Divyashakti Granites Ltd Directors Report.

Dear Shareholders,

Your Directors have pleasure in presenting the 27th Annual Report and the Audited Accounts for the financial year ended 31st March, 2018.

1. FINANCIAL RESULTS

Particulars Year ended 31.03.2018 Year ended 31.03.2017
(Rs. in lakhs) (Rs. in lakhs)
Sales 6858 10836
Gross Operating
Profit before depreciation and exchange variation 757 1637
Profit after depreciation but before exchange variation 692 1524
Profit after depreciation, exchange variation and before
Exceptional Items 745 1459
Profit after Exceptional items 745 1469
Profit after Tax 482 947
Appropriations:
General Reserves 297 762
Proposed Dividend 154 154
Tax on dividend 31 31
Total 482 947

2. DIVIDEND

Your Directors are pleased to recommend for your consideration a Dividend of Rs. 1.50 per share (15% of face value Rs.10/-) on the equity capital of the company for the financial year ended 31st March, 2018, aggregating an amount of Rs. 154.03 lakhs.

3. TRANSFERS TO RESERVES AND RETENTION IN THE PROFIT AND LOSS ACCOUNT ETC:

The Company proposes to transfer an amount of Rs. 297 lakhs to Reserves during the financial year under review.

4. Finance:

Cash and cash equivalents as at 31st March, 2018 was Rs. 1444 lakhs. The company continues to focus on judicious management of its working capital, receivables, inventories and other working capital parameters and they were kept under strict check through continuous monitoring.

5. COMPANYS WORKING DURING THE CURRENT YEAR 2017-2018 AND THE FUTURE PROSPECTS ALONG WITH REASONS WHILE COMPARING WITH PREVIOUS YEAR RESULTS:

Your Company has exported polished granite slabs and polished monuments valued at Rs.6758 lakhs to U.S.A. during the year under consideration. As regards the Raw Materials, out of the total purchases of Raw Blocks & Slabs valued at Rs.5167 lakhs made during the year, about 79% of slabs are Traded/ imported from China.

The year closed on a positive note with export orders on hand to the tune of Rs. 210 lakhs as compared to Rs.230 lakhs of last year.

Further, your Directors are pleased to state that your company could commission solar plant within the Factory and could thus save the power bills to the extent of Rs.58 lakhs.

Your Directors are further pleased to inform that your company has also established Quartz Slabs (Engineering Stone Slabs) manufacturing unit in its existing premises. The Quartz unit is expected to go into production soon in the current year itself.

6. CHANGE IN NATURE OF BUSINESS:

During the year the company has not changed its business.

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

There are no material changes and commitments that have bearing on the financial position of the Company.

8. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANYS OPERATIONS IN FUTURE:

There are no significant and material orders by the Regulators or Courts or Tribunals impacting the going concern status and companys operations in future.

9. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY :

The Management continuously reviews the internal control systems and procedures for the efficient conduct of the companys business. The Company adheres to the prescribed guidelines with respect to the transactions, financial reporting and ensure that all its assets are safeguarded and protected against losses. The Internal Auditors of the company conduct audit on regular basis and the Audit Committee periodically reviews internal audit reports and effectiveness of internal control systems.

10. DETAILS OF SUBSIDIARY/JOINT

V E N T U R E S / A S S O C I A T E COMPANIES:

The Company does not have any subsidiaries or Joint Venture or associate companies.

11. PERFORMANCE AND FINANCIAL

POSITION OF EACH OF THE SUBSIDIARIES, ASSOCIATES AND JOINTVENTURE COMPANIES INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENT.

Since the Company does not have any subsidiaries or Joint Venture or associate companies, consolidation of financial statements of the Company is not applicable.

12. DEPOSITS

The company has not accepted any fixed deposits from the public.

13. AUDITORS AND OBSERVATIONS

M/s Suryanarayana & Suresh, Chartered Accountants, Independent Auditors of the Company were appointed in the Annual General Meeting held on 25th September, 2017 for a period of Five year till conclusion of Thirty First (31st) Annual General Meeting.

14. SECRETARIAL AUDIT REPORT

Pursuant to provisions of section204 of the Companies Act, 2013, the Company has appointed Puttaparthi Jagannatham & Co., Company secretaries, a firm of company secretaries, to undertake the secretarial audit of the Company. The Secretarial Audit Report obtained is annexed within as Annexure-I

15. EXTRACT OF ANNUAL RETURN:

The extract of the Annual Return is placed on the website of the Company. The link to access the same is http:// www.divyashakti.com/html/annual-return- extracts.html

16. SHARE CAPITAL

None of the following issues were taken up during the year and hence details thereof were not required to be furnished A) Issue of shares with differential rights

B) Issue of sweat equity shares C) Issue of employee stock options D) Provision of money by company for purchase of its own shares by employees or trustees for the benefit of employees

17. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND

FOREIGN EXCHANGE EARNINGS AND OUTGO: (A) Conservation of energy a) Company ensures that the manufacturing operations are conducted in the manner whereby optimum utilization and maximum possible savings of energy is achieved. b) No specific investment has been made on reduction in energy consumption. c) As the impact of measures taken for conservation and optimum utilization of energy are not quantitative, its impact on cost cannot be stated accurately. d) Details of electricity consumption are as under:

2017-18 2016-17
1. Electricity
a) Purchased Units 781390 2063501
Total Amount (Rs. in lakhs) 67.51 168.55
Average Cost/ Unit (Rs./KWH) 8.64 8.17
b) Own Generation
i) Through Solar Plant-(w.e.f. Feb.2017) Produced Energy (in Units) 884718 135300
Total Value estimated (Rs. in lakhs) 58.86 8.92
Average Cost/Unit (Rs./KWH) 6.65 6.59
ii) Through Diesel Generator (Total Units) 55456 82167
Total Amount (Rs. in lakhs) 11.06 14.50
Units per liter of Diesel Oil 3.26 3.28
Average Cost/ Unit (Rs./KWH) 19.94 17.65

(B) Technology Absorption:

No outside technology is being used for manufacturing activities, therefore no technology absorption is required. The Company constantly strives for maintenance and improvement in quality of its products and entire research and development activities are directed to achieve the aforesaid goal.

(C) Foreign exchange earnings and outgo : Details of foreign exchange earnings and outgo are as follows a) Foreign Exchange Earnings : Rs. 6758 Lakhs b) Foreign Exchange Outgo : Rs. 4895 Lakhs

18. CORPORATE SOCIAL

RESPONSIBILITY AND GOVERNANCE COMMITTEE

Pursuant to Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, your Company has constituted the CSR committee consisting of the following Directors with the roles and responsibilities duly defined in accordance with the CSR Policy Rules. The committee met once on 10.02.2018 during the financial year ended 31st March, 2018.

Name of the Member Designation
Shri T.R.C. Bose Chairman
Shri T.H.Sastry Member
Shri S. Srinivas Member

The Committee reviewed the CSR Policy and has identified the Education and Environment as the broad areas towards providing clean and hygienic water, and health related areas as the focus areas for CSR activities.

The Company allocated an amount of Rs.29.70 lakhs to be spent during the year 2017-18 for Corporate Social Responsibility. However, the Company couldnt spend the amount earmarked for Corporate Social Responsibility in full due to problems in identifying the better areas and beneficiaries as per its approved CSR Policy. However, an amount of Rs.3.20 lakhs was spent by the company towards the CSR activities in the field of Education and Environment during the year 2017-18.

The report on CSR activities is attached as Annexure II to this Report.

19. DIRECTORS AND KEY

MANAGERIAL PERSONNEL A) Changes in Directors and Key managerial personnel: i) Sri N.S.R.C. Sekhara Rao tendered resignation from the position of Director with effect from 10.02.2018 on the ground that his advanced age is no longer permitting him to discharge his functions as Director. The same was accepted in the Board meeting held on 10th February, 2018. ii) Pursuant to the requirements of the Companies Act, 2013 and Articles of Association of the Company, Smt.

Anuradha Anne, Director retires by rotation at the ensuing Annual General Meeting and being eligible offers herself for re-appointment.

iii) Pursuant to the provisions of Sections 196, 197 and 203 read with Schedule V and other applicable provisions, if any, of the Companies Act, 2013 Sri Hari Hara Prasad Nallapati has been re-appointed as Managing Director of the Company for Five (5) Years with effect from 04th March, 2018. The resolution relating to ratification of remuneration is put up for approval of members at the ensuing Annual General Meeting.

B) Declaration by the Independent Directors of the Company that they meet the criteria of independence as provided in Sec 149(6) of the Companies Act, 2013.

All the independent Directors have given declarations under Section 149(7) of the Companies Act, 2013 that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013 and Regulation 16(2) and 25 of theSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and that there is no change in their status of Independence.

C) Formal evaluation statement by the Board of its own performance, its committees and individual Directors:

Pursuant to the provisions of the Companies Act, 2013 and the Listing Regulations, the Board has formulated a policy for evaluation of its Board, Board Committee, Directors and their performances and carried out an evaluation of them. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

D) Number of meetings of the Board of Directors:

The Directors met for 4 times during period under review. A calendar of meetings is prepared and circulated in advance to all the Directors. The number and details of the meetings of the Board are furnished in the Corporate Governance Report.

E) Meeting of Independent Directors:

A separate meeting of Independent Directors of the Company was held on 10.02.2018 as required under Schedule IV to the Companies Act, 2013 (Code for Independent Directors) and Regulation 17 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. At the Meeting, the Independent Directors reviewed the performance of Non Independent Directors and the Board as a whole.

F) Familiarization Programme for Independent Directors

The Company proactively keeps its Directors informed of the activities of the Company, its management and operations and provides an overall industry perspective as well as issues being faced by the industry. The Familiarisation programme for Independent Directors is disclosed on the Companys website.

20. AUDIT COMMITTEE:

The Board of Directors of the Company constituted Audit Committee consisting of the following Directors, with the roles and responsibilities duly defined in accordance with the applicable statutory and other requirements. During the year, four (4) meetings of the Committee took place.

Name of the Member Designation
Shri T.R.C. Bose Chairman
Shri T.H.Sastry Member
Shri N.S.R.C.Sekhara Rao Member

The Board has accepted all the recommendations of the Audit Committee.

Due to the resignation of Sri N.S.R.C. Sekhar Rao, member of Audit Committee, the Audit Committee was reconstituted on 10.02.2018 as follows:

Name of the Member Designation
Shri T.R.C. Bose Chairman
Shri T.H.Sastry Member
Shri S. Srinvas Member

21. DETAILS OF ESTABLISHMENT OF

VIGIL MECHANISM FOR DIRECTORS AND EMPLOYEES:

The Company at present has the vigil mechanism to deal with the instances of fraud and mismanagement, if any. The company ensures that strict confidentiality is maintained while dealing with the concerns and also that no discrimination is meted out to any person for a genuinely raised concern. It is taken care of by the audit committee of the company.

The Company has also formulated Whistle Blower Policy through which its Directors, Employees and Stake Holders can report their genuine concern about unethical behavior, actual or suspected fraud, or violation of the companys code of conduct or ethics Policy.

The Company hereby affirms that no Director/ employee have been denied access to the Chairman of the Audit Committee and that no complaints were received during the year.

22. CODE OF CONDUCT:

The Board of Directors have approved a code of conduct which is applicable to the members of the Board and all employees in the course of day to day business operations of the Company. The company is against bribery, corruption and unethical dealings / behaviours of any form and the board has laid down the directives to counter such acts. The code laid down by the Board is known as "Code of Business Conduct" and declaration with respect to its compliance forms an appendix to the Report.

The code lays down the standard procedure of business conduct which is expected to be followed by the Directors and the designated employees in their business dealings and in particular on matters relating to integrity in the work place, in business practices and in dealing with stakeholders .

All the Board members and senior Management Personnel have confirmed compliance with the code. All management staff were given training in this regard.

23. PREVENTION OF INSIDER TRADING:

The Company has adopted a Code of Conduct as per Securities and Exchange Board of India (SEBI) (Prohibition of Insider Trading) Regulations, 2015 for prevention of insider trading with a view to regulate trading in securities by the Directors and designated employees of the Company. The code requires pre clearance for dealing in the Companys shares and prohibits the purchase or sale of Companys shares by the Directors and designated employees while in possession of unpublished price sensitive information in relation to the company and during the period when the trading window is closed. The Board is responsible for implementation of the code.

During the year under review, there has been due compliance with SEBI (Prohibition of Insider Trading) Regulations, 2015.

24. NOMINATION AND REMUNERATION

COMMITTEE:

The Nomination and Remuneration Committee consist of the following Directors, with the role and responsibilities duly defined and in accordance with the applicable statutory and other requirements.

Name of Members Designation
1. Shri T.V.Chowdary Chairman
2. Shri S. Srinivas Member
3. Shri N.S.R.C.Sekhara Rao Member

The Board has formulated a policy in consultation with the Nomination and Remuneration Committee for selection and appointment of Directors, Senior management and fixation of their remuneration keeping in view the requirements given in section 178 of the companies Act, 2013 and it also involves in the evaluation of the Board and its remuneration policies. During the Financial Year under review, the Committee has met twice on 27th May, 2017 and 10th February, 2018. With the resignation of Sri N. S. R. C. Sekhar Rao, member of Nomination and Remuneration Committee, the Nomination and Remuneration Committee was reconstituted on 10th February, 2018 as follows:

Name of Members Designation
1. Shri T.V.Chowdary Chairman
2. Shri S. Srinivas Member
3. Shri T.R.C. Bose Member

25. PARTICULARS OF CONTRACTS OR

ARRANGEMENTS WITH RELATED PARTIES: All transactions entered with Related Parties for the year under review were on arms length basis. The particulars of every contract or arrangements entered into by the Company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arms length transactions under third proviso thereto are disclosed in Form No.AOC-2 as Annexure-III to this Report.

Policy on Related Party Transactions as approved by Board has been uploaded on Companys. Websitehttp:// www.divyashakti.com/images/

8 . % i m a g e s / 8 . % 2 0 p l i c y % .

2 0 R e l a t e d % 2 0 P a r t y % 20Transaction.pdf There were no materially significant transactions with Related Parties during the financial year 2017-18 which were in conflict with the interest of the Company. Suitable disclosures as required under AS-18 have been made in Note 3.07 of the Notes to the financial statements.

26. MANAGERIAL REMUNERATION:

Details of the ratio of the remuneration of each Director to the median employees remuneration and other details as required pursuant to Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Remuneration to 2017-18 % on total
Directors : Rs. salaries.
(a) N. Hari Hara Prasad
Managing Director
- Salary 26,00,000 15%
- Perquisites 15,90,187
Anuradha Anne
(Chief Financial
Officer) - Salary 5,50,000 2%

b) There is no information required pursuant to Section 197 read with 5(2) of the

Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as no employee of the Company is covered by these rules.

c) No Director is in receipt of any commission from the company and the Managing Director and Whole-time Director of the Company have not received any remuneration or commission from any other Company subject to its disclosure by the Company in the Boards Report.

27. CORPORATE GOVERNANCE

The Directors reaffirm their commitment to good corporate governance practices. During the year under review, the Company was in compliance with the provisions relating to corporate governance as provided under Regulation 27 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The compliance report, together with the Auditors Certificate on compliance with the conditions of Corporate Governance of the Listing Regulations is enclosed as Annexure - IV to this Report.

The Managing Director and Chief Financial Officer of the Company have issued necessary certificate pursuant to the provisions of Regulation 17(8) of the Listing Regulations and the same forms part of this Report.

28. RISK MANAGEMENT AND

INSURANCE

Your Company continuously monitors business and operational risk through business process, re-engineering and reviewing areas such as production, finance, legal and other issues. An exhaustive exercise is underway to bring a model regulating risk management mechanism. Your Companys assets are adequately insured against the risk from fire and earthquake.

There is no identification of risks which in the opinion of the Board may threaten the existence of the Company

29. DIRECTORS RESPONSIBILITY

STATEMENT:

Pursuant to Section 134 (5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, confirm that-(a) In the preparation of the annual accounts, the applicable accounting standards had been followed and that there are no material departures; (b) We have selected such accounting policies in consultation with the Statutory Auditors and have 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; (c) We have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, 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 Company had 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) We have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

30 PAYMENT OF LISTING FEE

At present the equity shares of the Company are listed on the Bombay Stock exchange at Mumbai. The Company confirms that it has paid Annual Listing Fees due to the Bombay Stock Exchange for the year 2018-2019.

31. DEPOSITORY SYSTEM

As the Members are aware, your Companys shares are tradable compulsorily in electronic form and your Company has established connectivity with Central Depository Services (India) Limited (CDSL). In view of the numerous advantages offered by the depository system, the Members are requested to avail the facility of Dematerialization of the Companys shares on NSDL & CDSL. The ISIN allotted to the Companys Equity shares is INE410G01010.

The company is pursuing the share holders, holding the shares in physical form for dematerialization of their shares.

32. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

UNDER SECTION 186:

There are no loans, guarantees or investments made under section 186 of the Companies Act,2013

33. MANAGEMENT DISCUSSION & ANALYSIS REPORT

The Management Discussion and Analysis Report as required Regulation 34(3) and 53(f) of the Securities and Exchange Board of India (Listing Obligations and Disclosure

Requirements) Regulations, 2015 with stock exchange forms part of this report as Annexure V

34. INTERNAL COMPLAINTS

COMMITTEE:

The "Internal Complaints Committee" reconstituted as per section 4 (1) of Sexual harassment of women at work place (Prevention, Prohibition and Redressal) Act, 2013 has the following members.

1. Sri T.R.C.Bose* - Chairperson

2. Sri S. Srinivas - Member

3. Smt Anuradha Anne - Member

* Consequent on resignation of Sri N.S.R.C.Sekhara Rao, Member , the Committee has been reconstituted in the Board Meeting held on 10th February, 2018 with induction of Sri T.R.C.Bose as Member

During the year under review, no complaints of harassment at the workplace were received by the committee.

ACKNOWLEDGEMENTS

Your Directors place on record their appreciation of the financial assistance and support extended by HDFC and State Bank of India. The Directors thank the shareholders for their continued confidence and trust placed by them with the Company. The Board also thanks all categories of employees of the Company for their dedicated and sincere services.

For and on behalf of the Board

(N.HARI HARA PRASAD) (T.H.SASTRY)
Managing Director Director
DIN : 00354715 DIN : 01786600
Place : Hyderabad,
Date : 30th May, 2018.