Nature and Purpose of each Reserve:

1. Research & Development Reserve:

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

2. Captial Redemption Reserve:

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

3. Indigenization Fund Reserve:

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

4. General Reserve:

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

14.4 The Company's Barrackpore Division is in possession of 23.385 acres (previous year; 23.385 acres) of land on which the Division has its Buildings, Hangar, Plant and Machinery etc. The instruments of transfer in favour of Division / Company either by way of lease or transfer in respect of this land is pending execution. Provision for lease rental amounting to ' 36.50 Lakhs up to the year ended 31^st March 2026 (previous year; ' 36 Lakhs) has been made. The transfer of the land is being pursued with Defence Estate Officer, Kolkata.

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

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

Land(Right-of-Use) under Property Plant and Equipment includes 200 acres land taken on lease for establishing a unit at Kasaragod at a cost of ' 708 lakhs during 2008. This cost is amortised over the lease period of 90 years. The Lease charges for the period amounting to ' 5 Lakhs (previous year; ' 8 lakhs) has been considered under depreciation during the year. However 4.171 acres(previous year; 4.171 acres) of land shortage due to surrender of certain tracts of land against local disputes by Kerala Industrial Infrastructure Development Corporation (KINFRA). Land shortage issue has been taken up with KINFRA for compensation of shortfall in the land. HAL Board has accorded approval in their 472^nd Meeting held on 27.09.2023, for proposal of acceptance of refund amount without interest from M/s KINFRA towards shortfall of land. During the year, the Board of KINFRA has remitted the lease premium of ' 14.78 Lakhs towards 4.171 acres of disputed land. Execution of amended Lease deed for 195.829 acres of land by Strategic Electronics Factory(SEF), Kasaragod was completed during the year 2025-26.

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

The Board in its 98^th Meeting held on 29^th September 1975, had approved transfer of 25 acres of land to National Remote Sensing Centre (NRSC), (erstwhile called NRSA) subject to clearance from Defence Ministry and the Govt. of Andhra Pradesh. After clearance and obtaining necessary approvals, the Division had handed over 23.01 acres of land to NRSC in 1976. However, Conveyance Deed of the land in favour of NRSC was not registered and kept pending by the Sub-Registrar for want of clarification from the then Govt. of Andhra Pradesh regarding exemption of stamp duty, Transfer Deed could not be executed between NRSC and HAL at that point of time. In order to ascertain the exact amount of land in possession of NRSC, the Division had conducted land survey of HAL Land and after post assessment, a proposal was placed before Board for execution of transfer deed for transfer of 22.20 Acres Land to NRSC and approval was accorded by the Board in its 479^th Meeting held on 16^th May 2024. Accordingly, Transfer deed was executed in June 2024 for transfer of Land to NRSC.

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

Land under clause 14.3 include 39.79 acres of land to M/s Ordnance Factory Board, 0.115 acers to RCMA, 0.37 acres to AFLE and 3.08 acers to M/s DAV College Trust on lease basis by Korwa Division.

14.5 a) Facilities Management Division (FMD) is holding 21 17.289 acres (previous year; 21 17.289 acres) land, out of which free hold land of 2096.189 acres (previous year; 2096.189 acres) is located in Bangalore and 15.1 acres (previous year; 15.1 acres) located at Bagalkot, Karnataka and Lease hold Land of 6 acres (previous year; 6 acres) is located at Harapanahalli, Davanagere, of which 17.737 acres (previous year; 17.737 acres) is under litigation / encroachment by third parties and 10.152 acres (previous year; 10.152 acres) is under dispute with M/s Bharat Earth Movers Limited(BEML).

Out of freehold land, 315 Sq. mtrs. (0.078 acres) of HAL land at Benniganahalli has been handed over to BMRCL for Construction of metro rail project work on 3^rd May 2024 under compulsory acquisition.

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

c) Pending dispute settlement, an amount of '3716 lakhs (previous year; '3572 Lakhs) towards cumulative lease rental income with various parties has not been considered in the books of accounts, The applicable revised lease rental will be considered only after settlement of dispute and renewal of the lease agreements.

d) Approval has been given by the Board in its 439^th and 458^th Meeting for Monetization of 2.925 acres of land at Okalipuram, Bengaluru. Accordingly, the Company advertised for outright sale of 2.925 acres for which e-auction was conducted on 12^th January 2023 and two parties submitted applications. The premium offered by H1 bidder is proposed for acceptance of the Competent Authority.

In the meanwhile, Govt. Audit raised an Audit Enquiry that the projected realizable land value is lesser than the Govt. guidance value. Accordingly, the Company engaged three valuers to independently undertake the valuation of 2.925 acres of land at Okalipuram afresh. A Committee constituted by the Competent Authority reviewed the Valuation Reports submitted by the Valuers and Committee analysed and submitted its report dated 28^th April 2023, recommending to cancel the sale of land and go for fresh asset monetization exercise by keeping the Reserve price of the land as ' 9780 lakhs. Based on approval of the Competent Authority on 4^th July 2023, the process of sale of land has been annulled and is in the process to monetize the land at a Reserve Price of ' 9780 lakhs.

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

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

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

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

g) "Land at Corporate office includes 711.22 sq.mtrs (previous year; 711.22 Sq. mtrs) of land that has been acquired for the Metro Rail Project by M/s. Bangalore Metro Rail Corporation Limited (BMRCL). The compensation awarded of '549 lakhs (previous year; '549 lakhs) by M/s. Karnataka Industrial Area Development Board (KIADB) was contested by Company in the City Civil Court at Bangalore. Currently, the case is pending before the City Civil Court at Bangalore . Meanwhile, a Joint Committee comprising the Company & BMRCL Officials

was formed to arrive at an out of court settlement. On completion of the Metro Rail project, the land utilized Is restricted to 272.94 sq.mt, (previous year : 272.94 sq. mt.) area to the extent of 438.28 sq. mt. has been conveyed back to the Company through Deed of transfer. Compensation amount for remaining area, i.e 272.94 sq. mt. is yet to be received by the Company. Company has filed memos in the pending cases requesting the Court to disburse ' 348 lakhs along with interest as compensation for remaining area of land (i.e. 272.94 sq.mt.). Further, Special Land Acquisition Officer (SLAO) has filed an application before Court requesting the Court to refund the entire amount with interest to it and for closing the case. Company has filed objections to the said application filed by SLAO. Company has also filed an application before the Court for disbursing ' 348 lakhs along with interest as compensation for remaining area of land (i.e. 272.94 sq.mt.) on 07.08.2025, the Court rejected application filed by HAL and directed that HAL is entitled for release for amount only after disposal of case on merits.. HAL has preferred Writ Petition No. 640 of 2026 challenging the order dated 7.8.2025 of the City Civil Court. The matter was listed before the High Court. The Court heard the matter for sometime and adjourned. No next date is given by the Court. As the matter is subjudice no adjustment has been made in the books.

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

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

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

The encroachment of 44.552 acres (previous year: 41.69 acres as per Drone Survey Report) has been identified as per Re-survey Report by Remote sensing Application Centre, UP. HAL has taken suitable and necessary steps towards eviction of the encroachers. Land of 25.49 acres is under litigation out of the total land of 429.03 acres. The Additional 5.14 acres of land was given on lease to DAV College Trust as per the lease agreement signed on 25^th September 2025.

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

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

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

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

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

17A Claims Receivable(Note 19) includes '978 lakhs (previous year; ' 1746 Lakhs) settled under Sabka Saath Sabka Vikas

scheme, is fully reimbursable by customer as per terms of pricing policy with Defence Services and the amount so paid in the earlier years in the scheme has been claimed by the Company and reimbursed by Customer of '768 during the year 2025-26, since, the balance amount of '978 lakhs long pending, provision has been created against the claims receivable.

17B The Board in its 479^th meeting accorded approval for upgrading Helicopter Factory, Tumakuru currently operating as extension of Helicopter Division to a new division named as Helicopter Division, Tumakuru (HFT) reporting to Helicopter Complex. Accounts of Helicopter Division, Tumakuru has been merged with Helicopter Division, Bangalore.

17C The Board in its 498^th Meeting held on 12^th Nov 2025 has accorded approval for the establishment of a new R&D Centre "Space Research & Design Centre (SRDC)" which shall function as an integral part of the Design Complex. Expenditure incurred by SRDC of '183 lakhs for the year ended has been included in ARDC division.

18A DIVIDEND POLICY:

As per extant Memorandum F.No. 5/2/2016-Policy dated 18^th November 2024 of the Department of Investment & Public Asset Management, Ministry of Finance, Government of India, all central public sector enterprises are required to pay a minimum annual dividend of 30% of Profit After Tax (PAT) or 4% of the net-worth, whichever is higher, subject to the limit, if any extant legal provision and the conditions mentioned in the aforesaid memorandum.

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

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

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

During trial of the Execution Petition the accused has submitted a memo in September 2025 offering to settle the matter by paying an amount of ' 289 lakhs being the initial principal amount claimed by the Company excluding interest. The proposal for out of Court Settlement was put up for approval of Competent Authority. The Competent Authority was accorded approval in January 2026, the same was communicated to the dealing counsel to take up with the defendent's counsel.

21A A fraud involving misappropriation of funds by Company official in collusion with six contractors has been noticed by the management and referred to Vigilance department for further investigations. The Vigilance department based on the investigations has lodged FIR with Central Bureau of Investigation (CBI), Bhubaneshwar. An amount of ' 1892 lakhs has been provisionally assessed and fully provided in the financials of 2018-19 and 2020-21 as fraudulent payments made to contractors and others during the period from May 2011 to September 2018 and reported in the FIR with CBI. Adjustment of expenses relating to capital and other accounts in the financial year 2018-19 and 2020-21 includes the above mentioned amount. The matter is under investigation by CBI.

21B An incidence of cyber fraud in the division was noticed by the management where the advance payment of ' 55 lakhs (USD 63,405.44) was transferred to a different bank account due to compromised email received from different domain other than the original source (vendor) and the matter was referred to Cybercrime cell and was also taken up with NIC for further investigation of any breach of NIC server. An amount of ' 55 lakhs has been transferred to Claims Receivable-Credit Impaired (Note-19) and provision for same has been made in the books of accounts during the financial year 2024-25. Further accounting treatment will be made based on the outcome of investigation in this regard.

21C An employee of ARDC division was deputed to Nasik for co-ordinating the finishing operation of Aircraft parts. After completing the finishing operations, while bringing back the finished parts to the division, the item valuing '20 lakhs was lost in transit. Employee lodged FIR at concerned police station and the matter is under investigation by police. Aircraft parts valuing ' 20 lakhs lost in transit has been written off in books for financial year 2025-26.

22 Operating Cycle The Company is having the Multiple Business Activities. Operating Cycle is

determined by Divisions based on Individual business activity.

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

Dispatching of the items to the customers are generally within three weeks from the end date of the reporting period. However, during the year ended 31.03.2026, based on the customer insistence/request, the Company is holding materials on behalf of customers.

24B HAL has launched production of Light Utility Helicopter (LUH) against Letter of Intent (LoI) received from customers. Material procured against this anticipated contract accounted as Inventory of '74245 lakhs (previous year: '50278 lakhs).

24C Approval for Change Order in respect of LCA (FOC) contract was accorded by the Ministry during 2024-25. Based on the approval, the Company has recognized differential revenue of ' 120344 lakhs during the year ended 31 March, 2025 pertaining to the supplies made in the earlier years, based on the amended contract. Differential revenue accounted for the year ended 31.03.2026 is 'NIL lakhs.

24D During the audit of accounts for the financial year 2024-25, the Comptroller and Auditor General of India (C&AG) raised an observation regarding the accounting treatment of "Offset Credit benefits received free of charge as per the Purchase Order terms from foreign suppliers". Accordingly, the Company referred the matter to the Expert Advisory Committee (EAC) of the Institute of Chartered Accountants of India (ICAI) on 24 September 2025 for its opinion on the appropriate accounting treatment. The opinion of the EAC was received on 07 March 2026.

Based on the opinion received from the EAC and the fair valuation assessed by the duly constituted committee, the Company has accounted for the Offset Credit benefits during the current year. Considering the immaterial impact on earlier periods and the impracticability involved in retrospective application, the accounting treatment has been applied prospectively in accordance with the principles of Ind AS 8 relating to accounting policies, changes in accounting estimates and errors.

Accordingly, during the year, the Company has recognised Revenue amounting to ' 11,317 lakhs, Intangible Assets amounting to ' 10,841 lakhs, Amortisation on Intangible Assets amounting to ' 1,790 lakhs, Claims Receivable amounting to '2,944 lakhs and Other Liability amounting to ' 3,831 lakhs. Consequently, the profit for the year has increased by ' 9,527 lakhs.

25 Seasonality of business:

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

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

27 Balance shown under Trade Receivables, Trade Payable, Claims Receivable, Advance against Goods and Services, Capital Advances, deposits and stock / materials lying with sub-contractors / fabricators are under reconciliation. Since the Company is a Government entity under the control of Ministry of Defence (MoD), around 98% of the Company's turnover, around 99% of Trade receivables and Contract Assets, around 98% of Claims receivables and around 100% of the customer advances is with respect to Government and Government related entities. The bills are raised on the customers by the divisions located at various places and reconciliation is carried out on an ongoing basis. However, management does not expect to have any material financial impact of such pending confirmation / reconciliation.

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

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

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

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

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

30 HTFE 25 Project; The project is pursued as technology development project to develop the critical technologies required for engine development of future projects. The Company has taken up the design and development of Hindustan Turbo Fan Engine (HTFE-25) in 2013-14 with a time frame of 6 years for completion. The Core Engine 2, run completed and development activities of TD Full Engine run and Design Configuration review are under progress. An amount of '20172 Lakhs (31.03.2025; ' 19097 Lakhs) has been accounted under Intangible Assets under Development.

It is assessed that, further activities for Engine development and associated technologies are of strategic importance to the country, therefore the current efforts are pursued towards engine certification in the next 4 - 5 years.

Keeping this in view and also that there is no visibility of any progress of any commitment/ orders for the Product, the Intangible Asset review Committee has recommended for impairment of total expenditure incurred on this project. Accordingly, '20172 lakhs has been impaired up to the year ended 31^st March 2026 (up to 31.03.2025; '19097 lakhs).

31A DDP/MoD paid an advance of ' 20812 lakhs to HAL towards conducting Def Expo-2022 at Gandhinagar from 10^th - 13^th Mar 2022. The event got postponed and held in the month of October 2022, HAL had incurred an expenditure of ' 23367 lakhs, audit of expenditure completed by the O/o PCDA Bangalore, and recommended payment to DEO, MOD. Payment is awaited, hence, the balance of '2555 lakhs shown under claims receivable from 2023-24.

31B Inventory items (both Company and Customer owned) held at the LCA TD store were damaged due to flood in September 2022. In respect of Company-owned items, the actual loss was assessed at ' 1,033 lakhs, for which a provision was created in the books of accounts. Following the division's insurance claim, the Insurance Surveyor confirmed the loss at ' 1,033 lakhs, and the full and final settlement was received from the insurance company in March 2026. Consequently, as of March 31, 2026, there is no damaged Company-owned inventory remaining in the books.

Regarding Customer-owned items, the initial loss was assessed at ' 5,590 lakhs, and a provision for replacement charges was established. However, based on feedback from OEMs regarding the retrieval of these items, the loss was reassessed at ' 1,091 lakhs. Accordingly, the excess provision of ' 4,499 lakhs was reversed by March 31, 2026. A provision of ' 1,091 lakhs for flood-affected Customer-owned inventory is being maintained as a future liability.

31C Existing FPQ, arising out of 3^rd PPRC, is up to 2022-23. 4^th PPRC is under progress, due to which the prices for the year 2023-24 and onwards is yet to be firmed up.

For the year 2023-24, FPQ sales has been provisionally recognised by considering the approved FPQ price of 202223 and applying indices for 2023-24.

For the year 2024-25, FPQ sales has been provisionally recognised by considering the prices of 2023-24, as arrived above and applying indices for 2024-25.

For the year 2025-26, FPQ sales has been provisionally recognised by considering the prices of 2024-25 as arrived above.

Since FPQ finalisation has taken more than two years, on conservative basis the prices of 2024-25 has been considered for the financial year 2025-26 without any escalation.

31D One overhauled Su-30 Aircraft having tail no. SB-182 got crashed during a flight near Ozar, Nashik on 04^th June 2024. HAL has taken an insurance policy for efforts and material used in overhaul, and preferred the claim with the Insurance Company for '14435 lakhs. An amount of ' 14071 lakhs have been advised for payment by Insurance Company after deducting policy Administration charges. The disbursement has been received by HAL Nasik on 17^th January 2025.

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

31E As per the LCA Mk 1A Contract, HAL has to deliver 3 Aircrafts during 2023-24, 16 Aircrafts during 2024-25 and 16 Aircrafts during 2025-26. As on date, no LCA Mk 1A has been issued Signaled out Certificate (SOC). LD has been provided for 19 LCA MK 1A Aircraft up to 2024-25.

Now, in line with Ind AS 37 and Accounting Policy, considering the expected delivery of 19 LCA Mk 1A has to be delivered during 2025-26 to be happen by March 2027, LD provision has been made for the remaining all 16 LCA Mk 1A during 2025-26.

33 Financial Risk Management

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

a) Foreign currency risk:

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

b) Credit risk:

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

c) Provision for expected credit losses:

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

d) Liquidity risk:

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

e) Market risk:

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

f) Risk Mitigation Process:

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

34 Capital Management:

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

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

37 Segment Reporting

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

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

39 Disclosure with regard to Joint Working Groups

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

43 Provision for Gratuity and Earned Leave has been made based on Actuarial Valuation, The date of Actuarial valuation as of 31.03.2026

Employee Benefits:

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

43A Gratuity:

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

The ceiling of Gratuity payable to Officers & Workmen was ' 20 lakhs w,e,f, 1,1,2017, In terms of the DPE OM dated 3,8,17, the ceiling of Gratuity shall increase by 25% whenever Industrial Dearness Allowance(IDA) rises by 50%, From 01,10,2025 IDA has been revised to 51,80% as notified vide Circular dated 8,10,2025, Accordingly ceiling of Gratuity to eligible Officers and Workmen of the Company have been revised from ' 20 lakhs to ' 25 lakhs from 01,10,2025,

The additional liability accruing to the Company due to the increased ceiling in respect of officers and workmen is ' 32733 lakh given effect in the year ended 31,03,2026 (previous year : ' Nil lakhs), Accordingly, employees cost for the year ended 31,03,2026 is not comparable with the corresponding previous year,

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

Sensitivity Analysis:

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

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

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

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

The Company has obtained report on the determination and disclosure of interest rate Guarantee & Diminution of Asset Values as per Ind AS19 of Employees Exempt Provident Fund of HAL for the period ended 31^st March 2026, Based on the actuarial valuation of provident fund the liability for the year has been reversed of '10094 lakhs (Previous year: created of liability ' 4602 lakhs),

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

43C(ii) During the year 2011, C&AG observed that the profits earned from short term deposits is an incidental activity and not a core activity of the Company and inclusion of the interest income from these deposits for PRP computation had led to excess of payment of ' 4318 lakhs to its executives. Based on HAL reply on difficulties in recovery, the C&AG vide letter dated 11^th November 2024, suggested that the issue of difficulties in retrospective recovery of excess amount of ' 4318 lakhs paid on account of PRP for the year 2009-10 to 2011-12 be placed before the Board for obtaining waiver and disclose in the Financial statements.

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

After deliberation, HAL Board approved the waiver from recovery of ' 4318 lakhs of excess payment of PRP for the Year 2009-10 to 2011-12 to its Executives.

Necessary accounting treatment has been done in the accounts for the year ended 31.03.2025.

43D(i) Pension:

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

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

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

The Scheme is managed by a duly constituted Trust.

43D(ii) Ministry vide OM dated 12.07.2023 has conveyed the approval for increasing the Company's contribution to the Pension Scheme of Executives from existing 7% to 10% of Basic Pay DA w.e.f. 0.1.01.2017. Revision of Pension contribution from 7% to 10% of Basic Pay DA w.e.f 01.01.2017 has been made in respect of Executives who are on the rolls of the Company as on the date of implementation of the revised ceiling i.e. 01.01.2017 implimented during 2023-24.

In respect of Workmen, Company issued Circular dated 24.04.2025 has conveyed the approval for increasing the Company's contribution to the Pension Scheme from existing 7% to 10% of Basic Pay DA w.e.f. 01.01.2025. Revision of Pension contribution from 7% to 10% of Basic Pay DA w.e.f 01.01.2025 has been made in respect of workmen who were on the rolls of the Company as on the date of implementation of the revised ceiling during March 2025.

The additional liability accruing to the Company due to the increased ceiling in respect of workmen is ' 4145 lakh pertaining to the year ended 31.03.2026 (previous year: '1051 lakhs [01.01.2025 to 31.03.2025]). Accordingly, employees cost for the current year 31.03.2026 is not comparable with the corresponding previous year 31.03.2025.

43E Post Superannuation Group Health Insurance Schemes:

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

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

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

The Schemes are managed by a duly constituted Trust.

43F HAL Employees Group Life Insurance Trust:

As per the approval accorded by the Board, the Company has notified an insurance scheme namely the HAL Employees Group Life insurance Trust to cover its employees, in case of death due to any reason other than suicide. The contribution towards the scheme are borne equally by employees and the Management. in the event of Death of an employee due to any reason other than suicide, the dependent family members will be paid the sum assured (' 10 lakhs). The Company has made contribution of ' 147 lakhs (previous year : ' 118 lakhs) to the trust for the year ended 31.03.2025 with employees contributing an equal amount.

43G Revision of pay scales of executives and workmen, with effect from 01.01.2017 was implemented in accordance with the guidelines issued by Department of Public Enterprises vide OM dated 03.08.2017 for Executives and in accordance with the Wage Agreement entered into between Management and Employees Union representative in 2019-20 in respect of Workmen.

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

While so, the Employees Union and Officers Association have filed Writ Petition with Hon'ble High Court of Karnataka to stay recovery of excess amount of salary paid by the Company. The H'ble High court given verdict in favour of Officers Associations by setting aside the Circular dated 24.07.2021 and the communication dated 26.07.2021 issued by the Management during 2024-25. The order of the H'ble High Court in favour of Officers was put up to the Board in its 490^th Meeting held on 12.02.2025. Board has noted the judgement of the H'ble High Court and accorded approval to abide by the Court order. Accordingly, the differential amount withheld by the Management in respect of Ex-officers has to be released /refunded to the concerned Ex-officers / Nominees along with applicable interest. Further, in respect of officers an amount of ' 18565 lakhs credited to salaries and wages in the earlier years and kept under claims receivable has been reversed during 2024-25.

in respect of Workmen, The Hon'ble High court vide order dated 10.03.2026 has allowed the Writ petition filed by Employees Union. Accordingly in line with the orders of Hon'ble High Court of Karnataka, the differential amount withheld by the division along with interest in respect of Ex-workmen to be released /refunded during FY 2026-27 to the concerned Ex-workmen / Nominees.

Further, in respect of workmen impact of one increment an amount of ' 16390 lakhs credited to salaries and wages in the earlier years (upto 31.03.2025) and kept under claims receivable has been reversed during 2025-26. Accordingly, employees cost for the current year is not comparable with the corresponding previous year.

43H Financial Assistance Scheme for Dependents of Deceased Employee

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

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

(b) As and when the instalments in respect of deferred debts falls due for payment to the Russian Federation, the same is paid by applying the exchange rate ruling on the date of actual payment and liability discharged. The differences arising due to recalculation of debts at the applicable /ruling rate is charged to the revenue at the time of payment and recognised as sales when realised from the customer except to the extent it pertains to Capital Assets. The sales for Exchange Rate Variation (ERV) considered is ' 5369 lakhs (Previous year - ' 6074 lakhs). The Assets and Liabilities relating to deferred credit transaction are reinstated under Non-current Other Financial Assets, Current Other Financial Assets (recoverable within one year), Non-current Other Financial Liabilities and Current Other Financial Liabilities (to be settled within one year).

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

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

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

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

The petition has been filed by Infotech HAL Limited to the National Company Law Tribunal(NCLT) for Commencement of Corporate Insolvency Resolution process. The NCLT, Bangalore Bench order dated 22^nd August 2025 has admitted the petition filed by Infotech HAL Limited under Section 10 of Insolvency and Bankruptcy Code, 2016. Further, NCLT ordereded for the commencement of corporate insolvency resolution process of Infotech HAL Limited and appointed Interim Resolution Professional.

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

45B(ii) During the financial year 2024-25, the Company has reversed the impairment provided in earlier years on its investment in the Joint Ventures for ' 855 lakhs for International Aerospace Manufacturing Pvt Limited and ' 61 lakh for BAe-HAL Software Limited. For this purpose, the investments made in IAMPL and BAeHAL were evaluated taking into account certain key financial parameters of the Joint Ventures. Based on the evaluation, it was assessed that there has been an overall improvement in the financial health of both the companies. The total financial effect of the reversal is ' 916 lakhs during 2024-25.

45C Defence Innovation Organisation ("DIO"):

A Section 8 Company has been formed (Under Companies Act 2013) in the name of "Defence Innovation Organisation" with M/s BEL with an authorised Capital of ' 100 lakhs (Paid up capital as on 31^st March 2026 is ' 1 Lakh( HAL 50% Share and BEL 50% Share). The registered office of DIO is situated at Centre for Learning and Development, Bharat Electronics Limited, Jalahalli, Bengaluru - 560013, Karnataka, India. DIO was incorporated to implement the scheme of defence innovation fund initiative by creation of an ecosystem to foster innovation and technology development in defence.

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

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

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

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

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

45E The Company paid ' 950 lakhs towards subscription of 950000 equity shares of the face value of ' 100 each to its Joint Venture Company, Helicopter Engines MRO Private Limited, on 8 January, 2024 towards equity participation in Rights issue of the Joint Venture Company. Pursuant to the same, the investment of the Company in the Joint Venture was ' 2460 lakh. Further, the Company made an investment of ' 600 lakhs towards subscription of 600000 equity shares of the face value of ' 100 each to its Joint Venture Company, Helicopter Engines MRO Private Limited during 2025-26 towards equity participation in Rights issue of the Joint Venture Company. The investment of the Company in the Joint Venture has increased from ' 2460 lakhs to ' 3060 lakhs.

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

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

45E(iii) A Section 8 Company has been formed (Under Companies Act 2013) in the name of "UAS Testing Foundation (UASTF)". The total project cost ' 60 Crs comprising of Govt. Grant-in-Aid of ' 45 Crs and SPV partners contribution ' 15 Crs. Wherein M/s HAL will be the lead with equity contribution of 33.33%, BEL-20%, BEML-20%, YIL-10%, GIL-10% & Endure Air-6.6%. UASTF was incorporated for Development, Operation and Management of DTI for Unmanned Aerial Systems(UAS). UASTF was incorporated on 21^st June 2024. HAL has made an investment of ' 500 lakhs (33.33% stake) towards subscription of 50000 Equity shares of ' 1000 each on 18^th July 2024.

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

45E(v) A Section 8 Company has been formed (Under Companies Act 2013) in the name of "Systems Testing and Research for Advanced Materials Foundation (STREAM)". The total project cost ' 49.68 Crs comprising of Govt. Grant-in-Aid of ' 36.864 Crs and SPV partners contribution ' 12.816 Crs. Wherein M/s Microlab will be the lead with equity contribution of 20%, BEML-20%, HAL-20%, Vaidheswaran Industries-10%, & TIDCO-30%. STREAM was incorporated with a vision of creating easy access and adressing the testing needs of domestic defence industry. STREAM was incorporated on 18^th September 2024. HAL has made an investment of ' 61.25 lakhs towards subscription of 61250 Equity shares of ' 100 each during 2024-25. Further HAL made an investment of ' 138.75 lakhs towards subscription of 138750 equity shares of ' 100 each during 2025-26.

47A The Shareholders of the Company, at the 60^th Annual General Meeting held on 31 August 2023, had approved the sub-division of one equity share of the face value of ' 10 each into two equity shares of face value ' 5 each. The record date for the said sub-division was 29^th September 2023.

48A Buyback of Shares:

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

48B To achieve the mandatory threshold of 25% minimum public shareholding in the Company, Government of India (Gol) had offered 3.5% (1,17,03,563) equity shares of the Company to Non-Retail Investors, Retail Investors and employees during March and April 2023, out of its shareholding of 75.15% in the Company, through Offer for Sale (OFS) by Stock Exchange Mechanism. Consequent to the OFS, the Government of India shareholding stands at 71.64%.

51 Sensitivity of estimates on provisions:

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

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

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

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

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

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

Provision for doubtful claims represents provision on expected credit losses.

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

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

52(a) Advances from Customers of ' 3412603 lakhs and Milestone receipts of ' 3980990 lakhs disclosed in Note Nos.

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

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

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

v. Earnings available for debt service = Profit after Tax Depreciation and amortisation(Note-42) Finance Cost (Note-41) Loss on sale of assets

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

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

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

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

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

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

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

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

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

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

55G Compliance with approved Scheme(s) of Arrangements NA

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

No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company, its subsidiary, associate to or in any other person(s) or entity(ies),including foreign entities (Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company , its subsidiary, associate, (Ultimate Beneficiaries).

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

55I Undisclosed Income

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

55M Recent pronouncements

Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On 13^th August, 2025, MCA amended the Companies (Indian Accounting Standards) Second Amendment Rules, 2025, as below. The amendment will be effective from 01^st April, 2025.

Ind AS 1 - Classification of Liabilities - The Company does not have the right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. Amendments clarify that covenants with which an entity must comply after the reporting period do not affect classification as current or noncurrent at the reporting date. The Company has evaluated the amendment accordingly modification to Material Accounting Policy on liability classification has been made.

Ind AS7 & Ind AS 107 Supplier Finance Arrangement - New disclosure requirement introduced to enhance transparency regarding the effects of supplier arrangements on entity's liabilities and cash flows. The Company has evaluated the amendment and there is no implication in the financial statements.

Ind AS 12 - International tax reform - Pillar Two model rules - This Standard applies to income taxes arising from tax law enacted or substantively enacted to implement the Pillar Two model rules published by the Organisation for Economic Co-operation and Development(OECD), including tax law that implements qualified domestic minimum top-up taxes described in those rules. The Company has evaluated the amendment and the impact of the amendment there is no tax implication in the financial statements.

56 The financial statements were approved for issue by the Board of Directors at their meeting held on 14^th May 2026.

These financial statements are presented in Indian rupees (rounded off to lakhs).

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