Dynamatic Technologies Ltd Directors Report.

TO SHAREHOLDERS

Your Directors are pleased to present their 47th Annual Report together with the Audited Statement of Accounts of the Company for the year ended 31st March 2022.

FINANCIAL RESULTS:

The Financial Results of the Company for the year ended 31st March 2022, were as follows:

(Rs in Lakhs)

Particulars Consolidated Standalone
Year Ended 31 March 2022 Year Ended 31 March 2021 Year Ended 31 March 2022 Year Ended 31 March 2021
Continuing Operations:
Revenue from Operation 1,25,337 1,11,820 54,897 51,374
Less: Cost of material and increase/decrease in stock 61,504 55,011 25,042 22,850
Less: Employee benefit expenses 25,604 22,147 9,130 8,008
Less: Other Expenses 21,306 19,761 8,787 8,262
EBITDA 16,923 14,901 11,938 12,254
EBITDA Margin 13.5% 13.3% 21.75% 23.85%
Add: Other Income 822 607 1,124 440
Less: Finance Charges 5,901 6,999 4,734 5,776
Less: Depreciation and Amortisation Expense 7,682 7,754 3,032 3,191
Profit from Continuing Operations before Tax 4,162 755 5,296 3,727
Profit before tax margin 3.32% 0.68% 9.65% 7.25%
Less: Tax expense 956 557 1,331 902
Profit after Tax from Continuing Operations 3,206 198 3,965 2,825
Profit after Tax margin 2.56% 0.18% 7.22% 5.50%
Discontinued Operations:
Add: Loss from Discontinued Operations (1,659) (2,385) - -
Add: Other Comprehensive Income/(Losses) (282) 2,057 (201) 184
Total comprehensive income, carried to Balance Sheet 1,265 (130) 3,764 3,009

Note: Previous year numbers were restated as appropriately to make these comparable to FY 2022 numbers.

COMPANY PERFORMANCE:

Despite global supply chain disruption and increasing inflationary pressure on commodity prices due to prevailing geopolitical conditions, Dynamatic Technologies Limited (Dynamatic Technologies or DTL or The Company) has reported strong business performance in FY2022. Consolidated net sales for FY2022 was Rs. 1,25,337 lakhs, increased by 12% as compared to Rs. 1,11,820 lakhs in FY2021. The top line growth was driven by better product mix and inventory management. Consolidated EBITDA for FY2022 was reported as Rs. 16,923 lakhs as compared to Rs. 14,901 lakhs during FY2021. EBITDA margin for the year under review was 13.6% compared to 13.3% in FY2021. The price increase for certain products and the reduction in finance cost due to debt dollarisation contributed to margin enhancement.

SEGMENT PERFORMANCE:

The Aerospace & Defence segment recorded a revenue of Rs. 36,014 lakhs compared to Rs. 37,395 lakhs in FY2021. The performance of the segment was impacted primarily due to travel related restrictions continued during this year also. Various travel bans between countries and decline in passenger traffic due to Covid-19 continued to impact the performance of the civil aviation sector. However, Dynamatic Technologies Limiteds defense vertical continued to grow driven by order book execution and delivery, in particular, orders from Boeing F-15EX and Bharat Electronics Limited, which helped to minimize the underperformance of the sector. Segment EBITDA for the year was Rs. 9,899 lakhs, reported alongside Rs. 11,131 lakhs in FY2021.

The Hydraulics segment reported robust performance in FY2022 supported by increasing demand from agriculture as well as other industries including construction and infrastructure equipment. The outlook for the segment remains encouraging, supported by favorable demand dynamics for the agriculture and infrastructure sectors resulting in greater demand for tractors. Revenues for this segment increased to Rs. 42,366 lakhs compared to Rs. 29,763 lakhs in the same period last year. EBITDA for FY2022 was Rs. 7,318 lakhs and Rs. 3,109 lakhs during last year.

The metallurgy industry showed resilience during the year which supported the moderate top line growth of the segment. The growth has been impacted by adverse demand scenario, shortage of semiconductors and other supply chain challenges. The segment profitability increased marginally on the back of better product mix. Revenue for this segment was Rs. 46,501 lakhs compared to same period last year Rs. 44,187 lakhs. Segment EBITDA was Rs. 2,032 lakhs compared to Rs. 1,820 lakhs in FY2021.

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, 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 in Hydraulics. However, the Aerospace and Metallergy 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 of pandemic 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:

During the FY2022, India experienced second and third waves of Covid-19 driven by the highly transmissible Delta and Omicron variants respectively. The new waves has led to a set of fresh restrictions in the country which has impacted the economic activity further, although new restrictions were lenient as compared to the previous fiscal year. The adverse impact of new waves on global supply chain, shortage of raw materials for various industries coupled with geo-political tensions impacted the global economic growth.

Despite this adverse situation, Dynamatic Technologies operations continued to run smoothly with topmost priority of health, safety and wellbeing of its employees. As a major supplier to global OEMs, the Company has undertaken various measures to contain the impact of the virus on its employees and ensure their safety and well-being. Dynamatic Technologies had tremendous responsibility to keep the industrial output in pace with the demand. Our proactive measures on Covid control like PPEs, social distancing, thermal screening, sanitisation, awareness drives and also setting up of our own BIOSECURITY lab with most advanced equipment and senior microbiologist to conduct and analyse RT-PCR test on every single employee helped create a safe bubble at work place. Dynamatic Technologies SOPs have been referred by number of industries and government bodies as a template for taking care of lives and livelihoods.

The Company has launched vaccination drives to provide vaccination to all employees and their families in line with Government guidelines and regulations. We have also undertaken the responsibility of conducting regular Covid-19 tests to ensure that employees are staying safe and to restrict the spread of the virus.

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.

DIVIDEND DISTRIBUTION POLICY:

Dividend Distribution Policy Pursuant to Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI Listing Regulations), the Board of Directors of the Company have adopted a Dividend Distribution Policy which aims to maintain a balance between profit retention and a fair, sustainable and consistent distribution of profits among its members. The said Policy is available on the website of the Company under the Investors section at https://www.dynamatics.com

SHARE CAPITAL:

As of 31st March 2022, 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 was no change in the Companys issued, subscribed and paid-up equity share capital. As of 31st March 2022, 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. 3,751 lakhs for physical infrastructure and Rs. 384 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 of the Company and its subsidiary are prepared in accordance with Indian Accounting Standards notified under the Companies (Indian Accounting Standards) Rules, 2015 (Ind AS). The Audited Consolidated Financial Statements together with the Auditors Report thereon forms part of this Integrated Annual Report.

The Company has adopted a Policy for determining Material Subsidiaries in terms of Regulation 16(1)(c) of the SEBI Listing Regulations. The Policy, as approved by the Board is uploaded on the Companys website at https://www.dynamatics.com

SUBSIDIARIES:

The Company has ten subsidiaries. There are no associate or joint venture companies within the meaning of Section 2(6) of the Companies Act, 2013 ("Act"). There has been no material change in the nature of the business of the subsidiaries. The structure of Dynamatic Technologies Limited and its subsidiaries as on 31st March 2022, is appended hereunder:

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.

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 nonoperating company.

Dynamatic Manufacturing Limited, India (DML) (formerly known as JKM Ferrotech Limited) is a Wholly owned Subsidiary of the Company held through its subsidiaries JKM Erla Automotive Limited and Eisenwerk Erla GmbH, Germany.

Pursuant to the order passed by Honble National Company Law Tribunal (NCLT), Bengaluru Bench dated 6th April 2021, the share capital of DML was reduced from Rs. 1,66,51,30,640 /- (Rupees One Sixty-Six Crore Fifty-One Lakh Thirty Thousand Six Hundred and Forty Only) divided into 16,65,13,064 (Sixteen Crore Sixty-Five Lakh Thirteen Thousand and Sixty- Four) fully paid-up equity shares of Rs. 10/- (Rupees Ten Only) each to Rs. 2,50,00,000/- (Rupees Two Crores Fifty Lakh Only) divided into 25,00,000 (Twenty-Five Lakhs) fully paid up equity shares of Rs. 10/- (Rupees Ten Only) each by cancelling and extinguishing 16,40,13,064 (Sixteen Crore Forty Lakh Thirteen Thousand and Sixty-Four) fully paid-up equity shares of Rs. 10/- (Rupees Ten Only) each.

During the year the Company sold the foundry business assets of its Wholly Owned Subsidiary JKM Ferrotech Limited, Chennai to M/s. Danblock Brakes India Private Limited, an Indian subsidiary of MAT Holdings, Inc. of USA. The transaction was concluded on 22nd July 2021.

Subsequent to the assets sale of the foundry business viz., ferrous casting facility located at Chennai, Tamil Nadu, to Danblock Brakes India Private Limited, there are no business operations in DML. Hence DML, as a part of its new vision and mission, is contemplating to revive its business operations by diversifying into manufacturing activities viz. sheet metal operations, heat treatment, surface treatment, metal forming, metal coating alongside other ancillary operations.

As a part of this initiative, the name has been changed from JKM Ferrotech Limited to Dynamatic Manufacturing Limited with effect from 11th April 2022.

JKM Automotive Limited (JAL) is a wholly owned subsidiary of JEAL and is a non-operating company.

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.

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 off-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 DLUK, is located in Swindon & Bristol, and is a leader in Aeronautical Precision Engineering and is currently working on components for most of the Airbus family of aircraft.

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

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 SUBSIDIARIES:

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:

Based on the framework of Internal Financial Controls and compliance systems established and maintained by the Company, the work performed by the Internal Auditors, Statutory Auditors and Secretarial Auditors, 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 Financial Year 2021-22.

Accordingly, pursuant to Sections 134(5) of the Act, the Board of Directors, to the best of its knowledge and ability, confirm that:

i. in the preparation of the annual accounts, for the Financial Year ended 31st March 2022, 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 for the Financial Year ended 31st March 2022, 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.

DISCLOSURE ON COMPLIANCE WITH SECRETARIAL STANDARDS:

Your Directors have devised proper systems and processes for complying with the requirements of applicable Secretarial Standards issued by the Institute of Company Secretaries of India and that such systems were adequate and operating effectively.

DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP):

Inductions, Re-appointments, Retirements & Resignations:

Pursuant to the provision of Section 152 of the Companies Act, 2013, Mr. James Tucker (DIN: 07093258), Non-Executive Director of the Company retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The Board recommends his re-appointment. A resolution seeking shareholders approval for his reappointment forms part of the Notice.

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 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 Companies Act, 2013.

Pursuant to the provisions of Section 203 of the Act, the Key Managerial Personnel of the Company as on 31st March 2022 are:

Mr. Udayant Malhoutra, CEO & Managing Director

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

Mr. Arvind Mishra, Executive Director, Global COO - Hydraulics, 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 Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the Listing Regulations). In terms of Regulation 25(8) of the Listing Regulations, the Independent Directors have confirmed that they are not aware of any circumstances or situations which exist or may be reasonably anticipated that could impair or impact their ability to discharge their duties.

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 Committee,

2. Nomination and Remuneration Committee,

3. Stakeholders Relationship Committee,

4. Risk Management Committee

5. Technology & Strategy Development Committee,

6. Finance Committee,

7. Corporate Social Responsibility Committee and

8. 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 in Investors Desk section.

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 in Investors Desk section.

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

In terms of the provisions of Section 178(3) of the Companies Act, 2013 and Regulation 19 of the Listing Regulations, the Nomination and Remuneration Committee (NRC) has formulated the criteria for determining qualifications, positive attributes and independence of Directors, the key features of which are as follows:

a. Qualifications - A transparent Board nomination process is in place that encourages diversity of thought, experience, knowledge, perspective, age, and gender. It is also ensured that the Board has an appropriate blend of functional and industry expertise. While recommending the appointment of a Director, the NRC considers the manner in which the function and domain expertise of the individual will contribute to the overall skill domain mix of the Board.

b. Positive Attributes - Apart from the duties of Directors as prescribed in the Companies Act, 2013, 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 Companies Act, 2013 and Regulation 16(1)(b) of the 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, board processes, information & functioning, Risk Management & Strategy, Corporate Social Responsibility, Organisational performance and structure, effectiveness of board processes, 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, Strategy & Risk Management, Interpersonal Skills alongside 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.

The Annual Performance Evaluation is conducted in a paperless manner with documents being securely uploaded and accessed electronically. This has resulted in saving paper, reducing the cycle time of the process, and increasing confidentiality of the information.

INTERNAL CONTROLS SYSTEMS AND THEIR ADEQUACY:

The Board has adopted policies and procedures 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 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 Committee and Risk Management Committee of the Board. A CEO & 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:

During the year under review, the Statutory Auditors, Cost Auditors and Secretarial Auditors have not reported any instances of frauds committed in the Company by its officers or employees, to the Audit Committee under Section 143(12) of the Act, details of which are required to be mentioned in this Report.

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 their 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; Mr. Ratish Tagde & Associates, Company Secretary in practice, has made no qualifications or reservations or adverse remark in the secretarial audit report.

The auditors above mentioned have used appropriate disclaimers to limit the scope of their audit to the documents provided by the management and explanations / representations made by the management

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 Section 124(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 already been transferred by the Company to the IEPF Authority. Details of shares transferred is available on the website of IEPF as well as the Company.

c) DEMAT Suspense Account Unclaimed Shares:

As on 31st March 2022, 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 FY2022 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 Listing Regulations.

During the year, there were no material Related Party Transactions undertaken by the Company which required shareholder approval under the 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 with related parties are provided in the accompanying financial statements. No transactions undertaken during the year were required to be reported in Point 1 of Form AOC-2, annexed as Annexure - 3.

In terms of Regulation 23 of the SEBI Listing Regulations, the Company submits details of RPTs on a consolidated basis, as per the format specified in the relevant accounting standards to the stock exchanges on a half-yearly basis.

CORPORATE GOVERNANCE:

Your Company is in compliance with all the applicable provisions of Corporate Governance as stipulated under Chapter IV of the Listing Regulations. A detailed report on Corporate Governance as required under the Listing Regulations is provided in a separate section and forms part of the Annual Report. A Certificate from a Practicing Company Secretary regarding compliance with the conditions stipulated in the Listing Regulations forms part of the Corporate Governance Report.

The Company has a legacy of maintaining highest standards of corporate governance practices. This 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-inclass 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 Listing Regulations. A detailed report on Corporate Governance, pursuant to the requirements of the 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 Listing Regulations is presented in a separate section forming part of this Annual Report.

MANAGEMENT DISCUSSION & ANALYSIS REPORT:

Pursuant to Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), the Management Discussion and Analysis Report is presented in a separate section forming part of this Annual Report.

BUSINESS RESPONSIBILITY & SUSTAINABILITY REPORT:

The Company endeavours to cater to the needs of the communities it operates in thereby creating maximum value for the society along with conducting its business in a way that creates a positive impact and enhances stakeholder value. As per Regulation 34(2)(f) of the SEBI Listing Regulations, as amended, and in line with the SEBI Circulars dated May 5, 2021, and May 10, 2021, though voluntary for FY 2021-22, the Company has, as a matter of good governance, made disclosure in the Business Responsibility & Sustainability Report (BRSR) depicting initiatives taken by the Company from an environmental, social and governance perspective. The BRSR forms part of this Integrated Annual Report.

AUDITORS:

Statutory Auditors:

Under Section 139 of the Companies Act, 2013 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, has appointed M/s. Rao, Murthy & Associates, Cost Accountants, as Cost Auditor of the Company for conducting the Cost Audit for the FY2023, 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 FY2023.

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 & Consulting Services LLP was appointed as Internal Auditors of the Company to undertake Internal Audit for the FY2023.

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 2022. 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.

RISK MANAGEMENT POLICY:

The Company has a robust Risk Management Policy, which provides an overall framework for Risk Management (RM) in the Company. The key elements of the companys risk management framework have been captured in the risk management policy, which details the process for identifying, escalating, prioritizing, mitigating, and monitoring key risk events and action plans. The assessment of the risks covers areas of Strategy, Technology, Finance, Operations and Systems, Legal & Regulatory and Human Resources. There are appropriate assurance and monitoring mechanisms in place to monitor the effectiveness of the risk management framework including the mitigation plans identified by the management for key risks identified through the risk management exercise. In addition, the company also has a Risk Management Committee (RMC) which reviews the analysis of ERM (Enterprise Risk Management) exercise done by the Company and provides necessary guidance on its implementation and monitoring.

The RMC 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. During the year under review, the Risk Management Policy and Terms of Reference of the Risk Management Committee were revised in line with the SEBI Listing Regulations to, inter alia, set up strategic policies including focus on ESG related risks, cyber security risks and defining the role and responsibilities of the Risk Management Committee.

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 Risk Management Committee is chaired by an Independent Director and the Chairperson of the Audit Committee is also a member of the said Committee. Further, the Board is apprised of any procedure that may impact the long-term plans of the Company.

The major risks forming part of the Risk Management process are linked to the audit universe and are also covered as part of the annual risk-based audit plan.

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 Companies Act, 2013 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 Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014.

HUMAN RESOURCES & DEVELOPMENT:

Dynamatic Technologies believes that Human Resources (HR) are the backbone for the overall growth of the organization and identifying, upgrading of talent & competence of employees is a must. The HR 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 resource. The HR should remain vibrant and flexible to adopt to challenging times. Dynamatic Technologies undertakes the best possible efforts not only to 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 and white collared, are made through this platform. As employees can access this system remotely, communication has been more effective. Also, HR team has successfully implemented first phase of SAP in both Divisions.

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. HR 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.

HR team has coordinated the activities to protect the health and safety of the employees during the pandemic. Guidelines were prepared listing proactive measures to be taken and routine disciplines to be followed by employees every day to prevent spread of Corona. The necessary infrastructure was put in place on the shop floor and in the canteen areas to maintain social distancing.

Dynamatic Technologies partnered with Aerospace and Aviation Sector Skill Council (AASSC) with MoU signed for RPL PMKVY 3.0-RPL-BICE (Pradhan Mantri Kaushal Vikas Yojana 3.0 - Recognition of Prior Learning, Type 4 - Best in Class Employers). This has been successfully assessed and has certified 344 employees across 07 different job roles identified by the AASSC with National Skill Qualification Framework (NSQF) Level 3 and 4.

Enrolment and batch creation were done on Skill India Portal (SIP) with the evaluation of assessment as per AASSC guidelines. The program was monitored by National Skill Development Corporation (NSDC) and certification approved by NCVET (National Council for Vocational Education and Training).

Every employees RT-PCR test status is monitored and periodical testing is ensured, The Company has launched vaccination drives to provide vaccination to all employees and their families in line with Government guidelines and regulations.

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 FY2022, as follows:

Your company focuses its CSR activities on three thematic areas - Promoting Education, Ensuring Environmental Sustainability and promoting Health care activities.

Dynamatic Technologies engages with "Directorate of Employment & Training, Government of Karnataka" for supporting Industrial Training Institute (ITI) as a centre for excellence for skill development and vocational training. 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 along with 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 the Aerospace Industry, who volunteer to enhance their skill levels. The Dynamatic Skill Initiative team has developed a 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 graduated trainees have been employed in various aerospace industries in and around Bangalore. This curriculum has been widely appreciated and is now approved as a two years long Trade (aerospace fitters trade) in Government 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.

The Aerospace Skill Development Centre (ASDC) which has been established with all the 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.

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 is continuing to be provided during the year.

Under health care activities, DTL has served the frontline workers in Police departments with necessary PPEs periodically.

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:

As per the requirements of Section 92(3) of the Act and Rules framed thereunder, the extract of the Annual Return for FY 2021-22 is uploaded on the website of the Company and the same is available at www.dynamatics.com

POLICY ON PREVENTION, PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT AT WORKPLACE:

The Company has zero tolerance for sexual harassment at the 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.

As a proactive measure and to bring awareness about the Act, training sessions from legal experts are conducted for the women employees. Such sessions are now being extended to all employees in a phased manner.

Policy for Safety and Well Being of Women:

The National Institute of Personal Management (NIPM), Karnataka Chapter had organized one day workshop on Prevention of Sexual Harassment (POSH) of Women at Workplace - Provisions of Law and complaint Redressal & Principles of Domestic Enquiry on 11th November 2021. Our ICC Committee members had participated in this work shop. The Company strives to create a safe, friendly and inclusive work environment for its employees. During the Financial Year 2021-22, the Company has not received any complaint on sexual harassment.

Womens Day was celebrated at Sheraton Grand Bangalore Hotel at Brigade Gateway, Bangalore in the month of March-22 by engaging all women employees in the campaign of Break the Barrier. In line with the campaign slogan, Dynamatic Teachnologies invited and honoured women Auto/ Taxi drivers of Bangalore city who have broken the gender barrier and are successfully making a livelihood. This inspired and added confidence to our women employees, who have already broken the barrier and are working successfully along with men in all the departments at various ranks. All the women employees of the Hydraulics and Aerospace Divisions participated and were excited about meeting with CEO & MD.

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 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 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 Companies Act, 2013 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 - 6, 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 - 7.

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.

Change in the Registered Office:

With effect from 1st April 2022, the registered office of the Company has changed from Dynamatic Park, Peenya Industrial Area, Bangalore-560 058 to JKM Plaza, Dynamatic Aerotropolis, 55 KIADB Aerospace Park, Devanahalli Bangalore 562110.

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:

The Company has entered into two major partnerships with Academia and DRDO. It signed a MOU with Indian Institute of Technology (IIT) Kanpur for design and development of unmanned solutions aimed at surveillance and reconnaissance. The Company has also signed an agreement with Central Scientific Instruments Organisation (CSIO) for advanced optical sensors and payload design and development. The partnerships are aimed at developing indigenous products and solutions for Indian Defence and Paramilitary in line with our Prime Ministers clarion call for self-reliance, Atma Nirbhar Bharat.

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
Long Term Issuer Rating IND BBB+/Positive
Fund Based Working Capital Limit IND BBB+ / Positive / IND A2+
Non-Fund Based Working Capital Limit IND A2+
Term loan IND BBB+/Positive

Listing with Stock Exchanges:

The Company confirms that it has paid the Annual Listing Fees for the year FY2022 to NSE (DYNAMATECH) and BSE (505242) where the Companys Shares are listed.

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. Primella Sanitary Products Private Limited

9. Greenearth Biotechnologies Limited

GREEN INITIATIVES:

In commitment to keep in line with the Green Initiatives and going beyond it, electronic copy of the Notice of 47th Annual General Meeting of the Company including the Annual Report for FY 2021-22 are being sent to all Members whose e-mail addresses are registered with the Company / Depository Participant(s).

APPRECIATION:

Your Directors take this opportunity to thank the employees, customers, vendors, investors of the Company and the communities in which the Company operates, for their unstinted co-operation and valuable support extended during the year. Your Directors also thank the Government of India, Government of Karnataka and Government of various States in India and government departments / agencies concerned for their co-operation. Your Directors appreciate and value the contributions made by each and every member of the Dynamatic family. 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: Swindon, UK Place: Bengaluru, India
Date: 25th May 2022