Diffusion Engineers Ltd Directors Report

The Board of directors take pleasure in presenting the 43^rd (Forty-Third) Boards Report on the business and operations of the Company for the financial year ended March 31, 2025. This being the first report after the Initial Public Offer ("IPO") and listing of the equity shares on BSE Limited ("BSE") and National Stock Exchange of India Limited ("NSE") (BSE and NSE hereinafter collectively referred as "Stock Exchanges"), the Board welcomes all the public shareholders and look forward to your continued faith and support.

Results of Companys operations and Companys Performance

(Amount In Millions)

	Standalone		Consolidated
Sr Particulars	For the year ended March 31		For the year ended March 31
	2025	2024	2025	2024
i. Revenue from Operations	3,160.07	2,571.26	3,351.96	2,781.45
ii. Other Income	90.79	71.94	93.27	74.17
iii. Total income (I + II)	3,250.86	2,643.19	3,445.23	2,855.62
iv. Expenses
Operating Expenses	2,151.90	1,775.93	2,228.56	1,856.51
Employee Benefits Expenses	399.15	345.51	419.02	360.56
Finance Costs	21.95	16.94	22.74	17.55
Depreciation and Amortisation Expenses	44.39	38.55	52.75	45.49
Admin & Other Expenses	200.20	147.11	233.61	175.70
Total Expenses	2,817.59	2,324.05	2,956.68	2,455.81
v. Profit/(Loss) Before Share of Profit of Joint	433.27	319.14	488.55	399.81
Venture, Exceptional Items and Tax (III-IV)
vi. Share of Profit of Joint Venture	-	-	(19.51)	13.60
vii. Profit Before Exceptional Items and	433.27	319.14	469.04	413.41
Tax(V+VI)
viii. Exceptional item	-	(2.57)	-	(2.57)
ix. Profit/(Loss) before tax (VII+VIII)	433.27	316.58	469.04	410.84
x. Tax expenses	95.74	82.63	108.63	102.80
xi. Profit/(Loss) for the period/year after tax	337.53	233.95	360.41	308.04
(IX -X)
xii. Total Other Comprehensive Income	(1.39)	(1.54)	0.51	(3.67)
xiii. Total Comprehensive Income for the year	336.14	232.42	360.92	304.38
(XI+XII)
xiv. Paid-up Equity Share Capital (Face value of	374.26	280.21	374.26	280.21
Rs 10/-each)
xv. Earnings Per Equity Share of Rs 10/- each:
- Basic	9.02	8.35	9.59	10.94
- Diluted	9.02	6.25	9.59	8.19

Financial Position

	Standalone		Consolidated
Particulars	For the year ended March 31		For the year ended March 31
	2025	2024	2025 2	024
Equity
Equity Share Capital	374.26	280.21	374.26	280.21
Other Equity	3,176.15	1,502.98	3,314.51	1,626.84
Non-controlling Interest	-	-	4.46	3.14
Total Equity	3,550.42	1,783.20	3,693.24	1,910.19
Non-Current Liabilities	61.62	58.06	66.22	62.43
Current Liabilities	678.99	755.70	684.96	782.63
Total Liabilities	740.61	813.76	751.18	845.05
Equity + Liabilities	4,291.02	2,596.96	4,444.42	2,755.24
Property, Plant and Equipment	950.70	877.93	974.00	905.71
Capital work-in-progress	31.44	11.05	31.44	11.05
Intangible Assets	4.83	4.25	4.83	4.25
Other Non-Current Assets	450.51	347.14	436.47	354.04
Current Assets	2,853.44	1,356.57	2,997.69	1,480.19
Total Assets	4,291.02	2,596.96	4,444.42	2,755.24

1. Financial Performance Revenue - Standalone

On a standalone basis in financial year 2024-25, our Revenue from operations has shown an increase of 22.90% which resulted increase of Revenue to Rs 3,160.07/- million in FY 2024-25 as compared to previous FY 2023-24 which was Rs 2,571.26/- million.

Revenue - Consolidated

On consolidated basis in financial year 2024-25, our Revenue from operations has shown an increase of 20.51% which resulted increase of Revenue to Rs 3,351.96/- million in FY 2024-25 as compared to financial year 2023-24 which was Rs 2,781.45 million.

Profits - Standalone

On a standalone basis in financial year 2024-25, the profit before tax and exceptional items has shown an increase of 35.76% and stood at Rs 433.27/- million and Profit after exceptional items and tax stood at Rs 337.53/- million. Whereas, in FY 2023-24 the profit before tax and exceptional items stood at Rs 319.14/- million and Profit after exceptional items and tax at Rs 233.95/- million.

Profits - Consolidated

On consolidated basis in financial year 2024-25, the profit before tax and exceptional items has shown an increase of 13.46% and stood at Rs 469.04/- million and profit after exceptional items and tax is Rs 360.41/- million. Whereas, in FY 2023-24 the profit before tax and exceptional items stood at Rs 413.4/- million and Profit after exceptional items and tax at Rs 308.04/- million.

EPS- Standalone

On Standalone basis, basic earnings per share increased to Rs 9.02/- per Equity share for financial year 2024-25 as compared to basic earnings per share of Rs 8.35/- per Equity share for last financial year 2023-24 and

Diluted earning per share increased to Rs 9.02/- per Equity share for financial year 2024-25 as compared to diluted earnings per share of Rs 6.25/- per Equity share for last financial year 2023-24.

EPS- Consolidated

On Consolidated basis, basic earnings per share decreased to Rs 9.59/- per Equity share for financial year 2024-25 as compared to basic earnings per share of Rs 10.94/- per Equity share for last financial year 2023-24 and

Diluted earnings per share increased to Rs 9.59/- per Equity share for financial year 2024-25 as compared to diluted earnings per share of Rs 8.19/- per Equity share for last financial year 2023-24.

2. Dividend

Your directors have recommended a final dividend of Rs 1.50/- (One Rupees Fifty Paisa Only) per Equity share for financial 2024-25 aggregating to Rs 56.14/- million subject to approval of Shareholders at the ensuing 43^rd Annual General Meeting of the Company to be held on Tuesday, July 22, 2025.

3. Business Description and State of Companys Affairs

Diffusion Engineers Limited was incorporated in the year 1982. The Company is engaged in the business of providing engineering solutions to customers both in domestic and international market. The Company has been in existence for over four decades and provides a wide range of products and services including manufacture of special welding consumables, wear plates and heavy engineering equipment for core industries and provide special and customized repairs and reconditioning services of heavy machinery and equipment.

The companys state of affairs reflects robust growth and a commitment to innovation, evidenced by its strategic expansions into new markets and pioneering projects that set industry benchmarks. Diffusions steadfast dedication to quality, reliability, and customer satisfaction underpins its success, making it a trusted partner for organizations seeking transformative solutions in todays dynamic business landscape.

4. Share Capital Structure

The Equity Shares of the Company were listed on Stock Exchanges with effect from October 04, 2024 and the Companys shares are compulsorily tradable in electronic form.

The Authorized Share Capital of the Company is Rs 40,00,00,000/- [Rupees Forty Crores Only] consisting of 4,00,00,000 [Four Crores] Equity Shares having face value of Rs 10/- [Rupees Ten Only] each. During the year there has been no change in the Authorised Share Capital of the Company.

The paid-up share capital of the Company is Rs 37,42,62,590 [Rupees Thirty-Seven Crore forty-two lakh sixty-two thousand five hundred and ninety only] consisting of 3,74,26,259 [ Three Crore seventy- four lakh twenty-six thousand two hundred and fifty- nine] Equity Shares having face value of Rs 10/- [Rupees Ten Only] each.

During the year, your Company has issued and allotted: 94,05,000 [Ninety-Four Lakhs Five Thousand] Equity shares having face value of Rs 10/- [Rupees Ten Only] each through Initial Public Offer [IPO]

5. Transfer to Reserves

The Company has not transferred any amount to the general reserve account during the reporting period.

6. Capital Expenditure on Assets

During financial year 2024-25 the company incurred capital expenditure of Rs 142.29/- million as compared Rs 324.57/- million in the last financial year 2023-24.

7. Change in the nature of business

During the year, the company has not changed its business and the activity of the company continues to be the same .

8. Annual Return

Pursuant to Section 92(3) of the Companies Act 2013 and Rule 12 of the Companies (Management and Administration) Rules, 2014, the Annual Return for FY 2024-25 is available on Companys website https:// www.diffusionengineers.com/investors-relation

9. Particulars of Loans, Guarantee and Investment

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 forms part of the Notes to the Financial Statements provided in this Annual Report.

10. Particulars of Loan to Directors or to Entities in which Directors are interested under Section 185 of the Companies Act, 2013

During the period under review, your Company has not given any loan to any Director or to entities in which Directors are interested under section 185 of Companies Act, 2013

11. Public Deposits

The Company has not accepted deposits within the meaning of the provision of Chapter V of the Companies Act, 2013 read with the relevant Rules.

12. Maintenance of Cost Records

Company has maintained cost records as per section 148 (1) of Companies Act, 2013.

13. Particulars of Contracts or Arrangements made with Related Parties

All contracts/ arrangements/transactions entered by the Company with the related parties during the financial year 2024-25 were in its ordinary course of business and at arms length basis.

Suitable disclosure as required by the Indian Accounting Standards (IND AS 24) has been made in the notes to the Financial Statements which forms part of the Annual Report.

As per the provisions of Regulation 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (Listing Regulations) the Company has formulated and adopted Policy on Related Party Transactions; details of the same are provided in Annexure-6 to the Boards Report.

Further, the Company during the reporting year, has not entered into a contract/ arrangement/ transaction which is considered material in accordance with the definition of materiality as included in the Companys Related Party Transaction Policy read with Regulation 23 of Listing Regulations as amended from time to time.

The disclosure of Related Party Transactions as required under Section 134(3)(h) of the Companies Act, 2013 in Form AOC-2 is appended as Annexure-2 to this Boards Report.

14. 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 the date of the Report:

The Shareholders of the Company on April 03, 2025 by way of postal ballot through remote e-voting process approved Re-Appointment of Mr. Prashant Garg (DIN: 00049106) as the Chairman and Managing Director of the Company for a period of Five (5) years with effect from 16^th March, 2025 till 15^th March, 2030.

The Board of Directors at its meeting held on May 15, 2025 approved,

i) The proposal for sale of 2.06% stake of its associate company, LSN Diffusion Limited.

ii) Diffusion Engineers Limited - Employee Stock Option Scheme 2025 and implementation through an irrevocable employee welfare trust namely Diffusion ESOP Trust to be set-up by the Company, pursuant to the provisions of Section 62(1)(b), of the Companies Act, 2013 read with rules framed thereunder, and the relevant provisions of the Securities and Exchange Board of India (Share Based Employee Benefits & Sweat Equity) Regulations, 2021, subject to the approval of shareholders of the Company by way of special resolution.

15. Board Policies

The details of the policies approved and adopted by the board as required under Companies Act, 2013 and Listing Regulations are provided in Annexure-6 to the Boards Report.

16. Risk Management

The Board had constituted the Risk Management Committee. The composition of Risk Management Committee is given in the Corporate Governance Report, forming part of the Annual Report. Further, pursuant to Section 134(3)(n) of the Companies Act, 2013 and Regulation 17(9) of SEBI Listing Regulations, the Company has formulated and adopted the Risk Management Policy inter-alia including the details/ process about identification of elements of risks if any, which in the opinion of the Board may threaten the existence of the Company. The aforesaid Risk Management Policy establishes the philosophy of the Company towards risk identification, analysis and prioritization of risks, development of risk mitigation plans and reporting on the risk environment of the Company. This Risk Management Policy is applicable to all the functions, departments and geographical locations of the Company. The purpose of this policy is to define, design and implement a risk management framework across the Company to identify, assess, manage and monitor risks. Aligned to this, purpose is also to identify potential events that may affect the Company and manage the risk within the risk appetite and provide reasonable assurance regarding the achievement of the Companys objectives and business continuity.

17. Human Capital Management

At Diffusion Engineers Limited, we deeply value our people and the opportunity to engage with them. We are committed to enhancing their potential through consistent empowerment, continuous learning, and the sharing of knowledge and experiences.

Our policies and processes are designed to align employees with their individual goals and the organizations objectives. We place strong emphasis on training and development, which has led to the adoption of industry best practices. Additionally, our self-directed learning culture encourages employees to develop at their own pace in environments that best suit their learning preferences.

The Company is also committed to fostering an equal, inclusive, and diverse workforce. As an Equal Opportunity Employer, we ensure non-discrimination in all aspects of employment. This approach not only strengthens our team but also gives us a competitive advantage in staffing and talent retention.

Furthermore, we are dedicated to the protection and advancement of human rights. Our key focus areas include promoting responsible practices across our extensive and diverse supply chain and supporting a corporate culture that champions diversity and inclusion.

We attract highly skilled and educated professionals. As of March 31, 2025, our workforce numbered 486 employees and 179 workers.

18. Management Discussion and Analysis

In terms of the provisions of Regulation 34 read with Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the Managements Discussion and Analysis Report is presented in a separate section forming part of this Annual Report.

19. Subsidiaries including Material Subsidiaries

Your Company as on March 31, 2025 have following Subsidiaries: -

i. Diffusion Super Conditioning Services Private Limited

ii. Nowelco Industries Private Limited

iii. Diffusion Hernon Adhesive and Sealant Private Limited

iv. Diffusion Engineers Singapore Pte. Ltd.

v. Diffusion Wear Solutions Philippines Inc.

vi. Diffusion Eurasia Muhendislik Sanayi Ve Ticaret Anonim Sirketi

Following are Associates /Joint Venture of our company: -

i) LSN Diffusion Limited (United Kingdom)

ii) Mecdiff SDN BHD (Malaysia)

None of the company ceased to be the subsidiary, joint venture or associate company of Diffusion Engineers Limited during the reporting year.

The Board of Directors in its meeting held on February 07, 2025 approved Incorporation of a Wholly-owned Subsidiary of the Company with the name having prefix "Diffusion Engineers Middle East" or such other name as may be approved by regulatory authorities of United Arab Emirates (UAE) for the purpose of the business related to service of welding and light fabrication shop to cater to Middle Eastern markets. The Company is in process of incorporation.

The company does not have any material subsidiary in terms of Regulation 16(1)(c) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

Pursuant to provisions of Section 129(3) of the Companies Act, 2013, the Company has prepared Consolidated financial statements of the Company and its subsidiary, which form part of the Annual Report. Further, a statement containing the salient features of the financial statement of the Companys subsidiaries in the prescribed format AOC-1 is appended as an Annexure-1 to the Boards Report.

In accordance with the third proviso of Section 136(1) of the Companies Act, 2013, the Annual Report of the Company, containing therein its Standalone and Consolidated financial statements have been placed on the website of the Company at https://www. diffusionengineers.com/investors-relation

20. Corporate Governance

The Company has adopted and consistently adheres to best practices in corporate governance. It firmly believes that strong governance is fundamental to sustainable business growth and the enhancement of stakeholder value. The Board of Directors reaffirms its unwavering commitment to maintaining high standards of corporate governance.

Corporate governance at the Company is an ethically driven process rooted in core values that aim to strengthen the organizations brand and reputation. This commitment is reflected in ethical decisionmaking and responsible business conduct aligned with stakeholders expectations.

A detailed report on Corporate Governance is an integral part of this Annual Report and is presented as a separate section herein.

21. Audit reports and Auditors

a) Statutory Auditor

The members at the 41^st Annual General Meeting held on 25^th September, 2023 appointed PGS

& Associates, Chartered Accountants (Firm Registration No. - 122384W) as Statutory Auditors of the Company to hold office for a period of five [5] years commencing from conclusion of 41^st Annual General Meeting till the conclusion of Annual General Meeting to be held in the year 2028. PGS & Associates have confirmed their eligibility and that they are not disqualified under the Companies Act, 2013, for their continuance as Statutory Auditors of the Company.

The Auditors Report for FY 2024-25 provided by PGS & Associates, Chartered Accountants, Statutory Auditors of the Company on Standalone and Consolidated Financial Statements (Financial Statements) does not contain any qualification, reservation or adverse remark. The statements made by the Auditors in their report are self - explanatory and do not call for any further comments. The Auditors Report is enclosed as separate section with the financial statements in this Annual Report.

b) Secretarial Auditors

Pursuant to provision of section 204 of Companies Act, 2013 read with rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Board of directors on the recommendation of the Audit Committee, in its meeting held on July 31, 2024, appointed Mr. Madhav Kawde, Practicing Company Secretary (CP No. 1892) as Secretarial Auditor to conduct the secretarial audit of the company for the financial year 2024 - 2025.

In terms of provisions of sub-section 1 of section 204 of the Companies Act, 2013, the Company has annexed to this Boards Report as Annexure-4, a Secretarial Audit Report given by the Secretarial Auditor. The Secretarial Auditors Report for FY 2024-25 does not contain any qualification, reservation, or adverse remark. The statements made by the Secretarial Auditor in his report are self - explanatory and do not call for any further comments.

As required under Listing Regulations the Practicing Company Secretarys Certificate on Corporate Governance and non-disqualification of directors including KYC requirement is appended as Annexure-8. The appended certificate does not contain any qualification, reservation or adverse remarks.

Internal Auditors

The Companys Internal Audit is being conducted by Independent Auditors on quarterly basis and they furnish their quarterly report on their observations to Audit Committee for review.

As per the provisions of Section 138 of the Companies Act, 2013 and Rules made thereunder, the Company has appointed Chitaley Mehta & Associates, Chartered Accountants, (Firm Registration No- 127021W) as Internal Auditors for the Financial Year 2025 - 2026.

c) Cost Auditors

As per Section 148 of the Companies Act, 2013, the Company is required to have the audit of its cost records conducted by a Cost Accountant in practice. The Board on the recommendation of the Audit Committee has appointed M/s A. B. Verma & Co., Cost Accountants, Nagpur (Firm Registration No. 102527/ Membership No. 31367), as the Cost Auditors of the Company for FY 2025 - 2026 under Section 148 and all other applicable provisions of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014.

M/s A. B. Verma & Co., have confirmed that they are free from disqualification specified under Section 141(3) and Section 148(3) read with Section 141(4) of the Act and that the appointment meets the requirements of Section 141 (3)(g) of the Act.

The remuneration payable to the Cost Auditors is required to be placed before the members in a general meeting for their ratification. Accordingly, a Resolution for seeking members ratification for the remuneration payable to M/s A. B. Verma & Co. is included in the Notice convening the Annual General Meeting.

The Cost Auditors Report for FY 2023-24 does not contain any qualification, reservation, or adverse remark.

22. Reporting of Fraud by Auditors

During the year under review, none of the Auditors have reported to the audit committee, under Section 143 (12) of the Companies Act, 2013, any instances of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned in the Boards report.

23. Revision of Financial Statements and Board Report

There was no revision of financial statements and Boards Report of the Company during the financial year under review. However, for the purpose of IPO, the Company has re-stated the financial statements of preceding three financial years pursuant to the provisions of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 ("SEBI ICDR Regulations").

24. Segment Reporting

The company has only one operating segment i.e "Welding Fabrication Technology and Engineering" as per Ind AS 108 which includes Manufacturing, Trading and Job Work.

25. Board of Directors and its Meeting

The Company has a professional Board with right mix of knowledge, skills and expertise with an optimum combination of Executive, Non- Executive and Independent Directors including Woman Director. The Chairman of the Board is a Executive Director. The Board provides strategic guidance and direction to the Company in achieving its business objectives and protecting the interest of the stakeholders. The Board met Eleven (11) times during the financial year. The maximum interval between any two meetings did not exceed 120 days, as prescribed under Companies Act, 2013. The details pertaining to the composition of the Board of Directors of the Company and the meetings thereof held during the financial year are given in the Report on Corporate Governance section forming part of this Annual Report.

26. Investor Education and Protection Fund (IEPF)

During the year, the Company was not required to transfer any amount to Investor Education and Protection Fund (IEPF) as per the requirements of the IEPF Rules.

27. Directors Responsibility Statement

The Standalone and Consolidated financial statements for the financial year ended March 31,2025 are prepared in accordance with Indian Accounting Standards (Ind AS) under the historical cost convention on accrual basis, the provisions of the Companies Act 2013 (to the extent notified) and guidelines issued by SEBI, Ind AS as prescribed under section 133 of Companies Act, 2013, read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or the revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

Pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, confirm that:

I. In the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures;

II. 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 of the Company for that period;

III. They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

IV. They have prepared the annual accounts on a going concern basis;

V. They have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively;

VI. They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

28. Internal Financial Controls with Reference to Financial Statements

The Company has internal financial control systems to commensurate with the nature of its business, size and complexity of its operations. Internal financial control systems include policies and procedures which are designed to ensure reliability of financial reporting, compliance with policies, procedure, applicable laws and regulations and that all assets and resources are acquired economically, used efficiently and adequately protected.

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, audit performed by the Internal, Statutory and Secretarial Auditors and the reviews performed by the relevant board committees, including the audit and management committee, the board is of the opinion that the Companys internal financial controls were adequate and effective during the financial year 2024-25. For more details, refer to the Internal control systems and their adequacy section in the Managements discussion and analysis, which forms part of this Annual Report.

29. Declaration of Independence by Independent Director

Independent Directors of the Company has provided declarations under Section 149 (7) of the Companies Act, 2013 and Regulation 25 (8) of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, that he/she meets with the criteria of independence, as prescribed under Section 149 (6) of the Companies Act, 2013 and Regulation 25 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Your Company has received declarations from all Independent Directors confirming that:

(i) They meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of the SEBI (LODR) Regulations, 2015.

(ii) They have complied with the code for independent directors prescribed under Schedule IV to the Act;

(iii) They have registered themselves with the independent directors database maintained by the Indian Institute of Corporate Affairs in compliance with Rules 6(1) and 6(2) of the Companies (Appointment and Qualification of Directors) Rules, 2014;

(iv) They are not aware of any circumstance or situation, which exists or may be reasonably anticipated, that could impair or impact their ability to discharge their duties.

30. Board Evaluation

The Board of Directors carried out an annual evaluation of its own performance, Board Committees and individual Directors pursuant to the provisions the Companies Act, 2013 and SEBI Listing Regulations. The evaluation parameters and the process have been explained in Corporate Governance Report.

31. Familiarization Program for Board Members

The Board members are provided with necessary documents / brochures, reports and internal policies to enable them to familiarise with the Companys procedures and practices. Periodic presentations are made on business and performance updates of the Company, business strategy and risks involved. The Directors are also updated with various regulations prevailing at the time and the new judicial pronouncements, if any.

32. Policy on Directors Appointment, Remuneration and other details

The Nomination and Remuneration Committee (NRC) has adopted the policy and procedures with regard to identification and nomination of persons who are qualified to become directors and who may be appointed in senior management and the same is available on the website of the company at https:// www.diffusionengineers.com/investors-relation This policy is framed in compliance with the applicable provisions of Regulation 19 read with Part D of the Schedule II of the SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015 (the Regulations) and Section 178 and other applicable provisions of the Companies Act, 2013.

The details as required under Section 197 (12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are provided in the Annexure-3 of the Boards Report.

33. Directors and Key Managerial Personnel of the Company

(i) The present composition of the Board of the Company is as under:

The Company has eminent individuals from diverse fields as Directors on its Board, who bring in the required skill, integrity, competence, expertise and experience that is required for making effective contribution to the Board. The Board comprise of six (6) Directors with an appropriate mix of NonExecutive Directors, Executive Directors and Independent Directors.

Name of Directors	DIN	Designation	Executive/ Non - Executive
Mr. Prashant Garg	00049106	Managing Director	Executive
Mr. Nitin Garg	08558736	Director	Non - Executive
Ms. Chitra Narendra Garg	01784644	Director	Non - Executive
Mr. Anil Kumar Trigunayat	07900294	Independent Director	Non - Executive
Mr. Sherry Samuel Oommen	07059616	Independent Director	Non - Executive
Ms. Deepali Bendre	10753545	Independent Director	Non - Executive

Appointment/Resignation of Directors

During the financial year under review:

a) Dr. Renuka Garg (DIN: 02815373) tendered her resignation from the post of NonExecutive Director of the Company with effect from July 23, 2024.

b) The Board on the recommendation of

Nomination and Remuneration Committee at its meeting held on July 23, 2024 appointed Dr Nitin Garg (DIN: 08558736) as an Additional Director under the category of Non-Executive Director of the Company with effect from July 23, 2024. The appointment was regularised by the shareholders at the Annual General Meeting of the Company held on August 31, 2024.

c) The Board on the recommendation of

Nomination and Remuneration Committee at its meeting held on August 26, 2024 appointed Mr. Sherry Samuel Oommen (DIN: 07059616) and Ms. Deepali Bendre (DIN: 10753545) as an Additional Director under the category of Non-Executive Independent Director of the Company with effect from August 26, 2024. Their appointments as Independent Directors for a term of five (5) years with effect from August 26, 2024 was regularised by the shareholders of the Company in their Extra Ordinary General meeting held on August 26, 2024

d) Mr Ajay Jain (DIN: 02815416) and Ms Anita Vijayakar (DIN: 01190200) ceased to be Independent Directors of the company upon completion of their second term of 5 (Five) consecutive years on September 13, 2024

(ii) Key Managerial Personnel (KMP)

In terms of the provisions of Section 2(51) and Section 203 of the Companies Act, 2013 the following are the KMPs of the Company:

1. Mr Prashant Garg [Managing Director]

2. Mr Ramesh Kumar Narasinghbhan [appointed as Chief Executive Officer (CEO) of Company with effect from February 13, 2025]

3. Mr Abhishek Mehta [appointed as Chief Financial Officer, with effect from 29^th June 2023]

4. Ms Chanchal Jaiswal [appointed as Company Secretary and Compliance Officer, with effect from 29^th June 2023]

Appointment/Resignation of Key Managerial Personnel (KMP)

During the financial year under review:

i. Mr Ramesh Kumar Narasinghbhan (PAN: ABOPN4848E) was appointed as Chief Executive Officer (CEO) of Company with effect from February 13, 2025 for the period of 4 (Four) years in the board meeting held on February 07, 2025.

ii. Mr. Prashant Garg (DIN: 00049106) was reappointed as the Chairman and Managing Director for a period of five years with effect from March 16, 2025, pursuant to a resolution passed by our Board of Directors at their meeting held on February 07, 2025 and a resolution passed by Shareholders through postal ballot on April 03, 2025.

Retirement by Rotation:

In terms of the provisions of Section 152 and other applicable provisions, if any, of the Companies Act, 2013, Dr Nitin Garg (DIN: 08558736), Director retires by rotation at the ensuing Annual General Meeting, and being eligible, offers himself for re - appointment.

Accordingly, a Resolution for seeking members approval for appointment of Director is included in the Notice convening the Annual General Meeting.

34. Committees of the Board

As on March 31, 2025, the Board has six committees:

i. Audit Committee

ii. Nomination and Remuneration Committee

iii. Corporate Social Responsibility Committee

iv. Stakeholders Relationship Committee

v. Risk Management Committee

vi. Management Committee

The details of the powers, functions, composition and meetings of the Committees of the Board held during the financial year 2024-25 are given in the Report on Corporate Governance section forming part of this Annual Report.

35. Conservation of Energy, Technology Absorption, Foreign exchange earnings and outgo

The particulars as prescribed under Sub-section (3) (m) of Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014, are given separately as Annexure-7 to the Boards Report.

36. Corporate Social Responsibility

The Company is committed to conduct its business in a socially responsible, ethical and environmental friendly manner and to continuously work towards improving quality of life of the communities in its operational areas. The Board of Directors at its meeting held on August 26, 2024 had re-constituted Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of Companies Act, 2013 read with rules formulated therein. The CSR agenda is planned in consultation with the CSR committee members through a systematic independent need assessment. Your Company believes in positive relationships that are built with constructive engagement which enhances the economic, social and cultural well-being of individuals and regions connected to the Companys activities. Your Company has adopted a detailed policy on Corporate Social Responsibility. The brief outline of the Corporate Social Responsibility (CSR) Policy of the Company including the annual report on the Companys CSR activities are set out in Annexure-5 of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014.

37. Secretarial Standards

The Company duly complies with all applicable secretarial standards issued by the Institute of Company Secretaries of India.

38. Vigil Mechanism (Whistle Blower Policy)

In terms of the section 177(9) of companies act, 2013 and rules framed thereunder read with Regulation 22 of Listing Regulations, your Company has established a Vigil Mechanism Policy and it provides a channel to the employees to report to the appropriate authorities concerns about unethical behaviour, actual or suspected fraud or violation of the Companys code of conduct policy and provides safeguards against victimization of employees who avail the mechanism and also provide a direct access to the Chairman of the Audit Committee in exceptional cases. Protected disclosures can be made by a whistle blower through an e-mail, or dedicated telephone line or a letter to the concerned authorities. The details of the vigil mechanism (whistle blower policy) are given in Annexure-6 of this Board Report.

39. Prevention of Insider Trading

The Securities and Exchange Board of India (SEBI) vide notification dated January 15, 2015 had put in place a new framework for prohibition of Insider Trading in securities and to strengthen the legal framework thereof. These regulations of the SEBI under the above notification had become effective from May 15, 2015. Whereas on December 31, 2018, the regulations were amended with Securities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2018 effective from April 1, 2019. Accordingly, the Board has formulated Code of Conduct and Fair Disclosure for Prevention of Insider Trading Policy in accordance with Regulation 8 & 9 of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 for regulating, monitoring and reporting of Trading of Shares by Insiders. The Code lays down guidelines, procedures to be followed and disclosures to be made while dealing with shares of the Company. The details of the Code of Conduct and Fair Disclosure for Prevention of Insider Trading are given in Annexure-6 of this Boards Report.

37. Code of Conduct

The Directors, KMPs and Senior Management of the Company have affirmed compliance with Code of Conduct applicable to them during the year ended March 31, 2025. The details of the Code of Conduct for Directors, KMPs and Senior Management are given in Annexure-6 of this Boards Report. The Annual Report of the Company contains a certificate by Ramesh Kumar Narasinghbhan, Chief Executive Officer of the Company, on compliance declaration received from the Members of the Board, KMPs and Senior Management as an Annexure-9.

38. Legal, Governance and Brand Protection

The Company continues to focus on the key areas and projects within the Legal, Compliance and Corporate Affairs functions.

39. Enhancing Shareholders Value

Your Company believes that its members are its most important stakeholders. Accordingly, your Companys operations are committed to the pursuit of achieving high levels of operating performance and cost competitiveness, consolidating and building for growth, enhancing the productive asset and resource base and nurturing overall corporate reputation.

40. Disclosure Requirements

As per Listing regulations, Corporate Governance Report with the Auditors Certificate thereon and the Management Discussion and Analysis Report are attached herewith and forms part of this Report. The Company has devised a proper system to ensure compliance with the provisions of all Secretarial Standards issued by the Institute of Company

Secretaries of India and that such systems are adequate and operating effectively.

41. Significant and Material Orders Passed by the Regulators or Courts or Tribunals Impacting the Going Concern Status of the Company

There are no orders passed by the Regulators or Courts or Tribunals which would impact the going concern status and the Companys future operations.

42. Credit Rating Obtained

During the year under review the Company had obtained the Credit rating from CRISIL Ratings Limited and Acuite Ratings & Research Limited for the loans and credit facilities from Banks. The details of Ratings are provided in Corporate Governance Report forming part of this Annual Report.

43. Sexual Harassment of Women at Workplace:

The Company has zero tolerance towards sexual harassment at the workplace and has adopted a Policy on Prevention of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder.

The details of the policy are given in Annexure-6 of this Boards Report. The Company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The details of complaints filed, disposed of and pending during the financial year pertaining to sexual harassment is provided in Corporate Governance Report of this Annual Report.

Your company has been certified as "Great place to work" for the third time in a row. The Great Place to Work Assessment is considered a Gold Standard in workplace Culture assessment.

44. Maternity Benefit

The company is in compliance with the provisions relating to the Maternity Benefit Act, 1961.

45. Green Initiatives

Electronic copies of Annual Report 2024-25 and the Notice of 43^rd Annual General Meeting shall be sent to all the members whose email addresses are registered with the company/ depository participant. Physical copies of Annual Report will be sent to only to those members who request the Company for the same once dispatch of Annual Report and Notice of AGM through electronic means is completed.

46. Board Diversity

The Board comprises of adequate number of members with diverse experience and skills, such that it best serves the governance and strategic needs of the Company. The Directors are persons of eminence in areas such as business, industry, finance, law, administration, economics etc. and bring with them experience and skills which add value to the performance of the Board. The Directors are selected purely on the basis of merit with no discrimination on race, colour, religion, gender or nationality. A brief profile of the Directors are available on the website of the Company at https:// www.diffusionengineers.com/about-us

47. Proceeding pending under the Insolvency and Bankruptcy Code, 2016.

No application has been made under the Insolvency and Bankruptcy Code; hence the requirement to disclose the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year is not applicable.

48. CEO/CFO Certification

As required Regulation 17(8) read with Schedule II of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the CEO/CFO certification is attached with this Annual Report as an Annexure-10.

49. The details of difference between the amount of the valuation done at the time of one-time settlement and the valuation done while taking loan from the banks or financial institutions along with the reasons thereof.

There has been no settlement made with any Bank or Financial institution by the Company during the Financial Year, thus the requirement to provide details not applicable to the Company.

50. Material events during FY 2024-25

Initial Public Offer & consequent listing of Shares on National Stock Exchange of India Limited ("NSE") and BSE Limited ("BSE")

The equity shares of the Company got listed on Stock Exchanges with effect from October 04, 2024, pursuant to the IPO of the Company by way of fresh issue of 94,05,000 Equity Shares aggregating to INR 1,579.64 million.

The issue comprising of a fresh issue, was open for subscription from September 26, 2024 and ended on September 30, 2024. The issue includes a reservation of up to 50,000 shares for employees offered at a discount of INR 8/- to the issue price. The allotment for Diffusion Engineers IPO was finalized on Tuesday, October 1, 2024. The shares got listed on BSE, NSE on October 4, 2024.

Company completed its IPO successfully with participation of several leading domestic and global institutional investors as well as NRIs, HNIs and retail investors. The Board is deeply grateful and honoured by the trust and confidence shown in the Company by its members. The Board would also like to express its sincere appreciation for the invaluable support from various Authorities, Book Running Lead Managers (BRLMs), Stock Exchanges, Depositories, Legal Counsels, Consultants, Auditors, and the Companys Employees, all of whom contributed significantly to the remarkable success of the Companys maiden IPO.

51. Acknowledgement

Your directors place on record their appreciation to the Government, the Securities and Exchange Board of India, the Stock Exchanges and other regulatory authorities for their valuable guidance and support and wish to express our sincere appreciation for their continued co-operation and assistance. We look forward to their continued support in future as well. We wish to thank our bankers, investors, rating agencies, customers and all other business associates for their support and trust reposed in us.

Your directors express their deep sense of appreciation for all the members of the Diffusion family whose commitment, co-operation, active participation, dedicated efforts, consistent contribution and professionalism at all levels has made the organizations growth possible. Your Board is thankful to you for the support and trust reposed in them and the Company.

For and on behalf of Board of Directors

Sd/- Prashant Garg Chairman and Managing Director (DIN: 00049106)

Place: Nagpur Date: 15th May 2025