Hindustan Aeronautics : Transcript of Analysts/Institutional Investor Meet/Con. Call

"Hindustan Aeronautics Limited Business Update Call

Hosted by ICICI Securities"

August 29, 2022

MANAGEMENT: MR. C. B. ANANTHAKRISHNAN - CMD, DIRECTOR

(FINANCE) & CFO, HINDUSTAN AERONAUTICS

LIMITED

MR. JAYADEVA E. P. - DIRECTOR (OPERATIONS),

HINDUSTAN AERONAUTICS LIMITED

MR. ALOK VERMA - DIRECTOR (HUMAN RESOURCES),

HINDUSTAN AERONAUTICS LIMITED

MR. GV SESHA REDDY - COMPANY SECRETARY,

HINDUSTAN AERONAUTICS LIMITED

MR. KRISHNA - EXECUTIVE DIRECTOR (PLANNING),

HINDUSTAN AERONAUTICS LIMITED

MODERATOR: MR. ABHIJIT MITRA - ICICI SECURITIES

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Moderator:Ladies and gentlemen, good day and welcome to the Business Update Call of Hindustan Aeronautics Limited Conference Call hosted by ICICI Securities. As a reminder, all participants' lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing '*' then '0' on your touchtone phone. Please note that this conference is being recorded.

I now hand the conference over to Mr. Abhijit Mitra from ICICI Securities. Thank you and over to you, Sir.

Abhijit Mitra:Thanks, Operator, and good evening to all the participant and thanks for joining in. We are here to discuss the business update of Hindustan Aeronautics and from the management we have Mr. C. B. Ananthakrishnan - CMD, Director (Finance) & CFO; Mr. Jayadeva E. P. - Director (Operations).

So, without further duo, I hand it over to the management team for his opening remarks.

C. B. Ananthakrishnan: Good evening and warm welcome to one and all. We have just completed our AGM and we are into this analyst call today.

At the outset, it's a great pressure and privilege to address you today for this analyst call post our AGM of 2021-22. I trust your family and you are all keeping well in the midst of this unprecedented pandemic COVID-19. At HAL, we are all fighting to revive and rebuild the operations in these challenging situations.

As you all know that we had a successful year 2021-22 wherein we showcased impressive performance in every area, whether it is from revenue to operational efficiency, contributing to the wealth of our treasured shareholder significantly with the increase in the market capitalization to almost Rs. 74,000 crores as on date. This also reiterated their belief on the company and the company is marching ever strong as it has been in the past.

I would like to introduce my team which is there with me right now. Today, as I speak to you, I have with me the Director (HR of the Company), Mr. Alok Verma; Director (Operations), Mr. Jayadeva; and Company Secretary Mr. Sesha Reddy; and also, our Executive Director (Planning) Shri Krishna besides my Finance team, which is also there to assist me out.

I take this opportunity to highlight the evolving landscape in the defense ecosystem in the country, the impact of the recent changes in the geopolitical situation, and the roadmap ahead for HAL. I would just like to take a 10-minute time for the introduction on all the recent significant milestones which HAL has achieved and also the roadmap for the future.

The current financial year 2022-23 has begun quite well and HAL has posted a robust financial results in the first quarter. We have declared our Q1 results, which is available in public domain, and most of you might already analyzed the same. The Q1 results reflect the normalcy that we

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have achieved in our operations compared to the previous year. It was a strong quarter and we could deliver improved performance for the various parameters including revenue, profits, EBITDA etc.

Our order book also has further strengthened to almost 84,800 crores, close to 85,000 crores on receipt of fresh orders of almost 6,000 crores plus. Our collections and the budget allocations is healthy during the current year as well, and today as on date, we are having a surplus cash balance of almost 14,000 crores, which is nothing but the working capital funding, which has been funded upfront by our customers.

Some of the significant development I would like to highlight here on the various project because since we last spoke almost sometime in May 2022. The first series production of light utility helicopter Mark 1 took to skies during July 2022 and is ready for rollout from the New Greenfield helicopter factory at Tumakuru. The project is almost complete and the factory is ready for its operations and we will commence our operations over there very shortly.

Light transport aircraft Hindustan 228 Dornier aircraft attained civil certification from DGCA during May 22 which is again a stepping stone for us to get the EASA certification for doing the export of this Dornier. Marking a major contribution towards the Human Space Flight Program or Gaganyaan, HAL has delivered the Crew Module Fairing and HEM-Thrust-transfer Structure hardware to ISRO during August 22.

The first flight of LCA Mark 1A, which is one of our flagship orders which we will have to execute and the first delivery is to happen in February 2024. It has already started and the first flight has already started and we are in line with that so that the deliveries will happen as per the scheduled delivery date.

In significant collaborative move aimed at bolstering the Make in India campaign, HAL has signed an MoU with Safran to set up a joint venture intended for development, production, sales and support of helicopter engines to meet not only the requirements of the Indian helicopter programs, like IMRH, but also for the global market. A 50-50 partnership is envisaged with the most important thing being that IPR will rest with the joint venture within the country.

HAL has also entered into an MoU with the IAI, Israel Aerospace Industries on 4 March 2022 to convert the civil passenger aircraft to multi-mission tanker aircraft. This is part of our diversification plan, which probably we are in discussions with IAI which we are expecting it to materialize in the days to come.

An EOI has been released for the public-private partnership for the Indian Multi Role Helicopter. This is again a major program. We wanted to public-private partnership right from the design and development stage itself, the first of its kind as far as HAL is concerned, as far as the Indian Defense industry is concerned. So, this model if it works, it augurs well for the Atmanirbhar and the self-reliance vision of our Prime Minister.

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I also would like to share with you what is the future outlook for HAL? It looks very stable and promising as I can say, many positive developments which will put HAL in the proper growth trajectory in the near future. It will also help not only HAL but also the ecosystem of the Indian Defense and Aerospace Industry as well.

Today, the thrust is more on indigenization. As you all know that the government's Atmanirbhar and self-reliance is more towards indigenization of the various platforms. At HAL indigenization is of utmost priority because we create the mission for mission success against adversaries wherein we need to be self-dependent and just to substantiate my statement during the last year almost out of 34 new platforms which has been manufactured and delivered, 30 are indigenously designed and developed state-of-the-art platforms which is really an immense contribution towards the indigenization and Atmanirbhar.

All the major platforms of HAL, namely, our LCA, Dornier 228, HTT-40, LCH, LUH are part of the positive list notified by MOD ensuring assured order for these platforms while over 50 LRU fitted on these platforms are also notified ensuring guaranteed order for our partners in the Indian private sector.

In fact, the third PIL, yesterday, the third PIL, that is the Positive Indigenization List has also been approved by the government which contains some about 780 strategically important LRU subsystems and components of which almost half of it, 360 are from HAL platforms like LCA, LCH, LUH and so on and so forth. This means that our thrust on indigenous development through the synergistic collaboration with the Indian private industry and assured long-term business for us and our business associates.

So, this shows the criticality and the importance which HAL attaches to the indigenization and also to reduce our dependency on the foreign OEMs in the days to come. This has been further strengthened by the recent geopolitical situation and pandemic, the quest for Atmanirbharta and HAL in collaboration with the private industry is relentlessly working towards breaking the dependency in all the critical area in aerospace segment.

Today, we have got multiple platforms indigenously designed and developed platforms. Earlier, we had more of license production. Today, we have got more of indigenous platforms in our stable almost as I have already mentioned ranging from fighters to trainers to fixed wing transport aircraft to utility helicopter, attack helicopters, and complete range of all the aircraft industry which anyone could think of. All these platforms would reduce our dependence on foreign OEMs and provide opportunities aggressively to pursue the export market, especially in the light of so much of enquiries being received in the recent past due to the changing geopolitical situation.

Also, to take care of the future, we do not want to lag on the technological front. We wanted to also be prepared for taking the technological requirements of the future like the Combat Air Teaming System, CATS, as we call it, and then the LCA Mark2, then TEDBF, that is Twin

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