DIRECTORS' REPORT

Your Board of Directors takes great pleasure in presenting the Report on the performance of the Company ("the Company" or "HAL"), and its Audited Financial Statements for the Financial Year ended March 31, 2026, together with Reports of the Statutory Auditors and the Comptroller & Auditor General of India (C&AG) thereon.

FINANCIAL HIGHLIGHTS

The financial highlights for the year ended March 31, 2026 are summarised as under:

During the year, the Revenue from Operations of the Company has increased by 7% to ' 33,08,979 Lakh from ' 30,98,092 Lakh in the previous year. The turnover of the Company has increased by 6% to ' 31,79,183 Lakh from ' 30,10,465 Lakh in the previous year. The Profit before Tax for the year has increased by 12% to ' 12,1 1,208 Lakh from ' 10,82,001 Lakh in the previous year. The Profit After Tax (PAT) has increased by 9% to ' 9,07,567 Lakh from ' 8,31,680 Lakh in the previous year.

PRODUCTION HIGHLIGHTS

During the year, the Company has produced new Aircraft and Helicopters, covering Light Combat Aircraft LCA Mk1A (Tejas), LCA Mk1 (Trainer), Hindustan Turbo Trainer (HTT-40), Do-228, Advanced Light Helicopter (ALH) and Light Utility Helicopter (LUH) in addition to the production of New Engines and Accessories, at its various Divisions. The Company has also carried out Repair and Overhaul of Aircraft & Helicopters and Engines in addition to providing required spares support to the customers.

ORDER BOOK POSITION

The Order Book position of the Company stands at ' 2,54,53,848 Lakh as on March 31, 2026.

During the year, the Company has received manufacturing contracts of over ' 69,60,000 Lakh and ROH Contracts of over ' 17,30,000 Lakh. Major Orders bagged include Contracts for supply of Qty 97 LCA Mk1A, Qty 06 ALH Mklll MR and Qty 8 Do-228 to Indian Armed Forces, Qty 10 ALH Dhruv NG to M/s Pawan Hans Ltd, Qty 2 Hindustan-228 to Guyana.

DIVIDEND

During the year, your Company has declared and paid interim dividend of ' 35/- per equity share of ' 5 each (700%) for the financial year 2025-26, amounting to ' 2,34,071.25 Lakh.

To comply with the Guidelines of Department of Investment and Public Asset Management (DIPAM) on capital restructuring with respect to payment of minimum dividend, the Board of Directors of the Company has recommended a final dividend of ' 10/- per equity share of ' 5 each. The Final Dividend if approved by the shareholders, would involve cash outflow of ' 66,877.50 Lakh.

Thus, the total dividend including final dividend for the financial year 2025-26 would be ' 45/- per equity share (900%), amounting to ' 3,00,948.75 Lakh.

In terms of the provisions of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 [SEBI (LODR) Regulations] and the Guidelines of DIPAM, the Company has formulated a Dividend Distribution Policy and the same is available on the Company's website at https://hal-india.co.in/backend/wp-content/uploads/2023/07/ Dividend-Distribution-Policy 13.02.2025.pdf

CAPEX

In order to maintain the state-of-the-art infrastructure and technologies to meet Aerospace Standard and also to develop systems/platforms for meeting the requirements of the Defence Forces and to become Atmanirbhar, the Company has incurred Capital Expenditure (CAPEX) of ' 2,46,535 Lakh in FY 2025-26 (PY: ' 2,02,584 Lakh). The investments are mainly channelised towards Green Field Helicopter Project at Tumakuru, augmentation of facilities of LCA, ROH of SU-30, ROH of AL-31FP Engine, IT Infrastructure, besides the regular replacement and rationalisation of the existing facilities, etc. on the infrastructure development front, and on the projects like IMRH, CATS, UHM, Civil ALH & LUH on the Research & Development front.

RESERVES

During the year, ' 94,506 Lakh was transferred to Research & Development Reserve, ' 18,901 Lakh to Indigenisation Fund Reserve and ' 4,88,559 Lakh to General Reserve.

BORROWINGS

As on March 31, 2026, short term and long-term borrowings of the Company was Nil.

INTERNAL FINANCIAL CONTROLS

Your Company has in place adequate internal financial controls with reference to financial reporting.

A detailed note on internal control system and their adequacy is provided in the Management Discussion and Analysis Report.

LOANS, GUARANTEES AND INVESTMENTS

Details of Loans, Guarantees and Investments form part of Notes to the Financial Statements.

RELATED PARTY TRANSACTIONS

During the year, your Company has entered into transactions with related parties after obtaining approval of the Audit Committee and/ or Board, as the case may be. However, as the Audit Committee was not in valid constitution during the period from April 1, 2025 to June 1, 2025, the transactions requiring recommendation/ approval of the Audit Committee were put up directly to the Board.

As per the threshold mentioned in the Related Party Transactions (RPTs) Policy, there were no material related party transactions with any of the related parties.

The disclosures related to RPTs, in accordance with the applicable accounting standards, are provided in Clause No. 45A of the Notes to the financial statements. Details of contract(s) or arrangement(s) with related parties referred to in Section 188(1) of the Companies Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014, in the prescribed form AOC-2, is attached to this Report as Annexure-I.

CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements of the Company for the year ended March 31, 2026 have been prepared in accordance with the provisions of Section 129(3) of the Companies Act and applicable Accounting Standards, and form part of this Report.

Pursuant to the first proviso of Section 129(3) of the Companies Act read with Rule 5 of the Companies (Accounts) Rules, 2014, a separate statement containing salient features of the Financial Statements of Subsidiaries / Associate / Joint Venture Companies in Form AOC-1 is appended to this Report, which forms part of the Financial Statements. The separate Audited Financial Statements in respect of the Subsidiaries are also available on the website of the Company at www.hal-india. co.in

SUBSIDIARY/ ASSOCIATE/ JOINT VENTURE COMPANIES

As on March 31, 2026, your Company has 2 Subsidiaries including 1 Wholly Owned Subsidiary and 19 Joint Venture Companies (JVCs) including 7 Not-for-Profit Companies (Section 8 Companies).

Due to non-performance of Infotech HAL Ltd, a JVC, an application for its voluntary winding up had been submitted to NCLT on March 19, 2024. The NCLT has since passed an order appointing an Interim Resolution Professional (IRP) to take charge of the accounts and other records of Infotech HAL Ltd. The IRP has submitted a Preliminary Report to the NCLT. The final order for closure of the JVC is awaited.

Pursuant to the provisions of Section 134(3)(q) of the Companies Act read with Rule 8(1) of the Companies (Accounts) Rules, 2014, a Report on the performance and financial position of each of the JVCs and Subsidiary Companies is attached to this Report as Annexure-II.

SIGNIFICANT ACHIEVEMENTS

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

? To enhance the production capacity of LCA Mk1A, a 3^rd production line was established at HAL Nasik.

? Indigenously designed & developed Advanced Light Helicopter (ALH) Dhruv-NG took maiden flight in presence of Hon'ble Minister of Civil Aviation on December 30, 2025.

? The maiden sortie of the first series production of Hindustan Turbo Trainer-40 (HTT-40) aircraft successfully completed on October 24, 2025.

? Certification for 'Indigenous manufacturing of Shakti Civil Engine' from the Directorate General of Civil Aviation (DGCA) was received on December 30, 2025.

? Contributed to ISRO's successful launch of LVM3-M5/CMS-03 mission on November 2, 2025 and LVM3-M6 mission that deployed the massive Blue Bird Block 2 satellite on December 24, 2025, by on- time supply of space worthy hardware.

? Signed the SSLV Technology Transfer Agreement with ISRO, IN-SPACe & NSIL on September 10, 2025, securing a non-exclusive license to manufacture the SSLV.

? Signed an MoU on October 27, 2025 with Public Joint Stock Company United Aircraft Corporation (PJSC-UAC) Russia for production of civil commuter aircraft SJ-100 in India.

? Signed an MoU with Mishra Dhatu Nigam Limited (MIDHANI) on November 3, 2025, for setting up a strategic metal bank for critical raw materials at MIDHANI, to mitigate future raw material supply chain issue.

? Signed an MoU with Yantra India Limited (YIL) on September 23, 2025, for funding the establishment of 10,000 Ton extrusion press.

? Signed an agreement with Safran Aircraft Engines in June 19, 2025, for industrialization and production of rotating parts for LEAP engines, which powers the single-aisle civil aircraft such as Airbus A320neo, Boeing 737 MAX, etc.

? Exported two H-228 (Civil variant) aircraft to M/s JAGS Aviation, Guyana in a record time within two months of signing the contract, due to proactive approach of the Company.

DESIGN AND DEVELOPMENT PROGRAMS

The Company continued to boost the "Atmanirbhar Bharat Abhiyan" of Govt. of India with its focused efforts towards design and development of products, technologies and capabilities to meet the future requirements of Indian Defence Forces and non-military aerospace market in India.

The Company has made considerable progress towards the realization of our indigenous programmes viz. Light Combat Aircraft (LCA) MK1A, Light Combat Helicopter (LCH), Light Utility Helicopter (LUH), Indian Multi-Role Helicopter (IMRH) and Development of Engines.

The progress achieved in respect of these projects during the year is as under:

LIGHT COMBAT AIRCRAFT (LCA) MK 1A

LCA MklA is an advanced variant of indigenously developed LCA MK1, equipped with Active Electronically Scanned Array (AESA) Radar, unified Electronic Warfare (EW) suite, Mission Computer (MC), Digital Map Generator (DMG), Smart MultiFunction Display (SMFD), Software Defined Radio (SDR), Combined Interrogator and Transponder (CIT), and Advanced Radio Altimeter.

The design and development activities for LCA Mk1A systems were undertaken with modification of two aircraft to Mk1A specific systems.

LIGHT COMBAT HELICOPTER (LCH)

Light Combat Helicopter (LCH), also known as Prachand, is a 5.8-ton class multi-role combat helicopter indigenously designed and developed by the Company.

The preliminary design studies of IMRH have been completed. The Company is progressing with the D & D activities as a Lead agency by adapting the following strategy for development:

? Design, development and production of Airframe, Mechanical Systems, Electrical & Avionics, Flight Control System, Mission System and Weapons Integration with participation of Indian Private Sector,

? Design, development and production of Engines for IMRH/ DBMRH through a Joint Venture Company "SAFHAL Helicopter Engines Pvt Ltd",

? Design & Development of Rotor System through specialized global consultancy,

SU30 MKI INDIGENOUS UPGRADE

The Company as the Lead System Integrator has undertaken design and development for indigenous upgrade of Su30 MKI, to enhance the operational capabilities,

The aircraft upgrade involves revamp of avionic architecture with integration of Indigenous systems like Mission Computer, Improved Sensors, AESA Radar, Electro Optic / Infra-Red (EO/ IR), Improved EW suite, Indigenous weapon control systems and weapons, Higher Size displays, Sensor fusion, Net Centric warfare capability and other associated indigenous avionic systems,

COMBAT AIR TEAMING SYSTEMS (CATS)

The Company has undertaken development of Manned/ Unmanned Teaming systems christened as Combat Air Teaming System (CATS), The CATS family under development includes the CATS Warrior unmanned wingman capable of autonomous operations and carriage of precision munitions; the CATS OMCA (Kiran Mk II converted to an optionally manned combat UAV / decoy); the CATS Hunter air launched explosive carrier (loitering / strike system); CATS ALFA swarming drones; HALE UAVs and the CATS MAX mother ship for command and control, Presently, the Company is focusing on the development of CATS-W and CATS OMCA, The engine ground run of a full-scale demonstrator CATS Warrior has already been carried out, Ground run, Taxi trials and flight test are planned in FY 2026-27.

UTILITY HELICOPTER-MARITIME (UH-M)

Utility Helicopter - Maritime (UH-M) is a 5,7 tonne dedicated Naval Helicopter for deck-based operations with all four Main Rotor Blades foldable, to reduce the size of the helicopter to enable stowage in Indian Navy ships,

Defence Acquisition Council (DAC) accorded Acceptance of Necessity (AoN) for procurement of Utility Helicopter-Maritime,

on April 3, 2023, Design and Development activities are progressing with internal funding,

25 kN TURBOFAN ENGINE (HTFE-25)

The Company has undertaken design and development of a 25kN thrust class turbofan engine, which can be used on Basic/ Advanced military trainers, small business jets and large UAV applications, The engine can be used on a 5-ton weight class aircraft in single engine configuration and on aircraft of up to 9-ton weight class with twin-engine configuration, Two core engines and one full engine have been built and is under testing, Core engine tested for light up, acceleration and speeds upto 99,5%, Further trials are progressing,

1200 kW TURBOSHAFT ENGINE (HTSE-1200)

Design and development of a 1200 kW Turbo shaft engine is being undertaken for 3 to 6-ton category helicopters, Two prototype engines (Jet mode engine & Power mode engine) have been built, Components like radial straightener, diffuser, and rear bearing support have been 3-D printed and evaluated in the Jet mode version engine, Engine has been tested upto 650 kW power rating at HAL test cell and further testing is in progress,

ROTARY UNMANNED AERIAL VEHICLE (RUAV)

The Company has undertaken design and development of Rotary Unmanned Aerial Vehicle (RUAV), a Vertical Take Off and Landing (VTOL) Helicopter Drone capable for deployment at High Altitude Zones in Cargo delivery and Intelligence, Surveillance, Reconnaissance (ISR) roles,

RESEARCH AND DEVELOPMENT ACHIEVEMENTS

During the year, the Company has incurred a total R&D expenditure of ' 2,79,447 Lakh, which is 8,79% of the Turnover, The Company has transferred a sum of ' 94,506 Lakh (15% of Operating PAT) to R&D Reserve for contribution to R&D corpus,

The significant R&D achievements are as under:

? A robust R&D policy framework and a process driven R&D Manual framework formulated and released by Hon'ble RM for uniform implementation across all R&D Centres,

? R&D Centres Modernisation plan of phase-I approved by Board, will pave the way for establishing modern infra and test facilities for upcoming R&D programs,

? Inaugurated the SSLV Design office of the Space Research and Design Centre (SRDC) at ARDC on December 1, 2025 to mark the formal establishment of Space Research and Design Centre,

? Unification of Weapons integration on Su-30MKI - Flight trials of Phase ii completed on D&D aircraft at AFS Jodhpur and AFS Pune in September, 2025.

? Type Approval certificate received from CEMILAC for AP (Air Producer)-Jaguar engine.

? Successfully completed maiden sea trials of LM2500 Engines on First Ship of M/s. GRSE, Kolkata.

? First Flight of indigenous Mission Computing & Display Suite (MCDS) on Dhruv Wheeled Demo Maritime (DWDM) Helicopter was carried out on December 13, 2025.

? Maiden flight of LCH with indigenous AFCS and IADS successfully completed on December 23, 2025.

? Achieved maiden flight on ALH Mkiii with two-segmented Main Rotor Blade (MRB) on February 5, 2026.

? Integration of Spice 1000 on wing store stations of Mirage 2000 i/Ti aircraft completed, Carriage & Handling and System evaluation flight trials completed.

? RCMA approval obtained for Total Technical Life (TTL) extension of AL-31FP engines from existing 2000 hours to 2500 hours and the first engine was handed over to iAF on January 8, 2026, after overhaul.

During the year, the Company has filed 223 iPR applications and 84 iPRs have been granted.

Further, out of total number of 2842 iPRs filed by the Company, 1226 iPRs have been granted so far (Patents -382, industrial Designs - 207, Copyrights - 635, Trademark - 2).

BOARD AND ITS COMMITTEE MEETINGS

During the year, 10 (Ten) Board Meetings were held and the maximum interval between any two meetings was not more than 120 days.

The details of meetings of the Board and Committees thereof held during the year are furnished in the Corporate Governance Report, which forms part of this Report.

COMMITTEES OF THE BOARD

As on March 31,2026, the Board has five Statutory Committees, namely Audit Committee, Nomination & Remuneration Committee, Corporate Social Responsibility & Sustainable Development Committee (CSR &SD), Stakeholders Relationship Committee (SRC) and Risk Management Committee (RMC). However, due to non-appointment of requisite number of Independent Directors, Audit Committee and Nomination & Remuneration Committee were not in valid constitution during the financial year till June 1, 2025. Apart from these, CSR & SD, SRC and RMC were also not in valid constitution during the period from April 28, 2025 till June 1, 2025.

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

CHANGES IN BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year, following changes took place in the Board of Directors and Key Managerial Personnel (KMP) of the Company:

Appointment

? Shri M. G. Balasubrahmanya, Executive Director (Human Resources) was appointed as Director (Human Resources) w.e.f. May 6, 2025.

? CA Rakesh Bhawsar was appointed as Independent Director w.e.f. May 15, 2025.

? Dr. S. D. Premkumar was appointed as Independent Director w.e.f. May 15, 2025.

? Shri Amit Satija, Joint Secretary (DIP), MoD was appointed as Government Nominee Director w.e.f. May 21, 2025.

? Shri Ajay Kumar Shrivastava, Executive Director (ARDC) was appointed as Director (Engineering and R&D) w.e.f. July 15, 2025.

? Ms Manisha Chandra, IAS, Joint Secretary (Aerospace), MoD was appointed as Government Nominee Director w.e.f. July 15, 2025.

Cessation

? Shri Deepak Abasaheb Shinde ceased as Independent Director on completion of his tenure w.e.f. April 27, 2025.

? Shri Shalabh Tyagi, Joint Secretary (P&C), MoD ceased as Government Nominee Director due to withdrawal of nomination w.e.f. May 21, 2025.

? Shri Amit Satija, Joint Secretary (DIP), MoD ceased as Government Nominee Director due to withdrawal of nomination w.e.f. July 15, 2025.

DECLARATION OF INDEPENDENCE

Declarations from Independent Directors of the Company have been received, confirming that they are meeting the criteria of independence as prescribed under Section 149(6) of the Companies Act and Regulation 25(8) of the SEBi (LODR) Regulations.

COMPANY'S POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION

The Company being a Government Company, the appointment, tenure and remuneration of Functional Directors including Chairman and Managing Director (CMD) are determined by the Government of India. The Terms & Conditions of appointment, including the period of appointment, the Scale of Pay and other entitlements are notified by the Government of India.

Government Nominee Directors are appointed by the Department of Defence Production, Ministry of Defence and are not entitled to any remuneration / sitting fees.

Independent Directors are appointed by the Government of India and are entitled to sitting fees for attending the Board / Committee meetings as prescribed by the Board in line with the Companies Act and Rules made thereunder.

As per Gazette Notification No. GSR 463 (E) dated June 5, 2015 of the Ministry of Corporate Affairs (MCA), the Company, being a Government Company, is not required to frame a Policy on Directors' appointment and remuneration, including criteria for determining qualifications etc. under Section 134(3)(e) of the Companies Act. Further, SEBI has granted specific exemption to the Company with respect to the Terms of Reference of the NRC for recommending the policy relating to the remuneration of directors.

The appointment/remuneration and other matters in respect of Key Managerial Personnel and Senior Management Personnel are governed by the Recruitment Rules and Procedures of the Company. Pay scales of the KMPs and Senior Management Personnel are governed by Presidential Directives received from the Ministry of Defence.

BOARD EVALUATION

Pursuant to the Gazette Notification No GSR 463 (E) dated June 5, 2015 of the MCA, formal annual evaluation by the Board of its own performance, its committees and individual directors, are exempted for the Company.

However, the performance of the Functional Directors and the Board as a whole is evaluated by the Independent Directors in their meeting. The performance evaluation of Independent Directors is carried out by the Board without the presence of Independent Directors.

ANNUAL RETURN

In accordance with the provisions of the Companies Act, Annual Return in the prescribed format has been hosted on website of the Company at https://hal-india.co.in/backend/wp-content/uploads/2026/07/Draft-MGT-7-17072026.pdf

COMPLIANCE WITH SECRETARIAL STANDARDS

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

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

Your Company being a defence Central Public Sector Enterprise (CPSE), the disclosure of information with respect to conservation of energy, technology absorption, foreign exchange earnings and outgo under the provisions of Section

134(3)(m) read with Rule 8(3) of the Companies (Accounts) Rules, 2014, is exempted vide Notification GSR No.680 (E) dated September 4, 2015.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Pursuant to the provisions of Section 135 of the Companies Act, Companies (Corporate Social Responsibility Policy) Rules, 2014 & Amendment thereof and DPE Guidelines, the Company has undertaken various activities during the year as per its CSR Policy. The projects / programmes / activities taken up are in line with Schedule VII of the Companies Act. The thrust areas under CSR are Health Care, Education, Skill Development, Women Empowerment, Rural Development, Promotion of Sports etc. The Company has spent an amount of ' 18,099 Lakh under CSR for the Financial Year 2025-26 against the CSR budget/ obligation of ' 16,867 Lakh.

The Corporate Social Responsibility Policy, Composition of the Committee and CSR Projects/ Activities of the Company is available on the Company's website at https://hal-india.co.in/ investors/corporate-social-responsibility-2 Salient features of the Policy form part of the Annual Report.

Annual Report on CSR activities undertaken by the Company during the year, pursuant to Section 135 of the Companies Act read with Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended, is attached to this Report as Annexure-III.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

In terms of Regulation 34(2)(f) of SEBI (LODR) Regulations, the Company has prepared Business Responsibility and Sustainability Report (BRSR) on Environment, Social and Governance (ESG) parameters in the prescribed format for the year 2025-26 and attached to this Report, along with reasonable assessment or assurance Report of BRSR Core, received from Independent Assessment or Assurance Provider.

DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY

The Company has a Board approved Risk Management Policy, in place. The Policy aims at elimination or reduction of risk exposures through identification and analysis of various types of risks and facilitating timely action for taking risk mitigation measures.

In line with Regulation 21 of the SEBI (LODR), Regulations, the Company has constituted the Risk Management Committee for monitoring and reviewing of the risk management plan and such other functions as it may deem fit, including Financial, Operational, ESG, Cyber Security and Business Continuity Plan, etc. The details of the Committee, its Terms of Reference and Risk Management Policy are set out in the Corporate Governance Report.

SIGNIFICANT AND MATERIAL ORDERS

During the year, no significant and material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and operation of the Company in future,

PUBLIC DEPOSITS

The Company has not accepted any deposit during the year, Further, there was no outstanding deposit and/or unpaid or unclaimed principal amount or interest against any deposit either at the beginning or at the end of the financial year 2025-26,

ISSUE OF EQUITY SHARES WITH DIFFERENTIAL RIGHTS

During the year, the Company has not issued any equity shares with differential rights as to dividend, voting or otherwise,

MATERIAL CHANGES SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS

There are no material changes and commitments affecting the financial position of the Company which occurred between March 31, 2026 and the date of signing of this Report,

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Pursuant to Gazette Notification No, G.S.R. 463 (E) dated June 5, 2015 issued by the MCA, disclosure of particulars of employees drawing remuneration in excess of the limits specified under provisions of Section 197 of the Companies Act and the relevant Rules thereof, are exempted for the Company.

MOU WITH GOVERNMENT

The Company has signed Memorandum of Understanding (MoU) with the Ministry of Defence (MoD), Government of India (Gol) for the financial year 2025-26, the performance rating of which is awaited,

However, your Company has achieved "Excellent" performance rating with a score of 92,07 for the financial year 2024-25,

INDIGENISATION AND ATMANIRBHAR BHARAT

In line with the Atmanirbhar Bharat Mission of Govt of India, the Company continues to put concerted efforts to realize higher achievements in indigenization, Towards achieving this, the Company has taken up indigenization of various Systems, Line Replaceable Units (LRUs), Spares etc of foreign origin fitted on HAL platforms to reduce dependence on imports, thus fostering self-reliance, Some of the efforts/ initiatives taken up in this regard are as under:

? Created a dedicated indigenization fund by transferring 3% of operating profit after tax of the Company every year,

on TReDS platform, as per the following details;

A total of 140 Invoices amounting '7,300 Lakh were settled through TReDS platform in the financial year 2025-26, which shows an increase of 75% in number of Invoices uploaded by MSMEs w.r.t previous year.

The Company has registered with MSME SAMBANDH Portal and the procurement details are being updated monthly in this Portal. The Company has also registered with MSME SAMADHAAN and CHAMPION Portal and the same is being monitored regularly for resolution of payment or procedural complaints of MSEs, if any.

The Company has implemented companywide e-Procurement system through its own e-Procurement portal which is adopted for tenders issued outside GeM Portal. A 24X7 e-Procurement help desk has been established to provide information, support, training, operational issues/clarifications to the vendors.

To encourage 'Make in India' and promote manufacturing and production of goods & services in India, the Company has implemented the Public Procurement (Preference to Make in India), Order 2017, and amendments thereof, issued by Department for Promotion of Industry and Internal Trade (DPIIT).

Special provisions are incorporated in Purchase Manual to facilitate MSEs & Startups in Supply Chain.

PROCUREMENT THROUGH GeM PORTAL

The Company has implemented companywide procurement through GeM portal. All efforts are continuously being made to persuade the potential domestic suppliers (covering area of Goods, Services and Outsourcing) to on-board them on the GeM Portal.

During the year, a total 13,133 orders were placed through GeM portal amounting to over ' 7,96,600 Lakh against the target procurement value of ' 3,50,000 Lakh.

PROCUREMENT FROM MICRO & SMALL ENTERPRISES (MSEs)

The Company has implemented the Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012 & its amendments issued by Ministry of MSME vide order No. 21(22)-2018-MA dated November 9, 2018. During the year, out of total domestic procurement of ' 11,30,100 Lakh, the value of procurement made from MSEs was ' 5,57,200 Lakh, as per the following details;

*Note; Para 4 of S.O. S81(E) PPP for MSE 2012 states that, in event of failure of such Micro and Small Enterprises to participate in tender process or to meet tender requirements and L1 price, 4 per cent sub-target for procurement earmarked for Micro and Small Enterprises owned by Scheduled Caste or Scheduled Tribe entrepreneurs shall be met from other Micro and Small Enterprises.

The Company has made payment to all its MSE vendors within the specified time in compliance with Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. During the year, the Company has made MSE payments of ' 1,93,500 Lakh as per the following details;

INTEGRITY PACT (IP)

Your Company has system of signing of Integrity Pact (IP) with vendors for all procurement of Goods, Services & Works / contracts having value of ' 5 Crore and above. Only those vendors/ bidders, who commit themselves to IP with the

Company would be considered competent to participate in the bidding process. Further, to encourage competition in procurement and to reduce processing lead time, the Company has implemented the Omnibus Integrity Pact with effect from January 1, 2018. This Omnibus IP shall be valid upto 5 years and the same can be proposed by bidder for consideration against other offers submitted by the vendor during the validity period of Omnibus IP.

HUMAN RESOURCE DEVELOPMENT

The strength of employees as on March 31, 2026 stood at 23,502.

As on March 31, 2026, a total of 3,882 apprentices were engaged in the Company in various Trades, which forms 11.19% of the total manpower strength including contractual staff.

EMPLOYEE WELFARE

The Company continues to provide a wide range of welfare measures for employees and their families, including comprehensive Medical Facilities, Housing Facilities, Educational

Facilities for employees' children, and Sports Facilities, among others. With a view to support employee well-being and overall development, various initiatives are undertaken from time to time. In line with this, HAL Sabbatical Scheme, now available to both Executives and Workmen, enables staff to take leave for self-renewal, skill development, or personal pursuits, offering flexibility to address social obligations, family support needs, or wellness journeys.

In furtherance of its employee-centric approach, the Company continues to provide financial security through multi-layered Insurance Policies covering Life and Accident disabilities for all employees. Additionally, the Financial Assistance Scheme offers monthly monetary support ranging from ' 15,000/- p.m. to ' 50,000/- p.m., based on the Grade / Scale of the employee, to dependents of deceased employees upto the notional retirement date, reaffirming the Company's dedication to comprehensive employee welfare beyond the workplace. The Group Health Insurance coverage for retired employees (retired before 01.01.07) and their spouses was enhanced from ' 4 lakhs to ' 5 lakhs per annum.

EMPLOYEE RELATIONS (ER) / INDUSTRIAL RELATIONS (IR)

The Employee Relations / Industrial Relations Scenario remained peaceful & cordial during the year. Effective communication between the Management and the Trade Unions / Associations paved way for maintenance of industrial harmony and to eliminate any scope of conflicts & misunderstandings. Meetings with the representatives of the Recognized Unions / Officers Associations at the Divisional, Complex & Corporate Levels were held periodically to discuss various issues and its resolutions.

Plant Level, Shop Level and various bi-partite Committees with representatives from the Management / Union are functioning in the Divisions to discuss & resolve production related & other matters. In order to address Employee Grievance / Representations, Grievance Redressal Mechanisms are also in place in the Company.

WOMEN EMPOWERMENT

Women Empowerment & Leadership Programs are being regularly conducted by the Company. The main objective of the programs is to enhance self-awareness & self-management, enhance competencies to drive business results, enhance ability to influence & harness the power of effective networking and to build essential leadership competencies. At present, around 92 Women Employees hold Senior Management posts i.e., Grade VII and above.

The Company is a Corporate Life Member of Women in Public Sector (WIPS) Forum. Women employees are encouraged to participate in programmes / activities of WIPS Forum. During the 36^th National Meet of WIPS Forum held on 11^th & 12^th February, 2026 at CIDCO Auditorium, Navi Mumbai, the Company was conferred with "Best Enterprise Award", under Maharatna Category. Further, 'Best Women Employee Award" (Non-Executive category) was awarded to one of the women employee.

Ladies Clubs / Families Welfare Associations are also functioning at different locations to take up various philanthropic / socio

cultural activities. Women's Day is celebrated on 8^th March every year.

PROHIBITION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE

The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 has been notified in the Company. In line with the Guidelines received from time to time, necessary actions have been taken to prevent Sexual Harassment of Women at Workplace. The CDA Rules of the Company applicable to the Officers, and the Certified Standing Orders applicable to the Workmen, have the required provisions in this regard.

Internal Complaints Committees (ICCs) as per Section 4 of the Act have been constituted in all the Divisions/Offices. The ICCs details are being updated under the SHe-Box as mandated by the Ministry of Women and Child Development. Information for the financial year 2025-2026 in terms of Section 22 of the Act and Schedule V of SEBI (LODR) Regulations, is as indicated below:

HEALTH & SAFETY INITIATIVES FOR HUMAN RESOURCES

The target prescribed by the MoD with respect to Compliance Parameter on "Health and Safety initiatives for Human Resources" for FY 2025-26 has been achieved successfully. The detail status of Compliance Parameter is as under:

COMPLIANCE ON MATERNITY BENEFIT UNDER LABOUR CODE

During the year, the Company has ensured the compliance of the provisions of the maternity benefit under labour Code.

RAJBHASHA IMPLEMENTATION

The Company is constantly taking efforts in implementing Official Language in all the Divisions/ Offices effectively, as per directives issued by Dept. of Official Language, Ministry of Home Affairs and Dept. of Defence Production, Ministry of Defence. The inspection reports pertaining to Parliamentary Committee inspections and compliance reports related to the assurances given to the Committees are being forwarded to the concerned Authorities/ Offices in time after reviewing the report at the Corporate Office level.

During the year, the Company has organized two half-yearly meetings of Town Official Language Implementation Committee

(Undertakings), Bengaluru under the Chairmanship of the Company. In the first meeting, TOLIC Member Offices were encouraged for best OL Implementation for the year and also motivated the Member Offices for sponsoring the competitions organized during Rajbhasha Sauhard Utsav-2025-26. Under the aegis of TOLIC, special lectures were organized on various topics like 'Discussion of Questionnaire related to Inspection of Committee of Parliament on Official Language', 'Translation and IT Tools' by eminent personalities.

The meetings of Official Language Implementation Committee in all the Divisions of the Company including Corporate Office are being conducted regularly. Necessary new guidelines issued by the Dept. of Official Language, Ministry of Home Affairs, New Delhi are also being circulated to all the Divisions of the Company to make aware of latest orders pertaining to implementation of Official Language. The periodical reports are also being sent online as per directives issued by the

Department of Official Language, Ministry of Home Affairs, New Delhi,

Hindi Incentive Scheme has been implemented effectively amongst the Divisions of the Company, In accordance with the Official Language guidelines, Hindi workshops and seminars are also being conducted on various topics from time to time by HAL, so that employees could do their routine work in Hindi as far as possible, And also, major translation works were carried out during the year,

The Inspection meetings were successfully carried out by Committee of Parliament on Official Language at various Divisions of the Company such as Overhaul Division, Bengaluru and Avionics Division, Hyderabad by Dy. Director (Implementation), Regional Implementation Office (South), Bengaluru,

INFORMATION TECHNOLOGY (IT) INITIATIVES

During the year, your Company has taken many IT initiatives towards adopting the latest technology, increasing customer satisfaction, implementing paperless processes and improving cyber security. Some of the major IT initiatives and achievements of the Company during the year are:

? Project Parivartan (Centralised ERP): Project Parivartan

was conceptualised as a strategic initiative aimed at standardising business processes across the Company, The Project involves upgrading the existing IFS system to a higher version (IFS Apps 10) and deploying it on a centralised, next-generation hardware platform with built-in redundancy, along with the establishment of a Disaster Recovery (DR) site at Bengaluru, Key initial phases—such as the "as-is" business process study, finalisation of "to-be" processes, project office and hardware setup, process demonstrations, and preparation of the Business Blueprint (Conference Room Pilot)—have been completed,

Development of customisations, reports, and dashboards is currently in progress,

? Establishment of Centralised Data Center: The

Company has conceptualised and planned for establishing a Tier-3 centralised Data Center, which will form the foundation for the HAL Private Cloud, This initiative is intended to accelerate digital transformation by enhancing security, control, and regulatory compliance for critical data and workloads,

? Implementation of SD-WAN Solution: In line with the centralisation of IT applications and the establishment of a centralised Data Center, MPLS circuits continue to serve as the primary backbone for inter-divisional communication, To strengthen network resilience and performance, a contract has been signed with M/s BSNL for the implementation of a high-speed SD-WAN solution, This includes upgrading the bandwidth of existing MPLS

circuits and provisioning an alternate communication link through an additional service provider,

? Cyber Security Posture: The Company has strengthened its cybersecurity framework through the deployment of 'Maya', a hardened Linux-based operating system developed by Cyber Information Research Agency (CIRA), aimed at minimising the impact of potential security breaches, Logs from critical devices, servers, and firewalls have been integrated with the MoD Security Operations Centre (SOC) 'NANDI', which enables continuous monitoring, analysis and feedback for timely corrective action, Additionally, Virtual Desktop Infrastructure (VDI) functionality has been implemented by hardening desktop environments, centralising data storage on secure Linux-based servers, and enabling controlled access through biometric and facial recognition mechanisms, thereby enhancing the overall cybersecurity posture,

AWARDS & RECOGNITIONS

During the year, the Company has received various Awards and

Recognitions, Some of the important accolades conferred to

the Company are as under:

? "SCOPE Eminence Award" for Institutional Excellence in the Maharatna/Navratna PSEs category for the year 202223 on August 29, 2025 at New Delhi,

? "Champion of Civil-Defence Convergence Award" during the 7^th Aerospace and Defence MRO South Asia summit 2026 held at New Delhi on March 1 1-12, 2026,

? "SIDM Champion Award 2025" for the project "Design and Development of Air Producer Engine for Jaguar Aircraft",

? "Performance Excellence Award-2025" by the Indian Institution of Industrial Engineering (IIIE) for its outstanding contributions on May 9, 2025 at Shillong, Meghalaya,

? "Best Enterprise Award' under the Maharatna category during the 36^th National Meet of Forum of Women in Public Sector (WIPS), at Navi Mumbai,

? "Platinum Award" under Operational Performance Excellence category and "Silver Award" under Corporate Governance category at 15^th PSE Excellence Awards event held on February, 27, 2026 at New Delhi,

? "Governance Now - 12^th PSU Award" in the category of Excellence in Learning & Development on March 1 1, 2026 in New Delhi,

VIGILANCE

The Company has a well-established and dedicated vigilance

department headed by Chief Vigilance Officer (CVO), To

uphold high ethical standards, transparency, accountability and responsibility in the workplace, the Company has implemented various initiatives. Towards this, vigilance officers are posted at various divisions and offices of the Company. Preventive Vigilance has been the thrust area of the Vigilance Department and the same received focussed attention during the current year.

Some of the key activities that have been carried out by Vigilance Department during the year are as under:

i. Preventive Vigilance: 174 complaints were handled, 383 regular scrutiny/surprise checks and 07 CTE type intensive examinations were carried out across the Company. Four system studies were also carried out on various topics and system improvement suggestions were made.

A total of 141 awareness sessions were conducted on various topics. Key note address by eminent speakers were organized to spread vigilance awareness among employees on various topics.

ii. Vigilance Publications: Three in-house vigilance e-magazines were published, as under:

? Marg Darshan Vol. XXII", an annual magazine was released on the theme "Classroom to Community -Shaping ethical leaders of tomorrow".

? "Vishleshan-V, A Compendium of Vigilance Interventions"- The booklet aims to enhance vigilance awareness, educate on various aspects of vigilance and preventive measures, share best practices and interventions to prevent corruption and irregularities.

? Integrity circle booklet "fiisha- Ethical Behavior - A way of life" - This booklet features articles, poems, short stories & posters contributed by students from integrity circle group which demonstrates the importance of integrity and honesty.

iii. System Improvement measures: Based on the recommendations of vigilance, several system improvements have been implemented by the management in the areas of HR, IMM, Stores, Works, Finance etc.

iv. Vigilance Awareness Week: Vigilance Awareness Week was observed from October 27, 2025 to November 02, 2025 on the theme "Vigilance: Our Shared Responsibility". Further, in line with CVC's directions, a three months' campaign was also carried out from August 18, 2025 to November 17, 2025 focusing the following areas:

? Disposal of pending complaints

? Disposal of pending cases

reliability through MODs, SIs, STIs, Training, indigenisation etc, in consultation with various OEMs.

? Certification and Achievements - 55 indigenous Suppliers and 75 Sub-Contractors have been awarded ASQMS Certification (Approval of Supplier / Sub-contractor & its Quality Management System) by Production Divisions and R&D Centres enabling the clearance and supply of Products produced by them under Certificate of Conformity ("COC"),

? Conference and Training - Barrackpore Division and DGAQA, Barrackpore had jointly organised a QA Conference on Chetak, Cheetah and Cheetal Helicopter Fleet during January, 2026, with the objective of reviewing and strengthening quality assurance practices, enhancing operational reliability and reinforcing safety and airworthiness aspects of the fleet,

? Quality Circle - Quality Circle teams from various HAL Divisions have participated in Chapter Convention on Quality Concepts (CCQC) & National Convention on Quality Concepts (NCQC) and have won 40 'Gold', 21 'Excellence', 16 'Par Excellence', 1 'Silver', 2 'Best of Manufacturing' and 1 'Distinguish' category awards,

AUDITORS

Statutory Auditors

The Company being a CPSE, Statutory Auditors were appointed by the Comptroller & Auditor General of India (C&AG), M/s Gupta Nayar & Co, Chartered Accountants, Bengaluru was appointed as Statutory Auditors for auditing the Accounts of the Company for the year and 19 firms of Chartered Accountants were appointed as Branch Auditors, The Auditors' Report does not contain any qualification, reservation or adverse remarks,

The Auditors' Report on financial statements for the FY 202526 and comments of the Comptroller & Auditor General of India (C&AG) under Section 143(6) of the Companies Act are attached to this Report, which is self-explanatory.

Cost Auditors

The Company has appointed M/s Murthy & Co, LLP, Cost and Management Accountants, Bengaluru as Cost Auditors for conducting the Cost Audit of the Company for the FY 202526, The Company maintains cost records as specified by the Central Government under Section 148(1) of the Companies Act, which are audited by Cost Auditors,

Internal Auditors

The Company has appointed 13 firms of Chartered Accountants and 1 firm of Cost and Management Accountants for carrying out internal audit of the Company for the FY 2025-26,

Secretarial Auditors

in pursuant to the provisions of Section 204 of the Companies Act, M/s. SNM & Associates, Practicing Company Secretaries, Bengaluru has been appointed as Secretarial Auditor of the Company for a consecutive period of five (5) years i.e., from FY 2025-26 upto FY 2029-30,

The Secretarial Audit Report for the FY 2025-26 is annexed to this Report as Annexure - IV,

The Secretarial Auditor in his report observed that:

> 5 posts of Independent Directors including Woman Independent Director remained vacant, The Company is not in compliance with Section 149 (4) of the Companies Act, 2013 read with the Rule 3 & 4 of Companies (Appointment & Qualification of Directors) Rules, 2014 and Regulation 17(1)(a) & 17(1)(b) of SEBi (Listing Obligations and Disclosure Requirements) Regulations, 2015 during the reporting period,

> Quorum requirement under Regulation 17(2A) of SEBi LODR for Board Meeting held on May 14, 2025 was not met,

> The Company did not have valid constituted Audit Committee and Nomination & Remuneration Committee respectively from 1^st April 2025 to 1^st June, 2025 and further the Company did not have validly constituted Stakeholders Relationship Committee, CSR & Sustainable Development Committee and Risk Management Committee from 28^th April, 2025 to 1^st June, 2025,

in response to the observations, it was informed that, all the above referred non-compliances was due to non-appointment of Independent Directors by the Government of India in the Company. Hence, the matter was beyond the control of the Company.

As per Regulation 24A of the SEBi (LODR) Regulations, the Company has filed the Annual Secretarial Compliance Report for the FY 2025-26, signed by the Secretarial Auditor with the BSE Limited and National Stock Exchange of India Limited within the stipulated time,

Reporting of Frauds by Auditors

During the year, neither the Statutory Auditor nor the Secretarial Auditor have reported to the Audit Committee under Section 143(12) of the Companies Act, any instance of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned.

CORPORATE GOVERNANCE REPORT

in terms of Regulations 34 read with Schedule V of SEBi (LODR) Regulations and DPE Guidelines, a report on Corporate

Governance for the FY 2025-26 along with Compliance Certificate on Corporate Governance issued by the Secretarial Auditor of the Company, is attached to this Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

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

VIGIL MECHANISM

The Company has a Whistle-blower Policy approved by the Board. The details of the Whistle-blower Policy are explained in the Corporate Governance Report and is hosted on the Company's website at www.hal-india.co.in/investors

Employees are encouraged to blow the whistle for raising their concerns.

None of the employees have been denied access to the Chairman of the Audit Committee.

DIRECTORS' RESPONSIBILITY STATEMENT

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

(a) In the preparation of the annual accounts for the year ended March 31, 2026, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(b) the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as on March 31, 2026 and of the profit and loss of the Company for the year ended on that date;

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

(d) the directors have prepared the annual accounts on a "going concern" basis;

(e) the directors have laid down internal financial controls which are being followed by the Company and that such internal controls are adequate and are operating effectively;

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

ACKNOWLEDGEMENT

Your Directors are extremely thankful and acknowledge the excellent support extended by the Government of India, in particular the Ministry of Defence, Department of Defence Production, Defence Acquisition and Defence Finance as well as other Ministries of the Government of India in all the endeavours of the Company.

Your Directors also place on record their sincere appreciation towards the Company's valued customers, in particular the Indian Defence Services, for the support and confidence reposed by them in the Management of the Company, and look forward to the continuance of this mutually supportive relationship in the future.

The Company wishes to place on record its appreciation for the co-operation extended and services provided by the Comptroller & Auditor General of India (C&AG), the Principal Director of Commercial Audit & Ex-officio Member, Audit Board, Statutory/ Internal Auditors, Cost Auditors, Secretarial Auditor, Bankers, Collaborators, JV Partners and Suppliers.

Your Directors are also thankful to the shareholders for the trust and confidence reposed in the Company and look forward to their continued support to propel the Company to greater heights.

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