1. INDUSTRY
After COVID-19, the Aerospace & Defence (A&D) industry is recovering in both
Civil and Defence Sectors. The Defence Sector is expected to continue to grow in 2023-24,
as due to global geopolitical conflicts many countries have significantly increased
Defence budgets to strengthen their military capabilities. In Civil Sector, the global
passenger traffic has improved significantly in 2022 which is expected to reach 2019
levels by end of 2023 or early 2024. This has become a driving factor for large size
manufacturing orders and aftersales activities in the industry.
1.1 Global Scenario
1.1.1 The A&D Industry is a vast industry which encompasses Commercial and General
Aviation, Military Aircraft, Space Systems, Ground Defence and Shipbuilding. As per an
industry report the global Aerospace & Defence market is expected to grow from $796
billion in 2022 to $855 billion in 2023 at a growth rate of 7.4%. The growth is mainly
driven by the companies recovering their operations from the COVID-19 impact, and Defence
budget allocation in various countries.
1.1.2 Globally supply chain disruptions and delays have made OEMs to look for local
sources for materials and components. Additionally to achieve efficiencies OEMs are moving
more and more towards digital technologies and smart factories. As per estimates the
global A&D market is expected to reach $1076 billion by 2027.
1.1.3 Pr esently, the key drivers in the A&D industry are of Supply Chain, high
efficiency & low fuel consumption, using digital technologies and smart factories.
1.2 The Indian Scenario
1.2.1 The Indian A&D Industry is dominated by Defence Sector. The major players of
Indian A&D industry are Defence Public Sector Undertakings (DPSUs). Therefore defence
projects, policies and funding of GoI plays crucial role in development of A&D
industry in India.
1.2.2 In the Union Budget 2023-24, 5,93,537.64 Crore have been allocated for Defence.
This includes expenditure on salaries of armed forces and civilians, pensions,
modernisation of armed forces, production establishments, maintenance, and research and
development organisations. This is 13% higher than 5,25,166.15 Crore (BE for FY 2022-23).
1.2.3 Under "Aircraft and Aero-engine" category, Indian Army has received an
allocation of 5,500 Crore, Indian Navy has received an allocation of 7,000 Crore and
Indian Air Force has received an allocation of 15,721.65 Crore, summing to a total
allocation of 28,221.65 Crore in addition to revenue budget provisions for maintenance,
repair & overhaul.
1.2.4 In the recent years significant impetus has been given by the Government to
develop and strengthen the A&D Industry in the Country. The Defence Acquisition
Procedures (DAP-2020) which promotes higher indigenous content in the Defence procurements
has been released. Four Positive Indigenisation Lists (PIL) issued by Department of
Military Affairs (DMA), in which 35 items of HAL are listed. Major platforms included
under these lists are Light Combat Aircraft (LCA) Mk IA, Light Combat Helicopter (LCH),
Transport Aircraft (Do-228), Basic Trainer Aircraft (HTT-40), Expendable Aerial Targets
(ABHYAS), Small Jet Engines with 120 kgf thrust (PTAE), Light Utility Helicopter (LUH),
Naval Utility Helicopter (NUH), Medium Altitude Long Endurance UAV (MALE), Combat Air
Teaming System (CATS), Long Range UAV (HALE). Significant thrust has been given to the
indigenisation of Defence equipment under "Aatmnirbhar Bharat" movement to
reduce Defence import bill and make the Country self-reliant in Defence.
2. ORGANISATION STRUCTURE
2.1 Pr esently, HAL has 20 Production and 10 R&D Centres co-located with the
Production Divisions. These Divisions
/ R&D Centres are located at ten geographic locations in seven states across the
country. These Divisions are organized into five complexes with current & future
operations given below:
Bangalore Complex (BC): Production and ROH of Fixed-wing Aircraft and Engines (Indian
and Western origin), Spacecraft Structures, Castings, Forgings & Rolled Rings.
MiG Complex (MC): Production and ROH of Fixed-wing Aircraft and Engines (mainly Russian
origin), Civil MRO and UAV Projects.
Helicopter Complex (HC): Production and ROH of Helicopters (Indian and Western origin).
Accessories Complex (AC): Production and ROH of Transport Aircraft. Production and ROH
of Accessories and Avionics for Fixed-wing and Rotary-wing Platforms (Indian, Russian and
Western origin). Depot Level Maintenance of UAVs.
Design Complex (DC): R&D of Fixed-wing and Rotary-wing Aircraft, Unmanned Aerial
Vehicles (UAV), Aero-engines, Avionics and Accessories.
BC, MC, HC and AC are headed by Chief Executive Officers (CEOs). Head of Divisions
under each Complex reports to the respective CEOs, whereas Head of R&D Centres under
Design Complex report to Director (Engineering and R&D). All the functional Directors
and CEOs report to Chairman and Managing Director (CMD).
3. SWOT ANALYSIS
3.1 SWOT Analysis is the tool to assess internal strengths and weaknesses of the
organisation as well as to identify potential opportunities and threats in its external
environment. The SWOT analysis of the company is as follows: Strength
The capability to cater a large spectrum of aerospace business which includes R&D,
Production and MRO of the Fixed-wing Aircraft, Rotary-wing Aircraft, Aero-engines, LRUs
and airborne systems.
Expertise in aircraft upgrade for the Defence Customers which includes major changes
like re-engining, avionics upgrade, and weapon system integration.
Expertise in absorption of Transfer of Technology (ToT) of _ghter and transport
aircraft. Successfully absorbed ToT and produced MiG-21, MiG-27, Su-
30MKI, Jaguar, Dornier-228 and AVRO.
Expertise in Design & Development of a wide range of helicopters including utility
and combat helicopters. The Company has developed flagship platforms like ALH Variants,
LCH, LUH in 3.5 to 5.5 ton class. Further, the Company is developing IMRH and DBMRH in
10-15 ton class, proving D&D capabilities in wide range of helicopters.
T rusted partner of Indian Defence Forces for support to aging fleets, some of which
are more than 60 years old fleets.
Weakness
Dependency on foreign OEMs for critical materials and LRUs.
Little pr esence outside India in export
Heavy dependency on MoD for the contracts which could adversely affect our ability to
grow or maintain our sales, earnings and cash flow.
Opportunity
Multiple policy reforms in the country to promote Defence manufacturing.
Focus of Government to reduce Defence import bill.
Gradually developing civil MRO opportunities in India.
Development of new potential market in India such as for regional jets, UAVs etc.
Gr owth potentials through alliance and for global markets.
Atmanirbhar Bharat Abhiyan of Govt. of India.
Threat
Collaborations of Indian Private Companies with Global OEMs and capability building by
them.
Change in preference of Defence customers by moving from nomination to competitive
procurement.
The Strategic Partnership (SP) Model may deprives HAL of some high value Defence
orders.
Dir ect competition from foreign companies looking for enter/sustain into Indian
market.
4. OUR STRATEGIES
4.1 W e intend to pursue the following principal strategies to leverage our strengths
and grow our business:
Launching Design and Development programs with initial company funding for Indian
Defence Services.
Diversify into civil market for both manufacturing and MRO opportunities.
Enhance Indigenisation to ensure higher indigenous content in our products.
Expand our operations globally through collaborations with global partners.
Opening Export Offices in the target geographies to explore global market and export
opportunities.
Str engthening and leveraging Marketing and Business Development functions through
restructuring.
Enhance customer satisfaction and improved quality of products and services.
Strategic product development to bring out right . products for our customers at right
time.
Focus on increasing operational efficiencies by adapting latest technologies such as
Industry 4.0, automation, additive manufacturing, etc.
5. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE
5.1 The Ministry of Corporate Affairs vide Notification No 1/2/2014-CL-V dated 23rd
February, 2018 has exempted Government Companies engaged in Defence Production to the
extent of application of Ind AS 108 on "Operating Segment". Disclosure in this
regard has been made at Clause No.37 of Note No. 49 to the Accounts.
6. OUTLOOK
6.1 In the year 2023-24, revenues of Aerospace & Defence companies are expected to
remain largely stable or grow, as military programs continue to be critical to national
security for many countries, especially considering rises in geopolitical tensions
globally. Global defense spending is expected to grow as major world powers are likely to
continue to strengthen their militaries in response to geopolitical tensions.
6.2 Both military and commercial aerospace sectors have good growth potentials in
India. In 2023-24, the total allocation of the three forces (including pensions) is
5,54,875 Crore which is ~93% of the total Defence budget. Out of this, allocation for
Army accounts for ~57% of the defence budget followed by the Air Force around 19% and Navy
~17%.
6.3 India has plans to develop civil aviation in the country through regional
connectivity for its tier-2 cities. Government has launched UDAN Scheme for the purpose.
HAL is contributing to the UDAN initiative through its Hindustan-228 aircraft which is the
first made in India civil aircraft used for commercial _ight.
6.4 The possible opportunities available for the Company in the future are:
Thrust from the Government towards domestic products for developing a self-reliant
industry will bring greater opportunities and new orders.
The stability of military sector during the time of crisis will entice commercial
players to diversify into military sector as risk aversion strategy. This will bring
opportunities for HAL to diversify into commercial sector by forming strategic alliance
with such companies.
6.5 The Aerospace Industry has always been capital-intensive with high technological
requirements and long gestation periods. In addition, the industry has challenges in
supply chain, and has to contend with costly raw material, unavailability of skilled
labour, technological requirements and multiple suppliers. The Government is supporting
the industry through the creation of Defence Industry Corridors and Special Economic Zones
(SEZ). This will help Micro, Small and Medium Enterprises (MSMEs) that supply components
and sub-assemblies to large manufacturers. The long gestation period and capital intensity
often creates entry barriers for MSMEs in this sector. SEZ would make it easy for
companies to have access to talent and create synergies on logistics.
6.6 Since the industry needs a skilled talent pool for this highly specialized
industry, the initiation of the Government to create skill centers, educational
institutions and universities that are tailor-made for the Aerospace Industry will
significantly help in making India a preferred manufacturing destination.
7. RISKS AND CONCERNS
7.1 The major risks and concerns for the Company are:
Dependency on foreign OEMs for supply of critical Components and Spares required for
the manufacture and overhaul of Aircraft/ Helicopters.
Dependency on limited customers for new contracts.
Competition from domestic and foreign players.
Risk of natural disasters and pandemic.
8. MEASURES TO TACKLE CHALLENGES
8.1 The measures taken by the Company to address the challenges, concerns and risks are
as follows:
Mitigating Strategic Challenges
The Company is focusing on diversification and enhance its revenues from commercial /
civil sector to maintain the growth and mitigate the risks of skewed Sales Portfolio
toward Defence.
The Company is focusing on opening Export Offices in the target geographies to expand
its exports market and revenue from exports.
Mitigating R&D Challenges
The Company is putting focus on market-oriented products and technology developments to
complement with company goals to expand in commercial and export market.
The Company has always focused on participation of academia with Industry. Over the
years, the company has established chairs at IITs and IISc to benefit from technological
developments and their application in our R&D programs.
The Company is focusing on enhanced participation of Startup, SME/MSME companies in
R&D and technology development.
Mitigating Marketing Challenges
The Company is putting enhanced impetus on strengthening and leveraging Marketing and
Business Development to complement business expansion goals.
Mitigating Operational Challenges
The Company is focusing on enhanced digitalization and IT enabled systems for speedy
communication and decision making.
The Company is focusing on use of advanced materials, Advanced Manufacturing
Technologies and automation to improve product quality and achieve operational
efficiencies.
9. CUSTOMER ORIENTATION
During the year, the Company has undertaken following initiatives towards customer
orientation:
Performance Based Logistics (PBL): Company has been providing PBL for Advanced
Light Helicopter (ALH) Mk-III fleet of Indian Coast Guard. Efforts are being made to
expand PBL services to other Indian Defence Customers also.
Fleetwise CS Workshop: For expeditious resolution of long pending issues and in
order to bring manufacturers and users on a common platform for exchange/ share ideas, CS
workshops were held during the year 2022-23. Fleets like Hawk, Jaguar, LCA, Dornier and
RPA benefitted by the workshops.
Case Management System: In order to have a centralized updated Life cycle
tracking of critical issues raised by different Customer, an In-house dashboard has been
developed for recording of Customer issues for effective tracking and closure in least
possible time.
Single Point of Contact (SPoC): To enhance better Customer support, it was felt
that a fleetwise SPoC would be more effective.
10. INTERNAL FINANCIAL CONTROLS
10.1 The Company has set up proper and adequate Internal Financial Controls with
respect to financial statements. Systems Audit is carried out by an internal team of
officials with a combined finance and technical background. This is in addition to the
internal audit by firms of Chartered Accountants/ Cost Accountants. Manuals pertaining to
various functions/activities such as Purchase, Outsourcing, Stores, Accounts, Systems
Audit etc., have been updated and implemented. Any instance of material weakness in the
operations, if observed, is followed up with necessary remedial measures and suitable
disclosures have been made in the Notes to Accounts.
10.2 The Statutory Auditors are also required to issue the Independent Auditors Report
vide Section 143(3)(i) of the Companies Act. The Report issued thereupon has been attached
along with the standalone and consolidated financial statements respectively.
11. DISCUSSION AND ANALYSIS OF FINANCIAL
PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:
Sl. No |
Particulars |
Year Ended March 31, 2023 |
Year Ended March 31, 2022 |
| 1 |
Turnover |
26,36,056 |
24,36,166 |
| 2 |
Revenue from Operations |
26,92,785 |
24,62,021 |
| 3 |
Value of Production |
27,05,441 |
23,76,948 |
| 4 |
Gross Margin |
8,33,476 |
6,39,916 |
| 5 |
Profit Before Tax |
6,49,294 |
5,23,115 |
| 6 |
Tax Expense |
68,177 |
14,465 |
| 7 |
Profit After Tax |
5,81,117 |
5,08,650 |
| 8 |
R&D Expenditure |
2,49,433 |
1,96,691 |
| 9 |
Net Worth |
23,50,617 |
19,26,400 |
| 10 |
Trade Receivable |
4,71,907 |
4,64,155 |
| 11 |
Cash and Bank Balance |
20,30,615 |
14,34,361 |
| 12 |
Borrowings |
- |
- |
| 13 |
Book Value Per Share () |
702.96 |
576.10 |
| 14 |
Earnings Per Share () |
173.79 |
152.11 |
| 15 |
Dividend Per Share () |
40 |
50* |
| 16 |
Debtors Turnover Ratio |
5.63 |
4.73 |
| 17 |
Inventory Turnover Ratio |
1.99 |
1.57 |
| 18 |
Interest Service Coverage |
- |
- |
|
Ratio |
|
|
| 19 |
Current Ratio |
1.7:1 |
1.8:1 |
| 20 |
Debt Equity Ratio |
- |
- |
| 21 |
Operating Profit Margin |
18% |
17% |
|
(%) |
|
|
| 22 |
Net Profit Margin (%) |
22% |
21% |
| 23 |
Return on net worth % |
25% |
26% |
* Includes final dividend of 10/- per equity share declared in 59th AGM for
the financial year 2021-22.
Reason for significant changes in ratios:
Debtors Turnover Ratio improved in FY 2022-23 due to improved collection from
customers.
Ther e is a growth in sales during the current year as compared to previous year and
also there is a considerable reduction in holding of inventory in the current period which
has resulted improvement in Inventory Turnover Ratios.
Incr ease in Operating Profit Margin in FY 2022-23 is due to increase in Repair and
Overhaul Sales in FY 2022-23.
Net Pr ofit Margin has improved in FY 2022-increase in interest income and Interest on
IT Refund in the FY 2022-23 as compared to PY 2021-22. The Company earned interest income
of 929 Crore in FY 2022-23 (PY 424 Crore) and Interest of 569 Crore on IT refund (PY
263 Crore).
Retur n on Networth has decreased in FY due to increase in percentage of Networth at a
higher rate as compared to increase in percentage of Net profit in FY 2022-23.
12. MA TERIAL DEVELOPMENTS IN HUMAN
12.1 During the year, Human Resource Development initiatives were geared in view of the
changes in the companys strategy and plan. The HR Vision and Mission was reframed to
align with the new organizational vision & mission. The new HR Vision is to
"Develop a Community of Excellence driven by technology and market culture to become
globally competitive". The new HR Mission is to "enable a positive environment
through empowerment to explore, learn, grow, innovate and drive collaboration to deliver
business excellence".
12.2 As a continuous improvement towards developing competencies, and thereby creating
a competitive Performance driven culture, the customised Competency Framework for the
Company was developed with 10 competencies in 3 clusters, with the sole objective of
Development of Executives. The Company has also introduced Reverse Mentoring Scheme
(WINGS) to enable new-age learning from junior to senior executives, to empower the young
workforce, and to develop learning organization, among other objectives. The Scheme has
been implemented through an Online Portal.
12.3 During the Year, the conduct of Employee Engagement Survey was institutionalized
as a process in the Company through a Standard Operating Procedure, to be conducted once
in two years, across key parameters. Employee Engagement Survey for the Year 2022 was
conducted during August – September 2022 with 93.97% participation. Short-term,
Mid-term and Long-term initiatives are planned based on the results of the Survey. 12.4
HAL Reward Scheme for Exemplary Performance in respect of Executives in Grades I to VIII
was introduced, incorporating provisions for recognition of achievements of High
Performers in terms of their Individual Contribution, Team based deliverables, and Project
level performance.
13. HAL MANAGEMENT ACADEMY (HMA)
During the year 2022-23, HMA conducted 140 programs against a plan of 87 programs
covering 6185 participants thereby achieving 39048 mandays of training. This amounts to
42% of the Officers of the Company undergoing training at HMA till date. Also, 595
external candidates participated in various training programs. Some of the initiatives
undertaken in training/ development program during 2022-23 are as follows: due to (i) As
part of the succession planning, the one year LDP Batch-6 commenced at HMA with 30
Officers on November 21, 2022.
(ii) The 45th batch of Management Trainees (MTs) /Design Trainees (DTs) have
completed training at Institution module (Mechanical & allied at IIT-Kanpur,
Electrical & 2022-23 allied at IIT -Kharagpur, Non-Technical at IIM-Indore &
Computer Science at IIIT-Dharwad) and are posted in Divisions.
(iii) The Company has entered into an MoU with Indian Institute of Management-Indore
for offering customised management programs in the fields of Strategy Management,
Operational Excellence, Organisational Behaviour and Project Management for Mid-level and
Senior level executives of HAL. (iv) Institution Programs: HMA collaborated with reputed
Institutions such as PMA-India, IIT-Madras, IIT Kanpur, IIT-Kharagpur, IIIT-Dharwad,
IIM-Ahmedabad, IIM-
Indore, IICA, NITIE, NLSIU, IMTMA, CII, ISI etc. for various Management Development
Programs, MTs/ DTs Training Programme and PGDM programmes.
(v) The Company has sponsored 20 Officers for Online M.Tech in Aerospace Engineering at
IIT-Madras.
14. SKILL DEVELOPMENT
14.1 Skill Development Policy (SDP) for the employees in non-executive cadre exist in
the Company with an objective to enhance individuals skill, knowledge and understanding
to achieve performance excellence by eliminating waste in terms of Rework, Rejection &
Pre-mature product failures, thereby enhancing productivity, quality & customer
satisfaction and strengthening the competitiveness of the Company.
14.2 The "Skill Development Process in HAL" has been granted Copyright
Certificate in March 2020 by the Registrar of Copyrights, New Delhi.
14.3 Mor e than 350 employees have been assessed during the year. So, far, over 15800
employees have been assessed out of 16000 employees across HAL. Based on the assessment
report, the post assessment training is planned.
14.4 Post Assessment Training: Over 1200 employees have completed Classroom Training
(CRT), 2040 employees have completed Shop Floor Training (SFT) / Work Place Training
(WPT), and 1700 employees completed Coaching / Mentoring (CMT) process during the year
2022-23. 14.5 A dedicated web portal for skill development called
Kaushal V Portal has been developed to handle the ikas huge skill data of HAL that
enables skill mapping of the employees, updation of Class Room Training (CRT), Shop Floor
Training (SFT)/ Work Place training (WPT), Coaching/ Mentoring (CMT), CST, Assessment and
Post Assessment Training etc.
15. MANPOWER
Total |
Officers |
Workmen |
Total |
Employees as on 31st March 2023 |
|
Direct |
Indirect |
Workmen |
| 24,457 |
7,550 |
10,836 |
6,071 |
16,907 |
16. ENVIRONMENT PROTECTION & CONSERVATION
V arious Divisions of the Company located at
Nasik, Koraput, Hyderabad, Lucknow, Kanpur, Korwa, Kasaragod and Barrackpore have taken
measures towards
Environment Protection & Conservation, governed by various Acts & Rules like
the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016, Solid
Waste Management Rules, 2016, The Air (Prevention and Control of Pollution) Act, 1981, The
Environment (Protection), Act, 1986, The Water (Prevention and Control of Pollution), Act,
1974 etc. All the Divisions are ISO 14001 certified and comply with the rules prescribed
by respective State Pollution Control Boards. All emissions and waste generation is
monitored as prescribed by the Pollution Control Boards.
V arious measures taken by the Company for protection and conservations are as unde
: Solid Waste Management: Municipal Solid Waste (MSW) generated from Townships
and Factories is segregated at source in Townships and Factories (Wet, Dry, Garden,
Sanitary and Rejects). Through the process of Vermi-Composting, the Bio-degradable waste
comprising of domestic waste and horticulture waste is being converted to manure. For
better utilization of biodegradable waste generated from HAL Estates, the Company has
installed Solid Waste Management Units like Organic Waste Converters and Bio Gas Plants at
select places. At Bangalore, 1.5 Tons per day capacity bio-gas plants are installed.
Hazardous Waste Management: The Divisions which use and generate hazardous
ef_uents such as chrome, acid/alkali, cyanide etc are having independent Ef_uent Treatment
Plants (ETPs) for treatment. Ef_uent samples after treatment are periodically checked in
the Laboratories. The sludge from the ETPs is disposed through Agencies authorized by
Pollution Control Boards. The waste water discharged from the ETPs is tested and further
treated in Sewage Treatment Plants (STPs) if meeting the norms. The water processed in the
STPs is being used for horticulture purposes within the Divisions and no waste water is
discharged to the public areas. The sludge generated from the STPs is converted into
manure and reused.
e-Waste Management:
The Company, as part of its operations, generates e-waste from old Electrical and
Electronics Systems such as LRUs, Avionics Control / Test
Systems, Electronics Items in Plant & Machinery, Computer Systems (IT) and
Communication Systems, which needs to be disposed after their life expiry or damage. Apart
from production activities, e-waste is also generated in Townships which is segregated and
collected at source. The e-waste generated & collected is stored in designated areas
(under cover) and auctioned through MSTC Limited (Central PSU) for disposal through
authorized Dismantlers / Recyclers / Refurbishers.
Waste Oil Management: Waste Oil produced during maintenance / overhauling of
equipment, vehicles and machinery is collected at source in leak proof containers. The
same is stored safely in demarcated areas inside salvage yards and handed over to
recyclers authorized by the respective Pollution Control Boards, through MSTC.
Most of the Divisions have taken initiatives towards banning of Plastics Bags /
Articles and declaring ‘No-Plastics Zones. The Non bio-degradable waste like
polythene etc., is being collected and sent to recycling Agencies, as per Rules.
The Company has taken an initiative towards recycling and reusing the waste paper
generated from various offices of HAL, Bangalore by setting up a Waste Paper Recycling
Unit (75kg / day). Various products made from the unit include Writing Pads, Visiting
Cards, Bags, Files, Folders, etc.
Rain Water Harvesting (RWH):
The Company has installed Rain Water Harvesting (RWH) systems at all its locations. The
stored water is used for gardening and other non-potable uses. Rain Water Harvesting
Systems are made compulsory in all new Buildings.
W ater bodies like Lakes and Ponds adjacent to some of the Divisions, are cleaned and
taken care as a step towards ensuring availability of constant source of Ground Water. The
Lake De-siltation, afforestation & Water –literacy works were undertaken by HAL
under CSR as part of the Kumudavathi River Rejuvenation Projects - Phase 2 activities.
Renewable Energy:
Rooftop solar: HAL has installed a total of 7.57 MW capacity Rooftop based Solar Energy
Systems, till date. Gr ound mounted solar: HAL has installed a total of 26.50 MW capacity
Solar power plants, till date.
W ind Energy: HAL has installed 14.7 MW capacity wind power plants in Karnataka.
The entire energy generated by the above power plants is utilized for captive
consumption at our production units. The captive consumption is avoiding more than 63000
Tons of CO2e emissions annually thereby contributing to the mitigation of climate change.
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