Bharat Electronics Ltd

Dear Shareholders,

It is with immense pleasure that I address you as the Chairman and Managing Director and share the Company's achievements and financial highlights during the past year.

FY 2022-23 has been an exceptional year for your Company. We grew on all fronts and emerged stronger with all your support, despite the geo-political crisis and global chip shortages. We continued to prioritise R&D, quality, technology and infrastructure modernisation, sustainability and excellence in operations which positions us on a stronger footing.

The year also saw us creating value for all stakeholders. I am pleased to share that BEL has achieved a market capitalisation of 71,307 Crore as on 31 March 2023. This is a testament to our commitment of adequately rewarding our shareholders. Great progress was also made with regards to extending support to the communities and ensuring sustainable operations.

I take this opportunity to share with you the performance highlights during the past year and the future outlook for the company.

In FY 2022-23, BEL achieved a turnover of 17,333 Crore as against 15,044 Crore in FY 2021-22, thereby registering a growth of 15.22%. The growth was driven by strong performances of both domestic and export business, across both defence and non-defence segments. Defence continued to be our mainstay, contributing to 87% of revenue in FY 2022-23 as against 90% in FY 2021-22, with the balance 13% coming from the non-defence segment.

Our export sales increased about 45% to USD 48.33 Million; we mainly exported to countries like France, USA, Spain, Germany, Mauritius, Switzerland, Vietnam, Sri Lanka, etc. The major products/systems exported include Sonar, Coastal System, Radar Warning Receiver, Missile Approach Warning System, T/R Modules, Communication Equipment, Low Band Receiver LRUs, Medical Technical Parts, Cable Looms, Sonar Spares, Software for Integration of Radar, Radar Spares, EOS CoMPASS, etc.

The Profit after Tax grew by 28% to 3,007 Crore in FY 2022-as against 2,349 Crore in FY 2021-22. Our net worth is now stronger at 13,582 Crore as against 11,984 Crore in the previous year. Turnover per employee has increased from

1.69 Crore in FY 2021-22 to 1.96 Crore in FY 2022-23.

We continued the momentum in order acquisition by booking an inflow of 20,344 Crore during FY 2022-23. Order book position now stands at 60,690 Crore as on 01 April 2023, giving stable revenue visibility for the next few years. We anticipate good order inflow in the next couple of years.

Innovation is a key differentiator for us. During the year, we continued investments in advanced technologies to deliver unique products and solutions to the customers, fulfilling our commitment to increase indigenised content and add value to our offerings. R&D investment as a percentage of turnover during the year was 6.28%, helping us to achieve 75% of our turnover from indigenous products.

Your Company has always been at the forefront in continuously developing innovative and quality products for customers. Some of the major products/systems introduced during FY 2022-23 include Coastal Surveillance System Ph.-II, SDR Variants, Combat Management System for ships, Voice Communication & Control Systems for C4I project, 4.8M Ku band Antenna, Gun Fire Control System (GFCS), Antenna System for Flight Level Radar MK-II, Navigation Complex System, 4KW GaN Transmitter, 0.4M Ku band Satcom on the Move (SoTM) System, Night Sight for 7.62mm LMG, Indigenous Goniometer, IFF MK XII(S), Super SCADA for Metro, etc.

Our unwavering dedication to R&D and strengthening of intellectual property has yielded remarkable results. In_FY 2022-23, we filed 242 IPRs including 121 patent applications in domains of Communications, Artificial

Intelligence, Radars, Antennae, Embedded Systems, etc. We have been granted 22 patents, taking our total to 46. Furthermore, our scientists and R&D engineers published 79 technical papers in prestigious national and international journals, seminars and conferences.

Your Company continues to maintain a strong commitment to future readiness by investing for the future. This includes creating infrastructure and test facilities for various projects, establishing a Software Development Centre in Visakhapatnam to develop and access competencies from Tier-2 city. Additionally, we also expanded the manufacturing and storage facility of Ballot Unit & Voter-Verified Paper Audit Trail (VVPAT) for EVMs at Bengaluru.

To foster synergistic R&D efforts and propel innovation journey, we have empanelled 309 partners. This includes 39 R&D solution providers, 198 design service providers, 40 consultants and 39 production service providers.

In recognition of our commitment to quality and sustainability, we are proud to have received 19 AS-9100 D standard certifications and 22 Green Channel Certificates for our products.

It gives us great pleasure to inform that our persistent endeavours have been duly recognised and rewarded across various prestigious platforms. Our accolades span corporate excellence, governance, R&D, software development and sustainability domains, and are a testament to our continued excellence and improvement across all facets of operations.

Some of the noteworthy awards being:

The Economic Times - Iconic Brand of India Award - 2022

International Aerospace & Defence Award for Excellence in Innovation, Design, Technology or R&D

Twin honour of CII EXIM Bank Business Excellence Award (2022) and the Jury's Commendation for Role Model Organisation for BEL's Ghaziabad Unit Winner of Raksha Mantri's Export Raksha Niryat Ratna Award 2021-22 among Large Companies ICC (Indian Chamber of Commerce) PSE Excellence Awards for the Company of the Year Quantic Technology Excellence Award 2022 for Best Security, Defence, or Law Enforcement IT Project Urban Infra Business Leadership Award 2022 for BEL's contributions to the transformation of Metro and Rail commutation in India, aligned with the Government's Make in India initiative Innovative CFO Award at the 2^nd edition of The Business Leadership Awards for Director (Finance) & CFO

Most Iconic Organisation Award for BEL's Panchkula Unit by the World Manufacturing Congress

Innovative Digital Smart City Project Award for Chandigarh Smart City to BEL's Panchkula Unit from Indian Institute of Material Management, Chandigarh These achievements inspire us and fuel our ambition to continue the pursuit of excellence and conquer new summits.

As we look ahead, we have a lot of promising opportunities as well as challenges.

BEL being a key player in defence with multiple existing competencies and strong R&D is well-placed. We are vigorously responding to many ‘Make-II' projects under Defence Acquisition Policy (DAP) 2020 and target to increase participation. We are also emphasising on progressing towards enhancing indigenous development of Sub-Systems, Systems and Services for which capabilities and competencies are being built. This includes investing in infrastructure creation and modernisation, skill development and outsourcing to Indian industries, especially MSMEs.

We will also continue to closely work with DRDO labs, research and premier academic institutions and niche technology players for developing new products and systems in emerging technologies. Further, considering increased private participation, we are increasingly interacting with the Indian defence industry towards building long-term relationships. In our non-defence business, we seek to continue building on our existing competencies as well as diversifying into new business areas.

We are continuously pursuing opportunities to expand business by capturing new customers in the existing and new markets. To give greater thrust to exports, we have plans to further expand the network of our marketing offices. The target is to increase business opportunities in South East Asia, Europe, Middle East, Africa and North and South America through incessant engagement with customers and collaborating with other Indian companies and local partners.

Our overarching goal is to maintain strategic electronics leadership. Towards this, we have established strategies and initiated actions to rise above competition and maintain a technological edge. We intend to do this by staying abreast with latest technologies and meet the changing requirements of customers with thrust on cost-effective and innovative solutions. Roadmaps have been drawn for future products, new technology areas, creation of IPRs and acquisition of key technologies. On the employee's front, we have solidified our reputation as a preferred employer with efforts around continuous learning, innovation, and empowerment.

In FY 2023-24, we target a healthy growth of 15-17% driven by both defence and non-defence businesses. We have several prestigious orders lined up and will be focussed on executing them on time. While the opportunities are many, we also anticipate challenges due to geopolitical situations, emerging new technologies, changing policies and regulatory landscapes, competition and evolving customer expectations. We will remain watchful and take necessary actions.

ESG and commitment to stakeholders' interests is a priority at BEL, guided by our value of ‘Endeavouring to fulfil social responsibilities'. It underpins our long-term success. We are making great strides towards reducing emissions, achieving water positivity and circular economy. A sharp focus is to reduce, reuse, recover and recycle through improvement in process and intend to build on them and create a greener future. Our community efforts focusses on health, nutrition, education, skill development and environment sustainability. A noteworthy initiative was the launch of ProGame, self-learning coding kit, designed to equip children with programming skills and logic development, particularly targeted at those without access to computers. 42,000 students benefited from it.

Your Company takes pride in constantly adopting and maintaining the highest standards of values and principles. Your Company has received ‘Nil' comments certificate from the C&AG for FY 2022-23. A detailed report on compliance of the guidelines on Corporate Governance can be read in Board's Report.

I extend my gratitude to all shareholders, esteemed customers and business associates for believing in us and partnering in our journey of value-creation. I thank my colleagues on the Board and the members of the Management Committee for their ongoing support and bringing in expertise to drive BEL's success. I am grateful to the Ministry of Defence and Defence Services for providing guidance, opportunities and having confidence in us. Employees have been our pillars of success in every sense, helping BEL reach newer heights and enabling us to deliver on the expectation of customers and all stakeholders. We look ahead to better times and seek the sustained support of all stakeholders to unlock greater value creation.

I remain dedicated to our continued success and eagerly look forward to working with each one of you to take BEL to greater heights.

Thank you for the continuous support to Bharat Electronics Limited

With Best Wishes,

Yours Sincerely,

Chairman and Managing Director (Additional Charge)

Bengaluru

1 August 2023