Management Discussion & Analysis Report
1. INDUSTRY
Aerospace, Defence & Space industry is a critical sector that includes the design, development, production, and maintenance of aircraft, spacecraft, and airborne systems. It serves both civilian and military needs, producing commercial aircraft, private jets, helicopters, fighter jets and UAVs. The industry also plays a significant role in space exploration, developing spacecraft, satellites, and space launch vehicles for both government and commercial purposes.
Research & Development (R&D) is crucial for the Aerospace & Defence (A&D) industry. Significant investments are made in developing new technologies and improving existing ones. This includes advancements in materials science, propulsion systems, avionics, and autonomous systems. The industry significantly impacts the global economy. It operates under strict regulations to ensure safety and compliance.
1.1 Global Scenario
Recent developments, such as the war in Ukraine, geopolitical disturbance and internal disturbances in Africa, and in the Middle East, have highlighted evolving trends in military requirements and technologies. Cyber warfare has gained prominence, with nations investing heavily in cybersecurity and offensive cyber capabilities to protect critical infrastructure and disrupt enemy operations.
The rise of advanced air defence systems and the increasing use of drones and UAVs have reduced the reliance on manned fighter jets. These technologies offer more cost- effective, flexible, and safer alternatives for many military operations. As a result, the role of traditional fighter aircraft is evolving, with a greater emphasis on integrating new technologies and adapting to the changing nature of warfare.
As per SIPRI Report, world military expenditure, driven by recent global conflict rose by 6.8 per cent in real terms to $2443 billion in 2023, the highest level ever recorded. Total military expenditure accounted for 2.3 per cent of the global Gross Domestic Product (GDP) in 2023. The five biggest spenders in 2023 were the United States, China, Russia, India and Saudi Arabia, which together accounted for 61 per cent of world military spending.
Artificial intelligence (AI) is widely adopted for autonomous systems, predictive maintenance, and cybersecurity. Additive manufacturing and 3D printing advanced significantly, enabling the production of lightweight components and addressing supply chain challenges. The Internet of Military Things (IoMT) connecting soldiers, vehicles, and devices, enhancing real-time data sharing and decision-making is also evolving at a faster pace.
Sustainability initiatives are a major focus in the industry with developments in electric propulsion systems and alternative fuels aimed at reducing carbon emissions. Innovations in hydrogen-powered aircraft and lightweight materials are also gaining traction. The space sector continues to expand, with increasing investments in satellite technologies, space tourism, and deep-space missions. Militarisation of space and management of space debris are area of concern. These developments underscore the dynamic and rapidly evolving complexities of the A&D industry, driven by technological innovation, increased defence spending, a strong commitment to sustainability and need to manage newer threats.
1.2 Indian Scenario
In 2024, the Indian Aerospace and Defence (A&D) industry saw significant growth and development. The market size was valued at approximately Rs.2.26 Lakh Crore, with a projected Compound Annual Growth Rate (CAGR) around 7% from 2024 to 2033. This growth is driven by several key factors, including rising demand in both the civil and defence sectors, government initiatives, and technological advancements.
The civil aviation sector experienced robust growth, with an anticipated 8% annual increase in air traffic over the next two decades. This was fuelled by an expanding middle class, increasing demand for air travel and addition of new routes and destinations. The Indian governments commitment to enhancing infrastructure, including plans to increase the number of operational airports from 157 in 2024 to 350-400 by 2047, further supported this growth.
The governments focus on self-reliance and indigenous manufacturing, under initiatives like "Make in India" and "Atmanirbhar Bharat," led to substantial investments in domestic defence production capabilities. In the budget Rs.1.12 Lakh Crore earmarked for procurement from domestic industries. Technological advancements play a crucial role in the industrys growth. The adoption of advanced technologies such as artificial intelligence (AI) and robotics, enhance production efficiency and innovation. Additionally, the development of electric propulsion systems and alternative fuels aimed at reducing carbon emissions highlighted the industrys commitment to sustainability.
Overall, the Indian A&D industry in 2024 was characterized by significant growth, driven by increased demand, government support, and technological innovation. These developments underscore Indias strategic importance in the global A&D landscape and its commitment to becoming a major player in the industry.
2. ORGANISATION STRUCTURE
Presently, the Company has 21 Divisions and 9 R&D Centres. These Divisions and R&D Centres are located at ten geographic locations in seven states across the Country. HALs Divisions and R&D Centres are organized into five Complexes with current & future operations given below:
Bangalore Complex (BC): Production, MRO and upgrade of Fixed-wing Aircraft and Engines of Indian and Western origin, Aerospace Structures & Castings, Forgings & Rolled Rings.
MiG Complex (MC): Production of indigenous Fixed- wing Aircraft, Production, MRO and upgrade of Fixed-wing Aircraft and Engines of mainly Russian origin, Civil MRO and UAV Projects.
Helicopter Complex (HC): Production, MRO and upgrade of Helicopters of Indian and Western origin. Production of Composite parts for Fixed and Rotarywing Platforms.
Accessories Complex (AC): Production, MRO and upgrade of Transport Aircraft. Production and MRO 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 Rotarywing Aircraft, Unmanned Aerial Vehicles (UAV), Aeroengines, 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 & Managing Director (CMD).
3. SWOT ANALYSIS
SWOT Analysis is the tool to identify potential opportunities and threats in the external environment and assess internal strengths and weaknesses of the organization. The SWOT analysis of the Company is as follows:
Strengths
Integrated aerospace business which includes R&D, Production and MRO including PBL solutions of the Fixed-wing Aircraft, Rotary-wing Aircraft, Aeroengines, 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 execution of Transfer of Technology (ToT) projects. HAL has successfully absorbed ToT and produced MiG-21, MiG-27, Su-30MKI, Jaguar, Hawk, 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.
Trusted partner of Indian Defence Forces for providing support.
Development of large scale Defence infrastructure with the support of Government of India and trained manpower with expertise in aerospace industry.
Weaknesses
Dependency on foreign OEMs for critical materials and LRUs.
Little presence outside India in global market.
Dependency on limited customers for the contracts.
Opportunities
Atmanirbhar Bharat Abhiyan and other policy reforms such as Positive Indigenisation List (PIL) by the Government promoting self-reliance and indigenous products.
Focus of Government to develop A&D ecosystem in the Country to reduce import bill and make India an A&D hub.
Civil MRO opportunities in India.
Development of new potential market in India such as for regional jets, UAVs etc.
Active support from Govt. of India for export promotion to friendly foreign countries.
Threats
Collaborations of Indian Private Companies with Global OEMs and capability building by their entities.
Change in preference of regular customers by moving from nomination to competitive procurement.
The Strategic Partnership (SP) Model may deprive the Company from some high value Defence orders.
Direct competition from foreign companies entering into Indian market.
Dependence on MoD for the contracts. Any change in procurement policy/preference can adversely affect our ability to grow or maintain our sales, earnings and cash flow.
4. OUR STRATEGIES
We intend to pursue the following principal strategies to leverage our strengths and grow our business:
Enhance indigenisation content in our products.
Enhance export sales.
Enhance customer satisfaction and improved quality of products and services.
Opening Export Offices in the target geographies to explore global market and export opportunities.
Progress Design and Development programs with initial company funding for Indian Defence Services.
Focus on increasing operational efficiencies by adapting technologies such as Industry 4.0, automation, additive manufacturing, etc.
5. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE
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
The Indian Aerospace & Defence (A&D) industry is experiencing significant growth, largely driven by various government initiatives aimed at promoting self-reliance and enhancing domestic capabilities. The "Make in India" and "Atmanirbhar Bharat" initiatives have been pivotal in encouraging local manufacturing and reducing dependency on imports. These programs have led to the development and induction of indigenous platforms such as the Tejas Mk1A fighter and advancements in the LCA Mk2 & Advanced Medium Combat Aircraft (AMCA) program. The governments focus on public-private partnerships has also fostered innovation and expanded the industrys capabilities. Moving forward, the Indian A&D sector is expected to continue its upward trajectory, with a strong emphasis on self-reliance, technological advancement, and strategic collaborations to bolster national security and economic growth.
Leading aircraft Original Equipment Manufacturers (OEMs) see India as an important market for both exports and manufacturing because of the high demand for aircraft, parts and equipment, strategic geographic location, engineering expertise, and competitive labour costs. To capture the Civil sector opportunities, the Indian Government has revised its MRO policy to increase the ease of doing business, with the goal of making India a global leader in the MRO sector. Approximately 90 percent of Indias MRO activity occurs outside of India, predominantly in Sri Lanka, Singapore, and Malaysia. Local capabilities are nascent but exhibit growth potential. Efforts are underway to make India a regional hub for MRO services, given its advantageous geographic location between Europe and Southeast Asia and its proximity to the Middle East. Indias growing fleet of aircraft is likely to translate into an increase in demand for maintenance services and MRO facilities.
7. RISKS AND CONCERNS
The major risks and concerns for the Company are:
Dependence on foreign OEMs for supply of critical components and spares.
Dependence on limited customers for new contracts.
Competition from domestic and foreign players.
8. MEASURES TO TACKLE CHALLENGES
HAL has taken the following focus areas to address the challenges, concerns and risks:
Indigenisation - to ensure higher indigenous content in our products to reduce dependency on foreign OEMs and Suppliers.
Enhancing participation of Startups, SME/MSME companies in R&D and production for A&D industry development.
Diversification into complementary business areas like civil aviation domain to enhance share of revenue and mitigate the risks of skewed Sales Portfolio toward Defence.
Opening Export Offices in the target geographies to expand its exports market and revenue from exports.
Market-oriented products and technology developments to complement with Companys goals to expand in commercial and export market.
Enhanced digitalization and IT & AI enabled systems for speedy communication and decision making.
Use of advanced materials, advanced manufacturing technologies and automation to improve product quality and achieve operational efficiencies.
9. CUSTOMER ORIENTATION
Customer Orientation is at the heart of the Companys operations and strategic philosophy. The Company is committed to not only delivering world class products but also building enduring relationships with our Customers through responsiveness, customization and collaborative engagement.
Following are the key initiatives towards Customer Orientation:
i. Indian Army-HAL Vayu Portal: Actions initiated towards integration of Army and HAL ERP to ensure transparent & responsive aviation logistic supply chain data. AOG, RRT and RMSO interfaces have been launched.
ii. Indian Air Force- HAL Vayu Vitt Portal: In line with the policy of Digital India, HAL is planning to fully digitize the transactions with customer and payment authority. Towards this Vayu Vitt Portal is being conceptualized and RDAQA, IAF and DCDA have been taken onboard for digital clearance of deliverable documents and preferring claims digitally.
iii. SPOC (Single Point of Contact) Re-Orientation Programme: To enhance the skill sets and to give a better awareness on Customer Service practices and procedures followed in the Company, a re-orientation program was conducted for already established SPOCs.
iv. Deputation of dedicated Logistics Officer: On request of the Company, a dedicated Logistics Officer from IAF was deputed, to liaison with the Company for improvement in data reconciliation and logistics correspondences, which resulted into considerable progress in various aspects of logistics management.
v. Visit of Senior Management & SPOC to Customer Bases/Commands: Visit of Senior officers/ SPOCs to Customer Bases/Commands for interactions and understanding the Customer issues/concerns, if any, and faster resolution of the same.
10. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
The Company has an Internal Control System commensurate with the size, scale and complexity of its operations. The Company has in place adequate internal financial controls for ensuring efficient conduct of its business.
To evaluate the effectiveness of internal controls, systems and procedures across different functions in the organisation, the Company has an independent Systems Audit Department. The Department evaluates the design and effectiveness of internal controls, identifies weaknesses and recommends improvements to mitigate risks. It also monitors compliance with laws, regulations and internal policies. Necessary systems improvement guidelines are also issued by the Department. The major observations of Systems Audit are placed before the Audit Committee for review.
11. DISCUSSION AND ANALYSIS OF FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:
(Rs. Lakh) | ||
Sl. No Particulars |
Year Ended March 31, 2025 | Year Ended March 31, 2024 |
1 Turnover |
30,10,465 | 28,16,185 |
2 Revenue from Operations |
30,98,092 | 30,38,084 |
3 Value of Production |
37,72,854 | 30,11,802 |
4 Gross Margin |
12,16,833 | 11,63,747 |
5 Profit Before Tax |
10,82,001 | 10,19,897 |
6 Tax Expense |
2,50,321 | 2,60,393 |
7 Profit After Tax |
8,31,680 | 7,59,504 |
8 R&D Expenditure |
2,48,233 | 2,82,624 |
9 Net Worth |
34,84,285 | 29,04,642 |
10 Trade Receivable |
4,64,754 | 4,61,667 |
11 Cash and Bank Balance |
38,17,076 | 26,42,184 |
12 Borrowings |
- | - |
13 Book Value Per Share (Face value of Rs. 5) (Rs.) |
520.99 | 434.32 |
14 Earnings Per Share (Face value of Rs. 5) (Rs.) |
124.36 | 113.57 |
15 Dividend Per Share (Face value of Rs. 5) (Rs.) |
25 | 35* |
16 Debtors Turnover Ratio (No. of times) |
6.50 | 6.03 |
17 Inventory Turnover Ratio (No. of times) |
1.73 | 2.22 |
18 Interest Service Coverage Ratio |
- | - |
19 Current Ratio |
2:1 | 1.7:1 |
20 Debt Equity Ratio |
- | - |
21 Operating Profit Margin (%) on Turnover |
27 | 29 |
22 Net Profit Margin (%) on Turnover |
28 | 27 |
23 Return on net worth % |
24 | 26 |
*Includes final dividend of 13 per share of face value of Rs.5 each declared In the 61s AGM for the financial year 2023-24.
Reason for significant changes in ratios for FY 2024-25:
Inventory Turnover Ratio has reduced in current year due to increase in inventory of major projects LCA Mk1A, AL-31FP and others.
12. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES
The major HR Initiatives for the Financial Year 2024-25 aimed at enhancing employee benefits, recognizing performance excellence, leveraging technology for operational efficiency and modernizing corporate identity are summarized as under:
A. Introduction of National Pension Scheme:
National Pension Scheme (NPS) was introduced in the Company in addition to the existing HAL Defined Contribution Pension Scheme. NPS provides employees with greater financial flexibility through options to allocate funds across different asset classes (Equity, Corporate Bonds & Government Securities), change Pension Fund Manager annually, select Annuity Schemes from PFRDA approved Annuity Service Providers and avail deferment of Annuity & withdrawal of lump sum.
B. HAL Reward Scheme for Exemplary Performance:
A structured recognition program was implemented with revised Individual category clustering Officers in Grades I to V and VI-VII, alongside Team and Project categories. The Scheme acknowledges outstanding contributions through cash award of Rs. 1,00,000 accompanied by a Scroll of Honour, enabling a culture of excellence and motivation across the organization.
C. AI-based HR Bot: An Artificial Intelligence based HR Bot was launched to streamline employee access to HR information from various manuals. This technological advancement enhances communication and operational efficiency by enabling employees to ask questions through a simple chat interface and receive detailed answers extracted directly from HR manuals, thereby eliminating the need to search through extensive documentation.
These initiatives demonstrate HALs continued commitment to employee welfare, technological advancement, and organizational excellence while creating a more responsive and modern workplace environment.
13. HAL MANAGEMENT ACADEMY (HMA)
During 2024-25, HMA conducted 148 programs against a plan of 87, covering 3,419 Officers (5,183 participants) and generating 32,594 man-days of training. This amounts to 47% of the officers of the Company. Additionally, 681 external candidates participated in various training programs. Some of the initiatives undertaken in training/ development programme during the year, are as under:
(i) Leadership Development Program (LDP-5 and LDP- 6): As part of succession planning, LDP-5 and LDP-6 participants completed various phases, including the Orientation Module, Bridge Module, and Interim Phase modules at HMA. Two domestic modules were held at IIM Ahmedabad, and action learning projects were carried out under the guidance of HMA faculty and IIM-A professors. Participants also underwent a two-week international module at the Aerospace Valley in Toulouse, France.
(ii) Certification Programs: Certification programs such as UTKARSH - Master Class for Strategic Leadership and IPMA Level B were conducted. Total 61 executives were certified.
(iii) An MoU was signed with IIIT Dharwad to facilitate executive enrolment in online M.Tech programs aimed at developing Industry 4.0 capabilities. IIIT Dharwad will also develop a Centre of Excellence in AI/ML at HAL.
(iv) An MoU was signed with the Defence Institute of Advanced Technology (DIAT), Pune, allowing HAL Executives to register for Ph.D programs and attend niche technology capsules in collaboration with Cranfield University, UK.
(v) An MoU was signed with BEML to enhance skill and competency at various levels through induction, leadership, and management development programs, and to foster cross-industry exposure.
14. SKILL DEVELOPMENT
During the year, the Company has undertaken the following initiatives for skill development:
A total of 182 job roles have been identified and released for Direct and Indirect employees of the Company. Skill mapping was carried out based on the job role standards. 775 training contents have been developed to impart the skill training to the employees across the Company.
Around 91% employees have been trained and assessed (direct & indirect) across various divisions. The skill development process in the Company consists of Classroom Training (CRT), Shop-floor Training (SFT), Coaching/Mentoring Training (CMT) and Assessment.
89 employees have completed three-day intensive training (residential) program at CMTI, Bengaluru on Advanced Manufacturing Practices including Industry 4/5.0 & Smart Manufacturing technologies.
The employees of highly skilled and exceptional category are trained on adjacent job roles as recommended by their Supervisor & HOD. Multiskilling will enable the management to effectively address the sudden change in production process & schedules. 98 employees have completed the multi skill training so far, and continued.
15. MANPOWER
Total |
Officers | Workmen |
Total | |
Employees as on March 31, 2025 |
Direct | Indirect | Workmen | |
23,999 |
7,390 | 10,881 | 5,728 | 16,609 |
16. ENVIRONMENT PROTECTION & CONSERVATION
Various Divisions of the Company located at Bangalore, 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, Environment (Protection) Act, 1986, 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 are monitored as prescribed by the Pollution Control Boards.
Various measures taken by the Company for environment protection and conservations are as under:
Non-hazardous 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 selected locations. Metal scrap is stored in designated areas and disposed periodically through MSTC. 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.
Hazardous Waste Management
Effluents: The Divisions which use and generate hazardous effluents such as chrome, acid/alkali, cyanide etc are having independent Effluent Treatment Plants (ETPs) for treatment. Effluent 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 outside the premises. The sludge generated from the STPs is converted into manure and reused or disposed through authorized agencies.
E-Waste: 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.
Used Oil/Lubricants: Used Oil and Lubricants produced during testing, 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 Limited.
Plastic: 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.
Other Hazardous wastes such as bio-medical waste, composite waste etc are collected, stored and disposed through authorized agencies as per respective Pollution Control Board norms.
Rain Water Harvesting (RWH):
The Company has installed Rain Water Harvesting (RWH) systems at all its locations. The harvested water is either used for ground water recharge or stored and used for gardening. Rain Water Harvesting Systems are made compulsory in all new Buildings.
Air emissions:
The emissions from process stacks and Diesel Generators are periodically monitored for compliance with the limits prescribed by Pollution Control Board.
Afforestation:
During the year, about 86,000 saplings were planted/distributed to enhance green cover and improve environment.
Renewable Energy:
Solar Power: During the year, Company has commissioned 1.5MW capacity captive solar power plants at its Divisions located in Kanpur, Korwa, Lucknow and Corporate Office at Bangalore. The cumulative capacity installed is 35.35 MW.
Wind 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 around 64,000 Tons of CO2e emissions in the reporting year thereby contributing to the mitigation of climate change.
IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000
IIFL Capital Services Support WhatsApp Number
+91 9892691696
IIFL Capital Services Limited - Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248, DP SEBI Reg. No. IN-DP-185-2016
ARN NO : 47791 (AMFI Registered Mutual Fund Distributor)
This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.