Bharat Dynamics Ltd

DEAR SHAREHOLDERS,

At the outset, I would like to extend my gratitude to each of you for your continued support and investment in BDL. Your strong support and faith in us, inspires us to achieve new milestones and take the Company to greater heights.

I take pleasure in sharing with you the 54th Annual Report of BDL, a Company built over a period of more than five decades of spirited and perseverant efforts by a highly skilled workforce.

BDL's performance during the fiscal year 2023-24 is impressive and bears testimony to the hard work put forth by all the stakeholders involved with the company. All this was made possible despite disruptions in the operational environment and supply chain as a result of the current global scenario,

The Government of India's initiatives to make India self-reliant in providing state-of-the-art weapon systems to the Indian Armed Forces, as well as clearance for export to Friendly Foreign Countries (FFCs), have created several opportunities for BDL to grow, expand and make in-roads into new markets. BDL has set on a path to explore more opportunities and live up to the expectations of investors.

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

FINANCIAL AND PERFORMANCE HIGHLIGHTS OF THE YEAR:

BDL has achieved a Profit After Tax (PAT) of 7 613 crore this Financial Year (FY) as against a profit of 7 352 crore reported in the previous FY.

BDL had performed well during the last fiscal year despite many operational and technical challenges. During the fiscal year under review, BDL achieved production of 7 2592 crore as against 7 2508 crore of previous financial year and achieved a sales turnover of 7 2369 crore as against 7 2489 crore of previous financial year.

I am extremely pleased to inform you that BDL continues to pay a stable dividend. Your Board has recommended a final dividend of 7 0.85 per equity share of 7 5 each, amounting to 7 31.16 crore. It also brings me great pleasure to inform you that BDL has already paid an interim dividend of 7 8.85 per equity share (with a face value of 7 10 each) for the financial year 2023-2024. The total dividend declared by the company for fiscal year 2023-24 is 7 5.275 per share (at face value of 7 5 each).

PERFORMANCE VIS-A-VIS MoU:

In terms of the Memorandum of Understanding (MoU) signed with the Department of Defence Production, Ministry of Defence (MoD), Government of India, BDL has been rated “Good” for the year 2022-23, and rating for 2023-24, it is under evaluation.

SIGNIFICANT ACHIEVEMENT:

During the year, BDL received orders worth 7 2076.28 crore (Gross) for supply of Anti-Tank Guided Missiles (ATGMs), Unified Launchers,

Very Short-Range Air Defence System (Laser Beam Riding) VSHORADS (LBR), Unmanned Aerial Vehicle Launched Precision Guided Missiles (ULPGM), upgraded version of Akash Missiles etc.,

In addition to the above, several orders like Medium Range Surface to Air Missile (MRSAM), Invar ATGM, Helina, NAG, Smart AntiAirfield Weapon (SAAW), Grad rockets, Refurbishment orders are expected to be received during the current financial year 2024-25.

NEW PARTNERS IN PURSUIT OF TECHNOLOGY UPGRADATION:

BDL has always prioritized technology upgrades in order to stay up with the current demands of the global defence industry. In pursuit 7 of this, BDL has entered into MoUs or teaming arrangements with the following entities:

• MoU with M/s Godrej & Boyce Manufacturing Company Limited, to work together on the current and future weapon programs for Domestic as well as export.

• MoU with M/s VEM Technologies Private Limited, to work together as a team on programmes for indigenisation of components.

• MoU with M/s Undersea Sensor Systems Inc (Ultra) to establish a manufacturing capability at BDL in India.

• MoU with M/s Tetra Radio Systems Private Limited to design and develop various RF Components.

• MoU with Bharat Electronics Limited towards commitments to synergize strengths to jointly work in fields of R&D, Export and Indigenization & other areas of mutual interest, contributing towards India ‘Atmanirbhar' in Defence.

• MoU with M/s Idea Forge for design and development of an integrated offering of weaponised UAVs in the territory of India.

• Licencing Agreement for Transfer of Technology (LAToT) with Terminal Ballistics Research Laboratory (TBRL), Chandigarh.

DIVERSIFICATION PLAN:

As a part of BDL's plan for diversification, new verticals have been identified, like guided bombs, drone delivered payloads, Warhead manufacturing, engines for cruise missiles, products for space applications, and propellants, rockets which are expected to create new business opportunities for BDL.

MAJOR MILESTONES ACHIEVED:

BDL has achieved significant milestones in association with DRDO during the year, which have given a boost to the various development projects:

• Hon'ble RRM Shri Ajay Bhatt flagged off the indigenously developed and BDL manufactured Astra Missiles for supply to the Indian Air Force in January 2024 at BDL, Kanchanbagh Unit, Hyderabad.

• The last Varunastra of the current order from Indian Navy was flagged off by Dr Y Sreenivas Rao, DS & DG (NS&M) at BDL Vizag Unit in presence of dignitaries from IHQ, ENC, NSTL, NAD & NAI.

QUALITY SYSTEMS:

As a missile manufacturer that produces single-shot devices, product quality is critical, and our products must operate the first time, every time. Hence, these products require stringent quality standards and a high reliability. In pursuit of this objective, BDL is always upgrading to international quality standards. As you are aware, the production facilities at Kanchanbagh and Bhanur are already certified to the International Aerospace Quality Management Standard AS 9100D.

• Three production units (Kanchanbagh, Bhanur and Vizag) have been Re-certified with ISO 14001:2015 w.e.f April 2023 by the Certification Body M/s International certification services Pvt Ltd. This certificate is valid for 3 years.

• The Silver Award for Innovation & Quality was won jointly by BDL & DGAQA in the National level QCC competition conducted by GRSE-SODET in November 2023 in Kolkata.

RESEARCH AND DEVELOPMENT (R&D):

BDL is continuously engaged in new product development and up-gradation of existing products to meet customer requirements. As part of the same, BDL's Design & Engineering division is working on development of various projects.

CORPORATE GOVERNANCE:

BDL has a well-established relationship between Company's Management, the board, shareholders, and other stakeholders. With its well-laid-out principles, policies, procedures, and clearly defined responsibilities and accountabilities, BDL has the perfect means of attaining its objectives and systems in place for monitoring the performance.

BDL conducts business with the highest ethical standards and prohibits all forms of bribery and corruption across all units of the organisation. During the year under review, no such instances of bribery or corruption were reported.

BDL's activities are monitored by several external agencies like the Statutory Auditors, Comptroller and Auditor General of India, CVC, MoD (Dept. of Defence Production), etc.

CORPORATE SOCIAL RESPONSIBILITY (CSR) AND SUSTAINABILITY DEVELOPMENT:

BDL is conscious of its responsibilities towards the society, and in accordance with the terms of the Companies Act of 2013, BDL has been allocating 2% of its average net income from the previous three fiscal years for CSR initiatives. CSR's primary priority areas are healthcare, nutrition, education and literacy, skill development and sanitation, PM TB Mukth Abhiyan, Sahara hostel for Veer Naaris, and so on. According to DPE guidelines, BDL has also expanded into aspirational districts and underdeveloped areas in Telangana and Andhra Pradesh to engage in corporate social responsibility (CSR). Some of the major projects taken up under CSR initiative, during the year are as follows:

• Provided job-oriented skill training in textiles, with a budget of 7 250 Lakh, to women at Vizianagaram district in Andhra Pradesh through the District Rural Development Agency, Vizianagaram.

• Undertook digitization of class rooms in 115 Govt. Schools at Vishakhapatnam & Vizianagaram Districts of Andhra Pradesh through Sarva Shiksha Abhiyan with a budget of 7 500 Lakh.

• Contributed for setting up Molecular Oncology Laboratory at MNJ Institute of Oncology & Regional Cancer Centre, Red Hills, Hyderabad with a budget of 7 75 Lakh.

• Supported Seva Bharathi, an NGO for conducting Mega Medical Camps at Secunderabad with a budget of 7 100 Lakh.

• Supported Military Hospital Secunderabad in providing much needed critical care facilities through their ICU by Provided 10 ICU Beds, with a budget of 7 25 Lakh.

WAY FORWARD AND FUTURE OUTLOOK:

The year 2023-24 ended with a record PAT and increased production with marginal dip in the revenues. Your company is having healthy order book position and which has reached a staggering figure of 7 19434 crore as of 31 March 2024. In the future, the order book position is expected to further expand as several orders are in various stages of finalization whilst the current orders will be executed in the next 4-5 years.

The current geopolitical situation prevailing in Europe and Middle East are the major setbacks for the Company which is causing delays in receipt of input materials from Foreign Original Equipment Manufacturers (FOEMs) and has impacted the performance during the year. Your company is making all efforts to counter these supply chain issues by taking up indigenization of these imports and convert the executable orders into production. Your company is in continuous talks with the FOEMs and also using all diplomatic channels to sort out the supply chain issues and ensure smooth production.

BDL is confident in the realisation of the potential orders due to the policy initiatives of the government and the ease of doing business in the country.

BDL is also investing in R&D activities both in-house and in association with DRDO for various development and production programmes. BDL is also entering into various agreements with foreign OEMs, both for manufacturing in India as well as joint development programmes.

In the export market, there is lot of interest in BDL's products like Akash Weapon Systems from potential Buyers. BDL is in the process of converting the leads received into orders. In order to further consolidate the order book of the company, there is a huge emphasis laid by BDL on the necessity of realising export orders, and the company is pursuing the same aggressively. Even though our main customers are the Indian Armed Forces, Company is exploring new markets for immediate growth. Many leads are being received from our FFCs which are being pursued to be converted into firm orders. In order to sustain business and growth, BDL is focused to execute the orders within the delivery schedule with quality products at a competitive price.

BDL is also focusing on improving indigenous creation of Sub-Systems, Systems, and Services, which will allow us to build capabilities and competences. This involves investing in infrastructure development and modernization, skill training, and outsourcing to Indian industries, particularly MSMEs. We will also continue to collaborate closely with DRDO labs, research and top academic institutions, and niche technology players to develop new products and solutions for emerging technologies. Furthermore, given the increased private engagement, we are actively dealing with the Indian defense industry towards building long-term relationships and synergizing the Indian Defence Industry.

In R&D, we have increased the expenditure and extended all the support. Emphasis is being laid on timelines for R&D Projects. Accordingly, marketing efforts are put in place to generate revenue from successful R&D Projects.

ACKNOWLEDGEMENT:

I wish to place on record, on behalf of the entire BDL family, our sincere thanks and gratitude to investors and shareholders who have reposed trust in this company and continued to support us in all our endeavours through this financial year. I also look forward to the same support from investors and all stakeholders in the years to come.

My special thanks also go to the MoD, Government of India, DIPAM, State Governments, Customers, Inspection Agencies, other DPSUs, our vendors, Employees of BDL and all the agencies involved directly or indirectly in the growth of this company.

I also thank the Board members for their valuable guidance and encouraging support rendered in the functioning of the company.

Finally, let me assure you that BDL is poised to reach greater heights. The entire fraternity of BDL will strive to achieve the desired results and exceed the investors' expectations.

I am proud of what we've accomplished together in the past few years, and I am even more optimistic about the opportunities ahead.