Aro Granite Industries Ltd Directors Report.

The Directors have pleasure in presenting the 32"d Annual Report together with Audited Accounts of the Company for the year ended on 31sRs. March 2020.

FINANCIAL RESULTS

(RRs. in Lakhs)

31.03.2020 31.03.2019
Gross Profit before Depreciation 1569.94 2078.10
Depreciation 1052.59 825.44
Profit before Tax 517.35 1252.66
Provision for Tax - -
Current 86.36 361.71
- MAT Credit (86.36) -
- Deferred 156.72 (80.17)
Surplus available for appropriation 360.62 971.11
Dividend (including Dividend Tax) (184.45) -
Amount transferred to General Reserve - -
Surplus carried to Balance Sheet 176.17 971.11

WORKING RESULTS

The Business environment for the natural stone industry continues to be a mixed bag. Though our Sales grew 3.06% from Rs. 172cr in FY2019 to Rs.177cr in FY2020, our Net Profit declined by 62.87% from Rs.9.71cr in FY2019 to Rs.3.61Cr in FY2020. The decline in profitability is due to the fact that our bank loan and working capital limits, being in foreign currency, are exposed to currency fluctuations and during the year the exchange loss was approximately Rs.9.00 Crores as per the AS 11 Accounting Standard, which is a notional entry only. Our focus on only core colours, some specialised shades and cut-to-size has helped us in improving our efficiency. Our Cut-to-size segment is performing well and is working at good capacities. We are getting regular and repeat orders from Europe. Cut-to-size is a value-added product and commands higher margin. These jobs are very labour intensive and require a high level of precision and quality finish. We have been able to differentiate our offerings, and this has allowed this segment to profitably scale up.

On August 1, 2019 we exported the first Container from our Jaipur Unit located in Mahindra World SEZ. During the 8 months of operations we faced some small teething issues which ware sorted out over the following months. The response of customers for the Rajasthan factory has been strong and over the 8 months of operations, Jaipur Unit has contributed 8% of our total yearS sales turnover.

The sales would have been higher if we had not lost 2 weeks in March 2020 to the Lock down in our Jaipur unit.

Had it not been for the Jaipur Unit, we would have lost all our sales of the Rajasthan Colours from our Portfolio. As more factories opened in the North of India, the transportation cost of bringing blocks to the South makes the prices unviable. With the quarries in Rajasthan for granite bring only in its Nascent Stages, we expect the future to be bright for the North Indian Shades.

Over the year there was no improvement in Quarry positions in the South of India. There are still thousands of quarries closed due to the lack of Environmental Clearance. This has continued to affect our business over the last 5 years.

With the raw materials issue continuing to impact sales in Hosur, we decided to put up a Quartz (Engineered Stone) unit in Hosur. The proposed installed capacity of the unit would be 180,000Sqr. mtr. per annum. We started work on constructing the factory in March 2019 and we expected to start trial runs by March 2020. However, the Chinese technicians responsible for Commissioning the plant returned to China in late January to celebrate the Chinese New Year. Following the Chinese festival, the technicians were unable to return to India due to the travel ban in force due to the COVID-19 Pandemic.

With all of our current resources and infrastructure and part of the granite machinery being designated for the quartz production our Fixed Cost is not very high. Hence the Cost burden due to Covid-19 delay in Quartz plant commissioning has been marginal and is largely an opportunity cost/loss.

Ever since the implementation of GST, cash flows have been tied up in pending GST refunds. However, during the year we were able to clear up large chunks of these refunds and bringing our current refund status up to date. This has helped us with a better Cash Flow.

Moreover, with relentless customer service and focus on quality, over the years, the company has built trust and reputation in the export market which has helped better positioning even in the unprecedented situation created due to pandemic.

DIVIDEND

Your Directors have not recommended any dividend for the year 2019-2020.

INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

During the year amount of Rs 228937/- for the Financial Year 2011-12 transfer to Investor Protection Fund under sub-section (2) of section 125 of the Companies Act 2013 and IEPF (Accounting, Audit, Transfer and Refund) Rules 2016. Shri Sabyasachi Panigrahi,

Company Secretary is the Nodal Officer appointed by the Company under the Provisions of the IEPF Act.

FIXED DEPOSIT

The Company has not accepted any fixed deposit from the public,

LOANS, GUARANTEES AND INVESTMENTS

The Company has not granted any Loans, Guarantees and made any Investments during the year,

RELATED PARTY TRANSACTIONS

All contracts/arrangements and transactions entered by the Company with related parties were in ordinary course of business and at armS length basis, Your Directors draw attention of the members to Notes to accounts of financial statement which sets out related party disclosures, The Related Party Transactions Policy as approved by the Board is available on the website of the Company www.arotile.com .

DIRECTORS

Shri K, Raghavendra Acharya, Executive Director passed away on 15,06,2020, The Board expresses its condolences and acknowledges the invaluable contribution made by Late Shri Acharya as an Executive Director of the Company during his tenure and association with the Company, His sudden and unexpected passing away will be an irreparable loss to the Company,

DIRECTORS RESPONSIBILITY STATEMENT

As required under Section 134(3)(c) of the Companies Act, 2013, your Directors state that:

a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) the accounting policies have been selected and applied consistently and judgments and estimates made 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) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the said Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

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

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

f) the proper systems to ensure compliance with the provisions of all applicable laws have been devised and that such systems were adequate and operating effectively,

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Corporate Social Responsibility Committee has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company which has been approved by the Board, The CSR policy may be access from the website of the Company i,e, www.arotile.com . The Annual Report on CSR activities is annexed herewith marked as Annexure I,

AUDITORS AND AUDITORS REPORT

(a) Statutory Auditor

M/s VAPS & Company, Chartered Accountants, New Delhi was appointed as the Statutory Auditor of the Company for a period of Five Years from the Conclusion of Twenty Ninth Annual General Meeting,The Notes on the financial statements referred to in the Auditors Report are self-explanatory and do not call for any further comments, The Auditors Report does not contain any qualifications, reservations or adverse remark,

(b) Secretarial Auditor

Practising Company Secretary Ms, Latika Jetley (CP No, 3074) was appointed as the Secretarial Auditor by the Board for the financial year 2019-20 to conduct the Secretarial Audit, The Secretarial Audit Report along with the Annual compliance Secretarial Audit Report under SEBI Regulation for the year 2019-20 is annexed herewith as Annexure II, The Secretarial Audit Report does not contain any qualifications, reservations or adverse remark,

(c) Internal Auditor

The Board had appointed M/s Sreekantha & Co,, Chartered Accountants, Hosur as the Internal Auditor of the Company for the year 2019-2020, Internal Audit report does not contain any qualification, reservations or adverse remark,

COMPLIANCE WITH SECRETARIAL STANDARDS

Compliance of Secretarial Standards on Meeting of Board of Directors (SS-1) issued by Institute of Company Secretary of India has been adopted by the Company,

Auditors CERTIFICATE ON CORPORATE GOVERNANCE

As required by SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, the Auditors Certificate on Corporate Governance is enclosed as Annexure III to the Boards Report. The Auditors Certificate for the year 2019-20 does not contain any qualifications, reservations or adverse remarks.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

During the period under review, there were no significant and material orders passed by the Regulators or courts or tribunals which would impact the going concern status of the Company and its future operations.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE

Additional information on conservation of energy, technology absorption, foreign exchange earnings and outgo as required as per the provisions of Companies Act 2013 and Rules there under is annexed herewith in Annexure IV and form part of this report.

EXTRACT OF THE ANNUAL RETURN: The Extract of annual return of the Company in form MGT 9 is annexed herewith as Annexure V and form part of this report and can be accessed at web link www.arotile.com :-

PARTICULARS OF REMUNERATION

Statement of particulars of employee pursuant to the provisions of section 197 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 for the year ended 31st March 2020.

Employed throughout the financial year, ended 31stMarch 2020 in receipt of remuneration not less than One Crore two Lakh rupees per annum.

Name Age Qualification Experience Date of Commencement Employment Designation Remuneration Last Employment
Mr. Sunil K Arora 61 Years B. Sc. 33 Years 03.05.1988 Managing Director 1,64,73,448 Since Inception

Pursuant to the provisions of Section 197 (12) of the Companies Act, 2013 read with Rule 5 of Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014, the details regarding the ratio of remuneration of each Director to the median employeeS remuneration and such other details as required therein are as under:

1. The ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year: The Board of Directors of the Company comprises of Non-Executive Directors who has been paid commission in the form of Remuneration and sitting fee from the Company.

si. No. Name Ratio to median remuneration
1 Shri Sunil K Arora, Managing Director 849.672
2 Shri Sundareshwara G Sastry 12.895
3 Shri Dinesh Chandra Kothari 6.189
4 Shri Rahul Gupta 9.026
5 Smt. Sujata Arora 7.737
6 Shri K Raghavendra Acharya, Executive Director 96.156
7 Smt. Vinita Sood 11.347
8 Shri Sahil Arora, Whole Time Director 129.959

2. The percentage increase in remuneration of each Director, Chief Financial Officer, Company Secretary, in the financial year: The Board of Directors of the Company comprises of Non-Executive Directors who has been paid Commission and sitting fee from the Company.

si. No. Name % Increase in Remuneration
1 Shri Sunil K Arora, Managing Director -0.49
2 Shri Dinesh Chandra Kothari -31.43
3 Shri Rahul Gupta -20.45
4 Smt. Sujata Arora 0.00
5 Shri K Raghavendra Acharya, Executive Director 17.72
6 Smt. Vinita Sood 144.44
7 Shri Sabyasachi Panigrahi, Company Secretary 7.90
8 Shri Sahil Arora, Whole Time Director 10.47
9 Shri Sundareshwara G. Sastry 8.70
10 Shri M Madan Gopal CFO -17.35

:b. The percentage increase in the median remuneration of employees in the financial year: 14.04

4. The number of permanent employees on the roll of Company: 286

5. Average percentile increase already made in the salaries of employees other than the managerial personnel in the financial year ended B1sRs. March 2020 was 12.75%

6. The Company affirms that the remuneration is as per the remuneration policy of the Company.

Corporate Governance including details pertaining to Board Meetings, Nomination and Remuneration Policy, Audit Committee and Vigil Mechanism

Your Company re-affirms its Commitment to the highest standards of Corporate Governance practices. Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, Management Discussion and Analysis, Corporate Governance Report and Auditors Certificate regarding compliance of conditions of Corporate Governance are made a part of this Annual Report.

The Corporate Governance Report which form part of this report also covers the following:

a) Particulars of the Four Board Meetings held during the financial year under review.

b) Policy on Nomination and Remuneration of Directors, Key Managerial Personnel and Senior Management.

c) The details with respect to composition of Audit Committee and establishment of Vigil Mechanism.

INTERNAL FINANCIAL CONTROLS

The Company has in place adequate internal financial controls with reference to financial statements and no material reportable weakness was observed in the system. Further, the Company has in place adequate internal financial controls commensurate with the size and nature of its operations. The Company also has robust Budgetary Control System and Management Information System (MIS) which are backbone of the Company for ensuring that your Companys assets and interests are safeguarded.

LISTING

The Equity Shares of the Company are listed in BSE Limited and National Stock Exchange of India Limited. Listing fees for the year 20202021 have already been paid to BSE Limited and National Stock Exchange of India Limited.

ACKNOWLEDGEMENT

Your Directors wish to thank and acknowledge the Banks, Government Authorities, Dealers, Suppliers, Business Associates and the Companys Valued Customers for their assistance and cooperation and the esteemed Shareholders for their continued trust and support. The Directors also wish to acknowledge the committed and dedicated team of Aro Granite whose unstinted work, efforts and ideas have taken the Company on a path of steady growth and development.

For and on behalf of the Board
Place: Hosur Sunil K Arora Sujata Arora
Date: 26.06.2020 Managing Director Director