Bharat Dynamics Ltd Management Discussions

FORWARD-LOOKING STATEMENTS

Certain statements in this Management Discussion and Analysis describing the Companys objectives, outlook, expectations and projections may constitute forward-looking statements within the meaning of applicable securities laws and regulations. These statements are based on assumptions, estimates, and expectations of future events that, while considered reasonable at the time of preparation, are inherently subject to uncertainties and risks.

Actual outcomes may differ materially from those expressed or implied in these statements because of a range of factors, including changes in Government policies and procurement strategies relating to defence equipment, regulatory and tax developments, macroeconomic conditions in India and globally, and other external influences beyond the Companys control. The Company undertakes no obligation to publicly update, revise or modify any forward-looking statements to reflect subsequent events or circumstances, except as required under applicable laws.

1. BHARAT DYNAMICS LIMITED – AN OVERVIEW

Headquartered in Hyderabad, Bharat Dynamics Limited (BDL) was incorporated on 16 July 1970 as a Public Sector Undertaking under the Ministry of Defence, Government of India.

Over the decades, BDL has emerged as one of the select defence manufacturers globally with advanced capabilities in the production and supply of guided missile systems, underwater weapons, airborne products and allied defence equipment for the Indian Armed Forces. The Company has steadily expanded its technological and manufacturing capabilities to support the nations evolving defence preparedness requirements. Beyond manufacturing, BDL provides comprehensive product lifecycle support for its equipment, including refurbishment and life-extension solutions for legacy missile systems already deployed by the Armed Forces. In parallel, the Company has strengthened its in-house research and development capabilities, with a focused emphasis on design and engineering excellence.

Aligned with Indias vision of building a self-reliant and developed nation under Viksit Bharat , BDL continues to play a strategic role in strengthening indigenous defence capabilities. The Company is actively pursuing collaborations with global defence players to further advance the Make in India initiative, while also engaging with leading Original Equipment Manufacturers (OEMs) for new-generation missile and underwater weapon systems involving potential transfer of technology. BDL has also expanded its presence in international markets, offering its indigenous defence solutions to friendly foreign countries and reinforcing Indias growing stature in the global defence ecosystem.

1.1 Global economy overview

After navigating a period of elevated trade barriers and persistent uncertainty, the global economy now faces renewed pressure from the ongoing conflict in the Middle East. Assuming the situation remains contained, global growth is projected to moderate to 3.1% in 2026 before improving marginally to 3.2% in 2027. Inflation is expected to rise modestly in the near term before easing again, with emerging and developing economies likely to experience sharper growth slowdowns and more persistent inflationary pressures.

Global economic growth

The global outlook remains fragile, with risks stemming from prolonged geopolitical conflicts, renewed trade tensions, financial market volatility, and weakening institutional confidence. While accelerated AI-driven productivity gains and easing trade tensions could support growth, rising defence spending and geopolitical fragmentation may intensify inflationary and fiscal pressures. In such an environment, policy agility, credible governance, and stronger international cooperation will be critical to sustaining stability and building long-term economic resilience.

1.2 Indian economy overview

India reaffirmed its position as the worlds fastest-growing major economy in FY26, with GDP growth estimated at 7.4%, driven by strong domestic consumption and sustained investment activity. According to the Economic Survey 2025-26, Indias GDP is expected to grow at 6.8 – 7.2% in FY27, with long-term growth potential estimated at around 7%. Domestic demand remained the cornerstone of economic expansion, supported by low inflation, stable employment conditions, and improving purchasing power. Rural consumption benefitted from favourable agricultural performance, while urban demand strengthened gradually following the rationalisation of direct and indirect taxes. Investment activity also remained resilient, with Gross Fixed Capital Formation estimated at 30% of GDP and growth in the first half of FY26 exceeding both last years levels and the pre-pandemic average. (Source: https://www.indiabudget.gov.in/economic survey/doc/Infographics%20English.pdf) [PE: Provisional Estimates FAE: First Advanced Estimates]

The agriculture and allied sectors remained resilient during FY26, supported by a favourable monsoon and stable growth in livestock and fisheries. Meanwhile, the industrial sector witnessed strong momentum, led by robust manufacturing growth and sustained infrastructure activity. Higher steel consumption, cement production, and improving industrial indicators reflected continued strength in economic activity, supported by public capital expenditure, favourable demand conditions, and ongoing policy reforms.

1.3 Indian defence industry

Indias defence sector underwent a structural inflection point in FY26, transitioning from a decade of incremental policy reform into a phase of visible, measurable industrial output. Record defence production, all-time-high exports, a deepened procurement pipeline, and rising private sector participation collectively signal that Indias ambition to become a top-five global defence manufacturing power is no longer aspirational; it is in execution. The launch of Atmanirbhar Bharat in 2020 marked a turning point, accelerating self-reliance through higher modernisation spending, import restrictions on over 400 items, streamlined approvals and the development of dedicated defence corridors. Over the years, India has transitioned from one of the worlds largest defence importers to an emerging exporter and self-reliant producer, with 2025 marking a significant milestone in establishing its position as a credible global defence manufacturing hub.

The Union Budget for FY26 earmarked 6,81,210 crore (~US$ 78.7 billion) for the Ministry of Defence, reflecting a 9.5% increase over the previous years allocation. Defence spending remained steady at 1.9% of GDP, while accounting for nearly 13.5% of the Central Governments total expenditure, underlining the continued strategic priority accorded to national security and capability enhancement. Further, the Union Budget for FY27 reaffirmed the Governments strong commitment to strengthening Indias defence capabilities, with the Ministry of Defence receiving an allocation of 7.85 lakh crore, the highest among all Ministries. Representing a 15.19% increase over the FY26 Budget Estimates, the allocation accounts for 14.67% of the Central Governments total expenditure, underlining the strategic importance of the sector.

A significant thrust has also been placed on indigenous manufacturing, with 1.39 lakh crore earmarked for procurement from domestic defence industries, reinforcing the Governments continued focus on self-reliance and local capability development. In parallel, allocations towards personnel welfare witnessed a notable rise, with 12,100 crore provided for the Ex-Servicemen Contributory Health Scheme, marking a 45.49% increase over the previous years Budget Estimates. Further, the allocation to the Defence Research and Development Organisation (DRDO) increased to 29,100.25 crore in FY27 from 26,816.82 crore in FY26, reflecting a sustained emphasis on research, innovation, and technological advancement in defence.

Budget allocations FY26 vs FY27

FY26 share of Budgetary Estimates (in crore) FY27 share of Budgetary Estimates (in crore)

Of the total capital expenditure allocation of 1,80,000 crore, 1,48,723 crore has been set aside for capital acquisition under the modernisation budget. Notably, the Government set aside approximately 1,11,545 crore, which is 75% of this allocation, for domestic procurement, reinforcing its continued focus on strengthening indigenous defence capabilities. Within this, 25% has been specifically earmarked for procurement from domestic private sector players, underscoring a clear policy intent to deepen private sector participation and accelerate the development of a self-reliant defence manufacturing ecosystem.

The Union Budget FY26 reinforces the Governments continued focus on strengthening Indias defence and strategic infrastructure capabilities. The Defence Research and Development Organisation (DRDO) received an allocation of 26,816.82 crore, up 12.41% over FY25, with a significant portion directed towards capital expenditure, including key R&D initiatives and the flagship Development-cum-Production Partner (DcPP) programme. Simultaneously, the Border Roads Organisation (BRO) was allocated 7,146.50 crore, reflecting a 9.74% increase over the previous year, to accelerate the development of critical border infrastructure along the Line of Actual Control and in the northeastern region.

Indias defence exports continued their remarkable upward trajectory in FY2025–26, reaching a record 38,424 crore, a sharp 62.7% increase over the previous year. The surge reflects the growing global acceptance of Indias indigenous defence capabilities, supported by sustained policy reforms, higher domestic manufacturing, and stronger participation from both public and private sector players. From advanced missile systems and naval platforms to avionics, radars and armoured solutions, Indian-made defence products are steadily finding markets across Asia, Africa and the Middle East. More importantly, the momentum signals Indias transition from being one of the worlds largest defence importers to an emerging global defence manufacturing and export hub aligned with the vision of Aatmanirbhar Bharat .

Indias Defence Export Trajectory

Defence Export Growth ( in crore)

(Source: https://mod.gov.in/sites/default/files/Defence-exports-skyrocket-to-record-in-Financial-Year-2025-26_0.pdf)

Indias defence sector has entered a defining phase of transformation. Supported by sustained government spending, strong long-term order pipelines, faster indigenisation, rising innovation-led demand and a growing export footprint, the sector is steadily maturing into a robust and self-reliant industrial ecosystem. While execution-related challenges remain, the broader direction is clear, the building blocks for enduring growth are firmly in place. Today, defence is no longer viewed solely through the lens of strategic preparedness; it is increasingly emerging as a key driver of Indias manufacturing strength, technological advancement and industrial self-sufficiency.

1.4 Indigenisation of the Indian Defence Industry

Indias push towards defence indigenisation is no longer just an economic or industrial objective, it has become a strategic imperative. For decades, the country remained heavily reliant on imports, with nearly 65 – 70% of defence requirements sourced from overseas suppliers. Over the past decade, however, this dependence has steadily reversed, with close to 65% of defence equipment now being manufactured within the country. The transformation marks a significant structural shift in Indias defence ecosystem. Yet, the journey is still unfolding. In this context, 2026 stands out as a defining year, one where policy intent is being translated into execution with far greater clarity, precision, and accountability than ever before in Indias defence procurement landscape.

The Governments Aatmanirbhar Bharat initiative has steadily evolved from a policy vision into a tangible industrial transformation for Indias defence sector. This shift is evident in the rollout of five Positive Indigenisation Lists (PILs), covering more than 500 defence systems, with phased import restrictions extending up to 2028 to encourage domestic manufacturing capabilities. In parallel, over 5,500 individual components and equipment categories have been placed under the indigenisation embargo, of which more than 3,000 had already been indigenised by February 2025. The momentum gathered further pace in FY25, when the Ministry of Defence signed 193 contracts valued at 2,09,050 crore, the highest annual procurement value recorded so far, with 177 contracts awarded to Indian companies. The governments SRIJAN Portal has also emerged as a key enabler of this transition, listing over 34,000 items identified for domestic production, with more than 10,000 already indigenised. Reinforcing this direction, the Ministry has set an ambitious target of achieving 70% self-reliance in defence equipment by 2027, while envisaging a significantly larger role for private industry, with its share in total production value expected to rise from 23% to 50%.

2. REVIEW OF BDLS BUSINESS

Bharat Dynamics Limited is one of the growing companies in the Indian defence sector and operates in an increasingly complex industry environment shaped by evolving national security priorities and persistent economic challenges, both in India and across global markets. In this backdrop, BDL remains firmly focused on disciplined execution, strengthening quality standards, and ensuring greater reliability and predictability in product deliveries to the Indian Army. At the same time, the Company continues to invest in advanced technologies to address the evolving requirements of the Indian Armed Forces, while also nurturing its talent base to build the technical capabilities needed to support long-term growth and operational excellence.

2.1 BDLs product offerings

SAMs/AAMs	ATGMs	Torpedoes	Launchers	Counter Measures	Test Equipment
Akash Weapon System, Medium Range SAM, ULPGM, & Astra Weapon System	Milan2T, Konkurs-M, INVAR, & NAG	Light weight Torpedoes, Heavy- weight Torpedoes	Launchers for Konkurs-M & MILAN 2T ATGMs	Counter Measures Dispensing Systems & Underwater Decoys	Functional monitoring equipment for ATGMs & SAMs

2.2 BDLs manufacturing prowess

BDL currently operates three manufacturing facilities located at Hyderabad, Bhanur, and Visakhapatnam, each certified with the ISO 14001:2015 Environmental Management System standard, reflecting the Companys commitment to responsible and sustainable operations. All production divisions hold the AS 9100D certification for Aerospace Quality Management, the most rigorous quality benchmark in the aerospace and defence sector. The Corporate Office at Hyderabad is certified to ISO 9001:2015, while the Material Testing, Electronics, and Standards Laboratories carry ISO/IEC 17025:2017 accreditation, affirming their technical competence in testing and calibration. The Electronics Division holds the approval for Quality Management System (AFQMS) certification, and the Company is also certified to ISO/IEC 27001:2022 for Information Security Management, an increasingly critical credential in todays competitive environment. Compliance across all certified divisions is maintained through a structured two-tier audit mechanism: internal audits conducted by the Companys own qualified auditors, and periodic surveillance audits carried out by accredited certification bodies.

With a growth-focused mindset, the Company is actively engaged in expanding its manufacturing footprint with three new greenfield upcoming facilities at Ibrahimpatnam near Hyderabad, Amravati in Maharashtra, and Jhansi in Uttar Pradesh. These facilities are being purpose-built to foster BDLs manufacturing capability in Surface-to-Air Missiles (SAMs), including next-generation missile systems, Very Short-Range Air Defence Systems (VSHORADs), rockets, and propellants for various Anti-Tank Guided Missile (ATGM) programmes. These capacity additions are in line with the nations indigenisation priorities and help strengthen BDLs role as a cornerstone of Indias defence production ecosystem.

2.3 Order Book

As of 31 March 2026, the Companys order book stood at approximately 26,176 crore, reflecting sustained business momentum and providing healthy revenue visibility for the periods ahead.

2.4 Financial Performance

i) Performance of the Company in financial terms is summarised below:

	in crore
Particulars	2025-26	2024-25	% of Increase / (Decrease)
Sales/Revenue from Operations	2,442	3,345	(27)
Value of Production	3,215	3,767	(15)
I. Import Material Consumed	290	110	164
II. Indigenous Material Consumed	1,706	1,990	(14)
Total Material Consumed	1,996	2,100	(5)
Value Added	1,219	1,667	(27)
Profit Before Tax (PBT)	568	749	(24)
Profit After Tax (PAT)	420	550	(24)
Earnings per share (in )	11.47	14.99	(23)

# EPS has been calculated based on profits excluding the other comprehensive income and number of shares outstanding at the end of the year is adjusted for the impact of sub division of 1 fully paid up equity share having a face value of 10 each into 2 fully paid up equity shares having a face value of 5 each

ii) Following data reflect the financial position of the company:

Particulars	in crore
	2025-26	2024-25	% of Increase / (Decrease)
Gross Block (Excl. CWIP)	1,697	1,601	6
Accumulated Depreciation	819	743	10
Net Block	878	858	2
Working Capital (Net)	6,411	6,018	7
Capital Employed	4,150	3,886	7
Net Worth	4,241	4,009	6

iii) Key Financial Ratios:

In accordance with the SEBI (LODR) Regulations, 2015, the company is required to give details of significant changes (change of 25% or more than compared to the immediately previous financial year) in the following key sector-specific financial ratios along with the detailed explanations there for:

Particulars	FY26	FY25	Change (in %)	Explanation for change of 25% or more
Debtors Turnover Ratio (times)	3.91	5.89	(34)	Reduction is due to lower Turnover and Higher Average Trade Receivables.
				However, due to higher realisations Trade Receivables as on 31 March 2026 have been significantly reduced.
Inventory Turnover Ratio (times)	0.67	1.45	(54)	Reduction is due to lower Turnover and Higher Inventory. Higher Inventory is maintained to meet the higher sales targets in succeeding years.
Interest Coverage Ratio (times)	Nil	Nil	-	-
Current Ratio (times)	2.01	2.38	(16)	-
Debt-Equity Ratio (times)	Nil	Nil	-	-
Operating Profit Margin (%)	6%	12%	(50)	Reduction in operating profit margin is due lower turnover achieved during the year
Net Profit Margin (%)	17%	16%	5	-
Return on Net worth (%)	10%	14%	(29)	Reduction is due to lower Net Profit which is mainly due to lower turnover achieved during the year.

iv) All the applicable Accounting Standards are followed except IND-AS-108 relating to segment reporting, keeping in view of the nature of business and the sensitive nature of the disclosure. As the company is engaged in defence production, exemption was granted from the applicability of the Accounting Standard on segment reporting under section 129 of Companies Act, 2013 vide Notification dated 23 February 2018 of the Ministry of Corporate Affairs and also under SEBI disclosures vide their letter no. SEBI/HO/CFD/DIL1/OW/P/2017/18400/1 dated 03 August, 2017.

2.5 Company Objectives

I) Achieve complete self-reliance in the development, production and lifecycle support of missile systems across all categories, including advanced strategic weapons.

II) Strengthen competitiveness in guided missile and underwater guided weapon technologies by building world-class technological and manufacturing capabilities.

III) Maximise utilisation of existing production capacities to drive higher operational efficiency, scalability and value creation.

IV) Expand presence in global markets and emerge as a preferred defence partner for friendly nations seeking reliable and advanced weapon systems.

V) Build BDL into a globally respected brand in weapon systems through continuous innovation, uncompromising quality standards, and strategic partnerships.

VI) Establish BDL as a trusted supplier of export-quality defence solutions, setting benchmarks in reliability, performance and technological excellence.

2.6 Opportunities & Threats

Opportunities

I) Strong domestic defence pipeline: BDL is well positioned to benefit from Indias expanding defence procurement pipeline, supported by higher domestic allocation, indigenisation mandates, and sustained modernisation spending. A robust order book provides long-term revenue visibility.

II) Expanding advanced missile portfolio: Rising defence preparedness is driving demand for advanced missile systems. BDLs growing portfolio of SAMs, VSHORADs, ATGMs, and torpedoes, supported by upcoming facilities, strengthens its future growth potential.

III) Growing export opportunity: Indias rising defence exports are creating new opportunities for BDL in global markets. Strong indigenous capabilities, competitive pricing, and increasing international interest in missile systems support export growth.

IV) Aatmanirbhar Bharat tailwinds: The evolving defence procurement framework increasingly favours companies with strong indigenous design and manufacturing capabilities. BDLs long-standing collaboration with DRDO strengthens its strategic positioning.

V) Capacity expansion for future growth: Investments in new manufacturing facilities are expected to enhance production capabilities, improve execution capacity, and support larger and more complex programmes.

VI) Emerging technology opportunities: The growing focus on unmanned systems, precision weapons, and directed-energy technologies presents new growth avenues aligned with BDLs core capabilities.

VII) Expanding MRO business: The increasing installed base of missile systems is expected to create a steady stream of lifecycle support and MRO opportunities for the Company.

Threats

I) Execution risks: Timely execution of large and complex programmes remains critical, as delays in delivery or integration could impact revenue and profitability.

II) Supply chain dependencies: Dependence on imported critical components exposes BDL to geopolitical, regulatory, and logistics-related disruptions.

III) Rising competition: Increasing private sector participation in defence manufacturing could intensify competition in guided weapon systems.

IV) Geopolitical and export risks: Export opportunities remain vulnerable to geopolitical developments, regulatory changes, and international defence trade restrictions.

V) Rapid technological change: Accelerating advancements in defence technologies require continuous investment in R&D to maintain operational relevance.

VI) Talent availability: Limited availability of specialised talent in missile and defence technologies could impact future scaling and innovation.

VII) Customer concentration risk: High dependence on the Ministry of Defence exposes the Company to changes in defence budgets and procurement priorities.

VIII) Impact of Order Cancellations on Order Book Strength and Operational Continuity- Cancellation of orders can weaken the order book and future revenue. Short closure of orders adversely impacts BDLs ability to maintain a strong order book position and Idle production lines due to the non-availability of firm orders lead to workforce shifts and operational inefficiencies.

2.7 Key Strategies

2.7.1 Product Portfolio Strategy

In collaboration with DRDO and original equipment manufacturers (OEMs), Bharat Dynamics Limited (BDL) is advancing more than 40 defence projects and these developments encompass a diverse portfolio. These developments encompass a diverse portfolio, including tactical and cruise missiles, short- and long-range air defence systems, anti-tank guided munitions, advanced heavy and lightweight torpedoes, underwater autonomous vehicles, sonobuoys, and specialised propulsion systems.

2.7.2 Export Strategy

Enhanced the global visibility of BDL through focused marketing and business development efforts. Strategic MoUs and partnerships with foreign OEMs and domestic manufacturers positioned BDL at the forefront of global defence technology trends.

Executed more than 80 MoUs with Indian and foreign partners to strengthen defence exports and establish BDL as a reliable global supply chain partner.

Established strong synergy with Defence Attachés, Ambassadors, and Channel Partners of Friendly Foreign Countries, for supply of BDL weapon systems to Friendly Foreign Countries.

2.7.3 R&D and Technology Strategy

By expanding internal R&D funding and implementing a structured long-term technology plan, the organisation has accelerated its development of critical defence technologies. Key focus areas include next-generation tactical strike systems, counter-unmanned aerial vehicle (UAV) networks, advanced multi-spectral targeting sensors, and specialised propulsion and payload solutions.

2.7.4 Management & Human Resources Strategy

To sustain long-term growth and agility, BDL is actively transforming its human capital framework through strategic structural updates and modern organisational philosophies. The company has initiated a comprehensive organisation gap analysis to evaluate current capabilities, skills, and leadership strengths against future competency requirements. To align BDLs structural framework with evolving strategic goals and technological demands, targeted Organisational Development (OD) interventions are being deployed through a continuous, iterative process that balances short- and long-term agility. Furthermore, BDL is restructuring its legacy systems to adopt modern management philosophies and streamline decision-making processes.

To maximise workforce efficiency, the company is establishing a centralised pool of non-executive personnel for dynamic distribution across divisions based on real-time manpower utilisation. Recognising that operational excellence depends on modern infrastructure, BDL is integrating advanced digital tools to optimise workforce management, enhance supply chain resilience, and strengthen project execution. Finally, securing BDLs future leadership pipeline remains a core priority through the formalisation of a robust Succession Plan and Leadership Development Plan (SPLDP). This ongoing, systematic process identifies, assesses, and develops high-potential Executives to fill business-critical positions over the short and long term, with the framework undergoing structured reviews at regular intervals.

3. RISK & CONCERNS

Various risks have been identified, along with appropriate mitigation plans, including those relating to industry dynamics, increasing market competition, time-to-market pressures, slowdowns or recessions in market segments, fluctuations in product and input prices, cost control and changing demand patterns. Risks relating to the environment, health and safety, information technology, research and development, intellectual property, and emerging technological requirements, such as digitalisation and smart manufacturing, are also continuously monitored and proactively managed through identified improvement initiatives and periodic review mechanisms.

3.1 Business Risk

The Company operates in a competitive environment, competing with both domestic and international players. Our ability to compete effectively, innovate, and uphold high-quality standards is vital for its long-term success. The company mainly relies on the Indian Armed Forces via the Ministry of Defence (MoD), Government of India, as its key customer. Any significant cutback or shift in defence spending by the Indian government, order reductions, contract cancellations, failure to win contracts through competitive bidding, or changes in the MoD or Armed Forces policies—whether short-term or long-term—could negatively affect the Companys business, financial health, operational results, growth potential, and cash flows. Additionally, increased private-sector involvement in defence could heighten competition and alter market dynamics.

With extensive defence sector experience and a solid manufacturing infrastructure, the Company is well-positioned to face competitive pressures and evolving market conditions. To broaden its customer base, it is actively pursuing export opportunities with support from the Government of India.

3.2 Policy Risk

Compliance with regulatory requirements and adherence to quality standards are paramount in the defence industry. The company is required to comply with various procurement policies and regulations of the Ministry of Defence, Government regulations, and other applicable laws and standards. Sudden or unforeseen changes in applicable regulations, procurement policies, or export restrictions may adversely affect the companys business, results of operations, and financial condition.

The company continues to comply with all applicable rules and regulations in line with the policies of the Government of India and takes proactive measures, wherever feasible, in anticipation of regulatory changes.

3.3 Operational & Labour Risk

The companys operations are carried out through its manufacturing units in Telangana and Andhra Pradesh. Any disruption, shutdown or loss of operations at any of these units may have a material adverse effect on the companys business, financial condition and results of operations. Further, a section of the workforce is represented by labour unions, and any prolonged work stoppage may affect operations.

The company continues to maintain cordial industrial relations with its employees and recognised unions and does not foresee any material adverse impact on its operations in this regard.

3.4 Supply Chain Management Risk

Efficient supply chain management is critical for timely execution of orders and cost optimisation. The company is dependent on certain key Original Equipment Manufacturers (OEMs), suppliers, subcontractors and, in some cases, single-source vendors for critical sub-assemblies and components. Any disruption or failure in performance by such entities may materially impact the companys operations and project execution.

The company is continuously expanding and strengthening its vendor base and is adequately safeguarded through appropriate contractual provisions, including liquidated damages clauses, wherever applicable. The company is also focusing on development of alternate and multiple vendors across various programmes to reduce dependence on single-source suppliers and ensure continuity of operations.

3.5 Technology Risk

The defence sector is marked by rapid technological progress and changing customer demands. The company remains committed to innovation, upgrading technology, and maintaining agility and adaptability to stay competitive and secure long-term sustainability. Its products feature advanced technologies, but developing and launching new technologies and products carries inherent risks, such as potential delays in realising expected benefits.

To mitigate technology-related risks, the company has enhanced its Research & Development efforts and increased investment in R&D. Additionally, it continues to collaborate closely with the Defence Research and Development Organisation (DRDO) on various projects and the development of advanced defence systems.

4. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has put in place a robust internal control framework that is aligned with the scale, complexity and nature of its operations, ensuring strong financial discipline and operational integrity. Well-defined policies and procedures govern key functional areas such as procurement, sub-contracting, works contracts, finance and accounting, human resources, information technology, security, and delegation of authority. These frameworks are periodically reviewed and refined to remain aligned with evolving business requirements and regulatory expectations.

To strengthen oversight and ensure the effectiveness of its control environment, the company has established an in-house Internal Audit Department staffed with qualified professionals. The department independently evaluates the adequacy and effectiveness of risk management systems, internal controls, and governance processes across the organisation. The scope and coverage of internal audits are reviewed and approved by the Audit Committee of the Board. In addition, independent external audit firms are engaged to provide assurance on the Companys financial statements and reporting practices. Observations and recommendations from both internal and external audits are thoroughly reviewed by the Audit Committee, enabling timely corrective actions and continuous improvement.

The company remains committed to strengthening its governance framework by adopting globally recognised best practices across processes and controls. Continuous efforts are directed towards enhancing transparency, accountability, and risk management standards, while aligning internal systems with evolving international benchmarks in corporate governance.

5. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES, INDUSTRIAL RELATIONS FRONT, INCLUDING THE NUMBER OF PEOPLE EMPLOYED

5.1 The manpower strength of the Company as on 31 March 2026 is as under:

Particulars	Non-Executives	Executives	Total
Male	1,198	631	1,829
Female	160	112	272
Total	1,358	743	2,101
Previous Year	1,510	759	2,269

5.2 Industrial Relations

The company continues to place strong emphasis on fostering constructive and transparent relationships between the management and trade unions, with the objective of maintaining a harmonious and collaborative workplace environment. Reinforcing this commitment, the Central Labour Department conducted the verification of trade union membership through secret ballot elections during the year.

In partnership with the recognised trade union, the management has established robust mechanisms for dialogue, consultation, and negotiation on matters relating to employment terms and working conditions. These processes are designed to facilitate timely resolution of concerns, encourage open communication, and strengthen industrial harmony across the organisation.

The recognised trade union continues to play an important role in representing employees in discussions with the management on industrial relations and employment-related matters. Through sustained engagement and mutual cooperation, the Company remains committed to nurturing a culture of trust, fairness, and transparency, while creating a positive and productive work environment for its employees.

6. ENVIRONMENTAL MEASURES

Environmental responsibility at BDL extends well beyond compliance and remains integral to the way the company operates. Sustainability considerations are embedded into operational decision-making through the adoption of cleaner production technologies and the consistent application of reduce, reuse and recycle practices across manufacturing units. Effluent Treatment Plants and Sewage Treatment Plants at all facilities ensure responsible treatment and disposal of industrial wastewater and sewage.

The company continues to strengthen its conservation efforts through water-saving initiatives, tree plantation drives, scientific disposal of hazardous waste and metal scrap, and systematic landscaping programmes. Recycled domestic water and treated effluents are reused within operations wherever feasible, helping reduce dependence on freshwater resources. Environmental performance is reviewed through ISO 14001 core team meetings, internal audits and periodic management reviews, ensuring continuous improvement of the Environmental Management System. Independent annual surveillance audits across all manufacturing units further reinforce compliance with applicable environmental standards.

Collectively, these initiatives reflect BDLs belief that industrial growth and environmental stewardship must progress together, with a continued focus on minimising environmental impact and advancing sustainable operations.

As a responsible corporate citizen committed to sustainable development, the company has proactively implemented several key energy conservation measures across its operations: » 100% Renewable Energy: Achieved complete reliance on renewable energy across all manufacturing units by adopting green energy tariffs and securing 100% green power supply.

» Green Infrastructure: Converted the Design & Engineering building into an eco-friendly facility, earning the prestigious Platinum Rating certification from the U.S. Green Building Council (USGBC).

» Eco-Friendly Mobility: Enhanced internal campus transit by introducing battery-operated vehicles, including four electric bicycles and one electric truck.

» Energy-Efficient Equipments: Upgraded facility infrastructure with the installation of 320 Brushless Direct Current (BLDC) fans, 11 Variable Frequency Drives (VFDs), 35 occupancy sensors, 2 Automatic Power Factor Correction (APFC) controllers, and 3 high-efficiency IE4 motors.

7. FOREIGN EXCHANGE CONSERVATION

The company continues to focus on conserving foreign exchange through a dedicated effort of adopting an indigenous approach for its various day-to-day operational requirements. By progressively increasing indigenous content in the assembly of final products, it is reducing dependence on imported components and subsystems sourced from OEMs.

8. FUTURE OUTLOOK

In FY 2025–26, Bharat Dynamics Limited recorded a turnover of 2,442 crore. Export revenues for the year stood at 702.23 crore, reflecting the Companys growing international presence and the increasing global acceptance of indigenously developed Indian defence systems.

Order inflows during the year aggregated 5,909 crore, consolidating a healthy order book of 26,176 crore as on 31 March, 2026. Looking ahead, BDL anticipates fresh order additions of approximately 25,000 crore over the next two to three years, as several significant programmes are in advanced stages of finalisation, providing a high degree of revenue visibility and reinforcing the Companys long-term growth trajectory.

9. BUSINESS OUTLOOK

Near-Term (FY 2026–27)

BDL is well positioned to sustain its growth momentum in FY 2026–27. Demand from Indias Armed Forces continues to strengthen, underpinned by the governments sustained policy focus on Aatmanirbhar Bharat and the progressive indigenisation of defence procurement. Multiple major programmes, spanning missile systems, precision-guided munitions, air defence platforms, anti-tank weapons, underwater weapons, loitering munitions, autonomous systems, and electronic warfare solutions, are at various stages of finalisation and are expected to translate into confirmed orders in the near term. The companys robust order pipeline, combined with expanding export opportunities and strategic technology partnerships, provides a firm foundation for another phase of strong, sustainable growth.

Long-Term Vision, Vision 2047

BDL is entering a transformative phase guided by Vision 2047, aligned closely with the national aspirations of Viksit Bharat and Aatmanirbhar Bharat. Indias evolving security environment and the accelerating demand for advanced strategic platforms create significant long-term opportunities, in modern missile systems, next-generation air defence and anti-submarine warfare technologies, precision munitions, and autonomous and electronic warfare capabilities.

The companys long-term ambition is to evolve from its established role as a missile systems manufacturer into a fully integrated defence solutions provider, with deep competencies in design, development, production, system integration, lifecycle support, and emerging defence technologies. This transformation is anchored in three strategic priorities: technological leadership, operational excellence, and global competitiveness.

10. STRATEGIC PRIORITIES

Indigenous Design, Development & Manufacturing

Self-reliance in critical and emerging defence technologies remains the cornerstone of BDLs strategy. The company is intensifying its in-house development of next-generation missile and defence systems, with the objective of progressively reducing dependence on foreign sources across all major programmes. Across every platform under development, increasing indigenous content is a non-negotiable programme parameter.

Research & Development

BDL has substantially increased its R&D expenditure in recent years and is committed to sustaining this investment trajectory. The company recognises innovation as the bedrock of long-term competitiveness and is working to embed a culture of experimentation, technical risk-taking, and continuous advancement throughout the organisation. R&D priorities span advanced seeker technologies, propulsion systems, guidance and control, artificial intelligence applications, robotics, and next-generation warhead and fuse systems.

To accelerate technology development, BDL has deepened its collaboration with premier academic and research institutions, IITs, NITs, IISc, and DRDO laboratories. These partnerships are directed at cutting-edge research, incubation of disruptive technologies, AI applications, and the development of defence solutions tailored to future warfare requirements.

Strategic Partnerships

Strategic collaboration remains a defining pillar of BDLs growth roadmap. The company is expanding partnerships with leading global Original Equipment Manufacturers (OEMs) for joint development, co-production, technology transfer, and in-country manufacturing of advanced defence systems. Simultaneously, BDL is deepening its engagement with DRDO, government laboratories, and industry partners to create a robust, end-to-end defence industrial ecosystem.

At the domestic level, BDL is actively working with Indian private industries, MSMEs, startups, and supply chain partners to build a resilient and integrated manufacturing base. These collaborations are designed to deliver efficient, scalable, and locally embedded solutions to emerging defence requirements.

Manufacturing Modernisation & Capacity Expansion

BDL is executing a significant modernisation and capacity enhancement programme to meet growing domestic demand and unlock export potential. The company has already made substantial investments in advanced manufacturing infrastructure and is continuing to invest in smart manufacturing technologies, automation, Industry 4.0 practices, advanced quality systems, and enhanced supply chain integration.

Planned investments over the next several years are aimed at establishing modern production facilities with improved scalability, efficiency, and reliability. These initiatives will not only support timely execution of the current order book but will also strengthen BDLs competitive positioning in the global defence export market.

Export Growth

On the international front, BDL continues to expand its global footprint by offering reliable, cost-effective, and customised defence solutions to friendly foreign nations. Several indigenous products have received export clearances, and there is growing international interest in Indian defence systems. Exports are expected to become a progressively larger contributor to overall revenues in the years ahead.

Human Capital & Organisational Development

BDLs leadership recognises that technological leadership can only be sustained through a highly skilled, future-ready workforce. The company is focused on attracting strong technical talent, building deep domain competencies, and providing structured pathways for continuous learning, reskilling, upskilling, and leadership development across the organisation. Beyond talent development, BDL is committed to organisational transformation, integrating digital tools, strengthening governance, fostering an innovation-led culture, and embedding operational excellence at every level. These efforts are aimed at ensuring that the company is as prepared for the demands of tomorrow as it is for those of today.

Conclusion

Bharat Dynamics Limited enters FY 2026–27 with a strong order book, a well-defined strategic roadmap, and the institutional capability to deliver on its commitments. The convergence of rising domestic defence requirements, accelerating indigenisation policy, expanding export opportunities, and BDLs own deepening technology capabilities positions the company for a period of sustained, high-quality growth.

Guided by Vision 2047 and anchored in the principles of Aatmanirbhar Bharat, BDL is committed to advancing Indias self-reliance in critical defence technologies, building advanced systems, strengthening national security, and contributing meaningfully to Indias emergence as a globally competitive defence manufacturing nation. The company remains resolute in its purpose: to deliver technologies and capabilities that India can rely on for decades to come.

For and on behalf of the Board

D.V. Srinivas Rao
Director (Technical) and
Chairman & Managing Director (Addl. Charge)
DIN : 10652125