Markets

Your Board of Directors has pleasure in presenting the 39^th Annual Report on the business and operations of your Company
together with the Audited Financial Statements for the financial year ended March 31, 2026.

FINANCIAL HIGHLIGHTS

Your Company's financial performance (standalone and consolidated) for the financial year ended March 31, 2026 is
summarised below:

During FY26, the total Consolidated Income of your Company
stood at T5,014.52 crore as compared to T4,122.28 crore in the
previous year, reflecting an increase of 21.64%.

Your Company achieved a Consolidated EBITDA of ?826.75
crore in FY26, as against ?506.75 crore in the previous year,
registering a growth of 63.15%. Further, the Consolidated
Profit Before Tax (PBT) increased by 97.46% to T427.68 crore
in FY26 from T216.59 crore in the previous year.

During FY26, your Company reported a Consolidated Profit
After Tax (PAT) of T329.44 crore, compared to T173.26 crore in
the previous year, representing an increase of 90.14%.

Net Worth

The net worth of your Company has increased during the year
under review to ?4727.45 crore from ?3962.55 crore in the
previous year.

Gross Debt

The consolidated debt in FY26 stood at ?1713.37 crore as
against T1341.05 crore in FY25.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the provisions of Section 129 read with
Schedule III to the Companies Act, 2013 (hereinafter referred
to as the “Act") and the Companies (Accounts) Rules, 2014,
Regulation 33 of the Securities and Exchange Board of
India (Listing Obligations and Disclosure Requirements)
Regulations, 2015 (hereinafter referred to as the “SEBI
Listing Regulations") and applicable Indian Accounting
Standards, the Audited Consolidated Financial Statements
of the Company for FY26, together with the Auditors' Report
forms part of this Annual Report.

TRANSFER TO RESERVES

The Board of Directors has decided to retain the entire
amount of profits for FY26, under Retained Earnings and has
not transferred any amount to the General Reserves, during
the year under review.

DIVIDEND

Your Board of Directors, at its meeting held on April 30, 2026,
has recommended a Dividend @20% i.e., ?0.20/- (Twenty
Paise) per equity share of face value of ?1/-, aggregating to
dividend pay-out of T30.61 crore for the financial year ended
March 31, 2026, subject to approval of shareholders at the
ensuing annual general meeting (“AGM") of the Company.
The above decision is in accordance with the Company's
Dividend Distribution Policy.

The dividend shall be subject to deduction of TDS before
payment to shareholders, as per applicable provisions of the
Income-Tax Act, 2025.

Dividend Distribution Policy

As per Regulation 43A of SEBI Listing Regulations, top 1000
listed companies based on the market capitalisation, shall
formulate a Dividend Distribution Policy.

Accordingly, the Policy has been adopted by the Board of
Directors of the Company setting out the parameters and
circumstances that will be taken into account by the Board in
determining the distribution of dividend to its shareholders
and/ or retaining profits earned by the Company.

The Dividend Distribution Policy is available on the
Company's website athttps://cdn.prod. website-files.
com/69e0036b695965871f0524aa/69e7d206406f3dd72b63
0591 Dividend Distribution Policy 22052025.pdf

Investor Education and Protection Fund (IEPF)

In accordance with the applicable provisions of the Act read
with the Investor Education and Protection Fund (Accounting,
Audit, Transfer and Refund) Rules, 2016 (“IEPF Rules"), all
unclaimed dividends are required to be transferred by the
Company to the IEPF, which remain unpaid or unclaimed for
a period of seven years, from the date of transfer to Unpaid
Dividend Account.

Further, according to IEPF Rules, the shares on which
dividend has not been claimed by the shareholders for
seven consecutive years or more shall be transferred to the
demat account of the Investor Education and Protection Fund
Authority (“IEPF Authority").

During the year under review, the Company transferred
unpaid/unclaimed dividend amounting to ?10.26 lakh
to IEPF. Further, 29,39,459 equity shares of ?1/- each were
transferred to the demat account of the IEPF Authority in
accordance with the applicable provisions of the Act and the
rules made thereunder.

Details of Nodal Officer

The Company has designated Mr. Manoj Baid, President &
Company Secretary of the Company as a Nodal Officer for
the purpose of IEPF Authority.

INDIAN ACCOUNTING STANDARDS (IND-AS)

Financial Statements of your Company and its subsidiaries,
for the financial year ended March 31, 2026, have been
prepared in accordance with Indian Accounting Standards
(Ind-AS), as notified under Section 133 of the Act read with
the Companies (Indian Accounting Standards) Rules, 2015, as
amended from time to time.

DEPOSITS

During FY26, your Company has not accepted any deposit
within the meaning of Section 73 and 74 of the Act read with
the Companies (Acceptance of Deposits) Rules, 2014. Further,
no amount of principal or interest was outstanding as on the
balance sheet closure date.

SHIFTING OF REGISTERED OFFICE

The Members of the Company, through a Special Resolution
passed at the Annual General Meeting held on September
15, 2025, approved the shifting of the Registered Office of the
Company from the State of Himachal Pradesh to the State of
Haryana, subject to the receipt of all necessary statutory and
regulatory approvals. Subsequently, the Hon'ble Regional
Director, Northern Region-II, Chandigarh, vide its Order dated
July 7, 2026, approved the shifting of the Registered Office,
and the same has been taken on record by the Registrar of
Companies, Chandigarh, Haryana.

Accordingly, the Registered Office of the Company stands
shifted to Plot No. 38, Institutional Area, Sector-32, Gurugram
- 122 001, Haryana, w.e.f. July 31, 2026.

SHARE CAPITAL AND CHANGES IN CAPITAL
STRUCTURE

Authorised Share Capital

As on March 31, 2026, the Authorised Share Capital of your
Company stood at ?760 crore (Rupees Seven Hundred
Sixty crore only) divided into 510 crore (Five Hundred Ten
crore) equity shares of face value of ?1/- (Rupee One) each,
aggregating to ?510 crore (Rupees Five Hundred Ten crore
only) and 2.50 crore (Two crore Fifty Lakhs) Cumulative
Redeemable Preference Shares (CRPS) of ?100/- (Rupees
Hundred) each, aggregating to ?250 crore (Rupees Two
Hundred Fifty crore only).

Paid-up Share Capital

As on March 31,2026, the Paid-up Equity Share Capital of your
Company stood at T153.06 crore comprising of 153,06,02,463
equity shares of face value of T1/- each.

Qualified Institutions Placement

In order to meet funding requirements, inter-alia, for
capital expenditure towards capacity expansion of optic
fiber and optic fiber cables; funding expenditure on
research & development initiatives, including acquisition
of technologies; repayments/ pre-payments of long term/
short term borrowings availed from banks/others; funding
long term working capital requirements and for general
corporate purposes, the Board of Directors of the Company
at its meeting held on July 25, 2025 which was also approved
by the Shareholders of the Company at its Annual General
Meeting held on September 15, 2025, decided to raise funds
up to ?700 crore by way of issue of Equity Shares, through
various permissible modes under the Securities and Exchange
Board of India (Issue of Capital and Disclosure Requirements)
Regulations, 2018 ("SEBI ICDR Regulations") and the Act and
the rules made thereunder.

Subsequently, the Fund-Raising Committee of Directors has,
at its meeting held on December 22, 2025, approved that
the proposed fund raise shall be by way of issue of Equity
Shares through a qualified institutions placement ("QIP") in
accordance with the provisions of the SEBI ICDR Regulations
and the Act and the rules made thereunder, each as amended.

Pursuant to above, the Fund-Raising Committee of Directors,
has allotted 8,79,29,651 equity shares through QIP at a price
of ?62.55/- per equity share [and reflecting a discount of
?3.29 (i.e. 5%) on the floor price of ?65.84 per Equity Share]
(including premium of T61.55 per Equity Share) aggregating
to approximately T550 crores, on December 24, 2025.

Pursuant to the said allotment, the paid-up equity share
capital of the Company increased from ?144,26,72,812/-
divided into 144,26,72,812 equity shares of ?1/- each to
T153,06,02,463/- divided into 153,06,02,463 equity shares of
T1/- each, as at March 31, 2026.

Out of the proceeds amounting to T550 crore, T513.72 crore
were utilised upto June 30, 2026, as per the objects and
purpose of the QIP issue.

Allotment of Warrants

The Allotment Committee (Warrants) of the Board of
Directors, vide its resolution dated May 25, 2026, allotted

7.50.00. 000 (Seven Crore Fifty Lakh) Warrants convertible into

7.50.00. 000 equity shares at an issue price of ?74/- per warrant
(Warrant Exercise Price), to persons belonging to Promoter/
Promoter Group category in accordance with the SEBI ICDR
Regulations read with the Section 42 and Section 62 of the
Companies Act, 2013, as approved by the Board of Directors
and the Shareholders of the Company at their respective
meetings held on March 25, 2026 and April 24, 2026.

The Company received an upfront amount of ?18.50 per
warrant, being 25% of the issue price of ?74/- per warrant,
aggregating to ?138.75 crore. The warrant holders shall be
required to pay the balance 75% of the issue price at the time
of exercise of the rights attached to such warrants to subscribe
to the corresponding equity shares of the Company.

The warrants are convertible into equivalent number of
equity shares and may be exercised by the warrant holders,
within a period not exceeding 18 (eighteen) months from
the date of allotment. In the event the warrant holders do
not exercise the warrants within the aforesaid period, the
warrants shall lapse and the amount paid thereon shall stand
forfeited by the Company.

As on the date of this Report, 7,50,00,000 convertible warrants
remain outstanding and pending for conversion.

Your Company has not issued equity shares with differential
rights as to dividend, voting or otherwise.

MANAGEMENT DISCUSSION AND ANALYSIS
(MDA) REPORT

The Management Discussion and Analysis Report for the year
under review, as stipulated under Regulation 34(2)(e) of the
SEBI Listing Regulations, is presented in a separate section,
forming part of this Annual Report.

CORPORATE GOVERNANCE

Your Company is committed to benchmark itself with global
standards for providing good corporate governance. Your
Board constantly endeavours to take the business forward
in such a way that it maximises long term value for the
stakeholders. The Company has put in place an effective
corporate governance system which ensures that the
provisions of SEBI Listing Regulations are duly complied with.

A detailed report on the Corporate Governance pursuant to
the requirements of the SEBI Listing Regulations forms part
of this Annual Report.

A Certificate from the Secretarial Auditor of the Company,
confirming compliance of conditions of corporate governance
as stipulated in SEBI Listing Regulations, is provided in the
Report on Corporate Governance which forms part of this
Annual Report.

BUSINESS RESPONSIBILITY AND
SUSTAINABILITY REPORT

As stipulated under Regulation 34(2)(f) of the SEBI Listing
Regulations, the Business Responsibility and Sustainability

Report, describing the initiatives taken by the Company from
environmental, social and governance perspective forms part
of this Annual Report.

EMPLOYEES' LONG TERM INCENTIVE PLAN

In terms of the Securities and Exchange Board of India (Share
Based Employee Benefits and Sweat Equity) Regulations, 2021
(“SEBI SBEB & SE Regulations"), as amended from time to
time and with the objective to promote entrepreneurial
behaviour among employees of the Company, motivate
them with incentives and reward their performance with
ownership in proportion to the contribution made by them
as well as align the interest of the employees with that of

the Company, “Himachal Futuristic Communications Limited
Employees' Long Term Incentive Plan-2017" (“HFCL Plan
2017") was approved by the Board of Directors of your
Company on August 26, 2017, which was further approved
by the members of the Company, in their 30^th Annual General
Meeting held on September 25, 2017.

The HFCL Plan 2017 comprises of the following three subsets:

1. Employee Stock Option Plan (ESOP) under which Options
would be granted;

2. Restricted Stock Units Plan (RSUP) under which Units
would be granted;

3. Employee Stock Purchase Scheme (ESPS) under which
shares would be issued.

During the FY26 your Company has not granted any Employee
Stock Options and Restricted Stock Units in terms of the HFCL
Plan 2017. The Company has also not issued any shares under
ESPS during the year under review.

Applicable disclosures as stipulated under the SEBI SBEB & SE
Regulations with regard to the HFCL Plan 2017, are provided
as Annexure - A to this Report.

Your Company has obtained a certificate from Mr. Baldev Singh
Kashtwal, Secretarial Auditor (ICSI Peer Review Certificate No.
7700/2026), confirming that the HFCL Plan 2017 for grant of
stock options has been implemented in accordance with the
applicable provisions of the SEBI SBEB & SE Regulations and
in compliance with the resolution passed by the members
at the 30^th Annual General Meeting of the Company held on
September 25, 2017.

The said Certificate would be placed at the ensuing annual
general meeting for inspection by the members.

The Nomination, Remuneration and Compensation
Committee of the Board of Directors, inter-alia, administers
and monitors, the HFCL Plan 2017 of your Company.

SUBSIDIARIES, JOINT VENTURES AND
ASSOCIATE COMPANIES

As on March 31, 2026, your Company had 12 (twelve)
subsidiaries and 02 (two) associates viz.

Subsidiary:

1. HTL Limited

2. Raddef Private Limited

Wholly-owned Subsidiary:

3. Polixel Security Systems Private Limited

4. Moneta Finance Private Limited

5. HFCL Advance Systems Private Limited

6. DragonWave HFCL India Private Limited

7. HFCL Technologies Private Limited

Foreign Subsidiary:

8. HFCL Inc. USA

9. HFCL B.V. Netherlands

10. HFCL Canada Inc. (Wholly-owned subsidiary ol
HFCL B.V.)

11. HFCL UK Limited (Wholly-owned subsidiary of HFCL B.V.'

12. HFCL Pty Limited (Wholly-owned subsidiary of HFCL B.V.)*
‘Voluntarily liquidated and de-registered w.e.f. August 19, 2026.

Associate:

13. Nimpaa Telecommunications Private Limited

14. BigCat Wireless Private Limited

During the year under review, HFCL Poland Sp. z.o.o.
(formerly Blue Diwali Sp. z.o.o.) (Wholly-owned subsidiary ol
HFCL B.V.) has been voluntarily liquidated and its name has
been removed from National Court Register w.e.f. January

02, 2026

The Company regularly monitors the performance ol
these companies.

There has been no material change in the nature of the
business of the subsidiaries.

A statement containing the salient features of the financia
statements of subsidiary companies and associate companies
of the Company in the prescribed Form AOC-1 forms as a pari
of this Annual Report in compliance with Section 129(3) anc
other applicable provisions, if any, of the Act read with Rule 5
of the Companies (Accounts) Rules, 2014, as amended.

The said Form also highlights the financial performance
of each of the subsidiaries, included in the Consolidated
Financial Statements (CFS) of the Company, pursuant to Rule
8(1) of the Companies (Accounts) Rules, 2014.

In accordance with the provisions of Section 136 of the Act
the financial statements of the subsidiaries are available foi
inspection by the members at the Registered Office of the
Company during business hours on all days except Saturdays
Sundays and public holidays up to the date of the ensuing
AGM. Any member desirous of obtaining a copy of the said
financial statements may write to the Company Secretary
at HFCL Limited, 8, Commercial Complex, Masjid Moth,
Greater Kailash - II, New Delhi - 110 048 and the same shal
be sent by post.

The financial statements including the CFS and all othei
documents required to be attached to this Report have beer
uploaded on the website of the Company at www.hfcl.com.

Material Subsidiaries

The Company has adopted a 'Policy for determining Materia
Subsidiaries' as per requirements stipulated in Explanation tc
Regulation 16(1)(c) of the SEBI Listing Regulations.

The said policy may be accessed on the website
of the Company athttps://cdn.prod.website-files.
com/69e0036b695965871f0524aa/69e7d109b2dc5d03ef4
fb5d3 HFCL-Policy-on-Determining-Material-
Subsidiaries 22052025.pdf

The Company has two material subsidiaries namely HTL
Limited & HFCL Inc. as on March 31, 2026.

DIRECTORS AND KEY MANAGERIAL
PERSONNEL (KMPs)

Re-Appointments/Appointments

In accordance with the provisions of Section 152 of the
Act and the Articles of Association of the Company,
Mr. Arvind Kharabanda (DIN: 00052270), Director (Non¬
Executive), is liable to retire by rotation at the ensuing AGM
and being eligible offers himself for re- appointment.

Brief resume, nature of expertise, disclosure of relationships
between directors inter-se, details of directorships and
committee membership held by him in other companies
along with his shareholding in the Company, as stipulated
under Regulation 36 of the SEBI Listing Regulations and
Secretarial Standard on General Meetings (SS-2) issued by
the Institute of Company Secretaries of India, is appended as
an Annexure to the Notice of the ensuing AGM. Appropriate
resolution for his re-appointment as a Director is being placed
for your approval at the ensuing AGM.

Your directors recommend his re-appointment as a non¬
executive director of your Company, by way of a special
resolution, since, he is aged above 75 years.

During the FY26, the Board of Directors on recommendation of
the Nomination, Remuneration and Compensation Committee,
appointed Mr. Anil Narendra Shah (DIN: 01844485) as an
Additional Director in the category of Independent Director
for a period of three consecutive years effective from January
21, 2026 to January 20, 2029, not liable to retire by rotation
who was further appointed as a Director (Independent) by the
shareholders of the Company on March 15, 2026, through Postal
Ballot by way of a special resolution.

In the opinion of the Board, Mr. Anil Narendra Shah possesses
requisite qualifications, experience, expertise and holds
highest standards of integrity.

Further, Mr. Anil Narendra Shah is exempted to qualify on¬
line proficiency self-assessment test conducted by the Indian
Institute of Corporate Affairs.

Cessation

Mr. Bharat Pal Singh (DIN: 00739712) has completed his
second term as Independent Director on the close of business
hours on January 20, 2026. The Board of Directors places on
record its sincere appreciation for the support and valuable
guidance given by Mr. Singh during his tenure as Independent
Director of the Company.

Key Managerial Personnel

During the year under review, Mr. Mahendra Nahata,
Managing Director, Mr. Vijay Raj Jain, Chief Financial Officer
and Mr. Manoj Baid, President & Company Secretary, continue
to be the Key Managerial Personnel of your Company, in
accordance with the provisions of Section 2(51) and 203
of the Act read with the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014.

Declaration by the Company

The Company has issued confirmation to its Directors,
confirming that it has not made any default under Section
164(2) of the Act, as on March 31, 2026.

Declaration by Independent Directors

The Company has received declarations from all the
Independent Directors confirming that they meet the criteria
of independence as prescribed under the provisions of the
Act, read with the Schedules and Rules issued thereunder
as well as clause (b) of sub-regulation (1) of Regulation 16
of the SEBI Listing Regulations (including any statutory
modification(s) or re-enactment(s) thereof for the time being
in force) and that they are independent of management.

In terms of Regulation 25(8) of the SEBI Listing Regulations,
the Independent Directors have confirmed that they are not
aware of any circumstance or situation, which exist or may
be reasonably anticipated, that could impair or impact their
ability to discharge their duties.

The Independent Directors have also confirmed that they
have complied with the Company's Code of Conduct.

In the opinion of the Board, Independent Directors fulfil
the conditions specified in the Act, Rules made thereunder
and the SEBI Listing Regulations and are independent of
the management.

Familiarisation Programme for Independent Directors

As per Regulation 25(7) of the SEBI Listing Regulations, the
Independent Directors of the Company need to be imparted
with familiarisation programme.

The familiarisation programme aims at making the
Independent Directors of the Company familiar with the
business and operations of the Company through various
structured familiarisation Programmes.

The details of programmes for familiarisation of
Independent Directors with the Company, their roles,
rights, responsibilities in the Company and related
matters are available on the website of the Company
at the web-link:https://cdn.prod.website-files.
com/69e0036b695965871f0524aa/69fce653a604554
332f23fb8 HFCL-Familiarisation-Prog-ID 2026.pdf

REMUNERATION OF DIRECTORS, KEY
MANAGERIAL PERSONNEL AND PARTICULARS
OF EMPLOYEES

As required under Section 197(12) of the Act, read with Rule
5(1) of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014, information relating to
percentage increase in remuneration, ratio of remuneration
of each Director and Key Managerial Personnel to the median
of employees' remuneration etc. is annexed as Annexure - B
to this report.

The details of remuneration of top 10 employees of the
Company as required to be disclosed under Section 197(12)
of the Act read with Rule 5(2) and 5(3) of the Companies
(Appointment and Remuneration of Managerial Personnel)
Rules, 2014 forms part of this Report.

Further, pursuant to second proviso to Section 136(1) of the
Act, this Report is being sent to the members excluding the
said Information.

Any member interested in obtaining a copy of the same may
write to the Company Secretary and Compliance Officer at
secretarial@hfcl.com.

The remuneration paid to the Directors is in accordance with
the Remuneration Policy formulated in accordance with
Section 178 of the Act and Regulation 19 of the SEBI Listing
Regulations (including any statutory modification(s) or re¬
enactment^) thereof for the time being in force).

Disclosure under Section 197(14) of the Act

The Managing Director of your Company does not receive
remuneration or commission from any of the subsidiaries of
the Company.

Remuneration Policy

Pursuant to provisions of Section 178 of the Act and the SEBI
Listing Regulations, the Nomination, Remuneration and
Compensation Committee ('NRC Committee') of your Board
has formulated a Remuneration Policy for the appointment
and determination of remuneration of the Directors including
criteria for determining qualifications, positive attributes,
independence of a director, Key Managerial Personnel,
Senior Management Personnel and other employees of
your Company.

The NRC Committee has also developed the criteria for
determining the qualifications, positive attributes and
independence of Directors and for making payments
to Executive and Non-Executive Directors and Senior
Management Personnel of the Company.

During the year under review, there was no change in the
Remuneration Policy, except to the extent required to be
aligned with the changes in the statutory provisions.

The Remuneration Policy is available on the
Company's website athttps://cdn.prod.website-files.
com/69e0036b695965871f0524aa/69e7cfec803eafddad
c9c00b Remuneration-Policy 22052025.pdfand the salient
aspects covered in the Remuneration Policy have been
outlined in the Corporate Governance Report, which forms
part of this Annual Report.

BOARD AND COMMITTEE MEETINGS

7 (Seven) meetings of the Board of Directors were held during
the FY26.

The intervening gap between any two consecutive meetings
of the Board was within the stipulated time frame prescribed
under the Act and the SEBI Listing Regulations.

Details of meetings held and attendance of directors are
mentioned in Corporate Governance Report, which forms
part of this Annual Report.

Separate Meeting of Independent Directors

In terms of requirements of Schedule IV to the Act and
Regulation 25 of the SEBI Listing Regulations, a separate
meeting of the Independent Directors was held on March
25, 2026 for FY26.

The meeting of the Independent Directors was attended by
all the three independent directors, namely, Mr. Ajai Kumar,
Mr. Anil Narendra Shah and Mrs. Bela Banerjee.

Board Committees

Your Company has constituted several Committees of the
Board which have been established as part of the best
corporate governance practices and are in compliance with
the requirements of the relevant provisions of applicable laws
and statutes.

As on March 31, 2026, your Board has 05 (five) mandatory
Committees, namely:

1. Audit Committee;

2. Nomination, Remuneration & Compensation
(NRC) Committee;

3. Stakeholders' Relationship Committee (SRC);

4. Corporate Social Responsibility (CSR) Committee; and

5. Risk Management Committee (RMC).

The details with respect to the composition, powers,
roles, terms of reference, number of meetings etc. of the
committees held during FY26 and attendance of the members
at each committee meeting, are provided in the Corporate
Governance Report which forms part of this Annual Report.

All the recommendations made by the committees of the
Board including the Audit Committee were accepted by
the Board.

Details related to Risk Management and Internal Financial
Controls are provided in the Management Discussion and

Analysis, which forms part of the Company's Annual Report
for FY26.

PERFORMANCE EVALUATION

The Act mandates formal annual evaluation by the Board
of its own performance and that of its committees and
individual directors. Schedule IV to the Act provides that the
performance evaluation of independent directors shall be
done by the entire board of directors, excluding the directors
being evaluated.

Pursuant to the provisions of the Act read with relevant
rules issued thereunder, Regulation 17(10) of the SEBI Listing
Regulations and the Master Circular issued by SEBI on January
30, 2026, the evaluation of the annual performance of the
Directors/ Board/ Committees was carried out for FY26.

The parameters for the performance evaluation of the Board,
inter-alia, include performance of the Board on deciding
long term strategy, rating the composition and mix of Board
members, discharging of governance and fiduciary duties,
handling critical and dissenting suggestions, etc.

The performance of the Board was evaluated after seeking
inputs from all the directors on the basis of above parameters.

The performance of the committees was evaluated after
seeking inputs from the committee members on the basis of
criteria such as the composition of committees, effectiveness
of committee meetings, etc.

The Nomination, Remuneration and Compensation
Committee reviewed the performance of the Individual
Directors, the committees of the Board and the Board as
a whole.

A questionnaire for the evolution of the Board, its committees
and the individual members of the Board, covering various
aspects of the performance of the Board and its committees,
including composition and quality, roles and responsibilities,
processes and functioning, adherence to Code of Conduct
and Ethics and best practices in corporate governance was
sent to the Members of the NRC Committee.

The Board of Directors reviewed the performance of the
Independent Directors. Performance Evaluation was done
on the basis of criteria such as the contribution of the
individual director to the Board and committee meetings like
preparedness on the agenda items, technical knowledge on
the subject matter, meaningful and constructive contribution
and inputs in meetings, etc.

In a separate meeting of the Independent Directors,
performance of Non-Independent Directors and the Board
as a whole was evaluated, taking into account the views of
Executive Directors and Non-Executive Directors.

Basis the feedback received on questionnaire from all the
Directors, the performance of the Board as a whole, the
committees of the Company and the individual directors was
found to be satisfactory.

The Directors expressed their satisfaction with the
evaluation process.

The details of the evaluation process are set out in the
Corporate Governance Report which forms part of this
Annual Report.

AUDITORS AND AUDITORS' REPORT

Statutory Auditors & their Report

M/s S. Bhandari & Co. LLP, Chartered Accountants (FRN:
000560C/C400334) and M/s Oswal Sunil & Company,
Chartered Accountants (FRN: 016520N) were re-appointed
as Statutory Auditors for second term of 05 (five) consecutive
years, at the 35^th Annual General Meeting (AGM) of the
Company, held on September 30, 2022, for auditing the
accounts of the Company from the financial year 2022-23 to
2026-27.

The Auditors' Report does not contain any qualification,
reservation or adverse remark.

Further, there were no frauds reported by the Statutory
Auditors to the Audit Committee or the Board under Section
143(12) of the Act.

Secretarial Auditors & their Report

Pursuant to provisions of Section 204 of the Act read with
Rule 9 of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014 (as amended or re enacted
from time to time), the members of the Company at the 38^th
Annual General Meeting held on September 15, 2025 had
approved the appointment of Mr. Baldev Singh Kashtwal,
Company Secretary in whole-time practice (COP No. 3169,
Membership No. F-3616), holding ICSI Peer Review Certificate
No. 7700/2026, as the Secretarial Auditor of the Company for a
term of 5 (five) consecutive financial years commencing from
FY2025-26 up to FY2029-30. Further, the Secretarial Auditor
has confirmed that he is not disqualified from continuing as
the Secretarial Auditor of the Company.

The Secretarial Audit Report for FY26 in prescribed form
MR-3, issued by the Secretarial Auditor is annexed herewith
as Annexure - C to this Report. Further, as required under
Regulation 24A of the SEBI Listing Regulations, the Secretarial
Audit Report for FY26 of HTL Limited, a material subsidiary of
the Company is also annexed herewith as Annexure - Cl to
this Report.

Remarks by Secretarial Auditor

The Secretarial Audit Report does not contain any
qualification, reservation or adverse remark for FY26.

Cost Records and Cost Audit

The Company is not required to maintain cost accounts and
records as specified by the Central Government under sub¬
section (1) of Section 148 of the Act and the relevant rules
made thereunder. Further, the Requirement of Cost Audit
as stipulated under the provisions of Section 148 of the Act,
are not applicable for the business activities carried out by
the Company.

INSOLVENCY AND BANKRUPTCY CODE, 2016

There is no application made or any proceeding pending
under the Insolvency and Bankruptcy Code, 2016 during FY26.

DETAILS OF DIFFERENCE BETWEEN THE
AMOUNT OF VALUATION DONE

The requirement to disclose the details of difference between
amount of the valuation done at the time of onetime
settlement and the valuation done while taking loan from the
banks or financial institutions along with the reasons thereof,
is not applicable during FY26.

VIGIL MECHANISM/ WHISTLE-BLOWER
POLICY

The Board of Directors of your Company has formulated
a Whistle-Blower Policy, which is in compliance with the
provisions of Section 177(9) & (10) of the Act and Regulation
22 of the SEBI Listing Regulations.

The Company, through this Policy envisages to encourage
the directors and employees of the Company to report to the
appropriate authorities any unethical behaviour, improper,
illegal or questionable acts, deeds, actual or suspected
frauds or violation of the Company's Codes of Conduct for
the Directors and the Senior Management Personnel.

During FY26, no complaint was received and no individual
was denied access to the Audit Committee for reporting
concerns, if any.

The Policy on Vigil Mechanism/Whistle-Blower
Policy may be accessed on the Company's
website at the link:https://cdn. prod .website-files.
com/69e0036b695965871f0524aa/69e0036b69596587
1f0528cc Vigil%20Mechanism%20and%20Whistle-
Blower%20Policy.pdf

Brief details of establishment of Vigil Mechanism in the
Company, is also provided in the Corporate Governance
Report which forms part of this Annual Report.

CREDIT RATINGS

CARE Ratings Limited (a SEBI Registered Credit Rating
Agency) (“CARE") vide its letter dated August 29, 2025, has
revised the credit ratings for the long-term and short-term
bank facilities of the Company, details of which are as below:

CARE vide its subsequent letter dated July 01, 2026 further
upgraded the credit ratings for the long-term and short-term
bank facilities of the Company, details of which are as below:

Further, the Company remains committed to integrating
environmental, social and governance (ESG) considerations
into its business operations and stakeholder engagement
practices. During the year, the Company's ESG performance
was independently assessed by various ESG rating agencies,
based on publicly available information, and the following
ratings/scores were assigned:

The rating agencies have characterised the Company's ESG
performance as strong and indicative of steady progress,
supported by solid disclosures and improving sustainability
practices. These assessments underscore the Company's
focused efforts toward strengthening its ESG framework
and reinforce its commitment to responsible and sustainable
business conduct.

The Company has not engaged any of the above agencies for
obtaining ESG ratings.

The ratings/scores have been assigned by such agencies
based on information available in the public domain.

ANNUAL RETURN

The draft Annual Return of the Company as on March 31,2026,
in prescribed e-Form MGT-7 in accordance with Section 92(3)
of the Act, read with Section 134(3)(a) of the Act, is available
on the Company's website at www.hfcl.com.

Further the Annual Return (i.e., e-form MGT-7) for FY26 shall
be filed by the Company with the concerned Registrar of
Companies within the stipulated period.

PARTICULARS OF LOANS, GUARANTEES AND
INVESTMENTS

Details of loans, guarantees and investments, as on March 31,
2026, as stipulated under Section 186 of the Act read with the
Companies (Meetings of Board and its Powers) Rules, 2014,
are as follows:

PARTICULARS OF CONTRACTS OR
ARRANGEMENTS WITH RELATED PARTIES

Your Company has adopted a “Policy on Dealing with and
Materiality of Related Party Transactions", in accordance with
the provisions of the Act and Regulation 23 of the SEBI Listing
Regulations, inter-alia, providing a framework for governance
and reporting of Related Party Transactions including material
transactions and threshold limits for determining materiality.

The said Policy is available on the website of the
Company at the web-link:https://cdn.prod.website-files.
com/69e0036b695965871f0524aa/69e7d02e2f7f4a49
c0a2b3b7 HFCL-Policy-on-RPTs 22052025.pdf

During the year under review, all contracts/ arrangements/
transactions entered into by the Company with related
parties were in ordinary course of business and on arm's
length basis.

The Company has entered into contracts/ arrangements/
transactions with related parties which qualify as material in
accordance with the Policy of the Company on materiality of
related party transactions.

Thus, there are transactions required to be reported in
prescribed Form AOC-2 pursuant to Section 134(3)(h) of
the Act read with Rule 8(2) of the Companies (Accounts)
Rules, 2014, the details of which is annexed herewith as
Annexure - D to this Report.

All transactions with related parties were reviewed and
approved by the Audit Committee and are in accordance
with the Policy on Related Party Transactions, formulated by
the Company.

There are no materially significant related party transactions
that may have potential conflict with interest of the Company
at large.

The details of the transactions with person(s) or entities
forming part of the Promoter(s)/Promoter(s) Group, which
individually hold 10% or more shareholding in the Company
and other related parties as per Indian Accounting Standards
(IND-AS) - 24 are set out in Note No. 51 to the Standalone
Financial Statements of the Company.

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

The details of energy conservation, technology absorption
and foreign exchange earnings and outgo as required under
Section 134(3)(m) of the Act, read with the Rule 8 of the
Companies (Accounts) Rules, 2014, are annexed herewith as
Annexure - E to this Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company has been proactively carrying out CSR activities
since more than two decades.

The Company is undertaking CSR activities through registered
societies, NGOs, Section 8 companies and directly.

In compliance with requirements of Section 135 of
the Act, the Company has laid down a Corporate
Social Responsibility (CSR) Policy. The CSR Policy is
available on the website of the Company and may be
accessed at the web-linkhttps://cdn.prod.website-files.
com/69e0036b695965871f0524aa/69e0036b695965871f
052623 CSR Policy.pdf

The composition of the CSR Committee, brief contents of
CSR Policy, unspent amount and reason thereof, if any, and
report on CSR activities carried out during the FY26, in the
format, prescribed under Rule 8 of the Companies (Corporate
Social Responsibility Policy) Rules, 2014 is annexed herewith
as Annexure - F.

For other details regarding the CSR Committee, please refer
to the Corporate Governance Report, which forms part of this
Annual Report.

MATERIAL CHANGES AFFECTING THE
COMPANY

A. Change in nature of business

The Company has not undergone any change in the
nature of the business during FY26.

B. Material changes and commitments, if any,
affecting the financial position of the Company

There are no material changes and commitments
affecting the financial position of the Company, which
have occurred between the end of FY26 and the date
of this Report except that the Board of Directors of
the Company, at its meeting held on June 03, 2026,
approved a strategic reorganisation and consolidation
of the defence and aerospace business under HFCL
Advance Systems Private Limited (“HASPL"), a wholly-
owned subsidiary of the Company.

As part of the aforesaid strategic initiative, the Company
approved an investment of ?89.25 crore in HASPL by way
of subscription to equity shares, subject to completion
of the conditions precedent and other terms agreed
between the parties.

Further, the Board approved the proposed transfer
of up to 80% of the paid-up share capital of Raddef
Private Limited, a subsidiary of the Company, to HASPL
for a consideration of T75 crore, and the transfer of the
Company's Thermal Weapon Sight (TWS) business
to HASPL on a slump sale basis as a going concern
for a lump sum consideration of ?50 crore, subject
to fulfilment of the agreed conditions and receipt of
applicable approvals, wherever required.

In addition, HASPL approved the acquisition of 100% of
the paid up share capital of HFCL Defence Systems Private
Limited (formerly known as Spiral EHL Engineering
Private Limited) from Defsys Solutions Private Limited
for a consideration of T25 crore. Upon completion of the
acquisition, HFCL Defence Systems Private Limited shall
acquire the Aerostructure Business of Defsys Solutions
Private Limited on a slump sale and going concern basis
for a consideration of T25 crore, subject to fulfilment of
the agreed conditions and applicable approvals.

The aforesaid transaction is intended to establish a
focused and scalable platform to strengthen HFCL's
existing defence business and expand its presence in
the aerostructures segment through HASPL thereby
positioning the business for long-term growth and
value creation.

SIGNIFICANT/MATERIAL ORDERS PASSED
BY THE REGULATORS, COURTS, TRIBUNALS
AFFECTING THE GOING CONCERN STATUS
AND COMPANY'S OPERATIONS IN FUTURE

There is no significant/material order passed by the
Regulators, Courts, Tribunals affecting the going concern
status and the Company's operations in future.

PREVENTION OF SEXUAL HARASSMENT AT
WORKPLACE

The Company has in place a Policy on Prevention of Sexual
Harassment at Workplace and has complied with the
provisions relating to the constitution of Internal Complaints
Committee(s) (ICCs) in line with the requirements of the Sexual
Harassment of Women at Workplace (Prevention, Prohibition
& Redressal) Act, 2013 and the rules made thereunder.

Internal Complaints Committee(s) at each workplace of
the Company, have been set up to redress complaints, if
any, received regarding sexual harassment. All employees
(permanent, contractual, temporary, trainees) are covered
under this Policy.

ICC of each workplace of the Company has also filed Annual
Return for the calendar year 2025 at their respective
jurisdictional offices, as required under Section 21(1) of the
Sexual Harassment of Women at Workplace (Prevention,
Prohibition and Redressal) Act, 2013 read with Rule 14 of
the Sexual Harassment of Women at Workplace (Prevention,
Prohibition and Redressal) Rules, 2013.

The details of complaints filed under the Sexual Harassment of
Women at Workplace (Prevention, prohibition and Redressal)
Act, 2013 are provided below:

SIGNIFICANT DEVELOPMENTS

Although, the Company has achieved various milestones
which have already been set out in the Management
Discussion and Analysis forming part of the Annual Report,
there were no other significant developments during the year
under review.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirements under Section 134(3)(c) of the
Act, the Directors confirm that:

a) in the preparation of the annual accounts, the applicable
accounting standards had been followed and there were
no material departures from the same;

b) the Directors had selected such accounting policies and
applied them consistently and made judgements and
estimates that are reasonable and prudent so as to give
a true and fair view of the state of affairs of the Company
at the end of the financial year March 31,2026 and of the
profits of the Company for that period;

c) the Directors had taken proper and sufficient care for
the maintenance of adequate accounting records
in accordance with the provisions of the Act for
safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;

d) the Directors had prepared the annual accounts on a
going concern basis;

e) the Directors, had laid down internal financial controls
to be followed by the Company and that such internal
financial controls are adequate and were operating
effectively; and

f) the Directors had devised proper systems to ensure
compliance with the provisions of all applicable
laws and that such systems were adequate and
operating effectively.

LISTING

The equity shares of your Company are presently listed on the
BSE Limited ('BSE') and the National Stock Exchange of India
Limited ('NSE'). The Company has paid annual listing fee for
FY27 to BSE and NSE.

DEPOSITORY SYSTEMS

Your Company's Scrip has come under compulsory
dematerialisation w.e.f. November 29, 1999 for Institutional

Investors and w.e.f. January 17, 2000, for all Investors. So far,
99.99% of the equity shares have been dematerialised.

The ISIN allotted to the equity shares of the Company
is INE548A01028.

IMPLEMENTATION OF CORPORATE ACTION

During the year under review, the Company has not failed
to implement any Corporate Action within the specified
time limit.

COMPLIANCE WITH SECRETARIAL STANDARDS

Pursuant to the provisions of Section 118(10) of the Act, the
Company has complied with the applicable provisions of the
applicable Secretarial Standards issued by the Institute of
Company Secretaries of India (ICSI).

COMPLIANCE WITH PROVISIONS RELATING
TO THE MATERNITY BENEFITS ACT, 1961

The Company has duly complied with all applicable provisions
of the Maternity Benefits Act, 1961.

REPORTING PRINCIPLE

The Financial and Statutory Data presented in this Report is
in line with the requirements of the Act (including the rules
made thereunder), Indian Accounting Standards (Ind AS) and
the Secretarial Standards (SS).

REPORTING PERIOD

The Financial Information is reported for the period April
01, 2025 to March 31, 2026. Some parts of the Non-Financial
Information included in this Board's Report are provided as
on the date of this Report.

CAUTIONARY STATEMENT

Statements in the Management Discussion & Analysis Report
describing the Company's projections, estimates, expectations
or predictions may be ‘forward looking statements' within
the meaning of applicable securities laws and regulations.
Actual results could differ materially from those expressed or
implied. Important factors that would make a difference to
the Company's operations include demand supply conditions,
raw material prices, changes in government regulations, tax
regimes and economic developments within the Country and
abroad and such other factors.

PERSONNEL

Your Directors wish to place on record their sincere
appreciation for the devoted services of all the employees
and workers at all levels and for their dedication and loyalty,
which has been critical for the Company's success.

ACKNOWLEDGEMENTS

Your Company's organisational culture upholds
professionalism, integrity and continuous improvement
across all functions as well as efficient utilisation of the

Company's resources for sustainable and profitable growth.

Your Directors wish to place on record their appreciation for
the valuable co-operation and support received from the
Government of India, various State Governments, the Banks
and other stakeholders such as, shareholders, customers and
suppliers, among others. The Directors look forward to their
continued support in future.

The Directors thank the Central Government, Government
of Goa, Government of Telangana, Government of Andhra
Pradesh, Government of Himachal Pradesh, State Bank of
India, Punjab National Bank, Bank of Baroda, Union Bank
of India, Indian Bank, IDBI Bank Limited, Yes Bank Limited,
Axis Finance Limited, ICICI Bank Limited, KEB Hana Bank, KB
Kookmin Bank, Shinhan Bank, CSB Bank Limited and other
Banks for all co-operations, facilities and encouragement
they have extended to the Company.

Your Directors acknowledge the continued trust and
confidence you have reposed in the Company.

For and on behalf of the Board

Mahendra Nahata Arvind Kharabanda

Managing Director Non-Executive Director

DIN: 00052898 DIN: 00052270