Arvind Fashions Ltd Directors Report.

To

The Members,

Arvind Fashions Limited.

Your Directors are pleased to present the Directors Report of the Company together with the audited accounts for the financial year ended March 31, 2021.

1. Financial Highlights

The Companys financial performances for the year under review along with previous years figures are given hereunder:

[ Rs.in Crores]
Particulars Standalone Consolidated
2020-21 2019-20 2020-21 2019-20
Revenue from operations (Net) 298.30 854.11 2,201.18 3,613.57
Profit/(Loss) Before Interest, Depreciation, Tax & Exceptional Items 35.01 62.29 121.33 317.57
Less: Finance Cost 31.43 37.32 224.90 273.55
Profit/(Loss) Before Depreciation, Tax & Exceptional Items 3.58 24.97 -103.57 44.02
Less: Depreciation/Amortization 17.54 13.04 302.69 420.66
Profit/(Loss) before exceptional items & tax -13.96 11.93 -406.26 -376.64
Less: Exceptional items 45.73 19.26 45.2 60.69
Profit/(Loss) before tax -59.69 -7.33 -451.46 -437.33
Less: Current tax/Deferred tax -0.28 -2.44 41.86 -77.43
Profit/(Loss) after Tax from Continuing Operations -59.41 -4.89 -493.32 -359.90
Profit/(Loss) Before Tax for the period from Discontinuing Operations - - -102.67 -59.09
Tax Expense/(Credit) on Discontinuing Operations - - - -19.80
Profit/(Loss) after Tax from Discontinuing Operations - - -102.67 -39.29
Net Profit/(Loss) for the period from Continuing Operations and Discontinuing Operations -59.41 -4.89 -595.99 -399.19
Add: Other Comprehensive Income 0.01 -0.17 -2.68 6.62
Profit/(Loss) after Tax and OCI -59.40 -5.06 -598.67 -392.57
Profit /(Loss) after tax carried over to Balance Sheet -59.40 -5.06 -598.67 -392.57
Proposed Dividend - - - -
Transfer to General Reserve - - - -

2. Review of Business Operations

Your Company has posted Revenue from operations (Net) for the current year Consolidated at Rs. 2201.18 Crores which was at Rs. 3613.57 Crores during the previous year. The Profit before interest, depreciation, tax and exceptional items for the current year Consolidated stands at Rs.121.33 crores which were at Rs. 317.57 Crores during the previous year.

3. Material Events during the year under review Rights Issue of Equity Shares

During the year under review, the Company had raised funds through two rights issue by the issue of equity shares;

First Rights issue of Equity Shares

The Company had issued and allotted 3,99,79,347 Equity Shares of Rs. 4 each of the Company on rights basis in the ratio of 62 equity shares for every 91 equity shares held, to eligible equity shareholders of the Company at an issue price of Rs. 100/- per Equity Share (including premium of Rs. 96 per Rights Equity Share) for an aggregate amount up to Rs. 399.79 crores and the same were allotted on July 24, 2020. The funds raised by the Company through Rights Issue, have been utilised for the objects stated in the Letter of Offer, dated May 18, 2020 read with the Addendum to Letter of Offer dated June 23, 2020 and other addenda issued in connection with the Rights Issue towards repayment of certain borrowings of the Company and its wholly-owned subsidiary and for General Corporate purpose

Second Rights issue of Equity Shares

The Company had issued 1,48,02,856 Equity Shares and allotted 14,801,776 Equity Shares of Rs. 4 each of the Company on rights basis in the ratio of 3 equity share for every 20 equity shares held, to eligible equity shareholders of the Company at an issue price of Rs. 135/- per Equity Share (including premium of Rs. 131 per Rights Equity Share) for an aggregate amount up to Rs. 199.84 crores. An amount equivalent to 51.85% of the issue price viz. Rs. 70 per equity share was received on application and an amount equivalent to 58.15% of the issue price viz. Rs. 65 per equity share is pending to be raised as the first and final call. The funds raised by the Company through aforesaid Rights Issue, have been utilised for the objects stated in the Letter of Offer, dated February 19, 2021, towards repayment of certain borrowings of the Company and its wholly-owned subsidiary and for General Corporate purpose

Strengthen Partnership with Flipkart Group

The Company had entered into a Strengthen Partnership with Flipkart Group on July 09, 2020, wherein Flipkart had purchased a significant minority stake for an amount of Rs. 260 Crores in Arvind Youth Brands Private Limited, a step-down subsidiary of the Company which owns and operates Flying Machine Brand.

4. Dividend

On account of losses incurred for the year under review and keeping in mind the need to conserve resources, your Directors did not recommend any dividend on Equity Shares for the year ended March 31, 2021. In terms of the provisions of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, your Company has formulated a Dividend Distribution Policy and the same is available on the Companys Website at https://www.arvindfashions.com/wp-content/uploads/2018/11/AFL-Dividend-Distribution-Policy.pdf

5. Board Meetings held during the year

The Company had held seven Board meetings during the financial year under review on 22/05/2020, 21/06/2020, 03/07/2020, 09/07/2020, 02/09/2020, 12/11/2020 and 03/02/2021.

6. Directors Responsibility Statement

The Directors hereby make the following Responsibility Statement as required by Section 134(3)(c) of the Companies Act, 2013:

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 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 and of the profit and loss account of the company for that period.

c) 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.

d) The Directors have prepared the annual accounts on a going concern basis.

e) They have laid down internal financial controls, which are adequate and are operating effectively.

f) The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

7. Explanation or Comments on Qualifications, Reservations or Adverse Remarks or Disclaimers made by the Auditors and the Practicing Company Secretary in their Reports

There were no qualifications, reservations or adverse remarks made by the Statutory Auditors or the Secretarial Auditor of the Company.

8. Particulars of Loans, guarantees or investments under Section 186 of the Companies Act, 2013

Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the Notes to the financial statements.

9. Related Party Transactions under Section 188 of the Companies Act, 2013

All the related party transactions are entered on an arms length basis, in the ordinary course of business and are in compliance with the applicable provisions of the Companies Act, 2013 and the SEBI (LODR) Regulations. There are no materially significant related party transactions made by the Company with Promoters, Directors or Key Managerial Personnel etc. which may have potential conflict with the interest of the Company at large or which warrants the approval of the shareholders. Accordingly, no transactions are being reported in Form AOC-2 in terms of Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014. However, the details of the transactions with Related Party are provided in the Companys financial statements in accordance with the Accounting Standards.

All Related Party Transactions are presented to the Audit Committee and the Board. Omnibus approval is obtained for the transactions which are foreseen and repetitive in nature. A statement of all related party transactions is presented before the Audit Committee on a quarterly basis, specifying the nature, value and terms and conditions of the transactions.

The Policy on Related Party Transactions as approved by the Board is available on Companys website at https://www.arvindfashions.com/wp-content/uploads/2018/11/AFL-RPT-Policy.pdf

10. Extract of Annual Return

The details forming part of the extract of the Annual Return is available on Companys website at: https://www.arvindfashions.com/corporate-governance/

11. Material changes and commitments affecting the financial position of the Company which have occurred between March 31, 2021 and June 03, 2021 (date of the Report).

In accordance with the terms of the Letter of Offer dated February 19, 2021, the Board of Directors in its meeting held on April 07, 2021, made the First and Final call on partly paid equity shares of Rs. 65 per share (comprising Rs. 2 towards face value and Rs. 63 towards securities premium), payable during the period from May 10, 2021 to May 24, 2021, both days inclusive and converted the partly paid-up shares to fully paid-up with effect from June 01, 2021.

12. Information on Conservation of Energy, Absorption of technology and Foreign Exchange Earnings and Outgo. i) Conservation of Energy

The Company is making efforts to achieve energy efficiency and increase the mix of renewable energy within the operations

a) Energy Efficiency

• The Company strives to shift conventional lighting fixtures at the end of their life with LEDs in entire operations thereby reducing the overall energy demand

• The company is evaluating the potential of Internet of Things (loT) for energy management within its store operations. Two different pilots were undertaken in FY 20 and FY 21 that indicated a potential reduction of 5%-8% in the energy demand. The same is being evaluated for commercial ramp up for few store operations

• The company is also working on SOPs to achieve behavioural based energy efficiency within the operations

b) Renewable energy

• We signed an agreement to wheel solar power from an independent power producer in FY 19, expected to cover 80-95% of the energy demand at AFLs corporate office. We have the potential of mitigating ~1,030 tons of carbon dioxide on an annual basis

• The Company is exploring the potential of shifting its warehouses to renewable energy in the near future. The same was planned in FY21 but was postponed due to the Covid-19 pandemic

• The Company is also engaging with its vendor partners to enable their transition to renewable energy thereby reducing the overall carbon footprint of its products

ii) Absorption of technology

The Company has not absorbed any technology.

iii) Foreign Exchange Earnings and Outgo

Rs.in Crores

Particulars 2020-2021 2019-2020
Earning in Foreign Currency 4.24 13.53
Expenditure in Foreign Currency 9.9 29.10

13. Nomination & Remuneration Policy of the Company

The Board has, on the recommendation of the Nomination and Remuneration Committee, framed a policy for selection and appointment of Directors, Key Managerial Personnel and Senior Management and their remuneration. The Remuneration Policy is available on the Companys website at https://www.arvindfashions.com/wp-content/uploads/2019/05/Nomination-and-Remuneration-Policy.pdf

14. Statement concerning development and implementation of Risk Management policy of the company

The Board has framed a policy to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. The Risk Management Policy is available on the Companys website at https://www.arvindfashions.com/wp-content/uploads/2019/03/Risk-Management-Policy.pdf

15. Corporate Social Responsibility (CSR)

The Companys initiatives for social advancement has been undertaken through Strategic Help Alliance to Relief to Distressed Areas (SHARDA) Trust. In addition, the skills of the vast majority of Employee Talents that the company has will be utilised in the accomplishment of its CSR vision.

We have supported and will continue to fund the ongoing projects mentioned below:

1. Supporting Government School Children

2. Providing Scholarships for higher education

3. Projects around Companys Area of Operations

During the year the company has spent Rs. 178 Lakhs on CSR projects through Strategic Help Alliance to Relief to Distressed Areas (SHARDA) Trust.

The Annual Report on CSR Activities in prescribed format including details of Corporate Social Responsibility Initiatives is enclosed as an Annexure-A.

16. Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and Regulation 17(10) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors ("Board") has carried out an annual evaluation of its own performance and that of its Committees and individual Directors. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

17. Change In the nature of the Business

There was no change in the nature of the business during the year under review

18. Directors & Key Managerial Personnel

The Board of Directors consists of 12 (Twelve) members, comprising of 1 Managing Director, 5 Non-Executive Directors and 6 Non-Executive Independent Directors.

As per the provisions of Section 152 (6) of the Companies Act, 2013, Mr. Punit Lalbhai (DIN 05125502) and Mr. Sanjay S. Lalbhai (DIN: 00008329), will retire by rotation at the ensuing Annual General Meeting and being eligible, offered themself for reappointment as the Directors of the Company.

The Independent Directors have submitted a declaration that each of them meets the criteria for independence as provided in Section 149 (6) of the Companies Act, 2013 and Regulation 16(1)(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) 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, Mr. Jayesh Kantilal Shah (DIN 00008349) has resigned as the Director of the Company w.e.f. November 12, 2020.

During the year under review, Mr. Shailesh Shyam Chaturvedi (DIN:03023079), was appointed as an Additional Director of the Company w.e.f. November 12, 2020, to hold office up to the date of the Annual General Meeting of the Company to be held thereafter and subject to the approval of shareholders in the ensuing annual general meeting During the year under review, Mr. Suresh Jayaraman (DIN 03033110) has resigned as the Managing Director and Chief Executive Officer of the Company w.e.f. February 01, 2021.

During the year under review, Mr. Shailesh Shyam Chaturvedi (DIN:03023079), was elevated to the position of the Managing Director and Chief Executive Officer of the Company w.e.f. February 01, 2021, subject to the approval of the members in the ensuing General Meeting During the year under review, Mr. Suresh Jayaraman (DIN 03033110) was appointed as a Non-Executive Additional Director of the Company w.e.f. February 02, 2021 to hold office up to the date of the Annual General Meeting of the Company to be held thereafter and subject to the approval of shareholders in the ensuing annual general meeting.

As per the provisions of Section 203 of the Companies Act, 2013, Mr. Shailesh Shyam Chaturvedi Managing Director & CEO, Mr. Pramod Kumar Gupta, Chief Financial Officer and Mr. Vijay Kumar B S, Company Secretary are the Key Managerial Personnel of the Company.

19. Disclosure under Section 67(3)(c) of the Companies Act, 2013

No disclosure is required under section 67(3)(c) of the Companies Act, 2013 read with Rule 16(4) of the Companies (Share Capital and Debentures) Rules, 2014, in respect of voting rights not exercised directly by the employees of the Company as the provisions of the said section are not applicable.

20. Auditors

Statutory Auditors

M/s. Sorab S. Engineer & Co, Chartered Accountants (ICAI Firm Registration No. 110417W) were appointed as the statutory auditors of your Company at the Annual General Meeting ("AGM") held on August 04, 2017, for a period of five consecutive years. The Report given by the Auditors on the financial statements of the Company is part of the Annual Report.

Secretarial Auditors

Pursuant to provisions of Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, your Company engaged the services of M/s. N. V. Kathiria & Associates, Company Secretary in Practice, Ahmedabad to conduct the Secretarial Audit of the Company for the financial year ended March 31, 2021. The Secretarial Audit Report (in Form MR-3) of the Company and its material Subsidiary Company is enclosed as an Annexure-B to this Report.

21. Subsidiaries /Joint Ventures / Associates

As on March 31, 2021, the Company has 4 subsidiary companies and 1 Joint Venture Companies.

Pursuant to the provisions of Section 129(3) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, a statement containing salient features of financial statements of subsidiaries, associates and joint venture companies in Form AOC-1 is attached to the Financial Statements. The separate audited financial statements in respect of each of the subsidiaries shall be kept open for inspection at the Registered Office of the Company. The Company will also make available these documents upon request by any Member of the Company interested in obtaining the same. The separate audited financial statements in respect of each of the subsidiaries are also available on the website of the Company at www.arvindfashions.com The Company has framed a policy for determining material subsidiaries, which has been uploaded on the companys website at https://www.arvindfashions.com/wp-content/uploads/2018/11/AFL-Policy-on-Material-Subsidiaries.pdf

22. Consolidated Financial Statements

The Consolidated Financial Statements of the Company are prepared in accordance with relevant Indian Accounting Standards issued by the Institute of Chartered Accountants of India and form part of this Annual Report.

23. Deposits

During the year under review, your Company has neither accepted nor renewed any deposits within the meaning of provisions of Chapter V – Acceptance of Deposits by Companies of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014.

24. Significant and Material Orders Passed by the Regulators or Courts or Tribunals impacting the Going Concern status of the Company

There are no significant and material orders passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company

25. Internal financial Controls

The Company has in place adequate internal financial controls with reference to financial statements and a dedicated Internal Audit team to ensure its adequacy. The scope and authority of the Internal Audit function are well defined in the organisation. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board. The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies of the Company. Based on the report of the Internal Audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls.

Significant audit observations and corrective actions suggested are presented to the Audit Committee of the Board. The Statutory Auditor of the Company has also given an opinion that the Internal Financial Controls over Financial Reporting are adequate and are operating effectively at the end of the financial year.

26. Disclosure of composition of Audit Committee

The Audit Committee consists of the following Members;

i) Mr. Nagesh Pinge –Independent Director

ii) Mr. Nilesh Shah –Independent Director

iii) Ms. Abanti Sankaranarayanan –Independent Director

iv) Ms. Nithya Easwaran –Non-Executive Director

27. Transfer of Unclaimed Dividend to Investor Education and Protection Fund

The Provisions of Section 125(2) of the Companies Act, 2013, do not apply as there was no dividend declared and paid since the incorporation of the Company.

28. Share Capital

During the year under review, the Company has increased its paid up capital from Rs 23,47,17,456/- to Rs 42,43,46,396/- by allotting 39,979,347 fully paid-up Equity shares, 14,801,776 partly paid-up Equity shares of and 27,000 shares on exercise of Employee Stock Options by the employees.

A. Issue of Equity Shares with differential rights – No such issue and accordingly no compliance

B. Issue of Sweat Equity Shares - No such issue and accordingly no compliance

29. Employee Stock Option Schemes (ESOS)

The Company has instituted the Employees Stock Option Scheme (ESOS) 2016 and 2018, to grant equity based incentives to certain eligible employees and directors of the Company and its subsidiary and holding companies. During the year under review, the Company has granted stock options to eligible employees. Disclosures in compliance with Section 62 of the Companies Act, 2013 and Rule 12 of Companies (Share Capital and Debentures) Rules, 2014 and the Securities and Exchange Board of India (Share based Employee Benefits) Regulations, 2014 are set out in Annexure -C to this report.

30. Vigil Mechanism

The Company has a vigil mechanism named Whistle Blower Policy to deal with instances of unethical behaviour, actual or suspected fraud or violation of the Companys Code of Conduct or ethics policy. The details of the Whistle Blower Policy are explained in the Corporate Governance Report and also posted on the website of the Company at https://www.arvindfashions.com/wp-content/uploads/2019/04/Whistleblower-Policy.pdf

31. Familiarization programme for the independent directors

In compliance with the requirements of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has put in place a familiarization programme for the Independent Directors to familiarize them with their role, rights and responsibility as Directors, the working of the Company, nature of the industry in which the Company operates, business model etc. The details of the familiarization programme are explained in the Corporate Governance Report and is also available on the Companys website at https://www.arvindfashions.com/wp-content/uploads/2018/11/AFL-Familiarisation-Programs-of-Independent-Directors.pdf

32. Corporate Governance Report and Management Discussion & Analysis

The Corporate Governance Report and Management Discussion & Analysis, which form part of this Report, together with the Certificate from the auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated in Schedule V of Regulation 34(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

33. Business Responsibility Report

The Business Responsibility Report for the year ended March 31, 2021 as stipulated under Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed which forms part of this Annual Report.

34. Particulars of Employees

The information required pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, will be provided upon request. In terms of Section 136(1) of the Companies Act, 2013, the Annual Report and Accounts are being sent to the Members and others entitled thereto, excluding the information on employees particulars which is available for inspection by the Members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in this regard.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given in Annexure-D to this report.

35. Disclosure as per sexual harassment of women at Workplace (prevention, prohibition and Redressal) Act, 2013

The Company has zero tolerance for sexual harassment at workplace and has adopted a policy against sexual harassment in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules framed thereunder. The Company has also formed Internal Complaint Committee in which the Committee members are experts on handling the investigations and proceedings as defined in the policy.

During the financial year 2020-21, the Company has not received any complaints on sexual harassment.

36. Human Resources

At Arvind Fashions, we believe that our people are our biggest asset. Our Organizational Values – Service, Innovation, Living the Brand, Collaborate and Care, along with a strong ‘will do culture have helped instil a sense of passion, commitment and performance among our employees.

At Arvind Fashions, We provide an environment that encourages collaboration and teamwork along with recognition. Demonstrating the values and leadership behaviours along with recognizing good performance has been the key to Arvind Fashions success. Our various platforms, events and engagement initiatives like SMILES – Our comprehensive employee engagement program for our retail staff provides instant support on salaries, learning and development, career progression and performance with the click of button, Fundo - the sports Olympiad event consisting of various high adrenaline activities, Family Day - a corporate organized function blending fun, family and activities in one well-planned occasion, and through reach-outs – employee town halls where leaders talk about the achievements of the quarter gone by and the way forward plans. Through such events, our employees get an opportunity to bond with their larger cross functional teams and understand the bigger picture they are contributing towards. At Arvind Fashions we focus on the holistic growth and wellness of our people. The Arvind YoHGA framework is developed to focus on the overall wellness of our employees and deliver a differentiated employee experience. Our progressive policies and practices such as flexi-time policy, Travel and accommodation benefits, Maternity & Adoption policy, Crche services and Paternity policy along with our Professional Development initiatives and Internal Career Mobility Platform ensures that an environment of empowerment is created for all employees. Our focus has been on development of our talent across job roles and our branded development initiatives like Arvind University - our learning and development centre of excellence where we ‘fashion possibilities in learning. Our purpose is to foster a learning environment where our employees develop skills they need to achieve high business performance for progressive growth. At Arvind University, we provide business specific learning interventions for retail, functional and leadership development, which help acquire skills & competencies that have direct business impact and individual growth. It is our vision to maximise these offerings to learn, contribute & grow. Arvind Express - our career progression initiative that provides employees a transparent and structured process to help take on larger roles within the company. Our assessment process has a holistic approach which blends both Machine Learning and Human Intervention to strategically evaluate employee performance and strengths to provide critical developmental feedback.

Our EVP (Employee Value Proposition) of ‘Fashioning Possibilities offers employees opportunity to impact beyond their job description. This along with our ‘Will Do culture and cutting-edge HR practices have helped us attract and retain the best talent. This has also made our company a preferred employer for professionals in the industry.

37. Acknowledgement

The Directors wish to express their appreciation for the continued support of bankers, financial institutions, customers, and various Government agencies. The Directors also wish to thank all the employees for their contribution, support and continued co-operation throughout the year.