Hindustan Aeronautics Ltd Auditor Reports

To The Members of

Hindustan Aeronautics Limited

Report on the Audit of Standalone Financial Statements

Opinion

We have audited the Standalone Financial Statements of Hindustan Aeronautics Limited ("the Company") which comprise the Standalone Balance Sheet as at 31^st March 2024, and the Standalone statement of profit and loss (including Other Comprehensive Income), standalone statement of Changes in Equity and the standalone statement of cash flows for the year then ended, and Notes to the Standalone Financial Statements, including Material Accounting Policies and other explanatory information (hereinafter referred to as "the standalone financial statements") in which are included the returns of 29 divisions for the year ended on that date audited by the Divisional Auditors of the company.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Financial Statements give the information required by the Companies Act, 2013 ("Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31^st March 2024, and its Profit and Other comprehensive income, Changes in Equity and its Cash Flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those SAs are further described in the Auditors Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the Standalone Financial Statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the Standalone Financial statements.

Emphasis of Matter

(I) Attention is invited to Notes to the Financial Statements extracted below: Note 49: Clause - 43G

Revision of pay scales of executives and workmen, with effect from 01.01.2017 was implemented in accordance with the guidelines issued by Department of Public Enterprises vide OM dated 03.08.2017 for Executives and in accordance with the Wage Agreement entered into between Management and Employees Union representative in 2019-20 in respect of Workmen.

On an interpretation on pay refixation and pursuant to the directives of the Administrative Ministry, the pay fixation to be revised and the excess amount paid is to be recovered from the employees.

This has resulted in reduction of salaries and wages by 5573 lakhs (previous year: 5155 lakhs) for the year ended 31^st March 2024.

While so, the Employees Union and Officers Association have filed Writ Petition with Honble High Court of Karnataka to stay recovery of excess amount of salary paid by the Company. The Honourable High Court has granted interim stay on recoveries, pending disposal of the writ petitions by the High court, the excess amount is shown under claims receivable (Gross) for 35218 lakhs (previous year: 29645 lakhs) and an equal amount of provision has been made in the books of accounts.

The amount withheld from employees who retired after 30 June 2021 is kept under other liabilities 4445 Lakhs (Previous year: 3026 Lakhs)

Based on the final order that may be passed, suitable effect will be carried out in the accounts.

Ministry vide OM dated 12.07.2023 has conveyed the approval for increasing the Companys contribution to the Pension Scheme of Executives from existing 7% to 10% of Basic Pay + DA w.e.f. 0.1.01.2017. Revision of Pension contribution from 7% to 10% of Basic Pay + DA w.e.f 01.01.2017 has been made in respect of Executives who are on the rolls of the Company as on the date of implementation of the revised ceiling i.e. 01.01.2017. In respect of new incumbents who joined the Company post 01.01.2017, it will be effective from the date of appointment.

The additional liability accruing to the division due to the increased ceiling, is 21736 lakhs pertaining to the period from 1 January 2017 to 31 March 2024 (3513 lakhs for the year ended 31^st March 2024). The total additional financial impact on revision of Pension contribution has been given effect in the books of accounts during the period ended 31^st March 2024. Accordingly, employees cost for the current year is not comparable with the corresponding previous year.

Note 49: Clause - 31C

Inventory were damaged due to _oods caused by rains, based on an internal technical assessment committee estimated the loss of Inventory 7856 lakhs and the same has been provided in the books during the year 2022-23. Subsequently, based on the findings as part of the exercise to submit an insurance claim, the actual loss has been re-assessed as 6591 Lakh and same provision has been created under Replacement Charges 5590 lakhs and Redundancy Charges of 1001 Lakh during the year 2023-24.

Our opinion is not modified in respect of these matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone Financial Statements of the current period. These matters were addressed in the context of our audit of the Standalone Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key Audit Matters	Response to Key Audit Matters & Conclusion
a) Revenue recognition
	Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:
(Ind AS 115) The revenue standard establishes a comprehensive framework for determining whether, how much and when revenue is recognized. This involves certain key judgments relating to identification of distinct performance obligations, determination of transaction price of identified performance obligation, the appropriateness of the basis used to measure revenue recognized over a period. Additionally, the standard mandates robust disclosures in respect of revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.	Evaluated the appropriateness of the disclosures provided under the revenue standard and assessed the completeness and mathematical accuracy of the relevant disclosures.
	Evaluated the design of internal controls relating to implementation of the revenue accounting standard.
	Selected a sample of continuing and new contracts, and tested the operating effectiveness of the internal control, relating to identification of the distinct performance obligations and determination of transaction price.
	We carried out a combination of procedures involving enquiry and observation, reperformance and inspection of evidence in respect of operation of these controls.
	Selected a sample of continuing and new contracts and performed the following procedures Read, analysed and identified the distinct performance obligations in these contracts.
	Compared these performance obligations with that generally identified and recorded by the group.
	Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue and to test the basis of estimation of the variable revenue.
	Examination of the correspondence relating to price revision and ascertained the reasonableness of the estimates.
	Sample of revenues disaggregated by type and service offerings was tested with the performance obligations specified in the underlying contracts.
	Due to detailed procedures, a portion of is recognised based on the most likely amount based on past experience and the consistent practices followed. We have verified the procedures revenue recognition including unbilled revenue.
b) Impairment of Trade Receivables	We have verified the
In respect of receivables from Government the company does not make any impairment provision based on past experience.	i) Effectiveness of internal controls in place and procedures followed in identifying the recoverability of long outstanding dues.
The amount involved being significant balance and management judgment we consider this as a Key Audit Matter.	ii) The procedures and follow-up actions in ascertaining the impairment of receivables.
	Our audit procedures include evaluation of provisions made for impairment in earlier years. We also made test checks of invoice wise collection details provided made in respect of in the five preceding financial years and we concluded the management assumption is reasonable.
c) Contract Asset
Contract asset represents the revenue recognized and yet to be invoiced to the customer.	Contract Assets represents the Companys right to receive the consideration in exchange for the Goods or Services that the Company has transferred to the Customer, when that right is conditioned on something other than passage of time.
d) Liquidated damages
The Companys contract with the customers has standard clause for Liquidated damages for delayed delivery. The companys product has extended period of manufacturing; design approvals and inspection by customer at various stages which result in delay in certain cases leading to liquidated damages. The liquidated damages recognized being significant in the statement of profit and loss, is considered a key audit matter in our opinion.	We have verified the controls, period of delay, the expected days of delay as on 31.03.2024 and the calculation for the liquidated damages recognized and found the system followed and calculation to be in order.
e) Work - in - Progress (WIP) - Inventories
	Our Audit Procedures generally include review of
	Physical Verification instructions
Inventories include Work in Progress which have been physically verified by the management based on verification instructions.	physical verification reports
	Physical reports
	Roll back procedures
	Examining the basis of valuation on a test check basis
	Currently, the verification of WIP is done on annual basis. The division wise WIP inventory was submitted from Divisions and consolidated at H.O. level.
	Based on the above audit procedures we conclude that the valuation of WIP is proper.
f) Pay Refixation
5) Revision of pay scales of executives and workmen, with effect from 01.01.2017 was implemented in accordance with the guidance issued by DPE vide OM dated 03.08.2017 for Executives and in accordance with the Wage Agreement entered into between Management and Employees Union representative in 2019-20 in respect of Workmen.	We have Verified the Calculations as well as the Interim Stay Granted by Honble High Court of Karnataka and there are no major observations.
On an interpretation on pay refixation and pursuant to the directives of the Administrative Ministry, the pay fixation to be revised and the excess amount paid is to be recovered from the employees.
This has resulted in reduction of salaries and wages for the year ended 31 March 2024 by 5573 lakh respectively (Previous year: 5155 lakh).
While so, the Employees Union and Officers Association have filed Writ Petition with Honorable High Court of Karnataka to stay recovery of excess amount of salary paid by the Company. The Honorable High Court has granted interim stay on recoveries. Pending disposal of the writ petitions by the High Court, the excess amount is shown under claims receivable (Gross) for 35218 lakhs (Previous year: 29645 lakhs) and an equal amount of provision has been made in the books of accounts.
The amount withheld from employees who retired after 30 June 2021 is kept under other liabilities 4445 lakh (Previous Year: 3026 lakh).
g) Revision of Contribution to Pension Scheme
4) Ministry vide OM dated 12.07.2023 has conveyed the approval for increasing the Companys contribution to the Pension Scheme of Executives from existing 7% to 10% of Basic Pay + DA w.e.f. 0.1.01.2017. Revision of Pension contribution from 7% to 10% of Basic Pay + DA w.e.f 01.01.2017 has been made in respect of Executives who were on the rolls of the Company as on the date of implementation of the revised ceiling i.e. 01.01.2017. In respect of new incumbents who joined the Company post 01.01.2017, it will be effective from the date of their appointment.	We have Verified the Calculations and there are no major observations.
The additional liability accruing to the Company due to the increased ceiling, is 21736 lakh pertaining to the period from 1 January, 2017 to 31 March, 2024 (3513 lakh for the year ended 31 March, 2024). The total additional financial impact on revision of Pension contribution has been given effect in the books of accounts during the year ended 31 March, 2024. Accordingly, employees cost for the current year is not comparable with the corresponding previous year.

Managements and Board of Directors Responsibilities for the Standalone Financial Statements.

The Companys Management and Board of Directors are responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the state of affairs, profit/ loss and other comprehensive income, changes in equity and cash flows of the Company, in accordance with the accounting principles generally accepted in India including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act,. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Standalone Financial Statements, the Management and Board of directors are responsible for assessing the Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the board of directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Companys financial reporting process.

Auditors Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone Financial Statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

Identify and assess the risks of material misstatement of the Standalone Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management and Board of Directors.

Conclude on the appropriateness of the Management and Board of Directors use of the going concern basis of accounting in preparation of standalone financial statements and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Company to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the Standalone Financial Statements, including the disclosures, and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deffciencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

Other Matters

We did not audit the financial statements of 29 division included in the standalone financial statements of the company whose financial statements/financial information reflect the total revenue of 30,38,084 lakhs for the year ended and Net profit after tax of 7,59,504 lakhs as at 31^st March 2024 and on that date, as considered in the standalone financial statements/information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of branches, is based solely on the report of such branch auditors.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditors Report) Order, 2020 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013 we give in the "Annexure-B" statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

As required by Section 143(3) of the Act, we report, that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books, and proper return adequate for the purpose of an audit have been received from the branches not visited by us.

c) The reports on the accounts of the divisions of the Company audited under section 143(8) of the act by the division auditors have been sent to us and have been properly dealt with us in preparing this report.

d) The Standalone balance Sheet, the Standalone Statement of Profit and Loss (Other comprehensive income), the Standalone statement of changes in equity and the Standalone statement of cash flows dealt with by this Report are in agreement with the books of account and with the returns received from the divisions not visited by us.

e) In our opinion, the aforesaid Standalone Financial Statements comply with the Ind AS prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

f) Ministry of Corporate Affairs vide notification no 1/2/2014-CL-V dated 23^rd February 2018 has exempted the companies engaged in defence production to the extent of application of relevant Accounting Standard on Segment Reporting. In view of the above, no disclosure is made by the company as required by Ind AS 108. Subject to the above, we state that, in our opinion, the aforesaid Standalone Financial Statements comply with the Accounting Standards specified under Section 133 of the Act.

g) In terms of circular NO. GSR 463(E) dated 05^th June 2015 issued by the Ministry of Corporate Affairs, Government of India, the company being Government Company, is exempt from the provisions of section 164(2) of the Act regarding disqualification of Directors.

h) The provisions of Section 197 are not applicable to a government Company (in terms of MCA Notification NO.GSR 463 (E) dated 05^th June 2015) as the managerial remuneration is paid as per the appointment letter from the Government of India.

i) With respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A".

j) With respect to the other matters to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations as at 31 March 2024, on its financial position in its Standalone Financial Statements - Refer Note 49 (2) (a), 49 (2) (b), 49 (20), 49 (21), 49 (43G), to the financial statements

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, on long-term contracts. The company does not have any derivative contracts.

iii. There has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the company.

iv. (a) The management has represented that, to the best of its knowledge and belief, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the intermediary shall, whether, directly or indirectly lend or invest in other persons or entities Identified in any manner whatsoever by or on behalf of the company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(b) The management has represented, that, to the best of its knowledge and belief, no funds have been received by the Company from any persons or entities, including foreign entities ("funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

(c) Based on the audit procedures performed that have been considered reasonable and appropriate in the circumstances; nothing has come to the notice that has caused us to believe that the representations under sub-clause (i) and (ii) contain any material misstatement.

v. a) The final dividend paid by the Company during the year, in respect of the same declared for the previous year is in accordance with Section 123 of the Act to the extent it applies to payment of dividend.

b) The interim dividend declared and paid by the Company during the year and until the date of this audit report is in accordance with Section 123 of the Act.

c) The Company has not proposed any final dividend up to the date of our report.

vi. The reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 is applicable from 1 April 2023.

Based on our examination, which included test checks, the company has used accounting software for maintaining its books of account for the financial year ended 31 March, 2024 which has a feature of recording audit trail (Edit log) facility and the same has been operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit we did not come across any instance of the audit trail feature being tampered with.

In our opinion, there is a scope for improvement and the existing audit trial need to be strengthened.

As proviso to Rule 3(1) of the companies (Accounts) Rules 2014 is applicable from April 1, 2023, reporting under Rule 11(g) of the companies (Audit and Auditors) Rules,2014 on preservation of Audit Trail as per Statutory requirements for the record retention in not applicable for the financial year ended March 31,2024.

3) As required by section 143(5) of the Act, we give in "Annexure C" a statement on the matters specified by the Comptroller and Audit General of India for the Company.

ANNEXURE "A" TO THE INDEPENDENT AUDITORS REPORT ON THE STANDALONE FINANCIAL STATEMENTS OF HINDUSTAN AERONAUTICS LIMITED FOR THE YEAR ENDED 31 MARCH 2024.

Report on the internal financial controls with reference to the aforesaid standalone financial statements under Clause (i) of Sub-section 3 of Section 143 of the Act.

We have audited the Internal Financial controls with reference to standalone financial statements of HINDUSTAN AERONAUTICS LIMITED ("the Company") as of 31 March, 2024 in conjunction with our audit of the Standalone Financial Statements of the Company for the year ended on that date.

Managements and Board of Directors Responsibility for Internal Financial Controls

The Companys Management and the Board of directors are responsible for establishing and maintaining Internal Financial controls with reference to financial statements criteria established by the Company, considering the essential components of Internal Control stated in the Guidance Note on Audit of Internal Financial controls with reference to financial statements, issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information, as required under the Act.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys Internal Financial controls with reference to financial statements based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial controls with reference to financial statements (the "Guidance Note") and the Standards on Auditing, issued by ICAI and deemed to be prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of Internal Financial Controls, with reference to financial statements. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate Internal Financial controls with reference to financial statements was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the Internal Financial Controls System with reference to over Financial Reporting and their operating effectiveness. Our audit of Internal Financial controls with reference to financial statements included obtaining an understanding of Internal Financial controls with reference to financial statements, assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the Auditors judgement, including the assessment of the risks of material misstatement of the Financial Statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companys internal financial controls with reference to financial statements.

Meaning of Internal Financial controls with reference to financial statements

A companys internal financial controls with reference to financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal financial controls with reference to financial statements include those policies and procedures that:

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements

Inherent Limitations of Internal Financial controls with reference to financial statements

Because of the inherent limitations of Internal Financial controls with reference to financial statements, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the Internal Financial controls with reference to financial statements to future periods are subject to the risk that the Internal Financial Control over Financial Reporting may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate Internal Financial Controls System over Financial Reporting and such Internal Financial controls with reference to financial statements were operating effectively as at March 31, 2024, based on the Internal Control over Financial Reporting criteria established by the Company, considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial controls with reference to financial statements issued by ICAI.

	For A. John Moris & Co.
	Chartered Accountants
	FRN NO: 007220S
	Rathan Raj. A
	Partner
Place: New Delhi	Membership No. 228538
Date: 16.05.2024	UDIN: 24228538BKFEVQ9997

ANNEXURE "B" TO THE INDEPENDENT AUDITORS REPORT ON THE STANDALONE FINANCIAL STATEMENTS OF HINDUSTAN AERONAUTICS LIMITED FOR THE YEAR ENDED 31 MARCH 2024.

(Referred to in paragraph 1 under ‘Report on Other Legal and Regulatory Requirements section of our report of even date)

In terms of the information and explanations sought by us and provided to us by the Company and the books of account and records examined by us in the normal course of audit and to the best our knowledge and belief we state that;

In respect of the Companys property, plant and equipment, right-of-use assets and intangible assets

(i) (a) (A) The Company has maintained proper records showing full particulars including quantitative details and situation of Property Plant and Equipment and relevant details of right-of-use-assets.

(B) The Company has maintained proper records showing full particulars of intangible assets.

(b) The Company has a programme of physical verification of these Property, Plant and Equipment so as to cover all the assets once in every five years, which in our opinion is reasonable having record to the size of the company and nature of its assets. Pursuant to the programme, certain Property, Plant and Equipments and right of use assets were due for verification during the year and were physically verified by the management during the year. According to the information and explanations given to us no material discrepancies were noticed on such verification.

(c) The title deeds of all the immovable properties (other than properties where the company is the lessee and the lease agreements are duly executed in favour of the lessee) disclosed in the financial statements are held in the name of the company, except the following:

Description of item of property	Gross Carrying value	Title deeds held in the name of	Whether title deed holder is a promoter, director or relative of promoter/ director of employee of promoter/director	Property held since which date	Reason for not being held in the name of the company
Land 76.475 acres	5	Various Persons, Bangalore	N/A	1950s Approx.	Compendium Error. Estate department is in possession of Hand book with land acquired in various survey numbers called as Compendium. Few title documents are not available as per the compendium.
Land - 39.32 Acres	286	Lucknow Development Authority	N/A	19.05.1986	The land is in the possessions of the division. However, same is to be registered in the name of the division by Lucknow Development Authority.
Land at Kasbe Sukena Railway Station: Approx. 196.22 Acres of rail siding	-	Government of Maharashtra	No	Since Inception of Nasik Division (1964)	196.22 Acre Land being Railway siding land is not in use by HAL & to be returned to Appropriate authority of State Government. Division is continuously following up the matter.
Land at Ojhar: Approx. 69.48 Acres of land given by State Government.	-	Government of Maharashtra	No	Since Inception of Nasik Division (1964)	Matter of 68.95 Acre of Land is being followed with Sub Divisional Megistrate Niphad for making Indenture.
Ghaukhera- Kanpur 16.81 acres	0	Exhibited as Audhyogik krishik, Land in Govt. record	N/A	13-12-1965	Land acquired and handed over to HAL by District Land Acquisition Officer, case filed with SDM for transfer of name
Chak kuriyan- Kanpur 7.92 acres	0	Not appearing in govt. record	N/A	22-12-1965	in title deed. _
Dahli Sujanpur- Kanpur 3.11 acres	0	Appearing as Vayuyaan Colony	N/A	15-12-1965	_
Land-Kanpur 401.19 acres	354	No title deed	N/A	Since inception 1964-65	Possession of the immovable property was handed over to Hindustan Aeronautics
Buildings	35				Limited (HAL) by district Land Acquisition Officer and Indian Air Force, therefore no title deed is required to be executed under Government Grants Act, 1895.(Section 2 Government Grants are exempted from the operation of the Transfer of Property Act)
Land - 7.115 Acres	_	Govt. of India	NA	31-03-1969	7.115 acres of Land received from Army in exchange of 5 acres of Land at Bangalore which was received free of cost from State Government before 31st March 1969. Therefore, no title deed is required to be executed under Government Grant Act, 1895 (Section 2 Government Grants are exempted from operation of the Transfer of Property Act)
Land - 282.4 acers	_	Various persons, Korwa Village	NA	26.11.1982	As informed vide UP Govt ltr No. 606/B/DT 08.05.1990 in the instant case sale deed or gift deed is not necessary. However the land is in the possession of the division.

(d) The Company has not revalued any of its Property, Plant and Equipment and intangible assets during the year.

(e) No proceedings have been initiated during the year or are pending against the Company as of 31^st March 2024 for holding any benami property under Benami Transaction (Prohibition) Act ,1988 (has amended in 2016) and rules made thereunder.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals and no discrepancies of 10% or more in the aggregate for each class of the inventory were noticed.

(b) The Company has been sanctioned working capital limits in excess of 5 crore, in aggregate, during the year from banks on the basis of security of current assets. The Quarterly stock statement filed by the company and the books of accounts are in agreement. Refer Clause 35C of note 49 to financial statements.

(iii) (a) The company has not provided any loans or advances in the nature of loan or stood guarantees or provided securities to any other entities during the year. Hence reporting under clause (iii)(a) of the Order is not applicable.

(b) In our opinion, the Investment made during the year and the terms and conditions of the grant of loans during the year are, prima facie, not prejudicial to the Companies Interest.

(c) The repayment of principal and payment of interest for employees loan has been stipulated and the repayments are regular.

(d) There are no overdue amount for more than ninety days.

(e) The company has not granted any loan or renewed or extended or fresh loans granted to settle the overdues of existing loans given to the same parties. Hence, reporting under clause 3(iii)(e) of the Order is not applicable.

(f) The Company has not granted any loans or advances in the nature of loans either repayable on demand or without specifying and terms or period of repayment during the year. Hence, reporting under clause 3(iii)(f) is not applicable.

(iv) In terms of Circular No. GSR 463 (E) dated 5^th June 2015 issued by Ministry of Corporate Affairs, Government of India, the Company being a Government Company engaged in Defence production is exempt from Section 185 and 186 of Companies Act 2013 and hence considered not applicable.

(v) The Company has not accepted any deposits or amount which are deemed to be deposits. Hence, reporting under Clause 3 (v) of the order is not applicable.

(vi) We have broadly reviewed the books of accounts relating to materials, labour and other items of cost maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 148 (1) of the Act and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however made a detailed examination of the records with a view to determine whether they are accurate or complete.

(vii) (a) The company is regular in depositing undisputed statutory dues, including Goods and Services Tax, Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise, Value Added Tax, Cess, Goods and Service Tax and any other Statutory Dues to the appropriate authorities and there were no undisputed amounts payable which were in arrears as at 31^st March 2024 for a period of more than six months from the date they became payable.

(b) Details of dues of Goods and Services Tax, income tax or Sales Tax or Service Tax or Duty of Customs or Duty of Excise or Value Added Tax, and Cess that have not been deposited as on 31^st March 2024 on account of disputes are given below:.

Sales Tax:

Assessment Year	Amount (in lakhs)	Appeal by	Forum Where Dispute is pending
2005-06	102	The company	WB Commercial Taxes Appellate and Revisional Board, Kolkata
2006-07	448	The company	WB Commercial Taxes Appellate and Revisional Board, Kolkata
2007-08	351	The company	WB Commercial Taxes Appellate and Revisional Board, Kolkata
2008-09	849	The company	WB Commercial Taxes Appellate and Revisional Board, Kolkata
2016-17	83	The company	WB Commercial Taxes Appellate and Revisional Board, Kolkata
1986-87	3,340	The company	Ist Appellate Authority
1988-89	5,106	The company	Ist Appellate Authority
1989-90	5,465	The company	Ist Appellate Authority
1991-92	4,279	The company	Ist Appellate Authority
1997-98	319	The company	Ist Appellate Authority
1999-2000	151	The company	Maharashtra Sales Tax Tribunal
2001-2002	4	The company	Rectification of remand back appeal order passed on 19/05/2022.
			The part payment adjusted against the tax dues against the order.
2000-2001	57	The company	First Appellate Authority (Re calculation pending)
2000-2001	9	The company	Rectification Application submitted on 19.05.2006 for Submission of C Form. Pending before Dy.Com. Of Sales Tax Assessment Nasik.
2002-2003	89	The company	Maharashtra Sales Tax Tribunal, Mumbai
2002-2003	365	The company	Maharashtra Sales Tax Tribunal, Mumbai
2003-2004	28	The company	Maharashtra Sales Tax Tribunal, Mumbai
2003-2004	321	The company	Maharashtra Sales Tax Tribunal, Mumbai
2004-2005	10,510	The company	Maharashtra Sales Tax Tribunal, Mumbai
2004-2005	270	The company	Rati_cation application before Sr. Dy. Comm. of Sales Tax Nasik
2005-2006	41,459	The company	Maharashtra Sales Tax Tribunal, Mumbai
2005-2006	59	The company	Remanded back order received from First Appellate Authority-
			Nasik on 23.11.2021
2006-2007	76,060	The company	Maharashtra Sales Tax Tribunal, Mumbai
2006-2007	8	The company	Maharashtra Sales Tax Tribunal, Mumbai
2008-2009	82,234	The company	Maharashtra Sales Tax Tribunal, Mumbai
2009-2010	1,02,090	The company	Maharashtra Sales Tax Tribunal, Mumbai
2009-2010	139	The company	Maharashtra Sales Tax Tribunal, Mumbai
2007-2008	57,387	The company	Maharashtra Sales Tax Tribunal, Mumbai
2007-2008	14	The company	Maharashtra Sales Tax Tribunal, Mumbai
2010-2011	92,600	The company	Maharashtra Sales Tax Tribunal, Mumbai
2011-2012	90,384	The company	Maharashtra Sales Tax Tribunal, Mumbai
2011-2012	11	The company	Maharashtra Sales Tax Tribunal, Mumbai
2012-2013	79,396	The company	Maharashtra Sales Tax Tribunal, Mumbai
2013-2014	93,906	The company	Maharashtra Sales Tax Tribunal, Mumbai
2014-2015	67,170	The company	Ist Appeal order received.2nd Appeal to be filed before tribunal.
2014-2015	4	The company	Ist Appeal order received.2nd Appeal to be filed before tribunal.
2015-2016	71,484	The company	Maharashtra Sales Tax Tribunal, Mumbai
2016-2017	1,06,895	The company	Maharashtra Sales Tax Tribunal, Mumbai
2016- 2017	61	The company	1st Appeal order received.2nd Appeal to be filed before tribunal.
2017-18 (Q1)	10,142	The company	Maharashtra Sales Tax Tribunal, Mumbai
2017-18 (Q1)	23	The company	Ist Appeal order received.2nd Appeal to be filed before tribunal.
2017-18	308	The company	Appellate authority (Dy. Commissioner of Sales TAX)
2015-16	8.5	The company	Customs, Excise and service tax Appellate Tribunal, Bengaluru
2016-17	3.34	The company	Customs, Excise and service tax Appellate Tribunal, Bengaluru
2004-05 to 22-23	32,436	The company	Additional Commissioner (Appeal)/Tribunal
2010-11	372	The company	Appellate Tribunal, Lucknow
2011-12	1,432	The company	High Court
2012-13	4,156	The company	High Court
2013-14	4,859	The company	High Court
2014-15	8,310	The company	High Court
2015-16	15,268	The company	Appellate Tribunal, Lucknow
2016-17	14,326	The company	Appellate Tribunal, Lucknow
2017-18	4,371	The company	Appellate Tribunal, Lucknow

# Sales Tax paid against Disputed tax of 32172 lakhs.

Service Tax
Assessment Year	Amount	Appeal by	Forum Where Dispute is pending
	(in lakhs)
2009-10	387	The Company	Pending before Tribunal, Bangalore
2008-09 to 2012-13	4,709	The Company	Pending before Tribunal, Bangalore
2014-15 to 2017-18	136	The Company	Pending before Tribunal, Bangalore
April 2017 to June 17	6	The Company	Pending before Commissioner of Service Tax (Appeals), Bangalore
April 2003 to March 2004	26	The Company	CESTAT, Bangalore
August 2002 to March 2003	6	The Company	CESTAT, Bangalore
April 2004 to March 2005	63	The Company	CESTAT, Bangalore
April 2005 to March 2006	78	The Company	CESTAT, Bangalore
April 2006 to March 2007	123	The Company	CESTAT, Bangalore
April 2007 to March 2008	128	The Company	CESTAT, Bangalore
April 2008 to March 2009	18	The Company	CESTAT, Bangalore
April 2009 to March 2010	1	The Company	CESTAT, Bangalore
April 2010 to March 2011	1	The Company	CESTAT, Bangalore
April 2013 to March 2017	13	The Company	CESTAT, Bangalore
2012-13	42	The Company	CESTAT
April 2009 To March 2013	450	The Company	CESTAT
2007-08-- amount – 245+50 - Nasik	295	The Company	ST/134/10-MUM Dated 23.03.2010.17/ST/2009. Matter decided by Hble CESTAT Mumbai in HAL Favour.
2008-09	235.96	The Company	ST/134/10-MUM Dated 23.03.2010.17/ST/2009. Matter decided by Hble CESTAT Mumbai in HAL Favour.
2012-2013,2013-2014 and 2014-2015	1,001	The Company	ST/85782/2022-DB dt 25.03.2022-Appeal filed before Honble CESTAT in Mar 2022
2012-13	8	The Company	Appeal filed before Honble CESTAT
2013-14	6	The Company	Appeal filed before Honble CESTAT
2014-15	7	The Company	Appeal filed before Honble CESTAT
2015-16	6.73	The Company	Appeal filed before Honble CESTAT
2016-17	4	The Company	Appeal filed before Honble CESTAT
2017-18	0.43	The Company	Appeal filed before Honble CESTAT
April 2011 to March 2012	74	The Company	CESTAT
April 2009-10 to March 2010-11	84	The Company	CESTAT
Oct 2007 to March 2009	120	The Company	CESTAT
2013-14 till 2017-18	56	The Company	Commissioner of Central Tax (Appeals) East Commissionerate Domlur
2009-10	282	The Company	CESTAT/Tribunal
2005- 06	62	The Company	CESTAT/Tribunal
June 2013 to June 2017	1	The Company	Service Tax – The Commissioner
2005-06 to 2009-10	385	The Company	CESTAT
2010-11	38	The Company	CESTAT
2011-12	340	The Company	CESTAT
2010-11	38	The Company	CESTAT
2015-16	280	The Company	CESTAT
2016-17 & 2017-18	242	The Company	CESTAT
2014-15 to 2017-18 (upto June 2017)	11.54	The Company	CESTAT
2015-16	1153	The Company	CESTAT EZB, at Kolkata
2016-17 & 2017-18	619	The Company	CESTAT EZB, at Kolkata
Various Years	166	The Company	Commissioner (Appeal)
2004-05 to 2008-09	426	The Company	Central Excise & Service Tax appellate Tribunal, New Delhi
2011-12 to 2014-15	13468	The Company	CESTAT, Allahabad
2015-16 to 2016-17	204	The Company	CESTAT, Allahabad
2007- 11	11234.5	The Company	CESTAT/Tribunal
2011-12	434.17	The Company	CESTAT/Tribunal
2012-13	688.15	The Company	CESTAT/Tribunal
2013-14	1617.24	The Company	CESTAT/Tribunal
2014-15	1904.28	The Company	CESTAT/Tribunal
Service Tax paid against Disputed tax of 3,768.29 lakhs.

GST

Assessment Year	Amount (in lakhs)	Appeal by	Forum Where Dispute is pending
2017-18	2045.5	The Company	HAL has filed appeal with the Appellate Authority (Joint Commissioner of CGST)
2019-20	2144	The Company	Deputy commissioner of Commercial Taxes, Yeshwantpur, Bengaluru.
2017-18	1.45	The Company	GST Department Begumpet
2017-18	300.51	The Company	GST Department Begumpet
2017-18	338.17	The Company	Addl Commissioner (appeal) GST Lucknow.
2017-18	297	The Company	GST Tribunal

GST paid against Disputed tax of 163 lakhs.

Customs Duty

Assessment Year	Amount (in lakhs)	Appeal by	Forum Where Dispute is pending
2019-20	945	The company	Pending before Tribunal, Bangalore
HSN Classification on imported	146.57	The company	CESTAT, Bangalore
Goods – ARDC
2017-18	3674	The company	Matter is sub judice with DRI (Mumbai)
2013-14	64.2	The company	CESTAT
2013-14	10288.96	The company	CESTAT
2013-14	94.82	The company	CESTAT
2013-14	13120.55	The company	CESTAT
2017-21	264.2	The company	CESTAT
2018-19	22.4	The company	CESTAT
2021-22	34.99	The Company	Commissioner of Customs (Appeal), Chennai.
2022-23	35.5	The Company	Commissioner of Customs (Appeal), Chennai.
2022-23	92.82	The Company	CESTAT Delhi.
2017-18 to 2022-23	12870	The Company	CESTAT
2015-16 to 2019-20	4,098	The company	CESTAT
2019-20 and 2020-21	699	The Company	Amount pertains to short levy of IGST due to misclassification of HSN Code.
2018-2019 and 2019 -2020	1596	The company	CESTAT, Bangalore
2017-18	240	The company	Appeal filed with Commissioner (Appeals) short payment of duty by adopting wrong Notification for Levy of IGST
2022-23	11.2	The company

Customs duty paid against Disputed tax of 3,592 lakhs.

Income Tax

Assessment Year	Amount	Appeal by	Forum Where Dispute is pending
	(in lakhs)
2019-20	28442	The company	Income Tax Appellate Tribunal
2017-18- CO	4248	The Company	Commissioner of Appeals
2022-23 – CO	21923	The Company	Commissioner Of Appeals
2008-09 to 2019-20	7	The company	Asst. Commissioner Income Tax, TDS
Not mentioned	15	The company	Demand of Income Tax
Not mentioned	488	The company	Demand of Income Tax
2011-12	33	The company	Asst. Commissioner, Income Tax, Kanpur
2013-14	162	The company	Asst. Commissioner, Income Tax, Kanpur
2023-24	0.45	The company	Outstanding Dues reflected in the TRACES
2022	6	The company	Outstanding Dues reflected in the TRACES
2007 to 08 - 2021-22	1	The company	Outstanding Dues reflected in the TRACES

Income Tax paid against Disputed tax of 9490.10 lakhs.

Others

Assessment Year	Amount	Appeal by	Forum Where Dispute is pending
	(in lakhs)
2001-02 to 2021-22	2795	The Company	Bombay High Court
2001-02 to 2021-22	440	The Company	Bombay High Court
2003 onwards- employees & contractors	421.3		High Court, Telangana
01/04/2019 to 30/09/2020	16.25	The Company	ESIC, Regional Director (Appellant Authority)
2013-14	119	The Company	ESI Court
2014-15	6	The Company	ESI Court
2014-15	507	The Company	High Court

Tax paid against Disputed tax of 368 lakhs.

(viii) There were no transactions relating to previously unrecorded income that have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act,1961 (43 of 1961).

(ix) (a) The Company has not taken any loans or other borrowings from any lender. Hence reporting under clause 3(ix)(a) of the Order is not applicable.

(b) The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.

(c) The Company has not taken any term loan during the year and there are no outstanding term loans at the beginning of the year and hence, reporting under clause 3(ix)(c) of the Order is not applicable.

(d) On an overall examination of the financial statements of the Company, funds raised on short-term basis have, prima facie, have not been used during the year for long-term purposes by the Company.

(e) on an overall examination of the financial statement of the Company, the Company has not taken any funds from any entity or person on account of or to meet the obligation of its subsidiaries.

(f) The Company has not raised any loans during the year and hence reporting under clause 3(ix)(f) of the order is not applicable

(x) (a) The Company has not raised moneys by way of initial public offer or further public offer (including debt instruments) during the year and hence reporting under clause 3(x)(a) of the Order is not applicable.

(b) During the year, the Company has not made any preferential allotment or private placement of shares or convertible debentures (fully or partly or optionally) and hence reporting under clause 3(x)(b) of the Order is not applicable.

(xi) (a) No fraud by the Company or fraud on the Company has been noticed or reported during the year

(b) No report under sub-section (12) of section 143 of the Companies Act has been filed in Form ADT-4 as prescribed under rule 13 of the Companies (Audit and Auditors) Rules, 2014 with the Central Government, during the year and up to the date of this report.

(c) As per the information and explanations provided to us, no whistle blower complaints are received during the year by the Company.

(xii) The Company is not a Nidhi Company and hence complying with the provisions of the Nidhi Rules, 2014 does not arise.

(xiii) All transactions with the related parties are in compliance with Sections 177 and 188 of the Companies Act, 2013 where applicable and the details have been disclosed in the Financial Statements etc, as required by the applicable Accounting Standards.

(xiv) (a) In our opinion, the Company has an adequate internal audit system commensurate with the size and nature of its business.

(b) We have considered, the internal audit reports for the year under audit, issued till date to the division during the year and till date.

(xv) The Company has not entered into any non-cash transactions with Directors or persons connected with him.

(xvi) a) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934. Hence reporting under clause 3(xvi)(a), (b) and (c) of the Order is not applicable.

b) In our opinion, there is no core Investment Company within Group (as defined in the Core Investment companies (Reserve Bank Directions,2016) and accordingly reporting under clause 3(xvi)(d) of the order is not applicable.

(xvii) The Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

(xviii) There has been no resignation of the statutory auditor of the Company during the Year.

(xix) On the basis of the financial ratios, ageing and expected dates of realisation of financial assets and payments of financial liabilities, other information accompanying the financial statements and our knowledge of the Board of Directors and Management plans and based on our examination of the evidence supporting the assumptions, nothing has come to our attention, which causes us to believe that any material uncertainty exists as on the date of the audit report indicating that Company is not capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date. We, however, state that this is not an assurance as to the future viability of the Company. We further state that our reporting is based on the facts up to the date of the audit report and we neither give any guarantee nor any assurance that all liabilities falling due within a period of one year from the balance sheet date, will get discharged by the Company as and when they fall due.

(xx) a) The Company has not transferred the amount remaining unspent on CSR Expenditure in respect of other than ongoing projects, to a fund specified in schedule VII to the Companies Act,2013 till the date of our report. However, the time period for such transfer ie six months of the expiry of the financial year as permitted under the second proviso to subsection (5) of section 135 of the act, has not elapsed till the date of our Report. The Provision of Section 135 of the Companies Act,2013 relating to CSR Expenditure is Compiled at Corporate Level. Hence paragraph (XX) (a) (b) of the order is not Commented upon.

b) There is no unspent amount towards Corporate Social responsibility (CSR) on ongoing projects requiring a transfer to a special account in compliance with provisions of sub section (6) of section 135 of the said act.

ANNEXURE – C TO THE INDEPENDENT AUDITORS REPORT

Directions indicating the areas to be examined by the Auditors during the course of audit of annual accounts of Hindustan Aeronautics Limited for the year 2023-24 issued by the Comptroller & Auditor General of India under Section 143(5) of the Companies Act, 2013.

S. No. Areas Examined	Observation/Finding
1 Whether the company has system in place to process all the accounting transactions through IT system? If yes, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications, if any, may be stated.	Yes. The Company has ERP System in place and the accounting entries are generated in the System as and when transaction is made. The ERP system is not linked to Internet and the modules in the ERP system are not interlinked. In view of the same some Journal Entries are required to be made to account for certain adjustment / correction derived basically from the System and then fed in to the system through required accounting process with a maker and checker concept to ensure the integrity of the System.
2 Whether there is any restructuring of an existing loan or cases of waiver/write off of debts/loans/interest etc. made by a lender to the company due to the companys inability to repay the loan? If yes, the financial impact may be stated. Whether such cases are properly accounted for?. (In case, lender is a Government company, then this direction is also applicable for statutory Auditor of Lender Company	Not applicable
3 Whether funds (grants/subsidy etc.) received/ receivable for specific schemes from Central/ State Government or its agencies were properly accounted for/utilized as per its term and conditions? List the cases of deviation.	Not applicable