Varroc Engineering Ltd.-இன் இயக்குநர் அறிக்கை

Mar 31, 2023

The Directors of your Company take pleasure in presenting the 35th Annual Report on the business and operations of the Company together with financial statements for the financial year ended March 31,2023.

FINANCIAL RESULTS & APPROPRIATION

As reported last year and pursuant to the Securities Purchase Agreement ["SPA"], your Company has divested its 4-wheeler lighting system operations in Americas & Europe and identified R&D business in India to Compagnie Plastic Omnium SE of France and its Affiliate/Associate Companies, and Subsidiaries by signing Business Transfer Agreement and other related agreements/documents with the subsidiaries and other parties involved.

The deal size of €600 million was adjusted downward by €80 million due to higher raw material inflation, lower demand caused by the Ukraine war, and other geopolitical issues.

The said divestment was concluded on October 06, 2022. Your Company continues its lighting operations in Asia and continues to operate its joint venture in China, other international two-wheeler business in Italy and Vietnam, and global electronics business in Poland and Romania.

The said transaction enabled the Company to focus on emerging areas such as electric vehicle components, electronics, and connectivity in the Indian market and the global two-wheeler lighting business.

The equity value agreed under the SPA was €69.5 Million (subject to closing adjustments as provided under SPA). In our standalone financials, the Company has recognised loss on equity investments and loans given to Varroc lighting systems operations ("VLS Business") of Rs. 13,240 million during the quarter ended September 30, 2022, as an exceptional item. Further loss of Rs. 81.90 million recognised during the quarter March 31, 2023, pertains to expenses related to sale of investment in VLS business. Pursuant to amendment to SPA on May 12, 2023, a mutual settlement is being attempted for the disagreements between the parties in accordance with the provisions of SPA.

The summarized Financial Results for the year ended March 31, 2023, and for previous year ended March 31, 2022 are as follows:

FINANCIAL RESULTS & APPROPRIATION

The summarized Financial Results for the year ended March 31, 2023, and for previous year ended March 31, 2022 are as follows:

(Rs. in Million)
Particulars	STANDALONE		CONSOLIDATED
	Financial Year 2022-23	Financial Year 2021-22	Financial Year 2022-23	Financial Year 2021-22
Continuing Operations
Revenue from operations	39,178.90	32,918.07	68,630.66	58,442.01
Other Income	530.03	646.14	578.81	339.33
Earnings before interest, tax, depreciation and amortisation	3,189.97	3,060.34	6,045.68	3,932.72
Less: Finance cost	1,700.98	909.76	1,902.95	1,183.52
Less: Depreciation and amortization	1,944.49	1,703.49	3,367.41	3,045.47
Add/(Loss): Share of Net Profit/(Loss) of Investment accounted for using the equity Method			53.28	(4.33)
Less: Exceptional item	13,321.90	-	-	-
Profit/(loss) before tax from continuing operations	(13,777.40)	447.09	828.60	(300.60)
Less: Current tax expense	137.66	79.92	660.95	347.97
Less: Short/(excess) provision for tax in respect of previous years	(110.90)	(0.11)	(105.78)	2.23
Less: Deferred tax	63.78	107.43	(114.46)	132.05
Net profit/(loss) for the year from continuing operations	(13,867.94)	259.85	387.89	(782.85)

(Rs. in Million)
	STANDALONE		CONSOLIDATED
Particulars	Financial Year	Financial Year	Financial Year	Financial Year
	2022-23	2021-22	2022-23	2021-22
Discontinued Operations
Total Income	-	-	38,659.62	69,095.14
Profit/(Loss) before tax from discontinued operations	-	-	(8,557.23)	(10,348.85)
Tax expense	-	-	1.91	(64.43)
Profit/(loss) for the year from the discontinued operations	-	-	(8,559.14)	(10,284.42)
Other comprehensive income from continuing operations	1.83	(19.63)	417.40	(211.34)
Other comprehensive income from discontinued operations	-	-	(2,344.95)	916.82
Total Other comprehensive income/(loss), net of tax from continuing and discontinued operations	1.83	(19.63)	(1,927.55)	705.48
Total comprehensive income/(Loss) for the year attributable to:	(13,866.11)	240.22	(10,098.80)	(10,361.79)
The Shareholders of the Company	-		(10,125.22)	(10,391.93)
Non-controlling interest	-		26.42	30.14
Profit for the year attributable to owners of the Company	(13,867.94)	259.85	(8,198.35)	(11,098.79)
Add : Profit/(Loss) brought forward from previous periods	4,273.23	4,033.00	(5,340.83)	5,797.10
Add/(Less): Other comprehensive income	1.83	(19.63)	(54.91)	(39.14)
Balance carried forward in Balance Sheet	(9,592.88)	4,273.22	(13,594.09)	(5,340.83)

DIVIDEND AND TRANSFER TO RESERVE

In view of the losses sustained during the year, and with a view to conserve resources for expansion of business, your Directors have thought it prudent not to recommend any dividend for the financial year under review. Further, no transfer to the General Reserve before declaration of Dividend has been considered.

Pursuant to Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 [SEBI Listing Regulations], the Board of Directors of the Company had formulated a Dividend Distribution Policy (‘the Policy''). The Policy is available on the Company''s website URL: https://varroc. com/investors/corporate-governance

CHANGE IN THE NATURE OF BUSINESS

The Company is engaged in the business of manufacturing automotive components. There has been no change in the business of the Company during the financial year ended March 31,2023.

CAPITAL & DEBT STRUCTURE

There has been no change in the authorised and paid-up share capital of the Company during the financial year ended March 31, 2023. The paid-up Equity Share capital of the Company as on March 31,2023 is Rs. 15,27,86,400/-comprising of 15,27,86,400 Equity Shares of Re. 1/- each.

The Company has not issued shares with differential voting rights. The Company has neither issued employee stock options nor sweat Equity Shares and does not have any scheme to fund its employees to purchase the shares of the Company.

Further, the Company has not issued any debt instruments during the year under review.

In the month of April 2023, the Company has acquired additional Equity Shares in its subsidiary Company, CarIQ Technologies Pvt. Ltd. increasing the stake to 95% from its original promoters. Necessary formalities, including intimation, have been completed under Regulation 30 of the Listing regulations to the Stock Exchanges.

The Company is compliant with the minimum public shareholding requirements. The breakup of Promoter and Public Shareholding of the Company post aforesaid sale of shares is provided below:

Category	No. of Equity Shares	% of total paid-up share capital
Promoter and Promoter Group	11,45,89,800	75.00
Public	3,81,96,600	25.00
Non-Promoter - NonPublic	-	-
Total	15,27,86,400	100.00

MANAGEMENT''S DISCUSSION AND ANALYSIS REPORT

The Industry outlook and the operational performance of the Company have been comprehensively covered in the Management Discussion and Analysis section of the Report (MD&A). A separate section on MD&A is included in the Annual Report as required under Regulation 34(2) (e) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the "Listing Regulations").

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

Pursuant to Regulation 34(2) (f) of the SEBI Listing Regulations, the initiatives taken by the Company from an environmental, social, and governance perspective are provided in the Business Responsibility and Sustainability Report [BRSR] which is included as a separate section in the Annual Report.

CORPORATE GOVERNANCE

The Board of Directors affirm their continued commitment to good corporate governance practices. During the year under review, the Company complied with the provisions relating to corporate governance as provided under the Listing Regulations. The Corporate Governance Report, together with the requisite certificate from Uma Lodha & Co., practicing Company Secretaries, confirming the compliance, is provided in the Report on Corporate Governance, which forms part of the Annual Report.

CREDIT RATING

The Credit rating of the Company is managed by ICRA Limited. During the Financial Year under review, your Company''s long rating, including NCD was at ‘[ICRA]A

(stable)''. The rating on the Company''s short-term bank facilities and commercial paper programme has been reaffirmed at ‘[ICRA]A2 ''.

In addition to this, India Rating has assigned ‘IND A1'' commercial paper programme in February 2023. The Company has also been assigned credit rating of IND A (Stable)/IND A1 by India Rating for long term/ short term facilities in April 2023.

INVESTOR RELATIONS (IR)

The Company strives for excellence in its investor relations ("IR") engagement with international and domestic investors. There is a structured conference call every quarter to discuss published results. The management has periodic interactions with the financial Community, including investors and analysts, through individual meetings and investor conferences.

The Company participated in investor meetings and conferences organized by reputed broking houses during the year. It is ensured that critical information related to the Company is uploaded on the Company''s website and made available to the stock exchanges so that it can be accessed easily and equally by all.

DEPOSITS FROM PUBLIC

During the year under review, the Company has not accepted any deposits from the public. As on March 31, 2023, there were no deposits that were unclaimed and due for repayment.

NUMBER OF MEETINGS OF THE BOARD

The Board of Directors met 9 (Nine) times during the Financial Year 2022-23 and the particulars of the meetings held and attended by each Director are given in the Corporate Governance Report which forms part of this Annual Report. The intervening gap between consecutive meetings was not more than one hundred and twenty (120) days as prescribed by the Companies Act, 2013 ("the Act"), and the Listing Regulations. The details of the Board and various Committee meetings are given in the Corporate Governance Report.

COMPOSITION OF AUDIT COMMITTEE

The Board has constituted the Audit Committee, which has Mr. Gautam Khandelwal as Chairman, Mrs. Vijaya Sampath and Mr. Vinish Kathuria Independent Directors

as Members and Mr. Tarang Jain, Chairman & Managing Director as Member. More details on the committee are given in the Corporate Governance Report forming part of this annual report. During the year under review, the recommendations made by the Audit Committee were duly accepted by the Board.

DIRECTORS & KEY MANAGERIAL PERSONNEL

At the Thirty Fourth Annual General Meeting (AGM) of the Company held on September 29, 2022, the shareholders approved the following appointment/ re-appointment:

• Re-appointment of Mr. Rohit Prakash (DIN: 02425849) as Director of the Company, liable to retire by rotation.

• Re-appointment of Mr. Tarang Jain (DIN 00027505) with the designation of Chairman & Managing Director of the Company, being liable to retire by rotation, for a further period of three (3) consecutive years from February 6, 2023 to February 5, 2026.

• Re-appointment of Mr. Arjun Jain (DIN 07228175) with the designation of whole-time Director of the Company, being liable to retire by rotation, for a further period of three (3) consecutive years from August 7, 2023, to August 6, 2026.

• Re-appointment of Mr. Vinish Kathuria (DIN 01951771) as an Independent Director of the Company, not being liable to retire by rotation, for his second term from February 6, 2023 upto February 5, 2028.

• Appointment of Mr. Dhruv Jain (DIN 09710448) with the designation of Non-executive Non-independent Director of the Company, being liable to retire by rotation.

• In accordance with the provisions of the Act and in terms of the Articles of Association of the Company, Mr. Tarang Jain (DIN 00027505) is liable to retire by rotation at the ensuing AGM and is eligible for re-appointment. A Resolution seeking the Shareholders'' approval for his re-appointment along with other required details forms part of the Notice.

In terms of Section 149 of the Act and the Listing Regulations, Mr. Gautam Khandelwal, Mrs. Vijaya Sampath, Mr. Marc Szulewicz and Mr. Vinish Kathuria are the Independent Directors of the Company as of the date of this report. All the Independent Directors have submitted declarations that each of them meets the criteria of independence as

laid down under Section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations, and there has been no change in the circumstances that may affect their status as independent Directors during the year. The profile of the Independent Directors forms part of the Corporate Governance Report.

During the year, the Independent Directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fees, commission and reimbursement of expenses incurred by them for the purpose of attending meetings of the Board of Directors and Committee(s) of the Company. The details of remuneration of the Independent Directors are mentioned in the Corporate Governance Report.

In the opinion of the Board, the Independent Directors possess the requisite expertise and experience and are persons of high integrity and repute. They fulfil the conditions specified in the Act as well as the Rules made thereunder and are independent of the management.

KEY MANAGERIAL PERSONNEL

Based on the recommendation of the Nomination and Remuneration Committee and the Audit Committee, the Board of Directors of the Company had approved the appointment of:

• Mr. T.R.Srinivasan resigned as Group Chief Financial Officer of the Company w.e.f. close of working hours on August 31, 2022. The Board of Directors places on record its appreciation for the services rendered by him over the years.

• Mr. K. Mahendra Kumar appointed as Group Chief Financial Officer of the Company w.e.f. September 28, 2022.

In terms of the provisions of Section 203 of the Act, as on March 31 , 2023, the Company has the following Key Managerial Personnel:

(a) Mr. Tarang Jain, Chairman & Managing Director

(b) Mr. Arjun Jain, Whole-time Director

(c) Mr. Rohit Prakash, Whole-time Director

(d) Mr. K. Mahendra Kumar, Group Chief Financial Officer

(e) Mr. Ajay Sharma, Group General Counsel and Company Secretary

FORMAL ANNUAL EVALUATION OF THE PERFORMANCE OF THE BOARD, ITS COMMITTEES AND DIRECTORS

The Board, the Committees of the Board and independent Directors continuously endeavour for the efficient functioning of the Board and its Committees and better corporate governance practices. A formal performance evaluation was carried out at the meeting of the Board of Directors held on May 23, 2023, where the Board made an annual evaluation of its own performance, the performance of Directors individually, as well as the evaluation of the working of its various Committees for the Financial Year 2022-23 on the basis of a structured questionnaire on performance criteria. The Board expressed its satisfaction with the evaluation process.

The evaluation process endorsed showiness amongst Directors, the openness of the management in sharing the information with the Board (including committees thereof) and placing various proposals for the Board''s (including committees thereof) consideration and approval.

The Independent Directors met on May 23, 2023, without the presence of other Directors or Members of management. All the Independent Directors were present at the meeting. In the meeting, the Independent Directors reviewed the performance of Non-Independent Directors, the Board as a whole, and the Chairman. They assessed the quality, quantity, and timeliness of the flow of information between the management of the Company and the Board. Post the review by the Independent Directors, the results were shared with the entire Board and its respective committees. The Independent Directors expressed satisfaction over the performance and effectiveness of the Board, individual non-Independent Directors, and the Chairman. They also expressed satisfaction with regard to the flow of information between the management of the Company and the Board.

The Members of the Audit Committee without the presence of Members of management also had a separate meeting with credit rating agencies.

POLICY ON DIRECTORS'' APPOINTMENT AND REMUNERATION

In adherence to the provisions of Section 134(3)(e) and 178(1) & (3) of the Act, the Board of Directors upon recommendation of the Nomination and Remuneration Committee, has approved a policy on Director''s appointment and remuneration, including criteria for determining qualifications, positive attributes,

independence of a Director and other matters. The said Policy is uploaded on the Company''s website at https://varroc.com/ investors/corporate-governance/.

The main objective of the said Policy is to ensure that the level and composition of remuneration are reasonable and sufficient to attract, retain, and motivate the Directors, Key Managerial Personnel (KMP) and senior management employees. The remuneration involves a balance between fixed and incentive pay, reflecting short and long-term performance objectives appropriate to the workings of the Company and its goals. The extract of the said Policy is also covered in the Corporate Governance Report which forms part of this Report.

POLICIES AND CODE ADOPTED BY THE COMPANY

The Board of Directors has, from time to time, framed and approved policies/codes as required by the Listing Regulations as well as under the Act. These policies/codes will be reviewed by the Board at periodic intervals. The Company has adopted the following policies/codes:

(i) Policy for Board Diversity-Appointment-RemunerationTraining and Evaluation of Directors and Employees (ii) Material Subsidiary Policy (iii) Policy for determination of materiality threshold for Disclosure of Events (iv) Code for Disclosure of Unpublished Price Sensitive Information (v) Code of Conduct for Insider Trading (vi) Policy on Preservation of Information and Archival of documents (vii) Policy on Related Party Transactions (viii) Code of Conduct for Directors and Senior Management Personnel (ix) Enterprise Risk Management Policy (x) Whistle Blower Policy (xi) Dividend Distribution Policy (xii) Environment, Social & Governance [ESG] policy (xiii) Corporate Social Responsibility [CSR] policy (xiv) Policy on prevention of sexual harassment.

The above policies are available on the Company''s website on the link https://varroc.com/investors/ corporate-governance/

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Act, the Board of Directors, based on the representation received from the Management to the best of their knowledge and ability, confirm that:

(a) in the preparation of the annual accounts for the year ended March 31, 2023, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(b) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31,2023 and of the loss of the Company for the year ended on that date;

(c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) they have prepared the annual accounts on a going concern basis;

(e) they have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively; and

(f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

AUDITORS & AUDITORS REPORT

a. STATUTORY AUDITOR

M/s SRBC & Co. LLP, Chartered Accountants (ICAI Firm Registration No. 324982E/E300003), were appointed as Statutory Auditors of the Company for a term of 5 (five) years at the 30th AGM held on September 05, 2018, to hold office from the conclusion of the said meeting till the conclusion of the 35th AGM to be held in the year 2023. The term of office of M/s SRBC & Co. LLP, Chartered Accountants, as Statutory Auditors of the Company will conclude with the close of the forthcoming AGM of the Company.

The Board of Directors at their meeting held on May 23, 2023, re-appointed M/s S R B C & Co. LLP, Chartered Accountants, as the Statutory Auditors of the Company to hold office from the conclusion of the 35th AGM till the conclusion of the 40th AGM to be held in the year 2028, based on the recommendation of the Audit Committee and subject to the approval of the shareholders at the ensuing 30th AGM. The Statutory Auditors have confirmed their independent status and eligibility for the said re-appointment.

The Audit report on the Consolidated financial statements

of the Company contains the following qualifications:

• As disclosed in Note no. 50 to the consolidated financial statements for the year ended March 31, 2023, the Financial Results and other financial

information for the year ended March 31, 2023, in respect of Varroc TYC Corporation BVI ("China JV"), a joint venture accounted for under the equity method, considered for the purpose of preparation of the consolidated financial statements, are unaudited. Hence, we are unable to determine the possible impact of Group''s share of profit/loss from China JV on the consolidated profit/loss before tax, profit/loss after tax, total comprehensive income, and earnings per share for the year ended March 31, 2023 and Group''s share of net assets of China JV on the investment in China JV as at March 31,2023.

Management Response:

The Group''s investment in Varroc TYC Corporation BVI (‘VTYC'' or ‘China JV''), a joint venture accounted for under the equity method, which is carried at Rs. 3,751.57 million as at March 31, 2023, and the Group''s share of VTYC''s net profit of Rs. 15.58 million, which is included in the Group''s income for the year then ended, are based on management certified accounts and were not subjected to audit. The Group is currently undertaking negotiations with the JV partner for resolution of certain matters regarding the operation of the JV, pending which the Group is unable to obtain audited financials and other information from the China JV.

• As provided in Note no. 51 to the Consolidated Financial Statements for the year ended March 31, 2023, regarding the sale of Varroc Lighting Systems Business, there is disagreement between the parties on the final adjustments against the agreed consideration, and both parties have agreed to negotiate to reach an agreement. Pending the conclusion of these negotiations, we are unable to comment on the impact of the same on the consolidated loss and financial position as of and for the year ended March 31,2023.

Management Response:

As per the terms of the Securities Purchase Agreement ("SPA") entered into among Varroc Engineering Limited ("VEL") and VarrocCorp Holding BV, Netherlands ("VCHBV", wholly owned subsidiary of VEL) (together referred to as "Sellers") and Compagnie Plastic Omnium SE, France ("Buyer"), a specific ‘Adjustment Escrow'' has been provided for the Final Closing Statement and the Final Closing Adjustment Statement to be

prepared as of the Closure Date, i.e., October 6, 2022. The Buyer had a period of 90 working days to come up with the same, duly supported by the requisite information/ documentation.

The Buyer submitted the final adjustments during the current quarter but failed to provide the necessary supporting details to enable the Sellers to understand these adjustments. Hence, Sellers sent a Dispute Notice in accordance with the SPA disputing the proposed adjustments. Pursuant to the amendment to the SPA dated May 12, 2023, both parties have mutually agreed to attempt the Resolution of their disagreements in accordance with the provisions of the SPA. Considering the disagreement between the parties and the fact that the negotiations with the Buyer are in progress, the effect of the proposed adjustments cannot be ascertained for recognition in the consolidated Financial Results as of March 31,2023.

The Audit report on the Standalone financial statements

of the Company contains the following qualifications:

• As provided in Note no. 52 to the standalone financial statements regarding the sale of Varroc Lighting Systems Business, there is disagreement between the parties on the final adjustments against the agreed consideration, and both parties have agreed to negotiate to reach an agreement. Pending the conclusion of these negotiations, we are unable to comment on the impact of the same on the net loss and financial position as of and for the year ended March 31,2023.

Management Response:

As per the terms of the Securities Purchase Agreement ("SPA") entered into among Varroc Engineering Limited ("VEL") and VarrocCorp Holding BV, Netherlands ("VCHBV", wholly owned subsidiary of VEL) (together referred to as "Sellers") and Compagnie Plastic Omnium SE, France ("Buyer"), a specific ‘Adjustment Escrow'' has been provided for the Final Closing Statement and the Final Closing Adjustment Statement to be prepared as of the Closure Date i.e., October 6, 2022. The Buyer had a period of 90 working days to come up with the same, duly supported by the requisite information/documentation.

The Buyer submitted the final adjustments during the current quarter but failed to provide the necessary supporting details to enable the Sellers to understand these adjustments. Hence, Sellers

sent a Dispute Notice in accordance with the SPA disputing the proposed adjustments. Pursuant to the amendment to SPA dated May 12, 2023, both parties have mutually agreed to attempt the Resolution of their disagreements in accordance with the provisions of the SPA. Considering the disagreement between the parties and the fact that negotiations with the Buyer are in progress, the effect of the proposed adjustments cannot be ascertained for recognition in the standalone Financial Results as of March 31,2023.

Apart from the above, there are no further qualifications, reservations, or adverse remarks on the financial statements for the year ended March 31, 2023. The notes on the financial statement referred to in the Auditors'' Report are self-explanatory and do not call for any further comments. The Auditor''s Report is enclosed with the financial statements.

The total fees for all the services paid by the Company and its subsidiaries, on a consolidated basis, to the statutory auditor, and all entities in the network firm/network entity of which the statutory auditor is a part, is given below:

Audit Spending (including pertaining to discountinued operations)

(H in Million)
Particular	For the year ended March 31,2023
Statutory Audit fees (Including limited reviews)	48.95
Tax Audit Fees	-
Others (including certifications)	36.40
Re-imbursement of Expenses	0.99
Total	86.34

b. COST AUDITOR

The cost accounts and records are required to be maintained under Section 148(1) of the Act. They are duly made and maintained by the Company. In terms of the provisions of Section 1 48 of the Act read with the Companies (Cost Records and Audit) Rules, 2014, the Board of Directors of the Company has, on the recommendation of the Audit Committee, appointed M/s S. R. Bhargave & Co., (Partnership Firm based in Pune Registration No. M - 000218), Cost Accountants, as Cost Auditor of the Company to conduct the cost audit of the Company for the financial year ending

March 31,2024, at a remuneration as mentioned in the Notice convening the 35th AGM.

As required under the Act read with the Companies (Cost Records and Audit) Rules, 2014, the remuneration payable to Cost Auditors must be placed before the Members at a general meeting for ratification. Hence, a Resolution for the same forms part of the notice of the ensuing AGM.

M/s S. R. Bhargave & Co., has confirmed the cost records for the financial year ended March 31, 2023, are free from any disqualifications as specified under Section 141 (3) and the proviso to Section 148(3) read with Section 141(4) of the Act. They have further confirmed their independent status. The Cost Audit Report for the Financial Year 2022-23 will be filed within the stipulated period.

c. SECRETARIAL AUDITOR

In terms of the provisions of Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board has appointed Uma Lodha & Co. (C.P. No.2593), Company Secretary in Practice, Mumbai, as the Secretarial Auditor for conducting the Secretarial Audit of the Company for the Financial Year ended March 31,2023.

The Secretarial Audit Report of the Company and Varroc Polymers Ltd. ("VPL"), a material subsidiary of the Company, for the Financial Year 2022-23 is annexed herewith and forms an integral part of this report. The Secretarial Audit Report does not contain any qualification, reservation, or adverse remark. The Company is in compliance with the Secretarial Standards, specified by the Institute of Company Secretaries of India (‘ICSI'').

ANNUAL SECRETARIAL COMPLIANCE REPORT

As per Regulation 24A of the Listing Regulations, the Company has undertaken an audit for the Financial Year 2022-23 for all applicable compliances as per SEBI Regulations and Circulars/Guidelines issued thereunder. The Annual Secretarial Compliance Report has been submitted to the Stock Exchanges.

The annual secretarial compliance report contains the following qualifications:

• Non-disclosure of the extent and nature of security created and maintained with respect to secured listed NCDs in the financial statements

Management response: "This was an inadvertent error and going forward, due care will be taken in this regard.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information pertaining to conservation of energy, technology absorption, foreign exchange earnings, and outgo as required under Section 134 (3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is provided in Annexure - I to this report.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENT

The particulars of loans given, investments made, guarantees given, and securities provided as per Section 186 of the Act by the Company are disclosed in the standalone financial statements.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures required under the provisions of Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, containing, inter-alia, the ratio of remuneration of Directors to median remuneration of employees, percentage increase in the median remuneration, are annexed to this Report as Annexure-II.

A statement containing the particulars of the top ten employees and the employees drawing remuneration in excess of limits prescribed under Section 197(12) of the Act, read with Rules 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is an annexure forming part of this Report. In terms of the proviso to Section 136(1) of the Act, the Report and Accounts are being sent to the Members excluding the aforesaid annexure. The said statement is kept open for inspection during working hours at the Registered Office of the Company. Any member who is interested in obtaining these, may write to the Group General Counsel & Company Secretary at the Registered Office of the Company.

The said statement is also available on your Company''s website, the weblink to which is https://varroc.com/ investors/corporate-governance/.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All related party transactions that were entered into during the financial year were in the ordinary course of business and on an arm''s length basis. In accordance with Section 188 of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014, there were no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or others, that may have a potential conflict with the interests of the Company at large or that warrant the approval of the shareholders. No material contracts or arrangements with related parties were entered into during the year.

The Company has nothing to report in Form AOC-2, hence, the same is not annexed.

The related party transactions are placed before the Audit Committee for prior approval, as required under applicable law. Only independent Directors who are Members of the Audit Committee approve the same. Prior omnibus approval of the Audit Committee is also obtained for transactions that are repetitive in nature and entered in the ordinary course of business on an arm''s length basis. A statement of all related party transactions is placed before the Audit Committee for review on a quarterly basis, specifying the nature and value of the transactions.

In line with the requirements of the Companies Act, 2013 and Listing Regulations, the Company has formulated a Policy on Related Party Transactions (RPTs), including any amendments thereto for identifying, reviewing approving and monitoring of RPTs. The said policy has been revised in line with the amendment in Listing Regulations and the same is available on the Company''s website https://varroc.com/wp-content/uploads/bsk-pdf-anager/ 2022 /2/ Policy on Related Party Transactions.pdf

The details of RPTs during FY 2022-23, including transaction(s) with persons or entities belonging to the promoter/ promoter group that hold 10% or more shareholding in the Company are provided in the accompanying financial statements.

WHISTLE BLOWER POLICY/VIGIL MECHANISM

On recommendations of the Audit Committee, the Board of Directors has approved and adopted a Whistle Blower Policy that provides a formal mechanism for the Directors, employees, and other stakeholders of the Company to report their concerns about unethical behaviour, actual or suspected fraud, or violations of the Company''s Code of

Conduct or Ethics Policy. The Policy provides for adequate safeguards against victimisation of employees who avail themselves of the mechanism. The Audit Committee oversees the functioning of this policy. The Whistle Blower Policy has been uploaded on the website of the Company at www.varroc.com.

RISK MANAGEMENT

Your Company has a defined risk control and management policy in place that is consistent with the provisions of the Act and the SEBI Listing Regulations. The Company has established procedures to periodically place before the Board/Audit Committee, the risk assessment and minimisation procedures being followed by the Company and the steps taken by it to mitigate the Risks. The Board of Directors of the Company have constituted a Risk Management Committee consisting of Board Members and Senior Management Personnel and has delegated the function of formulating, implementing, monitoring, and reviewing the risk management policy to the Committee. Further details in respect of the Committee are covered under the heading "Risk Management Committee" in the Corporate Governance Report.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUECY

The Company has a defined organisational structure, documented policy guidelines, and a defined authority matrix that ensures efficiency of operations, compliance with internal policies and applicable laws and regulations, as well as protection of resources. The Company believes that a strong internal control system and processes play a critical role in the day-to-day operations of the Company.

To this end, the Company has put in place an effective internal control system to synchronise its business processes, operations, financial reporting, fraud control, and compliance with extant regulatory guidelines and compliance parameters. The Company ensures that a standard and effective internal control framework operates throughout the organisation, providing assurance about the safekeeping of the assets and the execution of transactions as per the authorisation in compliance with the internal control policies of the Company.

The internal control system is supplemented by extensive internal audits, regular reviews by the management, and guidelines that ensure the reliability of financial and all other records. The management periodically reviews the framework, efficacy, and operating effectiveness of the Internal Financial Controls of the Company.

The Internal Audit reports are periodically reviewed by the Audit Committee. The Company has, in material respects, adequate internal financial control over financial reporting, and such controls are operating effectively. Internal Audits are carried out to review the adequacy of the internal control systems and compliance with policies and procedures. Internal Audit areas are planned based on inherent risk assessment, risk score, and other factors such as probability, impact, significance, and strength of the control environment. Its adequacy was assessed, and the operating effectiveness was also tested.

SUBSIDIARIES, JOINT VENTURE AND ASSOCIATE COMPANIES

Pursuant to a fresh certificate of incorporation issued by the Registrar of Companies, Maharashtra, Mumbai, on September 13, 2022, the status of Varroc Polymers Pvt. Ltd. was changed to Varroc Polymers Ltd.

The Company has 14 subsidiaries, including step-down subsidiaries, and 3 joint venture Companies as on March 31,2023. During the year, the Board of Directors has reviewed the affairs of its material subsidiaries.

As stipulated by Regulation 33 of the Listing Regulations, the Consolidated Financial Statements have been prepared by the Company in accordance with the applicable Accounting Standards. The audited Consolidated Financial Statements, together with Auditors'' Report, form part of the Annual Report.

Pursuant to Section 129(3) of the Companies Act, 2013, the report on the performance and financial position of each of the subsidiary and joint venture companies and the salient features of their financial statements is provided in the prescribed Form AOC- 1 and forms part of the Financial Statements of the Company. Details of subsidiaries of the Company and their performance are covered in the Management Discussion and Analysis section of the Annual Report.

Further, pursuant to the provisions of Section 136 of the Act, the standalone and consolidated financial statements of the Company and separate audited financial statements in respect of subsidiaries are available on the website of the Company https://varroc.com/investors/financial-results/.

The details of changes in Company''s subsidiaries, joint venture or associate companies, for the FY 2022-23, are as following:

Companies which have become subsidiaries:

• Varroc Germany GmBH

• Varroc Poland S.p.z.oo

• VL Lighting Solutions Private Limited

Companies which have ceased to be subsidiaries of the Company:

• Varroc Lighting Systems SRO, Czech Republic

• Varroc Lighting Systems S.de.R.L.De.C.V., Mexico

• Varroc Lighting Systems Inc. USA

• Varroc Lighting Systems GmBH, Germany

• Varroc Lighting Systems Morocco SA

• Varroc Lighting Systems s.p.z.oo, Poland

• Varroc Lighting Systems Turkey EndOstriyel OrOnler imalat ve Ticaret Anonim §irketi

• Varroc Do Brasil Industria E Comercia LTDA

• VL Lighting Solutions Private Limited

Companies which have become a Joint Venture of the Company: Nil

Companies which have ceased to be a Joint Venture of the Company: Nil

Entities which have ceased to be an Associate of the Company: Nil

Entities which have become an Associate of the Company: Nil

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Corporate Social Responsibility (CSR) is an integral part of Varroc culture. The Company is committed to undertaking various need-based activities in compliance with Section 135 of the Act read with Schedule VII to the Act and the Company''s Corporate Social Responsibility ("CSR") Policy. The Company continued its efforts on promoting and nurturing young and emerging sports talents by providing financial assistance, which helps them get the best training and makes them competent to participate in national and international sporting events. Further, the Company has also undertaken rejuvenating the Kham River to build a sustainable environment in Aurangabad, Maharashtra.

The CSR Policy is uploaded on the Company''s website www.varroc.com. The CSR Report for the Financial Year 2022-23 is annexed to this report as Annexure-III. In terms of Section 135 of the Act read with Rule 4(5) of the Companies (Corporate Social Responsibility Policy) Rules, 2015, the Director and Group Chief Financial Officer of the Company have provided the requisite certificate that the funds disbursed by the Company to Varroc Foundation and for other CSR activities during the financial year 202223 have been utilised for the respective purposes and in the manner as approved by the Board.

During the year under review, the Company was required to spend Rs. 15.00 million on CSR activities, against which it has spent Rs. 19.42 million.

CERTIFICATES/CONFIRMATIONS/DECLARATIONS/ AFFIRMATIONS DURING THE YEAR UNDER REVIEW

• There were no material changes and commitments affecting the financial position of the Company, that occurred between the end of the financial year of the Company to which the financial statements relate, viz., March 31,2023, and the date of this Report.

• There were no significant material orders passed by the regulators or courts or tribunals impacting the Company''s going concern status and its operations in the future.

• The Company has complied with the Secretarial Standards issued by the Institute of Company Secretaries of India on Board Meetings and Annual General Meetings.

• There was no fraud reported by the Statutory Auditors and the Secretarial Auditors of the Company under Section 143(12) of the Act to the Audit Committee.

• The Certificate duly signed by the Chairman & Managing Director and Chief Financial Officer on the Financial Statements of the Company for the year ended March 31, 2023, as submitted to the Board of Directors at its meeting held on May 23, 2023, is annexed to this report.

• The declaration by the Chairman & Managing Director regarding compliance by the Board Members and senior management personnel with the Company''s Code of Conduct is annexed to this report.

• The details of an application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 during the year - Nil.

• The details of the difference between the amount of the valuation done at the time of one-time settlement and the valuation done while taking a loan from the Banks or Financial Institutions along with the reasons thereof: Nil

• During FY 2022-23, Mr. Tarang Jain, Chairman & Managing Director, and Mr. Arjun Jain, Whole-Time Director, received remuneration of Rs. 32.31 million and Rs. 1 .1 1 million, respectively, from material subsidiary Varroc Polymers Ltd.

TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND

a) TRANSFER OF UNCLAIMED DIVIDEND / DEBENTURE REDEMPTION / DEBENTURE INTEREST TO IEPF:

As required under Section 124 of the Act, no Unclaimed Dividend/ Debenture redemption/ Debenture Interest has been lying with the Company for a period of seven years. Accordingly, no amounts have been transferred to the Investor Education and Protection Fund established by the Central Government.

b) TRANSFER OF SHARES TO IEPF

As required under Section 124 of the Act, no Equity Shares, in respect of which dividends have not been claimed by the Members for seven consecutive years or more, have been transferred by the Company to the Investor Education and Protection Fund Authority (IEPF) during the Financial Year 2022-23.

ANNUAL RETURN

As required under Sections 92(3) and 134(3)(a) of the Act and Rule 12(1) of the Companies (Management and Administration) Rules, 2014 (as amended), Annual Return in Form MGT - 7 is available on Company''s website at the link https://varroc.com/investors/corporate-governance/.

DISCLOSURE AS REQUIRED UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has a Sexual Harassment Policy in place in line with the requirements of the Sexual Harassment of Women

at Workplace (Prevention, Prohibition, and Redressal) Act, 2013. The Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contract, temporary, and trainees) are covered under this Policy.

During the year under review, the Company had arranged an online orientation programme under the POSH Act at the PAN India level in order to make the employees and the committee Members proficient to discharge their duties. The training was attended by all the Internal Committee Members & employees at PAN India. The Company has in place a module on "PREVENTION OF SEXUAL HARASSMENT IN THE WORKPLACE (POSH) at its internal platform, for sensitising the employees with the provisions under POSH.

The Policy is gender neutral. During FY 2022-23, the Committee received 2 (Two) complaints pertaining to sexual harassment. Both complaints were resolved with appropriate action. No cases of child labour, forced labour, involuntary labour, and discriminatory employment were reported during the period.

GREEN INITIATIVES

In commitment to keeping in line with the Green Initiative and going beyond it to create new green initiations, an electronic copy of the Notice of the 35th Annual General Meeting of the Company shall be sent to all Members whose email addresses are registered with the Company/ Depository Participant(s).

ACKNOWLEDGEMENTS

Your Directors place on record their acknowledgement for the co-operation received from the Customers, Vendors, Bankers, Associates, Collaborators and the Employees of the Company, without which it would not have been possible for the Company to achieve its performance and growth.

The Directors also thank the Government of India, the Government of various states in India, the Government of various countries, and the concerned government departments and agencies for their co-operation.

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Mar 31, 2018

BOARD’S REPORT

Dear Shareholders,

The Directors of your Company take pleasure in presenting the Thirtieth Annual Report on the business and operations of the Company together with financial statements for the financial year ended March 31, 2018.

1. Financial results & appropriations a. Financial results

Particulars	STANDALONE		CONSOLIDATED
	Financial Year 2017-18 (In millions)	Financial Year 2016-17 (In millions)	Financial Year 2017-18 (In millions)	Financial Year 2016-17 (In millions)
Revenue from operations	20,954.75	18,120.53	1,03,784.57	96,085.40
Total Income	21,242.46	18,445.04	1,04,170.67	97,022.69
Profit before finance cost, depreciation, exceptional items and extraordinary expenses (EBITDA)	2,469.21	1,931.46	9,161.76	6,754.84
Depreciation and amortization (-)	1,016.11	962.82	3,864.65	3,370.83
Finance cost (-)	401.50	468.50	861.70	903.96
Share of Net Profit of Investment accounted for using the equity Method ( )	-	-	690.27	791.88
PROFIT BEFORE TAX	1,051.60	500.14	5,125.68	3,271.93
Current tax expense (-)	232.97	110.99	1161.10	473.42
Deferred tax (-)	120.33	-30.89	-543.19	-336.32
NET PROFIT FOR THE YEAR	698.30	420.04	4,507.77	3,134.83
Less: Profit attributable to Non-controlling interest	-	-	5.19	3.83
Profit attributable to owners of the Company	698.30	420.04	4,502.58	3,131.00
Add: Profit brought forward from last year	1,182.23	1,015.09	5,135.42	2,275.61
Add: Re-measurements of defined benefit plans, net of tax	10.82	-8.04	-4.89	-25.28
Less: Transfer to Debenture Redemption Reserve (DRR)	-	-200	-125	-200
Add: On Account of Capital Reduction	-	-	-205.95	-
Appropriation: Dividend on Equity Shares	-61.56	-40.25	-61.56	-40.25
Tax on Dividend	-11.19	-4.61	-11.19	-4.61
Balance carried forward in Balance Sheet	1,818.60	1,182.23	9,639.98	5,135.42

b. Company’s Performance

During the financial year 2017-18, on a consolidated basis Varroc Group achieved revenue of Rs,103,784.6 million as compared to Rs,96,085.4 million in the previous year - a growth of 8 %. Profit after tax of the group for the year stood at Rs,4,507.8 million as against Rs,3,134.8 million in the previous year - a growth of 43.8%.

Revenue from operations on standalone basis increased to Rs,20,954.8 million as against Rs,18,120.5 million in the previous year - a growth of 15.6%. The profit after tax for the current year is Rs,698.3 million as against Rs,420.0 million in the previous year - a growth of 66.2%.

c. Dividend and transfer to reserve

The Board of Directors vide its circular resolution dated March 08, 2018 declared and paid Interim Dividend @ 50% (50 paise per share) on equity shares of Rs,1 for the Financial Year 2017-18.

The Board of Directors vide its resolution dated April 20, 2018 declared and paid Interim Dividend on 0.0001% Series C Compulsory Convertible Preference Shares (Series C CCPS) on fully diluted basis along with equity shares.

The total cash outflow on account of interim dividend on Equity and Preference shares was Rs,67.4 million. The Board recommends that the interim dividend, which was already declared and paid, be considered as the final dividend for the Financial Year 2017

18. The Board of Directors has considered it appropriate not to transfer any amount to the General Reserve before declaration of Dividend.

d. Credit Rating

During the year under review the credit rating of the Company’s short term and long-term debt was maintained by ICRA at ‘ICRA AA-(Stable)’ for long term loan and ‘ICRA A1 ’ for short term loan.

In May, 2018 ICRA upgraded the outlook on the ratings for the Company’s long term borrowing to ‘AA-(Positive)’ and maintained ratings for short term borrowings at ‘ICRA A1 ’.

e. Details of Internal Financial Controls with reference to the Financial Statements

Adequate internal control systems commensurate with the nature of the Company’s business and size and complexity of its operations have been developed with the help of independent expert agency and the same are operating satisfactorily. Internal control systems consisting of policies and procedures are designed to ensure accuracy and completeness of the accounting records and the timely preparation of reliable financial information, timely feedback on achievement of operational and strategic goals, compliance with policies, procedure, applicable laws and regulations and that all assets and resources are acquired economically, used efficiently and adequately protected.

The internal financial control with reference to the financial statements were adequate and operating effectively as endorsed by statutory auditors in their report.

f. Details in respect of frauds reported by Auditors

During the year under review, there have not been any instances of fraud and accordingly, the Statutory Auditors have not reported any frauds either to the Audit Committee or to the Board under Section 143(12) of the Act.

. Industry Outlook and Business Overview

Details on economic outlook, industrial outlook, business overview and SWOT analysis of the company is covered in the Management Discussion and Analysis report.

i. Financial Information and Disclosures a. Report on Performance of Subsidiaries, Associates and Joint Venture Companies

Your Company has 22 subsidiaries and 4 joint ventures companies as on March 31, 2018. During the year, the Board of Directors (the Board) reviewed the affairs of material subsidiaries. In accordance with Section 129(3) of the Companies Act, 2013 the Company has prepared consolidated financial statements of the Company and all its subsidiaries, which forms part of the Annual Report. Further, the report on the performance and financial position of each of the subsidiary and joint venture and salient features of the financial statements are provided in the prescribed Form AOC-1 and it forms part of the Financial Statements of the Company.

During the year under review, Varroc Lighting Systems SA, Morocco and Varroc Lighting Systems S.p.z.o.o., Poland were incorporated as step-down subsidiary companies under VarrocCorp Holding B.V., Nehterland, a wholly owned subsidiary of the Company with a purpose of setting up of new manufacturing facilities for automotive lighting and to provide technical support through research and development activities and engineering services.

During the year under review, the overseas wholly Owned Subsidiary VarrocCorp Holding B.V. has acquired a bare shell company “Lang MEKRA Engenharia Avancada Ltda" (renamed as Varroc Do Brasil Comercio, Importapao E Exportapao De Maquinas, Equipamento E Pepas LTDA.) for setting up of manufacturing facility in Brazil for automotive lighting business to cater north American markets.

Further, the Company through its wholly owned subsidiary Varroc Polymers Pvt. Ltd. has acquired 90% stake in Bangalore based Company Team Concepts Pvt. Ltd. engaged in the business of manufacturing and supply of automotive accessories and components for 4 wheelers.

Further, the Company has partnered with Dell’Orto S.p.A., Italy for equal co-ownership of IP rights of electronic fuel injection system and signed a Joint Venture Agreement for setting up 50:50 joint venture company for manufacturing and sale of electronic fuel injection system mainly for two wheelers in India.

In accordance with Section 136 of the Companies Act, 2013, the audited financial statements, including the consolidated financial statements and related information of the Company and audited financial statements of each of the subsidiary will be available on website www.varrocgroup.com. These documents will also be available for inspection during business hours at the registered office of the Company. Copy of these financial statements shall be made available to any Member of the Company, on request.

Details of subsidiaries and joint ventures of the Company and their performance are covered in Management Discussion and Analysis Report forming part of this Annual Report.

b. Conversion of Company to Public Limited Company

Your Company was converted from private limited to public limited as per the resolution passed by the members of the Company, at their Extra-ordinary General Meeting (“EoGM") held on January 25, 2018 and a fresh certificate of incorporate was issued by the Registrar of Companies, Maharashtra, Mumbai on February 05, 2018. Subsequently, under the Offer for Sale through Initial Public Offer, the shares of Company were admitted for listing and trading on the National Stock Exchange of India and The BSE Limited. Consequently, the status of the Company has changed to listed company.

c. Share Capital

During the year under review, following corporate actions were executed resulting in change in authorized and paid-up share capital of the Company.

i) Scheme of Capital Reduction

As per the order passed by the National Company Law Board Tribunal (“NCLT") on November 9, 2017 approving the scheme of capital reduction under erstwhile section 100 to 104 of the Companies Act,1956 (Section 66 of the Companies Act, 2013) the issued, subscribed and paid-up capital of the Company was reduced by cancellation of 852,349 equity shares of Rs,10 each, held by Varroc Polymers Pvt. Ltd., without any payment. The said order of NCLT filed with the Registrar of Companies, Maharashtra, Mumbai was approved on January 15, 2018.

(ii) Conversion of Preference Shares

As per the terms of issue of Series B and Series C 0.0001% Compulsorily Convertible Preference Shares 8,52,349 equity share of Rs,10 each and 1,16,83,770 equity shares of Rs,1 each were allotted to Mr. Tarang Jain on February 06, 2018 and May 31, 2018 respectively.

(iii) Restructuring of Share Capital

During the year under review, the share capital of the Company was sub-divided from equity shares and preference shares of Rs,10 each into equity shares and preference shares of Rs,1 each with effect from January 25, 2018. Simultaneously, the authorized share capital of the Company was reclassified from Rs,50,00,00,000 comprising of 16,50,00,000 Equity Shares and 33,50,00,000 Preference Shares to Rs,50,00,00,000 comprising of Rs,25,00,00,000 divided into 25,00,00,000 Equity Shares of Rs,1 each and Rs,25,00,00,000 divided into 25,00,00,000 Preference Shares of Rs,1 each. The paid-up equity share capital of the Company as on March 31, 2018 was Rs,13,48,11,530.

d. Fixed Deposits

During the year under review, the Company has not accepted any deposits from the public.

e. Disclosures under Section 134(3)(1) of the Companies act, 2013 - Material Changes and Commitment

As per share purchase agreement signed on May 30, 2018 VarrocCorp Holdings BV, wholly owned subsidiary has acquired SA-BA Endustriyel Urunler imalat ve Ticaret Anonim irketi, a Turkey based company engaged in the business of manufacturing and supply of automotive lighting for four wheelers along with its wholly owned subsidiary company in Bulgaria at an aggregate consideration of Euro 43 million. The acquisition was partly funded by borrowed funds and partly by internal accruals. The closing conditions, including approval of competition commission were completed on June 30, 2018. No other material changes and commitments affecting the financial position of the Company occurred between the end of the financial year to which these financial statements relate and on the date of this report.

f. Disclosure regarding significant and material orders passed by regulators or Courts or Tribunal

During the year under review, there were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company’s operations in future.

g. Particulars of contracts or arrangements made with Related Parties

All related party transactions that were entered into during the financial year were on arm’s length basis and in the ordinary course of the business. There are no materially significant related party transactions made by the company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the company at large.

h. Particulars of Loans, Guarantees or Investments

Particulars of loans, guarantees, investments and securities provided during the financial year under review along with the purposes of such loans, guarantees and securities is given in Annexure III to this report.

i. Disclosure under Section 43(a)(ii) of The Companies Act, 2013

The Company has not issued any shares with differential rights and hence no information as per provisions of Section 43(a)(ii) of the Act read with Rule 4(4) of the Companies (Share Capital and Debenture) Rules, 2014 is required to be furnished.

j. Disclosure under Section 54(1)(d) of the Companies Act, 2013

The Company has not issued any sweat equity shares during the year under review and hence no information as per provisions of Section 54(1)(d) of the Act read with Rule 8(13) of the Companies (Share Capital and Debenture) Rules, 2014 is required to be furnished.

k. Disclosure under Section 62(1}(b) of the Companies Act, 2013

The Company has not issued any equity shares under Employees Stock Option Scheme during the year under review and hence no information as per provisions of Section 62(1)(b) of the Act read with Rule 12(9) of the Companies (Share Capital and Debenture) Rules, 2014 is required to be furnished.

l. Disclosure under Section 67(3) of The Companies Act, 2013

During the year under review, there were no instances of non-exercising of voting rights in respect of shares purchased directly by employees under a scheme pursuant to Section 67(3) of the Act read with Rule 16(4) of Companies (Share Capital and Debentures) Rules, 2014.

4. Disclosures related to Board, Committees, Remuneration and Policies a. Directors and Key Managerial Personnel

Mr. Tarang Jain retires by rotation and being eligible, offer himself for re-appointment. Information in respect of Mr. Tarang Jain is provided in the notice of the Annual General Meeting. On conversion of the Company from private limited to public limited, Mr. Tarang Jain and Mr. Ashwani Maheshwari were re-appointed as Managing Director and Whole-time director respectively and Mr. Vinish Kathuria was appointed as Additional Director/Independent Director w.e.f. February 06,2018 and their terms of appointment, including remuneration, were subsequently approved by special resolutions passed at the extra ordinary general meeting of the Company held on February 13, 2018. In addition, Mr. Vinish Kathuria was appointed as Additional Director/Independent Director w.e.f. February 06, 2018 by the Board of Director on February 06,2018 and later on his appointment as independent director for a term of 3 years was ratified by the members of the Company on February 13, 2018.

Appointment of Mr. T. R. Srinivasan, Group CFO and Mr. Rakesh Darji, Company Secretary as key managerial personnel of the Company as required under Section 203 of the Companies Act, 2013 was confirmed at the Board meeting held on February 06, 2018. Mr. Tarang Jain, Mr. Ashwani Maheshwari and Mr. Arjun Jain by virtue of their position will also be considered as key management personnel.

Mr. Arjun Jain had stepped down as director of the Company on February 06, 2018. He has been re-inducted to the Board as Additional Director/Whole-time Director by the Board on August 08, 2018. The Company has sought approval of the members by way of special resolution for his appointment as Whole-time Director and terms and conditions of remuneration payable to him. Mr. Padmanabh Sinha (DIN 00101379), Investor Nominee Director has resigned w.e.f. May 28, 2018. The Board places on record its sincere appreciation for the services rendered and guidance provided to the management of the Company during his tenure.

In accordance with the amended requirement of Regulation 17(1A) of the Securities and Exchange Board of India (Listing Obligations & Disclosure Requirements) Regulations, 2015 which shall come into force with effect from April 1, 2019, Mr. Naresh Chandra (DIN 00027696) who has attained the age of eighty-three years consent of the members of the Company by way of special resolution is sought at the ensuing annual general meeting for Mr. Naresh Chandra to continue after April 1, 2019 as Non-Executive Director and Chairman of the Company.

Details of Board Meetings and Committee meetings held during the year under review attendance at the meetings are provided in Corporate Governance Report.

b. Declaration by Independent Directors

In terms of Section 149(7) of the Act, the Independent Directors have submitted their declaration confirming compliance with the criteria of independence as stipulated under Section 149(6) of the Act.

c. Information on Board Meeting procedure and attendance during the Financial Year 2017-18

The Board meetings of the Company are conducted as per the provisions of the Companies Act,2013 and applicable Secretarial Standards. Information as mentioned in the Act and all other material information, as may be decided by the management, are placed for consideration of the Board. Details on the matters to be discussed along with relevant supporting documents, data and other information is also furnished in the form of detailed agenda to the Board and the Committees concerned, to enable directors take critical decisions and accordingly advise the management.

Details regarding information furnished to the Board members, number of Committee and Board meetings held during the year along with attendance record of each director has been disclosed in the Corporate Governance Report of the Company.

d. Director’s Remuneration Policy and Criteria for Matters under Section 178 and Payment of Commission

As stipulated under Section 178 of the Act, the Board has approved a Nomination and Remuneration Policy of the Company. The Policy documents the mechanism for appointment, cessation, evaluation and remuneration of the Directors, Key Managerial

Personnel and Senior Management of the Company. Information on the Policy and details of the criteria for determining qualifications, positive attributes and other matters in terms of Section 178 of the Act are provided in the Corporate Governance Report.

The Company has not paid any Commission to Managerial Personnel during the financial year under review. The Company has paid in aggregate profit related commission of Rs,1.05 crore to non-executive directors for the financial year 2017-18 which is within 1% of profit approved by the shareholders and details of the same are provided in Corporate Governance Report.

e. Formal annual evaluation of the performance of the Board, its Committees and Directors

This being the first financial year after Company becoming public and listed company, formal annual evaluation of performance of the board and its committees and directors will be conducted at the end of financial year 2018-19.

f. Directors’ Responsibility Statement

Pursuant to Section 134(5) of the Act, the Directors, based on the representation received from the management, confirm that:

(i) in the preparation of the annual accounts for the year ended March 31, 2018, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year 2017-18 and of the profit and loss of the Company for that period;

(iii) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) the directors have prepared the annual accounts on a going concern basis;

(v) the directors have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively; and

(vi) the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

g. Corporate Governance

Corporate Governance Report along with General Shareholder Information and Management Discussion and Analysis are included in this Annual Report

The Managing Director and the Director and Group Chief Financial Officer have certified to the Board with regard to financial statements and other matters as required under Regulation 17(8) read with Schedule II to the Listing Regulations.

h. Corporate Social Responsibility and CSR Policy

Corporate Social Responsibility is an integral part of the Company’s ethos and policy and it has been pursuing this on a sustained basis. In this endeavor, the Company has contributed funds for the CSR activities/project related to promoting rural and nationally recognized sports, promotion of education and employment enhancing vocational skills, environment sustainability and promoting art and culture. During the year under review the Company was required to spent '' 9 million towards CSR activities against which, the Company has spent Rs,18.6 million. The Annual Report on CSR activities as required to be given under Section 135 of the Companies Act, 2013 and Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 has been provided in an Annexure - I to this Report.

i. Enterprise Risk Management Policy

The Board of Directors has approved and adopted comprehensive Enterprise Risk Management Policy (ERM) for the Company. The Enterprise Risk Management Policy is designed to manage risk within the risk threshold established by the Board and provide reasonable assurance over the achievement of strategic and operational objectives. The policy document covers the enterprise wide risk management aspects of all Business Units/Plants of the Company. The Policy will help in risk identification, risk measurement, define risk appetite and threshold limits and suggesting risk mitigation measures. The Company has with the professional help implemented ERM Policy by carrying out detailed risk identification, assessment and ranking in consultation with senior management of the Company. The process is ongoing and require continuous exercise across all locations and functions of the Company. As a part of risk mitigation measure, the Company has implemented Compliance Management Tool across all business units and functions to monitor compliance of all applicable laws in India. The Audit Committee will do the periodic review of implementation, assessment and mitigation measures under ERM. The Chief Internal Auditor has been appointed as Chief Risk Officer to monitor on-going basis risk and to suggest mitigation measures.

5 Auditors a. Statutory Auditor

M/s. Price Waterhouse & Co., Chartered Accountants, LLP, (Firm’s Registration No.304026E/E-300009) (“PWC"), hold office up to the conclusion of the Thirtieth Annual General Meeting (‘AGM’).

PWC were appointed as Statutory Auditors of the Company from the conclusion of twentieth annual general meeting (AGM) i.e. from 29th September, 2008 and thereafter they have been re-appointed every year. In terms of Section 139 of the Act read with Rule 6 of the Companies (Audit and Auditors) Rules, 2014, the term of appointment of PWC as Statutory Auditors of the Company expires at the ensuing AGM and rotation of statutory auditor is due at AGM.

In view of the foregoing, the Board has recommended for approval of the shareholders appointment and fix remuneration of M/s. S R B C & CO. LLP, Chartered Accountants (Firm Registration No: 324982E/E300003), as Statutory Auditors of the Company for a term of five years, from the conclusion of thirtieth AGM till the conclusion of thirty fifth AGM.

b. Cost Auditor

As per the provisions of Section 148 of the Act and Rule 3 of the Companies (Cost Records and Audit) Rules, 2014 (“the Rules"), the Company is required to maintain cost records with respect to certain products of the Company and get the same audited.

Based on the recommendation of the Audit Committee, the Board, at its meeting held on August 07, 2018, has appointed M/s S. R. Bhargave & Co., Cost Accountants as Cost Auditor of the Company for the financial year 2018-19 at a remuneration of Rs,3,00,000 (Three Lakhs only). The said fee is exclusive of applicable taxes and reimbursement of out-of-pocket expenses, which shall be payable at actuals. A proposal for ratification of the cost audit fee for the audit of cost records for the financial year 2018-19 has been proposed at the forthcoming Annual General Meeting. The Cost Audit Report for the financial year 2017-18 will be filed within the stipulated period of 30 days after it is submitted by the Cost Auditors.

c. Secretarial Auditor

In terms of the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s Uma Lodha & Co. (C.P. No.2593), Company Secretary in Practice, Mumbai was appointed by the Board as Secretarial Auditor to undertake the Secretarial Audit for the financial year 2017-18.

The Secretarial Audit Report for the financial year 2017-18 is annexed herewith as Annexure- II to this report. The report does not contain any qualification, reservation or adverse remark.

6. Initial Public Offer

The Company came out with its maiden Initial Public Offer (“IPO") by way of Offer for Sale (“OFS") under which 2,02,1 1,730 equity shares of '' 1 were offered to the public for subscription by promoter Mr. Tarang Jain (1,752,560 equity shares) and private equity investor Omega TC holdings Pte. Ltd. (16,917,130 equity shares) and Tata Capital Financial Services Limited (1,552,040 equity shares) at a price band of '' 965 to '' 967. The IPO of the Company was subscribed 3.6 times and the equity shares of the Company were listed on National Stock Exchange of India Limited and BSE Limited on 06th July 2018. Post IPO, 15 % of the shareholding is held by public and balance 85 % is held by the Promoter and Promoter group.

As the Company’s IPO was by way of OFS by shareholders, the Company did not receive any proceeds from the IPO and entire IPO proceeds were paid to the selling shareholders.

7. Other Disclosures and Statutory Information

a. Adoption of new set of Articles of Association

Consequent upon conversion of status of the Company to ‘public company’ and in order to fulfil the listing requirements, the Company has adopted new set of Articles of Association of the Company with effect from March 25, 2018

b. Policies and code adopted by the Company

The Board of Directors has from time to time framed and approved policies as required by the Listing Regulations as well as under the Companies Act, 2013. These policies will be reviewed by the Board at periodic intervals. Some of the key policies that have been adopted are as follows:

(i) Nomination and Remuneration Policy; (ii) Material Subsidiary Policy (iii) Policy for determination of materiality threshold (iv) Code for Disclosure of Unpublished Price Sensitive Information (v) Code of Conduct for Insider Trading (vi) Policy on Preservation of Information and Archival of documents (vii) Policy on Related Party Transactions (viii) Code of Conduct for Directors (ix) Enterprise Risk Management Policy (x) Whistle Blower Policy.

The above policies are available on the Company’s website on the link www.varrocgroup.com/ investor/ investor-relations.

c. Disclosure under code of conduct for Prevention of Insider Trading and Fair Disclosure of Unpublished Price Sensitive Information

In terms of the SEBI (Prohibition of Insider Trading) Regulations, 2015, the Company has adopted a ‘Code of Conduct for Prevention of Insider Trading’ (“PIT Code"). Further, the Company has also adopted a ‘Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information’ (“UPSI Code"). The required details have been disclosed in the Corporate Governance Report of the Company.

d. Particulars of employees and related disclosures

Disclosure of remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed herewith as Annexure-III.

A statement containing particulars of employees as required under Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided as separate annexure forming part of this Report. In terms of Section 136 of the Act, the Annual Report and financial statements are being sent to the Members excluding the aforesaid annexure. The said annexure is available for inspection at the registered and corporate office of the Company during business hours and will be made available to any shareholder, on request.

e. Conservation of Energy, Technology absorption, Foreign exchange earnings and Outgo

The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo as required under Section 134 (3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are provided in Annexure - IV to this report.

f. Extract of Annual Return

As required under section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014 (as amended), an extract of annual return in Form MGT - 9 is available on company’s website on the link www. varrocgroup.com/ investors/ investor-relations/annual return.

g. Occupational Health & Safety

The organization believes in ‘Zero Harm’. The aim is to improve health and safety standards of people who are working with the organization in their capacity as employees, contractors or in any other role. Efforts are taken to minimize activities which may affect the health and safety in working place. Steps are taken for optimum utilization of plants, with least disposal of harmful gases in environment.

h. Disclosure as required under sexual harassment of Women at Workplace (Prevention, Prohibition And Redressal) Act, 2013

Your Company is committed towards providing a healthy environment and thus does not tolerate any discrimination and/or harassment in any form. The Company has in place an Internal Complaints Committee to inter-alia Prevent sexual harassment at the workplace and Redress the complaints in this regard. During the year under review, the Company has not received any complaint.

8. Acknowledgements

Your Directors place on record their acknowledgement for the co-operation received from the Customers, Vendors, Bankers, Associates, Collaborators and the Employees of the Company without which it would not have been possible for the Company to achieve such performance and growth.

for and on behalf of the board of directors

For Varroc Engineering Limited

Naresh Chandra

Place : Mumbai Chairman

Date : August 07, 2018 DIN : 00027696