Aarvi Encon Director Discussions


Dear Shareholders,

Your Directors have the pleasure in presenting the 35th Annual Report of your Company (Aarvi Encon Limited/AARVI) on business and operations of the Company along with the Audited Standalone and Consolidated Financial Statements and the Auditors Report for the year ended March 31, 2023. Consolidated performances of the Company and its subsidiaries have been referred to wherever its required.

Corporate Overview:-

The Company was incorporated in 1987 and has been creating value for clients in India and abroad by delivering world-class Engineering and Manpower Outsourcing Services. The Companys dynamic approach to problem solving enable them to deliver quality services on time with consistent performance to the clients across the globe. Aarvi has long standing with clients and working with most of them for over decades. In the year 2017, the Company got listed on the SME platform of National Stock Exchange of India Limited after its successful Initial Public Offer (IPO). The Trading in the Equity Shares of the Company has been migrated from SME EMERGE platform to Main Board of NSE w.e.f. June 24, 2020. It has corporate headquarters at Mumbai and branch offices at various locations in India and abroad.

1. FINANCIAL HIGHLIGHTS/PERFORMANCE OF THE COMPANY

The financial results for the year ended on 31st March, 2023 and the corresponding figures for the previous year are as under:

Particulars

Consolidated (Rs.in Crores)

Standalone (Rs.in Crores)

Year ended 31st March, 2023 Year ended 31st March, 2022 Y-o-Y growth(%) Year ended 31st March, 2023 Year ended 31st March, 2022 Y-o-Y growth(%)
Net Revenue from 436.52 288.54 51 382.69 274.51 39
Operations
Other Income 1.31 1.17 12 1.61 1.21 34
Total Income 437.84 289.72 51 384.30 275.72 39
Total Expenditure 421.30 277.58 52 369.0 263.33 40
EBITDA 18.66 13.91 34 18.25 14.14 29
Profit before tax 15.68 12.15 29 15.30 12.39 24
Current Tax 1.11 0.11 - 1.11 0.11 -
Deferred Tax 0.05 (0.02) - 0.07 (0.02) -
Profit after taxes 14.51 12.06 20 14.12 12.30 15
EPS 9.82 8.16 20 9.55 8.33 15

STANDALONE AND CONSOLIDATED FINANCIAL STATEMENTS

As mandated by the Ministry of Corporate Affairs, the financial statements for the year ended on March 31, 2023 has been prepared in accordance with the Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (hereinafter referred to as "The Act") read with the Companies (Accounts) Rules, 2014 as amended from time to time. The estimates and judgments relating to the Financial Statements are made on a prudent basis, so as to reflect in a true and fair manner, the form and substance of transactions and reasonably present the Companys state of affairs, profits and cash flows for the year ended March 31, 2023. The Notes to the Financial Statements adequately cover the standalone and consolidated Audited Statements and form an integral part of this Report.

REVIEW OF BUSINESS OPERATIONS AND FUTURE PROSPECTS / STATE OF AFFAIRS:

Your Directors wish to present details of Business Operations done during the year under review:

STANDALONE PERFORMANCE

The Company has reported good performance in revenue during FY 2022-23. Revenue from operations at Rs. 382.69/- Cr. as against Rs. 274.51/-

Cr. of previous year which has increased drastically by 39% year on year, reflecting an exceptional results in key markets and segments. Operating profit at Rs. 14.12/- Cr. as against Rs. 12.30/- Cr. of previous year witnessing tremendous increase of 15% year on year.

CONSOLIDATED PERFORMANCE

Your Company has reported growth in revenue for the year ended on 31st March 2023. Revenue from operations at Rs. 436.52/- Cr. as against Rs. 288.54/- Cr. of previous year reflecting the increase in the growth than the previous year performance in key markets and segments. Operating profit at Rs. 14.51/- Cr. as against Rs. 12.06/- Cr. of previous year shows the upward growth.

Your Directors express their happiness on the overall financial performance and the progress made on different areas by the Company during the year under review.

In accordance with Section 129 of Companies Act, 2013 and the IND AS-27 on Consolidated and Separate Financial Statements, the Audited Consolidated Financial Statements are provided in the Annual Report.

2. SHARE CAPITAL

The Total Paid-up Capital of the Company as on March 31, 2023 is Rs. 14,78,40,000/- divided into 1,47,84,000 equity shares of Rs.10/- each. There has not been any new issue of share during the year under review. In order to enable the employees of the Company to participate in the future growth and success of the Company, the Board of Directors in their meeting held on May 26, 2022 adopted Aarvi Encon Limited Employee Stock Option Plan, 2022. This ESOP Scheme was approved by the Shareholders of the company in the Annual General Meeting held on July 29, 2022. The Company has also received In-principle Approval from the National Stock Exchange for listing of 7,39,200 equity shares under the Aarvi Encon Limited Employee Stock Option Plan, 2022.

3. DIVIDEND

Based on the Companys performance and keeping in mind the shareholders interest, the Board of Directors of the Company at its meeting held on May 29, 2023 has recommended a Final Dividend of 20 % i.e. Rs. 2/- per fully paid- up Equity Share of the face value of Rs. 10/- each for the year ended March 31, 2023, subject to the approval of the Members at the ensuing Annual General Meeting. The dividend once approved by the Shareholders will be paid after September 23, 2023. The dividend on Equity Shares if approved by the Members, would involve a cash outflow of Rs. 2.96 Crores reflecting pay out of 20% of the Net Profit and shall be paid out of profits of the Company for previous financial years i.e. FY 2022-23 forming a part of retained earnings pursuant to Section 123 (1) of the Companies Act, 2013 (‘the Act).

In view of the amendment to the Income Tax Act, 1961 through the Finance Act, 2020, imposition of Dividend Distribution Tax has been abolished. The dividend, if declared at the ensuing AGM will be taxable in the hands of the shareholders of the Company.

DIVIDEND DISTRIBUTION POLICY

As mandated under regulation 43A of SEBI Listing Regulations, the Board of Directors of the Company at its meeting held on June 3, 2021 adopted a Dividend Distribution Policy for the Company, which sets out the parameters and circumstances that will be taken into account by the Board in determining the distribution of dividend to its shareholders.

4. RESERVES

The Balance in Reserves & Surplus stands at Rs 93.28/- Cr. in comparison with the previous year balance of Rs. 79.91/- Cr. As per Consolidated financials, the net movement in the reserves of the Company for FY23 and FY22 are as follows:

Particulars

As on March 31, 2023 As on March 31, 2022
(Rs. in Cr.) (Rs. in Cr.)
Securities 14.92 14.92
Premium
General Reserve 6.91 6.91
Retained 69.21 56.90
Earnings

. SUBSIDIARY COMPANIES

The Company has three Subsidiary Companies and One Associate Company as on March 31, 2023.

1. Aarvi Encon FZE located at United Arab Emirates (UAE);

2. Aarvi Engineering and Consultants Private Limited;

3. Aarvi Encon Resources Limited located at United Kingdom (UK);

4. Aarvi Encon Staffing Services W.L.L. Located at Qatar.

Your Company has formulated a Policy for determining ‘Material Subsidiaries pursuant to the provisions of Regulation 16 of SEBI LODR Regulations, 2015. The said Policy is available on the Companys website https://aarviencon.com/ investors/policies Aarvi Encon FZE, a wholly owned Subsidiary

Company continues to be a material subsidiary of the Company as its net worth stands more than 10% to the total net worth of the Company. Aarvi Encon FZE is a Free Zone Establishment at

SAIF Zone, Sharjah, UAE incorporated on October 13, 2015. A Wholly owned Subsidiary of the Company had partnered with Bon Accord Employment Services, a proprietary Company at UAE in the year 2018 to develop the business of providing manpower or consultancy services in UAE. The Company has successfully executed the valuable projects along with the Bon Accord in Abu Dhabi and it expects more projects in the upcoming year also.

Aarvi Engineering & Consultants Private Limited, a Wholly Owned Subsidiary of the company engaged in Consultancy Services had no operation during the year under review. The accounts of Aarvi Engineering & Consultants Private Limited are consolidated with the accounts of the company according to the provisions of Companies Act, 2013, Income Tax Act, 1961 and read with the applicable "Accounting Standard" issued by ICAI.

Aarvi Encon Resources Ltd (AERL) incorporated on March 07, 2018 at United Kingdom (UK), a wholly owned Subsidiary of the Company. The Company has started its operation in the F.Y. 2022-23. The accounts of the AERL are also consolidated with the Company. Internationally, the Company has its presence via Aarvi Encon LLC, a Joint Venture Company incorporated on January 15, 2021 at Sultanate of Oman and PT Aarvi Encon Services, a Joint Venture Company incorporated on June 10, 2021 at Jakarta, Indonesia through its wholly owned Subsidiary Aarvi Encon FZE located in the United Arab Emirates.

Aarvi Encon staffing Services W.L.L. (Qatar), an Associate Company, located at Qatar incorporated on January 24, 2022.

The aforesaid Companies are yet to start their operations and are expected to start their operations in the F.Y 2023-24.

Pursuant to the provisions of Section 129(3) of the Act, a statement containing the details of performance and salient features of financial statements of the Companys subsidiaries in Form AOC-1 is attached herewith to the financial statements of the Company as Annexure -1. Further, pursuant to the provisions of Section 136 of the Act, the audited financial statements of the Company, consolidated financial statements along with relevant documents and separate audited financial statements in respect of subsidiaries are available on the website of the Company https:// aarviencon.com/investors/financial-results

5. AARVI ESOP, 2022

Pursuant to the approval of Members at the AGM held on July 29, 2022, the Company adopted Aarvi Encon Limited Employee Stock Option Plan, 2022, in order to retain and incentivize key talent, for driving long term objectives of the Company and ensuring that employee payoffs match the long gestation period of certain key initiatives whilst simultaneously fostering ownership behavior and collaboration amongst employees. The Company received In-Principle Approval from the National Stock Exchange on March 08, 2023 for listing of not exceeding 7,39,200 Stock Options under the Aarvi Encon Limited Employee Stock Option Plan, 2022, but the company has not yet implemented the policy of granting shares to the employees of the Company. The Aarvi Encon Limited Employee Stock Option Plan, 2022 is in compliance of SEBI (Share Based Employee Benefits) Regulations, 2014 and this has been certified by the secretarial auditor of the Company. The certificate of the secretarial auditor can be accessed on the following link https://aarviencon.com/investors/shareholders-information-and-announcements.

In line with Regulation 14 of the SEBI (Share Based Employee Benefits) Regulations, 2014, a statement giving complete details, as at 31 March 2023, is available on the website of the Company at https://aarviencon.com/investors/shareholders-information-and-announcements, which forms part of the Boards Report and is annexed as Annexure 2 to this report.

6. MANAGEMENT DISCUSSION AND ANALYSIS (MD&A) REPORT

Pursuant to the provisions of Regulation 34(e) read with "Schedule V" of the SEBI LODR Regulations 2015, the Management Discussion and Analysis capturing your Companys performance, industry trends and other material changes with respect to your Companies and its subsidiaries, is presented in a separate section forms part of this Report.

7. CORPORATE GOVERNANCE

Your Company is committed to maintain the highest standards of corporate governance. We believe sound corporate governance is critical to enhance and retain investor trust. Our disclosures seek to attain the best practices in corporate governance. We always strive to implement several best corporate governance practices in the Company to enhance long-term shareholder value and respect minority rights in all our business decisions. Corporate Governance Report in terms of regulation 34(3) read with "Schedule V" of the SEBI LODR Regulations 2015, for financial year 2022-23 is presented in separate section forming part of this Annual Report. A Certificate from M/s. Bhatt & Associates, Company Secretaries, LLP, confirming compliance to the conditions of Corporate Governance as stipulated under Para E of Schedule V of the Listing Regulations, is enclosed to this Report.

8. DEPOSITS

The Company has not accepted/ hold/ any deposits from public within the ambit of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014 during the year under review. Hence, the requirement for furnishing the details relating to deposits covered under Chapter V of the Act or the details of deposits that are not in compliance with the Chapter V of the Act is not applicable.

9. Change in the nature of business

There has been no change in the nature of business of the Company during the year under review.

10. PARTICULARS OF LOAN, GUARANTEE OR INVESTMENTS

The particular of loans given, guarantees provided and investments made are given in the notes to the Financial Statements.

11. DISCLOSURE OF RELATED PARTY TRANSACTIONS

All transactions entered into by the Company with Related Parties for the year under review were on arms length basis and in ordinary course of business and hence not falling under the ambit of Section 188 of the Companies Act, 2013. No Related Party Transactions (RPTs) were entered into by the Company during the financial year, which attracted the provisions of section 188 of the Companies Act, 2013. There being no ‘material related party transactions / contracts / arrangements as defined under regulation 23 of the SEBI (LODR) Regulations, 2015. Accordingly, the disclosure of related party transaction as required under section 134(3)(h) of the Act in Form AOC-2 is not applicable to the Company for the F.Y. 2022-23 and hence does not form part of this report.

Details of related party transactions entered into by the Company, in terms of AS-24 have been disclosed in the notes to the financial statements forming part of this report. The Company has formulated a Policy on "Materiality of Related Party Transactions", which are in line with the provisions of Section 188 of the Companies Act, 2013 and Regulation 23 of SEBI LODR Regulations, 2015. The same is also available on the Website of the Company at https://aarviencon.com/investors/ policies During the year 2022-23 pursuant to section 177 of the Companies Act, 2013 and regulation 23 of SEBI LODR Regulations, 2015, all RPTs were placed before the Audit Committee for its approval. Prior omnibus approval from the Audit Committee is obtained for transactions which are repetitive and also normal in nature. During the year under review, there were no material related party transactions under Regulation 23 (4) of SEBI LODR Regulations, 2015 entered into by the Company, which necessitates approval of Shareholders.

12. BOARD OF DIRECTORS, COMMITTEES OF BOARD AND KEY MANAGERIAL PERSONNEL A. Board of Directors

Your Companys Board of Directors as on the financial year end March 31, 2023 comprises of Two Executive Directors out of which one is Managing Director and other is Chief Financial Officer and Five Independent Directors which includes Two Women Directors and the same is disclosed in the Report on Corporate Governance as set out separately in this annual report.

In compliance with Section 149, 150, 152 of the Act, Mr. Ramamoorthy Ramachandran was appointed as a Non-Executive Independent Director of the Company w.e.f. January 23, 2023. During the year under review, the non-executive directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fees or reimbursement of expenses, if any incurred by them for the purpose of attending meetings of the Board/Committee of the Company.

NUMBER OF BOARD MEETINGS DURING THE YEAR

During the year, 6 meetings of the Board of Directors were held. The details of the same are mentioned in Corporate Governance Report.

B. Committees of the Board

As required under the Companies Act, 2013 and SEBI LODR Regulations, 2015, the Board has formed five Committees viz.

Audit Committee;

Nomination and Remuneration Committee;

Stakeholders Relationship Committee;

Corporate Social Responsibility Committee And

Finance and Management Committee.

Keeping in view the requirements of the Companies Act, 2013 and SEBI LODR Regulations, 2015, the Board decides the terms of reference of these Committees and the assignment of members to various Committees. The recommendations, if any, of these Committees are submitted to the Board for approval.

AUDIT COMMITTEE

Pursuant to Section 177(8) of the Companies Act, 2013, the composition of the Audit Committee is disclosed as under:

Sr. No.

Name of the Member

Designation

1. Mr. Devendra J. Shrimanker Chairperson (Independent Director)
2. Mrs. Sonal N. Doshi Member (Independent Director)
3. Mrs. Padma V. Devarajan Member (Independent Director)
4. Mr. Jaydev V. Sanghavi Member (Executive Director and CFO)
5. Mr. Ramamoorthy Ramachandran* *Appointed w.e.f. May 16, 2023. Member (Independent Director)

The details of all the Committees along with their composition, number of meetings and attendance at the meeting is stated in Report on Corporate Governance as set out separately in this annual report.

During the year, all recommendations of the Audit Committee were accepted by the Board.

NOMINATIONANDREMUNERATIONCOMMITTEE

In accordance with the provisions of the Section 178 of the Companies Act, 2013 read along with the applicable Rules thereto and Regulation 19 of the SEBI LODR Regulations, 2015, the Company has constituted Nomination and Remuneration Committee and has formulated "Nomination and Remuneration Policy" containing criteria for determining qualifications, positive attributes, independence of a director and other matters provided under section 178(3) of Companies Act, 2013 for selection of any Director, Key Managerial Personnel and Senior Management Employees. The said policy of the Company is directed towards rewarding performance, based on review of achievements on a periodic basis. The Board of Directors has approved Nomination and Remuneration policy and available at the Companys website under the web link https://aarviencon.com/ investors/policies The details pertaining to composition of the Nomination and Remuneration Committee are disclosed as under:

Sr. No.

Name of the KMP

Designation

1. Mr. Devendra J. Chairperson
Shrimanker (Independent Director)
2. Mrs. Sonal N. Member (Independent
Doshi Director)
3. Mrs. Padma V. Member (Independent
Devarajan Director)
4. Mr. Sharad S. Member (Independent
Sanghi Director)

STAKEHOLDERS RELATIONSHIP COMMITTEE

As per the provisions of section 178 of Companies Act, 2013, the composition of the Stakeholders Relationship Committee is as under:

Sr. No.

Name of the KMP

Designation

1. Mrs. Sonal N. Chairperson
Doshi (Independent Director)
2. Mr. Devendra J. Member (Independent
Shrimanker Director)
3. Mr. Jaydev V. Member (Executive
Sanghavi Director and CFO)

During the year under review, the Company received no complaints from any of its shareholders. The

Company Secretary acts as the Secretary to the Committee.

CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

As per the provisions of section 135 of Companies Act, 2013, the composition of the CSR Committee is as under:

Sr. No.

Name of the Member

Designation

1. Mr. Virendra D. Sanghavi Chairperson – Managing Director
2. Mrs. Sonal N. Doshi Member (Independent Director)
3. Mrs. Padma V. Devarajan Member (Independent Director)
4. Mr. Sharad S. Sanghi Member (Independent Director)
5. Mr. Ramamoorthy Ramachandran* Member (Independent Director)

*Appointed w.e.f. May 03, 2023.

The Companys CSR Policy provides guidelines to conduct CSR activities of the Company, which can be accessed on the Companys website at https://www.aarviencon.com/home/policies_of_the_ company. During the year the Company has spent Rs. 16,93,824/- on the CSR expenditure as against the mandated spend of Rs. 10,48,664/- . In terms of the provisions of the Act read with amended Companies (Corporate Social Responsibility Policy) Rules, 2014, the CSR Report for the financial year 2022-23 forms part of the Boards Report and is annexed as Annexure 3 to this report.

FINANACE AND MANAGEMENT COMMITTEE

The Board constituted the Finance & Management Committee, The Committee has been given the powers in order to have convenience in expediting day to day matters relating to Companys affairs like finance, management etc. The composition of the Committee as on 31st March, 2023 is as follows:

Sr.

Name of the Designation

No.

KMP
1. Mr. Virendra D. Chairperson – Managing
Sanghavi Director
2. Mr. Jaydev V. Member (Executive
Sanghavi Director and CFO)

The decisions of the Finance & Management Committee are to be ratified in the subsequent Board Meetings.

C. Key Managerial Personnel

Pursuant to the provisions of Section 203 of the Companies Act, 2013, the Key Managerial Personnel (KMP) of the Company as under:

Sr. No.

Name of the KMP Designation

1.

Mr. Virendra D. Sanghavi Managing Director

2.

Mr. Jaydev V. Sanghavi Executive Director and Chief Financial Officer

3.

Ms. Leela S. Bisht Company Secretary & Compliance Officer

D. Details of Directors or Key Managerial Personnel who were appointed or have resigned during the year:

In accordance with the provisions of Section 152 (6) of the Companies Act, 2013 and in terms of the Articles of Association of the Company, Mr. Virendra D. Sanghavi (DIN: 00759176), Executive Director of the Company, retires by rotation at the forthcoming Annual General Meeting and, being eligible, offers himself for re-appointment. The details of Mr. Virendra D. Sanghavi are furnished in the Notice of the Annual General Meeting. The Board recommends his reappointment for the consideration of the Members of the Company at the forthcoming Annual General Meeting.

The Board of Directors on the recommendation of NRC and in accordance with provisions of the Act and SEBI Listing Regulations has appointed Mr. Ramamoorthy Ramachandran as a Non-Executive Independent Director on the Board for a tenure of 5 years w.e.f. January 23, 2023.

E. Receipt of any commission by MD / ED from Company or from its holding or subsidiary Company

The Company has paid Commission @0.5% of the total turnover of the Company to Directors i.e. Mr. Virendra D. Sanghavi, Managing Director and Mr. Jaydev V. Sanghavi, Executive Director during the year. Director during the year as a part of remuneration is subject to the maximum limit of Rs. 1.68 Crs.

Further, Mr. Virendra D. Sanghavi and Mr. Jaydev V. Sanghavi did not draw any remuneration and /or commission from its subsidiaries.

13 . Declaration by Independent Directors

The Board took on record all declarations and confirmations submitted by Independent Directors that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 16(1) (b) and 25 of the SEBI LODR Regulations, 2015 and there has been no change in the circumstances which may affect their status as an independent director during the year.

During the year under review, the non-executive directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fees or reimbursement of expenses, if any incurred by them for the purpose of attending meetings of the Board/Committee of the Company. In the opinion of the Board, the Independent director re-appointed during the tenure possesses the requisite expertise and experience, (including proficiency) and are persons of high integrity. They fulfil the conditions specified in the Companies Act, 2013 and the rules made thereunder and independent of the management. The Independent Directors have also confirmed compliance with the provisions of the rule 6 of Companies (Appointment and Qualifications of Directors) Rules, 2014, as amended, relating to inclusion of their name in the databank of independent directors. The details of programme for familiarization of Independent Directors with the Company, nature of industry in which Company operates and related matters are put on website of the Company at https:// aarviencon.com/investors/policies

14. Annual Evaluation

Performance evaluation of Independent directors was done by the entire Board, excluding the Independent Director being evaluated.

The Nomination and Remuneration Committee (NRC) has approved a framework / policy for performance evaluation of the Board, Committees of the Board and the individual members of the Board (including the Chairperson) that includes criteria for performance evaluation, which is reviewed annually by the Committee. A questionnaire for the evaluation of the Board, its Committees and the individual members of the Board (including the Chairperson), designed in accordance with the said framework and covering various aspects of the performance of the Board and its Committees, including composition and quality, roles and responsibilities, processes and functioning, adherence to Code of Conduct and Ethics and best practices in Corporate Governance as mentioned in the Guidance Note on Board Evaluation issued by the Securities and Exchange

Board of India on January 5, 2017 was circulated to the Directors.

Pursuant to the provisions of the Act and SEBI LODR Regulations, 2015 and based on policy devised by committee, the board has carried out annual evaluation of its own performance, its committees and individual directors. The board performance was evaluated on inputs received from all the Directors after considering criteria as mentioned aforesaid. The performance of the committees was evaluated by the Board of Directors on inputs received from all committee members after considering criteria as mentioned aforesaid.

Pursuant to SEBI LODR Regulations, 2015, performance evaluation of independent director was done by the entire board, excluding the independent director being evaluated. The performance evaluation of non-independent directors and the board as a whole and Chairman of the Board and also assessed the quality, quantity and timeliness of the flow of information between the Management and the Board, which is necessary for the Board to effectively and reasonably perform its duties was also carried out by the Independent Directors of the Company through separate meeting on March 29, 2023

15. Meetings of the Board/Committees

The meetings of the Board are scheduled at regular intervals to decide and discuss on business performance, policies, strategies and other matters of significance. The schedules of the meetings are circulated in advance, to ensure proper planning and effective participation in meetings. In certain exigencies, decisions of the Board are also accorded through Circular Resolution.

The Board met 6 (six) times during the financial year 2022-23. The maximum interval between any two meetings did not exceed 120 days, as prescribed in the Companies Act, 2013. Detailed information regarding the meetings of the Board/Committee are included in the report on Corporate Governance, as set out separately in this Annual Report.

16. AUDITORS

A. STATUTORY AUDITORS

As per the provision of Section 139, 141 of the Companies act, 2013 and rules made thereunder, at the 34th AGM held on July 29, 2022, the Members had approved the appointment of M/s. Jay Shah & Associates, Chartered Accountants (Firm

Registration No. 135424W) as the Statutory Auditors of the Company to hold office for a period of five consecutive years from the conclusion of the 34th AGM till the conclusion of the 39th AGM.

AUDITORS REPORT

The Auditors Report on the Financial Statements of the Company for the year ending March 31, 2023 is unmodified i.e., it does not contain any qualification, reservation or adverse remark. The Auditors Report is enclosed with the Financial Statements forming part of the Annual Report.

DETAILS OF FRAUD REPORTED BY AUDITORS

There were no frauds reported by the Statutory Auditors under provisions of Section 143(12) of the Companies Act, 2013 and rules made thereunder.

B. INTERNAL AUDITOR AND INTERNAL AUDIT SYSTEMS

Pursuant to the provisions of Section 138 of the act and the Companies (accounts) Rules, 2014, your Company has appointed M/s. Natwarlal Vepari & Co., Chartered Accountants, to conduct internal audit across the organization. We have strengthened the in-house internal audit and compliance team to supplement and support the efforts of M/s. Natwarlal Vepari & Co.

C. SECRETARIAL AUDITOR

Section 204 of the Companies Act, 2013, inter-alia, requires every listed company to annex with its Boards Report, a Secretarial Audit Report given by a Company Secretary in practice, in the prescribed form. The Board of Directors appointed M/s. Bhatt & Associates, Company Secretaries, LLP, Mumbai, as Secretarial Auditor to conduct the Secretarial Audit of the Company for financial year 2022-23 and his Report is annexed to this Board Report (Annexure 4).

D. Secretarial Compliance Report of Aarvi Encon

Limited for the year ended March 31, 2023

As per Regulation 24A of SEBI LODR Regulations, 2015, read with SEBI Circular dated February 08, 2019, the listed entities in addition to the Secretarial Audit Report as required under section 204 of the Companies Act, 2013 is also required to submit a separate report i.e. Annual Secretarial Compliance Report with the exchange within sixty days of the end of the year for compliance of all the applicable SEBI Laws, circulars or guidelines thereunder. The Secretarial Compliance Certificate has been issued by the M/s. Bhatt & Associates, Company

Secretaries, LLP, after independent verification of the records, books, papers and documents as maintained by the Company as per all the applicable SEBI laws, Regulations and circulars/ guidelines issued thereunder. The same was submitted to the Stock Exchange(s) within the stipulated date and a copy of the same is hosted at our website at https:// aarviencon.com/investors/secretarial-compliance-report The observations and comments given by the Secretarial Auditor in their Report are self-explanatory and hence do not call for any further comments. Refer Annexure 5 for the Secretarial Compliance Report and Secretarial Audit Report.

17. INTERNAL FINANCE CONTROL

The Company has adequate internal financial control system commensurate with the size, scale and complexity of its operations. The Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified by the business and functions are systematically addressed through mitigation action on continuing basis. These are routinely tested and certified by Statutory as well as Internal Auditors. The audit observations on internal financial controls are periodically reported to the Audit Committee.

18. MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR OF THE COMPANY TO WHICH THE FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT

There were no material changes and commitments, affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and till the date of this Report.

19. RISK MANAGEMENT

The Company has adopted a draft Risk Management Policy which lays down the framework to define, assess, monitor and mitigate the business, operational, financial and other risks associated with the business of the Company. The Risk Management Policy enables for growth of company by helping its business to identify risks, assess, evaluate and monitor risks continuously and undertake effective steps to manage these risks.

20. THECONSERVATIONOFENERGY,TECHNOLOGY

ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Your Company is committed towards energy conservation. We recognize energy efficiency plays central role in lowering your Companys operational Green House Gas emissions. Various improvements and initiatives are implemented to enhance efficiency through technological upgrades and effective monitoring of operational and maintenance activities. Your Company has been able to reduce the electricity consumption and carbon footprint over the years through effective energy management and sustainable initiatives. The information pertaining to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and outgo as required under Section 135 (3) (m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are as stated below:

A) Conservation of Energy

1. The steps taken or impact on conservation of energy: The Company applied strict control system to monitor day to day power consumption. The Company ensures optimal use of energy with minimum extent of wastage as far as possible. The day to day consumption is monitored in an effort to save energy.

2. The steps taken by the company for utilizing alternate sources of energy: Company has not taken any such steps as we are into service sector and consume only electricity to operate laptop and maintain server.

3. The Capital Investment on Energy Conservation Equipment: The Company has not made any capital investment on energy conservation equipment.

B) Technology Absorption

Particulars relating to technology absorption are not applicable.

C) Foreign Exchange Earnings and Outgo

(Amount in Rs.)

Particulars

2021 – 22 2022 – 23
Foreign Exchange 3,00,139.00 4,76,483.00

Earnings in terms of actual inflows

Foreign Exchange outgo in terms of actual outflow

6,80,086.00 21,12,853.00

21. VIGIL MECHANISM

The Company is committed to adhere to the highest standards of ethical, moral and legal conduct of business operations and in order to maintain these standards, the Company encourages its employees who have genuine concerns about suspected misconduct to come forward and express these concerns without fear of punishment or unfair treatment.

Pursuant to the Regulation 22 of SEBI Listing Regulation, 2015 and the provision of Section 177(9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meeting of Board and its Powers) Rules, 2014, a "Vigil Mechanism Policy" for Directors and Employees of the Company is in place, to report their genuine concern of any violation of legal or regulatory requirements, incorrect or misrepresentation of any financial statements and reports, unethical behavior, actual or suspected fraud or violation of the Companys code of conduct etc. for adequate safeguard against victimization of person who use such mechanism and provision for direct access to the chairperson of the Audit Committee of the Company for redressal. During the year under review, no such complaints were received.

The details of the "Vigil Mechanism Policy" are available on the website of the Company at https:// aarviencon.com/investors/policies

22. INSIDER TRADING REGULATIONS

Based on the requirements under SEBI (Prohibition of Insider Trading) Regulations, 1992, as amended from time to time, the Insider Trading Policy as approved by the Board is in force in the Company. The Company also adopts the concept of Trading Window Closure, to prevent its Directors, Officers, designated employees, their relatives, other connected employees and other connected persons from trading in the securities of the Company at the time when there is access to Unpublished Price Sensitive Information (UPSI).

23. ANNUAL RETURN:

As required under Section 92(3)of the Act, the Annual Return as on March 31, 2023 is available on the Companys website on at www.aarviencon.com

24. CREDIT RATING

Your Companys Domestic Credit Rating is CRISIL SME Rating 1 for the long-term debt /facilities by CRISIL. CRISIL has reaffirmed its ratings i.e. BBB/ STABLE for long term borrowings and A3 + for short term borrowings. The Credit Rating derive strength from the operational track record of the Company, cost competitiveness, flexibility derived from diversified services and the Company s effort to reduce cost and to improve cost efficiency.

25. DIRECTORS RESPONSIBILITY STATEMENT

The Directors Responsibility Statement referred to in clause (c) of sub-section (3) of Section 135 of the Companies Act, 2013, shall state that: (a) In the preparation of the annual accounts, the applicable accounting standards had 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 at the end of the financial year and of the profit and loss of the company for that period; (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 that such internal financial controls are adequate and were operating effectively and (f) They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

26. LISTING ON STOCK EXCHANGE

The Equity shares of the Company got listed on The National Stock Exchange of India Ltd (NSE) SME Emerge Platform in the year 2017 and it has migrated the trading of its equity shares to the Main Board of NSE Ltd. (Capital Market Segment) on June 24, 2020.

27. SIGNIFICANT AND MATERIAL ORDERS PASSED BY REGULATORS OR COURTS OR TRIBUNALS IMPARTING THE GOING CONCERN STATUS AND COMPANYS OPERATION IN FUTURE

There are no significant and material orders passed by regulators or courts or tribunals imparting the going concern status and Company operation in future.

28. PARTICULARS OF EMPLOYEES

In terms of the provisions of 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, a statement showing the names of top ten employees in terms of remuneration drawn in the said rules forms part of this report. Further, there were no employees drawing remuneration in excess of the limits set out in the said rules and hence aforesaid disclosure is not applicable.

Disclosures relating to 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 forms part of this Report. Having regard to the provisions of the second proviso to Section 136(1) of the Act, the Annual Report excluding the aforesaid information is being sent to the members of the Company. Any member interested in obtaining such information may write to the Company Secretary at cs@aarviencon.com and the same will be furnished on request. The Company has no employee, who is in receipt of remuneration of Rs. 8,50,000/- per month and / or Rs. 1,02,00,000 per annum and hence the Company is not required to give information under sub rule 2 and 3 of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Further, Company has not posted any of the Employees in a country outside India, not being directors or their relatives, drawing more than sixty lakh rupees per financial year or five lakh rupees per month during the year.

Disclosures relating to 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 forms part of this Report. Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014: (a) Ratio of the remuneration of each Director, Chief Financial Officer and Company Secretary of the Company and b) ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year 2022 - 23:

Name of the Directors

Designation Remuneration of the Directors % Increase in the Remuneration Ratio of Remuneration of each Director/to median remuneration of employees. Increase/ (Decrease) in Median Remuneration as compared to Previous Year
Mr. Virendra D. Sanghavi Managing Director 1,68,00,000 - 32.84 (6.92)
Mr. Jaydev V. Sanghavi Executive Director & CFO 1,68,00,000 - 32.84 (6.92)
Mr. Devendra J. Shrimanker* Independent Director - - Independent Director -
Mrs. Sonal N. Doshi* Independent Director - - Independent Director -
Dr. Padma V. Devarajan* Independent Director - - Independent Director -
Mr. Sharad S. Sanghi* Independent Director - - Independent Director -
Ms. Leela S. Bisht Company Secretary - - 1.05 -

* Entitled for Sitting fees of 20,000 for attending each Board and Audit Committee and 7,500 for attending all other Committee Meetings.

(b) Number of permanent employees on the rolls of Company: 5427 (c) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration: NIL (e) It is affirmed that the remuneration paid to the Directors, Key Managerial Personnel and other Employees is as per the remuneration policy of the Company.

(f) Names of top 10 employees of Company in terms of remuneration drawn and name and particulars of the employees who were employed throughout the financial year and were in receipt of remuneration for that year which, in the aggregate, was not less than One Crore and Two Lakh Rupees per financial year and name and particulars of employees who were employed for a part of the year and were in receipt of remuneration for that period which, in the aggregate, was not less than Eight Lakh Fifty Thousand Rupees per month: No employees drew remuneration as per the limits specified under rule 5(2) and rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

(g) Names of employees of Company, who were employed throughout the financial year or part thereof and were in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole time director or manager, if any, and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the Company: N.A

29. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

Your Company is committed and dedicated in providing a healthy and harassment free work environment to every individual of the Company, a work environment that does not tolerate sexual harassment. We highly respect dignity of everyone involved at our work place, whether they are employees, suppliers or our customers. We require all employees to strictly maintain mutual respect and positive attitude towards each other.

In accordance with Sexual Harassment of Women at Work place (Prevention, Prohibition and Redressal) Act, 2013 and the rules framed their under, the Company has formed an Internal Complaints Committee and also framed and adopted the policy for Prevention of Sexual Harassment at Workplace. The following is the summary of Sexual Harassment complaints received and disposed of during the year 2022-23.

Number of complaints pending as on the beginning of the financial year : Nil Number of complaints filed during the financial year : Nil Number of complaints pending at the end of the financial year : Nil The Annual Return under the aforesaid Act has been filed with the Labour Commissioner, Mumbai.

30. HUMAN RESOURCES

Your Company treats its "human resources" as one of its most important assets. Your Company continuously invests in attraction, retention and development of talent on an ongoing basis. A number of programs that provide focused people attention are currently underway. Your Company thrust is on the promotion of talent internally through job rotation and job enlargement.

Total Employees and Consultant : 5427 No. of Women Employees during the F.Y 2022-23 : 215

The Company has all the required policies under the Indian laws for the time being in force and as required under the Companies Act, 2013 and SEBI LODR Regulations, 2015 to protect and safeguard the interest of the employees. The policies pertaining the code of conduct for employees, senior management team and directors, harassment free policy as required under the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Policy on Insider Trading as required under SEBI Prohibition of Insider Trading Regulations, 1992, Whistle Blower Policy etc. and all the Policies/Codes have been uploaded in the Website of the Company https://aarviencon.com/investors/policies, which forms part of the Boards Report and is annexed as Annexure 6 to this report.

31. COMPLIANCE WITH THE PROVISIONS OF SECRETARIAL STANDARD - 1 (SS-1) AND SECRETARIAL STANDARD - 2 (SS-2)

The Directors have devised proper systems to ensure compliance with the provisions of all applicable Secretarial Standards issued by the Institute of Company Secretaries of India and that such systems are adequate and operating effectively. The company has complied with SS-1 and SS-2.

32. DISCLOSURE, AS TO WHETHER MAINTENANCE OF COST RECORDS AS SPECIFIED BY THE CENTRAL GOVERNMENT UNDER SUB-SECTION (1) OF SECTION 148 OF THE COMPANIES ACT, 2013, IS REQUIRED BY THE COMPANY AND ACCORDINGLY SUCH ACCOUNTS AND RECORDS ARE MADE AND MAINTAINED :

The maintenance of Cost Records as specified by the Central Government under sub-section (1) of the Section 148 of the Companies Act, 2013 are not applicable to the Company.

33. STATUTORY DISCLOSURES

None of the Directors of your Company are disqualified as per the provisions of Section 164(2) of the Companies Act, 2013. Your Directors have made necessary disclosures, as required under various provisions of the Companies Act, 2013 and SEBI LODR Regulations 2015. The Company has received a Certificate pursuant to Schedule V(10) (i) of SEBI LODR Amendment Regulations 2018 from Bhatt & Associates Company Secretaries LLP, Mumbai, having certificate of practice no. 7023 stating that none of the directors on the Board of the company have been debarred or disqualified from being appointed or continuing as directors of companies by the Board/Ministry of Corporate Affairs or any such statutory authority during the period under review.

The certificate is attached to this Report as Annexure 7.

34. DECLARATION ON CODE OF CONDUCT

The Company has adopted the Code of Conduct for all its Senior Management Personnel and Directors and the same is affirmed by all the Board Members and Senior Management Personnel as required under Regulation 35 read with Part D of Schedule V of the SEBI LODR Regulations, 2015. A declaration signed by Mr. Virendra D. Sanghavi, Managing Director of the Company affirming the compliance with the Code of Conduct of the Company for the financial year 2022-23 as set separately in this annual report.

35. INTERNATIONAL STANDARDS

The Company successfully completed the annual ISO surveillance audit and retained the enterprise-wide ISO certification for ISO 9001:2015 and ISO 45001: 2018.

36. ANNUAL LISTING FEES TO THE STOCK EXCHANGES

Aarvi Encon Limited have listed its equity shares on the Main Board of NSE India Limited. The listing fees have duly paid to the exchange and annual custodial fees has been paid to CDSL and NSDL for the F.Y. 2022-23.

37. DEPOSITORY SYSTEM

Your Companys equity shares are in demat form only.TheCompanyhasappointedNationalSecurities Depository Limited (NSDL) and Central Depository Services India Limited (CDSL) as depositories to the Company.

38. DISCLOSURE UNDER RULE 8 OF THE COMPANIES (ACCOUNTS) RULES, 2014

During the year under review the Company has not made any application nor any proceedings are pending under the Insolvency and Bankruptcy Code, 2016. Further there were no instances of one-time settlement for any loans taken from the Banks or Financial Institutions.

39. CAUTIONARY STATEMENT

The Statements in this Directors Report and Management Discussion and Analysis Report describing the Companys objectives, projections, estimates, expectations or predictions may be

"forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make difference to the Companys operations include changes in Government regulations, Tax regimes, economic developments within India and other ancillary factors.

40. ACKNOWLEDGEMENT

Your Directors takes this opportunity to thank all Government Authorities, Bankers, Shareholders, Registrar & Transfer Agents, Investors and other Stakeholders for their assistance and co-operation to the Company. Your Directors express their deep sense of appreciation and gratitude towards all employees and staff of the company and wish the management all the best for further growth and prosperity.