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 Covid-19 pandemic has triggered the worst global recession in 2020 since the Great Depression of 1930s. This resulted in the drastic decline in global trade, lowering of commodity prices and tighter external financing conditions with varying implications for current account balances and currencies of various countries.

The Indian economy in 2020, experienced a crisis in the form of Covid-19, which forced the Government to resort to lockdowns, thus impacting the various economic and financial activities in the country. This disruption led to the contraction in the economy and the first quarter of the GDP witnessed a significant contraction.

The crisis necessitated a massive stimulus programme, amounting to about 13% of the GDP. The fiscal deficit (FD) also increased from 3.5% to 9.5% of the GDP in 2020-21.

As per the National Statistical Office (NSO), Indias real Gross Domestic Product (GDP) is estimated to contract by 7.7% in 2020-21, compared to a growth rate of 4.2% in 2019-20. The advance estimates for FY 2020-21 are expected to stage a resilient V-shaped recovery in 2020-21. After an estimated 7.7% pandemic-driven contraction in 2020-21, Indias real GDP is projected to record a growth of 11.0% in 2021-22 and the nominal GDP by 15.4%. However, impact of the 2nd wave of Covid-19 on the economy needs to be gauged in the near future.

India recorded a current account surplus of 3.1% of GDP in the firsthalf of FY 2020-21, largely due to services exports. However, the prospect is dependent on the global Covid outlook for external demand normalisation.

Defence

As per the SIPRI report released in April 2021, the global Defence spending reached US $1981 billion in 2020, a 2.6% annual uplift in real terms compared to 2019 – the highest level since 1988. As a proportion of the GDP, global spending sharply increased from a 2.2% in 2019 to 2.4% in 2020, an increase seen even after most countries in the world experienced severe economic contractions due to Covid-19.

The United States continues to be the highest military spender in the world, followed by China, India, Russia and United Kingdom, with India as the 3rd largest military spender in the world.

Military expenditure in 2020 as a percentage of the GDP in the highest spending countries are Oman (11%), Saudi Arabia (8.4%), Algeria (6.7%), Kuwait (6.5), Israel (5.6%), Russia & Morocco (4.3%), Ukraine (4.1%), Pakistan (4%), United States (3.7%), Colombia (3.4%), Singapore (3.2%), India (2.9%), South Korea (2.8%), etc.

In the context of the serious economic stress, the decline in tax revenue and high fiscal deficit, the hike in Indian budget for Defence was meagre.

The regional conflicts and tensions continue to rise creating real and perceived threats to the nation. Also, the geo-political situations in Ladakh & other border areas needed an urgent modernisation of Defence equipment. To counter these threats, more Defence products are likely to be purchased in the South Asian region.

Defence allocation in the budget has been increased to RS. 4,78,196 crore for the financial year 2021-22, an increase of RS. 6,818 crore or 1.4% hike in budget. 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. 1,35,061 crore for FY 2021-22 represents an increase of 18.75% over FY 2020-21. This is the highest ever increase in capital outlay for Defence. The capital expenditure allocated to the Air Force was RS. 53,215 crore, for the Army RS. 36,552 crore and the Navy RS. 33,254 crore.

As a policy initiative, in September 2020, the limit for foreign direct investment (FDI) under the automatic route was increased from 49% to 74%. The FDI beyond 74% is permitted following Government approval, which is provided for access to modern technology.

Domestic companies can benefit from enhanced access to capital and state-of-the-art technology. This change was announced as part of the Aatmanirbhar Bharat Abhiyaan.

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 and Software Solutions.

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. 1.66 lakh crore in the Union Budget for 2021-22, marginally lower than the allocation of Rs. 1.67 lakh crore in the last Budget.

The total budget allocation for the Union Home Ministry for 2021-22 for the Police Forces (which includes the Central Armed Police Forces (CAPFs) and Delhi Police) is RS. 1,03,802 crore against RS. 105,244 crore in 2020-21, marginally lower compared to the last Budget. Out of this RS. 9,715 crore is allocated for capital expenditure. The CAPFs, which include forces such as CRPF, BSF, ITBP, SSB, CISF and the Assam Rifles, have been allocated RS. 77,838 crore, almost the same as the last Budget. The Intelligence Bureau has been allocated RS. 2,839 crore.

Central police organisations such the Narcotics Control Bureau and the National Investigation Agency, among others, have been allocated RS. 1,000 crore. Police infrastructure expenditure has dropped from RS. 4,134 crore in the last budget to RS. 3,612 crore in this budget.

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), City Level Advisory Forums (CLAF) and appointed Project Management Consultants (PMC) to appraise, approve, implement, manage, operate, monitor and evaluate the projects. The various Smart City projects are under various stages of implementation.

The Smart Cities Mission has been given RS. 6,450 crore in the 2021-22 Budget against RS. 3,400 crore in the 2020-21 revised estimates.

As per news reports, out of the proposed 100 smart cities, in 53 cities Integrated Command and Control Centres are functional and many cities are able to effectively leverage technology in improving citizen services, reduction of crime and improve the overall quality of life, especially during this pandemic situation.

The Strategic Business Unit which was formed exclusively to address the Smart City and Homeland

Security business, has made significant achievements by bagging several orders for Homeland Security and Smart City projects which are under different stages of implementation.

Energy Storage Products

There are substantial business opportunities in the alternative power 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).

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. India plans to offer $4.6 billion in incentives to companies setting up advanced battery manufacturing facilities as it seeks to promote the use of electric vehicles and cut down its dependence on oil, according to a proposal drafted by the NITI Aayog.

Among the mature storage technologies, lithium-ion (Li-ion) batteries are the most versatile and efficient storage devices. In addition to lithium ion opportunities, 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 focused 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 an MoU with M/s Triton Electric Vehicle LLC USA for cooperation in Energy Storage Systems and Electric Vehicles.

Solar – Renewable Energy

The Government has set an ambitious target of generating 450 GW of renewable energy by 2030. This includes a target of generating 175 GW of renewable energy by 2022 with a target of 100 GW from solar power. However, the GoI is confident of achieving 225 GW of renewable energy by 2022, breaching the set target of 175 GW. In the Budget for year 2021-22,

RS. 1000 crore has been earmarked for the Solar Energy Corporation of India (SECI) which will enable the SECI to float 15,000 MW of tenders on a yearly basis.

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 focused approach to target the requirements of the Solar Business, which is likely to contribute to BELs 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.

Space Electronics

ISRO has opened up opportunities for manufacturing of ‘Polar Space Launch Vehicles (PSLVs) and small & micro satellites, for the Indian industry. The global requirement for small satellites 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 satellites 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. 13,949 crore for the year 2021-22, which is a growth of 33% from the FY 2020-21 budget. Out of this RS. 8,228 crore has been earmarked for capital expenditure. This clearly indicates the growing investment in space and Indias 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 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 year 2020-21, BEL has responded, as lead bidder with consortium partners, to the RFI for PSLV productionisation among Industry players and has been shortlisted for participation in the RFP.

BEL also expressed its interest for participation in productionisation of Small Satellite Launch Vehicle (SSLV) for 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 TWTs, which have usage in Defence, Government services and paramilitary applications, in collaboration with ISRO. 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:

With the advancement of digital technologies and their use in almost all areas, businesses like e-Governance, Defence, banking, etc. have become vulnerable from cyber-attacks. To address the above issues, a cyber security solution requirements range from Cyber Warfare, Espionage, National Defence, Protection of Intellectual Property, Data Security for employee / customer / personal information, are being developed.

The global Cyber Security market is expected to reach about US $190 billion by year 2025 and the cyber security market in India is estimated to be about RS. 20,000 crore for next three years.

BELs Network & Cyber Security division is working in the domain area of network elements and security, computing elements, encryption, security management, data analytics, cyber forensics, security services, etc.

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 premier Central Govt /PSU organisations, Data-Diode Solutions for Defence, PKI, Secure Tokens and associated services for IAF, system hardening for radios, secure computing solutions for Sonars & Radios, timing servers/systems for Navy and Defence, AI & data analytics for Navy and DRDO and security services for Banking/Govt Agencies.

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, ISO 27001 Information security management Lead Auditor 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 Make-In-India initiative, the plan is to create a future ready railway system by 2030, bringing down the logistic cost for Indian industries.

The total capital expenditure by Railways for 2021-22 is projected at RS. 2,15,058 crore, an annual increase of 21% over 2019-20.

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/Automatic Train Supervision (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, etc. are some of the key areas being pursued by BEL.

BEL is collaborating with various public/private organisations in the area of ATS System, Mission Critical Communication System, Composite panel 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 from US $74.0 billion in 2020 to US $112.8 billion by 2025, at a CAGR of 8.8%. The demands for lightweight, high-performance, corrosion resistance, long life are some of the key factors which are influencing the growth of the composite business.

BEL is planning to address the composites structures requirements of ship yards, submarines, aero structures, Railways & Metros, land equipment, pressurised missile containers, high altitude enclosures etc.

BEL has set up facilities for Resin Film Infusion (RFI) and Vacuum-Assisted Resin Transfer Molding Process (VARTM). BEL has also tied up with CSIR lab, Academia for consultancy and development of composite structures. Composite panels are being planned for development as per the requirement of shipyards and railways.

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 US $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 focused 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 are also being focused.

Medical Electronics & Healthcare Solutions

The medical device industry is poised for steady growth, with global annual sales forecast to rise by over 5% a year and reach nearly US $800 billion by 2030. BEL, after successfully manufacturing 30,000

ICU ventilators to address the pandemic issues, has taken firm steps in diversifying into the medical electronics & the healthcare segment. Your Company has created a business vertical - ‘Medical Electronics Division - to address the business in this segment. One of the objectives of your Company is to enter the market in this segment and introduce affordable healthcare products/solutions to urban & rural populations in India and achieve Atmanirbhart in the Healthcare segment. The BEL medical electronics division is ISO 13485 certified during this year.

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 has planned to produce dialysis machines, portable remote patient health monitoring system, patient monitoring system for ICUs, C-Arm X-ray machines, oxygen concentrators, turbine-based ventilator, MRI etc.

Focused approach for new areas in Defence

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

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 US $5 billion during the LTIPP 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.

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.) and Ground Control Station requirements of the UAVs. BEL has also developed Drone Guard Systems.

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

RF and IR Seekers

BEL is involved with the DRDO for concurrent absorption of technology for further engineering and production of RF and IR Seekers for various indigenous missiles categorised for domestic manufacturing. These Seekers are in various RF and IR spectrum bands.

BEL has been investing for the creation of modern manufacturing facilities for the indigenous manufacture of RF and IR seekers. The production lines creation for RF Seekers has been completed and Seekers manufactured in these lines have successfully completed flight trials during the year.

The requirements for RF and IR Seekers are derived demands arising out of procurement of various Next Generation Missiles. Some of these missiles are also included in the first negative list of import by the Ministry of Defence (MoD).

As per the reports, the global rocket and missile market is projected to reach US $ 71.79 billion by 2027, exhibiting a CAGR of 4.52% during the forecast period (2020-2027).

As BEL is a leading manufacturer of missile systems in India, with the requisite infrastructure and capability and long-term association with DRDO for concurrent absorption of technology, engineering and manufacturing of such systems; it is expected that RF and IR Seekers would be among the top new technology products which would contribute to BELs revenues in the near future.

Missiles, Arms & Ammunition

Due to the geopolitical situation in the country, there has always been substantial requirement of products in this segment. The demand is primarily met by dedicated Government manufacturing entities set up specifically for this purpose. The balance demand met with imports from various OEMs etc. To reduce dependency on imports for this critical category of military sufficiency hardware and achieve self-in domestic manufacturing and supply, the Govt. of India has opened up the manufacture of arms and ammunition for the Indian industry. To further assure and enable indigenous manufacturers to plan and create necessary infrastructure, technology/ manufacturing arrangements etc., the Govt. of India has included substantial products from this category in the first negative import list released during August, 2020.

The negative list of products under this category include, Ship borne Cruise Missiles, Beyond Visual Range Air to Air Missiles (BVRAAM), Rockets (Artillery and Anti-Submarine), Assault & Sniper Rifles Multipurpose Grenades, 40mm UBGL (Under Barrel Grenade Launcher), medium and high calibre ammunition for Artillery and AD Guns (120mm FSAPDS Mark II, 125 mm FSAPDS New Generation Ammunition, 30 mm Infantry, 155 mm Artillery Ammunition, 30MM HEI/HET, 23 mm ZU Ammunitions), Bi- Modular Charge System (BMCS), Electronic Fuses for Artillery Ammunitions etc.

The procurement of these items is initiated under various capital / revenue routes including Make-II procedures. It is expected that the renewed focus on indigenous manufacture of these critical military hardware, which are consumable in nature, would create sufficient near to long term market demand for this product segment. This segment also has good export market potential and as per the reports, the Global Arms and Ammunition Market is anticipated to reach US $35.63 billion by 2027 with a CAGR of 4.8%.

In this area, BEL is already engaged in the development and manufacture of missile electronics and parts, ammunition fuzes, Glide Bombs etc. BEL is actively pursuing the opportunities for next generation missiles (through DRDO, DcPP, etc.) and ammunition, including smart ammunition, small arms etc. BEL is also partnering with technology partners, Academia, R&D institutes, start-ups etc. to achieve the intended objective of indigenous manufacture of the required arms and ammunition.

With regard to the creation of the required infrastructure, BEL has been making the required investments for creation of the necessary infrastructure for manufacture of missiles, glide bombs, rockets and is its related parts. Substantial progress has been made during the last couple of years in this regard.

(b) Industry Structure and Developments – Macro View

At present, India is the second largest importer of Defence equipment with majority of its Defence needs being met through imports. 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 startups 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 been released with several improvements focusing 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.

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. The MoD has released a simplified Make-II procedure to help import substitution and promote innovative solutions. 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 Corridor will have six nodes at Agra, Aligarh, Chitrakoot, Jhansi, Kanpur and Lucknow. The Tamil Nadu Defence Corridors will have five nodes at Chennai, Coimbatore, Hosur, Salem and Tiruchirappalli. An investment plan of about RS. 3,100 crore and RS. 3,700 crore has been announced for Tamil Nadu and the UP corridors respectively by Ordinance Factories, DPSUs and private companies.

The procedure of ‘Make-I has been simplified and a new ‘Make-II programme has been introduced by the Government which is likely to help MSME and startup companies to integrate into Defence production.

BEL is also participating in many of the Make II programmes of the Defence services.

Toward MoDs big push to Atmanirbhar Bharat initiative, MoD has put Import embargo in Aug 2020, on 101 items beyond given timelines to boost indigenisation of defence production. BELs Products/ Systems can meet about 35% of this negative list of Defence.

Under these changing business scenarios, BEL is focusing on enhancing its interaction levels and building long-term relationships with emerging Strategic Partners, users and other key stake holders in the Indian Defence industry.

(c) SWOT Analysis – Looking Inwards Strengths

• Established Defence electronics player in India

• Defence PSU with a good image, reputation and work ethics culture

• 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 company wide 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

• Loyal customer base

• Agility in diversification initiatives

• Active learning from collaborators

• Expertise and experience in executing large & 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 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

• Governments 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 China as a manufacturing base

• Govt. of India push for alternate energy sources (Solar, Electric Vehicle).

• Space segment opening up to 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.

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

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

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

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

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, C4I Systems, Night Vision Devices, Multi-sensor Stabilization 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, the Ordnance Factory Board, 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 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. Benefitting 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 deployed an FM-based Passive Radar Demonstrator in Bangalore. A well-equipped Integration and Verification facility for high-end avionics systems set-up is geared to fulfil the offset sourcing in the Defence market. The Company is also involved in providing technical and product support for Air Traffic Management Radars.

BEL is in advance discussion with an Israeli OEM to establish a new Joint Venture Company to provide Product Life Cycle Support for the Air Defence Weapon System Programmes.

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 constant upgrade for realising solutions with a competitive edge. While it is inevitable to use proprietary technologies, getting locked into a single source for technologies/solutions is a major challenge.

The demands of size, weight, power and quality requirements always push R&D efforts to the edge. At component level, R&D efforts are steered towards meeting newer requirements of SoC, MMICs, highly integrated processor ICs, microwave super-components, etc. At the product level, R&D efforts are towards creating modular, configurable, multifunction and fault-tolerant products. Realising System of Systems needs expertise in systems engineering, project management along with system integration expertise. Obsolescence of critical components, continued dependency on the OEMs and requirement to support the entire product lifecycle 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 is put in place. At the topmost tier, the Central Research Laboratories (CRLs), each located at Bengaluru and at Ghaziabad, are engaged in blue sky research and applied research in core technology areas of Communication, C4I, Big Data, Network Centric Software, Electronic Warfare, Radio Frequency, Microwave, Power Amplifiers, Antenna, Radar Signal and Data Processing, Image Processing, Electro-Optics and Lasers, SoC, Embedded Smart Computing, Sensors, Networking, Navigation, Artificial Intelligence, Cyber Security, Cloud and Data Analytics, Machine Intelligence, Robotics, Unmanned Vehicles, NMS, DSS, Multi Sensor Tracking and Data Fusion etc.

At the second tier, a centralised Product Development and Innovation Centre (PD&IC) located at Bengaluru, focuses on engineering of core technology modules into products / systems. The core areas are Autonomous Systems, Communication Systems, Crypto Systems, Embedded Systems, Electro-Optics and Lasers, Energy Systems, Engineering Solutions, Radar Systems, RF and Microwave, MMIC, Sonar Systems, Super components, Electronic Warfare, Navigation and Stabilization, Weapon Systems etc.

At the third tier, the Development and Engineering (D&E) divisions operating at all Strategic Business Units (SBUs) and Units liaison with end customers for understanding their requirements, mapping them to technical specifications and developing products/solutions incorporating the core technology modules developed through the higher tiers, i.e. CRLs 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 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 R&D partners.

To overcome the challenge of lock-in to proprietary technologies, in feasible areas, the Company develops technology modules/ solutions based on standard protocols and with modular designs which can be evaluated using standard test and measuring instruments. Even when a given Technology Module/ Product/ Solution is built to specification (tailor-made 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 are 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 created to safeguard the company from getting locked in. The ever-increasing need for low size, weight, power is being addressed through development of a series of miniaturised platforms / products / solutions by optimizing processing performance, packaging and thermal management with standards driven approach. The obsolescence is being addressed through obsolescence management plan by creating alternate sources and indigenisation.

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 the year 2020-21:

• New initiatives taken in the emerging technology areas are Quantum Cryptography, Photonics based Radars and ESM, High-powered lasers, Geospatial Analytics, Image Profilingusing LiDARs, 5G communication, OFC based PIDS, 3D imaging using Drones, 400G optical transport, Big Data Analytics, Intelligent process automation, Artificial Intelligence-based detection and navigation etc.

• BEL had initiated development of several Artificial Intelligence-based products some of which are Gesture recognition for surveillance applications, Automatic Information Extraction & Synthesis, Traffic Analytics Module and Activity inference for enemy target using templating for air operations (C4I).

• Efforts are on to enhance collaboration with premier educational institutions and setting up R&D / Innovation cells in select institutions. The Companys R&D Cell at Kochi has realised core technology modules for sonars and simulators. The Companys R&D Cell at IIT Madras Research Park is developing core technology modules for 5G communication systems. Establishing such R&D cells at other campuses is being explored.

• The Company has been vigorously pursuing IPR-related activities. Concerted efforts have resulted in the grant of the following three patents during 2020-21:

Doppler-based Classifier for Automated Target Recognition

Proportional or Ratio-metric configurable Linear Variable Differential Transformer (LVDT) driver cum signal demodulator Application Specific Integrated Circuit (ASIC) Method for fabrication of Thin-Fin heat sink

• As on 31/03/2021, 13 cumulative patents were granted to the Company. In financial year 2020-21, a total of 162 new IPR applications were filed (Patents: 84, Copyrights: 68, Industrial Design: 7, SICLD: 3). R&D engineers have presented and published 97 papers in reputed conferences/seminars/journals.

• BEL has empanelled 16 new Collaborative R&D partners in FY 2020-21. As on 31/03/2021, cumulative Collaborative R&D partners empanelled are 279 (including 136 MSMEs). The partners have been categorised under R&D solution providers: 31, design service providers: 179, consultants: 36 and production service providers: 39, of which six are empanelled under two categories.

• Technical symposium at Central Research Laboratory, Bangalore was organised online.

New initiatives undertaken by the Company in collaboration with academia:

• Dual Band Antenna for DIRCM catering to both L band (1.2GHz) and Ka band (30GHz)

• Artificial Intelligence-enabled Fake News Detection Specific areas in which R&D was carried on and benefits derived as a result of the activities:

During FY 2020-21, 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, Electro-optics and Laser, Tank Electronics, Gun Upgrades, Civilian Equipment, Homeland Security, Medical Electronics, and components.

The benefits derived are in the form of a 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 solutions have also resulted in export orders received by the Company.

Details of major accomplishments in equipment and components area:

• R&D teams played a crucial role in technology absorption and implementing performance improvements / feature enhancements to CV200 ventilators in addition to indigenisation and in-house development of a large number of critical modules / subsystems and system software in a very short span of time.

• Indigenous - Automatic Train Supervision (i-ATS) subsystem of Communication Based Train Control (CBTC) signalling system of Metro Rail (DMRC) was realised.

• ‘e-Chhawani online portal to provide municipal services to more than 20 Lakh citizens across 62 Cantonment Boards through multi-tenancy central platform was launched.

• Under the AatmaNirbhar Bharat following equipment and components were launched:

Linear Variable Differential Transducer (LVDT) Motion Sensing and Feedback Control device, due to its high accuracy of functional parameters, finds applications in Aerospace, Missiles, Solar, Aircraft Engines, Wind energy and Naval systems, and functions in adverse climatic conditions.

1kW Transmitter Aerial Switching Rack (ASR) for Advanced Composite Communication System (ACCS) onboard Indian Naval ship allows switching four High Frequency (HF) Transmitters to four HF Antennas with Antenna Tuning Unit (ATU) in any combination.

• R&D projects which have fetched considerable revenues for the Company (both Defence and Non-Defence segments) include ACCCS (SHAKTI) Phase-III, SDR-Naval Combat, 1KW HF Radio, SRE Phase 1 upgrade, Re-engineered RAWL-02 MK-IIA radar, IACCS BatcRs. 2, Coastal Surveillance System Phase 2 (ICG), Anti Submarine Warfare fleet for CMS-

17, IFF MK-XII(S) Interrogator, Simulator to train operators of Weapon System, MRSAM, Panoramic Night Vision Googles (Aviation), Uncooled TI Sights, Instant Fire Detection and Suppression System, LIVE MK-II Encryptors, SMILE MK-II Encryptors, Battery for Two-Wheeled Electric Vehicle and Train Simulator for Mumbai Monorail.

• Some of the major Technology Modules and Subsystems developed indigenously, which have resulted in import substitution are Electrical Power System (EPS) for LRSAM, Receiver Multi-coupler, Compact Tracking Radar X-Band for Lynx U2 Fire Control System,

Weapon System Computer, Directing gear, VOIP based VHF Radio communication system and VHF Marine Radio for Coastal Surveillance System, Subsystems for re-engineered RAWL-02-MK-IIA, National Common Mobility Card compliant Electronic Ticket issuing Machines and On-bus fixed Integrated Observation Equipment and VUHF COMINT Receiver.

• R&D projects undertaken by BEL which have resulted in export are Coastal Surveillance System to Myanmar Navy and Seychelles Phase 2.

(e) Diversification / Expansion Plans - New Frontiers

As a diversification exploring opportunities in allied Defence and non-Defence areas for growth, leveraging its strengths & capabilities acquired in the defence electronics domain. In the past 4-5 years, the non-Defence portion, on an average (exception being in 2018-19 due to EVM/VVPTs) in the Companys business is about 15-20% of total turnover. This year, the Company has about 22% of turnover from the non-Defence segment. The Company aims to achieve and maintain revenues of about 20-25% of its turnover from the non-Defence business in the coming years.

The Company has been putting in a continuous effort to enter and address several new areas in both Defence & non-Defence areas for further expanding its business in new markets for sustainable growth.

Some of the areas being focused upon in Defence include: Next Generation indigenous SAM Systems, Airborne Radars, Arms & Ammunition and Explosives, RF Seekers, Imaging Infra-Red (IIR) Seekers, Missile Electronics, Unmanned Systems, Thermal Imaging Detectors for Night Vision Devices, Indian Regional Navigation Satellite System (IRNSS) based Inertial Navigation Systems (INS) and solutions, laser-based Directed Energy Weapons, Helmet Mounted Display Systems (HMDS), Direct Infrared Counter Measures for Aircrafts & Helicopters, Software as a Service, Network & Cyber security, Composites etc.

Some of the areas being focused in the non-Defence include: Solutions for Civil Aviation sector including Air Traffic Controller Radars, 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, Atmospheric Water Generator, a range of Medical Electronics & Healthcare solutions (ICU Ventilators, Dialysis Machines, Patient Monitoring System, UV sanitizer, Telemedicine, Medical Simulators, Portable CT Scan, Medical Displays, C-Arm X-ray, Ultra sound and MRI) etc.

BEL has successfully diversified into Electronic Ammunition Fuzes, Missile Seekers, Light Weight Composite Shelters & Masts, Homeland Security & Smart Cities, Network & Cyber Security, Rail & Metro solutions (Real-time Train Information System, Automatic Fare Collection & Gating system for

Metro Rail), Intelligent Traffic Management Systems, the Company has been Energy Storage Products, Solar Power Plants, Cells & Modules, 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:

Due to continuous change in the business, geo political and external environment, the Company is exposed to a variety of risks which are dynamic in nature.

To address these risks comprehensively, BEL has an established Enterprise Risk Management (ERM) framework, across the company. The deployment of ERM is based on the Risk Management (RM) Policy of the Company.

Based on the recommendation of the Risk Management Committee (RMC) of the Board, the Risk Management Policy of the Company was reviewed and revised during the year, taking into consideration the requirements of Listing Regulations and changes in the business environment. The revised RM policy is released with due approval of the Board.

The Risk Management Policy outlines the risk management structure, scope & objectives, focus areas of risk, roles and responsibilities of Risk Management Committees at various levels, risk champions and other concerned personnel in the Company. A comprehensive framework for

Risk Identification,

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. Key drivers for the risks in each of the above areas are also elucidated.

The Risk Management framework of BEL has a three-tier structure, with the Board of Directors (BoD) (represented by the RMC of the Board) at the apex level and the Corporate Risk Management Committee (CRMC) at the corporate level and the Unit Risk Management Committees (URMCs) at the SBUs / units /R&D centre level.

The above framework covers all units/SBUs, R&D centres and functional areas of the Company.

The Company level risks are monitored by the CRMC, which is headed by a Functional Director and senior management of corporate at the General Manager level are its members. The URMCs are constituted at each of the units/SBUs/R&D centres for effective management of risks. The URMCs are headed by the respective heads of SBU/Unit/R&D centres and coordinated by the respective unit/R&D Centre Risk Champions.

The URMCs focus on risks specific to their area of operations and carry out risk assessment in their respective operational areas, as an ongoing activity at every quarter and conducts a formal review of risks and suggests mitigation measures. Approval of the mitigation measures are obtained by the URMCs from the Management/Board, as applicable. The URMCs further prioritise and grade their risks as per their assessment in terms of probability and impact. The top risks are reported by the URMCs to the CRMC every quarter. The CRMC analyses the Risk Register received from the URMCs and also the Company-level Risks.

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. Suitable changes or policies and processes are introduced, if required.

The implementation of mitigation measures are further reviewed by the RMC for compliance and the implementation status reported to the Board. Evaluation, Prioritization and The risks, which may have a high potential of impact on major projects, investment proposals etc., are referred to the CRMC for review and recommendation of mitigation measures. Major project proposals and those having strategic importance mandatorily include risk analysis reports as part of their proposals while seeking approval from the approving authority. This is to enable the approving authority to take informed decisions.

Some of the risk mitigation measures implemented at BEL include diversification (increase in non-Defence business, product and market diversification), development of in-house technologies through creation of centres of excellence in key technologies, partnerships for co-development, co-production & addressing new business opportunities, including those arising out of the negative list of MoD, indigenisation through partnership with MSMEs/ start-ups and BEL-Make-II policy, comprehensive vendor development, support and evaluation process, etc.

To have a uniform understanding of the ERM in the company, ERM training programmes are periodically organised by the Corporate Human Resources Department for the concerned risk committee members and other stakeholders in the Company, as a continuous activity.

2. Cost Reduction:

In view of increasing competitive environment for electronic products both in civil & defence, BEL has adopted cost reduction strategy as one of the thrust areas. The 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 up a target for achieving cost reduction. Cost reduction activities concentrate on both manufacturing & non-manufacturing areas and encompass all facets of business.

3. Indigenisation:

BEL has always been striving to achieve self-reliance through indigenisation efforts through a strong thrust on in-house R&D and indigenisation, outsourcing from Indian industries, fostering public-private partnerships, joint ventures, capacity expansion, infrastructure development/modernisation etc. The list of 100 items identifiedfor indigenisation has been published on the BEL website. Details of about 231 items of high import value are listed on the MoDs indigenisation portal (Srijan) for indigenisation. To enhance procurement through GeM, several categories of items have been earmarked for procurement only through the GeM portal. BELs test facilities are also being offered to private vendors at nominal rates.

The efforts towards indigenous development of technology and attaining self-reliance in strategic electronics are put in at the D&Es of SBU/Unit.

To provide a further thrust on indigenisation, the Company has set up an integrated state-of-the-art Product Development & Innovation Centre (PD&IC) at Bengaluru. The indigenisation efforts not only cover initiatives through in-house R&D, but also through collaborative R&D and joint development with national laboratories, academic institutions, research institutes, industry and MSMEs. Towards the commemoration of the 75th Year of Indias

Independence and AatmaNirbhar Bharat, BEL organised an interactive webinar titled ‘Indigenisation

- India@75 on 24 March 2021.

(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 the 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. A 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 beenconfigured 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 seven units during 2020-21 and it is planned to cover 100% vouching of payments in BG Complex and Ghaziabad also during 2021-22. The Company has a 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 the Comptroller & Auditor General of India (C&AG).

BELs internal Audit teams are located at major manufacturing units and the Corporate officeof the Company which carries out audits as per the risk-based Annual Audit Programme approved by the Audit Committee of the Board. A new centre is also being planned to address the increased volume of transactions in certain regions. 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 the audit to Head of Internal Audit on a periodic basis. The Head of Internal Audit submits his/her reports to the Companys management at various levels for corrective actions and finally submits the report to the Audit Committee of the Board, indicating a 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. During FY 2020-21, a state-of-the-art Data Analytical Tool has been inducted into the internal audit system for monitoring data for identification of outliers, if any.

BELs 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. The functioning of the Internal Audit as well as the 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

2. Performance Highlights: from time to time and issues directives for compliance to further strengthen the internal control system, keeping in view the dynamic operating environment of the Company.

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.

(Rs. in Lakh)

Particulars Year ended 31 March 2021 Year ended 31 March 2020
Revenue from Operations 14,06,383 12,92,111
Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) 3,18,112 2,73,013
EBITDA Margin (EBITSA/Revenue from operations [Net]) 22.62% 21.13%
Profit After Tax 2,06,542 1,79,383
No. of Days Inventory/Value of Production 130 117
No. of Days Trade Receivables/Turnover 173 195
Current Ratio 1.41 1.45
Debt Equity Ratio - 0.001

3. Analysis of Financial Performance of 2020-21:

• Turnover registered a growth of around 9.6% from RS. 12,60,776 lakh in FY 2019-20 to Rs. 13,81,816 lakh in FY 2020-21.

• Value of production increased from RS. 12,34,833 lakh in FY 2019-20 to RS. 13,94,749 lakh in 2020-21. An increase of around 12.95%.

• Turnover per employee increased from RS. 135.87 lakh in FY 2019-20 to RS. 150.66 lakh in FY 2020-21.

• PAT-to-Turnover ratio was 14.95% in FY 2020-21 compared to 14.23% in FY 2019-20.

• Net Worth has increased from RS. 9,85,294 lakh in FY 2019-20 to RS. 10,80,789 lakh in FY 2020-21.

• The return on net worth increased to 19.11% during FY 2019-20 compared to 18.21% in the previous year. The main reason for the increase was an increase in the value of production by 12.95%.

• Earnings per share at RS. 8.48 in FY 2020-21 compared to RS. 7.36 in FY 2019-20.

• Book value per share is RS. 44.36 in FY 2020-21 compared to RS. 40.44 in FY 2019-20.

(D) Development in Human Resources

BEL has been focusing on sustained development of its employees, both at the individual and at the team levels, through various Human Resources development initiatives. To address the learning and organisation development needs, various management development programmes, technology-specific programmes and quality-related programmes are being organised both internally and through premier training institutions for all grades of executives. Some of the learning and development initiatives rolled out during the year are:

Name of the Programme About the Programme Target Audience Coverage
1 Strategy Building and Competitive Intelligence (SBCI) Strategizing is an important component for senior executives and strategizing skills are essential to achieve quantum leap in business growth. The program was organized through IIM faculty. DGM and above Grade Executives 29 Senior Executives attended the programme
2 Enterprise Risk Management (ERM) To provide a conceptual framework for identifying and mitigating potential business risks, a two-day programme on Enterprise Risk Management was organised. Managers and above Grade Executives 28 Executives attended the programme
3 Supply Chain Management Supply chain management is very critical to the success of the business besides being major contributors to the profitability of the company. One Programme on Supply Chain Management was organised through the IIM faculty. Executives working in Material Management, Production Control, Sub Contracts, Finance and other allied areas. 30 Executives from relevant areas attended the programme.
4 Advanced Programme for Senior Executives (APEX) Advanced Programme for Senior Executives (APEX) has been conducted with the objective of providing insights into management concepts and techniques, formulating and implementing strategies and to have an overall perspective for better decision-making for Additional General Managers. The programme was organised through the IIM faculty. Additional General Managers 26 AGMs attended the programme.
5 Young Women Leaders Programme (DEEPSHIKHA) An exclusive Women Leaders programme to develop the leadership skills for women executives conducted through the XLRI faculty. Women Executives in the grade of E-II to E-V 45 Executives attended the programme
6 Programme for Awareness on Coaching Essentials (PACE) Two programmes were conducted to help Executives understand the concepts, methodology and practices in Coaching. Manager and above Grade Executives 52 Executives attended the programme.
7 Competency Based Interviewing Skills Competency-Based Interviewing Skills workshop was conducted in two batches to support our Senior Executives who are already involved in the selection process of the new entrants as well as those preparing to take on such a role to conduct an effective interview using the Competency-Based Behavioural Model approach. Executives who are members of Selection Committees across Units/Offices 63 Executives attended the programme.
8 Making of a Global Professional Making of a Global Professional is a unique course designed and aimed at developing Executives into authentic, dynamic and character-based leaders. Executives in E-IV and E-V Grade. 43 Executives attended the programme.
9 Business Story Telling The programme is designed to give insights to participants on storytelling as an art of communication, to achieve business objectives, goal or desired outcome in mind. Senior Executives in the grade of E-V to E-VII across Units/Offices. 47 Executives attended the programme.
10 Competency Enhancement Programme for Finance Executives To enhance the knowledge on the financial regulation amongst our Finance Executives, an exclusive Refresher Programme covering topics like GST, Legal and Commercial Terms of Contract, IND-AS and Income Tax and International Taxation was conducted for a duration of 15 hours. All Executives of Finance Department across Units. 253 Executives attended the programme.
11 Public Procurement Order and Purchase Procedure programme Public procurement order is an important system for procurement of goods, works and services needed for public programmes and projects. The objective of the programme was to educate the participants on the process/procedure of public procurement. Executives from Material Management, Sales, Marketing and Finance 360 Executives attended the programme.
12 Programme on Preventive Vigilance As per the directives of the Government and the Vigilance Department, with an objective of better understanding of the vigilance activities, a programme on Preventive Vigilance was conducted. Executives across Grades 19 executives attended the programme.
13 Competency Development Programme (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 focused in Competency Development Programme (CODE) for enhancing specified competencies for individual and organisational excellence. Executives in E-IV and E-V Grade. 280 Executives
14 Labour Laws and Domestic Enquiry Procedures Programme Legal System and Labour Legislations have a considerable impact on the functioning of industrial establishments. This programme 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. 60 Executives
15 Competency Enhancement Training Programme (COMET) Competency Enhancement Training Programme (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. 281 Executives
16 Certificate Programme in HR Analytics (CHRA) Critical decisions in human capital in an organisation are now evidence- based and hence HR Analytics is essential for effective decision making. This programme was conducted for HR professionals to enable a detailed analysis of the policies, practices and procedures of the organisation by utilising the tools and techniques of HR Analytics for strategic alignment. HR Executives in various grades. 35 Executives
17 Advanced Leadership Programme (ALP) 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 have been addressed in the Advanced Leadership Programme for building these competencies for individual growth and organisational excellence. Executives in E-VI and E-VIA and E-VII Grade 55 Executives
18 High Impact Trainer (Train the Trainer) (HIT) Programme The High Impact Trainer Programme is 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. 55 Executives
19 Assessment and Development Centres Certification Programme (ADCC) (Batch-1 and Batch-2) Competency-based Assessment and Development Centres programme are being conducted for our Executives to assess their level of leadership competency. This programme 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

In addition to the above the following new initiatives were taken up during the financial year 2020-21:

Name of the Programme Brief of the Programme Target Audience Coverage
1 Vietnamese Language Programme The programme is conducted for Executives identifiedto be posted to Regional Office, The programmes help the participants to be conversant with the local language, to connect well with the customers and understand the available business opportunities, it also helps participants read, write and speak the Vietnamese language. Executives Vietnam. selected to be posted to Regional Office -Vietnam 2 executives attended the programme
2 People Capability and Maturity Model BEL Corporate Office and Bangalore Complex have been assessed and benchmarked against 13 key processes in HR with Global best practices and certified for People Capability Maturity Model (PCMM) Level 3 Certification. Executives of BG Complex & Corporate Office All Executives
3 Competency Based Questionnaire and Online Development Centre The Company has an Executive behavioural Competency Model comprising of 9 Behavioural Competencies that we intend to foster amongst our Executives. In order to measure the existing levels of these 9 competencies among the Executives and identify the gaps and come with individual development plan, Competency Based Questionnaire for E-I Grade Executives and Online Development Centre for E-II & E-III grade Executives was conducted. E-I Executives for CBQ E-II to E-III Executives for ODC 2344 Executives in the grade of E-I to E-III
4 Employee Engagement and Satisfaction Survey A Company-wide Employee Engagement and Satisfaction Survey was conducted in the FY 2020-21 covering 96% of the employees across the company. With a view to improving on certain areas, Focused Group Discussions and Action Planning workshops were scheduled. All Employees across the Company 8645 Employees across units attended the survey.

Technology programmes to enhance knowledge of our engineers in various technology areas were conducted and Executives were also nominated to External Technology programmes. Some of the programmes are:

a) M.Tech “Microelectronics” (Total 3 M.Techs) from IIT Madras

b) PG Certificate in Management PGCM (one year) from IIM Kozhikode

c) 31 Certification programmes from NPTEL, ASHRAE, ICAI

d) Certificate Programme in Export Import Management

e) 7 Global Certification programmes of PMI, USA & ASQ

f) Customized Leadership programmes

g) 55+ unique technology programmes

To enhance the technology skills and develop in-house talent in technology areas, BEL Engineers have been nominated for M.Tech Programme at DIAT, Pune.

The following training programmes are organized at the BEL Academy for Excellence:

a) Web-based M.Tech from IIT-Madras on Communication & Signal Processing

b) Web-based M.Tech from BITS-Pilani on Artificial Intelligence

c) Web-based and customised certification programme (4 months duration) from DIAT, Pune on “VHDL-FPGA Design”

For and on behalf of the Board
Bengaluru Anandi Ramalingam
31 August 2021 Chairman & Managing Director
(Additional Charge)