Bharat Electronics Ltd Management Discussions.

(A) Industry Structure and Developments, Strengths, Weaknesses, Opportunities and Threats, Major Initiatives undertaken and planned to ensure sustained Performance and Growth:

(a) General outlook of economy, industry in which the Company operates, Government Budget, particularly the Defence Budget, market conditions and how these impact the Company, measures taken/action plan to protect the interest of the Company

The economic shock of the pandemic has been weathered well by India. After a sharp contraction of economy (-7.3%) in FY 2020-21, Indian economy witnessed the expected V shape recovery and growth of 9% in FY 2021-22. Economic impact of COVID "second wave" during first quarter of FY 2021-22 was relatively less, primarily due to Government of India?s response comprised of safety-nets to cushion the impact on vulnerable sections of society and the business sector, significant increase in capital expenditure to spur growth and supply side reforms for a sustained long-term expansion. Indian Economy has performed well almost on all Macroeconomic Performance indicators, including fall in fiscal deficit from 9.2 % of GDP (in FY 2020-21) to 6.9% of GDP during FY 2021-22.

After attaining pre-pandemic levels in FY 2021-22, going forward in FY 2022-23, the challenge would be to return to a high growth trajectory. As per Monetary policy committee of RBI (in Feb 22), GDP growth is estimated to be 7.8%. There is good pick-up visible on both demand & private investment front, however, inflation due to rise in oil and commodities prices on account of Russia-Ukraine crisis, continued shortage of semiconductors and global COVID outlook may pose challenge to momentum in short term.

Defence

Defence allocation in the Budget has been increased to Rs. 5,25,166 Crore for the FY 2022-23. It is an increase of 9.8% but keeping the threat perceptions along the borders, the important capital outlay has been raised by more than 10 % for the second consecutive year. The allocation under capital expenditure, which relates to modernisation and infrastructure development of the Armed Forces has been significantly increased. The Capital allocation of Rs. 1,52,370 Crore for FY 2022-23 represents an increase of 12.6% over FY 2021-22. The capital expenditure allocated to the Air Force is Rs. 56,852 Crore, for the Navy is Rs. 47,591 Crore and for the Army is Rs. 32,135 Crore.

In order to support Domestic defence industry, 68% of the capital procurement budget has been earmarked for domestic industry in 2022-23. Also, an allocation of 25% of the Defence R&D budget has been planned for the Indian Industry, Start-ups and Academia to take up design and development of military platforms and equipment in collaboration with DRDO and other organisations. Similarly, since August 2020, Govt. has notified more than 300+ items (as part of Positive Indigenisation lists) comprising of various Complex Defence Systems and equipment, to be procured only from Indigenous manufacturers. Such progressive initiatives will give further boost to indigenisation with active participation of public and private sector for fulfilling the twin objectives of achieving self-reliance and promoting defence exports.

Non-Defence

Apart from its core Defence business, BEL has ventured into several non-Defence areas like Homeland Security, Smart City, Energy Storage Products, Solar, Space Electronics, Network & Cyber Security, Railways & Metro solutions, Composites, Medical Electronics & Healthcare Solutions, Software Solutions, etc.

Homeland Security

The Homeland Security market in India is spread across the Central / State Governments, government entities including the PSUs and Private Sector Organisations. A significant market opportunity exists in police modernisation, critical infrastructure protection, border management, counter terrorism activities, urban area security, ground transportation, port & maritime security, etc. Prevailing internal security concerns due to terrorist activities & crime, data thefts, remote monitoring needs for centralised command & control, asset protection & disaster management, growth in public infrastructure, increased IT spending, various Government initiatives, increase in security spending are boosting demand for the Homeland Security market in India.

The Ministry of Home Affairs has been allocated in excess of Rs. 1.85 Lakh Crore in the Union Budget for 2022-23, nearly about 11.5% more than the previous year budget allocation of Rs. 1.66 Lakh Crore with the majority of spending on central police organisations like the CRPF, BSF and for improving the infrastructure along the international borders.

Modernisation of police forces, intelligence gathering apparatus, women safety, cyber security and the decennial census got priority in the Budget.

The Budget allocated the bulk of the MHA funds to the Police - Rs. 1.17 Lakh Crore in comparison to Rs. 1.09 Lakh Crore in 2021-22.

Among the central police organisations, the Central Reserve Police Force (CRPF) which is mostly responsible for internal security duties and fighting militancy, has been allocated Rs. 29,325 Crore in comparison to Rs. 27,307 Crore in 2021-22.

The Border Security Force (BSF) has been allocated Rs. 22,718 Crore in comparison to Rs. 21,491 Crore in 2021-22.

The Central Industrial Security Force (CISF), which protects vital installations like nuclear projects, airports and metro networks, has been given Rs. 12,202 Crore in comparison to Rs. 11,373 Crore allocated in 2021-22. The Intelligence Bureau, a key domestic internal agency, has been given Rs. 3,168.36 Crore in comparison to Rs. 2,793.02 Crore given in the current fiscal.

Smart City

Under the Smart City Mission launched by the GoI in June 2015, 100 smart cities have been selected and all the 100 have incorporated Special Purpose Vehicles (SPVs) and the various Smart City projects are under various stages of implementation. As per reports, of the total number of projects allocated by the mission, approximately 46% have been completed with at least one project completed in every city in 2022.

The timeline for the implementation of the Smart Cities Mission has been extended to June 2023 due to the pandemic with an allocation of Rs. 6,444.88 Crore for the Mission for 2022-23. Additionally, the Budget 2022-23 also has provisions for City Investments to Innovate, Integrate and Sustain (CITIIS), a new initiative under SCM. The Strategic Business Unit which was formed exclusively to address the Homeland Security and Smart City business, has made significant achievements in the Homeland Security and Smart City domain.

Energy Storage Products

Energy Storage is emerging as sunrise sector and part of the clean energy systems of the 21st century. There are substantial business opportunities in the Energy storage segment in the coming years due to huge requirement of high energy storage and maintenance free batteries for Defence and strategic applications and also for electric vehicles (EV). As per report, the global battery energy storage system market size is expected to grow from USD 4.4 Billion in 2022 to USD 15.1 Billion by 2027 at a CAGR of 27.9%.

The EV market in India has gained momentum after several policy initiatives such as setting up of a National Mission on Transformative Mobility and Battery Storage, Faster Adoption & Manufacturing of Electric Vehicles EV (FAME II) with an outlay of Rs. 10,000 Crore, launching of a Phased Manufacturing Programme (PMP) to localise production across the entire EV value chain, etc. Battery cells currently constitute around 35% of the cost of EVs.

Among the mature storage technologies, lithium-ion (Li-ion) batteries are the most versatile and efficient storage devices. The fuel cell technology-based energy storage products are also projected to dominate the future energy storage markets globally, as well as in India.

Seeing the opportunity for Li-ion cells and emerging market for fuel cells, BEL identified Li-ion cells/batteries and fuel cells as one of the focus areas and created a dedicated micro SBU to address business in a focussed manner and further expand its presence in the Energy Storage Products segment, by manufacturing of Li-ion Cells and development/manufacturing of fuel cells. BEL is collaborating with various Public/Private organisations in this area and has signed a MoU with global companies such as Triton Electric Vehicle LLC USA, SFC Energy AG, Germany, etc.

Solar – Renewable Energy

The Government has set an ambitious target of generating 280 GW of installed solar capacity by 2030. In the Budget for year 2022-23, the government has proposed production linked incentives (PLI) of Rs. 19,500 Crore to boost manufacturing of high efficiency modules with priority for fully integrated units.

BEL has scaled up its operations from a Cell/Module manufacturing to execution of solar power plant projects under the Engineering Procurement Construction (EPC)/ Developer mode. BEL has created a new Micro SBU for a focussed approach to target the requirements of the Solar Business, which is likely to contribute to BEL?s business on a continuous basis in the near future. BEL has also been shortlisted by ISRO for manufacturing of Multi-Junction Solar Cells for space application. The plant, with a capacity of about 60,000 multi-junction cells per annum will be set up by ISRO and BEL is to oversee its complete manufacturing operations under Government-Owned Company Operated (GOCO) model.

Space Electronics

ISRO has opened up opportunities for manufacturing of Launch Vehicles and small & micro satellites, for the Indian industry. The global requirement for small launches is expected to touch around 500 numbers per annum. ISRO has ambitious plans to increase the number of satellite launches on an average of about 18 launches per annum from the year 2023-24 onwards. Commensurate with the plans of ISRO, the Department of Space has been allotted a budget of Rs. 13,700 Crore for the year 2022-23, which is a growth of 8.3% from the FY 2021-22 revised estimate. Out of this, Rs. 7,465 Crore has been earmarked for capital expenditure. This clearly indicates the growing investment in space and India?s commitment to the development of its space programme. In addition to this, ISRO has approval for launch of 30 PSLVs and 10 Geo Synchronous Satellite Launch Vehicles (GSLVs) in the next three years.

BEL is one of the major players in ground segment of Satellite Communication and desires to enter into Space Electronic Systems, manufacture of Small & Micro Satellite, Satellite Communication Services and address Launch Vehicle segment jointly with Indian private industry. BEL has long-term objective of becoming a prominent player in Space Based Assets and Payloads. During FY 2021-22, BEL also expressed its interest for participation in productionisation of Small Satellite and Small Satellite Launch Vehicle (SSLV) with support from ISRO.

BEL has qualified as an industry partner of ISRO for Assembly, Integration and Testing (AIT) of satellites. It has completed Satellite AIT of three RISAT satellites at ISRO. BEL has collaborated with ISRO and has come out with new products like the next-generation Indigenous Receivers for Positioning and Navigation (IRNSS), Satcom Terminals, LTCC-based Substrates and high power space TWTs, which have usage in Defence, Government services and paramilitary applications. BEL is jointly working with ISRO for supply and commissioning of various types of satellite networks and HUBs for satellite communication applications.

Network and Cyber Security

Cyber-attacks in India have increased during the pandemic, and this trend appears to be continuing, as the new distributed workforce provides more opportunities for criminals to exploit. The cyber security market in India which is driven by investments by organisations to safeguard against cyber threats is expected to grow to about Rs.30,000 Crore by 2025._As many companies have adopted work-from-home policies in response to the pandemic, cyber security has become a major issue. While every organisation?s objective is to follow the technology trends of anywhere, anytime connection, it also forces them to consider an unprecedented growth in the attack surface throughout the network. The global Cyber Security market is expected to reach about USD 366 Billion by year 2028.

The Network & Cyber Security division has made key progress during the year in implementing a sizeable amount of cyber security business such as Security Analytics Centre (SAC) for Govt. Agencies, Data-Diode Solutions for DRDO, PKI and associated services for IAF, Security services for Banking/Govt. Agencies, Security Information and Event Management (SIEM) solution for IAF, Security Operation Centre (SOC) for PSUs, etc. Since its inception, the vertical has diversified and strengthened it by various tie-ups, partnerships and consortiums with start-ups, OEMs, channel partners and Academia. BEL has been empanelled by CERT-In for providing information security auditing services. BEL Network and Cyber security is an ISO 27001 Information security management systems-certified division. Various Cyber Security certifications have been obtained by this group, including CEH, GSEC, Lead Auditor for ISO 27001, etc. The team is also pursuing the Certified Information Systems Security Professional (CISSP) certification to qualify in domestic and global tenders.

Railways and Metro

Indian Railways has prepared a National Rail Plan for India 2030. To enable Atmanirbhar Bharat and Make-In-India initiative, the plan is to create a future-ready railway system by 2030, bringing down the logistic cost for Indian industries. A special thrust on promotion of Digital India and adoption of emerging technologies were given through 5G, Artificial Intelligence (AI), Machine Learning (ML), Drones etc.

The total capital expenditure by Railways for 2022-23 is projected at Rs. 2,45,800 Crore, an increase of 14% over the revised estimates of 2021-22. Indian Railways is planning to redevelop 400 stations across 100 cities. The program has an outlay of over Rs. 1 Lakh Crore. Indian Railways also planned the induction of 400 new Vande Bharat trains in next 3 years. For Metro, total budget of the financial year 2022-23 is Rs. 19,130 Crore. There are substantial business opportunities in the Rail and Metro businesses in India. As per the reports, around 34 Metro Rail projects are in construction stage, including nine newly-approved projects in different parts of India.

The modernisation and new projects like National Common Mobility Card (NCMC) compliant Automatic Fare Collection (AFC) Gating system for Metros, Indian Computer-based Train Control/Intelligent Automatic Train Supervision (i-ATS), Real Time Information System (RTIS) for Indian Railways, Supervisory Control And Data Acquisition (SCADA), CCTV Radios, LTE based Mission critical communication networks for the Railways, Unmanned Railway Crossing system, Composite Panels for Rail and Metros, Platform Screen Doors etc. are some of the key areas being pursued by BEL.

BEL is collaborating with DMRC, RDSO, NCRTC and various public/private organisations in the area of i-ATS System, Mission Critical Communication System, Composite Panel, Platform Screen Doors etc. The NCMC-compliant AFC gating system executed by BEL will be implemented across all modes of transportation i.e. metro, trains or buses in a phased manner.

Composites

The composites are used for the manufacture of various products in Aerospace & Defence, wind energy, transportation, marine applications etc. As per the reports, the global composites market size is projected to grow to USD 126.3 Billion by 2026, at a CAGR of 7.5%. The Composites market is growing due to the rising demand for lightweight, high-performance solutions from wind energy, aerospace & defence, and automotive and transportation industries. However, owing to the COVID-19, the sales of various industries has declined, resulting in reduced demand for composites.

BEL is planning to address the composites structures requirements of shipyards, submarines, aero structures, railways & metros, land equipment, pressurised missile containers, high altitude enclosures etc. BEL has set up facilities for the same and has also tied up with Government labs/Academia for consultancy and development of composite structures.

Civil Aviation

As per reports, the global domestic aviation market valued is expected to reach USD 1,130.8 Billion by 2027 at a CAGR of 3.2%. The aircraft passenger traffic in India is estimated to reach 520 Million by 2037, and airline operators are projected to increase their fleet size to 1,100 aircraft by 2027. India?s aviation industry is expected to witness Rs. 35,000 Crore investments in the next four years. The Indian Government is planning to invest USD 1.83 Billion for development of airport infrastructure along with aviation navigation services by 2026. This includes investment on Air traffic management, Airport ground Infrastructure, other Modernisation activities, etc. The AAI has earmarked a sum of Rs. 25,000 Crore for a period of five years, for modernising 100 airports across the country.

To enable Atmanirbhar Bharat and Make-In-India initiative, BEL is collaborating with M/s Airports Authority of India for modernisation of Airports, providing solutions for Air traffic management, other ground & navigations solutions, etc.

BEL is also exploring partnerships with global OEMs in Civil aviation segment for indigenisation of systems and solutions required for modernisation of Airports and ground infrastructure.

Software

The Defence technology is transiting from Platform-centric warfare to Network-centric warfare. Amidst this transition, software is becoming a crucial piece of weaponry in the modern Defence system. Advance software systems and embedded software technologies play a vital role in modern warfare and is transforming every aspect of the product offerings.

India is one of the leading software development centres in the world and the Indian IT industry is growing at a CAGR of 10.71%. As per reports, the Indian IT industry, comprising software products, IT services, engineering and R&D services, ITES/BPO, hardware and e-commerce is expected to grow to USD 350 Billion by 2025. Majority of the revenue comes from exports of software and services.

BEL is pursuing business opportunities with potential customers like the Paramilitary forces, Special forces, State governments, other non-Defence customers etc. in addition to existing Defence customers. To address the software business opportunity in a focussed manner in both the Indian and export market, a dedicated General Manager has been appointed.

Apart from core Defence segments, opportunities with respect to Homeland Security, e-Governance projects, Smart Cities, digital transformation projects, healthcare, software simulators, portal for examinations, software assurance services, ERP Implementation, Digital Agriculture, are also being focussed. BEL is also planning to open Offshore Development Centre.

Medical Electronics & Healthcare Solutions

The medical electronics market is expected to reach over USD 248.43 Billion by 2030 and is expanding growth at a remarkable CAGR of 11.8%.

BEL, after successfully manufacturing 30,000 ICU ventilators to address the pandemic issues, has taken further firm steps in diversifying into the medical electronics & healthcare segment. During this year, BEL?s Medical Electronics Division manufactured around 18,000 Oxygen Concentrators. One of the objectives of your Company is to enter into this market segment and introduce affordable healthcare products/solutions to urban & rural populations in India and achieve self reliance in the Healthcare segment.

To quickly grow in this segment, a few niche products, indigenously designed by Indian companies, have been identified which can be manufactured at BEL through a ToT process. Also, to grow further in this segment, your Company is planning to come out with its own products for futuristic markets, either through the in-house effort or through collaborative R&D approach. Based on the above approaches, your Company is planning to produce Haemodialysis machines, portable remote patient health monitoring system, patient monitoring system for ICUs, C-Arm X-ray machines, turbine-based ventilator, MRI, etc.

Focussed approach for new areas in Defence

To give a focussed approach to upcoming areas in Defence & Aerospace sector, BEL has ventured into Unmanned Systems, RF and IR Seekers, Missiles, Rockets, Glide Bombs, Arms & Ammunitions.

Unmanned Systems

Military applications like reconnaissance, intelligence gathering, detection of threats etc. are migrating from Manned Systems to Unmanned Systems, due to the criticality of missions, avoidance of risk associated with International norms and value for human life.

The Indian UAV segment offers an overall opportunity of about Rs. 65,000 Crore during the TPCR Plan period ending by 2027. Opportunities in Unmanned Systems include Unmanned Aerial Vehicle (UAV) systems, Unmanned Ground Vehicles (UGVs) and Unmanned Underwater Vehicles (UUVs) & Unmanned Surface Vehicle (USV) systems.

To address the Unmanned Systems Business Opportunities in a focussed manner with dedicated resources, a separate business vertical has been created at BEL Bangalore, to address the Unmanned Systems Business.

BEL has been addressing the UAV/UGV/UUV/USV requirements of the Indian Defence/Non-Defence segments by partnering with DRDO/foreign OEMs/ Indian Academia/Start-ups, etc. BEL has been working on the Payloads (like EO, Communication, ESM, etc.), Data links and Ground Control Station requirements of the UAVs. BEL has also developed and supplying Drone Guard Systems.

RF and IR Seekers

The change in nature of warfare with a need for precision attack is accelerating use of seekers in the weapons & missiles. This has been demonstrated in the recent global conflicts. The advanced air defence system with guided missile with kill probability of greater than 90% helps countries in defending themselves against attack from missile & rockets.

The requirements of Seekers are derived demands arising out of procurement of various missiles. As per the reports, the Seekers market is projected to reach to USD 7.19 Billion by 2027, exhibiting a CAGR of 5.2%. BEL is associated with the DRDO for concurrent absorption of technology for further engineering and production of RF and IR Seekers for various indigenous missiles programs. BEL has been investing for the creation of modern manufacturing facilities for the manufacture of RF and IR Seekers for the upcoming requirements and opportunities arising out of the positive indigenisation list and policy initiatives of GOI for Atmanirbhar Bharat. The production lines creation for RF Seekers has been completed and Seekers manufactured in these lines have successfully completed flight trials. It is expected that RF and IR Seekers would be among the top new technology products which would contribute to BEL?s revenues in the near future.

Missiles, Arms & Ammunition

GOI/MoD through major policy initiatives for Make in India, has issued a series of positive Indigenisation lists with phased targets for procurement of critical defence equipment solely from domestic manufacturers through local production. Arms and Ammunition including Missiles are critical for the strategic needs of the country for which self-reliance has to be ensured. Most of the equipment in the positive indigenisation list is related to Missiles and Arms and Ammunition and offers huge opportunity to domestic defence manufacturers and BEL would be playing a major role for domestic manufacturing in this strategic segment.

As per the reports, the Global Arms and Ammunition Market, is anticipated to reach USD 35.63 Billion by 2027 with a CAGR of 4.8%.

BEL is already engaged in the development and manufacture of missile electronics, ammunition fuzes, Glide Bombs etc. BEL has created dedicated focussed business vertical for actively pursuing the opportunities. BEL is partnering with DRDO, Technology partners, Academia, R&D institutes, Start-ups etc. and making substantial investment for creation of the necessary infrastructure for manufacture of missiles, glide bombs, rockets and its related parts.

(b) Industry Structure and Developments

At present, India is one of the largest importers of Defence equipment with majority of its Defence needs being met through imports, though India?s arms import have decreased in the recent years, as per the reports. The Government of India aims to develop a strong self-reliant domestic industry in the Defence sector with substantial participation from the private sector, including MSMEs and start-ups to reverse the trend of imports.

In this regard, the Government has taken several initiatives like the Make-In-India programme, creation of an eco-system for development of technologies through innovation by MSMEs/start-ups, etc. With the support of the Government, the Indian industry is expected to move up in the value chain and deliver quality products, systems and services to the Defence forces. The Government has promulgated a draft Defence production policy that aims at increasing Defence production to Rs. 1,70,000 Crore by 2025.

The MoD has introduced the Strategic Partnership model (SP) for the Indian private sector, as part of the DPP 2016. The model aims to progressively build indigenous capabilities in the private sector to design, develop and manufacture complex weapon systems and platforms. The Defence Acquisition Procedure 2020 (DAP 2020) has incorporated several improvements focussing on self-reliance, wherein indigenisation and innovation is enabled through processes of make, design & development and Strategic Partnership. Import substitution has been facilitated through various schemes with an aim of reducing lifecycle costs and building a robust ecosystem with the help of the domestic industry/MSMEs. Amendments to DAP-2020 are underway, in order to further simplify the Make-I and Make-II procurement process, inclusion of Space activities, etc.

To promote indigenous Defence manufacturing, the Government has undertaken initiatives like liberalisation of Industrial Licensing, development of Defence Corridors, funding for Innovation in Defence and Aerospace through iDEX/DIO, continuous updation of DPP, thrust on exports, etc. Suo moto proposals can also be submitted under Make-II category.

Foreign Direct Investment (FDI) up to 74% is allowed through the automatic route and above 74% under the Government route, wherever it needs to access modern technology.

The DRDO developed technologies are now made available on a non-exclusive basis to the Indian industry, including the private sector against the payment of ToT and royalty fees. Also, the DRDO has come out with a revised Policy and Procedures for Transfer of Technology to Industry.

Two Defence industrial corridors in Uttar Pradesh and Tamil Nadu are being established by the Government. The Uttar Pradesh Defence Industrial Corridor (UPDIC) will have six nodes at Agra, Aligarh, Chitrakoot, Jhansi, Kanpur and Lucknow. The Tamil Nadu Defence Industrial Corridors (TNDIC) will have five nodes at Chennai, Coimbatore, Hosur, Salem and Tiruchirappalli. An investment plan of about Rs. 11,100 Crore and Rs. 8,700 Crore has been announced for Tamil Nadu and the UP corridors respectively by DPSUs including newly-formed DPSUs and private companies.

The procedure of ‘Make-I? and ‘Make-II? programme has been introduced and being simplified further, by the Government which is likely to help MSME and start-up companies to integrate into Defence production. BEL is also participating in many of the Make-II programmes of the Defence services.

BEL has been indigenously designing and manufacturing various complex products / systems meeting the Indian defence requirements. Though, BEL has been sourcing mainly from the indigenous sources, BEL is also dependent on the global semiconductor companies and their distributors for supply of Semiconductor components, generic embedded PCBs / sub-systems. These components / sub-systems form the building blocks of the complex defence systems. A select few companies in the world manufacture Semiconductor ICs and the shortage of these ICs has impacted business across all sectors around the world including BEL. In spite of BEL?s best efforts, BEL faced difficulties in delivering some of the products and systems, as per timelines, due to non-receipt of components, modules, assemblies etc, involving Semiconductor ICs both from Indian and foreign sources, as per the committed delivery timelines. Major segments of BEL like the Weapon Systems, Communication, Tank Electronics, Naval Systems, Gun Systems, C4I Systems, Electronic warfare systems, non-defence business etc, was affected by the global semiconductor shortage.

However, BEL is taking necessary actions like alternate sourcing/redesign and proactive sourcing to shorten the procurement cycle time and to manage the semiconductor shortage/delays.

Toward MoD?s big push to Atmanirbhar Bharat initiative, MoD has put Import embargo on 300 plus items from Aug 2020 and published three positive indigenisation lists with timelines to boost indigenisation of defence production. BEL?s Products/Systems can meet about 35% of these positive lists of Defence Indigenisation. Under these changing business scenarios, BEL is focussing on enhancing its interaction levels and building long-term relationships with emerging Strategic Partners, users and other key stakeholders in the Indian Defence industry.

(c) SWOT Analysis

Strengths

• Established Defence electronics player in India.

• Diverse technology domain expertise.

• Agile & state-of-the-art manufacturing infrastructure across 9 locations and strong execution capability.

• Concerted efforts on generating IPRs across the technology domains.

• Growth-oriented & forward-looking organisation having strong connect with Defence Customers.

• Strong Capability in Indigenisation across segments.

• Robust Product support network across India.

• Ability to design and deliver tech-intensive customised solutions for the customers.

• Defence PSU with good brand image, reputation , strong value system and work ethics.

• Strong multi-layered in-house R&D for technology and new product development.

• Committed workforce with state-of-the-art infrastructure and manufacturing facilities and quality assurance.

• Well established systems and procedures including Companywide ERP system.

• Decades of experience resulting in excellent domain knowledge and core competencies in defence electronics.

• Wide product range with strong product support network across India.

• Strong relationship with the Armed forces, Defence R&D Labs and Government agencies.

• Agility in Diversification initiatives.

• Leveraging partnerships for growth.

• Expertise in executing complex system integration projects & turnkey solutions.

• Consistently profit-making.

• Long-term commitment to customers. Weaknesses

• Gaps in some of the critical technology areas.

• Dependence on Cyclic Defence market.

• Time to Market - High.

• Low value addition in certain projects.

• Dependence on DRDO for technology in certain segments.

• Dependence on foreign OEMs for certain critical technologies. Opportunities

• Growing Defence and security needs.

• Government?s emphasis on Make-In-India and Atmanirbhar Bharat for manufacture of Defence equipment.

• Growing Defence budget allocation towards modernisation, upgrade programmes and maintenance repair & Overhaul.

• Increased impetus on modernisation of central paramilitary and police forces.

• Withdrawal of OEMs from select Asian countries as a manufacturing base.

• Govt thrust on promoting alternate energy sources (Solar, Electric Vehicle).

• Opening up of Space segment for Industries.

• Modernisation of CPMF, Police, Railways, Airports.

• Growing market for allied non-Defence areas such as Homeland Security, Smart City, Energy Storage Products, Network & Cyber Security, Composites, Solar based power plants, Railways etc.

• PLI & Positive list of Defence Indigenisation. Threats

• Rapid changes in technology in Defence.

• Difficulty in sourcing of few critical and denied technologies.

• Policy interventions favouring the private sector.

• Manifold increase in competition from Indian private industry and foreign OEMs including their JVs in the Defence sector.

• Procurement of electronic systems under Strategic Partnership Model.

• Impact due to COVID-like pandemic and Semiconductor shortage.

• Disinvestments by the Govt. of India and depleting cash reserves.

• Capital restructuring of CPSEs by the Govt. of India.

• Changes in Global geopolitical scenario.

(d) Major initiatives undertaken/planned, including strategy, goals and targets set by the top management, to ensure sustained performance and growth of the Company

The Company has undertaken the following major initiatives to ensure sustained performance and growth of the Company:

(i) Strategic alliances in emerging businesses through Co-development, Co-production and Manufacturing ToT:

The Company is working in many strategic and other areas of national importance such as Weapon systems, Surveillance, tracking and multifunction AESA-based radars, naval & airborne applications, Next Generation Electronic Warfare Suites and Counter Measure Systems, Air Defence Systems, including Seekers & Missiles, Unmanned Systems for Land, Air, Surface & Underwater Applications, Anti-Submarine Warfare Systems, Software Defined Radios for Tactical Applications, Network Centric Systems, Night Vision Devices, Multi-sensor Stabilisation Systems, Arms and Ammunitions, Transportation Solutions for Railways and Metro, Composite Products for Land, Marine & Avionics segments, Artificial Intelligence & Robotics, Space Electronics & Launch Vehicles, Solar, medical equipment and related solutions, Energy Storage Products etc.

Many strategic alliances have been formed and other select partnerships are being pursued with Defence laboratories, DPSUs including newly-formed DPSUs, Academia, Startups, niche technology companies and reputed global OEMs and Indian companies / agencies for addressing the emerging Defence and Non-Defence businesses, including exports.

Some of the products & systems identified and being pursued for alliances for co-development, co-production and manufacturing ToT and for Lifecycle Support include Surface-to-Air Missile (SAM) Systems, RF / IIR Seeker, Air Defence Radars (Land and Naval based), Navigational Complex System, Sonar Systems, Next Generation Night Vision Devices, Gun Upgrades / New Gun Programmes, Small Arms for Defence, Explosives, Ammunitions, Inertial Navigation Systems, High Power Lasers, Tethered Unmanned Aerial Vehicles and Swarm UAVs, Remotely Operated Vehicle (RoV), Counter Measure Systems,

Electronics Systems for Futuristic AFV platforms FICV etc., Satcom Terminals, Navigation Receivers, Composite products, Rail & Metro Solutions, Li-ion Cells, Medical Equipment and related solutions etc.

(ii) Joint Ventures (for existing/emerging business areas):

BEL has been continuously exploring opportunities for establishing joint ventures/special purpose vehicles with reputed companies in complementary technology/ strength areas to bridge technology gaps and also to scale up the existing areas as well as enter into emerging business areas.

The Joint Venture BEL-THALES Systems Limited (BTSL) is formed between BEL and Thales, France with an objective to engage in design, development, marketing, supply and support of civilian and select Defence radars for the Indian and global markets. Benefiting from the confluence of work culture and technology/manufacturing support of the parent companies, the JV has imbibed the best practices of both parent organisations and is growing into a centre for development, evolution and customisation of products and as a trusted supplier. BTSL is presently engaged in the co-development of a Multi-Target Tracking Radar with Thales Netherlands to address the Indian weapon systems projects as well as the global requirements. BTSL has successfully customised and demonstrated the capability of FM-based Passive Radar to Indian Customers like IAF, Cabsec. A well-equipped Integration and Verification facility for high-end avionics systems has been set-up and this facility has been utilised for the manufacture and delivery of Avionics equipment (Offset orders). The Company is also involved in providing technical and product support for Air Traffic Management Radars.

BEL is in discussion with an Israel OEM for setting up a Joint Venture for providing Product Life cycle support to Weapon System Programs in India for which the Israel OEM is the main designer.

Technology Upgradation and R&D Challenges

Core technologies required for developing state-of-the-art products and solutions are often not readily available. R&D on core technologies requires innovation and constant upgrade for realising solutions with a competitive edge. While initially it is inevitable to use proprietary technologies, getting locked with a single source for technologies/solutions is a major challenge. The demands of optimised Size, Weight, Power, Cost (SWaP-C) and Quality requirements always push R&D efforts to the edge. At the component level, R&D efforts are steered towards meeting newer requirements of System on Chip (SoCs), Monolithic Microwave Integrated

Circuits (MMICs), highly integrated processor ICs, Microwave Super-Components, Photonic components etc. At the product level, R&D efforts are towards creating modular, configurable, multifunction, automatic health monitoring/reporting, fault tolerant and high availability products. Realising System of Systems needs expertise in system engineering, project management along with system integration expertise. Obsolescence of critical components, continued dependence on OEMs and requirement to support entire product life cycle are the other critical challenges.

Measures

To overcome the challenge of continuous upgrade of underlying core technologies for all products and solutions across BEL, a 3-tier R&D structure has been put in place. At the topmost tier, Central Research Laboratories (CRLs) one each located at Bengaluru and at Ghaziabad are engaged in blue sky research and applied research in core technology areas of Communication, Networking, C4I, Network Centric Software, Electronic Warfare, Radio Frequency & Microwave, Power Amplifiers, Antennas, Radar Signal and Data Processing, Multi Sensor Tracking and Data Fusion, Image Processing, Photonics (Electro-Optics and Lasers), System on Chip (SoC), Embedded Smart Computing, Big Data, Cloud and Data Analytics, Sensors, Navigation, Artificial Intelligence, Machine Learning, Cyber & Network Security, Secure Strategic Systems, Unmanned Vehicles, Decision Support, Simulation, War Gaming etc.

At the second tier, a centralised Product Development and Innovation Centre (PD&IC) located at Bengaluru, focusses on Automation Systems, Antennas, Crypto Systems, Embedded Systems, Energy Systems, Engineering Solutions, Radio Frequency and Microwave, Monolithic Microwave Integrated Circuits (MMIC), Sonar Systems, Super components, Electronic Warfare, Navigation and Stabilisation, etc. Additionally, 3 Centres of Excellence (CoEs) in the areas of Electronic Warfare & Photonics (EW&P), Military Communication Systems (MCS) and Radar & Weapon Systems (R&WS), located at Bengaluru, focus on System configuration and engineering of core technology modules into Products/ Systems/Systems of Systems.

At the third tier, Development and Engineering (D&E) divisions operate in all Strategic Business Units (SBUs) and Units. These D&E divisions liaison with end customers from requirements elicitation, mapping them to technical specifications and developing products/ solutions incorporating the core technology modules developed through the other tiers, i.e. CRLs, CoEs and PD&IC.

The D&E of Software SBU (formerly BEL Software Technology Centre - BSTC) addresses all requirements related to software modules either directly to the customers or through respective D&Es of SBUs/Units.

In BEL, the technology challenges are further being addressed through planned R&D initiatives, systems engineering, technology training for R&D Manpower, system driven obsolescence management and by leveraging expertise through suitable collaborative partners.

To overcome the challenge of lock-in to proprietary technologies, in feasible areas, BEL develops alternate/ equivalent technology modules/solutions based on standard protocols and with modular designs. Even when a given Technology Module/Product/Solution is Built to Specs (tailormade for the defence forces), they are developed with standard interfaces so that they can be used as plug and play modules in larger systems so that modularity and scalability is ensured. This safeguards against the lock-in situation and ensures that the system developed is easily maintainable.

Further, wherever a subsystem or a component is procured, multiple sources for this subsystem/ component are developed to safeguard BEL from getting locked into a single source. The ever-increasing need for optimised Size, Weight, Power and Cost (SWaP-C) is being addressed through development of a series of miniaturiaed platforms/products/solutions by optimising processing performance, packaging and thermal management with standards-driven approach. Obsolescence is being addressed through structured obsolescence management plan through indigenisation and by creating alternate sources.

R&D Initiatives and Achievements

Following are some of the new initiatives undertaken by BEL in the areas of R&D and technology development during FY 2021-22:

• Formation of Centres of Excellence in the technology areas of:

a) Military Communication Systems

b) Electronic Warfare & Photonics

c) Radar & Weapon Systems

• Focussed development groups in the emerging areas of Medical Electronics, Artificial Intelligence (AI), Robotics, Arms and Ammunition and Unmanned Systems

• BEL has taken up development of several Artificial Intelligence (AI) based products including AI

enabled Fake News Detector as part of Social Media Analytics, AI based Passive TWS (Track While Scan) System, Automatic Information Extraction and Synthesis-Intelligence Report Generation, Geographic profiling/Criminal Profiling for Crime and Suspect analysis as part of Social Network Analysis, AI based classifier for Frequency Modulated Continuous Wave (FMCW) radar, Predictive maintenance of Equipment using AI, Integrated Weather Support & Disaster Management System etc.

• Efforts are on to enhance collaboration with reputed Institutions and setting up R&D/Innovation cells in select institutions. BEL R&D Cell at Kochi has realised core technology modules/algorithms for Sonars and simulators. BEL R&D Cell at IIT Madras Research Park has developed core technology modules for communication systems. Establishing such R&D cells at other campuses is being explored.

• BEL has been vigorously pursuing Intellectual Property Rights (IPR) related activities year after year. Concerted efforts put in have resulted in grant of 11 patents during FY 2021-22. As on 31 March 2022, cumulative number of patents granted to BEL are 24.

• In FY 2021-22, a total of 137 new IPR applications were filed, including 65 patent applications. BEL R&D engineers have presented/published 51 papers in reputed conferences/seminars/journals.

• BEL has empanelled 24 new collaborative R&D partners in the year FY 2021-22. As on 31 March 2022, cumulative collaborative R&D partners empanelled are 303 (including 152 MSMEs). The partners are categorised under R&D solution providers, Design service providers, Consultants and Production service providers.

• BEL has taken initiatives to develop technologies in collaboration with premier Academic Institutions. The technology areas include Artificial Intelligence, UAV, Video Analytics, Smart City etc.

Specific areas in which R&D was carried on and benefits derived as a result of the activities:

During FY 2021-22, R&D projects were taken up by BEL and several projects were completed in specific business segments/areas. These include R&D projects in technology areas like Missile Systems, Radars, Electronic Warfare, Avionics, Military Communication, Naval Systems, Sonars, C4I systems, Photonics (Electro-Optics and Laser), Tank Electronics, Gun Upgrades,

Civilian Equipment, Homeland Security, Medical Electronics and Components. The benefits derived are in the form of major share of revenues generated by the Company in the above business segments. Several technology modules have been developed, some of which have resulted in import substitutions. Some of the BEL developed solutions have also resulted in receipt of export orders.

Details of major accomplishments in Equipments and Components area:

• R&D projects which have fetched considerable revenues for the Company (both Defence and Non- Defence segments) include:

a) SDR Variants

b) Improved Version of Link2-MOD3 System

c) Sensors for VSHORAD

d) IFF Mark XII for MRSAM

e) Navigational Complex System

f) IIR SEEKER FOR HELINA/NAG/PROSPINA

g) Gunner TI Sight for T-90

h) Spotter scope with Digital Camera

i) Continuous Zoom Lens 20-860 MM

j) Image Stabilisation

k) Multi Function Radar-VLSRSAM

l) EPS for P15B

m) Hand Held Laser Dazzler

n) ACCS 1135.6/ACCS SVL

• Some of the major Technology Modules and Subsystems developed indigenously, which have resulted in import substitution, are:

a) BUC 40W (LB)

b) PWA Multi-MODEM BASE PWA FLEX MODEM Assy

c) Modem For ETC

d) BUC 40W (HB)

e) MFSTAR Antenna

f) DG Set 18.5KVA

g) MODEM for GDU

h) Antenna 7M C Band

i) Antenna 2.4M

j) Navigation Computer

k) Secure Interface Unit

l) Liquid to Liquid Cooling system

m) 330 KW Electrical Power supply

n) Radio Interface adaptor for ETC

o) ESPF for IPSS

p) LCD based TV Monitor for Reporter Radar

• R&D projects undertaken by BEL which have resulted in export are:

a) SDR-NC

b) HF/VHF Radio

c) Pan & Tilt for Servo Systems

d) CMS

e) 3D Surveillance Radar

f) 43X (20-860mm) Zoom Lens

g) MWIR HD Zoom Lens

h) HD VLF

i) Beacon MKIII

j) CSS

k) WLR

(e) Diversification/Expansion Plans - New Frontiers

As a diversification strategy, the Company has been exploring opportunities in allied defence and non-defence areas for growth, leveraging its strengths & capabilities acquired in the defence electronics domain and capitalising on the conducive policy environment encouraging indigenous solutions. In the past 5 years, the non-defence portion, on an average in Company?s business is about 15-20% of total turnover. This year, the Company has about 12% of turnover from non-defence segment. The Company aims to achieve and grow the revenues from the non-defence business in the coming years to about 25% of Company?s turnover.

The Company has been putting continuous efforts & focus to enter and address several new areas in both defence & non-defence for further expanding its business in new markets for sustainable growth. Some of the areas being focussed upon in defence include: Next Generation indigenous SAM Systems, RF Seekers, Imaging Infra-Red (IIR) Seekers, Arms & Ammunition and Explosives, Missile Electronics, Unmanned Systems, Airborne Radars, II and Thermal Imaging solutions for Night Vision Devices, Indian Regional Navigation Satellite System (IRNSS) based Inertial Navigation Systems (INS) and solutions, Directed Energy Weapons, countermeasure systems for Air platforms, Avionics systems for next. Gen Aircraft/Helicopters, Software as a Service, Network & Cyber security etc.

Some of the areas being focussed in the non-defence include: Solutions for Civil Aviation sector including Air Traffic Management solutions, Advance Ground Control Surface Movement Radar, Anti Drone systems, Space/Satellite Electronics, Space Launch Vehicles, Satellite Communication Services, Space grade Solar Cells, Satellite Assembly & Integration, Solar Business, Railway and Metro Solutions, Software as a Service, Electric Vehicles (Li-ion & Fuel Cells, Charging Stations etc.), Homeland Security & Smart City Businesses, Smart Meters, a range of Medical Electronics and health care solutions (ICU Ventilators, Dialysis Machines, Patient Monitoring System, X-ray C arm, Ultra sound, MRI, Image/Voice/Video Analytics etc).

BEL has successfully diversified into Electronic Ammunition Fuses, Missile Seekers, Light Weight Composite Shelters & Masts, Homeland Security & Smart Cities, Network & Cyber Security, Rail & Metro solutions, Energy Storage Products, Solar Power Plants, Medical Electronics, Cells & Modules, Cyber Security, Digital Transformation solutions, Satellite Assembly & Integration, etc.

BEL also continuously strives to expand its business by capturing new customers in the existing geographical markets as well as new geographies for its proven products, systems & solutions. BEL has ventured into new business models like Government-owned Company Operated (GOCO), OPEX Model etc. (e.g. Class Room Jammers, X-ray Baggage Inspection Machines, etc.) to expand its business by capturing new customer segments. BEL is striving to exploit its dual-use technologies (e.g. SDR, Solar Cells, etc.) for expanding the market as well as customisation of its products/solutions to meet the new customer segments/geographical areas, especially in the export markets.

BEL is leveraging on its new International Marketing offices to expand the reach of its products & services to the new markets and also explore offset opportunities. BEL is also forging partnerships with other PSUs/industry players for quickly expanding the geo spatial reach through resource sharing.

(f) Specific Measures on Risk Management, Cost Reduction and Indigenisation:

1. Risk Management:

The Company has an established Enterprise Risk Management (ERM) framework to comprehensively address the potential Risks which may be encountered by the Company in pursuit of its business objectives. The deployment of ERM is based on the Risk Management (RM) Policy of the Company, approved by the Board, based on the recommendation of the Risk Management Committee (RMC) of the Board.

A comprehensive framework for Risk Identification, Evaluation, Prioritisation and Mitigation of various risks associated with different areas such as Technology, Market, Product, Cyber Security, Operations, Finance, Human Resources, etc. are also defined in the Policy.

The risks having Company-wide impact, which needs review and advice, are placed before the RMC. Following review and recommendation by the RMC and approval by the Board (as applicable), these risks are addressed with appropriate mitigation measures. The implementation of mitigation measures are further reviewed by the RMC for compliance and the implementation status reported to the Board.

Risks which may significantly impact the operations of the Company or wherever deemed necessary are reported to RMC which reviews the risks and recommends to the Board for further deliberations and approval of mitigation measures.

2. Cost Reduction:

In view of increasing competitive environment in civil & defence, BEL has adopted cost reduction strategy as one of the thrust areas. "Cost Reduction" Task Forces are set up in all the Units / SBUs with members from Cross-Functional Areas. The Task Forces identify & take up projects and set target for achieving cost reduction with focus on both manufacturing & non-manufacturing areas and encompass all facets of business.

3. Indigenisation:

BEL strongly believes that achieving self-reliance is one of the prime objectives to meet the strategic needs of the nation. Towards this endeavour, around 80% of the Company?s turnover is generated from indigenous technology.

In line with Government?s "Make in India" policy, BEL has been taking several initiatives to achieve self-reliance through strong thrust on In-house R&D and Indigenisation, Increased outsourcing from Indian Private industries, Public Private Partnerships, Joint Ventures, Capacity expansion, Infrastructure Development & modernisation etc. Major initiatives taken towards achieving the goals of indigenisation & self-reliance include:

• Continuous product development through In-house R&D efforts, Joint development by partnering with DRDO, National R&D Labs & Academia and Collaborative R&D partnership with Indian private sector (MSMEs/Start-ups) & foreign OEMs/ Design houses.

• ToT based In-depth manufacturing from foreign OEMs.

• Import substitution of critical sub-systems through in-house/domestic vendor development.

• Three years R&D plan for Indigenous development.

• Outsourcing & Vendor Development Policy.

• Test facilities for use by Indian Private entities.

• EOIs published for imported items under Make- II to attract capable/prospective domestic manufacturers for indigenisation.

• Details of items planned for indigenisation uploaded on ‘Srijan Portal?, Indigenisation portal of MoD.

The Government has taken several policy initiatives and brought reforms to encourage indigenous design, development & manufacture of defence equipment within India, with an aim to reduce dependency on imports. These initiatives, inter alia, include (1) According priority to procurement of capital items from domestic sources under Defence Acquisition Procedure (DAP)-2020, (2) Notification of two ‘Positive Indigenisation Lists? of total 209 items for which there would be an embargo on the import beyond the timeline indicated against them. There are as many as 169 items of BEL included in the lists. The lists have been hosted on Ministry of Defence website to give wide visibility to the Defence Industrial base in enabling them to effectively meet requirements of the Armed Forces. The initiative has been welcomed by the Indian industry.

In addition to this, setting up of the two defence corridors, one each in Uttar Pradesh and Tamil Nadu, aims to generate employment in coming years. Subsequently, six nodes, namely Aligarh, Agra, Chitrakoot, Jhansi, Kanpur and Lucknow were identified for Uttar Pradesh Defence Industrial Corridor (UPDIC) and five nodes, namely Chennai, Coimbatore, Hosur, Salem and Tiruchirappalli for Tamil Nadu Defence Industrial Corridor (TNDIC).

Defence Industrial Corridors (DICs) are aimed at providing fillip to the defence manufacturing ecosystem in both States.

In order to meet the_objectives_set for Indigenisation of critical components, Government of_India_has been implementing various Action Plans that would address all aspects of the eco-system.

BEL has a greater role to play and complement in realising the Government?s objectives on Indigenisation. With the sustained business growth of BEL in Defence Electronics, the opportunities for its supply chain partners are also on the increase, especially for the MSMEs, Start-ups and domestic players as the companies "thrust and thirst" has been on Indigenisation and Self-reliance since its inception.

While BEL?s objective & initiatives provide tremendous scope for indigenisation activities, the Company is confident of increased participation from all sectors will lead to self-reliance and a win-win situation among its supply-chain partners.

DPSUs Positive Indigenisation List: MoD has released 1st DPSUs positive indigenisation list of 2,500 items (already indigenised) comprising 152 items of BEL & 351 items (to be indigenized in next 3 years) comprising 18 items of BEL during Dec 2021. 2nd DPSUs Positive indigenisation list has been released during March 2022 comprising 107 major LRUs/Subsystems across various segments. BEL has 21 major LRUs/Subsystems in the 2nd DPSUs Positive Indigenisation list which are under Make-II scheme and EoIs have already been published for the same.

(B) Internal Control System and its Adequacy:

BEL has a robust system of internal controls in place. It has documented policies and procedures on Purchase, Sub-contract, Works contract, Accounting, HR, IT and Security, Sub-delegation of Powers, etc. covering all financial and operating functions, and revised in tune with the changing times. These controls have been designed to provide a reasonable assurance with regard to maintaining of proper accounting controls for ensuring reliability of financial reporting, monitoring of operations, and protecting assets from unauthorised use or losses, compliance with regulations, etc. BEL has implemented File Life Cycle Management System (FLM) for online processing and approvals of procurement and other proposals, which facilitates complete transparency, accountability, protection and security of the information/files. Elaborate guidelines for preparation of accounts are followed consistently for compliance with Indian Accounting Standards (Ind AS) and Companies Act, 2013.

BEL has implemented Company-wide ERP system (SAP) with centralised deployment. Governance Risks and Compliance (GRC) Access Control module has been implemented as the primary means of addressing user access risks by embedding preventive rule based checks while assigning authorisations to business transactions. Authorisations to users are given based on principles of Segregation of Duties and Least Privilege. Risk rules have been configured in the system in several business processes like Finance, Procure to Pay, Order to Cash, Material Management, HR and Payroll. Risk analysis reports are regularly run to ensure that processes are under control. Additional control in the form of biometric fingerprint authentication for critical transactions is also in place. Audit logs for all changes in roles and authorisations are maintained.

BEL has its own Internal Audit Department commensurate with the size of its operations, with teams of professionally qualified personnel who conduct regular and comprehensive internal audits to ensure that all checks and internal control systems are in place. Services of external professional audit firms are being utilised to carry out 100% vouching of vendor payments (including travel/medical claims/reimbursements) in nine Units (including BEL Corporate Office, CRL BG Cx, CRL Ghaziabad and PDIC during 2021-22). The Company has sub-committee of the Board viz. Audit Committee (AC) to keep a close watch on compliance with Internal Control Systems. Also, being a Government Company, BEL is subject to Audit by Comptroller & Auditor General of India (C&AG).

BEL?s Internal Audit teams are located at major manufacturing units and Corporate Office of the Company which carry out audits as per risk-based Annual Audit Programme approved by Audit Committee of the Board. New centre is also planned to address the increased volume of transactions in certain regions wherever required. All the Internal Audit teams submit audit reports to their team leaders and after considering the Auditees? replies/action taken reports, team leaders submit reports of significant issues observed during audit to Head of Internal Audit on periodical basis. Head of Internal Audit submits his/her reports to Company?s Management at various levels for corrective actions and finally submits report to the Audit Committee of Board indicating status of compliance with well-established internal control systems of the Company and plan for mitigating the key risks associated with major activities of the Company. State-of-the-art Data Analytical Tool is also being used in Internal Audit for monitoring of data for identification of outliers, if any.

BEL?s Internal Audit checks the adequacy and effectiveness of internal control system through regular audits, system reviews, process reviews, data analytics, etc. and provides assurance on compliance with the legal and regulatory requirements, and internal policies and procedures of the Company. Functioning of Internal Audit as well as Internal Control systems are periodically reviewed by Board-level Audit Committee. The Audit Committee of the Board of Directors, comprising Independent Directors, regularly reviews the audit plans, significant audit findings, adequacy of internal controls, and compliance with accounting standards and policies from time to time and issues directives for compliance to further strengthen the internal control system keeping in view the dynamic environment in which the Company is operating. The Company continues its efforts to align all its processes and controls with global best practices, to assure the highest level of Corporate Governance.

(C) Financial/Operational Performance:

1. Strategy & Objectives: The main objectives of the financing strategy of your Company are to generate adequate internal resources for profitable growth, to give value for money and create wealth for shareholders, to maintain the highest credit rating and to build in risk mitigation strategies in the business processes to minimise exposure to financial risks.

2. Performance Highlights:

(Rs. in Lakh)

Particulars Year ended 31 March 2022 Year ended 31 March 2021
Revenue from Operations 15,31,376 14,06,383
Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) 3,30,924 3,18,112
EBITDA Margin (EBITDA/ Revenue from operations [Net]) 21.61% 22.62%
Profit After Tax 2,34,893 2,06,542
No. of Days Inventory/ Value of Production 133 130
No. of Days Trade Receivables/Turnover 148 173
Current Ratio 1.39 1.41
Debt Equity Ratio - -

3. Analysis of Financial Performance of FY 2021-22:

• Turnover registered a growth of 8.87% from Rs. 13,81,816 Lakh in 2020-21 to Rs. 15,04,367 Lakh in 2021-22.

• Value of Production has increased from Rs. 13,94,749 Lakh in 2020-21 to Rs. 15,32,064 Lakh in 2021-22. Increase of 9.85%.

• 13.73% increase in Profit After Tax, from Rs. 2,06,542 Lakh in 2020-21 to Rs. 2,34,893 Lakh in 2021-22.

• Increase of PAT to Turnover Ratio from 14.95% in 2020-21 to 15.61% in 2021-22.

• Turnover per Employee has increased from Rs. 150.66 Lakh in 2020-21 to Rs. 169.93 Lakh in 2021-22.

• Earnings Per Share has increased from Rs. 8.48 in 2020-21 to Rs. 9.64 in 2021-22.

• Book Value Per Share has increased from Rs. 44.36 in 2020-21 to Rs. 49.18 in 2021-22.

• Net Worth has increased from Rs. 10,80,789 Lakh in 2020-21 to Rs. 11,98,426 Lakh in 2021-22.

• Return on Net Worth has increased from 19.11% in 2021-21 to 19.60% in 2021-22. The main reason for increase is due to increase in value of production by 9.85%.

(D) Development in Human Resources:

BEL has been focussing on sustained development of its employees, both at the individual and at the team level through various Human Resources Development initiatives. The focus has been on Development and Enhancement of Functional, Behavioural and Leadership Competencies in Executives across all Domains and Grades. In line with this various Technology specific programmes, Management Development Programmes, Quality Related Certification Programmes and CEP Programs were organised both Internally through Subject Matter Experts and Externally through Premier Training Institutions.

Some of the Learning and Development initiatives rolled out during the year are enumerated below:

Sl. No. Name of the Program Brief of the Program Target Audience Coverage
1 Creativity and Innovation Program (CIP) Creativity and Innovation is an essential imperative for executives in our organisation. This Program will address the business case for innovation and varied aspects of Creativity and Lateral Thinking required for progressing towards innovative behaviour culminating in effective growth. E-II & E-III Executives 20 Executives attended the program
2 Re-Orientation Program for Promotee Executives Re-orientation Program for Promotee Executives (ROPE) is organised as a structured development program to impart basic behavioural and management principles and concepts to promotee executives. E-I & E-II Grade Executives 30 Executives attended the program
3 General Management Program for Young Executives (GEN Y) General Management Program for Young Executives (GEN Y) Program is organised to sensitise executives in E-II/E-III grade with the trends in business environment and impart basics of general management subjects. E-II & E-III Grade Executives (Directly Inducted) 29 Executives attended the program
4 Deputy Managers Executive Education Program (DEEP) Deputy Managers Executive Education Program - DEEP is being conducted to familiarise executives in E-IV grade to develop a deeper insight into management functions like Strategy, Finance, Marketing, HR, etc. and provide an integrated perspective for executive development. The contents of the program have been curated to be in line with the requirement of FDC of BEL. E-IV Executives 30 Executives attended the program
5 Young Leaders Program (YLP) Current business environment demands executives to achieve peak performance for business excellence. This dedicated program is conducted for executives to address competencies required for their personal development enabling them to progress towards leadership roles facilitating business goals. E-IV Grade Executives 25 Executives attended the program
6 Leadership Acceleration Program (LEAP) Leadership Acceleration Program is being conducted to enhance leadership skills as executives in Manager grade hence enabling them to evolve as effective leaders. This program equips Managers to understand interpersonal dynamics & leverage the same to foster a high performance work culture. E-V 79 Executives attended the program
7 Program for Awareness on Coaching Essentials (PACE) Two programs were conducted to help Executives understand the concepts, methodology and practices in Coaching. E-V Grade Executives 71 Executives attended the program
8 Induction Program Probationary Engineers The Induction Program will enable PEs to understand the business operations and manufacturing procedures at BEL, with specific technical overviews along with Plant visit and Customer Site visit. The Induction Program also provides an opportunity for the PEs to imbibe professional skills that will help them to align with Organisational culture and requirements. E-II Grade Executives 33 Probationary Engineers Recruited during FY attended the program
9 Intellectual Property Rights The Program provides basic awareness on Intellectual Property Rights covering the various types of Intellectual Property like patents, copyrights, trademarks etc. All Executives 143 Executives attended the program
10 Competency Enhancement Training Program (COMET) Competency Enhancement Training Program (COMET) was conducted to enhance specific competencies for Executives after mapping the competencies in E-I to E-III grades, based on BEL Behavioural Company Model, analysing the group reports, identified behavioural competencies. Executives in E-I to E-III grades 155 Executives attended the program
11 Finance for Non-Finance Exec Program Developing a financial acumen is essential for all Executives. Also, in a highly competitive business environment, working knowledge of financial concepts is essential. This Program will enable participants to gain insight into various aspects of Finance and in turn take informed decisions. E-III & above 55 Executives attended the program
12 Competency Development Program (CODE) Online Development Centres (ODC) has been conducted for executives in E-IV and E-V grades to identify the gaps in the Competencies based on BEL Behavioural Company Model. Analysing the group reports, identified behavioural competencies has been focussed in Competency Development Program (CODE) for enhancing specified competencies for individual and organisational excellence. E-IV and E-V Grade Executives 240 Executives attended the program
13 High Impact Trainer (Train the Trainer) (HIT) Program High Impact Trainer Program is a Train the Trainer Program conducted to develop a pool of internal Trainers possessing the appropriate competencies required for imparting training in various domains. Executives in E-IV and above Grades. 27 Executives attended the program
14 Mastering the Art of Feedback (MAF) Receiving and giving feedback is an integral part of Performance Management. This program is being conducted to empower our executives to receive and provide feedback for improving and building High Performance Teams. E-IV & above 136 Executives attended the program
15 Enterprise Risk Management (ERM) The occurrence of unanticipated business risks for the organisation is high. Enterprise Risk Management Program will provide a comprehensive overview to the participants on the theory and practice of Enterprise Risk Management. E-V and above Grade Executives 35 Executives attended the program
16 Strategy Building and Competitive Intelligence (SBCI) The current business scenario is intensely competitive and hence there are challenges posed by various players in different business segments. This Program will enhance strategising skills essential to achieve business growth. E-VI and above Grade Executives 27 Senior Executives attended the program
17 Labour Laws and Domestic Enquiry Procedures Program Legal System and Labour Legislations have a considerable impact on the functioning of industrial establishments. This program has been conducted for our Executives to be judicious and be aligned with the legal procedures prevalent since there are legal ramifications. Executives in various grades. 32 Executives
18 Advanced Leadership Program (ALP)-I Assessment Centres are being conducted for senior executives to assess their Behavioural Competencies based on the BEL Behavioural Competency Model. Based on the Group Reports, identified Behavioural Competencies has been addressed in the Advanced Leadership Program for building these competencies for individual growth and organisational excellence. Executives in E-VI and E-VIA and E-VII Grade 54 Executives attended the program
19 Assessment and Development Centres Certification Program (ADCC) Competency based Assessment and Development Centres program are being conducted for our Executives to assess their level of leadership competence. This program enhances the knowledge of our executives for internal capability building; to align with the competency based development initiatives. Executives in E-V and above Grades 33 Executives Nominated for the Program
20 Post Graduate Certificate in Management- I & II Managers face the challenge of increasing competition due to the globalisation of business and economy. Salient changes witnessed are the liberalisation of economies, new industry structures, technological advances, changes in the customer preferences and emergence of new forms of organisation and management practices. This Program will enable participants to have an in-depth knowledge of business subjects. E-IV & above Grade Executives 25 Executives attending in Each batch of the program
21 Certificate Program in Executive Coaching Leader have to appreciate that business goals can be achieved by instituting a coaching culture in the organisation it is imperative to gather leadership insides through the process of capability building in executive coaching for individual and organisation growth. E-V & above 24 Executives Nominated for the Program

In addition to the above, the following new Domain-wise Competency Enhancement Programs were initiated during the financial year 2021-22

Sl. No. Name of the Program Brief of the Program Target Audience Coverage
1 Competency Enhancement Program for Material Management Executives (Purchase) To enhance the competency of executives working in the Sub Contract domain, this program is organised covering the topics critical aspects of Purchase Procedure Preventive Vigilance and internal controls pertaining to Purchase Domain, Goods and Services Incoterms 2020 GST Letter of Credit Mechanism and Customs Procedure All Executives of Purchase Department across Units 46 Executives attended the program
2 Competency Enhancement Program for Material Management Executives (Sub-Contracts) To enhance the competency of executives working in the Sub Contract domain, this program is organised covering the topics critical aspects of Sub Contract Procedure Preventive Vigilance and internal controls pertaining to subcontracts Domain, Goods and Services All Executives of Sub -Contracts Department across Units 33 Executives attended the program
3 Competency Enhancement Program for Marketing Executives This program focusses on development of better customer insights so that opportunity can be seized in a changing business environment. It also touches upon aspects of branding, forecasting and regulatory frameworks and International Trade Laws All Executives of Marketing Department across Units 31 Executives attended the program
4 Competency Enhancement Program for Finance Executives Awareness Program on INCOTERMS – 2020 (6 Batches) To enhance the knowledge of executive and the revised INCOTERMS 2020 Finance Executives 123 Executives attended the program

During the FY 2021-22, various Technology programs were conducted to enhance Domain knowledge and Competencies of our engineers in various technology areas. Executives were also nominated for External Technology programs conducted by Premier Institutes. Some of the programs conducted at BAE/Nominated by BAE are:

Sl. No. Name of the Program Brief of the Program Target Audience Coverage
1 60 Unique technology programs from various technology domains Topics on Communication, Signal Processing, RADAR, SONAR, Microwave Engineering, Antenna, Rob dynamics, GIS, Automation, Control Systems, Simulators, Avionics & Electronic Warfare Systems, EMI/EMC, RFIC Design, Unmanned Systems, Artificial Intelligence, Data Analytics, Machine Learning, Cryptography, Cyber Security, Simulators, IoT, Cloud Computing, Programming Languages. EII-EVIA 2,057 Executives attended the program
2 Certification Programs Topics on Wireless & Cellular Communication, SDR, Microwave Engineering, Mechanical Vibration, Machine Learning, Cryptology, Artificial Intelligence, FPGA, RADAR, Antenna, EW&A, Image Processing, Industry 4.0, HVAC, IndAS, GST, IBC, CDMA/MIMO/OFDM, Patent law for Engineers & Scientists, Manufacturing Automation, Control Systems, Unmanned Systems. EII-EV 117 Executives attended the program
3 M.Tech (Communication & Signal Processing) - IIT Madras Covers advance topics in DSP, Modulation and Coding, Wave propagation, Antenna, Wave guides, Microwave circuits and RADAR systems. EII-EV 20 Executives are attending the program
4 M.Tech (Data Science & Engineering/AI) -BITS, Pilani Provides mathematical foundation for data science and develop models based on AI, ML, Deep Learning and Natural Learning processing. EII-EV 35 Executives attended the program
5 IITM - M.Tech (Microelectronics) - IIT Madras Specialisation in Microelectronics with emphasis on design, simulation, modelling, fabrication and testing of microelectronic devices and systems. EII-EV 20 Executives are attending the program
6 M.Tech (Communication & Signal Processing with Networks Specialisation) - IIT Madras Covers advance topics in the areas of communications & signal processing, with a focus on networks that includes wireless LANS, cellular communication networks. EII-EV 13 Executives are attending the program

In the Quality Domain, following Programs were conducted during FY 2021-22:

Sl. No. Name of the Program Brief of the Program Target Audience Coverage
1 Certified Quality Engineer (ASQ-CQE) The ASQ-CQE Certification is a globally recognised certification for Quality Engineers working in any fields. This is the mother of all ASQ Certifications, and it is one of the most comprehensive programs on quality. The program covers the whole set of quality concepts which are imperative for any Engineer working in any field, and who intends to improve his/her work processes. The ASQ-CQE Body of Knowledge (BoK) covers all the latest and relevant global concepts on quality and related topics. Executives in E-III to E-VIA grade 47 Executives attended the program
2 Certified Reliability Engineer (ASQ-CRE) The ASQ-CRE is one of the most sought-after and globally recognised certification for Design Engineers. The ASQ-CRE Body of Knowledge (BoK) includes design review and control, prediction, estimation, and apportionment methodology, FMEA, Planning, operation and analysis of reliability testing including mathematical modelling, understanding human factors in reliability and the ability to develop and administer reliability information systems for failure analysis, design, and performance improvement over the entire product lifecycle Executives in E-III to E-VIA grade 47 Executives attended the program
3 Certified Manager of Quality/Organisational Excellence (ASQ-CMQ/OE) The ASQ-CMQ/OE is one of the most prestigious and globally recognised certification for top level Quality Managers. The ASQ-CMQ/ OE Body of Knowledge (BoK) includes topics like: Lead and champion process improvement initiatives in organisations. Lead team efforts to establish and monitor customer/supplier relations; support strategic planning and deployment initiatives. Develop measurement systems to determine organisational improvement. Motivate and evaluate staff; manage projects and human resources. Analyse financial situations, determine and evaluate risk, and employ knowledge management tools and techniques in resolving organisational challenges. Executives in E-V to E- VII grade (E-V + 4 Years? Experience) 20 Executives attended the program
4 Project Management Professionals (PMP) The PMP Certification [based on Exam Content Outline (ECO)] is one of the most sought-after and globally recognised certification for Project Managers. The Project Management Body of Knowledge (PMBOK) includes ten Knowledge Areas (KAs) and the Agile Practice Guide. There are a total of 49 processes in these ten KAs grouped under five Process Groups i.e. Initiating, Planning, Executing, Monitoring & Controlling and Closing Process Group. This program introduces the participants with the basic project Management terminology, glossary and concepts including the Agile concepts as given in the PMBOK Guide. This "35 Contact Hours Project Management Preparatory Training" Program is a mandatory requirement for taking the PMP certification exam offered by PMI-USA. Executives in E-IV to E-VII grade 93 Executives attended the program
5 Design for Six Sigma – Green Belt (DFSS-GB) (ISI) Studies have shown that 70 - 80% of all quality problems are design related. The Design for Six Sigma (DFSS) aims to design or redesign products, services or processes so as to achieve Six Sigma quality. In addition to Six Sigma DMAIC tools, the program provides additional tools, structure and better methods for new design or design modification to achieve greater commercial and technical success of the ultimate product or service. The DFSS approach uses a structured method of DMADV, which indicates the five phases of design improvement, i.e. Define, Measure, Analyse, Design, and Verify. Executives in E-III to E-VIA grade 47 Executives attended the program
6 Certified Six Sigma Black Belt (CSSBB) (ISI) Six Sigma-DMAIC methodology is a powerful breakthrough business strategy based on data and fact driven approach, and sound performance metrics coupled with statistical analysis. It uses a structured method of DMAIC, i.e. Define, Measure, Analyse, Improve, and Control. The program is at Black Belt (BB) level. A Certified Six Sigma Black Belt (CSSBB) can successfully apply the methodology for breakthrough process improvement resulting in significant improvement in quality, productivity and competitiveness. Executives in E-IV to E-VIA grade 19 Executives attended the program
7 Business Analytics & Data Management (BA&DM) (ISI) Data are extremely important for an organisation. The insights gained from data analysis can help an organisation develop specific strategies and actions to cost reduction, new product development and optimised customer offerings, and smarter business decision making that drives growth and reduces risks. In order to move to a fact-based decision making culture, managing performance, establishing a framework for decision-making and aligning strategies, the today?s organisations must adapt business analytics. The course will dwell upon the data management techniques, supervised learning for developing models using statistical learning techniques, and machine learning techniques. Executives in E-III to E-VIA grade 18 Executives attended the program
8 ISO 14001:2015 EMS Internal Auditor Program Internal audit is an important aspect of an Environmental Management System. This course is intended to provide an understanding of the global environmental issues, the national and international legal and regulatory framework for environmental protection, and the requirements of the ISO 14001:2015 Standard. The program also covers the auditing requirements, and methodologies essential to conduct an effective internal auditas per ISO 19011 Guidelines. Audit case studies and open discussions are used to reinforce the learning and required skills of an internal auditor. Executives in E-IV to E-VIA grade 44 Executives attended the program
9 SIX SIGMA DMAIC - GREEN BELT (GB) Six Sigma is a data-driven, process-oriented approach, for causing breakthrough improvement in products, processes, and services. Six Sigma is a new culture of doing business. It started with defect elimination through variability reduction in processes, and has become now a means to achieve business excellence. Six Sigma DMAIC methodology uses a structured method of Define, Measure, Analyse, Improve and Control. The program will cover the basic concepts of Six Sigma, various quantitative data analysis techniques for structured problem solving method, lean concepts, principles and tools. This program will equip the participants to acquire Six Sigma Green Belt certifications, and to successfully apply the methodology for breakthrough improvement. Executives in E-III to E-VIA grade 183 Executives attended the program
10 Six Sigma Green Belt for Software (SSGB-SW) (ISI) Six Sigma is a data-driven, process-oriented approach, for causing breakthrough improvement in products, processes, and services. It started with defect elimination through variability reduction in processes, and has become now a means to achieve business excellence. Six Sigma DMAIC methodology can be effectively used in software field for designing and developing high reliable software products based on data analysis. It uses a structured method of Define, Measure, Analyse, Improve and Control. The program will equip the participants to acquire Six Sigma Software Green Belt certifications, and to successfully apply the methodology for breakthrough improvement. Executives in E-III to E-VIA grade 25 Executives attended the program

Some of the external/open programs attended by our Executives are:

i. Webinar on Overview on Lean Management organised by SODET.

ii. Course on operational audit with idea analytics by IIA.

iii. Online program on applications of GeM, GFR & CPP in Public Procurement organised by Ni-MSME.

iv. Orientation Program on Insolvency & Bankruptcy Code organised by DPE.

v. IIMB CCGC Webinar on Corporate Reporting Dialogue: Future of Corporate Transparency and Disclosure by IIM Bangalore.

vi. Program on management of technology and innovation organised by IPE.

vii. Workshop on posh of women at workshop organised by NIPM.

viii. CII Annual Meeting 2021 on the Theme: India @75: Government and Business working together for Atmanirbhar Bharat by CII.

ix. Webinar on Practical Aspects of POSH - Concerns & Challenges by EFSI.

x. 15th Global Communications Conclave - Communication 2021-2030 "Mapping the Mega Trends" by PRCI.

For and on behalf of the Board
Anandi Ramalingam
Bengaluru Chairman & Managing Director
28 July 2022 (Additional Charge)