Dynamatic Technologies Ltd Directors Report.

TO SHAREHOLDERS

Your Directors are pleased to present their 45th Annual Report together with the Audited Statement of Accounts of Dynamatic Technologies Limited ("Dynamatic Technologies" or "the Company") for the year ended 31st March 2020.

FINANCIAL RESULTS

The Financial Results of the Company for the year ended 31st March 2020, were as follows:

( Rs in Lakhs)

Consolidated

Standalone

Particulars Year Ended 31 March 2020 Year Ended 31 March 2019 Year Ended 31 March 2020 Year Ended 31 March 2019
Continuing Operations:
Net Revenue 132,121 150,030 56,963 59,215
Less: Cost of material and increase/decrease in stock 63,877 76,741 24,494 27,806
Less: Employee benefit expenses 25,027 25,388 8,379 7,247
Less: Other Expenses 24,231 30,377 9,834 10,821
EBITDA* 18,986 17,524 14,256 13,341
EBITDA Margin 14.4% 11.7% 25.0% 22.5%
Add: Other Income 1,304 724 1,636 892
Less: Finance Charges 8,298 7,950 7,026 6,832
Less: Depreciation and Amortisation Expense 9,017 4,925 3,389 1,865
Less: Exceptional item - - 27,108 -
Profit/(Loss) from Continuing Operations before 2,975 5,373 (21,631) 5,536
Tax
Profit/(Loss) before tax margin 2.3% 3.6% (38.0%) 9.3%
Less: Tax expense/ (income) (2,531) 2,257 (2,457) 1,937
Profit/(Loss) after Tax from Continuing Operations 5,506 3,116 (19,174) 3,599
Profit/(Loss) after Tax margin 4.2% 2.1% (33.7%) 6.1%
Discontinued Operations:
Add: Loss from Discontinued Operations (1,600) (369) (1,600) (369)
Add: Other Comprehensive Income/(Loss) 921 (706) (70) 15
Total Comprehensive Income carried to Balance Sheet 4,827 2,041 (20,844) 3,245

*Due to adoption of IND AS 116, effective April 1, 2019, the results for the FY2020 is not comparable with previous year. Adjusted EBITDA for FY2020 decreased by 21.5% to Rs 13,750 lakhs and adjusted EBITDA margin stood at 10.4%.

COMPANY PERFORMANCE

FY2020 was a year of macroeconomic volatility along with geopolitical uncertainty globally. The Indian economy also grew at a slower pace than earlier predicted. There were sluggish conditions across industries and the unprecedented situation caused by COVID-19. Consolidated net sales for FY2020 was Rs 132,121 lakhs, reduced by 12% as compared to Rs 150,030 lakhs in FY2019.

Consolidated EBITDA for FY2020 increased by 8.3% to Rs 18,986 lakhs as compared to Rs 17,524 lakhs during the same period last year driven by facilities ramp up and resource optimization. EBITDA margin for the year under review was 15.1% compared to 11.7% in FY2019. Adjusted EBITDA for FY2020 decreased by 21.5% to Rs 13,750 lakhs and adjusted EBITDA margin stood at 10.4%.

SEGMENT PERFORMANCE

The Aerospace & Defence segment recorded a revenue growth of 6.1% to reach Rs 49,760 lakhs compared to Rs 46,885 lakhs in FY2019. Order book execution and delivery led to this revenue growth in FY2020. Revenue was partially impacted towards the end of the year due to the lockdown and subsequent postponement of deliveries. Segment EBITDA for the year was Rs 15,252 lakhs, while adjusted EBITDA stood at Rs 12,316 lakhs compared with Rs 11,684 lakhs in FY2019. During the year, the Aerospace & Defence segment continued its focus on product innovation and advanced technology platform. Dynamatic Technologies as a single source supplier with Bell Helicopter has seen a significant increase in volume for the Bell 407 model. The Company has also won orders from the Indian Defence Public Sector Undertaking (PSUs) and this is expected to help mitigate the slowdown in the Civil Aviation sector.

Further, conversion of the Aerospace Division into an Export-Oriented Unit (EOU) has contributed to the overall efficiency of this division. This will also result in lower administrative requirement and faster processing for export.

The Hydraulics segment was affected by the global slowdown and the lockdowns that ensued due to the pandemic. Q4 FY2020 was impacted due to the reduction in aftermarket sales and the liquidity crunch that customers faced. Revenue for the year decreased by 18.8% to Rs 29,500 lakhs compared to Rs 36,310 lakhs in the same period last year. EBITDA for FY2020 was Rs 2,286 lakhs and adjusted EBITDA was Rs 1,493 lakhs from Rs 4,155 lakhs last year. Normal monsoon expectations and the increased demand for after sales services is anticipated to drive growth for the Company in the tractor industry. The Company has shifted from outsourcing to in-house production, which will help reduce dependency on third party vendors, increase utilisation levels, minimise wastages and improve cost control efficiencies.

The Automotive and Metallurgy segments top line growth was subdued due to the slowdown in the global and domestic auto industry. However, with a focus on margin expansion, low margin products rationalization continued during FY2020. Revenue for the year was Rs 52,613 lakhs, representing a decrease of 21.3% compared to same period last year. Segment EBITDA was Rs 2,884 lakhs and adjusted EBITDA was Rs 1,370 lakhs compared to Rs 2,509 lakhs in FY2019. Increased shift in production facilities from China to Europe is expected to help improve the Companys product base.

STATE OF THE COMPANYS AFFAIRS

Over the years, Dynamatic Technologies has created its own brand image and has found its niche presence in the industry. Dynamatic Technologies supplies products to the worlds renowned Original Equipment Manufacturers (OEMs) such as Airbus, Boeing, Bell Helicopters, Textron, Hyundai, Daimler, BMW, Honeywell, John Deere and Mahindra & Mahindra. The Company is focused on expanding the size of business with existing customers and expanding its customer base with addition of new customers. However, all our business segments were adversely impacted at different degrees by the global slowdown and the COVID-19 pandemic. To reduce the financial impact of the pandemic, the Company has undertaken various cost control measures including alternative raw material sourcing and renegotiation of vendor contracts. Going forward, we are closely monitoring segments where we operate globally and are taking appropriate steps to minimize the impact on our business. With a strong business foundation, technological excellence and industry recognition for products, we are confident of creating utmost value for all of our stakeholders.

COVID-19 – PANDEMIC

The World Health Organization declared a global pandemic of the Novel Coronavirus disease (COVID-19) on 11th February 2020, and the pandemic developed rapidly into a global crisis, forcing governments to enforce lockdowns on all economic activities. The focus of your Company immediately shifted to ensuring the health and well-being of its employees. Continuous communication on the latest updates played a key role in enabling our employees to stay on top of the evolving situation.

As a responsible member of the communities that it operates in, the Company has contributed to various COVID-19 relief and monitoring programs within the locality where it operates Viz. Supply of Sanitisers, Face Masks, Personal Protective Equipment (PPE) and Supply of Food. Apart from this, the Company took proactive measures and held awareness programmes through handouts and posters deployed across the Company/Supply chain, residential areas, schools and in our workers native places. The Company also conducted street plays and town hall meetings with adequate social distancing measures in early March 2020. As a part of business continuity plan, your Company through approved labs is regularly conducting diagnostic testing of its employees for COVID-19, before being inducted into the work place and these tests are being repeated on a monthly basis to ensure our offices and training centers are safe to operate. During the COVID-19 pandemic, your Companys Defence and Aerospace operations was categorised as essential industries by the Principle Secretary to Government, Commerce and Industries Department, Government of Karnataka, and was allowed to function with minimal capacity subject to following safety measures and guidelines laid out by the Ministry of Home affairs and the State Government. Wherever feasible, our teams reacted with speed and efficiency, and quickly leveraged technology to shift the workforce to a ‘work-from-home model thus ensuring client commitments were not materially compromised.

DIVIDEND

The Board of Directors of your Company, after considering holistically the relevant circumstances and keeping in view the current economic conditions has decided that it would be prudent, not to recommend any dividend for the year under review.

SHARE CAPITAL

As at 31st March 2020, the Company had an authorized share capital of Rs 2,500 lakhs, divided into 2,00,00,000 equity shares of Rs 10/- each and Rs 500 lakhs divided into 5,00,000 redeemable cumulative preference shares of Rs 100/- each. During the year under review, there is no change in the Companys issued, subscribed and paid-up equity share capital. As at 31st March 2020, the Company had issued, subscribed and paid-up equity share capital of Rs 634.14 lakhs divided into 63,41,443 equity shares of Rs 10/- each.

TRANSFER TO RESERVES

During the year under review, the Board of Directors do not propose to transfer any amount to General Reserve.

CAPITAL EXPENDITURE

During the year under review, the Company incurred capital expenditure of Rs 5,666 lakhs for physical infrastructure and Rs 139 lakhs for procurement of intangible assets. Significant investments have been made in building infrastructure, state-of-the-art machinery, design software, data security, information systems, and design and development activities, for the future benefits of the Company.

CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements prepared by the Company is in accordance with the applicable Indian Accounting Standards issued by the Institute of Chartered Accountants of India, form part of the Annual Report.

SUBSIDIARIES

The Company has ten subsidiaries. The structure of Dynamatic Technologies Limited and its subsidiaries as on 31st March 2020, is appended hereunder

INDIAN SUBSIDIARIES

JKM Research Farm Limited, India (JRFL) is a wholly owned subsidiary of the Company. It continues to be the Research & Development facilitator to the Company. It operates a unique facility for testing and analysing complete tractor aggregates and systems.

JKM Erla Automotive Limited, India (JEAL) continues to be a wholly owned subsidiary of the Company and is a non-operating company.

JKM Ferrotech Limited, India (JFTL) is engaged in the manufacturing of ferrous alloy and castings, having its operations in Gummidipoondi, Tamil Nadu. This subsidiary has expertise in producing High Si-Mo automotive components and is certified to the highest quality standards specified by the automotive industry. The expertise in producing intricately shaped castings as well as the skill in handling ferrous alloys, particularly High Si-Mo and Ni-Resis makes JFTL a strong development partner for prototypes in ferrous alloy castings.

On 11th February 2020, the members of JFTL (WOS) , subject to confirmation by National Company Law Tribunal, Bengaluru Branch ("NCLT"), has approved a capital reduction resolution under section 66 of Companies Act, 2013 ("Act") and is awaiting confirmation from NCLT. JKM Automotive Limited (JAL) is a wholly owned subsidiary of JEAL.

OVERSEAS WHOLLY OWNED SUBSIDIARIES

JKM Global Pte. Limited, Singapore, continues to be an investment hub for overseas businesses.

Dynamatic Limited, Swindon, UK, (DLUK) is a wholly owned subsidiary and held through JKM Global Pte. Limited, Singapore.

Yew Tree Investments Limited, Bristol, UK is a wholly owned subsidiary of Dynamatic Limited, UK.

Originally Yew Tree Investments Limited and Dynamatic Limited are the subsidiaries of JKM Global Pte. Limited. Post merger, DLUK has its Hydraulics unit in Swindon and its Aerospace unit, Dynamatic-Oldland Aerospace in Bristol and Swindon.

Dynamatic Hydraulics, a division of DLUK located in Swindon, UK, produces high performance engineered hydraulic products. The plant has over 50 years of experience in gear pump design and manufactures and caters to agriculture, construction and highway vehicle manufacturers. Products include combined variable and fixed displacement pump packages, temperature controlled fan drive systems and fixed displacement pumps in aluminium and cast iron with a range of additional integrated valve options.

Dynamatic-Oldland Aerospace, a division of Dynamatic Limited UK, is located in Bristol and Swindon, and is a leader in Aeronautical Precision Engineering and is currently working on components for most of the Airbus family of aircraft. Dynamatic LLC, US is a subsidiary of Dynamatic Limited, UK.

JKM Erla Holdings GmbH, Germany (JKM Erla) is engaged in the business of setting up automotive components processing/manufacturing units.

Eisenwerk Erla GmbH, Germany (Eisenwerk) became a subsidiary of the Company, subsequent to its holding company, JKM Erla, becoming a subsidiary of the Company. Eisenwerk has been in business for over 630 years and is a preferred supplier to leading global OEMs including Audi, BMW and Volkswagen. The manufacturing capabilities of this subsidiary include high precision, machining of complex metallurgical products for automotive engines and turbochargers.

PERFORMANCE OF SUBSDIARIES

Pursuant to the provisions of Section 129(3) of the Act, a statement containing the salient features of financial statements of the Companys subsidiaries in Form No. AOC-1 is attached to the financial statements of the Company as

Annexure-1.

There are no associate or joint venture companies within the meaning of Section 2(6) of the Act . There has been no material change in the nature of the business of the subsidiaries.

Further, pursuant to the provisions of Section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited financial statements in respect of subsidiaries, are available on the website of the Company

(https://www.dynamatics.com).

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the section 134 (5) of the Act, the Board of Directors, to the best of knowledge and belief and according to the information and explanations obtained by them, hereby 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 are adequate and operating effectively. Based on the framework of internal financial controls and compliance systems established and maintained by the Company, the work performed by the internal, statutory and secretarial auditors and external consultants, including the audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by management and the relevant board committees, including the audit committee, the Board is of the opinion that the Companys internal financial controls were adequate and effective during FY2020.

DISCLOSURE ON COMPLIANCE WITH SECRETARIAL STANDARDS

Your Directors confirm that the Secretarial Standards issued by the Institute of Company Secretaries of India, have been complied with.

DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP)

Inductions, Re-appointments, Retirements & Resignations

Based on performance evaluation and recommendation of Nomination and Remuneration Committee, the Board of Directors at their Meeting held on 11th February 2020, approved the re-appointment of Mr. Udayant Malhoutra (DIN: 00053714), CEO & MD, Mr. P S Ramesh (DIN: 05205364) and Mr. Arvind Mishra (DIN: 07892275), Executive Directors and (hereafter called as "Directors") for a period of 3 years. A resolution seeking shareholders approval for their reappointment forms part of the notice.

Pursuant to the provision of Section 152 of the Act, Mr. PS Ramesh (DIN 05205364), Executive Director of the Company retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. A resolution seeking shareholders approval for his re-appointment forms part of the Notice. The Board recommends his re-appointment. During the year, Mr. Nalini Ranjan Mohanty ceased to be the Director with effect from 14th August 2019, upon completion of his term as Independent Director. The Board places on record its appreciation for his invaluable contributions and guidance.

Pursuant to the provisions of Section 149 of the Act, the independent directors have submitted declarations that each of them meet the criteria of independence as provided in Section 149(6) of the Act along with Rules framed thereunder and Regulation 16(1)(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘the SEBI Listing Regulations). There has been no change in the circumstances affecting their status as independent directors of the Company.

During the year under review, the non-executive directors of the Company had no pecuniary relationship or transactions with the Company other than reimbursement of expenses incurred by them for the purpose of attending meetings of the Board / Committee of the Company. The independent Directors had no pecuniary relationship or transactions with the Company, other than sitting fee and reimbursement of expenses incurred by them for the purpose of attending meetings of the Board / Committee of the Company None of the Directors of the Company are disqualified from being appointed as Directors as specified under Section 164 of the Act.

Pursuant to the provisions of Section 203 of the Act, the Key Managerial Personnel of the Company as on 31st March 2020, are:

Mr. Udayant Malhoutra, CEO & Managing Director

Mr. P S Ramesh, Executive Director, Group Technical Services and Human Resources

Mr. Arvind Mishra, Executive Director, Global COO Hydraulics and Head of Homeland Security

Mr. Chalapathi P, Chief Financial Officer

Mr. Shivaram V, Head Legal, Compliance & Company Secretary.

Declaration by Independent Directors

All the Independent Directors of the Company have provided their declarations to the Company under Section 149(7) of the Act that they meet the criteria of independence as provided under Section 149(6) of the Act and Regulation 16(1)(b) of the SEBI Listing Regulations. In the opinion of the Board, they fulfil the conditions of independence as specified in the Act and the Listing Regulations and are independent of the management.

BOARD MEETINGS

Four meetings of the Board were held during the year under review. For details of meetings of the Board, please refer to the Corporate Governance Report, which is a part of this report

COMMITTEES OF BOARD OF DIRECTORS

The Board has seven committees:

1. Audit and Risk Management Committee,

2. Nomination and Remuneration Committee,

3. Stakeholders Relationship Committee,

4. Technology & Strategy Development Committee,

5. Finance Committee,

6. Corporate Social Responsibility Committee and

7. Independent Directors Committee.

Details of all the Committees of Board of Directors as per the Secretarial Standard - 1, as issued by the Institute of Company Secretaries of India have been disclosed in the Corporate Governance Report. The Board has accepted the recommendations made by the Committees of Board of Directors during the year under review, with no instances where recommendations of the Audit Committee were not accepted by the Board.

REMUNERATION POLICY

The philosophy for remuneration of directors, Key Managerial Personnel and all other employees of the Company is based on the commitment of fostering a culture of leadership with trust. Dynamatic Technologies believes in providing an opportunity that is strongly linked to and constantly reinforces the performance culture of the Company. Dynamatic Technologies has laid down remuneration policy in line with globally accepted governance practices. The remuneration policy is designed with the objective to attract, motivate, retain human capital and improve productivity by creating a congenial work environment, encouraging initiative, personal growth and teamwork while simultaneously offering appropriate remuneration packages. The remuneration policy is also market-led and takes into account the competitive circumstance of each business so as to attract and retain quality talent and leverage performance significantly. Remuneration Policy is annexed as Annexure 2.

Members can download the complete remuneration policy on the Companys website (www.dynamatics.com/investor. html).

DIVERSITY IN THE BOARD

In line with the core strategy, the Company understands the importance of maintaining board diversity. Ensuring optimal mix of varied perspectives, skills, expertise, industry experience, age, gender, race, ethnicity and cultural background is critical to foster innovation and helps us to retain our competitive advantage. The Board has adopted the policy on appointment, continuation and cessation of Directors which sets out the approach to diversity in the composition of the Board. The Company has an optimum mix of executive and non-executive independent directors and woman director.

FAMILIARIZATION PROGRAMME FOR THE INDEPENDENT DIRECTORS

An appropriate induction for new directors and ongoing training for all directors ensure high corporate governance in the Company. Dynamatic Technologies conducts an induction programme for every new independent director. The induction program has been developed with the objective to provide them with comprehensive understanding about the Company, its businesses, markets and the regulatory environment in which it operates. The programme also aims to familiarize the independent directors with the management and its operations to gain a clear understanding of their roles and responsibilities and contribute significantly towards the growth of the Company. They have full opportunity to interact with Senior Management Personnel and are provided all the documents required and sought by them to enhance their understanding as mentioned above. Dynamatic Technologies firmly believes that a Board, which is well informed / familiarised with the Company, can contribute significantly to effectively discharge its role of trusteeship in a manner that fulfils stakeholders expectations. In pursuit of this objective, the Directors are updated on a continuous basis on developments in the corporate and industry scenario, including those pertaining to the regulatory and economic environment, to enable them to take well informed and timely decisions. The details of the familiarisation programme are uploaded on the Companys corporate website (www. dynamatics.com/investor.html).

CRITERIA FOR DETERMINING QUALIFICATIONS, POSITIVE ATTRIBUTES, AND INDEPENDENCE OF A DIRECTOR

In terms of the provisions of Section 178(3) of the Act and Regulation 19 of the SEBI Listing Regulations, the Nomination & Remuneration Committee has formulated the criteria for determining qualifications, positive attributes and independence of Directors, the key features of which are as follows: a. Qualifications The Board nomination process encourages diversity of thought, experience, knowledge, age and gender. It also ensures that the Board has an appropriate blend of functional and industry expertise. b. Positive Attributes - Apart from the duties of Directors as prescribed in the Act, the Directors are expected to demonstrate high standards of ethical behaviour, communication skills and independent judgment. The Directors are also expected to abide by the respective Code of Conduct as applicable to them. c. Independence - A Director will be considered independent if he / she meets the criteria laid down in Section 149(6) of the Act and Regulation 16(1)(b) of the SEBI Listing Regulations.

PERFORMANCE EVALUATION OF THE BOARD, ITS COMMITTEES AND INDIVIDUAL DIRECTORS

The Board of Directors has carried out an annual evaluation of its own performance, board committees and individual directors pursuant to the provisions of the Act and SEBI Listing Regulations. The Evaluation was based on the criteria and framework adopted by the Board. The performance also included inputs from all the directors on the basis of criteria such as the board composition and structure, effectiveness of board processes, information, functioning, etc. The performance of the committees was evaluated by the board after seeking inputs from the committee members based on criteria such as the composition of committees, effectiveness of committee meetings, etc. The above criteria are broadly based on the Guidance Note on Board Evaluation issued by the Securities and Exchange Board of India on 5th January 2017. In a separate meeting of independent directors, performance of non-independent directors, the Board as a whole and the Chairman of the Company was evaluated, considering the views of executive directors and non-executive directors. The Board and the Nomination and Remuneration Committee reviewed the performance of individual directors on the basis of criteria such as the contribution of the individual director to the board and committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc. At the board meeting that followed the meeting of the independent directors and meeting of Nomination and Remuneration Committee, the performance of the Board, its Committees, and individual directors was also discussed. Performance Evaluation of Independent Directors was done by the entire Board, excluding the independent director being evaluated.

INTERNAL CONTROLS SYSTEMS AND THEIR ADEQUACY

According to Section 134(5)(e) of the Act, the term Internal Financial Control (IFC) means the policies and procedures adopted by a company for ensuring the orderly and efficient conduct of its business, including adherence to the companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information and disclosures. The Company has ensured that adequate systems for internal control commensurate with its size and complexity are in place. These systems and controls ensures that all assets are safeguarded and protected and that the transactions are authorized, recorded and reported correctly. In addition, the Company has also ensured that adequate checks and balances are in place to determine the accuracy and reliability of accounting data. All the related processes are properly documented and appropriate steps are undertaken to ensure adherence to the internal control systems. Roles and responsibility of various stakeholders involved in the process is clearly demarcated. The Internal Auditors independently evaluate the adequacy of internal controls and concurrently audit majority of the transactions in value terms. Independence of the audit and compliance is ensured by direct reporting to the Audit & Risk Management Committee of the Board. A CEO and CFO Certificate, forming part of the Corporate Governance Report, further confirms the existence and effectiveness of internal controls and reiterates their responsibilities to report deficiencies to the Audit & Risk Management Committee and rectify the same. During the year, such controls were tested and no reportable material weaknesses in the design or operation were observed.

REPORTING OF FRAUDS

There was no instance of fraud during the year under review, which required the Statutory Auditors to report to the Audit Committee and / or Board under Section 143(12) of the Act and the rules made thereunder.

QUALIFICATIONS IN AUDIT REPORTS

Explanations or comments made by the Board on every qualification, reservation or adverse remark or disclaimer made: a. by the Statutory Auditor in his report: There are no qualifications, reservations or adverse remarks reported by M/s. Deloitte Haskins & Sells., LLP, (ICAI Firm Registration No. 117366W/W-100018) Statutory Auditors in their report for the year under review. b. by the Company Secretary in Practice in his Secretarial Audit Report; M/s. Ratish Tagde & Associates, Company Secretary in practice, has made no qualifications or reservations or adverse remark in the secretarial audit report. The observations of the Secretarial Auditor provided in the report are self-explanatory.

TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND a) Transfer of Unclaimed Dividend to Investor Education and Protection Fund (IEPF)

Particulars of Dividend remaining unclaimed in terms of Section124(5) of the Act, amounts transferred to the Unpaid Dividend Account of the Company, which remain unpaid or unclaimed for a period of seven years from the date of such transfer, shall be transferred by the Company to the IEPF established by the Central Government along with the underlying shares.

The details pertaining to the transfers is forming part of the Corporate Governance Report which is annexed to this report.

b) Transfer of Shares to IEPF

As required under Section 124(6) of the Act, Equity Shares in respect of which dividend has not been claimed by the members for seven consecutive years or more, have been transferred by the Company to the IEPF Authority during the financial year 2019-20. Details of shares transferred have been uploaded on the website of IEPF as well as the Company.

c) Demat Suspense Account Unclaimed Shares

As on 31st March 2020, there are 11 members, holding 851 Equity Shares of Rs 10/- each, lying in the escrow account due to non-availability of their correct particulars. A detailed note in this regard is provided in the Corporate Governance Section under "Suspense Account for the unclaimed shares". The voting rights on these shares shall remain frozen till the rightful owner of such shares claims the shares.

RELATED PARTY TRANSACTIONS

All Related Party Transactions during the FY2020 were executed at arms length basis and in the ordinary course of business. These transactions were in compliance with the applicable provisions of the Act and the SEBI Listing Regulations.

During the year, there were no materially significant Related Party Transactions undertaken by the Company which required shareholder approval under the SEBI Listing Regulations. All Related Party Transactions are placed before the Audit Committee for approval. Additionally, prior omnibus approval of the Audit Committee is obtained for the transactions which are repetitive in nature. A statement of all Related Party Transactions is placed before the Audit Committee for its review on a quarterly basis, specifying the nature, value and other terms and conditions of the transactions.

The Related Party Transactions Policy adopted by the Company, as approved by the Board, is uploaded on the Companys website. Details of transactions were required to be reported in Form AOC-2 is annexed as Annexure 3.

CORPORATE GOVERNANCE

The Company has a legacy of maintaining highest standards of Corporate Governance practices. This has been achieved as the basic DNA of the Company and is based on the philosophy that effective Corporate Governance practices provides a strong and stable foundation for a successful enterprise. The Company always emphasizes on ensuring integrity and transparency in all its dealings which is always critical to retain the trust of all stakeholders. The core values of the Companys Corporate Governance system comprises of independence, transparency, accountability, responsibility, compliance, ethics, values and trust. We believe that our Corporate Governance practices will enable us to efficiently and ethically execute business operations and enhance shareholders wealth sustainably for all our stakeholders. Dynamatic Technologies is committed to maintaining the best standards of Corporate Governance and proactively adopts ethical and transparent governance practices even before they are mandated by law. The Company has always strived towards building trust with shareholders, employees, customers, suppliers and other stakeholders based on the principles of good corporate governance including transparency and integrity. Strong leadership and best-in-class corporate governance practices are considered one of the major strengths of the Company.

The Company is in compliance with all the applicable provisions of Corporate Governance as stipulated under Chapter IV of the SEBI Listing Regulations. A detailed report on Corporate Governance, pursuant to the requirements of the SEBI Listing Regulations, forms part of the Annual Report. M/s. Ratish Tagde & Associates, Company Secretary in Practice, had conducted the Corporate Governance audit for the year under review. A certificate from M/s. Ratish Tagde & Associates, regarding compliance of conditions of Corporate Governance as stipulated under SEBI Listing Regulations is presented in a separate section forming part of this Annual Report.

AUDITORS Statutory Auditors

Under Section 139 of the Act and the Rules made thereunder, it is mandatory to rotate the statutory auditors on completion of the maximum term permitted under the said section. In line with the requirements of the Act, M/s. Deloitte Haskins & Sells., LLP, (ICAI Firm Registration No. 117366W/W-100018) are the Statutory Auditors of the Company for a period of five years from the conclusion of 44th Annual General Meeting until the conclusion of 49th Annual General Meeting.

The report of the Statutory Auditors along with notes to Schedules is enclosed to this report. The observations made in the Auditors Report are self-explanatory and therefore do not call for any further comments. The Auditors Report does not contain any qualification, reservation or adverse remark.

Cost Auditors

As per Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014, as amended from time to time, the Company is required to have its cost records audited by a Cost Accountant in practice. The Board of Directors, based on the recommendation of the Audit Committee, had appointed M/s. Rao, Murthy & Associates, Cost Accountants, as Cost Auditor of the Company for conducting the Cost Audit for the FY2021, to conduct cost audits pertaining to relevant products prescribed under the Companies (Cost Records and Audit) Rules, 2014 as amended from time to time. The Members are hereby requested to ratify the remuneration payable to Cost Auditors for the FY2021.

Internal Auditors

The Internal Audit function is responsible for assisting the Audit & Risk Management Committee on an independent basis with a full status of the risk assessments and management. M/s. KPMG Assurance and Consulting Services LLP., were appointed as Internal Auditors of the Company for the FY2020.

Secretarial Auditor

The Company had appointed M/s. Ratish Tagde & Associates, Company Secretary in practice, to conduct its Secretarial Audit for the financial year ended 31st March 2020. The Secretarial Auditors have submitted their report, confirming compliance by the Company of all the provisions of the applicable corporate laws. The Report does not contain any qualification, reservation or adverse remark. The Secretarial Audit Report is annexed as Annexure 4 to this report.

Tax Auditors

M/s. BVS & Associates, Chartered Accountants, are the Tax Auditors of the Company for the FY 2020.

RISK MANAGEMENT POLICY

At Dynamatic Technologies, Risk management is a part of the Business DNA which aids the management adopt an integrated approach to managing current and emerging threats. It plays a key role in business strategy and planning discussions at Dynamatic Technologies setting the boundaries for Group level risk taking within the framework of Companys risk appetite Dynamatic Technologies has a robust process in place to identify key risks across the Company and prioritises relevant action plans to mitigate all the risks that the organization faces such as strategic, financial, liquidity, security, regulatory, legal, reputational and other risks that have been identified and assessed to ensure that there is sound Risk Management Policy in place to address such concern/risk. Our aim is to help reinforce our resilience by encouraging a holistic approach to the management of risk and return throughout our organization as well as the effective management of our risk, capital and reputational profile. The Audit & Risk Management Committee has been entrusted with the responsibility of assisting the Board members with risk assessment and its minimization procedures, which includes discussing the management submissions on risks, prioritizing key risks and approving action plans to mitigate such risks. The Company has a Risk Management Policy in place which enables framing an appropriate action for the key risks identified, so as to make sure that risks are adequately compensated or mitigated in the designated response time. The main objectives of the said policy include:

i. To ensure that all the current and future material risk exposures of Dynamatic Technologies are identified, assessed, quantified, appropriately mitigated and managed;

ii. To establish a framework for Dynamatic Technologies risk management process and to ensure company-wide implementation;

iii. To ensure systematic and uniform assessment of risks related with each of the units of Dynamatic Technologies;

iv. To enable compliance with appropriate regulations, wherever applicable, through the adoption of best practices; and

v. To assure business growth with financial stability. The said policy has been uploaded on Companys website (www.dynamatics.com/investor.html).

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Loans, guarantees and investments covered under 186 of the Act form part of the notes to the financial statements provided in this Annual Report.

DEPOSITS

During the year under review, the Company has neither accepted nor renewed any deposits from the public and, as such, no amount of principal or interest was outstanding as on the Balance Sheet date within the meaning of Section 73 of the Act and the Companies (Acceptance of Deposits) Rules, 2014.

HUMAN RESOURCES & DEVELOPMENT

Dynamatic Technologies believes that human resources are the backbone for the overall growth of the organization and identifying, upgrading of talent & competence of employees is a must. The Human Resources function is to foresee the changes likely to happen in the industry and prepare the employees capabilities accordingly. Multiskilling, ability to keep pace with the demands of the digital world, continuously changing diverse labour laws and social scenarios, are kept in mind while steering the human resources. The human resources should remain vibrant and flexible to adopt to challenging times. Dynamatic Technologies undertakes the best possible efforts to not only maintain cordial relationships with the employees but also to create an equitable, just and harmonious work environment conducive to their personal and professional development. Dynamatic Technologies has put in place a customised software to capture attendance of employees and assist carrying out payroll activity completely in a digital format. This software addresses all HR modules from recruitment to separation, thus eliminating human intervention and subjectivity. Data pertaining to employees is kept safe and protected in digital form. All communications to employees, both blue collar and white collar are made through this platform. As employees can access this system remotely, communication has been more effective.

The Companys focus has always been to acquire, nurture and develop the best talent to prepare them for leadership roles within the organization. There are various ongoing exercises being undertaken to enhance the skills of employees through constant training and learning initiatives. Human Resources team organises sensitization programs and encourage communication to ensure an organizational culture that always provides for a fair and safe working environment for all the employees. The Company has an excellent track record of cordial and harmonious industrial relations and over the years not a single man-day has been lost on account of labour unrest.

CORPORATE SOCIAL RESPONSIBILTY (CSR)

Your Company has a Policy on Corporate Social Responsibility which has been posted on the website of the Company at www.dynamatics.com. Pursuant to the provisions of section 135 and other applicable provisions of the Act read with applicable rules, the company has undertaken various initiatives during the FY2020 as follows:

Your company focuses its CSR activities on three thematic areas - Equip, Empower and Enrich. Under Empower theme, Dynamatic Technologies engages with "Directorate of Employment & Training, Government of Karnataka" for supporting ITI as a centre for excellence for skill development and vocational training. This ITI is being supported with provision of equipment for laboratories, volunteering of employees for training sessions, developing training modules and enrolling women students who belong to rural community alongwith students from underprivileged backgrounds.

Dynamatic Technologies has strengthened its objectives of CSR and through its Skill Development Initiative Team, has been imparting skills to trainees with ITI / Diploma background and in serving workers from Aerospace Industry, who volunteer to enhance their skill levels. The Dynamatic Skill Initiative Team has developed curriculum for systematically training the ITI passed students, both in theory subjects and on the practical aspects of aircraft structural assembly work which serves as the basis for the 3 months long bridge course. Dynamatic Technologies had two such batches completing their course successfully during this year and the passed out trainees have been employed in various aerospace industries in and around Bangalore. This curriculum has been widely appreciated and is now approved as Two years long Trade (aerospace fitters trade) in Govt. ITIs all over the country. The course addresses the technical skills in operations such as sheet metal forming, material handling, drilling, riveting, painting and NDT etc.

Affiliation application has been filed by IMC for course on AEROSPACE STRUCTURAL AND EQUIPMENT FITTER under CTS Course. Proposal is sent to DET and DGET for consideration.

The Aerospace Skill Development Centre which has been established with all necessary infrastructure to train the trainees in aerospace subjects under Institute Management committee, has further come up with two CNC program courses this year, one is in turning and other is in milling. CNC machines are in place at the ITI facility and necessary cutting tools and raw material for practicing on the machines have been provided by Dynamatic Technologies. Classes for fresh batch of trainees are being conducted in these trades and at the same time, the ITI students in the existing trades are also trained in technical and certain soft skills.

The Senior ITI Machinist trainees and also ITI faculty were trained on CNC programming both in theory and in practical subjects. An existing seminar hall at Government Industrial Training Institute has been converted in to fully equipped hall for conducting classes to regular ITI trainees. This seminar hall was inaugurated by Dr. Udayant Malhouthra, CEO & Managing Director, Dynamatic Technologies together with Mr. Vaijagonda, Joint Director, Department of Industrial Training and Employment, on 30th October 2019.

CNC OPERATOR-TURNING A Level 3 Course which is registered under Chief Ministers Kaushalya Karnataka Yojane (CMKKY) in Department of Skill Development and Entrepreneurship and Livelihood, was also started during this year in the ITI. The Annual Report on CSR activities in terms of the requirements of Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed as Annexure-5, which forms part of this Report.

EXTRACT OF THE ANNUAL RETURN

Pursuant to the provisions of section 92(3) of the Act and rule 12(1) of the Companies (Management and Administration) Rules, 2014, the extract of Annual Return in the prescribed Form MGT-9 is annexed herewith as Annexure-6 , which forms part of this Report.

POLICY ON PREVENTION, PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT AT WORK PLACE

The Company has zero tolerance for sexual harassment at workplace and has adopted a Policy on Prevention, Prohibition and Redressal of Sexual Harassment at Workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules made thereunder. The Policy aims to provide protection to employees at workplace and prevent and redress complaints of sexual harassment and for matters connected or incidental thereto, with the objective of providing a safe working environment, where employees feel secure.

Policy for Safety and Well Being of Women

An awareness program on Prevention of Sexual Harassment at the Work Place was conducted by a team from SASHA (Support against Sexual Harassment) to ensure a safe, secure, friendly and respectful work-environment to all employees. SASHA assists workplaces in the effective implementation of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013. The Company strives to create a safe, friendly and inclusive work environment for its employees and we are proud to state that there have been no complaints regarding harassment at the workplace. Further, the Company has a fully functional Creche at the Aerospace Division. The facility is maintained by an efficient team of caretakers and equipped with amenities like a kitchen, rest room and kids play area. The facility is open to all the employees children and is also monitored under CCTV for safety.

Womens Day celebrations this year included a chat with CEO. On this occasion, women employees had an open house with the CEO & Managing Director and shared experiences of working at Dynamatic Technologies. All the women employees of the Hydraulics and Aerospace Divisions participated and were excited about meeting with CEO & MD. Women employees were also given a day off for a company sponsored trip to a Resort.

The HR team has more women in your company than men proving the point that the company has the mandate to increase the women employees in all its functions and improve the gender ratio.

WHISTLE BLOWER POLICY AND VIGIL MECHANISM

The Company has adopted a Vigil Mechanism Policy through which all stakeholders including Directors and Employees may report unethical behaviour, malpractices, actual or suspected fraud, wrongful conduct and violation of the Companys code of conduct without fear of reprisal. Details of complaints received, and the action taken are reviewed by the Audit & Risk Management Committee.

During the year under review, the Company / Committee has not received any such complaint. The functioning of the vigil mechanism is reviewed by the Audit & Risk Management committee from time to time.

This Policy provides for adequate safeguards against victimization of employees who avail of this mechanism. The Policy also provides for direct access to the Chairman of the Audit Committee in order to best manage such events and to enable integrity of information. It is affirmed that no personnel of the Company will be denied access to the Audit Committee. The policy on vigil mechanism may be accessed on the Companys website (https://www.dynamatics. com/investor.html)

PARTICULARS OF REMUNERATION OF DIRECTORS, KMP AND EMPLOYEES

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules is attached which forms part of this report. Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as Annexure-7 , which forms part of this report.

ENVIRONMENTAL PROTECTION MEASURES

The Company continuously strives to reduce its environmental footprint, while enhancing livelihood of people across the product value chain. In view of this objective, the Company has adopted several measures for improvement in the field of environment, safety and health. Measures like standard operating procedures, training programmes for all levels of employees regarding resource conservation, environment protection and housekeeping have been conducted. Sustainable living is a part of long-term business strategy of the Company.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO

The information relating to conservation of energy, technology absorption, Research & Development and Foreign Currency is appended as Annexure-8.

OTHER DISCLOSURES

Events Subsequent to the Date of the Financial Statements

There have been no material changes / commitments affecting the financial performance of the Company which occurred between the end of the Financial Year of the Company to which the Financial Statements relate and the date of this Report.

Change in the Nature of Business, if any

The Company continues to focus on its key business segments and looks for selective growth / expansion opportunities. There was no change in the nature of business during the year under review. State of the affairs of the Company and future plan of action and outlook is discussed in this report.

In the fight against the pandemic and in the larger public interest, your Company wishes to support the Government of India by stepping up to the challenge and serve the country in developing and manufacturing indigenous medical equipment that are most affordable and critical for rural primary health centers. One such Make in India initiative by the team of engineers of your Company, under the guidance of renowned medical doctors, scientists and various design experts, is developing and manufacturing disposable mechanical resuscitators / ventilators that do not require electricity to function and can control oxygen mix for a controlled breathing system that are critical for treatment COVID-19 patients.

Significant & Material Orders Passed by the Regulators

During the year under review, no significant / material orders were passed by the regulators or the Courts or the Tribunals impacting the going concern status and the Companys operations in future.

Partnerships and Collaborations

In February 2020, the Company signed a strategic collaboration agreement with Hindustan Aeronautics Limited (HAL) and Israel Aerospace Industries (IAI). This partnership between HAL, IAI and Dynamatic Technologies is first in the country to manufacture IAI-designed unmanned aerial vehicles (UAVs). This collaboration will enhance technology sharing and business partnership between India and Israel.

Credit Rating

During the year under review, the Companys debt facilities were rated by India Ratings and Research. The instrument wise ratings are as below:

Instrument Type Rating / Outlook Rating Action
Fund based working capital limits IND BBB+/ Positive/IND A2+ Affirmed; Outlook revised to Positive from Stable
Non-fund-based working capital limits IND A2+ Affirmed
Term Loan IND BBB+/Posi- tive Affirmed;
Outlook revised to Positive from Stable

Change of name of Registrar and Transfer Agent (RTA) of the Company

The Company was informed by its RTA namely KFin Technologies Private Limited (erstwhile Karvy Fintech Private Limited) about change of its name to KFin Technologies Private Limited w.e.f. 5th December 2019.

Listing with Stock Exchanges

The Company confirms that it has paid the Annual Listing Fees for the year FY2020 to NSE (DYNAMATECH) and BSE (505242) where the Companys Shares are listed.

Managements Discussion & Analysis Report

Pursuant to regulations 34 of the SEBI Listing Regulations, Managements Discussion & Analysis Report for the year is presented in a separate section forming part of the Annual Report.

Business Responsibility Report

As required under Regulation 34 of the SEBI Listing Regulations, the Business Responsibility Report is provided in a separate section and forms part of the Annual Report.

Promoters

The list of the promoters is disclosed for the purpose of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

Mr. Udayant Malhoutra is the promoter of the Company within the definition of ‘Promoter for the purpose of regulations 2(1)(s) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

Details of the promoter group are appended as under:

No. Name of the entity / person
1. JKM Holdings Private Limited
2. Udayant Malhoutra and Company Private Limited
3. JKM Offshore India Private Limited
4. Wavell Investments Private Limited
5. Mrs. Barota Malhoutra
6. Vita Private Limited
7. Christine Hoden (India) Private Limited
8. Pramilla Sanitary Products Private Limited
9. Greenearth Biotechnologies Limited

ACKNOWLEDGMENTS

The Board of Directors would like to express their sincere gratitude and appreciation to the investors, financial institutions and banks for their continued support during the year. The Directors would like to thank the regulatory authorities and government authorities and agencies for their continued guidance and co-operation. The Directors also wish to place on record their deep sense of appreciation to executives and employees at all levels for their hard work, dedication and commitment to the Company. Their enthusiasm and efforts have enabled the Company to be at the forefront of the industry.

The Board would also like to take this opportunity to thank all the Companys customers without whom our success story would not have been possible.

For and on behalf of the Board of Directors

UDAYANT MALHOUTRA P S RAMESH
CEO & Managing Director ED Group Technical Services & HR
DIN : 00053714 DIN : 05205364
Place: Bengaluru
Date: 3rd July 2020