Notes to Accounts of Hindustan Aeronautics Ltd.

Mar 31, 2025

20. PROVISION AND CONTINGENT LIABILITIES

a) A provision is recognised, when the Company has the present obligation as result of past events and it is probable that
an outflow of resources will be required to settle the obligation in respect of which reliable estimate can be made.

b) Where no reliable estimate can be made or when there is a possible obligation or present obligations that may, but
probably will not, require an outflow of resources, disclosure is made as Contingent Liability. Expected reimbursement,
if any, is disclosed under Notes to Accounts.

c) When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is
remote, no provision or disclosure is made.

I. PROVISION FOR WARRANTY

Provision for warranty is recognized on actuarial valuation for Manufacturing and Repair and Overhaul of Aircraft/
Helicopter/Engine/Rotables and Spares and development activities etc.

II. PROVISION FOR LIQUIDATED DAMAGES

Provision for Liquidated Damages is recognized when the expected date of delivery of Goods / rendering of Service in
respect of Manufacturing and Repair and Overhaul of Aircraft/Helicopter/Engine/Rotables, Spares and Development
activities etc is beyond the due date as per delivery schedule and at the rates specified in the Contract with the
Customer.

III. PROVISION FOR ONEROUS CONTRACTS

A provision for onerous contract is recognized when the expected benefits to be derived by the Company from the
contract are lower than the unavoidable cost of meeting its obligations under the contract. Before a provision is
established, the Company recognizes any impairment loss on the assets associated with that contract.

21. BORROWING COSTS

Borrowing cost includes interest, and other costs incurred in connection with the borrowing of funds and exchange differences
arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.

Borrowing costs, if any, directly attributable to the acquisition, construction or production of an asset that necessarily takes
a substantial period of time to get ready for its intended use or sale, are capitalized as part of the cost of the asset. All other
borrowing costs are expensed in the period in which they are incurred.

22. ESTIMATES AND ERRORS

The Company revises its accounting policies if the change is required due to a change in Ind AS or if the change will provide
more relevant and reliable information to the users of the financial statements. Changes in accounting policies are applied
retrospectively unless it is impracticable to apply.

A change in an accounting estimate that results in changes in the carrying amounts of recognised assets or liabilities or to
statement of profit and loss is applied prospectively in the period(s) of change.

When it is difficult to distinguish a change in an accounting policy from a change in an accounting estimate, the change is
treated as a change in an accounting estimate.

Discovery of material errors results in revisions retrospectively by restating the comparative amounts of assets, liabilities, and
equity of the earliest prior period in which the error is discovered. The opening balances of the earliest period presented are
also restated.

23. EVENTS AFTER THE REPORTING PERIOD

Adjusting events are events that provide further evidence of conditions that existed at the end of the reporting period. The
financial statements are adjusted for such events before authorisation for issue.

Non-adjusting events are events that are indicative of conditions that arose after the end of the reporting period. Non¬
adjusting events after the reporting date are not accounted.

24. EARNINGS PER SHARE

The Company presents basic and diluted earnings per share for its ordinary shares. Basic earnings per share is calculated by
dividing the net profit or loss attributable to equity holders of the Company by the weighted average number of equity shares
outstanding during the period.

Diluted earnings per share is determined by dividing the net profit or loss attributable to equity holders of the Company by
the weighted average number of equity shares outstanding during the period adjusted for the effects of all dilutive potential
equity shares.

iLk U4-

(BARENYA SENAPATI) (DR. D.K. SUNIL)

Director (Finance) & CFO Chairman & Managing Director

DIN: 08525943 DIN: 09639264

(SHAILESH BANSAL)

Place: Bengaluru Company Secretary

Date: 14.05.2025 FCS No. 5064

Nature and Purpose of each Reserve:

1. Research & Development Reserve:

Research and Development Reserve is created by transfer from Retained Earnings an annual contribution of 15% of
Operating Profit After Tax. Research & Development Reserve is created to bring technological superiority to the products in
order to cope with the future technological challenges. The amount of utilisation for Research and Development purposes
during the year is transferred from Research and Development Research to General Reserve.

2. Captial Redemption Reserve:

Capital Redemption Reserve is created on redemption/buyback of equity shares.

3. Indigenization Fund Reserve:

I ndigenization Fund Reserve is created by transfer from Retained Earnings an amount equal to 3 % of Operating Profit
After Tax which will be utilised to encourage Indigenization of items which are being sourced from foreign sources at
present.

4. General Reserve:

General Reserve is created out of the profits of the Company and out of Research & Development Reserve on utilization of
Research & Development purposes. This is a free reserve.

33 Financial Risk Management

The Company is exposed to market risk, credit risk and liquidity risk which may impact the fair value of its financial
instruments. The Company, based on its business operation, evaluated the following risks:

a) Foreign currency risk:

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of
changes in exchange rates. The Company''s exposure to the risk of changes in exchange rates relates primarily to
the Company''s imports for which the payment has to be done in currencies other than the functional currency
of the Company. The fluctuation in exchange rates in respect to the Indian rupee may have very restricted
impact on company as any fluctuations in foreign exchange are in general reimbursed by the customers of the
Company in terms of the contractual obligations which the Company has with its customers.

b) Credit risk:

Credit risk is the risk of financial loss to the Company if a customer or counter party to a financial instrument
fails to meet its contractual obligations resulting in a financial loss to the Company. Credit risk arises principally
from trade receivables, loans & advances, advances given to suppliers (for procurement of goods, services and
capital goods), cash & cash equivalents and deposits with banks and financial institutions. The Company for
the Financial Year (FY) derived 97% (Previous year: 95%) of its total sales from sales to the Indian Defence
Services. The Company expects to continue to derive most of its sales from the Indian Defence Services under
the contracts of the Ministry of Defence (MoD), Government of India (GoI) the Company''s principal shareholder
and administrative ministry.

c) Provision for expected credit losses:

As the Company''s debtors are predominantly the Government of India (Indian Defence Services, Ministry of
External Affairs), Central Public Sector Undertakings where the counter - parties have sufficient capacity to
meet the obligations and where the risk of default is nil / negligible. Accordingly, impairment on account of
expected credit losses is being assessed on a case to case basis in respect of dues outstanding for significant
period of time as per the accounting policy of the Company. Further, management believes that the unimpaired
amounts that are due is collectable in full, based on historical payment behaviour and extensive analysis of
customer credit risk.

d) Liquidity risk:

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its
financial liabilities that are settled by delivering cash or another financial asset. Typically, the Company ensures
that it has sufficient cash on demand to meet expected operational expenses including the servicing of financial
obligations. The Company''s standard contract terms provide that, the Company receives advance payments
from customers pursuant to the applicable contracts, including the Government of India and the Indian Defence
Services at the time of signing of any contract and milestone payments on achievement of physical milestones.
These payments are utilized to meet the Company''s working capital needs (for the Company required to
maintain a high level of working capital because the Company''s activities are characterized by long product
development periods and production cycles). A majority of the Company''s research, design and development
costs are funded by the Indian Defence services. Services and supply of spares are governed by the Fixed Price
Quotation (FPQ) policy for fixation of the prices wherein the prices are fixed for the base year with escalation
parameters for a pricing period of 5-7 years. The process of fixation of prices and approvals takes a minimum
period of two years after the expiry of previous pricing period. In the interim, the approved prices of the
previous pricing period are continued and payments are accordingly realised and on finalisation of the revised
prices, the differential prices are paid to the Company. Further, certain costs not forming part of selling price are
reimbursed by customer on incurrence of expenditure. The reimbursement is based on verification and issuance
of audit certificate by the payees. There are delays in the above process due to unanticipated variations/
adjustments in the scope and schedule of the Company''s obligations due to subsequent modifications by the
customers and delays in receipt of approvals from the customer. Further, payments to the Company by the
Indian Defence Services are reliant on the continuing availability of budgetary appropriations by Government of
India and any disruptions to the availability of such appropriations could adversely affect the Company''s cashflows.

43A Gratuity:

The Company has a Gratuity Scheme for its employees, which is a funded plan. Every year the Company funds to the
Gratuity Trust to the extent of shortfall of the assets over the fund obligations, which is determined through actuarial
valuation. As per the Gratuity Scheme, Gratuity is payable to an employee on the cessation of his employment
after he has rendered continuous service for not less than 5 (five) years in the Company. For every completed year
of service or part thereof in excess of six months, the Company shall pay Gratuity to an employee at the rate of
15 (fifteen) days'' emoluments based on the emoluments last drawn with a ceiling of '' 20 (twenty) Lakhs.

The following tables summarise the components of net benefit expense recognised in the Statement of Profit and
Loss and the funded status and amounts recognised in the Balance Sheet for the plan as furnished in the Disclosure
Report provided by the Actuary:

Gratuity is a lump sum plan and the cost of providing these benefits is typically less sensitive to small changes in
demographic assumptions. Sensitivity analysis indicates the influence of a reasonable change in certain significant
assumptions on the outcome of the Present value of obligation(PVO) and aids in understanding the uncertainty of
reported amounts. Sensitivity analysis is done by varying one parameter at a time and studying its impact. The key
actuarial assumptions to which the benefit obligation results are particularly sensitive to are discount rate and future
salary escalation rate. The following table summarizes the impact in percentage terms on the reported defined
benefit obligation at the end of the reporting period arising on account of an increase or decrease in the reported
assumption by 100 basis points.

43B(i) The exempt provident fund set up by the company is a defined benefit plan under Ind AS 19 Employee Benefits.

Provident Fund for eligible employees is managed by the Company through a trust in line with the Provident
Fund and Miscellaneous Provision Act, 1952. The plan guarantees interest at the notified by the Provident Fund
Authorities. The contribution by the employer and employee together with the interest accumulated thereon are
payable to employees at the time of separation from the Company or retirement, whichever is earlier. The benefits
vests immediately on rendering of the services by the employee.

The minimum interest rate payable by the trust to the beneficiaries every year is notified by the Government. The
Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust
(including investment risk fall) and the notified interest rate.

The Company has obtained report on the determination and disclosure of interest rate Guarantee & Diminution
of Asset Values as per Ind AS19 of Employees Exempt Provident Fund of HAL for the period ended 31^st March
2025. Based on the actuarial valuation of provident fund the liability for the year has been created of '' 4602 lakhs
(Previous year: '' 5372 lakhs).

As per the approval of Board an amount of '' 8089 lakhs released to various PF Trusts of HAL towards deficit arising
out of investments made in DHFL and Sintex during the year 2023-24, Nil for 2024-25.

43C(i) The Company has provided Performance Related Pay for the year as per the Guidelines issued by Department of
Public Enterprises.

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.

43D(i) Pension:

In line with the Guidelines issued by the Department of Public Enterprises, Ministry of Heavy Industries & Public
Enterprises, Govt. of India for revision of the Salary Structure of Executives of CPSEs with effect from 1^st January,
2007 and as per the approval accorded by the Board of Directors and Department of Defence Production, Ministry
of defence, a Defined Contribution Pension Scheme was notified in the Company on 16^th July, 2014 in respect of
Executives retired etc., from 1^st January, 2007.

A Defined Contribution Pension Scheme in respect of Workmen retired after 1^st January, 2012 was notified on
2^nd June, 2015 which was agreed as a part of the Workmen''s Wage Revision effective from 1^st January, 2012.

Contribution to the corpus of the above schemes by the Management may vary from year to year as the same is
dependent on profits generated, affordability & sustainability by the Company.

The Scheme is managed by a duly constituted Trust.

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 Company due to the increased ceiling, is '' 21776 lakh pertaining to the
period from 1 January, 2017 to 31 March, 2024 ('' 3719 lakh for the year ended 31 March, 2025). The total
additional financial impact on revision of Pension contribution up to 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 lakh 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.

43E Post Superannuation Group Health Insurance Schemes:

In line with the Guidelines issued by the Department of Public Enterprises, Ministry of Heavy Industries & Public
Enterprises, Government of India and as per the approval accorded by the Board of Directors and Department of
Defence Production, Ministry of defence, Post Superannuation Group Health Insurance Schemes in respect of (a)
Employees (Officers & Workmen) retired before 1^st January, 2007 and (b) Executives retired on or after 1^st January,
2007 were introduced with effect from 1^st February, 2014.

A Post Superannuation Group Health Insurance Scheme in respect of Workmen of the Company retired, etc. after
1^st January, 2007 has been introduced in the Company with effect from 1^st February, 2015 which was agreed as a
part of the Workmen''s Wage Revision effective from 1^st January, 2012.

Benefits under the Schemes may vary from year to year, as contribution to the Corpus of the Schemes is dependent
on Profits generated, Affordability & Sustainability by the Company.

The Schemes are managed by a duly constituted Trust.

43F HAL Employees Group Life Insurance Trust:

As per the approval accorded by the Board, the Company has notified an insurance scheme namely the HAL
Employees Group Life Insurance Trust to cover its employees, in case of death due to any reason other than suicide.
The contribution towards the scheme are borne equally by employees and the Management. In the event of Death
of an employee due to any reason other than suicide, the dependent family members will be paid the sum assured
('' 10 lakhs). The Company has made contribution of '' 118 lakhs (previous year : '' 135 lakhs) to the trust for the
year ended 31.03.2025 with employees contributing an equal amount.

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 Hon''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 Hon''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 Hon''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.

43H Financial Assistance Scheme for Dependents of Deceased Employee

As per the approval accorded by the Board, the Company has notified "Financial Assistance Scheme for dependents
of Deceased Employees (FASDDE)" to pay a fixed amount on monthly basis to surviving spouse or dependent
children if the spouse is not surviving, till the notional date of superannuation of the deceased employee. The prime
objective of the scheme is to provide financial support for dependent beneficiaries of the employees who expire
while in service, to enable them to lead a normal life. The scheme will be applicable in all cases of Death of an
employee due to any other reason other than suicide. Fund of '' 4000 lakhs during 2021-22 & '' 1500 lakhs during
2022-23 transferred to trust for management of the Corpus. The income generated from the Corpus which will be
invested with M/s LIC will be utilized to make payments under the Scheme.

During the year '' NIL lakhs (previous year: '' 56 lakhs) has been incurred as expenditure under Financial Assistance
Scheme for Dependents of Deceased Employee which is included in Note 40 - Staff Welfare expenditure.

(b) As and when the instalments in respect of deferred debts falls due for payment to the Russian Federation, the same
is paid by applying the exchange rate ruling on the date of actual payment and liability discharged. The differences
arising due to recalculation of debts at the applicable /ruling rate is charged to the revenue at the time of payment
and recognised as sales when realised from the customer except to the extent it pertains to Capital Assets. The
sales for Exchange Rate Variation (ERV) considered is '' 6074 lakhs (Previous year - '' 4873 lakhs). The Assets and
Liabilities relating to deferred credit transaction are reinstated under Non-current Other Financial Assets, Current
Other Financial Assets (recoverable within one year), Non-current Other Financial Liabilities and Current Other
Financial Liabilities (to be settled within one year).

45B The Board in its 406^th meeting held on 22^nd September 2017, accorded in principle approval for voluntary winding
up / closure of the three Joint Ventures i.e. M/s. HAL-Edgewood Technologies Private Limited, M/s. Tata HAL
Technologies Ltd and M/s. Multirole Transport Aircraft Ltd. enabling the Company to take further action in the
matter.

Further, the Board authorized the Company to seek approval of Ministry of Defence (MoD), for short closure of
the Contracts associated with the M/s Multirole Transport Aircraft (MTA) project and requested MoD, to initiate
necessary action for closure of IGA, as it is a prerequisite for winding up of the MTA - Joint Venture Company.
Further, MOD vide its letter dated 14^th October 2021 notified the termination of the agreement between the Govt.
of the Republic of India and Govt. of Russian Federation. In this respect the Russian Federation vide its letter dated
20^th April 2022 intimated that the decision of the Indian side has been taken into consideration.

Further in 435^th meeting held on 16^th March 2020, the Board has directed the Company to expedite the closure of
M/s. Multirole Transport Aircraft Ltd at the earliest after taking clearance from Russian partners from their Board(refer
Clause No.10).

The Board in its 440^th meeting held on 9^th December 2020, accorded in principle approval for voluntary
winding up / closure of Joint Venture M/s. Infotech HAL Limited(IHL) enabling the Company to take further action
in the matter.

45B(i) The Company had signed an agreement with Safran Helicopter Engines SAS for setting up a joint venture to
carry out business of design, development, certification, production, sale and support of helicopter engines.
Pursuant to the same a Joint Venture Company with Safran Helicopter Engines SAS by name SAFHAL Helicopter
Engines Private Limited has been incorporated on 09 November 2023. Each JV partner has subscribed for 1000000
equity shares of '' 10 each amounting to '' 100 lakhs.

45B(ii) During the current financial year, the Company has reversed the impairment provided in earlier years on its
investment in the Joint Ventures for '' 855 lakhs for International Aerospace Manufacturing Pvt Limited and
'' 61 lakh for BAe-HAL Software Limited. For this purpose, the investments made in IAMPL and BAeHAL were
evaluated taking into account certain key financial parameters of the Joint Ventures. Based on the evaluation, it
was assessed that there has been an overall improvement in the financial health of both the companies. The total
financial effect of the reversal is '' 916 lakhs.

45C Defence Innovation Organisation ("DIO"):

A Section 8 Company has been formed (Under Companies Act 2013) in the name of "Defence Innovation
Organisation" with M/s BEL with an authorised Capital of '' 100 lakhs (Paid up capital as on 31^st March 2025 is
'' 1 Lakh( HAL 50% Share and BEL 50% Share). The registered office of DIO is situated at Centre for Learning and
Development, Bharat Electronics Limited, Jalahalli, Bengaluru - 560013, Karnataka, India. DIO was incorporated to
implement the scheme of defence innovation fund initiative by creation of an ecosystem to foster innovation and
technology development in defence.

HAL Board in its 417^th meeting held on 30^th July 2018 had accorded approval for release of '' 5000 lakhs to
DIO towards initial corpus fund in form of Grant in Aid in a staggered manner. Accordingly '' 500 lakhs has been
released to DIO in the month of August 2018 and the balance amount of '' 4500 lakhs has been released to
DIO during August 2024.

45D The Board in its 434^th meeting was informed that Government approval is not required for transfer of lease hold
land to M/S Helicopter Engines MRO Private Limited (HE-MRO), as it is neither defence land nor it is a land owned by
HAL. Board reconsidered the decision taken in its 431^st meeting and approved transfer of land without Government
approval to M/s HE-MRO.

In line with the Board Approval in its 431^st and 434^th meetings, Tripartite Deed of Lease was executed on the
18^th May 2023 between Goa Industrial Development Corporation (GIDC), M/s Helicopter Engines MRO Private
Limited (HE MRO) and HAL MRO Division for transfer of Lease hold rights of industrial plot admeasuring 7.41 acres
to HE MRO.

Further, the Sale of Deed was executed between HAL-MRO Division and HE -MRO on 8^th June 2023 for sale of
Building and Plant & Machinery and Other Assets for a total consideration of '' 1029 lakhs.

Accordingly necessary accounting treatment has been made in the Books of Accounts.

45E The Company paid '' 950 lakhs towards subscription of 950000 equity shares of the face value of '' 100 each to its
Joint Venture Company, Helicopter Engines MRO Private Limited, on 8 January, 2024 towards equity participation
in Rights issue of the Joint Venture Company. Pursuant to the same, the investment of the Company in the Joint
Venture has increased from '' 1510 lakh to '' 2460 lakh during the FY 2023-24.

45E(i) A Section 8 Company has been formed (Under Companies Act 2013) in the name of "Electronic Warfare (Defence)
Testing Foundation(EWDTF)". The total project cost '' 46.96 Crs comprising of Govt. Grant-in-Aid of '' 35.22 Crs
and SPV partners contribution '' 11.74 Crs. Wherein M/s BEL will be the lead with equity contribution of 40%,
HAL-20%, IOL-20%, BDL-10% & TIDCO-10%. EWDTF was incorporated for Development, Operation and
Management of DTI for Electronic Warfare. EWDTF was incorporated on 21^st May 2024. HAL has made an investment
of '' 235 lakhs (20% stake) towards subscription of 23480 Equity shares of '' 1000 each on 27^th June 2024.

45E(ii) A Section 8 Company has been formed (Under Companies Act 2013) in the name of "Communication (Defence)
Testing Foundation (CDTF)". The total project cost '' 41.81 Crs comprising of Govt. Grant-in-Aid of '' 31.36 Crs
and SPV partners contribution '' 10.45 Crs. Wherein M/s BEL will be the lead with equity contribution of 40%,
HAL-25%, BEML-25%, & AWEIL-10%. CDTF was incorporated for Development, Operation and Management
of DTI for Communication domain. CDTF was incorporated on 31^st May 2024. HAL has made an investment of
'' 261 lakhs (25% stake) towards subscription of 26125 Equity shares of '' 1000 each on 27^th June 2024.

45E(iii) A Section 8 Company has been formed (Under Companies Act 2013) in the name of UAS Testing Foundation
(UASTF)". The total project cost '' 60 Crs comprising of Govt. Grant-in-Aid of '' 45 Crs and SPV partners contribution
'' 15 Crs. Wherein M/s HAL will be the lead with equity contribution of 33.33%, BEL-20%, BEML-20%, YIL-10%,
GIL-10% & Endure Air-6.67%. UASTF was incorporated for Development, Operation and Management of DTI
for Unmanned Aerial Systems(UAS). UASTF was incorporated on 21^st June 2024. HAL has made an investment of
'' 500 lakhs (33.33% stake) towards subscription of 50000 Equity shares of '' 1000 each on 18^th July 2024.

45E(iv) A Section 8 Company has been formed (Under Companies Act 2013) in the name of "Advanced Materials (Defence)
Testing Foundation (AMDTF)". The total project cost '' 54.36 Crs comprising of Govt. Grant-in-Aid of '' 40.70 Crs
and SPV partners contribution '' 13.66 Crs. Wherein M/s MIDHANI will be the lead with equity contribution of
20%, HAL-20%, BDL-20%, YIL-20% & PTC-20%. AMDTF was incorporated for Development, Operation and
Management of DTI for Mechanical & Material(M&M) testing. AMDTF was incorporated on 4^th June 2024. HAL has
made an investment of '' 273.20 lakhs (20% stake) towards subscription of 27320 Equity shares of '' 1000 each on
8^th July 2024.

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.

i. Current Assets = Inventories (Note - 13) Investments (Note -14) Trade receivables (Note -15) Contract Assets
(Note -15A) Cash and Cash Equivalents (Note - 16) Bank Balances other than Cash and Cash Equivalents (Note-
17) Loans (Note -18) Other Financial Assets (Note 19) Current tax Assets (net) (Note - 20) Other Current
Assets (Note - 21)

ii. Current Liabilities = Borrowings (Note - 30) Lease liability (Note 30A) Trade Payables (Note - 31) Other Financial
liabilities (Note - 32) Other current liabilities (Note - 33) Provisions (Note - 34) Current Tax Liabilities (Net)
(Note - 35)

iii. Total Debt = Non-current borrowing (Note-24) Current borrowing working capital loan - Cash Credit (Note - 30)
Current borrowing from Banks - Commercial paper (Note - 30)

iv. Shareholders Equity = Equity Share Capital (Note - 22) Other Equity (Note - 23)

v. Earnings available for debt service = Profit after Tax Depreciation and amortisation (Note - 42) Finance Cost

(Note - 41) Loss on sale of assets

vi. Debt Service = Finance cost (Note - 41) Principal repayment

vii. Net Profits after taxes = Profit (Loss) for the period

viii. Average Shareholder''s Equity = (Shareholder''s Equity for current period previous year) /2

ix. Average Inventory = (Inventories (Note-13) for current period previous year) / 2

x. Average Accounts Receivable = (Trade Receivables (Note-8 and Note -15) for current period previous year) / 2

xi. Average Trade Payables = (Trade payables (Note - 25 and Note - 31) for current period previous year) / 2

xii. Average Working Capital = (Total Current Assets - Total Current Liabilities for current period previous year) / 2

xiii. Net Profit = Profit(Loss) for the period from continuing operations

xiv. Earning before interest and taxes = Profit Before Tax Finance Cost (Note - 41)

xv. Capital Employed = Shares holder''s Equity Long Term Borrowings(Note - 24) Deferred tax liability (Note - 28)

55H Utilisation of borrowed funds and share Premium through intermediaries or for benefit of third party
beneficiaries:

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, its subsidiary, associate to or in any other person(s) or entity(ies),including
foreign entities (Intermediaries") with the understanding, whether recorded in writing or otherwise, that the
Intermediary shall lend or invest in party identified by or on behalf of the Company, its subsidiary, associate, (Ultimate
Beneficiaries).

The Company have not received any fund from any party(s) (Funding Party) with the understanding that the
Company, its subsidiary, associate, shall whether, directly or indirectly lend or invest in other persons or entities
identified by or on behalf of the Company, its subsidiary, associate ("Ultimate Beneficiaries") or provide any
guarantee, security or the like on behalf of the Ultimate Beneficiaries.

55I Undisclosed Income

No transaction that has been not recorded in the books of accounts which are surrendered or disclosed as income
during the year in the tax assessments under the Income Tax Act, 1961 (such as search or survey or any other
relevant provisions of the Income Tax Act, 1961), unless there is immunity for disclosure under any scheme and
previously unrecorded income and related assets that have been properly recorded in the books of accounts during
the year.

55L Recent pronouncements

Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under
Companies (Indian Accounting Standards) Rules as issued from time to time. On 7^th May, 2025, MCA amended the
Companies (Indian Accounting Standards) Amendment Rules, 2023, as below. The amendment will be effective
from 01^st April, 2025.

Ind AS 21, Effects of change in foreign exchange rates - This amendment has defined the exchangeability of a
currency. The Company has evaluated the amendment and the impact of the amendment is insignificant in the
standalone financial statements.

56 The financial statements were approved for issue by the Board of Directors at their meeting held on 14^th May 2025.
These financial statements are presented in Indian rupees (rounded off to lakhs).

Material accounting policies and accompanying notes no.1 to 49 form an integral part of the financial statements.

As per our report of even date attached

For and on behalf of the Board of Directors

For GUPTA NAYAR & CO .Hr, \ .

Chartered Accountants, IU*A_'' LjL\-

Firm Registration No: 008376N

(BARENYA SENAPATI) (Dr. D.K. SUNIL)

I Director (Finance) & CFO Chairman & Managing Director

DIN: 08525943 DIN: 09639264

CA NANDLAL AGARWAL Q . q

Partner

Membership No: 091272 (SHAILESH BANSAL)

Place: Bengaluru Company Secretary

Date: 14.05.2025 FCS No. 5064

---

Mar 31, 2024

Nature and Purpose of each Reserve:

1. Research & Development Reserve:

Research and Development Reserve is created by transfer from Retained Earnings an annual contribution of 15% of Operating Profit After Tax. Research & Development Reserve is created to bring technological superiority to the products in order to cope with the future technological challenges. The amount of utilisation for Research and Development purposes during the year is transferred from Research and Development Research to General Reserve.

2. Captial Redemption Reserve:

Capital Redemption Reserve is created on redemption/buyback of equity shares.

3. Indigenization Fund Reserve:

Indigenization Fund Reserve is created by transfer from Retained Earnings an amount equal to 3% of Operating Profit After Tax which will be utilised to encourage Indigenization of items which are being sourced from foreign sources at present.

4. General Reserve:

General Reserve is created out of the profits of the Company and out of Research & Development Reserve on utilization of Research & Development purposes. This is a free reserve.

Note 49 - Explanatory Notes to the Standalone Financial Statements ('' in Lakhs)
Clause No.	Particulars
1(a)	Company Overview: Hindustan Aeronautics Limited ("HAL") herein after referred to as, "the Company" is a limited Company incorporated in India. It is presently a Government Company within the meaning of Section 2(45) of the Companies Act, 2013 as the President of India acting through the Ministry of Defence (MoD) holds 71.64%(Previous year: 71.65%) equity shares of the Company. The Company is engaged in the design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures. The Company has been set up to meet the requirement of Indian Defence Forces (namely Indian Air Force, Indian Army, Indian Navy and Indian Coast Guard) in the area of Aerospace. The Company''s operations are organised into five complexes, namely the Bangalore Complex, MiG Complex, Helicopter Complex, Accessories Complex and Design Complex, which together include 20 production divisions and 11 research and design centres ("R&D Centres") and 8 support offices located across India. For the purpose of Financial Statements 29 Divisions are consolidated by merging R&D Centers and support offices with the main production division. The Company relies on Indigenous research as well as enter into technology transfer and licence agreements to manufacture its products. In addition, the Company has established 12 (previous year: 11) Commercial Joint Venture Companies(JVCs) in collaboration with leading international aviation and Indian Organizations and 2 Subsidiary Companies to grow its operations. Besides, the Company also formed 2 Section-8 (non-profit) Companies. The financial statements are prepared to comply in all material aspects with Indian Accounting Standards (Ind AS) as prescribed under Section 133 of Companies Act, 2013 read with relevant rules of the Companies (Indian Accounting Standards) Rules.

2(b)	Contingent Liability not acknowledged as Debts(Gross)
	Particulars	As at 1st April 2023	Additions (net)	Removal (from Opening Balance)	As at 31st March 2024
(i) Income Tax		12625	26664	12402	26887
(ii) Municipal Tax
(iii) Others		9465	4170	426	13208
TOTAL		22090	30834	12828	40095

The Bruhath Bangalore Mahanagara Palike (BBMP) issued a Demand Notice dated 24^th September 2021 for a sum of ''20253 lakhs for the period between 2008-09 to 2021-22 with respect to property tax (including interest, cess and penalty) for properties owned by the Company. The Company challenged the same before City Civil Court. During the pendency of the case, the matter was taken up by BBMP before the Government of Karnataka and a "One Time Settlement Scheme" was notified by Government of Karnataka on 27^th March 2023. In furtherance thereof, a revised demand notice dated 31^st March 2023 for ''9159 lakhs (including property tax, cess and interest) was issued by BBMP The said demand was paid and complied by the Company as on 31^st March 2023.

	Particulars	As at 31st March 2024	As at 31st March 2023
2(c)	Guarantees excluding financial guarantees	-	-
3	Commitments
	Estimated amount of contracts remaining to be executed and not provided for:
	Particulars	As at 31st March 2024	As at 31st March 2023
	on Capital Account	227889	160734

I n view of the nature of business, being long term contracts there may be other commitments for purchase of material etc., which has been considered as normal business process, hence not been disclosed.

14.4 The Company''s Barrackpore Division is in possession of 23.385 acres (previous year: 22.51 acres) of land on which the Division has its Buildings, Hangar, Plant and Machinery etc. The instruments of transfer in favour of Division / Company either by way of lease or transfer in respect of this land is pending execution. Provision for lease rental amounting to '' 35.50 Lakhs upto the year ended 31^st March 2024 (previous year: ''35.00 Lakhs) has been made. The transfer of the land is being pursued with Defence Estate Officer, Kolkata.

The above does not includes 7.115 acres of Land received from Army in exchange of 5 acres of Land at Bangalore which was received free of cost from State Government before 31^st March 1969. Since the value of 5 acres land was nil, the value of 7.115 acres land received in exchange of 5 acres land is also taken as Nil.

The title deeds of immovable properties are not held in the name of the Division.

Land(Right-of-Use) under Property Plant and Equipment includes 200 acres land taken on lease for establishing a unit at Kasargod at a cost of '' 708 lakhs (previous year: '' 708 lakhs). This cost is amortised over the lease period of 90 years. The Lease charges for the year amounting to '' 8 Lakhs (previous year: '' 8 lakhs) has been considered under depreciation for the year. However 4.171 acres(previous year: 4.171 acres) of land shortage due to surrender of certain tracts of land against local disputes by KINFRA. Land shortage issue has been taken up with KINFRA for compensation of shortfall in the land. The Board of KINFRA also decided that the lease premium of '' 14.78 Lakhs remitted by HAL towards 4.171 acres of land will be refunded. HAL Board has accorded approval in their 472^nd Meeting held on 27.09.2023, proposal for acceptance of refund amount without interest from M/s KINFRA towards shortfall of land. Execution of amended Lease deed for 195.29 acres of land by SEF, Kasaragod is in progress.

Land under 14.3 include 12 acres of land given under lease to M/s LNB Renewable Energy Pvt Ltd., Hyderabad for 25 years, giving vendor the ''Right to Use'' specific land for establishing solar PV Power Plant project only and not for any other purpose with a Purchase Agreement for a period of 25 years for purchase of electricity generated by the Solar PV Power Plant project at the fixed tariff of ''3.23/KWh.

Further, 0.098 acres of free hold land located at Bowenpally, Hyderabad is included in total land held.

Land(Right-of-Use) under Property, Plant and Equipment includes land 0.273 acres taken on lease for Liason Office Mumbai at a cost of ''3 lakhs (including development cost). This cost is amortised over the lease period of 30 years. The amount of amortisation has been considered under depreciation for the year. Lease rental is ''2304/- payable annually.

Land under 14.3 include 39.79 acers to M/s Ordinance Factory, 0.098 acers to RCMA and 4.19 acers to M/s DAV College Trust.

14.5 a) Facilities Management Division (FMD) is holding 21 17.367 acres (previous year: 21 17.367 acres) land, out of

which free hold land of 2096.267 acres (previous year: 2096.267 acres) is located in Bangalore and 15.1 acres (previous year: 15.1 acres) located at Bagalkot, karnataka and Lease hold Land of 6 acres (previous year: 6 acres) is located at Harapanahalli, Devanagere, of which 17.737 acres (previous year: 17.737 acres) is under litigation / encroachment by third parties and 10.152 acres( previous year: 10.152 acres) is under dispute with M/s Bharat Earth Movers Limited.

b) Titles to land are not in the name of the Company in respect of 30 survey numbers totalling to 76.475 acres(previous year: 76.475 acres) at FMD division, However, Records of Tenancy Certificate is available.

c) Pending dispute settlement, an amount of ''3420 lakhs (previous year: ''3269 Lakhs) towards cumulative lease rental income with various parties has not been considered in the books of accounts, The applicable revised lease rental will be considered only after settlement of dispute and renewal of the lease agreements.

d) Department of Investment and Public Asset Management(DIPAM) has communicated the Institutional framework for monetization of the assets of the Central Public Sectors Enterprises, approved by Cabinet in its meeting dated 28^th February 2019.

In this regard, approval has been given by the Board in its 439^th Meeting held on 13^th November 2020 for Monetization of 1.45 acres of land at Okalipuram, Bengaluru for forwarding the proposal to Department of Defence Production(DDP) for approval / further action by DDP / DIPAM. HAL during November 2020 referred the proposal to MoD. MoD vide letter dated 8^th January 2021 communicated that the DIPAM has taken note of the asset monetization plan and indicated that HAL may take action to process the case further after taking necessary approval of competent authority as per extant guidelines. Accordingly FMD had advertised for outright sale of 1.45 acres of land through e-auction. However no bidders came forward to participate in response to the notification even after time for participation was extended twice. Thereafter a Committee was formed and as per its recommendation it was decided to monetize the full property of 2.925 acres at Okalipuram. Accordingly, the Board in its 458^th Meeting held on 29^th July 2022 approved monetization of 2.925 acres of land at Okalipuram. Accordingly, the Company advertised for outright sale of 2.925 acres for which e-auction was conducted on 12^th January 2023 and two parties submitted applications.The premium offered by H1 bidder is proposed for acceptance of the Competent Authority.

In the meanwhile, Govt. Audit raised an Audit Enquiry that the projected realizable land value is lesser than the Govt. guidance value. Accordingly, the Company engaged 3 valuers to independently undertake the valuation of 2.925 acres of land at okalipuram afresh. A Committee constituted by the Competent Authority reviewed the Valuation Reports sumbitted by the Valuers and submitted its report dated 28^th April 2023, recommending to cancel the sale of land and go for fresh asset monetization exercise by keeping the Reserve price of the land as '' 9780 lakhs. Based on approval of the Competent Authority on 04^th July 2023, the process of sale of land to the H1 Bidder has been annulled and is in process to monetize the land at a Reserve Price of '' 9780 lakhs during the year 2023-24.

e) Freehold Land of 4620.13 acres of Nasik division includes a land of 7 Acres - 13 Guntas which has been acquired by Maharashtra Government and transferred to HAL along with Durga Devi Temple and one tree. The title deeds of the land is in the name of HAL and there is no enchroachment. Further, the Land at Nasik division includes 0.0516 acres (previous year: 0.0516 Acres) of land encroached by 9 persons.

HAL Board in its 212^th Board meeting had accorded approval for leasing of land 2.47 Acres to Maharashtra State Road Transport Corporation (MSRTC) at Ojhar Nasik adjoining the National Highway to MSRTC for construction of bus stand for initial period of 30 years on a nominal rent of ''1/- per annam per acre, in exchange of one acre of MSRTC land to be leased to HAL at Nasik City located at SL. No.287/A, Aurangabad Road, Nasik measuring 4050 Sq. Mtrs. (i.e.1 acre of land).

Division has obtained 7/12 extract from revenue authorities Gut No.128 which indicates that land belongs to HAL.

f) About 50.21 acres(previous year: 50.21 acres) of the land belonging to the Company''s Koraput Division is encroached upon by the nearby villagers for cultivation.

g) "Land at Corporate office includes 711.22 sq.mt(Previous year 711.22 sq. mt) of land that has been acquired for the Metro Rail Project by M/s. Bangalore Metro Rail Corporation Limited (BMRCL). The compensation awarded of ''549 Lakhs (rounded off)(Previous year ''549 lakhs) by M/s. Karnataka Industrial Area Development Board (KIADB) was contested by Company in the City Civil Court at Bangalore. Meanwhile, a Joint Committee comprising the Company & BMRCL Officials was formed to arrive at an out of court settlement. Currently, the

case is pending at evidence stage before the City Civil Court at Bangalore . However, this is subject to final agreement of parties and order of court. On completion of the Metro Rail project, the land utilized is restricted to 272.94 sq.mt.(Previous year 272.94 sq. mt) Area to the extent of 438.28 sqm has been conveyed back to the Company through Deed of transfer. Compensation amount for remaining area, i.e 272.94 Sq. mt. is yet to be received by the Company. Company has filed memos in the pending cases requesting the Court to disburse '' 348 lakhs (rounded off) along with interest as compensation for remaining area of land (i.e. 272.94 sq.mt.). Further, Special Land Acquisition Officer (SLAO) has filed an application before Court requesting the Court to refund the entire amount with interest to it and for closing the case. Company has filed objections to the said application filed by SLAO. Company has also filed an application before the Court for disbursing '' 348 lakhs (rounded off) along with interest as compensation for remaining area of land (i.e. 272.94 sq.mt.) The matter was listed for hearing, on which date the SLAO filed the Memo stating that it is ready to pay compensation amount. Court is in process of hearing and disposing off our memos and the applications filed by SLAO and HAL." As the matter is subjudice, no adjustment has been made in the books.

14.6 Land under 14.1 includes (i) 376.76 acres (previous year: 376.76 acres) of the land acquired by State Government of Uttar Pradesh for HAL and possession was handed over to HAL by District Land Acquisition Officer. (ii) The factory area 54.30 acres was transferred during 1973 from Indian Air Force to HAL. (iii) Out of total land of 431.06 acres, 2.03 acres of land was sold to NHAI.

In the above cases, as per the legal position, all the parties are Government bodies. According to Government Grants Act, 15 of 1895, Section-2 Governments Grants are exempted from the operation of the transfer of property Act. Thus, there is no need of execution of the sale deed / transfer deed. Hence, the title deeds are not in the name of the Company.

Land under 14.3 does not include, the ownership of 27 acres (previous year: 27 acres) of land on which labour colony has been built by Labour Commissioner, Kanpur, belongs to the Company as per Revenue records. Out of the above said land, Joint Secretary, UP government vide its orders transferred 6.617 acres of land to UP State Electricity Board.

The encroachment of 41.69 acres has been identified as per Drone Survey Report, HAL has taken suitable and necessary steps towards eviction of the encroachers and Land of 25.49 acres is under litigation out of the total land of 429.03 acres.

14.7 a) Approval has given by the Board for acquiring 7.41 acres of land on lease at sattari Goa for undertaking

MRO activity during December 2017 Subsequently, as per the Board Approval in its 431^st and 434^th Meeting, tripartite lease deed was executed on the 18^th May 2023 between Goa Industrial Development Corporation (GIDC), M/s Helicopter Engines MRO Private Limited (HE MRO) and HAL MRO Division for transfer of Lease hold rights of land admeasuring 7.41 acres to HE-MRO.

b) The Company acquired during January 2021, 5 acres of defence land on lease at Akabil village, Missamari, District sonitpur for establishing MRO Hub Facilities for an annual lease rental of ''1.00 per annum without any premium and registration charges, processing fees etc as per actual.

c) The Company acquired during March 2021,4.34 acres of defence land on lease at Mamun Military station for establishing MRO Hub facilities at an annual lease rental of ''1.00 per annum without any premium along with necessary registration charges, processing fees etc as per actual.

Fair value of investment property

Fair value of the investment properties is ''40562 lakhs as valued by a Registered valuer as defined under rule 2 of Companies (Registered Valuers and Valuation) Rules, 2017.

In respect of the materials received under bulk contracts with the Russian Federation where the suppliers do not indicate itemized prices, the value of materials issued is assessed on technical estimates to exhibit a fair value of the closing work-in-progress and inventory of these materials is subject to adjustment at the end of the project.

Claims Receivable(Note 19) includes '' 2154 lakhs (Previous year - ''2154 Lakhs) settled under Sabka Saath Sabka Vikas scheme, is fully reimbursable by customer as per terms of pricing policy with Defence Services.

18A DIVIDEND POLICY:

As per extant memorandum F.No. PP/14(0005)/2016 dated June 20, 2016, of the Department of Public Enterprises, Ministry of Heavy Industries & Public Enterprises, Government of India (GOI) ("DoE") read with the memorandum F.No. 5/2/2016-Policy dated 27^th May, 2016 of the Department of Investment & Public Asset Management, Ministry of Finance, GoI, all central public sector enterprises are required to pay a minimum annual dividend of 30% of Profit After Tax (PAT) or 5% of the net-worth, whichever is higher, subject to the maximum dividend permitted under the extant legal provisions and the conditions mentioned in the aforesaid memorandum.

However, the declaration and payment of dividends on our Equity Shares will be recommended by our Board and approved by our shareholders, at their discretion, subject to the provisions of the Articles, the Companies Act, 2013. Further, the dividends, if any, will depend on a number of factors, including but not limited to our earnings, guidelines issued by the DoE, capital requirements and overall financial position of our Company. In addition, our ability to pay dividends may be impacted by a number of factors, including the results of operations, financial condition, contractual restrictions, restrictive covenants under the loan or financing arrangements the Company may enter into.

20 HAL has initiated criminal proceedings against the accused in 2011-12 and during 2012-13, two civil suits have been filed for recovery of fradulently drawn amounts against the accused, his accomplices and institutions namely, the State Bank of India (SBI) for ''289 Lakhs (COM.OS.5322/2012) and Shri Krishna Souharda credit Co-operative Limited for ''102 lakhs (COM.OS.8225/2012), totalling to ''391 lakhs. Both the civil cases and criminal case are under progress in the court. Properties of the accused amounting to ''138 lakhs have also been attached by the court. An amount of ''243 lakhs has been received from SBI on 25.04.19 and the balance amount of ''148 lakhs has been provided in the financials of 2018-19. The Hon''ble Court has passed the judgement and decree in favour of HAL by awarding ''289 Lakhs along with

interest. Out of which to the extent of ''148 Lakhs to be retained by HAL and the balance amount to be re-imbursed to SBI as per MoU entered between HAL and SBI. HAL has filed an Execution Petition on defendants for recovery of ''597 lakhs along with interest. Further, the subject case has been transferred to Commercial Court, Bengaluru Rural. The issuance of sale warrant in respect of the attached property is pending in court.

21 A fraud involving misappropriation of funds by 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 Investigation (CBI), Bhubaneshwar. An amount of ''1892 lakhs has been provisionally assessed and fully provided in the financials of 2018-19 and 2020-21 as fraudulent payments made to contractors and others during the period from May 2011 to September 2018 and reported in the FIR with CBI. Adjustment of expenses relating to capital and other accounts in the financial year 2018-19 and 2020-21 includes the above mentioned amount. The matter is under investigation by CBI.

24A As per the Accounting Policy of the Company, in respect of deliverables like spares, Revenue is recognized based on acceptance by the Buyers'' Inspection Agency or as agreed by the buyer.

Dispatching of the items to the customers are generally within three weeks from the date of acceptance. However, during the year ended 31.03.2024, there has been a delay in dispatching spares of '' 11134 lakhs due to Customer insistence / space constraint.

24B HAL has launched production of Light Utility Helicopter (LUH) against Letter of Intent (LoI) received from customers. Against this anticipated contract Material has been procured for '' 6690 lakhs (previous year: ''18011 lakhs) has been accounted as Inventory.

24C The Company was actively pursuing with the Ministry of Defence, Government of India for the approval of amendment of LCA (IOC) contract including price variation (LCA Change Order 3). Approval for the Change Order 3 in respect of LCA (IOC) contract was accorded. The Company has recognized differential revenue of ''54894 lakh during the year ended 31 March, 2024 pertaining to the supplies made in the earlier years, based on the amended contract.

The Company had recognized revenue in the earlier years based on the estimated selling price of LCA aircrafts pending approval of the amendment to the contract price and out of prudence, the Company had subsequently recognized the same as doubtful debt pending approval. Consequent to the approval of the Change Order 3, the Company has reversed the provision of ''103367 lakh made in earlier years during the year ended 31 March, 2024.

25 Seasonality of business:

The Company experiences cyclicality in respect of recognition of revenue from operations, which is attributable to the delivery of a majority of our products happening in the second half of the year. The Company recognise sales upon acceptance of the product by customers and issuance of a signaling out certificate (SOC) /certificate of conformity (COC) by them. The sales are dependent on the certification process which needs to be completed before the customers can take deliveries. The certification process typically takes place in the third and fourth quarter due to favourable weather conditions for flight tests during this period. This leads to bunching up of sales during the third and fourth quarter of each financial year and consequently, the revenue varies significantly between the first and second half of the year.

26 Aircraft have been accepted and signaled out by customers'' inspector with fitment of Cat-B items taken on Loan, in case of non availability of Cat-A items. As the aircraft is flight worthy and the customers have accepted the same, the sales are accounted, consistently, on the basis of Signaling Out Certificate (SOC) / Certicate of Conformity(COC). As a principle, Loan items fitted on the aircraft are excluded in value for recognising Sales. Sales in respect of such Cat-A items are recognized on supply of Cat-A items, within the contract period.

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 89% of Trade receivables and Contract Assets, around 34% 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.

28 In the opinion of the Board, the Company do not have any assets other than fixed assets and Non-current investments having a value on realisation in the ordinary course of business less than the amount stated.

29A Sales, based on Accounting Policy of the Company, is accounted on issuance of Signaling Out Certificate (SOC) by the customers. There is a time lag between SOC and Ferry out of Aircraft / Helicopter in view of the time involved in deputation of Ferry team by the customers, their handling flights and rectification of snags involved, if any, formation of the new squadron, training of pilots etc. The details of Aircraft /Helicopters which are yet to be ferried out (for which sales has been setup) as on the date of approval of financial statement is as under:

The expenditure involved in the work carried out post SOC date is absorbed against the provision for replacement charges.

The Company has taken up with Ministry of Defence (MoD) for amendment of ALH contract in respect of both Indian Air Force and Indian Army to bring them in line with the accounting policy of the Company. In respect of Indian Air Force, MoD have concurred ""in principle"" to above, with the stipulation that the contract amendment can be made only after similar contract amendment in respect of Indian Army contract with the Company is finalized. In respect of Indian Army contracts, the matter is under discussion.

29B The PSLV contract contains a clause that the acceptance of hardware takes in two places. The preliminary acceptance will be based on the inspection and quality reports and test carried out at the contractor''s premises and will be for the purpose of movement of hardware. Final acceptance will be at the site based on the final inspection / functional checks to be carried out on receipt at site.

30A HTFE 25 Project: The Company has taken up the design and development of Hindustan Turbo Fan Engine (HTFE-25) in 2013-14 with a time frame of 6 years for completion. The Core Engine 2, Run completed and development activities of TD Full Engine run and Design Configuration review are under progress. An amount of '' 17967 Lakhs (previous year: '' 16766 Lakhs) has been accounted under Intangible Assets under Development. It is assessed that, further development activities involve development of flight worthy engine for certification on a particular platform would require at least another 4 years or so. Keeping this in view and also that there is no visibility of any progress of any commitment/ orders for the Product, the Intangible Asset review Committee has recommended for impairment of total expenditure incurred on this project. Accordingly, ''17967 lakhs has been impaired upto the year ended 31^st March 2024 (upto previous year: ''16766 lakhs).

30B HTT 40 Project: The Company has undertaken the design and development of Hindustan Turbo Prop Trainer Aircraft (HTT- 40).

HAL has signed a contract with MoD on 6^th March 2023 for supply of 70 HTT 40 Aircraft. As per the Contract, '' 82824 Lakhs (excluding taxes) has been sanctioned towards Design & Development of HTT 40 aircraft. Accordingly '' 5856 lakhs (previous year: '' 76968 lakhs) has been recognised as revenue. The development amount of '' 4284 lakhs (previous year: '' 58518 lakhs) has been amortised against the revenue recognised.

31A One upgraded Mirage 2000 Aircraft crashed during customer acceptance flight at HAL Airport, Bangalore on 1^st February 2019. HAL has taken an insurance policy for efforts and material used in repair / overhaul, and preferred the claim with the Insurance company for '' 3447 lakhs. An amount of '' 3181 lakhs has been adviced for payment by Insurance Company after deducting 1% policy Administration charges, the disbursement has been received on 3^rd November 2022.

31B DDP/MoD paid an advance of '' 20812 lakhs to HAL towards conducting Def Expo-2022 at Gandhinagar from 10^th -13^th Mar 2022. The event got postponed and held in the month of October 2022, HAL had incurred an expenditure of '' 23367 lakhs, pending completion of audit of expenses by the O/o PCDA Bangalore, the balance of ''2555 lakhs shown under note-19 claims receivable as on 31^st March 2024.

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 lakhs and same provision has been created under Replacement Charges '' 5590 lakhs and Redundancy Charges of ''1001 lakhs during the year 2023-24.

31D 3 ^rd PPRC fixed FPQ prices from 2016-17 to 2022-23. 4^th PPRC for fixation of FPQ policy is due from 2023-24. Pending

finalization of approval for the FPQ fixation of prices for year 2023-24, sales have been recognized provisionally based on the indices provided by Air HQ.

31E As per Accounting Instruction, provision for redundancy is assessed on ageing at a suitable percentage / level of closing inventory. 100% redundancy provision is made for inventory items which have not moved for more than 5 years. The company makes estimates for recognizing provision for inventory. To bring uniformity in identifying the materials which have not moved more than 5 years, the date of arrival of the item to stores and subsequent issues has been reckoned for calculation of 5 years period. Due to the revision of the accounting estimates, an additional impact of '' 102497 Lakhs considered in the accounts during the year 2023-24.

33 Financial Risk Management

The Company is exposed to market risk, credit risk and liquidity risk which may impact the fair value of its financial

instruments. The Company, based on its business operation, evaluated the following risks:

a) Foreign currency risk:

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in exchange rates. The Company''s exposure to the risk of changes in exchange rates relates primarily to the Company''s imports for which the payment has to be done in currencies other than the functional currency of the Company. The fluctuation in exchange rates in respect to the Indian rupee may have very restricted impact on company as any fluctuations in foreign exchange are in general reimbursed by the customers of the Company in terms of the contractual obligations which the Company has with its customers.

b) Credit risk:

Credit risk is the risk of financial loss to the Company if a customer or counter party to a financial instrument fails to meet its contractual obligations resulting in a financial loss to the Company. Credit risk arises principally from trade receivables, loans & advances, advances given to suppliers (for procurement of goods, services and capital goods), cash & cash equivalents and deposits with banks and financial institutions. The Company for the Financial Year (FY) derived 95% (Previous year: 93%) of its total sales from sales to the Indian Defence Services. The Company expects to continue to derive most of its sales from the Indian Defence Services under the contracts of the Ministry of Defence (MoD), Government of India (GoI) the Company''s principal shareholder and administrative ministry.

c) Provision for expected credit losses:

As the Company''s debtors are predominantly the Government of India (Indian Defence Services, Ministry of External Affairs), Central Public Sector Undertakings where the counter - parties have sufficient capacity to meet the obligations and where the risk of default is nil / negligible. Accordingly, impairment on account of expected credit losses is being assessed on a case to case basis in respect of dues outstanding for significant period of time as per the accounting policy of the Company. Further, management believes that the unimpaired amounts that are due is collectable in full, based on historical payment behaviour and extensive analysis of customer credit risk.

d) Liquidity risk:

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Typically, the Company ensures that it has sufficient cash on demand to meet expected operational expenses including the servicing of financial obligations. The Company''s standard contract terms provide that, the Company receives advance payments from customers pursuant to the applicable contracts, including the Government of India and the Indian Defence

Services at the time of signing of any contract and milestone payments on achievement of physical milestones. These payments are utilized to meet the Company''s working capital needs (for the Company required to maintain a high level of working capital because the Company''s activities are characterized by long product development periods and production cycles). A majority of the Company''s research, design and development costs are funded by the Indian Defence services. Services and supply of spares are governed by the Fixed Price Quotation (FPQ) policy for fixation of the prices wherein the prices are fixed for the base year with escalation parameters for a pricing period of 5-7 years. The process of fixation of prices and approvals takes a minimum period of two years after the expiry of previous pricing period. In the interim, the approved prices of the previous pricing period are continued and payments are accordingly realised and on finalisation of the revised prices, the differential prices are paid to the Company. Further, certain costs not forming part of selling price are reimbursed by customer on incurrence of expenditure. The reimbursement is based on verification and issuance of audit certificate by the payees. There are delays in the above process due to unanticipated variations/ adjustments in the scope and schedule of the Company''s obligations due to subsequent modifications by the customers and delays in receipt of approvals from the customer. Further, payments to the Company by the Indian Defence Services are reliant on the continuing availability of budgetary appropriations by Government of India and any disruptions to the availability of such appropriations could adversely affect the Company''s cashflows.

e) Market risk:

The Ministry of Defence (MoD) and the Government of India (GoI) have continued efforts to reform defence related policies such as the Defence Acquisition Procedure 2020 (""DAP 2020"") to promote private participation, a level playing field and the domestic defence manufacturing Industry and eco-system. While the MoD has given the highest priority to Indigenously Designed, Developed and Manufactured (""IDDM"") products for capital procurement, the Company faces competition to be selected as the Indian production agency for such contracts. These policies have raised the level of market competition in the areas in which the Company operates.

f) Risk Mitigation Process:

As a step of institutionalizing the risk management in the Company, an elaborate framework has been developed and the Company''s top management has overall responsibility for the establishment and oversight of the Company''s risk management framework. An important purpose of the framework is to have a structured and comprehensive risk management system across the company which ensures that the risks are being properly identified and effectively managed. The Company has a risk management policy to manage & mitigate these risks. The risk management process includes risk identification, risk assessment, risk evaluation, risk mitigation and regular review and monitoring of risks.The Company''s risk management policy aims to reduce volatility in financial statements while maintaining balance between providing predictability in the Company''s business plan along with reasonable participation in market movement.

34 Capital Management:

For the purpose of the Company''s capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Company''s capital management is to maximise the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and requirements. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

35B Working Capital Facilities

The total Cash Credit limits '' 400000 lakhs including ''240000 lakhs of Commercial Paper(previous year: '' 400000 lakhs including ''240000 lakhs of Commercial Paper) and Corporate Loan of ''NIL lakhs and Non-Fund based limits '' 205000 lakhs (previous year: '' 205000 lakhs) sanctioned by consortium of bankers. The said limits are secured by hypothecation of inventories and receivables.

37 Segment Reporting

The Ministry of Corporate Affairs vide notification no 1/2/2014-CL-V dated 23^rd February 2018 has exempted the Government companies engaged in Defence production to the extent of application of Ind AS 108 on "Operating Segment''''.

38 As per Ind AS-109 relating to Accounting for Investments, amount being Dividend received from Joint Venture companies, which is recognised when right to receive Dividend is established.

39 Disclosure with regard to Joint Working Groups

The Company has entered into two Joint Working Agreements with Air India (AIJWG) to start Ramp Handling Business and with CONCOR(HALCON) to carry out Air Cargo Handling Business. The Joint Working Group pools together the resources for carrying out its business activity and ownership of the assets vests with the respective working group.

43 Provision for Gratuity and Earned Leave has been made based on Actuarial Valuation. The date of Actuarial valuation as of 31.03.2024

Employee Benefits:

The Company has adopted the Ind AS-19 on Employee Benefits. Consequently, the liability thereon is accounted on the basis of actuarial valuation, and is being recognised as short-term benefits / long term benefits.

43A Gratuity:

The Company has a Gratuity Scheme for its employees, which is a funded plan. Every year the Company funds to the Gratuity Trust to the extent of shortfall of the assets over the fund obligations, which is determined through actuarial valuation. As per the Gratuity Scheme, Gratuity is payable to an employee on the cessation of his employment after he has rendered continuous service for not less than 5 (five) years in the Company. For every completed year of service or part thereof in excess of six months, the Company shall pay Gratuity to an employee at the rate of 15 (fifteen) days'' emoluments based on the emoluments last drawn with a ceiling of '' 20 (twenty) Lakhs.

The following tables summarise the components of net benefit expense recognised in the Statement of Profit and Loss and the funded status and amounts recognised in the Balance Sheet for the plan as furnished in the Disclosure Report provided by the Actuary:

Sensitivity Analysis:

Gratuity is a lump sum plan and the cost of providing these benefits is typically less sensitive to small changes in demographic assumptions. Sensitivity analysis indicates the influence of a reasonable change in certain significant assumptions on the outcome of the Present value of obligation(PVO) and aids in understanding the uncertainity of reported amounts. Sensitivity analysis is done by varying one parameter at a time and studying its impact. The key actuarial assumptions to which the benefit obligation results are particularly sensitive to are discount rate and future salary escalation rate. The following table summarizes the impact in percentage terms on the reported defined

43B(i) The exempt provident fund set up by the company is a defined benefit plan under Ind AS 19 Employee Benefits.

Provident Fund for eligible employees is managed by the Company through a trust in line with the Provident Fund and Miscellaneous Provision Act, 1952. The plan guarantees notified interest rate by the Provident Fund Authorities. The contribution by the employer and employee together with the interest accumulated thereon are payable to employees at the time of separation from the Company or retirement, whichever is earlier. The benefits vests immediately on rendering of the services by the employee.

The minimum interest rate payable by the trust to the beneficiaries every year is notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust (including investment risk fall) and the notified interest rate.

The Company has obtained report on the determination and disclosure of interest rate Guarantee & Diminution of Asset Values as per Ind AS19 of Employees Exempt Provident Fund of HAL for the period ended 31^st March 2024.

In view of uncertainties regarding recoverability of certain investments in ILFS, Reliance Capital, Srei equipment finance, Future Enterprises etc., the liability was created. During the year ended 31^st March 2024 based on actuarial valuation additional liability has been created of ''5372 lakhs (Previous year - ''3928 lakhs).

Further, based on settlement made by DHFL, Sintex, Reliance Commercial Finance and Hazaribagh Ranchi Express Way Ltd., the actual loss of investment including interest of ''8247 lakhs has been accounted under employee benefits during the year ended 31^st March 2023. No settlement accounted under employee benefit expenditure during the year ended 31^st March 2024.

As per the approval of Board an amount of ''8089 lakhs released to various PF Trusts of HAL towards deficit arising out of investments made in DHFL and Sintex during the year 2023-24.

43C The Company has provided Performance Related Pay for the year as per the Guidelines issued by Department of Public Enterprises.

43D(i) Pension:

In line with the Guidelines issued by the Department of Public Enterprises, Ministry of Heavy Industries & Public Enterprises, Govt. of India for revision of the Salary Structure of Executives of CPSEs with effect from 1^st January, 2007 and as per the approval accorded by the Board of Directors and Department of Defence Production, Ministry of defence, a Defined Contribution Pension Scheme was notified in the Company on 16^th July, 2014 in respect of Executives retired etc., from 1^st January, 2007.

A Defined Contribution Pension Scheme in respect of Workmen retired after 1^st January, 2012 was notified on 2^nd June, 2015 which was agreed as a part of the Workmen''s Wage Revision effective from 1^st January, 2012.

Contribution to the corpus of the above schemes by the Management may vary from year to year as the same is dependent on profits generated, affordability & sustainability by the Company.

The Scheme is managed by a duly constituted Trust.

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 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.

43E Post Superannuation Group Health Insurance Schemes:

In line with the Guidelines issued by the Department of Public Enterprises, Ministry of Heavy Industries & Public Enterprises, Government of India and as per the approval accorded by the Board of Directors and Department of Defence Production, Ministry of defence, Post Superannuation Group Health Insurance Schemes in respect of (a) Employees (Officers & Workmen) retired before 1^st January, 2007 and (b) Executives retired on or after 1^st January, 2007 were introduced with effect from 1^st February, 2014.

A Post Superannuation Group Health Insurance Scheme in respect of Workmen of the Company retired, etc. after 1^st January, 2007 has been introduced in the Company with effect from 1^st February, 2015 which was agreed as a part of the Workmen''s Wage Revision effective from 1^st January, 2012.

Benefits under the Schemes may vary from year to year, as contribution to the Corpus of the Schemes is dependent on Profits generated, Affordability & Sustainability by the Company.

The Schemes are managed by a duly constituted Trust.

43F HAL Employees Group Life Insurance Trust:

As per the approval accorded by the Board, the Company has notified an insurance scheme namely the HAL Employees Group Life Insurance Trust to cover its employees, in case of death due to any reason other than suicide. The contribution towards the scheme are borne equally by employees and the Management. In the event of Death of an employee due to any reason other than suicide, the dependent family members will be paid the sum assured ('' 10 lakhs). The Company has made contribution of '' 135 lakhs to the trust with employees contributing an equal amount during the year 2023-24.

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 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) and provision of ''35218 lakhs (previous year: ''29645 lakhs) has been made in the books of accounts. The amount withheld from employees who retired after 30^th 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.

43H Financial Assitance Scheme for Dependents of Deceased Employee

As per the approval accorded by the Board, the Company has notified "Financial Assistance Scheme for dependents of Deceased Employees (FASDDE)" to pay a fixed amount on monthly basis to surviving spouse or dependent children if the spouse is not surviving, till the notional date of superannuation of the deceased employee. The prime objective of the scheme is to provide financial support for dependent beneficiaries of the employees who die while in service, to enable them to lead a normal life. The scheme will be applicable in all cases of Death of an employee due to any other reason other than suicide. Fund of ''4000 lakhs during 2021-22 & 1500 lakhs during 2022-23 transferred to trust for management of the Corpus. The income generated from the Corpus which will be invested with M/s LIC will be utilized to make payments under the Scheme.

During the year ''56 lakhs (previous year: ''378 lakhs) has been incurred as expenditure under Financial Assistance Scheme for Dependents of Deceased Employee which is included in Note 40 - Staff Welfare expenditure.

(b) As and when the instalments in respect of deferred debts falls due for payment to the Russian Federation, the same is paid by applying the exchange rate ruling on the date of actual payment and liability discharged. The differences arising due to recalculation of debts at the applicable /ruling rate is charged to the revenue at the time of payment and recognised as sales when realised from the customer except to the extent it pertains to Capital Assets.The sales for Exchange Rate Variation (ERV) considered is ''4873 Lakhs(Previous year - '' 5118 Lakhs). The Assets and Liabilities relating to deferred credit transaction are reinstated under Non-current Other Financial Assets, Current Other Financial Assets (recoverable within one year), Non-current Other Financial Liabilities and Current Other Financial Liabilities (to be settled within one year).

45B The Board in its 406^th meeting held on 22^nd September 2017, accorded in principle approval for voluntary winding up / closure of the three Joint Ventures i.e. M/s. HAL-Edgewood Technologies Private Limited, M/s. Tata HAL Technologies Ltd and M/s. Multirole Transport Aircraft Ltd. enabling the Company to take further action in the matter.

Further, the Board authorized the Company to seek approval of Ministry of Defence (MoD), for short closure of the Contracts associated with the M/s Multirole Transport Aircraft (MTA) project and requested MoD, to initiate necessary action for closure of IGA, as it is a prerequisite for winding up of the MTA - Joint Venture Company. Further, MOD vide its letter dated 14^th October 2021 notified the termination of the agreement between the Govt. of the Republic of India and Govt. of Russian Federation. In this respect the Russian Federation vide its letter dated 20^th April 2022 intimated that the decision of the Indian side has been taken into consideration.

Further in 435^th meeting held on 16^th March 2020, the Board has directed the Company to expedite the closure of M/s. Multirole Transport Aircraft Ltd at the earliest after taking clearance from Russian partners from their Board(refer Clause No.10).

The Board in its 440^th meeting held on 9^th December 2020, accorded in principle approval for voluntary winding up / closure of Joint Venture M/s. Infotech HAL Limited(IHL) enabling the Company to take further action in the matter.

TATA HAL Techonology Ltd., Pursuant to the Board Resolution dated 08^th June 2021, the company has filed the application for voluntary liquidation to MCA in terms of Section 59 of the Insolvency and Bankruptcy Code, 2016 and the official liquidator is appointed. The official liquidator, vide their letter dated 07.03.2022, intimated about

the distribution of liquidation proceeds to the stakeholders of the TATA HAL Technologies Limited. Pursuant to the same liquidation proceeds of ''34 lakhs was received by the Company during 2022-23.

The Company has derecognized the investment made in TATA HAL Technologiy Limited as on 30^th June 2022.

45B(i) The Company had signed an agreement with Safran Helicopter Engines SAS for setting up a joint venture to carry out business of design, development, certification, production, sale and support of helicopter engines. Pursuant to the same a Joint Venture Company with Safran Helicopter Engines SAS by name SAFHAL Helicopter Engines Private Limited has been incorporated on 09 November 2023. Each JV partner has subscribed for 1000000 equity shares of ''10 each amounting to ''100 lakhs.

45C Defence Innovation Organisation ("DIO"):

A Section 8 Company has been formed (Under Companies Act 2013) in the name of ""Defence Innovation Organisation"" with M/s BEL with an authorised Capital of '' 100 lakhs (Paid up capital as on 31^st March 2024 is '' 1 Lakh( HAL 50% Share and BEL 50% Share). The registered office of DIO is situated at Centre for Learning and Development, Bharat Electronics Limited, Jalahalli, Bengaluru - 560013, Karnataka, India. DIO was incorporated to implement the scheme of defence innovation fund initiative by creation of an ecosystem to foster innovation and technology development in defence.

HAL Board in its 417^th meeting held on 30^th July 2018 had accorded approval for release of '' 5000 lakhs to DIO towards initial corpus fund in form of Grant in Aid in a staggered manner. Accordingly '' 500 lakhs has been released to DIO in the month of August 2018 and the balance amount is recognised and disclosed in other finanial liabilities - other liabilities (note 32).

45D The Board in its 434^th meeting was informed that Government approval is not required for transfer of lease hold land to M/S Helicopter Engines MRO Private Limited (HE-MRO), as it is neither defence land nor it is a land owned by HAL. Board reconsidered the decision taken in its 431^st meeting and approved transfer of land without Government approval to M/s HE-MRO.

In line with the Board Approval in its 431 and 434 meetings, Tripartite Deed of Lease was executed on the 18^th May 2023 between Goa Industrial Development Corporation (GIDC), M/s Helicopter Engines MRO Private Limited (HE MRO) and HAL MRO Division for transfer of Lease hold rights of industrial plot admeasuring 7.41 acres to HE MRO.

Further, the Sale of Deed was executed between HAL-MRO Division and HE -MRO on 8^th June 2023 for sale of Building and Plant & Machinery and Other Assets for a total consideration of ''1029 lakhs.

Accordingly necessary accounting treatment has been made in the Books of Accounts.

45E The Company paid ''950 lakhs towards subscription of 950000 equity shares of the face value of ''100 each to its Joint Venture Company, Helicopter Engines MRO Private Limited, on 8 January, 20

---

Mar 31, 2023

Nature and Purpose of each Reserve:1. Research & Development Reserve:

Research and Development Reserve is created by transfer from Retained Earnings an annual contribution of 15% of Operating Profit After Tax. Research & Development Reserve is created to bring technological superiority to the products in order to cope with the future technological challenges. The amount of utilisation for Research and Development purposes during the year is transferred from Research and Development Reserve to General Reserve.

2. Capital Redemption Reserve:

Capital Redemption Reserve is created on redemption/buyback of equity shares.

3. Indigenization Fund Reserve:

Indigenization Fund Reserve is created by transfer from Retained Earnings an amount equal to 3 % of Operating Profit After Tax which will be utilised to encourage Indigenization of items which are being sourced from foreign sources at present.

4. General Reserve:

General Reserve is created out of the profits of the Company and out of Research & Development Reserve on utilization of Research & Development purposes. This is a free reserve.

Company Overview:

Hindustan Aeronautics Limited ("HAL") herein after referred to as, "the Company" is a limited Company incorporated in India. It is presently a Government Company within the meaning of Section 2(45) of the Companies Act, 2013 as the President of India acting through the Ministry of Defence (MoD) holds 71.65%(Previous year - 75.15%) equity shares of the Company.

The Company is engaged in the design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures. The Company has been set up to meet the requirement of Indian Defence Forces (namely Indian Airforce, Indian Navy, Indian Army and Indian Coast Guard) in the area of Aerospace.

1(a) The Company''s operations are organised into five complexes, namely the Bangalore Complex, MiG Complex, Helicopter Complex, Accessories Complex and Design Complex, which together include 20 production divisions and 11 research and design centres ("R&D Centres") and 8 support offices located across India. For the purpose of Financial Statements 29 Divisions are consolidated by merging R&D Centers and support offices with the main production division. The Company relies on Indigenous research as well as enter into technology transfer and licence agreements to manufacture its products. In addition, the Company has established 11(eleven)(Previous year 12(twelve)) Commercial Joint Venture Companies(JVCs) in collaboration with leading international aviation and Indian Organizations and 2(two) Subsidiary Companies to grow its operations. Besides, the Company also formed 2(two) Section-8 (non-profit) Companies.

The Financial Statements are prepared to comply in all material aspects with Indian Accounting Standards (Ind AS) as prescribed under Section 133 of Companies Act, 2013 read with relevant rules of the Companies (Indian Accounting Standards) Rules.

One Avro Aircraft (BH 572) is on lease from Indian Air Force for a period of 1 year for an amount of ''248 lakhs. The charges for the same has been accounted as expenditure of ''248 lakhs for the year ended 31^st March 2023. The company has option to renew the lease subject to increment of 9% over previous year. as lessor:

The Company leases out its Investment property and Property, Plant and Equipment. The Company has classified these lease as operating leases, as there is no transfer substantially all the risks and rewards incidental to the ownership of the assets. Clause 14.12 of Note 49 gives information about the operating leases of Investment Property.

R&D Corpus

Considering the futuristic business interest of the Company and to maintain the yearly growth in Revenues of the

¹² Company, the Board has approved the enhancement of the existing fund allocation for creation of R&D Corpus (excluding customer funded R&D) with an annual contribution from 10 % to 15% of Operational Profit After Tax (PAT).

Indigenization Corpus

13 Notification on Policy for Indigenization of Components and spares used in Defence platforms for DPSUs/OFB was issued on 8^th March 2019. As per the guidelines from Department of Defence Production(DDP) Board has approved creation of Indigenization Corpus with an annual contribution of 3% of Operating Profit After Tax (PAT).

The Company''s Barrackpore Division is in possession of 22.51 acres (Previous year - 22.51 acres) of land on which the Division has its Buildings, Hangar, Plant and Machinery etc. The instruments of transfer in favour of Division / Company either by way of lease or transfer in respect of this land is pending execution. Provision for lease rental amounting to ''35.00 Lakhs upto the period ended 31^st March 2023 (Previous year - ''34.50 Lakhs) has been made. The transfer of the land is being pursued with Defence Estate Officer, Kolkata.

The above does not includes 7.115 acres of Land received from Army in exchange of 5 acres of Land at Bangalore which was received free of cost from State Government before 31^st March 1969. Since the value of 5 acres land was nil, the value of 7.115 acres land received in exchange of 5 acres land is also taken as Nil.

The title deeds of immovable properties are not held in the name of the Division.

Land(Right-of-Use) under Property Plant and Equipment includes land taken on lease for establishing a unit at Kasargod at a cost of ''708 lakhs for 200 acres (Previous year - ''708 lakhs for 200 acres). This cost is amortised over the lease period of 90 years. The Lease charges for the year amounting to '' 8 Lakhs (Previous year - '' 8 lakhs)

14.4 has been considered under depreciation for the year. However 4.171 Acres(Previous year - 4.171 Acres) of land shortage due to surrender of certain tracts of land against local disputes by KINFRA. However issue has been taken up with KINFRA for compensation of shortfall in the land. The Board of KINFRA also decided that the lease premium of ''14.78 Lakhs remitted by HAL towards 4.171 acres of land will be refunded and necessary corrections are to be made in the lease deed to effect the changes. Awaiting action from KINFRA.

Land under 14.3 include 12 acres of land given under lease to M/s LNB Renewable Energy Pvt Ltd., Hyderabad for 25 years, giving vendor the ''Right to Use'' specific land for establishing solar PV Power Plant project only and not for any other purpose with a Purchase Agreement for a period of 25 years for purchase of electricity generated by the Solar PV Power Plant project at the fixed tariff of '' 3.23/KWh.

Land(Right-of-Use) under Property, Plant and Equipment includes land 0.273 acres taken on lease for Liason Office Mumbai at a cost of '' 3 lakhs (including development cost). This cost is amortised over the lease period of 30 years. The amount of amortisation has been considered under depreciation for the year. Lease rental is '' 2304/- payable annually.

Land under 14.3 includes 38.68 acres of land given under lease to M/s Ordanance Factory Board(OFB), out of which

8.65 acres has been sub-leased to M/s Indo-Russian Rifles Private Limited (IRRPL) at an annual rent of ''1 per annum.

14.5 a) Facilities Management Division (FMD) is holding 21 17.367 acres (Previous year - 21 17.367 acres) land, out of which free hold land of 2096.267 acres (Previous year -2096.267 acres) is located in Bangalore and 15.1 acres (Previous year - 15.1 acres) located at Bagalkot, karnataka and Lease hold Land of 6 acres (Previous year - 6 acres) is located at Harapanahalli, Devanagere, of which 17.737 acres (Previous year - 17.737 acres) is under litigation / encroachment by third parties and 10.152 acres( Previous year - 10.152 acres) is under dispute with M/s Bharat Earth Movers Limited.

b) Titles to land are not in the name of the Company in respect of 30 survey numbers totalling to 76.475 acres(Previous year - 72.675 acres) at FMD Division, However, Records of Tenancy Certificate is available.

c) An amount of '' 3269 lakhs (Previous year - '' 3119 Lakhs) towards cumulative Lease Rental charges with various parties has not been considered in the books of accounts, pending dispute settlement. The applicable revised lease rental will be considered only after renewal of the lease agreements.

d) Department of Investment and Public Asset Management(DIPAM) has communicated the Institutional framework for monetization of the assets of the Central Public Sectors Enterprises, approved by Cabinet in its meeting dated 28^th February 2019.

In this regard, approval has been given by the Board in its 439^th Meeting held on 13^th November 2020 for Monetization of 1.45 acres of land at Okalipuram, Bengaluru for forwarding the proposal to Department of Defence Production(DDP) for approval / further action by DDP / DIPAM. HAL during November 2020 referred the proposal to MoD. MoD vide letter dated 8^th January 2021 communicated that the DIPAM has taken note of the asset monetization plan and indicated that HAL may take action to process the case further after taking necessary approval of competent authority as per extant guidelines. Accordingly FMD had advertised for outright sale of 1.45 acres of land through e-auction. However no bidders came forward to participate in response to the notification even after time for participation was extended twice. Thereafter a Committee was formed and as per its recommendation it was decided to monetize the full property of 2.925 acres at Okalipuram. Accordingly, the Board in its 458^th Meeting held on 29^th July 2022 approved monetization of 2.925 acres of land at Okalipuram. Accordingly, the Company advertised for outright sale of 2.925 acres for which e-auction was conducted on 12^th January 2023 and two parties submitted applications.The premium offered by H1 bidder is proposed for acceptance of the Competent Authority.

In the meanwhile, Govt. Audit raised an Audit Enquiry that the projected realizable land value is lesser than the Govt. guidance value. Accordingly, the Company engaged the valuers to undertake the valuation.

e) Land at Nasik Division includes 0.0516 acres (Previous year - 0.0516 Acres) of land encroached by 9 persons.

f) Further, about 50.21 acres(Previous year - 50.21 acres) of the land belonging to the Company''s Koraput Division is encroached upon by the nearby villagers for cultivation.

g) Land at Corporate office includes 711.22 sq.mt (Previous year - 711.22 Sq.mt) of land has been acquired for the Metro Rail Project by M/s Bangalore Metro Rail Corporation Limited (BMRCL). The compensation awarded of '' 549 Lakhs by M/s Karnataka Industrial Area Development Board (KIADB) was contested by Company in the City Civil Court at Bangalore. Meanwhile, a Joint Committee comprising the Company and BMRCL Officials was formed to arrive at an out of court settlement. Currently the case is pending at evidence stage, the Company is seeking adjournment on account of discussion between parties for settlement. However, this is subject to final agreement of parties and order of court. On completion of the Metro Rail project, the land utilized is restricted to 272.94 sq.mt (Previous year - 272.94 Sq.mt). Area to the extent of 438.28 sqm has been conveyed back to HAL through Deed of transfer. Compensation amount for acquired area, i.e 272.94 Sq. mt. is yet to be received by the Company. HAL has filed memos in the pending cases requesting the Court to disburse '' 348 lakhs along with interest as compensation for acquired area of land (i.e. 272.94 sq.mt.) to HAL. As the matter is subjudice, no adjustment has been made in the books.

Land under 14.1 does not include 374.73 acres (Previous year - 374.73 acres) of the land was aquired by State Government of Uttar Pradesh and possession was handed over to HAL by District Land Acquisition Officer. The factory area 54.30 acres was transferred during 1973 from Indian Air Force to HAL. As per the legal position, both the parties are Government bodies. According to Government Grants Act, 15 of 1895, Section-2 Governments Grants are exempted from the operation of the transfer of property Act. Thus, there is no need of execution of the

14.6 sale deed / transfer deed. A transfer of the title of land, thus, required no registration. The transfer of land by State of Uttar Pradesh and Indian Air Force to HAL need not require any registration as this transfer is exempted by the Government Grants Act.

Land under 14.3 does not include, the ownership of 27 acres (Previous year - 27 acres) of land on which labour colony has been built by Labour Commissioner, Kanpur belongs to the Company as per Revenue records.

a) Approval has been given by the Board for acquiring 7.41 acres of land on lease at Sattari Goa for undertaking MRO activity.

b) Approval has been given by the Board for acquiring 5 acres of defence land on lease at Akabil village,

14 7 Missamari, District sonitpur for establishing MRO Hub Facilities for an annual lease rental of ''1.00 per annum

. without any premium and registration charges, processing fees etc as per actual.

c) Approval has been given by the Board for acquiring 4.34 acres of defence land on lease at Mamun Military station for establishing MRO Hub facilities at an annual lease rental of ''1.00 per annum without any premium along with necessary registration charges, processing fees etc as per actual.

One Hawk-i Aircraft has been used by Aircraft Division for Marketing and Testing Activities. The useful life of the 14.8 Hawk-i Aircraft is technically assessed to be 5 years from 2018-19, accordingly the depreciation has been provided @ 20% per annum.

DIVIDEND POLICY:

As per extant memorandum F.No. PP/14(0005)/2016 dated June 20, 2016, of the Department of Public Enterprises, Ministry of Heavy Industries & Public Enterprises, Government of India (GOI) ("DoE") read with the memorandum F.No. 5/2/2016-Policy dated 27^th May, 2016 of the Department of Investment & Public Asset Management, Ministry of Finance, GoI, all central public sector enterprises are required to pay a minimum annual dividend of 30% of Profit After Tax (PAT) or 5% of the net-worth, whichever is higher, subject to the maximum dividend permitted 18A under the extant legal provisions and the conditions mentioned in the aforesaid memorandum.

However, the declaration and payment of dividends on our Equity Shares will be recommended by our Board and approved by our shareholders, at their discretion, subject to the provisions of the Articles, the Companies Act, 2013. Further, the dividends, if any, will depend on a number of factors, including but not limited to our earnings, guidelines issued by the DoE, capital requirements and overall financial position of our Company. In addition, our ability to pay dividends may be impacted by a number of factors, including the results of operations, financial condition, contractual restrictions, restrictive covenants under the loan or financing arrangements the Company may enter into.

HAL has initiated criminal proceedings against the accused in 2011-12 and during 2012-13, two civil suits have been filed for recovery of fradulently drawn amounts against the accused, his accomplices and institutions namely, the State Bank of India (SBI) for ''289 Lakhs (COM.OS.5322/2012) and Shri Krishna Souharda credit Co-operative Limited for ''102 lakhs (COM.OS.8225/2012), totalling to '' 391 lakhs. Both the civil cases and criminal case are under progress in the court. Properties of the accused amounting to ''138 lakhs have also been attached by the court. An amount of '' 243 lakhs has been received from SBI on 25.04.19 and the balance amount of ''148 lakhs has been

20 provided in the financials of 2018-19.

The Hon''ble Court has passed the judgement and decree in favour of HAL by awarding '' 289 Lakhs along with interest. Out of which to the extent of '' 148 Lakhs to be retained by HAL and the balance amount to be re-imbursed to SBI as per MoU entered between HAL and SBI. HAL has filed an Execution Petition on defendants for recovery of '' 597 lakhs along with interest. Further, the subject case has been transferred to Commercial Court, Bengaluru Rural, accordingly the case was re-allotted as Ex/124/2022 dt. 27.06.2022. The issuance of sale warrant in respect of the attached property is pending in court.

A fraud involving misappropriation of funds by 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 Investigation (CBI), Bhubaneshwar. An amount

21 of ''1892 lakhs has been provisionally assessed and fully provided in the financials of 2018-19 and 2020-21 as fraudulent payments made to contractors and others during the period from May 2011 to September 2018 and reported in the FIR with CBI. Adjustment of expenses relating to capital and other accounts in the financial year 2018-19 and 2020-21 includes the above mentioned amount. The matter is under investigation by CBI.

The Company''s IJT Division is primarily engaged in production of Intermediate Jet Trainer (IJT) Aircraft. Contract for supply of 12 Limited Series Production of IJT Aircraft with IAF is pending for fulfillment of certain Parameters as required by the Customer. Completion of all parameters required by the Customers will take some more time after which delivery of 12 IJT LSP will start. As per the Article 5.2 of 12 LSP IJT Contract, Stores to be supplied under this contract shall be new i.e. not manufactured before and shall incorporate all the latest improvement and modification thereto. Therefore, Parts manufactured and lying in Inventory could not be used for delivery of 23A ultimate product to the customers at this stage. Accordingly, Work in progress of '' 26589 lakhs as on 31^st March 2022 lying in the Books of IJT Division has been fully provided for in line with Company''s accounting procedure.

Similarly, Kanpur Division of HAL has received order for supply of Series production of 72 IJT which will start after completion of supply of 12 IJT by IJT LSP Division. Accordingly, Net realisable value of Stock in Trade and Finished Goods of valuing '' 5705 Lakhs as on 31^st March 2022 in the Books of Lucknow and Hyderabad Division has been considered as Nil.

While the company is pursuing actively with Ministry of Defence, for the approval of the price variation to change 23B order in LCA-IOC contract which is pending for approval, out of prudence, provision for ''99025 lakhs is recognised in the Financial Statements 2021-22.

As per the Accounting Policy of the Company, in respect of deliverables like spares, Revenue is recognized based on acceptance by the Buyers'' Inspection Agency or as agreed by the buyer.

24b Delivery of the items to the customers are generally within three weeks from the date of acceptance. However, during the year ended 31.03.2023, due to lack of space in Customer premises/Customer insistence to dispatch the items at later date, there has been a delay in dispatching spares of ''76 lakhs to the Customers within three weeks from the date of acceptance.

HAL has launched production of Light Utility Helicopter (LUH) against Letter of Intent (LoI) received from customers. 24C Against this anticipated contract Material has been procured for '' 18011 lakhs (Previous year - ''1899 lakhs) has been accounted as Inventory.

Seasonality of business :

The Company experiences cyclicality in respect of recognition of revenue from operations, which is attributable to the delivery of a majority of our products happening in the second half of the year. The Company recognise sales upon acceptance of the product by customers and issuance of a signaling out certificate/certificate of conformity

25 by them. The sales are dependent on the certification process which needs to be completed before the customers can take deliveries. The certification process typically takes place in the third and fourth quarter due to favourable weather conditions for flight tests during this period. This leads to bunching up of sales during the third and fourth quarter of each financial year and consequently, the revenue varies significantly between the first and second half of the year.

Aircraft have been accepted and signaled out by customers'' inspector with fitment of Cat-B items taken on Loan, in cases of non availability of Cat-A item. As the aircraft is flight worthy and the customers have accepted

26 the same, the sales are accounted, consistently, on the basis of Signaling Out Certificate (SOC) / Certicate of Conformity(COC). As a principle, Loan items fitted on the aircraft are excluded in value for recognising Sales. Sales in respect of such Cat-A items are recognized on supply of Cat-A items, within the contract period.

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 97% of the

27 Company''s turnover, around 97% of Trade receivables and Contract Assets, around 38% 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.

2g In the opinion of the Board, the Company do not have any assets other than fixed assets and Non-current investments having a value on realisation in the ordinary course of business less than the amount stated.

The expenditure involved in the work carried out post SOC date is absorbed against the provision for replacement charges.

The Company has taken up with Ministry of Defence (MoD) for amendment of ALH contract in respect of both Indian Air Force and Indian Army to bring them in line with the accounting policy of the Company. In respect of Indian Air Force, MoD have concurred "in principle" to above, with the stipulation that the contract amendment can be made only after similar contract amendment in respect of Indian Army contract with the Company is finalized. In respect of Indian Army contracts, the matter is under discussion.

The PSLV contract contains a clause that the acceptance of hardware takes in two places. The preliminary 29b acceptance will be based on the inspection and quality reports and test carried out at the contractor''s premises and will be for the purpose of movement of hardware. Final acceptance will be at the site based on the final inspection / functional checks to be carried out on receipt at site.

HTFE 25 Project: The Company has taken up the design and development of Hindustan Turbo Fan Engine (HTFE-25) in 2013-14 with a time frame of 6 years for completion. The Core Engine 2, Run completed and development activities of TD Full Engine run and Design Configuration review are under progress. An amount of '' 16766 Lakhs (Previous year - '' 15923 Lakhs) has been accounted under Intangible Assets. It is assessed that, further 30A development activities involve development of flight worthy engine for certification on a particular platform would require at least another 5 years or so. Keeping this in view and also that there is no visibility of any progress of any commitment/ orders for the Product, the Intangible Asset review Committee has recommended for impairment of total expenditure incurred on this project. Accordingly, ''16766 lakhs has been impaired upto the year ended 31^st March 2023 (Previous year - '' 15923 lakhs).

HTT 40 Project: The Company has undertaken the design and development of Hindustan Turbo Prop Trainer Aircraft ( HTT- 40).

30B HAL has signed a contract with MoD on 6^th March 2023 for supply of 70 HTT 40 Aircraft. As per the Contract, ''82824 Lakhs (excluding taxes) has been sanctioned towards Design & Development of HTT 40 aircraft. Accordingly ''76968 lakhs has been recognised as revenue during the year. The development amount of ''58518 lakhs has been amortised against the revenue recognised.

One upgraded Mirage 2000 Aircraft crashed during customer acceptance flight at HAL Airport, Bangalore on 1^st February 2019. HAL has taken an insurance policy for '' 3412 lakhs for HAL efforts and material used in repair 31A / overhaul, and preferred the claim with the Insurance company for '' 3447 lakhs. An amount of '' 3181 lakhs

has been adviced for payment by Insurance Company after deducting 1% policy Administration charges (Claim admitted ''3215 lakhs less '' 34 lakhs), the disbursement has been received on 03.1 1.2022.

DDP/MoD Paid Advance of '' 20812 lakhs to HAL towards conducting Def Expo-2022. The event got postponed 31B while HAL had incurred expenditure of '' 19011 lakhs. Pending completion of audit of expenses by the O/o PCDA Bangalore, the balance of '' 1801 lakhs is shown under note-32 Other financial liability as on 31.03.2023.

Inventory amounting to ''16,939 lakhs were damaged due to floods caused by rains. An internal technical 31C assessment committee estimated the loss of Inventory ''7856 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''s based on the original cost has been submitted to the Insurance Company.

The Company is exposed to market risk, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company, based on its business operation, evaluated the following risks:

a) Foreign currency risk:

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in exchange rates. The Company''s exposure to the risk of changes in exchange rates relates primarily to the Company''s imports for which the payment has to be done in currencies other than the functional currency of the Company. The fluctuation in exchange rates in respect to the Indian rupee may have very restricted impact on company as any fluctuations in foreign exchange are in general reimbursed by the customers of the Company in terms of the contractual obligations which the Company has with its customers.

b) Credit risk:

Credit risk is the risk of financial loss to the Company if a customer or counter party to a financial instrument fails to meet its contractual obligations resulting in a financial loss to the Company. Credit risk arises principally from trade receivables, loans & advances, advances given to suppliers (for procurement of goods, services and capital goods), cash & cash equivalents and deposits with banks and financial institutions. The Company for the Financial Year (FY) derived 93% (Previous year - 93%) of its total sales from sales to the Indian Defence Services. The Company expects to continue to derive most of its sales from the Indian Defence Services 33 under the contracts of the Ministry of Defence (MoD), Government of India (Gol) -the Company''s principal

shareholder and administrative ministry.

c) Provision for expected credit losses:

As the Company''s debtors are predominantly the Government of India (Indian Defence Services, Ministry of External Affairs), Central Public Sector Undertakings where the counter - parties have sufficient capacity to meet the obligations and where the risk of default is nil / negligible. Accordingly, impairment on account of expected credit losses is being assessed on a case to case basis in respect of dues outstanding for significant period of time as per the accounting policy of the Company. Further, management believes that the unimpaired amounts that are due is collectable in full, based on historical payment behaviour and extensive analysis of customer credit risk.

d) Liquidity risk:

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Typically, the Company ensures that it has sufficient cash on demand to meet expected operational expenses including the servicing of financial obligations. The Company''s standard contract terms provide that, the Company receives advance payments from customers pursuant to the applicable contracts, including the Government of India and the Indian Defence Services at the time of signing of any contract and milestone payments on achievement of physical milestones. These payments are utilized to meet the Company''s working capital needs (for the Company required to maintain a high level of working capital because the Company''s activities are characterized by long product development periods and production cycles). A majority of the Company''s research, design and development costs are funded by the Indian Defence services. Services and supply of

spares are governed by the Fixed Price Quotation (FPQ) policy for fixation of the prices wherein the prices are fixed for the base year with escalation parameters for a pricing period of 5-7 years. The process of fixation of prices and approvals takes a minimum period of two years after the expiry of previous pricing period. In the interim, the approved prices of the previous pricing period are continued and payments are accordingly realised and on finalisation of the revised prices, the differential prices are paid to the Company. Further, certain costs not forming part of selling price are reimbursed by customer on incurrence of expenditure. The reimbursement is based on verification and issuance of audit certificate by the payees. There are delays in the above process due to unanticipated variations/adjustments in the scope and schedule of the Company''s obligations due to subsequent modifications by the customers and delays in receipt of approvals from the customer. Further, payments to the Company by the Indian Defence Services are reliant on the continuing availability of budgetary appropriations by Government of India and any disruptions to the availability of such appropriations could adversely affect the Company''s cashflows.

e) Market risk:

The Ministry of Defence (MoD) and the Government of India (GoI) have continued efforts to reform Defence related policies such as the Defence Acquisition Procedure 2020 ("DAP 2020") to promote private participation, a level playing field and the domestic Defence manufacturing Industry and eco-system. While the MoD has given the highest priority to Indigenously Designed, Developed and Manufactured ("IDDM") products for capital procurement, the Company faces competition to be selected as the Indian production agency for such contracts. These policies have raised the level of market competition in the areas in which the Company operates.

33 f) Risk Mitigation Process:

As a step of institutionalizing the risk management in the Company, an elaborate framework has been developed and the Company''s top management has overall responsibility for the establishment and oversight of the Company''s risk management framework. An important purpose of the framework is to have a structured and comprehensive risk management system across the company which ensures that the risks are being properly identified and effectively managed. The Company has a risk management policy to manage & mitigate these risks. The risk management process includes risk identification, risk assessment, risk evaluation, risk mitigation and regular review and monitoring of risks.The Company''s risk management policy aims to reduce volatility in financial statements while maintaining balance between providing predictability in the Company''s business plan along with reasonable participation in market movement.

g) COVID-19 Impact

Current Period 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

For the purpose of the Company''s capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Company''s capital management is to maximise the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and requirements. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

Working Capital Facilities

The total Cash Credit limits '' 400000 lakhs including ''240000 lakhs of Commercial Paper and Corporate Loan of ''NIL lakhs (Previous year - '' 400000 lakhs including ''240000 lakhs of Commercial Paper) and Non-Fund based limits '' 205000 lakhs (Previous year - '' 205000 lakhs) sanctioned by consortium of bankers. The said limits are secured by hypothecation of inventories and receivables.

Pursuant to the Orders passed for the Assessment years 2007-08, 2010-1 1 to 2015-16, giving effect to the orders of the Appellate authority, current period '' 125788 Lakhs (Previous year - '' 1 19273 Lakhs) provision no longer required is credited under Tax expense and consequent interest income of '' 56947 Lakhs (Previous year 41 - '' 26273 Lakhs) is included in other income. The Assessing Officer has passed the Orders Giving Effect (OGE)

for all the above years in compliance with the orders passed by the Income Tax Appellet Tribunal /High Court.

Provision for Gratuity and Earned Leave has been made based on Actuarial Valuation. The date of Actuarial valuation as of 31.03.2023

43 Employee Benefits:

The Company has adopted the Ind AS-19 on Employee Benefits. Consequently, the liability thereon is accounted on the basis of actuarial valuation, and is being recognised as short-term benefits / long term benefits.

43A Gratuity

The Company has a Gratuity Scheme for its employees, which is a funded plan. Every year the Company funds to the Gratuity Trust to the extent of shortfall of the assets over the fund obligations, which is determined through actuarial valuation. As per the Gratuity Scheme, Gratuity is payable to an employee on the cessation of his employment after he has rendered continuous service for not less than 5 (five) years in the Company. For every completed year of service or part thereof in excess of six months, the Company shall pay Gratuity to an employee at the rate of 15 (fifteen) days'' emoluments based on the emoluments last drawn with a ceiling of '' 20 (twenty) Lakhs.

The following tables summarise the components of net benefit expense recognised in the Statement of Profit and Loss and the funded status and amounts recognised in the Balance Sheet for the plan as furnished in the Disclosure Report provided by the Actuary:

The exempt provident fund set up by the company is a defined benefit plan under Ind AS 19 Employee Benefits.

Provident Fund for eligible employees is managed by the Company through a trust in line with the Provident Fund and Miscellaneous Provision Act, 1952. The plan guarantees interest at the notified by the Provident Fund Authorities. The contribution by the employer and employee together with the interest accumulated thereon are payable to employees at the time of separation from the Company or retirement, whichever is earlier. The benefits vests immediately on rendering of the services by the employee.

The minimum interest rate payable by the trust to the beneficiaries every year is notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust (including investment risk fall) and the notified interest rate.

43B(i)

The Company has obtained report on the determination and disclosure of interest rate Guarantee & Diminution of Asset Values as per Ind AS19 of Employees Exempt Provident Fund of HAL for the period ended 31^st March 2023.

In view of uncertainties regarding recoverability of certain investments in ILFS, Reliance Capital, Srei equipment finance, Future Enterprises etc., the liability was created. During the year ended 31^st March 2023 based on actuarial valuation additional liability has been created of ''3928 lakhs (Previous year - reversal of liability ''5313 lakhs).

Further, based on settlement made by DHFL, Sintex, Reliance Commercial Finance and Hazaribagh Ranchi Express Way Ltd., the actual loss of investment including interest of ''8247 lakhs has been accounted under employee benefits during the year ended 31^st March 2023.

43c The Company has provided Performance Related Pay for the year as per the Guidelines issued by Department of Public Enterprises.

Pension:

In line with the Guidelines issued by the Department of Public Enterprises, Ministry of Heavy Industries & Public Enterprises, Govt. of India for revision of the Salary Structure of Executives of CPSEs with effect from 1^st January, 2007 and as per the approval accorded by the Board of Directors and Department of Defence Production, Ministry of defence, a Defined Contribution Pension Scheme was notified in the Company on 16^th July, 2014 in respect of 43D Executives retired etc., from 1^st January, 2007.

A Defined Contribution Pension Scheme in respect of Workmen retired after 1^st January, 2012 was notified on 2^nd June, 2015 which was agreed as a part of the Workmen''s Wage Revision effective from 1^st January, 2012.

Contribution to the corpus of the above schemes by the Management may vary from year to year as the same is dependent on profits generated, affordability & sustainability by the Company.

The Scheme is managed by a duly constituted Trust.

Post Superannuation Group Health Insurance Schemes:

In line with the Guidelines issued by the Department of Public Enterprises, Ministry of Heavy Industries & Public Enterprises, Government of India and as per the approval accorded by the Board of Directors and Department of Defence Production, Ministry of defence, Post Superannuation Group Health Insurance Schemes in respect of (a) Employees (Officers & Workmen) retired before 1^st January, 2007 and (b) Executives retired on or after 1^st January, 2007 were introduced with effect from 1^st February, 2014.

43E

A Post Superannuation Group Health Insurance Scheme in respect of Workmen of the Company retired, etc. after 1^st January, 2007 has been introduced in the Company with effect from 1^st February, 2015 which was agreed as a part of the Workmen''s Wage Revision effective from 1^st January, 2012.

Benefits under the Schemes may vary from year to year, as contribution to the Corpus of the Schemes is dependent on Profits generated, Affordability & Sustainability by the Company.

The Schemes are managed by a duly constituted Trust.

HAL Employees Group Life Insurance Trust:

As per the approval accorded by the Board, the Company has notified an insurance scheme namely the HAL Employees Group Life Insurance Trust to cover its employees, in case of death due to any reason other than suicide. ^43F The contribution towards the scheme are borne equally by employees and the Management. In the event of Death of an employee due to any reason other than suicide, the dependent family members will be paid the sum assured(? 10 lakhs). The Company has made contribution of '' 470 lakhs to the trust with employees contribuitng an equal amount.

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.

43G This has resulted in reduction of salaries and wages by '' 5155 lakhs and a consequential reduction in sales revenue by ''1239 lakhs for the year ended 31^st March 2023.

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 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) under Note No.19 for ''29645 lakhs (Previous year - ''24489 lakhs) and an equal amount of provision has been made in the books of accounts.

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

The Board in its 436^th meeting held on 25^th June 2020 accorded approval to introduce the HAL Employees Voluntary Retirement Scheme-2020 subject to approval of the Administrative Ministry in light of the present economic 43H circumstances and changing business scenario and to operate economically to reduce surplus manpower and high labour cost to withstand the competition from private companies. Administrative Ministry approval for the scheme is awaited.

Financial Assitance Scheme for Dependents of Deceased Employee

As per the approval accorded by the Board, the Company has notified "Financial Assistance Scheme for dependents of Deceased Employees (FASDDE)" to pay a fixed amount on monthly basis to surviving spouse or dependent children if the spouse is not surviving, till the notional date of superannuation of the deceased employee. The prime objective of the scheme is to provide financial support for dependent beneficiaries of the employees who 43I die while in service, to enable them to lead a normal life. The scheme will be applicable in all cases of Death of an employee due to any other reason other than suicide. Fund of '' 4000 lakhs during 2021-22 & ''1500 lakhs during 2022-23 transferred to trust for management of the Corpus. The income generated from the Corpus which will be invested with M/s LIC will be utilized to make payments under the Scheme.

As and when the instalments in respect of deferred debts falls due for payment to the Russian Federation, the same is paid by applying the exchange rate ruling on the date of actual payment and liability discharged. The differences arising due to recalculation of debts at the applicable /ruling rate is charged to the revenue at the time (b) of payment and recognised as sales when realised from the customer except to the extent it pertains to Capital Assets.The sales for Exchange Rate Variation (ERV) considered is ''5118 Lakhs(Previous year - '' 3971 Lakhs). The Assets and Liabilities relating to deferred credit transaction are reinstated under Non-current Other Financial Assets, Current Other Financial Assets (recoverable within one year), Non-current Other Financial Liabilities and Current Other Financial Liabilities (to be settled within one year).

The Board in its 406^th meeting held on 22^nd September 2017, accorded in principle approval for voluntary winding up / closure of the three Joint Ventures i.e. M/s. HAL-Edgewood Technologies Private Limited, M/s. Tata HAL Technologies Ltd and M/s. Multirole Transport Aircraft Ltd. enabling the Company to take further action in the matter.

Further, the Board authorized the Company to seek approval of Ministry of Defence (MoD), for short closure of the Contracts associated with the M/s Multirole Transport Aircraft (MTA) project and request MoD, to initiate necessary action for closure of IGA, as it is a prerequisite for winding up of the MTA - Joint Venture Company. Further, MOD vide its letter dated 14^th October 2021 notified the termination of the agreement between the Govt. of the Republic of India and Govt. of Russian Federation. In this respect the Russian Federation vide its letter dated 20^th April 2022 intimated that the decision of the Indian side has been taken into consideration.

Further in 435^th meeting held on 16^th March 2020, the Board has directed the Company to expedite the closure of 45B M/s. Multirole Transport Aircraft Ltd at the earliest after taking clearance from Russian partners from their Board (refer Clause No.10).

The Board in its 440^th meeting held on 9^th December 2020, accorded in principle approval for voluntary winding up / closure of Joint Venture M/s. Infotech HAL Limited(IHL) enabling the Company to take further action in the matter.

TATA HAL Techonologies Limited, Pursuant to the Board Resolution dated 08^th June 2021, the company has filed the application for voluntary liquidation to MCA in terms of Section 59 of the Insolvency and Bankruptcy Code, 2016 and the official liquidator is appointed. The official liquidator, vide their letter dated 07.03.2022, intimated about the distribution of liquidation proceeds to the stakeholders of the TATA HAL Technologies Limited. Pursuant to the same liquidation proceeds of '' 34 lakhs was received by the Company [On 27 April, 2022 ('' 31 lakhs) and 15 June, 2022 (''3 lakhs)].

The Company has derecognized the investment made in TATA HAL Technologies Limited as on 30^th June 2022.

Defence Innovation Organisation ("DIO"):

A Section 8 Company has been formed (Under Companies Act 2013) in the name of "Defence Innovation Organisation" with M/s BEL with an authorised Capital of '' 100 lakhs (Paid up capital as on 31^st March 2023 is '' 1 Lakh( HAL 50% Share and BEL 50% Share). The registered office of DIO is situated at Centre for Learning and Development, Bharat Electronics Limited, Jalahalli, Bengaluru - 560013, Karnataka, India. DIO was incorporated to implement the scheme of defence innovation fund initiative by creation of an ecosystem to foster innovation ^45C and technology development in defence.

HAL Board in its 417^th meeting held on 30^th July 2018 had accorded approval for release of '' 5000 lakhs to DIO towards initial corpus fund in form of Grant in Aid in a staggered manner. Accordingly '' 500 lakhs has been released to DIO in the month of August 2018 and the balance amount is recognised and disclosed in other finanial liabilities - other liabilities (note 32).

The Board in its 434^th meeting was informed that Government approval is not required for transfer of lease hold land to M/S Helicopter Engines-MRO Private Limited (HE-MRO), as it is neither Defence land nor it is a land owned by HAL. Board reconsidered the decision taken in its 431^st meeting and approved transfer of land without Government approval to M/s HE-MRO.

45D

The company has received a sum of ''929 lakhs from HE-MRO for transfer of lease hold land at Goa to HE-MRO for right of use assets and the transfer of land is pending for registration, accordingly the carrying amount of right of use assets of ''811 lakhs has been disclosed as asset held for sale and ''929 lakhs received from HE-MRO disclosed under note 32 - Other Financial liabilities in accordance with Ind AS 105.

Promoters of HE-MRO have decided to restart the activities of the Company on improvement of the Covid-19 situation. To meet its financial requirement, HE-MRO in its 33^rd Board meeting held on 30^th July 2021 decided to raise funds by way of Right issue of 20 lakh equity shares to the existing shareholders at par value of ''100 per share. ^45E HE-MRO has sent Right issue offer letter to existing shareholders including HAL. This matter was put up to Board of Directors of HAL in its 449^th Meeting held on 21^st September 2021, and the Board has accepted the Right issue offer. Consequent to the same, ''1000 lakhs has been paid to HE-MRO towards equity participation in Rights issue of HE-MRO Private Limited on 30.09.2021. The Company has been allotted 10 lakh Equity shares of ''100 each on 11^th November 2021 against the share application money paid.

In accordance with the approval of Board of Directors at its 408^th meeting held on 28^th November, 2017 and 48A approval of shareholders, the Company has bought back 2,71,12,500 fully paid equity shares of ''10/- each equivalent to 7.5% of the paid -up share capital and Free Reserves of the Company, for an aggregate amount of '' 92150 lakhs (excluding tax of ''20636 lakhs) at '' 339.88 per equity share from the President of India. The consideration amount for buy back of shares was paid to the Government of India on 19^th December, 2017 and the shares so bought back were extinguished on 22^nd December, 2017.

To achieve the mandatory threshold of 25% minimum public shareholding in the Company, Government of India (GoI) had offered 3.5% (1,17,03,563) equity shares of the Company to non-Retail Investors and Retail Investors on March 23-24, 2023, out of its shareholding of 75.15% in the Company, through Offer for Sale (OFS) by 48b Stock Exchange Mechanism. Consequent to the OFS, the Government of India shareholding stands at 71.65%.

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

Sensitivity of estimates on provisions:

The assumptions made for provisions relating to current period are consistent with those in the earlier years. The assumptions and estimates used for recognition of such provisions are qualitative in nature and their likelihood could alter in next financial year. It is impracticable for the Company to compute the possible effect of assumptions and estimates made in recognizing these provisions.

Provision for replacement and other charges represents, amounts towards expenditure incurred from the date of Signaling Out Certificate (SOC) to date of ferry out, loan items taken from the customer which needs to be replaced etc.

Warranty represents Performance Warranty for manufacture, repair and overhaul of Aircraft / Helicopters/ Engines / Rotables, supply of spares and development activities etc.

Provision for Redundancy in Raw Material and Components, Stores and Spares, Construction Material, Loose Tools and Work in progress represents provision on redundancy of such materials, completed / specific projects and 51 other surplus / redundant materials pending transfer to salvage stores etc.

Provision for Liquidated Damages represents amounts provided for the period of delay between the due date of supply of the Goods / rendering of services as per delivery schedule and the expected Date of delivery of said Goods / rendering of service in respect of manufacture / repair and overhaul of Aircraft / Helicopters/ Engines / Rotables, supply of spares and development activities etc.

Provision for doubtful debts is being assessed on a case to case basis in respect of dues outstanding for a significant period of time. Debts from the Government departments are generally treated as fully recoverable and hence the Company does not recognize credit risk of such financial assets.

Provision for doubtful claims represents provision on expected credit losses.

Impairment in value of investment represents reduction in the share of net worth below investment

Provision for Onerous contract has been recognised as the cost of meeting obligations is over and above the economic benefits expected to be received under it.

Recent pronouncements

Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 31, 2023, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2023, as below:

Ind AS 1 - Presentation of Financial Statements - This amendment requires the entities to disclose their material accounting policies rather than their significant accounting policies. The effective date for adoption of this amendment is annual periods beginning on or after April 1, 2023. The Company has evaluated the amendment and the impact of the amendment is insignificant in the standalone financial statements.

56

Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors - This amendment has introduced a definition of ''accounting estimates'' and included amendments to Ind AS 8 to help entities distinguish changes in accounting policies from changes in accounting estimates. The effective date for adoption of this amendment is annual periods beginning on or after April 1, 2023. The Company has evaluated the amendment and there is no impact on its standalone financial statements.

Ind AS 12 - Income Taxes - This amendment has narrowed the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences. The effective date for adoption of this amendment is annual periods beginning on or after April 1, 2023. The Company has evaluated the amendment and there is no impact on its standalone financial statement.

The financial statements were approved for issue by the Board of Directors at their meeting held on 12^th May 2023.

⁵⁷ These financial statements are presented in Indian rupees (rounded off to lakhs). Previous Year figures have been rearranged or regrouped wherever necessary.

---

Mar 31, 2022

Nature and Purpose of each Reserve:1 Research & Development Reserve:

Research & Development Reserve is created to bring technological superiority to its products in order to cope with the future technological challenges by transfer of annual contribution of 10% of Operating Profit After Tax. The amount of utilisation for R&D puposes during the year is transferred to General Reserve.

2 Captial Redemption Reserve:

This was created on redemption/buyback of equity shares.

3 General Reserve:

General Reserve is created out of the profits of the Company and out of Research & Development Reserve on utilization of Research & Development purposes. This is a free reserve.

Company Overview:

Hindustan Aeronautics Limited ("HAL") herein after referred to as, "the Company" is a limited Company incorporated in India. It is presently a Government Company within the meaning of Section 2(45) of the Companies Act, 2013 as the President of India acting through the Ministry of Defence (MoD) holds 75.15%(Previous year -75.15%) equity shares of the Company.

The Company is engaged in the design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures. The Company has been set up to meet the requirement of Indian Defence Forces (namely Indian Airforce, Indian Navy, Indian Army and Indian Coast Guard) in the area of Aerospace.

The Company''s operations are organised into five complexes, namely the Bangalore Complex, MiG Complex, Helicopter Complex, Accessories Complex and Design Complex, which together include 20 production divisions and 11 research and design centres ("R&D Centres") and 8 support offices located across India. For the purpose of Financial Statements 29 Divisions are consolidated by merging R&D Centers and support offices with the main production division. The Company relies on Indigenous research as well as enter into technology transfer and licence agreements to manufacture its products. In addition, the Company has established 12(twelve) Commercial Joint Venture Companies(JVCs) in collaboration with leading international aviation and Indian Organizations and 2(two) Subsidiary Companies to grow its operations. Besides, the Company also formed 2(two) Section-8 (nonprofit) Companies.

Restatement for the year ended 31 March 2021 and as at 1 April 2020

In accordance with Ind AS 8, ''Accounting Policies, Changes in Accounting Estimates and Errors'' and Ind AS 1, ''Presentation of Financial Statements'', the Company has retrospectively restated its Balance Sheet as at 31 March 2021 and 1 April 2020 (beginning of the preceding period) and Statement of Profit and Loss for the year ended 31 March 2021 for the reasons as stated in the note no. 49(1)(b)(vi). Reconciliation of financial statement line items which are retrospectively restated are as under:

Accounting treatment of assets owned by Customer for its use in specific project:

In respect of certain capital items specific to projects have been funded by the customer either upfront or is reimbursed through product cost spread over the duration of the projects. Hitherto these assets were capitalized, and shown under Property, Plant and Equipment. Revenue was recognised to the extent of depreciation on such capitalized assets. The value of assets were adjusted to Advances from Customers, where the Company has no control over the assets and disclosed under explanatory notes to Financial Statement.

An Expert Advisory Committee opinion was sought from The Institute of Chartered Accountants of India for the accounting treatment of assets funded by Customer for its use in specific project. Based on the opinion received, the view taken by the Company that it has control over the assets, recognising revenue towards the consideration received in the form of assets, over the useful life of the asset, to the extent of depreciation provided on such assets are not correct. As per the opinion received from Expert Advisory Committee, the revenue in respect of funds received from the customer for the manufacturing facility should be recognized as or when the control over manufacturing facility is transferred to the customer in line with the requirements of Ind AS 115.

As at 01^st April 2020:

Revenue pertains to previous periods prior to comparative period presented, Revenue and cost to the extent of '' 27107 Lakh is recognised in the opening reserve as at 01^st April 2020.

Revenue and cost recognised to the extent of depreciation, on such assets, pertains to previous periods prior to comparative period presented, now reversed to the extent of '' 3384 Lakh in the opening reserve as at 01^st April 2020.

Consequently, Trade receivables for '' 2922 Lakh, Contract Assets for ''2054 Lakh and Advances from Customers for '' 18747 Lakh has been restated based on the terms of payment. Further, Capital Work in Progress, Capital Advance & Capital Creditors pertaining to such assets has been reclassified.

For the year ended 31^st March 2021:

Revenue pertains to comparative period. Revenue and cost to the extent of ''14739 Lakh is recognised in the Comparative period i.e 2020-21. Revenue and cost recognised to the extent of depreciation on such assets, now reversed by restating the Revenue and depreciation in the Comparative period i.e 2020-21 for '' 2039 Lakh.

Consequently, cumulative impact on Trade receivables for ''11010 Lakh, Contract Assets for '' 2161 Lakh and Advances from Customers for '' 19352 Lakh has been restated based on the terms of payment. Further, cumulative impact on Capital Work in Progress, Capital Advance & Capital Creditors pertaining to such assets has been reclassified.

Insurance Premium

The provisional insurance premium paid on Aviation Policy was charged off to Profit and Loss Account in the respective years i.e. 2018-19, 2019-20 and 2020-21. On the basis of submission of actual value of Aircraft delivered during the said period, the actual premium has been assessed and excess of provisional premium over the actual premium is recognised and restated accordingly.

Hitherto the Company was claiming that the factory land and incidental uses are not subject to property tax by Bruhath Bangalore Mahanagara Palike(BBMP). The Joint Commissioner, BBMP, Mahadevpura by his order dated 13.08.2021 did not accept the contention and directed the Assistant Revenue officer to make an assessment order after giving opportunity to the Company.

The officer, suo moto raised a demand of '' 20253 lakh for the FY 2008-09 to 2021-22 without passing an order consisting of property tax '' 8268 Lakh and interest thereon ''1 1985 Lakhs.

The Company has filed an appeal before the City Civil Court, Bangalore to set aside the demand notice and the appeal is pending.

Pending disposal of the appeal and without prejudice to its grounds under writ petition, pursuant to legal advice the Company has recognized '' 5043 Lakhs property tax based on self-assessment basis.

Working Capital Facilities

The total Cash Credit limits '' 400000 lakhs including '' 240000 lakhs of Commercial Paper and Corporate Loan of ''183000 lakhs (Previous year - '' 1000000 lakhs including '' 480000 lakhs of Commercial Paper) and Non-Fund based limits '' 205000 lakhs (Previous year - '' 205000 lakhs) sanctioned by consortium of bankers. The said limits are secured by hypothecation of inventories and receivables.

The Company has received a sum of '' 13229 lakhs(Previous year - '' 13229 lakhs) from Ministry of Defence (MoD), Government of India (GOI) towards investment by the Company in Multirole Transport Aircraft Limited (MTAL). Out of the above, the Company has till date invested a sum of ''11347 lakhs (Previous year - ''11347 lakhs). The balance of ''1882 lakhs has been paid during the year 2020-21. Interest @ 6.85% has been provided on the unutilised portion up to the date of repayment ''3326 lakhs (Previous year - '' 3326 lakhs) included in other financial liabilities (refer clause no. 45B).

R&D Corpus

Board has approved the creation of R&D Corpus (excluding customer funded R&D) with an annual contribution of 10% of Operating Profit After Tax (PAT).

Indigenization Corpus

Notification on Policy for Indigenization of Components and spares used in Defence platforms for DPSUs/OFB was issued on 8^th March 2019.

As the guidelines from Department of Defence Production(DDP) regarding modalities has not been received as on 31^st March 2022 no provision has been made during this period.

The Company''s Barrackpore Division is in possession of 22.51 acres (Previous year - 22.51 acres) of land on which the Division has its Buildings, Hangar, Plant and Machinery etc. The instruments of transfer in favour of Division / Company either by way of lease or transfer in respect of this land is pending execution. Provision for lease rental amounting to '' 34.50 Lakhs (Previous year - '' 34.00 Lakhs) has been made. The transfer of the land is being pursued with Defence Estate Officer, Kolkata.

The above does not include 7.115 acres of Land received from Army in exchange of 5 acres of Land at Bangalore which was received free of cost from State Government before 31^st March 1969. Since the value of 5 acres land was nil, the value of 7.115 acres land received in exchange of 5 acres land is also taken as Nil.

The title deeds of immovable properties are not held in the name of the Division.

Land(Right-of-Use) under Property Plant and Equipment includes land taken on lease for establishing a unit at Kasargod at a cost of '' 708 lakhs for 200 acres (Previous year - '' 708 lakhs for 200 acres). This cost is amortised over the lease period of 90 years. The Lease charges for the year amounting to '' 8 Lakhs (Previous year - '' 8 lakhs) has been considered under depreciation for the year. However 4.171 Acres(Previous year - 4.171 Acres) of land shortage due to surrender of certain tracts of land against local disputes by KINFRA. However issue has been taken up with KINFRA for compensation of shortfall in the land. The Board of KINFRA also decided that the lease premium of '' 14.76 lakhs remitted by HAL towards 4.171 acres of land will be refunded and necessary corrections are to be made in the lease deed to effect the changes. Awaiting action from KINFRA.

Land under 14.3 include 12 acres of land given under lease to M/s LNB Renewable Energy Pvt Ltd., Hyderabad for 25 years, giving vendor the ''Right to Use'' specific land for establishing solar PV Power Plant project only and not for any other purpose with a Purchase Agreement for a period of 25 years for purchase of electricity generated by the Solar PV Power Plant project at the fixed tariff of ''3.23/KWh.

Land(Right-of-Use) under Property Plant and Equipment includes land (0.273 acres) taken on lease for Liason Office Mumbai at a cost of ''3 lakhs (including development cost). This cost is amortised over the lease period of 30 years. The amount of amortisation has been considered under depreciation for the year. Lease rental is ''2304/- payable annually.

Land under 14.3 include 38.68 acres of land given under lease to M/s Ordanance Factory Board(OFB), out of which 8.65 acres has been sub-leased to M/s Indo-Russian Rifles Private Limited (IRRPL) at an annual rent of ''1 per annum.

a) Facilities Management Division (FMD) is holding 2117.367 acres (Previous year - 21 17.367 acres) land, out of which free hold land of 2096.267 acres (Previous year - 2096.267 acres) is located in Bangalore and 15.1 acres (Previous year - 15.1 acres) located at Bagalkot, karnataka and Lease hold Land of 6 acres (Previous year - 6 acres) is located at Harapanahalli, Devanagere, of which 17.737 acres (Previous year - 17.737 acres) is under litigation / encroachment by third parties and 10.152 acres( Previous year - 10.152 acres) is under dispute with M/s Bharat Earth Movers Limited(BEML).

b) Titles to land are not in the name of the Company in respect of 30 survey numbers totalling to 72.675 acres(Previous year - 72.675 acres) at FMD Division, However, Records of Tenancy Certificate is available.

c) An amount of '' 3119 lakhs (Previous year - '' 2967 lakhs) towards cumulative Lease Rental charges with various parties has not been considered in the books of accounts of FMD, pending dispute settlement.

d) DIPAM has communicated the Institutional framework for monetization of the assets of the CPSE''s, approved by Cabinet in its meeting dated 28^th February 2019.

In this regard, approval has been given by the Board in its 439^th Meeting held on 13^th November 2020 for Monetization of 1.45 acres of land at Okalipuram, Bengaluru for forwarding the proposal to DDP for approval / further action by DDP/DIPAM. HAL during November 2020 referred the proposal to MoD. MoD vide letter dated 8^th January 2021 communicated that the DIPAM has taken note of the asset monetisation plan and indicated that HAL may take action to process the case further after taking necessary approval of competent authority as per extant guidelines. FMD division further processing the case.

e) Land at Nasik Division includes 0.052 acres (Previous year - 0.052 acres) of land encroached by 9 persons.

f) Further, about 50.21 acres(Previous year -50.21 acres) of land belonging to the Company''s Koraput Division is encroached upon by the nearby villagers for cultivation.

g) Land at Corporate office includes 711.22 sq.mt (Previous year - 711.22 Sq.mt) of land has been acquired for the Metro Rail Project by M/s Bangalore Metro Rail Corporation Limited (BMRCL). The compensation awarded of ''549 Lakhs (Previous year - ''549 lakhs) by M/s Karnataka Industrial Area Development Board (KIADB) was contested by Company in the City Civil Court at Bangalore. Meanwhile, a Joint Committee comprising the Company & BMRCL Officials was formed to arrive at an out of court settlement. Currently the case is pending at evidence stage, the Company is seeking adjournment on account of discussion between parties for settlement. However, this is subject to final agreement of parties and order of court. On completion of the Metro Rail project, the land utilized is restricted to 272.94. sq.mt(Previous year - 272.94 Sq.mt). Area to the extent of 438.28 sqm has been conveyed back to HAL through Deed of transfer. Compensation amount for remaining area, i.e 272.94 Sq. mt. is yet to be received by the Company. Accordingly, further necessary actions are being taken by the BMRCL / KIADB in the matter. HAL has filed memos in the pending cases requesting the Court to disburse '' 348 lakhs along with interest as compensation for remaining area of land (i.e. 272.94 sq.mt.) to HAL. As the matter is subjudice, no adjustment has been made in the Books.

Land under 14.1 does not include 374.73 acres (Previous year - 374.73 acres) of the land was aquired by State Government of Uttar Pradesh and possession was handed over to HAL by District Land Acquisition Officer. The factory area 54.30 acres was transferred during 1973 from Indian Air Force to HAL. As per the legal position, both the parties are Government bodies. According to Government Grants Act, 15 of 1895, Section-2 Governments Grants are exempted from the operation of the transfer of property Act. Thus, there is no need of execution of the sale deed / transfer deed. A transfer of the title of land, thus, required no registration. The transfer of land by State of Uttar Pradesh and Indian Air Force to HAL need not require any registration as this transfer is exempted by the Government Grants Act.

Land under 14.3 does not include, the ownership of 27acres (Previous year - 27 acres) of land on which labour colony has been built by Labour Commissioner, Kanpur belongs to the Company as per Revenue records.

a) Approval has been given by the Board for acquiring 7.41 acres of land at Sattari Goa for undertaking MRO activity.

b) Approval has been given by the Board for acquiring 5 acres of defence land on lease at Akabil village, Missamari, District sonitpur for establishing MRO Hub Facilities for an annual lease rental of ''1.00 per annum without any premium and registration charges, processing fees etc as per actual.

c) Approval has been given by the Board for acquiring 4.34 acres of defence land on lease at Mamun Military station for establishing MRO Hub facilities at an annual lease rental of ''1.00 per annum without any premium along with necessary registration charges, processing fees etc as per actual.

One Hawk-i Aircraft has been used by Aircraft Division for Marketing and Testing Activities. The useful life of the Hawk-i Aircraft is technically assessed to be 5 years from 2018-19, accordingly the depreciation has been provided @ 20% per annuam.

As per the Accounting Policy of the Company, in respect of deliverables like spares, Revenue is recognized based on acceptance by the Buyers'' Inspection Agency or as agreed by the buyer.

Delivery of the items to the customers are generally within three weeks from the date of acceptance. However, during the year ended 31.03.2022, due to COVID 19 Pandemic, there has been a delay in dispatching spares of '' NIL lakhs (Previous year - ''2243 lakhs) to the Customers within three weeks from the date of acceptance.

Against anticipated contract for LUH project '' 332 lakhs (Previous year - '' NIL lakhs) has been accounted as Work in Progress.

Sales includes ''127600 lakhs of differential sale on finalization of fixed price quotation for the years from the Financial Year 2016-17, approved by the Ministry of Defence.

In respect of the materials received under bulk contracts with the Russian Federation where the suppliers do not indicate itemized prices, the value of materials issued is assessed on technical estimates to exhibit a fair value of the closing work-in-progress and inventory of these materials is subject to adjustment at the end of the project.

DIVIDEND POLICY:

As per extant memorandum F.No. PP/14(0005)/2016 dated June 20, 2016, of the Department of Public Enterprises, Ministry of Heavy Industries & Public Enterprises, Government of India (GOI) (“DoE") read with the memorandum F.No. 5/2/2016-Policy dated 27^th May, 2016 of the Department of Investment & Public Asset Management, Ministry of Finance, GoI, all central public sector enterprises are required to pay a minimum annual dividend of 30% of Profit After Tax (PAT) or 5% of the net-worth, whichever is higher, subject to the maximum dividend permitted under the extant legal provisions and the conditions mentioned in the aforesaid memorandum.

However, the declaration and payment of dividends on our Equity Shares will be recommended by our Board and approved by our shareholders, at their discretion, subject to the provisions of the Articles, the Companies Act, 2013. Further, the dividends, if any, will depend on a number of factors, including but not limited to our earnings, guidelines issued by the DoE, capital requirements and overall financial position of our Company. In addition, our ability to pay dividends may be impacted by a number of factors, including the results of operations, financial condition, contractual restrictions, restrictive covenants under the loan or financing arrangements the Company may enter into.

HAL has initiated criminal proceedings against the accused in 2011-12 and during 2012-13, two civil suits have been filed for recovery of fraudulently drawn amounts against the accused, his accomplices and institutions namely, the State Bank of India (SBI) for ''289 Lakhs and Shri Krishna Souharda credit Co-operative Limited for ''102 Lakhs . Both the civil cases and criminal case are under progress in the court. Properties of the accused amounting to ''138 Lakhs have also been attached by the court. An amount of ''243 lakhs has been received from SBI on 25.04.19 and the balance amount of '' 148 lakhs has been provided in the Financials of 2018-19.

The Hon''ble Court has passed the judgment and decree in favor of HAL by awarding ''289 Lakhs along with interest. Out of which to the extent of '' 148 lakhs along with interest and the legal expenditure to be retained by HAL and the balance amount to be re-imbursed to SBI as per MOU signed between HAL and SBI. HAL has filed and Execution petition No.COM.EX/100/2021 dt. 03.03.2021 on defendants for recovery of ''597 Lakhs along with interest and other charges. The Court has issued summons to the accused and the case is being dealt by HAL legal counsel for recovery of the amount.

A fraud involving misappropriation of funds by 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 Investigation (CBI), Bhubaneshwar. An amount of ''1892 lakhs has been provisionally assessed and fully provided in the financials of 2018-19 and 2020-21 as fraudulent payments made to contractors and others during the period from May 2011 to September 2018 and reported in the FIR with CBI. Adjustment of expenses relating to capital and other accounts in the financial year 2018-19 and 2020-21 includes the above mentioned amount. The matter is under investigation by CBI.

The Company is having the Multiple Business Activities. Operating Cycle Operating Cycle is determined by Divisions based on

Individual business activity.

The Company''s IJT Division is primarily engaged in production of Intermediate Jet Trainer (IJT) Aircraft. Contract for supply of 12 Limited Series Production of IJT Aircraft with IAF is pending for fulfillment of certain Parameters as required by the Customer. Completion of all parameters required by the Customers will take some more time after which delivery of 12 IJT LSP will start. As per the Article 5.2 of 12 LSP IJT Contract, Stores to be supplied under this contract shall be new i.e. not manufactured before and shall incorporate all the latest improvement and modification thereto. Therefore, Parts manufactured and lying in Inventory could not be used for delivery of ultimate product to the customers at this stage. Accordingly, Work in progress of '' 26589 Lakhs lying in the Books of IJT Division as on 31.03.2022 has been fully provided for in line with Company''s accounting procedure.

Similarly, Kanpur Division of HAL has received order for supply of Series production of 72 IJT which will start after completion of supply of 12 IJT by IJT LSP Division. Accordingly, Net realisable value of Stock in Trade and Finished Goods of valuing '' 5705 Lakhs in the Books of Lucknow and Hyderabad Division has been considered as NIL in the Books of Lucknow and Hyderabad Division as on 31.03.2022.

While the Company is pursuing actively with Ministry of Defence, for the appproval of the price variation to change order in LCA-IOC contract which is pending for approval, out of prudence, provision for ''99025 lakhs is recognised in the Financial Statements 2021-22.

The Company''s Aircraft Division is primarily engaged in the production of Aircraft. The division is manufacturing airframe structure of LCA(IOC) and FOC offloaded by LCA division along with other activities under Task / RMSO issued by Defence Services. The loss is due to the non-absorption of overheads commensurate to the workload. The loss of the division reduced compared to the previous year. The Division will generate more revenue in the coming years to reduce the loss.

However, considering the LCA production program in ensuing years, the division will be a profit generating unit and no impairment is considered necessary

Seasonality of business :

The Company experiences cyclicality in respect of recognition of revenue from operations, which is attributable to the delivery of a majority of our products happening in the second half of the year. The Company recognise sales upon acceptance of the product by customers and issuance of a signaling out certificate/certificate of conformity by them. The sales are dependent on the certification process which needs to be completed before the customers can take deliveries. The certification process typically takes place in the third and fourth quarter due to favourable weather conditions for flight tests during this period. This leads to bunching up of sales during the third and fourth quarter of each financial year and consequently, the revenue varies significantly between the first and second half of the year.

Aircraft have been accepted and signaled out by customers'' inspector with fitment of Cat-B items taken on Loan, in cases of non availability of Cat-A item. As the aircraft is flight worthy and the customers have accepted the same, the sales are accounted, consistently, on the basis of Signaling Out Certificate (SOC) / Certicate of Conformity(COC). As a principle, Loan items fitted on the aircraft are excluded in value for recognising Sales. Sales in respect of such Cat-A items are recognized on supply of Cat-A items, within the contract period.

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 97% of the Company''s turnover, around 97% of Trade receivables and Contract Assets, around 51% 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.

In the opinion of the Board, the Company do not have any assets other than fixed assets and Non-current investments having a value on realisation in the ordinary course of business less than the amount stated.

Sales, based on Accounting Policy of the Company, is accounted on issuance of Signaling Out Certificate (SOC) by the customers. There is a time lag between SOC and Ferry out of Aircraft / Helicopter in view of the time involved in deputation of Ferry team by the customers, their handling flights and rectification of snags involved, if any, formation of the new squadron, training of pilots etc. The details of Aircraft /Helicopters which are yet to be ferried out (for which sales has been setup) as on the date of approval of financial statement is as under

The expenditure involved in the work carried out post SOC date is absorbed against the provision for replacement charges.

The Company has taken up with Ministry of Defence (MoD) for amendment of ALH contract in respect of both Indian Air Force and Indian Army to bring them in line with the accounting policy of the Company. In respect of Indian Air Force, MoD have concurred "in principle" to above, with the stipulation that the contract amendment can be made only after similar contract amendment in respect of Indian Army contract with the Company is finalized. In respect of Indian Army contracts, the matter is under discussion.

The PSLV contract contains a clause that the acceptance of hardware takes in two places. The preliminary acceptance will be based on the inspection and quality reports and test carried out at the contractor''s premises and will be for the purpose of movement of hardware. Final acceptance will be at the site based on the final inspection / functional checks to be carried out on receipt at site.

HTFE 25 Project: The Company has taken up the design and development of Hindustan Turbo Fan Engine (HTFE-25) in 2013-14 with a time frame of 6 years for completion. The Core Engine 2, Run completed and development activities of TD Full Engine run and Design Configuration review are under progress. An amount of '' 15923 Lakhs (Previous year - '' 15542 Lakhs) has been accounted under Intangible Assets under Development . It is assessed that, further development activities involve development of flight worthy engine for certification on a particular platform would require at least another 5 years or so. Keeping this in view and also that there is no visibility of any progress of any commitment/ orders for the Product, the Intangible Asset review Committee has recommended for impairment of total expenditure incurred on this project. Accordingly, '' 15923 lakhs has been impaired (Previous year - ''15542 lakhs).

HTT 40 Project: The Company has undertaken the design and development of Hindustan Turbo Prop Trainer Aircraft ( HTT- 40). Taking into the capability of the proposed Turbo Prop Aircraft, market studies, upgrade functionality etc. requirement of 290 Aircraft (70 Aircraft for IAF and 220 Aircraft for other customers) has been projected by the Company.

The Company continues to fund the HTT Design and Development program.

Hence the expenditure of '' 2444 lakhs (Previous year - ''3493 lakhs) has been treated as Development Expenditure and accounted under Intangible Assets under Development

Special Tools includes '' Nil Lakhs (31.03.2021 - ''434 lakhs) towards COMPASS Project at Bharat Electronics Limited (BEL), on behalf of MRO Division against which Company derives future economic benefits for repair of electro optical pods.

One upgraded Mirage 2000 Aircraft crashed during customer acceptance flight at HAL Airport, Bangalore on 1^st February 2019. HAL has taken an insurance policy for '' 3412 lakhs for HAL efforts and material used in repair / overhaul, and preferred the claim with the Insurance company for '' 3447 lakhs. An amount of '' 3181 lakhs has been adviced for payment by Insurance Company after deducting 1% policy Administration charges (Claim admitted '' 3215 lakhs less '' 34 lakhs), the disbursement is awaited.

DDP/MoD Paid Advance of '' 8800 lakhs to HAL towards conducting Def Expo-2022.The event got postponed while HAL had incurred expenditure of '' 3200 lakhs. Pending completion of audit of expenses by the O/o PCDA Bangalore, the balance of '' 5600 lakhs is shown under note-32 Other financial liability.

The Company is exposed to market risk, credit risk and liquidity risk which may impact the fair value of its financial

instruments. The Company, based on its business operation, evaluated the following risks:

a) Foreign currency risk:

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in exchange rates. The Company''s exposure to the risk of changes in exchange rates relates primarily to the Company''s imports for which the payment has to be done in currencies other than the functional currency of the Company. The fluctuation in exchange rates in respect to the Indian rupee may have very restricted impact on company as any fluctuations in foreign exchange are in general reimbursed by the customers of the Company in terms of the contractual obligations which the Company has with its customers.

b) Credit risk:

Credit risk is the risk of financial loss to the Company if a customer or counter party to a financial instrument fails to meet its contractual obligations resulting in a financial loss to the Company. Credit risk arises principally from trade receivables, loans & advances, advances given to suppliers (for procurement of goods, services and capital goods), cash & cash equivalents and deposits with banks and financial institutions. The Company for the Financial Year (FY) derived 93% (31^st March 2021 - 94%) of its total sales from sales to the Indian Defence Services. The Company expects to continue to derive most of its sales from the Indian Defence Services under the contracts of the Ministry of Defence (MoD), Government of India (Gol) -the Company''s principal shareholder and administrative ministry.

c) Provision for expected credit losses:

As the Company''s debtors are predominantly the Government of India (Indian Defence Services, Ministry of External Affairs), Central Public Sector Undertakings where the counter - parties have sufficient capacity to meet the obligations and where the risk of default is nil / negligible. Accordingly, impairment on account of expected credit losses is being assessed on a case to case basis in respect of dues outstanding for significant period of time as per the accounting policy of the Company. Further, management believes that the unimpaired amounts that are due is collectable in full, based on historical payment behaviour and extensive analysis of customer credit risk.

d) Liquidity risk:

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Typically, the Company ensures that it has sufficient cash on demand to meet expected operational expenses including the servicing of financial obligations. The Company''s standard contract terms provide that, the Company receives advance payments from customers pursuant to the applicable contracts, including the Government of India and the Indian Defence Services at the time of signing of any contract and milestone payments on achievement of physical milestones. These payments are utilized to meet the Company''s working capital needs (for the Company required to maintain a high level of working capital because the Company''s activities are characterized by long product development periods and production cycles). A majority of the Company''s research, design and development costs are funded by the Indian Defence services. Services and supply of spares are governed by the Fixed Price Quotation (FPQ) policy for fixation of the prices wherein the prices are

fixed for the base year with escalation parameters for a pricing period of 5-7 years. The process of fixation of prices and approvals takes a minimum period of two years after the expiry of previous pricing period. In the interim, the approved prices of the previous pricing period are continued and payments are accordingly realised and on finalisation of the revised prices, the differential prices are paid to the Company. Further, certain costs not forming part of selling price are reimbursed by customer on incurrence of expenditure. The reimbursement is based on verification and issuance of audit certificate by the payees. There are delays in the above process due to unanticipated variations/adjustments in the scope and schedule of the Company''s obligations due to subsequent modifications by the customers and delays in receipt of approvals from the customer. Further, payments to the Company by the Indian Defence Services are reliant on the continuing availability of budgetary appropriations by Government of India and any disruptions to the availability of such appropriations could adversely affect the Company''s cashflows.

e) Market risk:

The Ministry of Defence (MoD) and the Government of India (GoI) have continued efforts to reform Defence related policies such as the Defence Acquisition Procedure 2020 ("DAP 2020") to promote private 33 participation, a level playing field and the domestic Defence manufacturing Industry and eco-system. While

the MoD has given the highest priority to Indigenously Designed, Developed and Manufactured ("IDDM") products for capital procurement, the Company faces competition to be selected as the Indian production agency for such contracts. These policies have raised the level of market competition in the areas in which the Company operates.

f) Risk Mitigation Process:

As a step of institutionalizing the risk management in the Company, an elaborate framework has been developed and the Company''s top management has overall responsibility for the establishment and oversight of the Company''s risk management framework. An important purpose of the framework is to have a structured and comprehensive risk management system across the Company which ensures that the risks are being properly identified and effectively managed. The Company has a risk management policy to manage & mitigate these risks. The risk management process includes risk identification, risk assessment, risk evaluation, risk mitigation and regular review and monitoring of risks.The Company''s risk management policy aims to reduce volatility in financial statements while maintaining balance between providing predictability in the Company''s business plan along with reasonable participation in market movement.

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 have put in additional hours for the hours lost during lockdown period. The lost man hours was recovered in June and July 2021. The Company has shown improved performance in the last three Quarters (July - March 2022). Hence, there is no significant impact during the year ended 31^st March 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.

For the purpose of the Company''s capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Company''s capital management is to maximise the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and requirements. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

Pursuant to the Orders passed for the Assessment years 2007-08, 2010-1 1 to 2015-16, giving effect to the orders of the Appellate authority, CY '' 119273 lakhs (PY '' 4933 lakhs for the Assessment years 2005-06 and 2006-07) provision no longer required is credited under Tax expense and consequent interest income of CY '' 26273 lakhs (PY ''4791 lakhs) is included in other income. Pending passing of Revision order by the Assessing officer, giving effect to the Income Tax Appellate Tribunal Orders for AY 2011-12 to AY 2014-15 estimated refund of ''107329 lakhs and the interest thereon '' 41175 lakhs is not recognised and will be given effect in the year in which the revision order is passed by the Assessing Officer.

Provision for Gratuity and Earned Leave has been made based on Actuarial Valuation. The date of Actuarial valuation is 31^st March 2022.

Employee Benefits:

The Company has adopted the Ind AS-19 on Employee Benefits. Consequently, the liability thereon is accounted on the basis of actuarial valuation, and is being recognised as short-term benefits / long term benefits.

Gratuity:

The Company has a Gratuity Scheme for its employees, which is a funded plan. Every year the Company funds to the Gratuity Trust to the extent of shortfall of the assets over the fund obligations, which is determined through actuarial valuation. As per the Gratuity Scheme, Gratuity is payable to an employee on the cessation of his employment after he has rendered continuous service for not less than 5 (five) years in the Company. For every completed year of service or part thereof in excess of six months, the Company shall pay Gratuity to an employee at the rate of 15 (fifteen) days'' emoluments based on the emoluments last drawn with a ceiling of '' 20 (twenty) Lakhs.

The following tables summarise the components of net benefit expense recognised in the Statement of Profit and Loss and the funded status and amounts recognised in the Balance Sheet for the plan as furnished in the Disclosure Report provided by the Actuary:

Sensitivity Analysis:

Gratuity is a lump sum plan and the cost of providing these benefits is typically less sensitive to small changes in demographic assumptions. Sensitivity analysis indicates the influence of a reasonable change in certain significant assumptions on the outcome of the Present value of obligation(PVO) and aids in understanding the uncertainty of reported amounts. Sensitivity analysis is done by varying one parameter at a time and studying its impact. The key actuarial assumptions to which the benefit obligation results are particularly sensitive to are discount rate and future salary escalation rate. The following table summarizes the impact in percentage terms on the reported defined benefit obligation at the end of the reporting period arising on account of an increase or decrease in the reported assumption by 50 basis points.

The exempt provident fund set up by the company is a defined benefit plan under Ind AS 19 Employee Benefits.

Provident Fund for eligible employees is managed by the Company through a trust in line with the Provident Fund and Miscellaneous Provision Act, 1952. The plan guarantees interest at the notified by the Provident Fund Authorities. The contribution by the employer and employee together with the interest accumulated thereon are payable to employees at the time of separation from the Company or retirement, whichever is earlier. The benefits vests immediately on rendering of the services by the employee.

The minimum interest rate payable by the trust to the beneficiaries every year is notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust (including investment risk fall) and the notified interest rate.

The Company has obtained report on the determination and disclosure of interest rate Guarantee & Diminution of Asset Values as per Ind AS19 of Employees Exempt Provident Fund of HAL for the period ended 31^st March 2022.

In view of uncertainties regarding recoverability of certain investments in ILFS, Dewan Housing, Reliance Capital, syntax, Srei equipment finance etc., liability was created during 2019-20 and 2020-21. Further as per the settlement made by Dewan Housing and considering stressed investment in Future Enterprises Ltd during 2021-22, the liability recognised in earlier years is reversed during the year ended 31^st March 2022 by '' 5313 lakhs (Previous year -accounted liability of ''15468 lakhs).

The Company has provided Performance Related Pay for the year as per the Guidelines issued by DPE.

Pension:

In line with the Guidelines issued by the Department of Public Enterprises, Ministry of Heavy Industries & Public Enterprises, Govt. of India for revision of the Salary Structure of Executives of CPSEs with effect from 1^st January, 2007 and as per the approval accorded by the Board of Directors and Department of Defence Production, Ministry of defence, a Defined Contribution Pension Scheme was notified in the Company on 16^th July, 2014 in respect of Executives retired etc., from 1^st January, 2007.

A Defined Contribution Pension Scheme in respect of Workmen retired after 1^st January, 2012 was notified on 2^nd June, 2015 which was agreed as a part of the Workmen''s Wage Revision effective from 1^st January, 2012.

Contribution to the corpus of the above schemes by the Management may vary from year to year as the same is dependent on profits generated, affordability & sustainability by the Company.

The Scheme is managed by a duly constituted Trust.

Post Superannuation Group Health Insurance Schemes:

In line with the Guidelines issued by the Department of Public Enterprises, Ministry of Heavy Industries & Public Enterprises, Government of India and as per the approval accorded by the Board of Directors and Department of Defence Production, Ministry of defence, Post Superannuation Group Health Insurance Schemes in respect of (a) Employees (Officers & Workmen) retired before 1^st January, 2007 and (b) Executives retired on or after 1^st January, 2007 were introduced with effect from 1^st February, 2014.

A Post Superannuation Group Health Insurance Scheme in respect of Workmen of the Company retired, etc. after 1^st January, 2007 has been introduced in the Company with effect from 1^st February, 2015 which was agreed as a part of the Workmen''s Wage Revision effective from 1^st January, 2012.

Benefits under the Schemes may vary from year to year, as contribution to the Corpus of the Schemes is dependent on Profits generated, Affordability & Sustainability by the Company.

The Schemes are managed by a duly constituted Trust.

HAL Employees Group Life Insurance Trust:

As per the approval accorded by the Board, the Company has notified an insurance scheme namely the HAL Employees Group Life Insurance Trust to cover its employees, in case of death due to any reason other than suicide. The contribution towards the scheme are borne equally by employees and the Management. In the event of Death of an employee due to any reason other than suicide, the dependent family members will be paid the sum assured ('' 10 lakhs). The Company has made contribution of '' 481 lakhs to the trust with employees contribuitng an equal amount.

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 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 Petition with Hon''ble 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 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.

The Board in its 436^th meeting held on 25^th June 2020 accorded approval to introduce the HAL Employees Voluntary Retirement Scheme-2020 subject to approval of the Administrative Ministry in light of the present economic circumstances and changing business scenario and to operate economically to reduce surplus manpower and high labour cost to withstand the competition from private companies. Administrative Ministry approval for the scheme is awaited.

Financial Assitance Scheme for Dependents of Deceased Employee

As per the approval accorded by the Board, the Company has notified "Financial Assistance Scheme for dependents of Deceased Employees (FASDDE)" to pay a fixed amount on monthly basis to surviving spouse or dependent children if the spouse is not surviving, till the notional date of superannuation of the deceased employee. The prime objective of the scheme is to provide financial support for dependent beneficiaries of the employees who die while in service, to enable them to lead a normal life. The scheme will be applicable in all cases of Death of an employee due to any other reason other than suicide. Fund of '' 4000 lakhs and a trust will be established for management of the Corpus. The income generated from the Corpus which will be invested with M/s LIC will be utilized to make payments under the Scheme.

During the year ''4000 lakhs paid to Trust for creation of Corpus and ''418 lakhs has been incurred as expenditure under Financial Assistance Scheme for Dependents of Deceased Employee which is included in note 40 - Staff Welfare expenditure.

As and when the instalments in respect of deferred debts falls due for payment to the Russian Federation, the same is paid by applying the exchange rate ruling on the date of actual payment and liability discharged. The differences arising due to recalculation of debts at the applicable /ruling rate is charged to the revenue at the time of payment and recognised as sales when realised from the customer except to the extent it pertains to Capital Assets. The sales for Exchange Rate Variation (ERV) considered is ''3971 Lakhs (31^st March 2021 - '' 4106 Lakhs). The Assets and Liabilities relating to deferred credit transaction are reinstated under Non-current Other Financial Assets, Current Other Financial Assets (recoverable within one year), Non-current Other Financial Liabilities and Current Other Financial Liabilities (to be settled within one year).

The Company maintains gratuity trust for the purpose of administering the gratuity payment to its employees (HAL Employees Gratuity scheme). During the year, the Company contributed ''18525 Lakhs (Previous Year -''15580 Lakhs) and as on 31-03-2022 the amount payable is NIL (Previous year '' 3174 Lakhs), amount receivable is '' 17022 lakhs ( Previous Year '' 17999 lakhs) and Advance paid to Gratuity trust is '' 5640 lakhs (Previous year NIL).

The Board in its 406^th meeting held on 22^nd September 2017, accorded in principle approval for voluntary winding up / closure of the three Joint Ventures i.e. M/s. HAL-Edgewood Technologies Private Limited, M/s. Tata HAL Technologies Ltd and M/s. Multirole Transport Aircraft Ltd. enabling the Company to take further action in the matter.

Further, the Board authorized the Company to seek approval of Ministry of Defence (MoD), for short closure of the Contracts associated with the M/s Multirole Transport Aircraft (MTA) project and request MoD, to initiate necessary action for closure of IGA, as it is a prerequisite for winding up of the MTA - Joint Venture Company. Further, MOD vide its letter dated 14^th October 2021 notified the termination of the agreement between the Govt. of the Republic of India and Govt. of Russian Federation. In this respect the Russian Federation vide its letter dated 20^th April 2022 intimated that the decision of the Indian side has been taken into consideration.

Further in 435^th meeting held on 16^th March 2020, the Board has directed the Company to expedite the closure of M/s. Multirole Transport Aircraft Ltd at the earliest after taking clearance from Russian partners from their Board (refer Clause No.10).

The Board in its 440^th meeting held on 9^th December 2020, accorded in principle approval for voluntary winding up / closure of Joint Venture M/s. Infotech HAL Limited(IHL) enabling the Company to take further action in the matter.

TATA HAL Techonologies Limited, Pursuant to the Board Resolution dated 08^th June 2021, the company has filed the application for voluntary liquidation to MCA in terms of Section 59 of the Insolvency and Bankruptcy Code, 2016 and the official liquidator is appointed.

A Section 8 Company has been formed (Under Companies Act 2013) in the name of "Defence Innovation Organisation" with M/s BEL with an authorised Capital of '' 100 lakhs (Paid up capital as on 31^st March 2022 is '' 1 Lakh (HAL 50% Share and BEL 50% Share). The registered office of DIO is situated at Centre for Learning and Development, Bharat Electronics Limited, Jalahalli, Bengaluru - 560013, Karnataka, India. DIO was incorporated to implement the scheme of defence innovation fund initiative by creation of an ecosystem to foster innovation and technology development in defence.

HAL Board in its 417^th meeting held on 30^th July 2018 had accorded approval for release of '' 5000 lakhs to DIO towards initial corpus fund in form of Grant in Aid in a staggered manner. Accordingly '' 500 lakhs has been released to DIO in the month of August 2018 and the balance amount is recognised and disclosed in other finanial liabilities - other liabilities (note 32).

The Board in its 434^th meeting was informed that Government approval is not required for transfer of lease hold land to M/S Helicopter Engines-MRO Private Limited (HE-MRO), as it is neither Defence land nor it is a land owned by HAL. Board reconsidered the decision taken in its 431^st meeting and approved transfer of land without Government approval to M/s HE-MRO.

The company has received a sum of ''919 lakhs from HE-MRO for transfer of lease hold land at Goa to HE MRO for right of use assets and the transfer of land is pending for registration, accordingly the carrying amount of right of use assets of ''811 lakhs has been disclosed as asset held for sale and '' 919 lakhs received from HE-MRO disclosed under note 32 Non current - other liabilities in accordance with Ind AS 105.

Promoters of HE-MRO have decided to restart the activities of the Company on improvement of the Covid-19 situation. To meet its financial requirement, HE-MRO in its 33^rd Board meeting held on 30^th July 2021 decided to raise funds by way of Right issue of 20 lakh equity shares to the existing shareholders at par value of ''100 per share.HE-MRO has sent Right issue offer letter to existing shareholders including HAL. This matter was put up to Board of Directors of HAL in its 449^th Meeting held on 21^st September 2021, and the Board has accepted the Right issue offer.

Consequent to the same, Rs.1000 lakhs has been paid to HE-MRO towards equity participation in Rights issue of HE-MRO Private Limited on 30.09.2021. The Company has been allotted 10 lakh Equity shares of ''100 each on 11^th November 2021 against the share application money paid.

Buyback of Shares:

In accordance with the approval of Board of Directors at its 408^th meeting held on 28^th November, 2017 and approval of shareholders, the Company has bought back 2,71,12,500 fully paid equity shares of ''10/- each equivalent to 7.5% of the paid -up share capital and Free Reserves of the Company, for an aggregate amount of '' 92150 lakhs (excluding tax of '' 20636 lakhs) at '' 339.88 per equity share from the President of India. The consideration amount for buy back of shares was paid to the Government of India on 19^th December, 2017 and the shares so bought back were extinguished on 22^nd December, 2017.

The Government of India, on 27^th August 2020 - 28^th August 2020 made an offer for sale (OFS) upto 15% of the paid up equity share capital, out of its shareholding of 89.97%, in order to achieve the mandatory threshold of 25% minimum public shareholding by a listed Company. Consequent to the OFS, the Government of India shareholding stands at 75.15%.

Sensitivity of estimates on provisions:

The assumptions made for provisions relating to current period are consistent with those in the earlier years. The assumptions and estimates used for recognition of such provisions are qualitative in nature and their likelihood could alter in next financial year. It is impracticable for the Company to compute the possible effect of assumptions and estimates made in recognizing these provisions.

Provision for replacement and other charges represents, amounts towards expenditure incurred from the date of Signaling Out Certificate (SOC) to date of ferry out, loan items taken from the customer which needs to be replaced etc.

Warranty represents Performance Warranty for manufacture, repair and overhaul of Aircraft / Helicopters/ Engines / Rotables, supply of spares and development activities etc.

Provision for Redundancy in Raw Material and Components, Stores and Spares, Construction Material, Loose Tools and Work in progress represents provision on redundancy of such materials, completed / specific projects and other surplus / redundant materials pending transfer to salvage stores etc.

Provision for Liquidated Damages represents amounts provided for the period of delay between the due date of supply of the Goods / rendering of services as per delivery schedule and the expected Date of delivery of said Goods / rendering of service in respect of manufacture / repair and overhaul of Aircraft / Helicopters/ Engines / Rotables, supply of spares and development activities etc.

Provision for doubtful debts is being assessed on a case to case basis in respect of dues outstanding for a significant period of time. Debts from the Government departments are generally treated as fully recoverable and hence the Company does not recognize credit risk of such financial assets.

Provision for doubtful claims represents provision on expected credit losses.

Impairment in value of investment represents reduction in the share of net worth below investment.

Provision for Onerous contract has been recognised as the cost of meeting obligations is over and above the economic benefits expected to be received under it.

Company has not revalued its Property, Plant and Equipment, and therefore disclosure, whether the revaluation is based on the valuation by a registered valuer as defined under rule 2 of the Companies (Registered Valuers and Valuation) Rules, 2017 does not arise.

Company has not revalued its intangible assets, and therefore disclosure, whether the revaluation is based on the valuation by a registered valuer as defined under rule 2 of the Companies (Registered Valuers and Valuation) Rules, 2017 does not arise.

Loans or Advances in the nature of loans are g

---

Mar 31, 2019

Notes to the Financial Statements for the year ended March 31, 2019

Note 49 - Notes to Accounts

	(Rs. in Lakhs)
Clause No.	Particulars
45B	The Board in its 406* meeting held on 22nd September 2017, accorded in principle approval for voluntary winding up /closure of the three Joint Ventures i.e. M/s. HAL-Edgewood Technologies Private Limited, M/s. Tata HAL Technologies Ltd and M/s. Multirole Transport Aircraft Ltd. enabling the Company to take further action in the matter. Further, the Board authorized the Company to seek approval of Ministry of Defence (MoD), for short closure of the Contracts associated with the M/s Multirole Transport Aircraft (MTA) project and request MoD, to initiate necessary action for closure of IGA, as it is a prerequisite for winding up of the MTA -Joint Venture Company.
	Defence Innovation Organisation ("DIO"):
45C	A Section 8 Company has been formed (Under Companies Act 2013) in the name of "Defence Innovation Organisation" with M/s BEL with an authorised Capital of Rs. 100 lakhs (Paid up capital as on 30-06-2018 is Rs. 1 Lakh (HAL 50% Share and BEL 50% Share). The registered office of DIO is situated at Centre for Learning and Development, Bharat Electronics Limited, Jalhalli, Bengaluru - 560013, Karnataka, India. DIO was incorporated to implement the scheme of defence innovation fund initiative by creation of an ecosystem to foster innovation and technology development in defence. HAL Board in its 417* meeting held on 30* of July 2018 had accorded approval for release of Rs. 5000 lakhs to DIO towards intitial corpus fund in form of Grant in Aid in a staggered manner. Accordingly 500 lakhs has been released to DIO in the month of August 2018. The balance amount is recognised in financials.
45D	Defence Production IT Division has been created as one of the Division of HAL to implement IT related initiatives in DDP including OFB and DPSUs.

	Key Management Personnel in the Company	31st Mar, 2019			31st Mar, 2018
	Particulars	Salary	Company Contribution toPF/ Gratuity	Total	Salary	Company Contribution to PF/ Gratuity	Total
	1. Shri T. Suvarna Raju, Chairman & Managing Director	24	2	26	57	5	62
	2. Shri R. Madhavan, Chairman & Managing Director	30	3	32			-
	3. Shri V.M.Chamola, Director (HR)	56	5	60	54	5	59
	4. Shri C.V. Ramana Rao, Director (Finance) & CFO	17	1	19	51	4	56
	5. Shri C. B. Anantha Krishnan, Director (Finance) & CFO	30	3	33			-
	6. Shri S. Subrahmanyam, Director (Operations)			-	3	-	4
	7. Shri Sunil Kumar, Director (Operations)	46	4	50	28	2	30
	8. Shri D.K. Venkatesh, Director- Engineering	8	1	8	46	4	50
45E	9. Shri Arup Chatterji	36	3	39			-
	10. Shri G.V. Sesha Reddy (Company Secretary)	28	3	30	26	3	29

Shri T. Suvarna Raju, Chairman & Managing Director ceased to be the chairman consequent upon superannuation on 31st August 2018._______________________________________________________________________________

Shri R. Madhavan was appointed as Chairman & Managing Director with effect from 1st September 2018

Shri C.V. Ramana Rao ceased to be Director (Finance) and CFO consequent upon supperannuation on 31st July 2018

Shri C.B. Anantha Krishnan was appointed as Director (Finance and CFO) with effect from 1st August 2018

Shri Subrahmanyan, Director (Operations) ceased tobe Director (Operations) of the company consequent upon supperannuation on 30th April 2017.

Shri Sunil Kumar was appointed as Director (Operations) with effect from 16th October 2017

Shri D K Venkatesh, Director - Engineering, ceased to be Director- Engineering consequent upon superannuation on 31st May 2018.__________________________________________________________________________________

Shri Arup Chatterji was appointed as Director (Engineering) with effect from 1st June 2018.

		(Rs. in Lakhs)
Clause No.	Particulars
	PART TIME NON-OFFICIAL DIRECTORS	Sitting Fees$
	1. Smt Dipali Khanna, Independent Director	4
	2. Dr J. K. Bajaj, Independent Director	6
	3. Shri Anil Kumar*, Independent Director	4
45F	4. Shri Neelakanta Iyer R*, Independent Director	4
	5. Shri Siddharth*, Independent Director	4
	6. Rear Admiral K.C. Sekhar Avsm. VSM	2
	7. Dr.S. Malla Reddy	2
26

$ Does not include GST payable by the Company on reverse charge basis

Apart from transactions reported above, the Company has transactions with other Government related entities, which includes but not limited to the following:

45G	Name of Government:	Government of India
	Nature of Transactions:	Sale of Products and Services

These transactions are conducted in the ordinary course of the Company''s business The disaggregation of changes to OCI is shown below: During the year ended 31st Mar 2019

	Particulars	Opening balance as on 01.04.2018	Additions	Reversals	Closing balance as on 31.3.2019
	Gains and losses arising from the financial statements of a foreign operations	9	6		15
	Re-measurement gains (losses) on defined benefit plans (Gratuity)	-20324	-5830		-26154
46	Total	-20315	-5824	-	-26139
	During the year ended 31st Mar 2018 Particulars	Opening balance as on 01.04.2017	Additions	Reversals	Closing balance as on 31.3.2018
	Gains and losses arising from the financial statements of a foreign operations	-2	11		9
	Re-measurement gains (losses) on defined benefit plans (Gratuity)	-5223	-15101		-20324
	Total	-5225	-15090	-	-20315

Clause No.	Particulars
47	As per Ind AS-33 relating to Earnings per Share (Basic and Diluted)-
	Profit Before Tax	362764	323985
	Provision for Taxation	134520	125243
	Net Profit After Tax	228244	198742
	Weighted Average Number of Equity Shares of Face Value of Rs. 10/- each fully paid up	334387500	353923356
	Earnings per Share (in Rupees) - Basic and Diluted	68.26	56.15

Buyback of Shares:

In accordance with the approval of Board of Directors at its 408* meeting held on 28th November, 2017 and approval of shareholders, the Company has bought back 2,71,12,500 fully paid equity shares of Rs.10/- each equivalent to 7.5% 48 of the paid -up share capital and Free Reserves of the Company, for an aggregate amount of Rs 92150 lakhs (excluding tax of Rs 20636 lakhs) at Rs 339.88 per equity share from the President of India. The consideration amount for back buy of shares was paid to the Government of India on 19th December, 2017 and the shares so bought back were extinguished on 22nd December, 2017.

49	As required by Ind AS 36, an assessment of impairment of assets was carried out and based on such assessment, the Company has accounted impairment losses due to decrease in value in use in respect of Intangible Assets is recognised in ''impairment expense'' in the Statement of Profit and Loss.	31st March 2019	31st March 2018
		24,909	2,152

Restatement of Prior Period Errors: Liquidated damages for delay in execution Rs. 29947 lakhs and Rs. 6067 lakhs upto 49A 31.03.2017 and for the FY 2017-18 respectively, now discovered have been recognized and adjusted in equity as on 01.04.2017 and Statement of Profit and Loss 2017-18 restated respectively.

Clause No.		Particular
	As per Ind AS 37 relating to Provisions, Contingent Liability and Contingent Assets - the movement of provisions in the Books of Accounts is as follows:
	Nature of Provision	Opening Balance	Provision made during the year	Utilisation during the year	Reversal during the year	Closing Balance
	Provision for Warranty Charges	43056	22186	6838	1941	56463
	(Previous Year)	(53,890)	(8,634)	(8,678)	(10,790)	(43,056)
	Provision for Replacement and Other Charges	101577	51323	8075	171	144655
	(Previous Year)	(88,693)	(25,029)	(11,953)	(192)	(101,577)
	Provision for Redundancy in Raw Material and Components, Stores and Spares, Construction Material and Loose Tools	77314	9638	137	8561	78254
	(Previous Year)	(70,079)	(12,829)	(45)	(5,549)	(77,314)
	Provision for Doubtful Debts	18122	719	-	2108	16733
	(Previous Year)	(14,253)	(4,125)	(1)	(255)	(18,122)
	Provision for Claims	29831	2153	250	572	31162
	(Previous Year)	(13,878)	(15,972)	(5)	(14)	(29,831)
	Provision for Liquidated Damages	166255	43707	19658	-	190304
	(Previous Year)	(158,449)	(37,597)	(31,874)	(3,020)	(161,151)
50A	Impairment of Investments	12877	275	-	-	13152
	(Previous Year)	(6,584)	(6,293)	-	-	(12,877)
	Provision for Onerous contract	90330	-	-	37426	52904
	(Previous Year)	(110,469)	-	(1)	(20,138)	(90,330)

* Figures in brackets relate to previous year.

	31st March 2019			31st March 2018
Nature of Provision	Long Term Provision	Short Term Provision	Total Provision	Long Term Provision	Short Term Provision	Total Provision
Provision for Warranty Charges	-	56,463	56,463	-	43,056	43,056
Provision for Replacement and Other Charges	14,775	129,880	144,655	12,276	89,301	101,577
Provision for Redundancy in Raw Material and Components, Stores and Spares, Construction Material and Loose Tools		78,254	78,254		77,314	77,314
Provision for Doubtful Debts	1,401	15,331	16,732	1,302	16,820	18,122
Provision for Claims	22,722	8,440	31,162	23,096	6,735	29,831
Provision for Liquidated Damages	67,402	122,903	190,305	75,541	85,610	161,151
Impairment of Investments	13,152	-	13,152	12,877	-	12,877
Provision for Onerous contract	-	52,904	52,904	24,713	65,617	90,330

Clause No.	Particulars
	Sensitivity of estimates on provisions: The assumptions made for provisions relating to current period are consistent with those in the earlier years. The assumptions and estimates used for recognition of such provisions are qualitative in nature and their likelihood could alter in next financial year. It is impracticable for the Company to compute the possible effect of assumptions and estimates made in recognizing these provisions.
	Provision for replacement and other charges represents, amounts towards expenditure incurred from the date of Signalling Out Certificate (SOC) to date of ferry out, loan items taken from the customer which needs to be replaced etc.
	Warranty represents Performance Warranty for manufacture, repair and overhaul of Aircraft / Helicopters/ Engines / Rotables, supply of spares and development activities etc.
50B	Provision for Redundancy in Raw Material and Components, Stores and Spares, Construction Material and Loose Tools represents provision on redundancy of such materials, completed / specific projects and other surplus / redundant materials pending transfer to salvage stores etc..
	Provision for Liquidated Damages represents amounts provided for the period of delay between the due date of supply of the Goods / rendering of services as per delivery schedule and the expected Date of delivery of said Goods / rendering of service in respect of manufacture / repair and overhaul of Aircraft / Helicopters/ Engines / Rotables, supply of spares and development activities etc.
	Provision for doubtful debts is being assessed on a case to case basis in respect of dues outstanding for a significant period of time. Debts from the Government departments are generally treated as fully recoverable and hence the Company does not recognize credit risk of such financial assets.
	Provision for doubtful claims represents provision on expected credit losses.
	Impairment in value of investment represents reduction in the share of net worth below investment.
	Provision for Onerous contract has been recognised as the cost of meeting obligations is over and above the economic benefits expected to be received under it.

Information regarding income and expenditure of Investment property As per Ind AS 40 - Investment property:	31st March 2019	31st March 2018
Rental income derived from investment properties	536	646
Direct operating expenses (including repairs and maintenance) generating rental income	-	1
51 Direct operating expenses (including repairs and maintenance) that did not generate rental income	-	-
Profit arising from investment properties before depreciation and Indirect expenses	536	645
Less - Depreciation	-	-
Profit arising from investment properties before Indirect expenses	536	645
Fair value of investment property
As at 31st March 2019, the fair value of the properties is Rs. 3631 lakhs as valued by an Independent valuer

Advances from Customers of Rs. 664358 Lakhs and Milestone receipts of Rs. 1565487 Lakhs disclosed in Note Nos. 29 and 33 as Non-Current and Other Current Liabilities (in terms of Schedule III to the Companies Act, 2013) represent gross amounts received. These amounts have been utilised for procurement of Special Purpose Tooling, Incurrence of DRE, Inventory Holding, Advances to Vendors etc. as detailed below:

Particulars	31st March 2019		31st March 2018
	Note 29	Note 33	Note 29	Note 33
	Non - Current	Current	Non -Current	Current
Outstanding Advances from Customer
- Defence	274000	385941	329076	450036
- Others	-	4417	-	7430
	274000	390358	329076	457466
Less: Utilisation of Advances		-	-	-
- Inventory	226641	318150	249779	258231
- Advances against Goods & Services	-	3486	-	7399
- Deferred Revenue Expenditure	-	7543	-	70844
- Special Tools & Equipment	9219	7307	17980	11770
-Trade Receivables	-	579	-	-
52 -Claims Receivables	16	1022	-	1794
	235876	338087	267759	350038
Net Outstanding Advances (A)	38124	52271	61317	107428
Outstanding Milestone Receipt
- Defence	562766	921695	504398	1241386
- Others	4886	76140	12741	64885
	567652	997835	517139	1306271
Less: Utilisation of Milestone Receipts
- Inventory	187799	495010	208227	606052
- Advances against Goods & Services	14632	65250	9553	34535
- Deferred Revenue Expenditure	26697	12987	24795	28998
- Special Tools & Equipment	56765	67004	85346	123465
-Trade Receivables	-	47225	4047	11327
-Claims Receivables	2300	3428	-	40895
	288193	690904	331968	845272
Net Outstanding Milestone Receipts (B)	279459	306931	185171	460999
Total (A B)	317583	359202	246488	568427

Note 49 - Notes to Accounts

Clause No.	Particulars	31st March 2019	(Rs. in Lakhs) 31st March 2018
52	Summary
	(A) Gross Advances from Defence Customers
	Initial Advances from Defence Customers	659941	779112
	Milestone Advances from Defence Customers	1484461	1745784
	Gross Advances from Defence Customers (A)	2144402	2524896
	Advances from Others (B)	85443	85056
	Total ( A B )	2229845	2609952
	Less Advances / Milestone utilisation (C)	1553060	1795037
	Outstanding Advances / Milestone Receipts (A B-C)	676785	814915
	Defence Customers	613728	737374
	Others	63057	77541
	Total	676785	814915

The financial statements were approved for issue by the Board of Directors at their meeting held on 27th May 2019.

53 These financial statements are presented in Indian rupees (rounded off to lakhs). Previous Year figures have been rearranged or regrouped wherever necessary.

Note ''1'' to ''49'' and Accounting Policies attached form part of the Accounts As per our Report attached

	For and on behalf of the Board of Directors
For Maharaj N R Suresh & Co.	(C. B. Ananthakrishnan)	(R. Madhavan)
Chartered Accountants	Director (Finance) &CFO	Chairman & Managing Director
FRN No. 001931S	DIN: 06761339	DIN: 08209860
CA N R Suresh		(G.V. Sesha Reddy)
Partner		Company Secretary
Membership No. 021661
Place: Bengaluru
Date: 27.05.2019

196

---

Mar 31, 2018

1. 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 Ind AS 108 on "Operating Segment".

As per Ind AS-109 relating to Accounting for Investments, amount being Dividend received from Joint Venture

2. companies, which is recognized when right to receive Dividend is established.

Provision for Gratuity and Earned Leave has been made based on Actuarial Valuation. The date of Actuarial valuation is of 31^st March, 2018 43 Employee Benefits:

The Company has adopted the Accounting Standard (Ind AS)-19 on Employee Benefits. Consequently, the liability thereon is accounted on the basis of actuarial valuation, and is being recognized as short-term benefits / long term benefits: Gratuity:

The Company has a Gratuity Scheme for its employees, which is a funded plan. Every year the Company funds to the Gratuity Trust to the extent of shortfall of the assets over the fund obligations, which is determined through actuarial valuation. As per the Gratuity Scheme, Gratuity is payable to an employee on the cessation of his employment after he has rendered continuous service for not less than 5 (five) years in the Company. For every completed year of service or part thereof in excess of six months, the Company shall pay Gratuity to an employee at the rate of 15 (fifteen) days’ emoluments based on the emoluments last drawn with a ceiling of RS,20 (twenty) Lakhs.

The following tables summaries the components of net benefit expense recognized in the Statement of Profit and Loss and the funded status and amounts recognized in the Balance Sheet for the plan as furnished in the Disclosure Report provided by the Actuary:

Gratuity is a lump sum plan and the cost of providing these benefits is typically less sensitive to small changes in demographic assumptions. The key actuarial assumptions to which the benefit obligation results are particularly sensitive to are discount rate and future salary escalation rate. The following table summarizes the impact in percentage terms on the reported defined benefit obligation at the end of the reporting period arising on account of an increase or decrease in the reported assumption by 50 basis points.

The Board in its 406^th meeting held on 22^nd September 2017, accorded in principle approval for voluntary winding up / closure of the three Joint Ventures i.e. M/s. HAL-Edgewood Technologies Private Limited, M/s. Tata HAL Technologies Ltd and M/s. Multirole Transport Aircraft Ltd. enabling the Company to take further action in the matter.

3.

Further, the Board authorized the Company to seek approval of Ministry of Defence (MoD), for short closure of the Contracts associated with the M/s Multirole Transport Aircraft (MTA) project and request MoD, to initiate necessary action for closure of IGA, as it is a prerequisite for winding up of the MTA - Joint Venture Company Investment in M/s Indo Russian Helicopters Pvt Ltd:

The Company, Russian Helicopters and Rosoborone Exports had executed the Indo Russian Helicopters Private Limited shareholders agreement (IRHL SHA) to incorporate Indo Russian Helicopters Limited (“IRHL”). As a Subsidiary Company with the following objectives;

(i) To organize production of Ka-226T Helicopters and its modification in India

(ii) Undertake maintenance, operation and repair of Ka-226T Helicopters

(iii) Jointly modernize, including design and development, of helicopters for new applications and upgrades including replacement and

45C (iv) Jointly market Ka-226T Helicopters and ensure technical support for them.

In terms of IRHLSHA, the Company, Russian Helicopters and Rosoborone Exports shall hold 50.5%, 42% and 7.5% respectively of the Equity Share Capital in IRHL. Subsequently based on the above, IRHL was incorporated on 2^nd May, 2017.

The Company and Bharat Electronics Limited (“BEL”) has set up DIO as a joint venture company. DIO was incorporated under Section 8 of the Companies Act 2013 on April 10, 2017. The registered office of DIO is situated at Centre for Learning and Development, Bharat Electronics Limited, Jalhalli, Bengaluru - 560013, Karnataka, ^45E India. DIO was incorporated to implement the scheme of defence innovation fund initiative by creation of an ecosystem to foster innovation and technology development in defence.

However, DIO, neither conducted any operation nor did it opened a bank account, conducted meetings etc., The Company has not invested any amount as on 31^st March, 2018.

Shri P S Krishnan, Shri Pradipta Banerji, Shri Gopabandhu Pattanaik & AVM (R) D K Pande, AVSM,VSM ceased to be Independent Directors with effect from 4^th May, 2017 on completion of their tenure.

Shri V Somasundaran, Shri Arun Kumar Sinha & Dr J K Bajaj appointed as Independent Directors of the Company with effect from 11^th September, 2017.

Shri Arun Kumar Sinha ceased to be Independent Director of the Company consequent upon resignation with effect from 22^nd January, 2018.

Shri V Somasundaran ceased to be Independent Director of the Company consequent upon resignation with effect from 6^th February, 2018.

Shri Chandraker Bharti, ceased to be Government Nominee Director with effect from 1^st March, 2018.

Shri Neelakanta Iyer R & Shri Siddharth was appointed as Independent Directors with effect from 5^th March, 2018. Apart from transactions reported above, the Company has transactions with other Government related entities, which includes but not limited to the following:

45H Name of Government: Government of India

Nature of Transactions: Sale of Products and Services

These transactions are conducted in the ordinary course of the Company''s business

1. In accordance with the approval of Board of Directors at its 396^th meeting held on 22^nd March, 2016 and approval of shareholders through special resolution in the Extra-ordinary General Meeting held on the said date, the Company has bought back 12,05,00,000 fully paid equity shares of H10/- each equivalent to 25% of the paid -up share capital and Free Reserves of the Company, for an aggregate amount of H428438 lakhs (excluding tax of H98154 lakhs) at H355.55 per equity share from the President of India. The consideration amount for back buy of shares was paid to the Government of India on 30^th March, 2016 and the shares so bought back were extinguished

48 on 5^th April, 2016.

2. In accordance with the approval of Board of Directors at its 408^th meeting held on 28^th November, 2017 and approval of shareholders , the Company has bought back 2,71,12,500 fully paid equity shares of H10/- each equivalent to 7.5% of the paid -up share capital and Free Reserves of the Company, for an aggregate amount of H92150 lakhs (excluding tax of H20636 lakhs) at H339.88 per equity share from the President of India. The consideration amount for back buy of shares was paid to the Government of India on 19^th December, 2017 and the shares so bought back were extinguished on 22^nd December, 2017.

Sensitivity of estimates on provisions:

The assumptions made for provisions relating to current period are consistent with those in the earlier years. The assumptions and estimates used for recognition of such provisions are qualitative in nature and their likelihood could alter in next financial year. It is impracticable for the Company to compute the possible effect of assumptions and estimates made in recognizing these provisions.

Provision for replacement and other charges represents, amounts towards expenditure incurred from the date of Signalling Out Certificate (SOC) to date of ferry out, loan items taken from the customer which needs to be replaced etc., Warranty represents Performance Warranty for manufacture, repair and overhaul of Aircraft / Helicopters/ Engines / Rotables, supply of spares and development activities etc

Provision for Redundancy in Raw Material and Components, Stores and Spares, Construction Material and Loose Tools represents provision on redundancy of such materials, completed / specific projects and other surplus / ^50B redundant materials pending transfer to salvage stores etc.,

Provision for Liquidated Damages represents amounts provided for the period of delay between the due date of supply of the Goods / rendering of services as per delivery schedule and the expected Date of delivery of said Goods / rendering of service in respect of manufacture / repair and overhaul of Aircraft / Helicopters/ Engines / Rotables, supply of spares and development activities etc.

Provision for doubtful debts is being assessed on a case to case basis in respect of dues outstanding for a significant period of time. Debts from the Government departments are generally treated as fully recoverable and hence the Company does not recognize credit risk of such financial assets.

Provision for doubtful claims represents provision on expected credit losses.

Impairment in value of investment represents reduction in the share of net worth below investment.

Provision for Onerous contract has been recognized as the cost of meeting obligations is over and above the economic benefits expected to be received under it.

These financial statements are presented in Indian rupees (rounded off to lakhs). Previous Year figures have been rearranged or regrouped wherever necessary.

As per the requirement of Schedule III Division II, the Company is required to classify the amount due towards purchase of capital goods under "Other Financial Liabilities". In earlier years, such liability has been classified under Trade Payables . For the current year, the Company has revised the classification to report these liabilities under other financial liabilities. As per Ind AS 1 "Presentation of Financial Statements “the Company should present a third Balance Sheet as at the beginning of the preceding period, if it reclassifies items in its financial statements and the re-classification has material effect on the information in the Balance Sheet at the beginning

4.of the preceding period.

Since the Company is of the opinion that the reclassification has a material effect on the information in the Balance Sheet. , it has accordingly, as per requirement of Ind AS 1 has prepared Balance Sheet as at the beginning of the preceding period i.e. as at 1^st April 2016. Corresponding reclassification have also been made to the Statement of Cash Flows for the year ended 31^st March 2017.

This change in classification does not materially affect previously reported cash flows from operations or from financing activities in the Statement of Cash Flows, and has no effect on the previously reported Statement of Operations for any peri