. No. 008376N

Nandlal Agarwal

Partner

Place: Bengaluru M No. 091272

Date: 14.05.2025 UDIN: 25091272BMSCAJ4838

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Mar 31, 2024

Hindustan Aeronautics Limited

Report on the Audit of Standalone Financial Statements

Opinion

We have audited the Standalone Financial Statements of Hindustan Aeronautics Limited ("the Company") which comprise the Standalone Balance Sheet as at 31^st March 2024, and the Standalone statement of profit and loss (including Other Comprehensive Income), standalone statement of Changes in Equity and the standalone statement of cash flows for the year then ended, and Notes to the Standalone Financial Statements, including Material Accounting Policies and other explanatory information (hereinafter referred to as "the standalone financial statements") in which are included the returns of 29 divisions for the year ended on that date audited by the Divisional Auditors of the company.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Financial Statements give the information required by the Companies Act, 2013 ("Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31^st March 2024, and its Profit and Other comprehensive income, Changes in Equity and its Cash Flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those SAs are further described in the Auditor''s Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the Standalone Financial Statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the Standalone Financial statements.

Emphasis of Matter

(I) Attention is invited to Notes to the Financial Statements extracted below:

Note 49: Clause - 43G

Revision of pay scales of executives and workmen, with effect from 01.01.2017 was implemented in accordance with the guidelines issued by Department of Public Enterprises vide OM dated 03.08.2017 for Executives and in accordance with the Wage Agreement entered into between Management and Employees Union representative in 2019-20 in respect of Workmen.

On an interpretation on pay refixation and pursuant to the directives of the Administrative Ministry, the pay fixation to be revised and the excess amount paid is to be recovered from the employees.

This has resulted in reduction of salaries and wages by ''5573 lakhs (previous year: ''5155 lakhs) for the year ended 31^st March 2024.

While so, the Employees Union and Officers Association have filed Writ Petition with Hon''ble High Court of Karnataka to stay recovery of excess amount of salary paid by the Company. The Honourable High Court has granted interim stay on recoveries, pending disposal of the writ petitions by the High court, the excess amount is shown under claims receivable (Gross) for ''35218 lakhs (previous year: ''29645 lakhs) and an equal amount of provision has been made in the books of accounts.

The amount withheld from employees who retired after 30 June 2021 is kept under other liabilities ''4445 Lakhs (Previous year: ''3026 Lakhs)

Based on the final order that may be passed, suitable effect will be carried out in the accounts.

Note 49: Clause - 43D(ii)

Ministry vide OM dated 12.07.2023 has conveyed the approval for increasing the Company''s contribution to the Pension Scheme of Executives from existing 7% to 10% of Basic Pay DA w.e.f. 0.1.01.2017. Revision of Pension contribution from 7% to 10% of Basic Pay DA w.e.f 01.01.2017 has been made in respect of Executives who are on the rolls of the Company as on the date of implementation of the revised ceiling i.e. 01.01.2017. In respect of new incumbents who joined the Company post 01.01.2017, it will be effective from the date of appointment.

The additional liability accruing to the division due to the increased ceiling, is ''21736 lakhs pertaining to the period from 1 January 2017 to 31 March 2024 (''3513 lakhs for the year ended 31^st March 2024). The total additional financial impact on revision of Pension contribution has been given effect in the books of accounts during the period ended 31^st March 2024. Accordingly, employees cost for the current year is not comparable with the corresponding previous year.

Note 49: Clause - 31C

Inventory were damaged due to floods caused by rains, based on an internal technical assessment committee estimated the loss of Inventory ''7856 lakhs and the same has been provided in the books during the year 2022-23. Subsequently, based on the findings as part of the exercise to submit an insurance claim, the actual loss has been re-assessed as ''6591 Lakh and same provision has been created under Replacement Charges ''5590 lakhs and Redundancy Charges of ''1001 Lakh during the year 2023-24.

Our opinion is not modified in respect of these matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone Financial Statements of the current period. These matters were addressed in the context of our audit of the Standalone Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key Audit Matters		Response to Key Audit Matters & Conclusion
a) Revenue recognition (Ind AS 115) The revenue standard establishes a comprehensive framework for determining whether, how much and when revenue is recognized. This involves certain key judgments relating to identification of distinct performance obligations, determination of transaction price of identified performance obligation, the appropriateness of the basis used to measure revenue recognized over a period. Additionally, the standard mandates robust disclosures in respect of revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.	Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows: • Evaluated the appropriateness of the disclosures provided under the revenue standard and assessed the completeness and mathematical accuracy of the relevant disclosures. • Evaluated the design of internal controls relating to implementation of the revenue accounting standard. • Selected a sample of continuing and new contracts, and tested the operating effectiveness of the internal control, relating to identification of the distinct performance obligations and determination of transaction price. We carried out a combination of procedures involving enquiry and observation, reperformance and inspection of evidence in respect of operation of these controls.
	•	Selected a sample of continuing and new contracts and performed the following procedures
	•	Read, analysed and identified the distinct performance obligations in these contracts.
	•	Compared these performance obligations with that generally identified and recorded by the group.

	Key Audit Matters	Response to Key Audit Matters & Conclusion
		• Considered the terms of the contracts to determine the
		transaction price including any variable consideration to verify the transaction price used to compute revenue and to test the basis of estimation of the variable revenue.
		• Examination of the correspondence relating to price
		revision and ascertained the reasonableness of the estimates.
		• Sample of revenues disaggregated by type and service
		offerings was tested with the performance obligations specified in the underlying contracts.
		Due to detailed procedures, a portion of is recognised based on the most likely amount based on past experience and the consistent practices followed. We have verified the procedures revenue recognition including unbilled revenue.
b)	Impairment of Trade Receivables	We have verified the
	In respect of receivables from Government the company	i) Effectiveness of internal controls in place and procedures
	does not make any impairment provision based on past	followed in identifying the recoverability of long
	experience.	outstanding dues.
	The amount involved being significant balance and management judgment we consider this as a Key Audit	ii) The procedures and follow-up actions in ascertaining the impairment of receivables.
	Matter.	Our audit procedures include evaluation of provisions made for impairment in earlier years. We also made test checks of invoice wise collection details provided made in respect of in the five preceding financial years and we concluded the management assumption is reasonable.
c)	Contract Asset	Contract Assets represents the Company''s right to receive the consideration in exchange for the Goods or Services that the
	Contract asset represents the revenue recognized and yet	Company has transferred to the Customer, when that right is
	to be invoiced to the customer.	conditioned on something other than passage of time.
d)	Liquidated damages	We have verified the controls, period of delay, the expected days of delay as on 31.03.2024 and the calculation for the
	The Company''s contract with the customers has standard	liquidated damages recognized and found the system followed
	clause for Liquidated damages for delayed delivery. The company''s product has extended period of manufacturing; design approvals and inspection by customer at various stages which result in delay in certain cases leading to liquidated damages. The liquidated damages recognized being significant in the statement of profit and loss, is considered a key audit matter in our opinion.	and calculation to be in order.
e)	Work - in - Progress (WIP) - Inventories	Our Audit Procedures generally include review of
	Inventories include Work in Progress which have been	• Physical Verification instructions
	physically verified by the management based on physical	• Physical verification reports
	verification instructions.	• Roll back procedures • Examining the basis of valuation on a test check basis
		Currently, the verification of WIP is done on annual basis. The division wise WIP inventory was submitted from Divisions and consolidated at H.O. level.
		Based on the above audit procedures we conclude that the valuation of WIP is proper.

	Key Audit Matters	Response to Key Audit Matters & Conclusion
f)	Pay Refixation	We have Verified the Calculations as well as the Interim Stay Granted by Hon''ble High Court of Karnataka and there are no
5)	Revision of pay scales of executives and workmen, with effect from 01.01.2017 was implemented in accordance with the guidance issued by DPE vide OM dated 03.08.2017 for Executives and in accordance with the Wage Agreement entered into between Management and Employees Union representative in 2019-20 in respect of Workmen. On an interpretation on pay refixation and pursuant to the directives of the Administrative Ministry, the pay fixation to be revised and the excess amount paid is to be recovered from the employees. This has resulted in reduction of salaries and wages for the year ended 31 March 2024 by ''5573 lakh respectively (Previous year: ''5155 lakh). While so, the Employees Union and Officers Association have filed Writ Petition with Honorable High Court of Karnataka to stay recovery of excess amount of salary paid by the Company. The Honorable High Court has granted interim stay on recoveries. Pending disposal of the writ petitions by the High Court, the excess amount is shown under claims receivable (Gross) for ''35218 lakhs (Previous year: ''29645 lakhs) and an equal amount of provision has been made in the books of accounts. The amount withheld from employees who retired after 30 June 2021 is kept under other liabilities ''4445 lakh (Previous Year: ''3026 lakh).	major observations.
g)	Revision of Contribution to Pension Scheme	We have Verified the Calculations and there are no major
4)	Ministry vide OM dated 12.07.2023 has conveyed the approval for increasing the Company''s contribution to the Pension Scheme of Executives from existing 7% to 10% of Basic Pay DA w.e.f. 0.1.01.2017. Revision of Pension contribution from 7% to 10% of Basic Pay DA w.e.f 01.01.2017 has been made in respect of Executives who were on the rolls of the Company as on the date of implementation of the revised ceiling i.e. 01.01.2017. In respect of new incumbents who joined the Company post 01.01.2017, it will be effective from the date of their appointment. The additional liability accruing to the Company due to the increased ceiling, is ''21736 lakh pertaining to the period from 1 January, 2017 to 31 March, 2024 (''3513 lakh for the year ended 31 March, 2024). The total additional financial impact on revision of Pension contribution has been given effect in the books of accounts during the year ended 31 March, 2024. Accordingly, employees cost for the current year is not comparable with the corresponding previous year.	observations.

The Company''s Management and Board of Directors are responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the state of affairs, profit/ loss and other comprehensive income, changes in equity and cash flows of the Company, in accordance with the accounting principles generally accepted in India including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act,. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Standalone Financial Statements, the Management and Board of directors are responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the board of directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Company''s financial reporting process.

Auditor''s Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone Financial Statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

• Identify and assess the risks of material misstatement of the Standalone Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management and Board of Directors.

• Conclude on the appropriateness of the Management and Board of Directors use of the going concern basis of accounting in preparation of standalone financial statements and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the Standalone Financial Statements, including the disclosures, and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

Other Matters

We did not audit the financial statements of 29 division included in the standalone financial statements of the company whose financial statements/financial information reflect the total revenue of ''30,38,084 lakhs for the year ended and Net profit after tax of ''7,59,504 lakhs as at 31^st March 2024 and on that date, as considered in the standalone financial statements/information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of branches, is based solely on the report of such branch auditors.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditor''s Report) Order, 2020 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013 we give in the "Annexure-B" statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

As required by Section 143(3) of the Act, we report, that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books, and proper return adequate for the purpose of an audit have been received from the branches not visited by us.

c) The reports on the accounts of the divisions of the Company audited under section 143(8) of the act by the division auditors have been sent to us and have been properly dealt with us in preparing this report.

d) The Standalone balance Sheet, the Standalone Statement of Profit and Loss (Other comprehensive income), the Standalone statement of changes in equity and the Standalone statement of cash flows dealt with by this Report are in agreement with the books of account and with the returns received from the divisions not visited by us.

e) In our opinion, the aforesaid Standalone Financial Statements comply with the Ind AS prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

f) Ministry of Corporate Affairs vide notification no 1/2/2014-CL-V dated 23^rd February 2018 has exempted the companies engaged in defence production to the extent of application of relevant Accounting Standard on Segment Reporting. In view of the above, no disclosure is made by the company as required by Ind AS 108. Subject to the above, we state that, in our opinion, the aforesaid Standalone Financial Statements comply with the Accounting Standards specified under Section 133 of the Act.

g) In terms of circular NO. GSR 463(E) dated 05^th June 2015 issued by the Ministry of Corporate Affairs, Government of India, the company being Government Company, is exempt from the provisions of section 164(2) of the Act regarding disqualification of Directors.

h) The provisions of Section 197 are not applicable to a government Company (in terms of MCA Notification NO.GSR 463 (E) dated 05^th June 2015) as the managerial remuneration is paid as per the appointment letter from the Government of India.

i) With respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A".

j) With respect to the other matters to be included in the Auditors'' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations as at 31 March 2024, on its financial position in its Standalone Financial Statements - Refer Note 49 (2) (a), 49 (2) (b), 49 (20), 49 (21), 49 (43G), to the financial statements

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, on long-term contracts. The company does not have any derivative contracts.

iii. There has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the company.

iv. (a) The management has represented that, to the best of its knowledge and belief, no funds have been advanced or

loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the intermediary shall, whether, directly or indirectly lend or invest in other persons or entities Identified in any manner whatsoever by or on behalf of the company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(b) The management has represented, that, to the best of its knowledge and belief, no funds have been received by the Company from any persons or entities, including foreign entities ("funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

(c) Based on the audit procedures performed that have been considered reasonable and appropriate in the circumstances; nothing has come to the notice that has caused us to believe that the representations under sub-clause (i) and (ii) contain any material misstatement.

v. a) The final dividend paid by the Company during the year, in respect of the same declared for the previous year is in

accordance with Section 123 of the Act to the extent it applies to payment of dividend.

b) The interim dividend declared and paid by the Company during the year and until the date of this audit report is in accordance with Section 123 of the Act.

c) The Company has not proposed any final dividend up to the date of our report.

vi. The reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 is applicable from 1 April 2023.

Based on our examination, which included test checks, the company has used accounting software for maintaining its books of account for the financial year ended 31 March, 2024 which has a feature of recording audit trail (Edit log) facility and the same has been operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit we did not come across any instance of the audit trail feature being tampered with.

In our opinion, there is a scope for improvement and the existing audit trial need to be strengthened.

As proviso to Rule 3(1) of the companies (Accounts) Rules 2014 is applicable from April 1, 2023, reporting under Rule 11(g) of the companies (Audit and Auditors) Rules,2014 on preservation of Audit Trail as per Statutory requirements for the record retention in not applicable for the financial year ended March 31,2024.

3) As required by section 143(5) of the Act, we give in "Annexure C" a statement on the matters specified by the Comptroller and Audit General of India for the Company.

For A. John Moris & Co.

Chartered Accountants FRN NO:007220S

Rathan Raj. A

Partner

Place: New Delhi Membership No. 228538

Date: 16.05.2024 UDIN: 24228538BKFEVQ9997

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Mar 31, 2023

To The Members of Hindustan Aeronautics Limited Report on the Audit of the Standalone Financial StatementsOpinion

We have audited the accompanying Standalone Financial Statements of Hindustan Aeronautics Limited ("the Company") which comprise the Balance Sheet as at 31^st March 2023 and the Statement of Profit and Loss (including Other Comprehensive Income), Statement of Changes in Equity and the Statement of Cash Flows for the year then ended, and Notes to the Standalone Financial Statements, including a summary of Significant Accounting Policies and other explanatory information (hereinafter referred to as "the standalone financial statements" ) in which are included the returns of 29 divisions for the year ended on that date audited by the Division Auditors of the company.

In our opinion, and to the best of our information and according to the explanations given to us, the aforesaid Standalone Financial Statements give the information required by the Companies Act, 2013 ("Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023 and its profit, total comprehensive income, changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor''s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the Financial Statements under the provisions of the Act, and the Rules there under, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the standalone financial statement.

Emphasis of Matter1) Attention is invited to Notes to the Financial Results extracted below:a) Note:49 (33) (g)COVID-19 Impact

Current year Impact:

The Company has shown normal performance during the year. Hence, there is no impact during the year ended 31^st March 2023.

Anticipated Future Impact:

Based on the information available (internal as well as external) up to the date of approval of this financial result, Company expects to recover the carrying amount of Intangible assets, Inventories, Property, Plant and Equipment''s, Lease, Financial Instruments, Trade Receivables etc. The Company will continue to closely monitor the developments, the future economic and business outlook and its impact on Company''s future financial statements with a view to minimize the Covid impact.

b) Note no :49 (43 G)

Revision of pay scales of executives and workmen, with effect from 01.01.2017 was implemented in accordance with the guidance issued by DPE vide OM dated 03.08.2017 for Executives and in accordance with the Wage Agreement entered into between Management and Employees Union representatives in 2019-20 in respect of Workmen. On an interpretation on pay refixation and pursuant to the directives of the Administrative Ministry, the pay fixation to be revised and the excess amount paid is to be recovered from the employees.

This has resulted in reduction of salaries and wages for the year ended 31 March 2023 by '' 5155 lakhs (Previous year: '' 5256 lakhs) and a consequential reduction in sales revenue for the year ended 31 March 2023 by ''1239 lakhs (Previous year: '' 812 lakhs).

While so, the Employees Union and Officers Association have filed Writ Petitions with Hon''ble High Court of Karnataka to stay recovery of excess amount of salary paid by the Company. The Hon''ble High Court has granted interim stay on recoveries, Pending disposal of the writ petitions by the High court, the excess amount is shown under claims recoverable Note No.19 for '' 29645 lakhs (Previous year '' 24489 lakhs). Provision has been created for the full liability of '' 29645 lakhs during the year as a prudential measure in case the issue will be settled in favour of employees.

I n respect of employees who retired prior to 30 June, 2021, provision is made for the amount recoverable '' 2665 lakhs (Previous year: '' 2584 lakhs). The amount withheld from employees who retired after 30^th June 2021 is kept under other liabilities '' 2706 lakhs (Previous year: '' 1835 Lakhs). Based on the final order that may be passed, suitable effect will be carried out in the accounts.

c) Note no :49 (31C)

I nventory amounting to '' 16,939 Lakhs were damaged due to floods caused by rains. An internal technical assessment committee estimated the loss of Inventory '' 7,856 Lakhs and the same has been provided in the books during the year. A claim for '' 750 Lakhs towards loss of Inventory and Plant & Equipment based on the original cost has been submitted to the Insurance Company.

Our opinion is not modified in respect of these matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Financial Statements of the current period. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Key Audit Matters

Response to Key Audit Matters & Conclusion

a) Revenue recognition (''Ind AS 115'') The revenue standard establishes a comprehensive framework for determining whether, how much and when revenue is recognized. This involves certain key judgements relating to identification of distinct performance obligations, determination of transaction price of identified performance obligation, the appropriateness of the basis used to measure revenue recognized over a period. Additionally, the standard mandates robust disclosures in respect of revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.

Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows: • Evaluated the appropriateness of the disclosures provided under the revenue standard and assessed the completeness and mathematical accuracy of the relevant disclosures. • Evaluated the design of internal controls relating to implementation of the revenue accounting standard. • Selected a sample of continuing and new contracts, and tested the operating effectiveness of the internal control, relating to identification of the distinct performance obligations and determination of transaction price. We carried out a combination of procedures involving enquiry and observation, reperformance and inspection of evidence in respect of operation of these controls. • Selected a sample of continuing and new contracts and performed the following procedures: • Read, analyzed and identified the distinct performance obligations in these contracts. • Compared these performance obligations with that generally identified and recorded by the company.

Key Audit Matters		Response to Key Audit Matters & Conclusion
• Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue and to test the basis of estimation of the variable revenue. • Examination of the correspondence relating to price revision and ascertained the reasonableness of the estimates. • Sample of revenues disaggregated by type and service offerings was tested with the performance obligations specified in the underlying contracts. Due to detailed procedures, a portion of is recognized based on the most likely amount based on past experience and the consistent practices followed. We have verified the procedures revenue recognition including unbilled revenue.
b)	Impairment of Trade Receivables	We have verified the
	In respect of receivables from Government the company generally does not make any impairment provision based on past experience.	i) Effectiveness of internal controls in place and procedures followed in identifying the recoverability of long outstanding dues.
	The amount involved being significant balance and management judgement we consider this as a Key Audit Matter.	ii) The procedures and follow up actions in ascertaining the impairment of receivables. Our audit procedures include evaluation of provisions made for impairment in earlier years. We also made test checks of invoice wise collection details provided made in respect of in the five preceding financial years and we concluded that the management assumption is reasonable.
c)	Contract Asset Contract asset represents the revenue recognized but yet to be invoiced to the customer.	Contract Assets represents the Company''s right to receive the consideration in exchange for the Goods or Services that the Company has transferred to the Customer, when that right is conditioned on something other than passage of time.
d)	Liquidated damages The Company''s contract with the customers has standard clause for Liquidated damages for delayed delivery. The company''s product have extended period of manufacturing; design approvals and inspection by customer at various stages which result in delay in certain cases leading to liquidated damages. The liquidated damages recognized being significant in the statement of profit and loss, is considered a key audit matter in our opinion.	We have verified the controls, period of delay, the expected days of delay as on 31.03.2023 and also the calculation for the liquidated damages recognized and found the system followed and calculation to be in order.
e)	Work - in - Progress (WIP) - Inventories	Our Audit Procedures include review of
	Inventories include Work in Progress which have been physically verified by the management based on physical verification instructions.	• Physical Verification instructions • Physical verification reports • Roll back procedures • Examining the basis of valuation on a test check basis
		Based on the above audit procedures we concluded that the valuation of WIP is proper.

Key Audit Matters	Response to Key Audit Matters & Conclusion
f) Revision of pay	We have verified the Audit para given by PDCA Bangalore, and the directives given by the Administrative Ministry dated
Revision of pay scales of executives and workmen, with effect from 01.01.2017 was implemented in accordance	07.04.2021.
with the guidance issued by DPE vide OM dated	We have verified the Copies of the writ petition filed by the
03.08.2017 for Executives and in accordance with the	employees, the interim orders of the Hon''ble High Court and
Wage Agreement entered into between Management and	the legal opinion from the company counsel.
Employees Union representatives in 2019-20 in respect of Workmen. On an interpretation on pay refixation and	We verified the internal control and the program logic for
pursuant to the directives of the Administrative Ministry, the pay fixation is to be revised and the excess amount paid is to be recovered from the employees.	recalculation of the employees cost and also made test check on walk through basis .Based on the above audit procedures we are satisfied with accounting treatment followed for employees benefits expenses, recognition of the amount recoverable, and
The revision has resulted in reduction of salaries and	the provision relating to retired employees and the provision
wages for the year ended 31 March 2023 by '' 5155 lakhs (Previous year: '' 5256 lakhs ) and consequential reduction in sales revenue for the year ended 31 March 2023 by '' 1239 lakhs (Previous year: '' 812 lakhs) .	made during the year.
While so, the Employees Union and the Officers Association have filed Writ Petitions with Hon''ble High Court of Karnataka to stay recovery of excess amount of salary paid by the Company. The Hon''ble High Court has granted interim stay on recoveries, Pending final disposal of the writ petitions by the High court, the excess amount is shown under claims receivable Note No. 19 '' 29645 lakhs (Previous year '' 24489 lakhs). Provision has been created in FY 2022-23 for the full liability of '' 29645 lakhs as a prudential measure in case the issue will be settled in favour of employees.
In respect of employees who retired prior to 30 June, 2021, provision is made for the amount recoverable '' 2665 lakhs (Previous year: '' 2584 lakhs).The amount withheld from employees who retired after 30th June 2021 is kept under other liabilities '' 2706 lakhs (Previous year: '' 1835 Lakhs)

Information Other than the Financial Statements and Auditors Reports Thereon

The company''s Board of Directors is responsible for the other information. The other information comprises the information included in Board''s Report, Management Discussion & Analysis Report, Business Responsibility Report, but does not include the financial statements and our auditor''s report thereon. The Board''s Report, Management Discussion & Analysis Report, Business Responsibility Report is expected to be made available to us after the date of this auditor''s report.

Our opinion on the financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

When we read the reports, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibility of Management and Those Charged with Governance for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act,2013("the Act") with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the financial position, financial performance,(Changes in Equity)and cash flows of the Company in accordance with the accounting principles generally accepted in India including the accounting Standards specified under Section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Financial Statements, The Board of Directors is responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company''s financial reporting process.

Auditor''s Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Companies Act, 2013, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management''s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the Standalone Financial Statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings including any significant deficiencies in Internal Control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

Other Matter

a) We did not audit the financial statements / information of 29 Divisions included in the financial statement of the company whose financial statements / financial information reflect total assets of '' 67,1 1,738 Lakhs as at 31^st March 2023 and the total revenue of ''26,92,785 lakhs for the year ended on that date, as considered in the standalone financial statements / information of these divisions have been audited by the division auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of divisions, is based solely on the report of such division auditors.

Our opinion is not modified in respect of these matters Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2020 (" the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013 we give in the "Annexure -B" statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

2. As required by Section 143(3) of the Act, we report, that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the divisions not visited by us.

c) The reports on the accounts of the divisions of the company audited under Section 143 (8) of the Act by the division auditors have been sent to us and have been properly dealt with by us in preparing this report.

d) The Balance Sheet, the Statement of Profit and Loss (the Statement of Changes in Equity) and Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the returns received from the divisions not visited by us.

e) In our opinion, the aforesaid Standalone financial statements comply with the AccountingStandards prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

f) Ministry of Corporate Affairs vide notification no 1/2/2014-CL-V dated 23^rd February 2018 has exempted the companies engaged in defense production to the extent of application of relevant Accounting Standard on Segment Reporting. In view of the above, no disclosure is made by the company as required by Ind AS 108. Subject to the above, we state that, in our opinion, the aforesaid standalone financial Statements comply with the Accounting Standards specified under Section 133 of the Act

g) In terms of circular NO. GSR 463(E) dated 05^th June 2015 issued by the Ministry of Corporate Affairs, Government of India, the company being Government Company, is exempt from the provisions of section 164(2) of the Act regarding disqualification of Directors.

h) The provisions of Section 197 are not applicable to a government Company (in terms of MCA Notification NO.GSR 463 (E) dated 05^th June 2015) as the managerial remuneration is paid as per the appointment letter from the Government of India.

i) With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A"

j) With respect to the other matters to be included in the Auditors'' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its Financial Statements -Refer Note 49 (2) (a),49 (2) (b) ,49 (20),49 (21),49 (41),49 (43G), to the financial statements

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, on long-term contracts. The company does not have any derivative contracts.

iii. There were no amounts which were required to be transferred to the Investor education and protection fund by the company.

iv. (a) The management has represented that, to the best of it''s knowledge and belief, no funds have been advanced

or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the division to or in any other persons or entities, including foreign entities ("lntermediaries"}, with the understanding, whether recorded in writing or otherwise, that the intermediary shall, whether, directly or indirectly lend or invest in other persons or entities Identified in any manner whatsoever by or on behalf of the company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(b) The management has represented, that, to the best of it''s knowledge and belief, no funds have been received by the division from any persons or entities, including foreign entities ("funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

(c) Based on such audit procedures we have considered reasonable and appropriate in the circumstances, nothing has come to the notice that has caused us to believe that the representations under sub-clause (i) and (ii) contain any material mis-statement.

v) a) The company has declared final dividend for the financial year 2021-2022 on 29.08.2022.

b) The interim dividends declared on 1 1.1 1.2022 and 10.03.2023 for the financial year 2022-2023 and paid by the Company during the year is in accordance with Section 123 of the Companies Act, 2013.

c) The Company has not proposed any final dividend up to the date of our report.

I) As required by section 143(5) of the Act, we give in "Annexure C" a statement on the matters specified by the Comptroller and Audit General of India for the Company.

For A.John Moris & Co.

Chartered Accountants FRN NO:007220S

(A G Krishnan)

Partner

Membership No. 021183

Place: Bengaluru UDIN: 23021 183BGTCQC1773

Date: 12.05.2023

---

Mar 31, 2022

Opinion

We have audited the accompanying Standalone Financial Statements of Hindustan Aeronautics Limited ("the Company") which comprise the Balance Sheet as at 31^st March 2022 and the Statement of Profit and Loss (including Other Comprehensive Income), (Statement of Changes in Equity) and the Statement of Cash Flows for the year then ended, and Notes to the Standalone Financial Statements, including a summary of Significant Accounting Policies and other explanatory information (hereinafter referred to as "the standalone financial statements") in which are included the returns of 27 divisions for the year ended on that date audited by the Division Auditors of the company.

In our opinion, and to the best of our information and according to the explanations given to us, the aforesaid Standalone Financial Statements give the information required by the Companies Act, 2013 ("Act") in the manner so required and give a true and fair view in conformity with accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2022, and the Profit, total comprehensive income, (Changes in Equity ) and its Cash Flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor''s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the Financial Statements under the provisions of the Act, and the Rules there under, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the standalone financial statement.

Emphasis of Matter

1) Attention is invited to Notes to the Financial Results extracted below:

a) Note:49 (33) (g)

COVID-19 Impact

Current year Impact:

Second wave of Covid-19 has forced the company to declare for a phased Lockdown at various divisions on substitution basis during April and May 2021.The Employees will put in additional hours for the lost hours during lockdown period. The lost man hour was recovered in June and July 2021.The Company has shown improved performance in the last III Quarter (July to March 2022). Hence, there is no significant impact during the year ended 31.03.2022.

Anticipated Future Impact:

Based on the information available (internal as well as external) up to the date of approval of this financial result, Company expects to recover the carrying amount of Intangible assets, Inventories, Property, Plant and Equipment''s, Lease, Financial Instruments, Trade Receivables etc. Efforts are being made to minimize the impact. The Company will continue to closely monitor the developments, the future economic and business outlook and its impact on Company''s future financial statements with a view to minimize the Covid impact.

b) Note no :49 (43 G)

Revision of pay scales of executives and workmen, with effect from 01.01.2017 was implemented in accordance with the guidance issued by DPE vide OM dated 03.08.2017 for Executives and in accordance with the Wage Agreement entered into between Management and Employees Union representatives in 2019-20 in respect of Workmen. On an interpretation on pay refixation and pursuant to the directives of the Administrative Ministry, the pay fixation to be revised and the excess amount paid is to be recovered from the employees.

This has resulted in reduction of salaries and wages for the year ended 31 March 2022 by '' 5256 lakhs (Previous year: '' 14450 lakhs) and a consequential reduction in sales revenue for the year ended 31 March 2022 by '' 812 lakhs (Previous year: '' 5677 lakhs) .

While so, the Employees Union and Officers Association have filed Writ Petitions with Hon''ble High Court of Karnataka to stay recovery of excess amount of salary paid by the Company. The Hon''ble High Court has granted interim stay on recoveries,Pending disposal of the writ petitions by the High court, the excess amount is shown under claims recoverable Note No.19 for '' 24489 lakhs (Previous year ''19368 lakhs)

In respect of employees who retired prior to 30 June, 2021, provision is made for the amount recoverable '' 2584 lakhs (Previous year: '' 2680 lakhs).The amount withheld from employees who retired after 30^th June 2021 is kept under other liabilities '' 1835 lakhs (Previous year: '' NIL).Based on the final order that may be passed, suitable effect will be carried out in the accounts.

Our opinion is not modified in respect of these matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Financial Statements of the current period.These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Key Audit Matters

Response to Key Audit Matters & Conclusion

a) Revenue recognition (''Ind AS 115'') The revenue standard establishes a comprehensive framework for determining whether, how much and when revenue is recognized. This involves certain key judgements relating to identification of distinct performance obligations, determination of transaction price of identified performance obligation, the appropriateness of the basis used to measure revenue recognized over a period. Additionally, the standard mandates robust disclosures in respect of revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.

Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows: • Evaluated the appropriateness of the disclosures provided under the revenue standard and assessed the completeness and mathematical accuracy of the relevant disclosures. • Evaluated the design of internal controls relating to implementation of the revenue accounting standard. • Selected a sample of continuing and new contracts, and tested the operating effectiveness of the internal control, relating to identification of the distinct performance obligations and determination of transaction price. We carried out a combination of procedures involving enquiry and observation, reperformance and inspection of evidence in respect of operation of these controls. • Selected a sample of continuing and new contracts and performed the following procedures: • Read, analyzed and identified the distinct performance obligations in these contracts. • Compared these performance obligations with that generallidentified and recorded by the company. • Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue and to test the basis of estimation of the variable revenue. • Examination of the correspondence relating to price revision and ascertained the reasonableness of the estimates.

Key Audit Matters		Response to Key Audit Matters & Conclusion
• Sample of revenues disaggregated by type and service offerings was tested with the performance obligations specified in the underlying contracts.
b)	Impairment of Trade Receivables	We have verified the
	In respect of receivables from Government the company generally does not make any impairment provision based on past experience.	i) Effectiveness of internal controls in place and procedures followed in identifying the recoverability of long outstanding dues.
	The amount involved being significant balance and management judgement we consider this as a Key Audit	ii) The procedures and follow up actions in ascertaining the impairment of receivables.
	Matter	Our audit procedures include evaluation of provisions made for impairment in earlier years. We also made test checks of invoice wise collection details provided made in respect of in the five preceding financial years and we concluded that the management assumption is reasonable
c)	Liquidated damages The Company''s contract with the customers has standard clause for Liquidated damages for delayed delivery. The company''s product have extended period of manufacturing; design approvals and inspection by customer at various stages which result in delay in certain cases leading to liquidated damages. The liquidated damages recognized being significant in the statement of profit and loss, is considered a key audit matter in our	We have verified the controls, period of delay, the expected days of delay as on 31.03.2022 and also the calculation for the liquidated damages recognized and found the system followed and calculation to be in order.
	opinion.
d)	Work - in - Progress (WIP) - Inventories	Our Audit Procedures include review of
	Inventories include Work in Progress which have been physically verified by the management based on physical verification instructions.	• Physical Verification instructions • Physical verification reports • Roll back procedures • Examining the basis of valuation on a test check basis
		Based on the above audit procedures we concluded that the valuation of WIP is proper.
e)	Revision of pay Revision of pay scales of executives and workmen, with effect from 01.01.2017 was implemented in accordance with the guidance issued by DPE vide OM dated 03.08.2017 for Executives and in accordance with the Wage Agreement entered into between Management and Employees Union representatives in 2019-20 in respect of Workmen. On an interpretation on pay refixation and pursuant to the directives of the Administrative Ministry, the pay fixation is to be revised and the excess amount paid is to be recovered from the employees.	We have verified the Audit para given by PDCA Bangalore, and the directives given by the Administrative Ministry dated 07.04.2021. We have verified the Copies of the writ petition filed by the employees, the interim orders of the Hon''ble High Court and the legal opinion from the company counsel. We verified the internal control and the programme logic for recalculation of the employees cost and also made test check on walk through basis. Based on the above audit procedures we are satisfied with accounting treatment followed for employees benefits expenses, recognition of the amount recoverable, and the provision relating to retired employees.

Key Audit Matters

Response to Key Audit Matters & Conclusion

The revision has resulted in reduction of salaries and wages for the year ended 31 March 2022 by '' 5256 lakhs (Previous year: '' 14450 lakhs ) and consequential reduction in sales revenue for the year ended 31 March 2022 by '' 812 lakhs (Previous year: '' 5677 lakhs) . While so, the Employees Union and the Officers Association have filed Writ Petitions with Hon''ble High Court of Karnataka to stay recovery of excess amount of salary paid by the Company. The Hon''ble High Court has granted interim stay on recoveries, Pending final disposal of the writ petitions by the High court, the excess amount is shown under claims recoverable Note No.19 '' 24489 lakhs (Previous year '' 19368 lakhs) In respect of employees who retired prior to 30 June, 2021, provision is made for the amount recoverable '' 2584 lakhs (Previous year: '' 2680 lakhs).The amount withheld from employees who retired after 30th June 2021 is kept under other liabilities '' 1835 lakhs (Previous year: '' NIL).

Information Other than the Financial Statements and Auditors Reports Thereon

The company''s Board of Directors is responsible for the other information. The other information comprises the information included in Board''s Report, Management Discussion & Analysis Report, Business Responsibility Report, but does not include the financial statements and our auditor''s report thereon. The Board''s Report, Management Discussion & Analysis Report, Business Responsibility Report is expected to be made available to us after the date of this auditor''s report.

Our opinion on the financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

When we read the reports, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibility of Management and Those Charged with Governance for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act,2013 ("the Act") with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the financial position, financial performance, (Changes in Equity) and cash flows of the Company in accordance with the accounting principles generally accepted in India including the accounting Standards specified under Section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Financial Statements, The Board of Directors is responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company''s financial reporting process.

Auditor''s Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Companies Act, 2013, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management''s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the Standalone Financial Statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings including any significant deficiencies in Internal Control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

Other Matter

a) We did not audit the financial statements/ information of 27 Divisions included in the financial statement of the company whose financial statements/financial information reflect total assets of '' 25 65 043 Lakhs as at 31^st March 2022 and the total revenue of '' 6 77 320 lakhs for the year ended on that date, as considered in the standalone financial statements/information of these divisions have been audited by the division auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of divisions, is based solely on the report of such division auditors.

Our opinion is not modified in respect of these matters

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2020 (" the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013 we give in the "Annexure -B" statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

2. As required by Section 143(3) of the Act, we report, that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the divisions not visited by us.

c) The reports on the accounts of the divisions of the company audited under Section 143 (8) of the Act by the division auditors have been sent to us and have been properly dealt with by us in preparing this report.

d) The Balance Sheet, the Statement of Profit and Loss (the Statement of Changes in Equity) and Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the returns received from the divisions not visited by us.

e) In our opinion, the aforesaid Standalone financial statements comply with the Accounting Standards prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

f) Ministry of Corporate Affairs vide notification no 1/2/2014-CL-V dated 23 ^rd February 2018 has exempted the companies engaged in defense production to the extent of application of relevant Accounting Standard on Segment Reporting. In view of the above, no disclosure is made by the company as required by Ind AS 108. Subject to the above, we state that, in our opinion, the aforesaid standalone financial Statements comply with the Accounting Standards specified under Section 133 of the Act.

g) In terms of circular No. GSR 463(E) dated 05^th June 2015 issued by the Ministry of Corporate Affairs, Government of India, the company being Government Company, is exempt from the provisions of section 164(2) of the Act regarding disqualification of Directors.

h) The provisions of Section 197 are not applicable to a government Company (in terms of MCA Notification NO.GSR 463 (E) dated 05^th June 2015) as the managerial remuneration is paid as per the appointment letter from the Government of India.

i) With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A"

j) With respect to the other matters to be included in the Auditors'' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its Financial Statements -Refer Note 49 (2)(a), 49 (2)(b), 49 (20), 49 (21), 49 (41), 49 (43G), to the financial statements

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, on long-term contracts. The company does not have any derivative contracts.

iii. There were no amounts which were required to be transferred to the Investor education and protection fund by the company.

iv. (a) The management has represented that, to the best of it''s knowledge and belief, no funds have been advanced

or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the division to or in any other persons or entities, including foreign entities ("lntermediaries"}, with the understanding, whether recorded in writing or otherwise, that the intermediary shall, whether, directly or indirectly lend or invest in other persons or entities Identified in any manner whatsoever by or on behalf of the company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(b) The management has represented, that, to the best of it''s knowledge and belief, no funds have been received by the division from any persons or entities, including foreign entities ("funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

(c) Based on such audit procedures we have considered reasonable and appropriate in the circumstances, nothing has come to the notice that has caused us to believe that the representations under sub-clause (i) and (ii) contain any material mis-statement.

v) a) The company has not declared any final dividend for the financial year 2020-2021.

b) The interim dividends declared on 1 1.1 1.2021 and 10.02.2022 for the financial year 2021-2022 and paid by the Company during the year is in accordance with Section 123 of the Companies Act, 2013.

c) The Company has not proposed any final dividend up to the date of our report.

I) As required by section 143(5) of the Act, we give in "Annexure C" a statement on the matters specified by the Comptroller and Audit General of India for the Company.

For Maharaj N R Suresh and Co. LLP

Chartered Accountants Firm Registration No. 001931S/S000020

UÂ¥-

N R Suresh

Partner

Place:Bengaluru Membership No.: 021661

Date: 13.05.2022 UDIN:22021661AIXLJQ1542

---

Mar 31, 2019

Independent Auditor''s Report

To the members of

M/s Hindustan Aeronautics Limited

Report on the audit of Standalone Financial Statements Opinion

We have audited the accompanying Standalone Financial Statements of HINDUSTAN AERONAUTICS LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2019 and the Statement of Profit and Loss (including Other Comprehensive Income), Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date and Notes to the Standalone Financial Statements, including a summary of the Significant Accounting Policies and other explanatory information (here in after referred to as "the standalone financial statements") in which are incorporated the returns of 38 Divisions of the Company audited by other Auditors.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Financial Statements give the information required by the Companies Act, 2013 ("Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2019, the Profit (Including Other Comprehensive Income), the changes in Equity, and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the Standalone Financial Statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor''s Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the Standalone Financial Statements under the provisions of the Act and the Rules there under, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the Standalone Financial Statements.

Emphasis of Matter

Deferred Tax Assets on Provisions for warranty. Replacements Doubtful debts etc., amounting to Rs.114360 Lakhs as on March 31, 2019, (Rs.105871 Lakhs March 31 2018) and Rs 8489 Lakhs for the year ended 31st March 2019 and Rs.12175 Lakhs for the year ended March 31 2018 are not recognized as the temporary differences are not likely to reverse in the foreseeable future. The issue is being referred to the Expert Advisory Committee of the ICAI and based on the opinion the financial statement will be restated by company in accordance with Section 131 of the Companies Act 2013.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone Financial Statements of the current period. These matters were addressed in the context of our audit of Standalone Financial Statements as a whole, and in forming our opinion thereon and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Key Audit Matters

Response to Key Audit Matters & Conclusion

Revenue recognition As described in Accounting Policies No 13 and 14, Note no 49 (1 b)to the standalone financial statements, the company has adopted Ind AS 115, Revenue from Contracts with customers (''Ind AS 115'') which is the new revenue accounting standard. The application and transition to this accounting standard is complex and is an area of focus in the audit.

Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows: • Evaluated the cumulative effect of adjustments as at 1 April 2018 for compliance with the new revenue standard: and • Evaluated the appropriateness of the disclosures provided under the new revenue standard and assessed the completeness and mathematical accuracy of the relevant disclosures.

Key Audit Matters

The revenue standard establishes a comprehensive framework for determining whether, how much and when revenue is recognized. This involves certain key judgements relating to identification of distinct performance obligations, determination of transaction price of identified performance obligation, the appropriateness of the basis used to measure revenue recognized over a period. Additionally, the standard mandates robust disclosures in respect of revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.

The Company adopted Ind AS 115 and applied the available exemption provided therein, to not restate the comparative periods.

Uncertainty In Tax Treatments

Pursuant to MCA notification dated 30.03.2019 amending the Accounting Standard Ind AS 12 - Income Tax the company reviewed the disputed income tax demand of Rs 221247 Lakhs, hitherto, disclosed under contingent liabilities.

This involves significant management judgment to determine the possible outcome of the uncertain tax position, consequently having an impact on related accounting and disclosures in the standalone financial statements.

Refer Note 49 Paragraphs 41A & 41B to the standalone financial statements.

Impairment of Trade Receivables

In respect of receivables from Government the company does not make any impairment provision based on past experience.

The amount involved being significant balance and management judgement we consider this as a Key Audit Matter.

Response to Key Audit Matters & Conclusion

• Evaluated the design of internal controls relating to implementation of the new revenue accounting standard.

• Selected a sample of continuing and new contracts, and tested the operating effectiveness of the internal control, relating to identification of the distinct performance obligations and determination of transaction price. We carried out a combination of procedures involving enquiry and observation, reperformance and inspection of evidence in respect of operation of these controls.

• Selected a sample of continuing and new contracts and performed the following procedures:

• Read, analyzed and identified the distinct performance obligations in these contracts.

• Compared these performance obligations with that of identified and recorded by the group.

• Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue and to test the basis of estimation of the variable revenue.

• Sample of revenues disaggregated by type and service offerings was tested with the performance obligations specified in the underlying contracts.

Our audit procedures include the following substantive procedures:

• Obtained understanding of key uncertain tax positions; and

• We along with our internal tax experts - Read and analyzed select key correspondences including appeal papers and orders, external opinions and also held discussions with the Company''s tax advocate appropriate senior management and evaluated management''s underlying key assumptions in estimating the tax provisions; and

Assessed management''s estimate of the possible outcome of the disputed cases.

Recalculated the accounting estimates and disclosures made in accordance with the Accounting Standards Ind As 12 and IndAS 8_____________________________________________

Our audit procedures include evaluation of provisions made for impairment in earlier years. We also made test checks of invoice wise collection details provided made in respect of in the two preceding financial years and we concluded the management assumption is reasonable.

Key Audit Matters	Response to Key Audit Matters & Conclusion
Recognition and Impairment of Intangible assets A significant degree of judgement is required to determine the Intangibles to be recognized and intangibles to be impaired. The company has substantial intangibles assets both under use and in progress. The recognition /impairment assessment involves technical and management. In respect of intangible Assets which are under development and whose life is infinite the same was reviewed by internal technical team as at the end of the reporting period and necessary impairment, if any, is recognized.	Our audit procedures involved the test check of verification of internal controls and incurrence of expenditure on intangible assets. We also reviewed the report of the Technical committee constituted to review the Intangibles Assets - development expenditure who have given a recommendation of the Intangible assets to be recognized and assets to be impaired in the Financial year. Based on the audit procedures as above we find the recognition and impairment provision have been made accordingly.
Provision for Wage Revision The provision for wage revision under negotiation for workmen is made on estimated basis. Refer Note 49 Paragraph 43F to the Standalone Financial Statements.	We have reviewed the basis of assumptions and the management estimates for calculating the provision based on the ongoing negotiations as well as the past revisions and found it to be reasonable.
Provision for Performance Related Pay The provision for performance related pay is made based on Department of Public enterprises guidelines (DPE) yet to be approved by Board of directors.	We have reviewed the circular issued by DPE and verified the computations to satisfy that the methodology as prescribed in the circular has been followed and the provision made is reasonable.
Deferred Tax Assets on Provisions Deferred Tax Assets on Provisions for warranty. Replacements Doubtful debts etc., amounting to Rs. 114,360 Lakhs as on March 31, 2019, ( Rs.105,871 Lakhs March 31 2018) and Rs 8,489 Lakhs for the year ended 31st March 2019 and Rs.12,175 Lakhs for the year ended March 31, 2018 are not recognized as the temporary differences are not likely to reverse in the foreseeable future. The issue is being referred to the Expert Advisory Committee of the ICAI and based on the opinion the financial statements will be restated by company in accordance with Section 131 of the Companies Act 2013.	We have verified the Deferred Tax Asset computations as the past recognition practice. As the matter is subject to interpretation, the matter is referred to Expert Advisory Committee of the ICAI. While the company is consistent in its application, the Deferred Tax asset is not likely to reverse in the foreseeable future, we consider this may have to be recognized as it is a temporary difference. The management has assured to refer the matter to Expert Advisory Committee of the ICAI and based on the opinion necessary effect will be given.

Management Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the Financial Position, Financial Performance (including Other Comprehensive Income), Changes in Equity and Cash Flows of the Company in accordance with Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate implementation and maintenance of accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Standalone Financial Statements, management is responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Company''s financial reporting process.

Auditor''s Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone Financial Statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

0 Identify and assess the risks of material misstatement of the Standalone Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

0 Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate Internal Financial Controls system in place and the operating effectiveness of such controls.

0 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

0 Conclude on the appropriateness of management''s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

0 Evaluate the overall presentation, structure and content of the Standalone Financial Statements, including the disclosures, and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the Standalone Financial Statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the Standalone Financial Statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings including any significant deficiencies in Internal Control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

Other Matters

We did not audit the Financial Statements/financial information of 38 Divisions of the Company included in the standalone financial statements, of the company, whose financial statements/financial information reflect the total assets of Rs 45,65,085 lakhs as on 31st March,2019 and the total revenue of Rs.19,62,583 lakhs for the year ended on that date.

The standalone financial statements/ financial information of these Divisions have been audited by the Divisional auditors, whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these Divisions, are based solely on the report of such Divisional auditors. The standalone financial statements also takes into account the particulars and information made available to us and also the changes carried out at the Corporate level based on the observation of the Divisional auditors and the Comptroller and Auditor General of India who have reviewed the audited standalone financial statements of the Division under Section 143(6) of the Act. Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act, we report, that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books, and proper returns adequate for the purpose of our audit have been received from the divisions not visited by us.

c) The reports on the accounts of the division of the Company audited under section 143(8) of the Act by the Divisional Auditors have been sent to us and have been properly dealt with by us in preparing this report.

d) The Balance Sheet, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Cash Flow Statement dealt with by this Report are in agreement with the books of account, and with the returns received from divisions not visited by us.

e) In our opinion, the aforesaid Standalone Financial Statements comply with the Indian Accounting Standards prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

f) Ministry of Corporate Affairs vide notification no 1/2/2014-CL-V dated 23rd February 2018 has exempted the companies engaged in defence production to the extent of application of relevant Accounting Standard on Segment Reporting. In view of the above, no disclosure is made by the company as required Ind AS 108. Subject to the above. We state that, in our opinion, the aforesaid Standalone Financial Statements comply with the Accounting Standards specified under Section 133 of the Act

g) In terms of circular NO. GSR 463(E) dated 05th June 2015 issued by the Ministry of Corporate Affairs, Government of India, the company being Government Company, is exempt from the provisions of section 164(2) of the Act regarding disqualification of Directors.

h) With respect to the adequacy of the Internal Financial Controls over financial reporting of the Company, and the operating effectiveness of such controls, refer to our separate Report in "Annexure A".

i) The provisions of Section 197 are not applicable to a government Company (in terms of MCA Notification NO.GSR 463 (E) dated 05th June 2015) as the managerial remuneration is paid as per the appointment letter from the Government of India.

j) With respect to the other matters to be included in the Auditors'' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its Standalone Financial Statements.

ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii. There has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the company.

2. As required by the Companies (Auditors'' Report) Order, 2016 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the Order.

3. As required by Section 143(5) of the Act, we have given in ''Annexure-C'' a statement on the matters specified by the Comptroller and Auditor General of India for the Company.

	For MAHARAJ N R SURESH AND CO.
	Firm Regn. No. 001931S
	N R Suresh
	Membership No. 021661
Place: Bengaluru	Partner
Date: May 27, 2019	Chartered Accountants

ANNEXURE "A" TO THE INDEPENDENT AUDITOR''S REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF HINDUSTAN AERONAUTICS LIMITED.

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act").

We have audited the Internal Financial Controls over Financial Reporting of HINDUSTAN AERONAUTICS LIMITED (''the Company") as of March 31, 2019 in conjunction with our audit of the Standalone Financial Statements of the Company for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

The Company''s Management is responsible for establishing and maintaining Internal Financial Controls based on the Internal Control over Financial Reporting criteria established by the Company, considering the essential components of Internal Control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting, issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors'' Responsibility

Our responsibility is to express an opinion on the Company''s Internal Financial Controls over Financial Reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") and the Standards on Auditing, issued by ICAI and deemed to be prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of Internal Financial Controls, both applicable to an audit of Internal Financial Controls and both issued by ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate Internal Financial Controls over Financial Reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the Internal Financial Controls System over Financial Reporting and their operating effectiveness. Our audit of Internal Financial Controls over Financial Reporting included obtaining an understanding of Internal Financial Controls over Financial Reporting, assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the Auditors'' judgement, including the assessment of the risks of material misstatement of the Financial Statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s Internal Financial Controls System over Financial Reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company''s Internal Financial Control over Financial Reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s Internal Financial Control over Financial Reporting includes those policies and procedures that:

(i) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorisations of Management and Directors of the Company; and

(iii) Provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of the Company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of Internal Financial Controls over Financial Reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the Internal Financial Controls over Financial Reporting to future periods are subject to the risk that the Internal Financial Control over Financial Reporting may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate Internal Financial Controls System over Financial Reporting and such Internal Financial Controls over Financial Reporting were operating effectively as at March 31, 2019, based on the Internal Control over Financial Reporting criteria established by the Company, considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by ICAI.

	For MAHARAJ N R SURESH AND CO.
	Firm Regn. No. 001931S
	N R Suresh
	Membership No. 021661
Place: Bengaluru	Partner
Date: May 27, 2019	Chartered Accountants

ANNEXURE "B" TO THE INDEPENDENT AUDITOR''S REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF HINDUSTAN AERONAUTICS LIMITED.

The Annexure referred to in Paragraph 2 under the heading ''Report on Other Legal and Regulatory Requirements'' of our Report of even date:

(i) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets;

(b) These fixed assets have been physically verified by the management in accordance with its phased programme designed to cover the assets of all locations/units by physical verification over a period of one to five years, which in our opinion is reasonable having regard to the size of the company and nature of the assets.

(c) The title deeds of immovable properties are held in the name of the Company except as stated Annexure D as per Note 49 Clause 14.1,14.2,14.3,14.4 and 14.5

(ii) The Management has conducted physical verification of inventory at reasonable intervals and no material discrepancies were noticed.

(iii) The Company has not granted any loans, secured or unsecured to companies, firms. Limited Liability Partnerships or other parties covered in the register maintained under Section 189 of the Companies Act 2013.

(iv) In terms of Circular No. GSR 463(E) dated 05th June 2015 issued by Ministry of Corporate Affairs, Government of India, the Company being a Government Company engaged in Defence production is exempt from Section 185 and 186 of Companies Act 2013.

(v) The Company has not accepted any deposits from the public.

(vi) We have broadly reviewed the books of accounts relating to materials, labor and other items of cost maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 148(1) of the Act and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however made a detailed examination of the records with a view to determine whether they are accurate or complete.

(vii) According to the information and explanations given to us in respect of Statutory dues:

(a) The Company is regular in depositing undisputed statutory dues, including Provident Fund, Employees ''State Insurance, Income Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise, Value Added Tax, Cess.Goods and Service Tax and any other Statutory Dues to the appropriate authorities and there were no undisputed amounts payable which were in arrears as at 31st March 2019 for a period of more than six months from the date they became payable.

(b) Details of dues of Income Tax or Sales Tax or Service Tax or Duty of Customs or Duty of Excise or Value Added Tax, Cess and Goods and Service Tax have not been deposited as on 31st March 2019 on account of disputes are given below:

SALES TAX/VAT/CST*

Assessment Year	Amount ( Rs. In Lakhs)	Appeal by	Forum where dispute is pending
1986-87 To 2001 -02	19,375	The Company	1st Appellate Authority
2004-15 & 2008-09	7,523	The Company	Additional Commissioner Appeal
2012-14&2015-16	1,84,351	The Company	Bombay High Court
2012-13	10,142	Asst. Commissioner LTU	CST TRIBUNAL
2011-12	8,367	Asst. Commissioner LTU	CST TRIBUNAL
2005-06	138	The Company	CCT. J&K
2004-05	936	The Company	Deputy Commissioner (Assessments)
2000-01	9	The Company	Dy. com. of Sales Tax Nasik
2014-18	50,032	The Company	HIGH COURT
2003-04, 2008-09 & 2010-15	30,333	The Company	High Court
2005-06 To 2011-12	5,42,444	The Company	IInd Appellate Authority Mumbai
2013-14	14	The Company	Ist Appellate Authority Nashik
2010-11	349	The Company	Joint Commissioner Sale Tax
2015-16	4,076	The Company	Jt. Commissioner(A), Commercial Tax, Kanpur
2002-05 & 1999	11,465	The Company	Maharashtra Sales Tax Tribunal, Mumbai
2004-05	270	The Company	Sr. Deputy Commissioner of Sales Tax Nasik
2002-03 & 2009- 10	167	The Company	STAT
1996 To 2015	39,003	The Company	Tribunal
2005 To 2009	1,750	The Company	WB commercial Taxes Appellate and Revisional Board, Kolkata
Total	9,10,742

Finance Act, 1994 Assessment Year	-Service Tax $ Amount (Rs. in Lakhs)	Appeal By	Forum where dispute is pending
2004-05 to 2008-09	425	The Company	Central Excise and service Tax Appellate Tribunal, New Delhi
2005-06 to 2009- 10	385	The Company	CESTAT
2006-15	98	The Company	CESTAT
2010-14&2015-16	881	The Company	CESTAT
April 2009 to March 2013	450	The Company	CESTAT
2011-12 to 2014-15	12507	The Company	CESTAT Allahabad
2002 To 2011	1020	The Company	CESTAT Bangalore
Apr 2009 to March 2011	74	The Company	CESTAT Bangalore
Apr 2011 to June 2017	1483	The Company	CESTAT Bangalore
Apr 2011 to March 2014	639	The Company	CESTAT Bangalore
Jul 2007 to Jul 2008	1168	The Company	CESTAT Bangalore
Oct 2007 to March 2009	120	The Company	CESTAT Bangalore
Oct 2009 to March 2011	84	The Company	CESTAT Bangalore
2007-08 to 2011 -12	2647	The Company	CESTAT EZB, Kolkata
2012 To 2015	557	The Company	CESTAT EZB, Kolkata
2006-07 To 2017-18	54385	The Company	CESTAT, Mumbai
2010-11	57	The Company	Commissioner (Appeals)
Mar 2012 to March 2014	182	The Company	Commissioner of Appeals
2015-16	138	The Company	Commissioner of CGST & Central Excise and Customs, Bhubaneswar
Service Tax	5096	The Company	Pending with Tribunal
2007-08 & 2010-11	11235	The Company	Service Tax Department
2011-14&2017&18	4644	The Company	Service Tax Department
2006 To 2008	5292	Service Tax Dept	Supreme Court
2005-06 & 2009-10	343	The Company	Tribunal
TOTAL	103910

SI. No.	Assessment Year/ Period relating to	Amount (Rs. in Lakhs)	Appeal By	Forum where dispute is pending
	CUSTOMS DUTY #
1	2012-13	13,215	COMPANY	CCE (Appeals), Bangalore
2	2012-13	10,353	COMPANY	CESTAT Bangalore
	TOTAL	23,569
SI. No.	Assessment Year/ Period relating to	Amount (Rs. in Lakhs)	Appeal By	Forum where dispute is pending
1	Income Tax**
2	2005-06, 2006-07 and 2010-11 *	25,527	Department and company	High Court
3	2007-08, 2011 -12, 2012-13, 2013-14, 2014-15,2015-16*	1,79,533	The Company	Income Tax Appellate Tribunal
	TOTAL	2,05,060

* Sales Tax paid against disputed tax Rs. 195.03 Lakhs

$ Service Tax paid against disputed tax Rs. 151.31 Lakhs

# Customs Duty paid against disputed tax Rs. 3127.20 Lakhs ** Income Tax paid against disputed Tax Rs. 174,200 Lakhs

(viii) The Company has not defaulted in repayment of loans or borrowing to a financial institution, bank. Government or dues to debenture holders.

(ix) The Company has not raised any moneys by way of initial public offer or further public offer (including debt instruments) during the year.

(x) A fraud involving misappropriation of funds by the Company official in collusion with six contractors has been noticed by the management and referred to Vigilance department for further investigations. The Vigilance department based on the investigations has lodged FIR with Central Bureau of Investigations (CBI) Bhubaneswar. An amount of Rs.1876 lakhs has been provisionally assessed as fraudulent payments made to contractors during the period from December 2013 to September 2018, and reported in the FIR with CBI. Adjustment of expenses relating to capital and other accounts includes the above mentioned amount. The matter is under investigation by CBI. As explained to us no fraud has been committed by the Company.

(xi) The provisions of Section 197 are not applicable to a Government Company (in terms of MCA Notification no. GSR 463(E) dated 05th June 2015) as the managerial remuneration is paid as per the appointment letter from Government of India.

(xii) The Company is not a Nidhi Company and hence complying with the provisions of the Nidhi Rules, 2014 does not arise.

(xiii) All transactions with the related parties are in compliance with Sections 177 and 188 of the Companies Act, 2013, where applicable and the details have been disclosed in the Financial Statements, etc., as required by the applicable Accounting Standards.

(xiv) The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review.

(xv) The Company has not entered into any non-cash transactions with Directors or persons connected with him. (xvi) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.

	For MAHARAJ N R SURESH AND CO.
	Firm Regn. No. 001931S
	N R Suresh
	Membership No. 021661
Place: Bengaluru	Partner
Date: May 27, 2019	Chartered Accountants

ANNEXURE - CTO THE INDEPENDENT AUDITOR''S REPORT

Directions indicating the areas to be examined by the Auditors during the course of audit of annual accounts of Hindustan Aeronautics Limited for the year 2018-19 issued by the Comptroller & Auditor General of India under Section 143(5) of the Companies Act, 2013.

SI. No.	Areas Examined	Observation/Finding
1.	Whether the company has system in place to process all the accounting transactions through IT system? If yes, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications, if any, may be stated.	Yes. The Company has ERP System in place and the accounting entries are generated in the System as and when transaction are made. The ERP system is not linked to Internet and the modules in the ERP system are not interlinked. In view of the same some Journal Entries are required to be made to account for certain adjustment / correction derived basically from the System and then fed in to the system through required accounting process with a maker and Checker concept to ensure the integrity of the System.
2	Whether there is any restructuring of an existing loan or cases of waiver/write off of debts/loans/interest etc. made by a lender to the company due to the company''s inability to repay the loan? If yes, the financial impact may be stated.	Not applicable
3	Whether funds received/receivable for specific schemes from Central/State agencies were properly accounted for/ utilized as per its term and conditions? List the cases of deviation.	The Company has received a sum of Rs. 13229 lakhs from Ministry of Defence (MOD), Government of India (GOI), towards investments by the Company in M/s Multirole Transport Aircraft Ltd (MTAL). Out of the above, the Company has till date invested a sum of Rs. 11347 lakhs (PY Rs. 11347 lakhs). The balance of Rs. 1882 lakhs (PY Rs. 1882 lakhs) is shown other Current liabilities. Interest @ 6.85 % has been provided on the unutilized portion under other financial liabilities.

	For MAHARAJ N R SURESH AND CO.
	Firm Regn. No. 001931S
	N R Suresh
	Membership No. 021661
Place: Bengaluru	Partner
Date: May 27, 2019	Chartered Accountants

---

Mar 31, 2018

Independent Auditors’ Report

To,

The Members of M/s. Hindustan Aeronautics Limited,

15/1 Cubbon Road,

Bengaluru - 560 001

Report on the Company’s Standalone Ind AS Financial Statements:

1. We have audited the accompanying standalone Ind AS financial statements of M/s. Hindustan Aeronautics Limited (the “Company”), which comprise the Balance Sheet as at 31^st March, 2018, and the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flows and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information, in which are incorporated the Returns for the year ended on that date audited by the Divisional Auditors of the Company''s 37 Divisions, at locations of the Divisions (hereinafter referred to as standalone ''Ind AS financial statements'').

Management’s Responsibility for the Standalone Ind AS Financial Statements:

2. The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the state of affairs (financial position), profit or loss (financial performance including other comprehensive income), cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act read with Companies (Indian Accounting Standards) Rules,2015, as amended.

3. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility:

4. Our responsibility is to express an opinion on these standalone lnd AS financial statements based on our audit.

5. In conducting our audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under and the Order issued under Section 143(11) of the Act.

6. We conducted our audit of the standalone Ind AS financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone Ind AS financial statements are free from material misstatement.

7. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone lnd AS financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone lnd AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the standalone lnd AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the standalone lnd AS financial statements.

8. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone lnd AS financial statements.

Opinion:

9. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone lnd AS financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including the lnd AS, of the state of affairs (financial position) of the Company as at 31^st March, 2018, and its Profit (financial performance including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Other Matters:

10. We did not audit the Ind AS financial statements of 37 Divisions of the Company included in the standalone Ind AS financial statements, whose financial statements reflect total assets of RS,37,91,794 lakhs as at 31^st March, 2018 and total revenues of RS,18,08,770 lakhs for the year ended on that date. The Ind AS financial statements of these Divisions have been audited by the Divisional Auditors'' whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these divisions, are based solely on the report of such Divisional Auditors. The Standalone Ind AS financial statements also takes into account the particulars and information made available to us and also changes carried out at the corporate level based on the observations of the Divisional Auditors and the Comptroller and Auditor-General of India who have reviewed the audited Ind AS financial statements of the Divisions under section 143(6) of the Act.

11. Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements:

12. As required by the Companies (Auditor''s Report) Order, 2016 (“the Order”), issued by the Central Government in terms of Section 143(11) of the Act, we give in “Annexure - A” a statement on the matters specified in paragraphs 3 and 4 of the Order.

13. As required by Section 143(3) of the Act, we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books and proper returns adequate for the purposes of audit have been received from the Divisions not visited by us.

c) The reports on the accounts of the Divisions of the Company audited under Section 143(8) of the Act by the Divisional Auditors have been sent to us and have been properly dealt with by us in preparing this report.

d) The Balance Sheet, the Statement of Profit and Loss including other comprehensive income, the Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account and with the returns received from Divisions not visited by us.

e) Ministry of Corporate Affairs vide notification no 1/2/2014-CL-V dated 23^rd February 2018 has exempted the Companies engaged in defence production to the extent of application of relevant Accounting Standard on Segment Reporting. In view of the above, no disclosure is made by the Company as required under Ind AS 108. Subject to the above, we state that, in our opinion, the aforesaid standalone Ind AS financial statements comply with the Accounting Standards specified under Section 133 of the Act.

f) In terms of circular No. GSR 463(E) dated 05^th June, 2015 issued by the Ministry of Corporate Affairs, Government of India, the Company being Government Company, is exempt from the provisions of section 164(2) of the Act regarding disqualification of Directors.

g) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in “Annexure - B”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company''s internal financial controls over financial reporting.

h) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements - Refer clause 2 of Note No. 49 to the standalone Ind AS financial statements.

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, on long-term contracts - Refer clause 50A of Note No. 49 to the standalone Ind AS financial statements. The Company does not have any derivative contracts.

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

14. As required by section 143(5) of the Act, we give in “Annexure - C”, a statement on the matters specified by the Comptroller and Auditor General of India for the Company.

“Annexure A” to the Independent Auditors Report

(referred to in paragraph 12 under the heading ''Report on Other Legal & Regulatory Requirements’ of our report of even date to the standalone Ind AS financial statements of the Company for the year ended 31^st March, 2018. The information contained in this annexure is based on the audit reports received from the 37 divisions of the Company)

As per the books and records produced before us and as per the information and explanations given to us and based on such audit checks that we considered necessary and appropriate, we confirm that:

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The fixed assets have been physically verified by the management in accordance with its phased programme designed to cover the assets of all locations/units by physical verification over a period of one to five years, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets.

(c) The title deeds of immovable properties are held in the name of the Company except as stated in Annexure - D. The same has been disclosed in Notes to Accounts of standalone Ind AS financial statements.

(ii) The inventories of the Company have been physically verified by the management at reasonable intervals during the year under audit. We have been informed that the discrepancies noticed on verification between physical stocks and the book records were not material having regard to the nature of business and volume of operations and the same have been properly dealt with in the books of accounts.

(iii) The Company has not granted any loans, secured or unsecured to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013 during the year under review.

(iv) In our opinion, the Company has complied with the provisions of section 185 and 186 of the Companies Act, 2013 with respect to Loans and Investments made.

(v) The Company has not accepted any deposits from public.

(vi) We have broadly reviewed the books of accounts relating to materials, labour and other items of cost maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 148(1) of the Act and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

(vii) (a) The Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Employees

State Insurance, Income tax, Sales Tax, , Service tax, Duty of Customs, Duty of Excise, Value Added Tax, Goods and Services Tax, Cess and other statutory dues with the appropriate authorities. There are no undisputed amounts payable in respect of Income Tax, Wealth Tax, Service Tax, Sales Tax, Value Added Tax, Duty of Customs, Duty of Excise, Goods and Services Tax or cess which have remained outstanding as at 31^st March, 2018, concerned for a period of more than six months from the date they became payable.

(b) There are no dues of income tax or sales tax or service tax or duty of customs or duty of excise or value added tax have not been deposited with the appropriate authorities on account of any dispute except as stated below.

Assessment year	Amount (J in lakhs)	Appeal by	Forum where dispute is pending
Income tax Act, 1961*
2005-06, 2006-07, 2010-11	32,716	Both by Assessing Officer and the Company	Karnataka HC
2007-08, 2011-12, 2012-13, 2013-14, 2014-15	1,57,467	The Company	Income Tax Appellate Tribunal
2015-16	22,107	The Company	CIT(A)
Customs Act, 1962#
2012-13	23,474	The Company	CESTAT
2012-13	95	The Company	CCE (Appeals)
Finance Act, 1994 - Service Tax$
2002-03 to 2014-15	25,396	The Company	CESTAT
April 09 to March13 and 2010-11	507	The Company	Commissioner
2006-14	98	The Company	Commissioner (Appeals)
2007-08 to 2017-18	15,878	The Company	Department
2006-07 to 2007-08	4,957	Commissioner of Central Excise, Customs and Service Tax	Supreme Court
2008-09 to 2009-10 and 2012-13 to 2014-15	1,232	The Company	Joint Commisioner of Central Excise & Customs, Nashik
April 2009- March 2011 and October 2009- March 2011	158	The Company	CCE(Appeals), Banglore
2012-13	42	The Company	Commissioner of Central Excise (Appeal - I)
2005-06, 2007-08 to 2009-10 and 2011-12	5,439	The Company	Appellate Tribunal
April 2015- June 2017	35	The Company	Appeal yet to be filed with CCE (Appeals). Demand notice recd.23/03/18
Sales tax / VAT / Entry Tax@:
2010-11 to 2014-15	15,262	The Company	Appellate Tribunal Lucknow
1997-98, 2000-01, 2005-06 to 2008-09	1,809	The Company	WB Commercial Taxes Appelate and Revisional Board, Kolkata
1999-2000, 2002-03 to 2004-05	11,465	The Company	Maharastra Sales Tax Tribunal,Mumbai
1996-97 to 2003-04 and 2005-06 to 2012-13	50,775	The Company	Appellate Tribunal
1986-87 to 1998-99, 2000-01, 2001-02, 2012-13	93,144	The Company	1st Appellate Authority
2005-06 to 2011-12	5,42,444	The Company	2nd Appellate Authority
2013-14 to 2014-15	6,904	The Company	Add. Commisioner (A), Commercial Tax, Kanpur
2004-05	270	The Company	Sr. Deputy Commissioner of Sales Tax, Nasik
2000-01 and 2004-05	944	The Company	Deputy Commissioner (Assessments)

Assessment year	Amount (J in lakhs)	Appeal by	Forum where dispute is pending
2008-09 and 2004-10	3,716	The Company	Additional Commissioner (Appeal)
2003-04, 2008-09, 2010-11, 2013-14	14,053	The Company	High Court
2013-14	93,921	The Company	Dy. Comm. Of Sales Tax on 26.03.2018
2005-06	138		CCT, J&K
	11,24,446

* Amount paid under dispute is RS,1,28,118 lakhs.

# Amount paid under dispute is RS,3,127 lakhs.

$ Amount paid under dispute is RS,172 lakhs.

@ Amount paid under dispute is RS,2,001 lakhs

(viii) The Company has not defaulted in repayment of loans or borrowings to a financial institution, banks, government or dues to debenture holders during the year under review. The details of loans is as under:

Date of Loan	Amount in lakhs	Purpose	Amount Repaid in lakhs	Date of Repayment
30/06/2017	40,000	Working Capital	40,000	11/07/2017
30/06/2017	40,000		40,000	11/07/2017
20/03/2018	15,000		15,000	20/04/2018
20/03/2018	9,687		9,687	20/04/2018
23/03/2018	15,000		15,000	20/04/2018
28/03/2018	1,11,300		85,000	31/03/2018
28/03/2018	74,700		74,700	31/03/2018
28/03/2018	49,000		49,000	31/03/2018
28/03/2018	90,000		90,000	31/03/2018
29/03/2018	10,000	For Acquisition of Capital Asset	Repayment not yet started
	4,54,687		4,18,387

(ix) The shares of the Company were listed with Bombay Stock Exchange and National Stock Exchange on 28^th March, 2018 in pursuance of an IPO of the Company made during the year. However, the Company did not raise money by way of initial public offer during the year under review, as the IPO made by the Company was sale of 3,35,32,320 (10.03%) shares by the promoter viz., the President of India acting through Ministry of Defence. The Company did not raise money by way of further public offer (including debt instruments). The Company has obtained a term loan of RS,100 crores, which is yet to be utilized by the Company.

(x) No fraud of material nature by the Company or on the Company by its officers or employees has been noticed or reported during the course of audit.

(xi) The provisions of section 197 are not applicable to a Government Company (in terms of MCA Notification no. G.S.R. 463 (E) dated 05^th June, 2015) as the managerial remuneration is paid as per the appointment letter from Government of India.

(xii) As the Company is neither carrying on the business of nidhi nor reported as a nidhi company, paragraph 3(xii) of the Order is not applicable.

(xiii) The transactions with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the standalone Ind AS Financial Statements as required by the applicable accounting standards.

(xiv) The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(xv) The Company has not entered into any non-cash transactions with directors or persons connected with them. Accordingly, paragraph 3(xv) of the Order is not applicable.

(xvi) As the Company is not carrying on the business of Non-Banking Finance, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

“Annexure - B” to the Independent Auditor’s Report of even date on the Standalone Ind AS Financial Statements of M/s. Hindustan Aeronautics Limited

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

1. We have audited the internal financial controls over financial reporting of M/s. Hindustan Aeronautics Limited (“the Company”) as of 31^st March, 2018 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

2. The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (“the Guidance Note”) issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

3. The Company''s Management has in present financial year amongst other areas has specifically identified the following areas

(i) Goods in Transit, (ii) Capital Work in Progress, Trade Receivables, (iv) Trade Payables (v) Claims receivable, (vi) Advance to Vendor for Goods & Services/Capital Advances and (vii) Intangible Assets & its Amortization as a benchmark criteria for establishing Internal Financial Controls over financial reporting.

Auditors’ Responsibility

4. Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. . Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

5. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness.

6. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error.

7. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

8. A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

9. Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

10. In our opinion, the Company has, in all material respects, an adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31^st March, 2018, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note issued by the Institute of Chartered Accountants of India.

Other Matters

11. Out of 38 divisions of the Company, 37 divisions of the Company are audited by the Divisional Statutory Auditors and our work is confined to the Consolidation of the accounts. Our aforesaid reports under section 143(3)(i) of the Act on the adequacy and operating effectiveness of the internal financial controls over financial reporting insofar as it relates to 37 divisions, is based on the corresponding reports of the auditors of such 37 divisions.

For S. Venkatram and Co. LLP

Chartered Accountants

Firm Registration No: 004656S/S200095

S. Sundarraman

Place : Bengaluru Partner

Date : 30^th May, 2018 Membership No. 201028