dynamatic technologies ltd Directors report

Your directors are pleased to present their 48th Annual Report together with the Audited Statement of Accounts of the Company for the year ended 31st March 2023.

FINANCIAL RESULTS:

The Financial Results of the Company for the year ended 31st March 2023, were as follows:

(Rs in Lakhs)

	Consolidated		Standalone
Particulars	Year Ended 31 March 2023	Year Ended 31 March 2022	Year Ended 31 March 2023	Year Ended 31 March 2022
Continuing Operations:
Revenue from Operation	1,31,577	1,25,337	58,112	54,897
Less: Cost of material and changes in Inventories	63,102	61,504	27,018	25,042
Less: Employee benefit expenses	25,342	25,604	9,218	9,130
Less: Other Expenses	25,007	21,306	10,453	8,787
EBITDA	18,126	16,923	11,423	11,938
EBITDA Margin	13.8%	13.5%	19.66%	21.75%
Add: Other Income	976	822	536	1,124
Less: Finance Charges	6,538	5,901	5,158	4,734
Less: Depreciation and Amortisation Expense	7,042	7,682	2,419	3,032
Profit from Continuing Operations before Tax	5,522	4,162	4,382	5,296
Profit before tax margin	4.20%	3.32%	7.54%	9.65%
Less: Tax expense	1,243	956	1,467	1,331
Profit after Tax from Continuing Operations	4,279	3,206	2,915	3,965
Profit after Tax margin	3.25%	2.56%	5.02%	7.22%
Discontinued Operations:
Add: Loss from Discontinued Operations	-	(1,659)	-	-
Add: Other Comprehensive Income/(Losses)	676	(282)	(335)	(201)
Total comprehensive income, carried to Balance Sheet	4,955	1,265	2,580	3,764

COMPANY PERFORMANCE:

Despite global supply chain disruption and increasing inflationary pressure on commodity prices due to prevailing geopolitical conditions, Dynamatic Technologies has reported strong business performance in FY2023. Consolidated net sales for FY2023 were Rs. 1,31,577 lakhs, increased by 5% as compared to Rs. 1,25,337 lakhs in FY2022. The top line growth was driven by better product mix and, inventory management. Consolidated EBITDA for FY2023 was reported as Rs. 18,126 lakhs as compared to Rs. 16,923 lakhs during FY2022. EBITDA margin for the year under review was 13.8% compared to 13.5% in FY2022. Increase in overall revenue and price increases for certain products contributed to margin enhancement.

SEGMENT PERFORMANCE:

The Aerospace & Defence segment recorded a revenue of Rs. 43,737 lakhs compared to Rs. 36,014 lakhs in FY2022. The Indian Aerospace industry witnessed moderate growth supported by improvement in order execution and delivery. During the FY2023, the Aerospace segment reported a growth of 21.4% y-o-y driven by resilient performance of air transport industry. Commercial deliveries and ramp-up of parts for F-15EX Eagle and Escape Hatch Doors for Airbus A220 aircraft will start from coming years which will contribute to top line and new business opportunities. A strong order book by major aircraft producers will drive both defence and commercial demand once global supply chain issues are resolved. Segment EBITDA for the year was Rs. 11,682 lakhs, reported alongside Rs. 9,899 lakhs in FY2022.

The Hydraulics segment reported healthy growth in FY2023 supported by growth in Tractor Production in India. Demand for tractors were largely driven by the farming sector riding on back-to-back good monsoons, as well as other industries including construction and infrastructure equipment sector. The outlook for the segment in FY2024 is slightly subdued with forecast of below normal monsoon and cyclic impact of El Nino. The industry would still witness a growth of low single digit and the overall volumes of production would remain healthy. Revenues for this segment increased marginally to Rs. 46,166 lakhs compared to Rs. 42,366 lakhs in the same period last year. EBITDA for FY2023 was Rs. 8,748 lakhs and Rs. 7,318 lakhs during last year. The metallurgy industry showed resilience during the year which supported the moderate top line decrease of the segment. The development has been impacted by adverse demand scenario, shortage of semiconductors and other supply chain challenges. The segment profitability decreased marginally because of inflation scenario in energy and material cost. Revenue for this segment was Rs. 41,661 lakhs compared to same period last year Rs. 46,501 lakhs. Segment EBITDA was Rs. 1,714 lakhs compared to Rs. 2,032 lakhs in FY2022.

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. With a strong business foundation, technological excellence and industry recognition for products, we are confident of creating utmost value for all of our stakeholders.

DIVIDEND:

The interim dividend declared by the Board of Directors of Rs. 3/- per share was paid by the Company during the year in accordance with Section 123 of the Act, as applicable. Further, the Board of Directors of the Company vide its meeting held on 29th May 2023, has proposed final dividend of Rs. 7/- per share for the year which is subject to the approval of the members at the ensuing Annual General Meeting.

The total dividend outgo amounts to Rs. 6,65,64,430/-, out of which Rs. 1,90,24,329/- was paid as interim dividend. The Register of Members and Share Transfer Books of the Company will remain closed from Saturday, 16th September 2023 to Friday, 22nd September 2023 (both days inclusive) for ascertainment of shareholders eligible to receive dividend for the financial year ended 31st March, 2023.

DIVIDEND DISTRIBUTION POLICY:

In terms of Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("the Listing Regulations"), the Dividend Distribution Policy duly approved by the Board is available on the website of the Company. The Board has recommended dividend based on the parameters laid down in the Dividend Distribution Policy and dividend will be paid out of the profits for the year. 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 2023, 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, the company allotted 4,50,000 Equity Shares for an amount of Rs. 112,90,50,000 to non-promoter persons on a preferential basis in accordance with Chapter V of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

The Issued, subscribed, and Paid-up Equity Share Capital of the Company as of 31st March 2023, was Rs. 679.14 lakhs, comprising 67,91,443 equity shares of Rs.10/- each.

TRANSFER TO RESERVES:

The Board of Directors have decided to retain the entire amount of profit for FY2023 in the Statement of Profit & Loss as of 31st March 2023.

CAPITAL EXPENDITURE:

During the year under review, the Company incurred capital expenditure of Rs. 9,084 lakhs for physical infrastructure and Rs. 127 lakhs for procurement of intangible assets. Significant investments have been made in building infrastructure, 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 form 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 nine 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 2023, 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 non-operating company.

Dynamatic Manufacturing Limited, India (DML) (formerly known as JKM Ferrotech Limited) is wholly owned subsidiary of the Company. During the year under review, pursuant to an Asset Purchase and Employee Transfer Agreement, certain Plant, and machinery, along with identified employees, were acquired by DML from Dynamatic Technologies Limited (DTL). Further, pursuant to an internal restructuring, DTL entered into an agreement with Eisenwerk Erla GmbH (EEG) and DML to purchase an equity interest of 24.62% held by EEG in DML. As of 31st March 2023, the shareholdings of 24.62% had been transferred from EEG to DTL after following the requisite procedures. DTL now holds 100% shareholdings in DML (57.65% shareholding directly and the balance 42.35% through its wholly owned subsidiary, JKM Erla Automotive Limited).

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.

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

Originally Yew Tree Investments Limited and Dynamatic Limited were the subsidiaries of JKM Global Pte. Limited. Post-merger, DLUK has its Hydraulics unit and Aerospace unit, Dynamatic-Oldland Aerospace? in 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 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 Dynamatic Limited UK, is located in 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) JKM Erla Holdings GmbH, Germany (JKM Erla) was engaged in the business of setting up automotive component processing/ manufacturing units. JEAL owned 100% share holdings in JKM Erla, which held 100% share holdings in Eisenwerk Erla GmbH, Germany. During the course of the year, as an outcome of the corporate restructuring measures implemented by Eisenwerk Erla GmbH, Germany, through the ‘Protective Shield Process by self-administration it was determined that JKM Erla would be dismantled with the aim of streamlining the group holding structure in Germany.

As on the date of this report, JKM Erla ceases to exist and 100% of the shareholdings of Eisenwerk Erla GmbH, Germany is now held by JKM Erla Automotive Limited (JEAL), India

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.

Eisenwerk is currently in the process of transformation from automotive/foundry-focus to the aerospace business. Considering the various challenges viz.; supply chain crisis at OEMs; current inflation in Europe; steep and unpredictable increase in the cost of gas and electricity being faced by corporations across Europe, Eisenwerk undertook corporate restructuring measures through "Protective Shield process by self -administration" under the applicable German Laws. Subsequently, Eisenwerk had submitted a financial resolution plan to the court, based on which a creditors? meeting was convened by the Chemnitz court on 28th June 2023, in which the aforesaid resolution plan was voted and approved by the creditors in favour of Eisenwerk based on which the local court at Chemnitz, vide its final decision/order dated 27th July 2023, ended the protective shield by self-administration proceedings with effect from 1st August 2023, by accepting the legally binding confirmation of the financial resolution plan submitted by Eisenwerk. With this all-creditor balances have been adjusted and proceedings closed.

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 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 FY2023.

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 2023, the applicable accounting standards have been followed and there is 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 laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively; v. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. vi. they have prepared the Annual Accounts for the Financial Year ended 31st March 2023, on a going concern basis;

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

The Board of Directors at the meeting held on 9th August 2023, based on the recommendation of the Nomination and Remuneration Committee, appointed Ms. Gaitri Issar Kumar as an Additional Director (Non-Executive Independent) of the Company with effect from the said date. Pursuant to the provisions of Section 161 of the Act, Ms. Gaitri Issar Kumar holds office till the date of ensuing Annual General Meeting and is eligible for appointment. A resolution for her appointment as an Independent Director of the Company for a term of 5 years effective from 9th August 2023 to 8th August 2028 is set out at Item No. 6 of the Notice of Annual General Meeting for approval by the Members by way of a Special Resolution. Pursuant to the provision of Section 152 of the Companies Act, 2013, Mr. Dietmar Hahn (DIN: 06414463), 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 reappointment. A resolution seeking shareholders approval for his re-appointment forms part of the Notice.

Based on the recommendations of the Nomination and Remuneration Committee, the Board of Directors, at its meeting held on 29th May 2023, have re-appointed a) Mr. Udayant Malhoutra (DIN:00053714), CEO & MD, for a period of 3 years, with effect from 1st October 2023 to 30th September 2026, which is subject to the approval of the members by way of a Special Resolution. b) Mr. P S Ramesh (DIN: 05205364), Executive Director & COO – Hydraulics, for a period of 1 year, with effect from 14th November 2023 to 13th November 2024, which is subject to the approval of the members by way of a Special Resolution.

A resolution in this behalf is set out at Item No. 4 and 5 of the Notice of the forthcoming 48th Annual General Meeting, for Members approval. Mr. Govind Mirchandani and Ms. Malavika Jayaram will be retiring as Independent Directors effective 14th August 2023, after completing their term of appointment. The Board places on record its appreciation for the contributions and guidance made by Mr. Govind Mirchandani and Ms. Malavika Jayaram, during their stint with the Company as Independent Directors.

Mr. Arvind Mishra ceased to be an Executive Director and Global COO - Hydraulics and Head -Homeland Security, upon his resignation w.e.f the close of the business hours on 8th August 2023.

During the year under review, the Company did not have any pecuniary relationship or transactions with any of its directors, other than payment of remuneration/incentive to the Executive Directors and payment of sitting fees to Non-executive Directors and reimbursement of expenses incurred by them for the purpose of attending meetings of the Board/Committees 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 2023 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.

* re-designated as Executive Director & COO-Hydraulics w.e.f 8th August 2023 ** resigned w.e.f 8th August 2023

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:

Six 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 eight 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 considers the competitive circumstance of each business 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 of providing them with a comprehensive understanding of 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 to the growth of the company. They have full opportunity to interact with senior management personnel and are provided with all the documents required and sought by them to enhance their understanding, as mentioned above.

Dynamatic Technologies firmly believes that a board that 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 familiarization program are uploaded on the companys corporate website, www.dynamatics.com, in the 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 based on 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. 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 based on 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 ensure that all assets are safeguarded and protected and that 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. The roles and responsibilities of various stakeholders involved in the process are clearly demarcated.

The internal auditors independently evaluate the adequacy of internal controls and concurrently audit the majority of the transactions in value terms. Independence of the audit and compliance are ensured by direct reporting to the Audit 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 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 2023, 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 FY2023 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 materially significant 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 or when the need for these transactions cannot be foreseen in advance. 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 Form AOC-2, annexed as

Annexure - 3.

In terms of Regulation 23 of the SEBI Listing Regulations, the Company submits details of RPTs 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.

Dynamatic Technologies has a legacy of maintaining the highest standards of corporate governance practices. This is based on the philosophy that effective corporate governance practices provide a strong and stable foundation for a successful enterprise. The company always emphasizes ensuring integrity and transparency in all its dealings, which are critical to retaining the trust of all stakeholders. The core values of the companys corporate governance system comprise independence, transparency, accountability, responsibility, compliance, ethics, values, and trust. We believe that our corporate governance practices will enable us to execute business operations efficiently and ethically 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 to build 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 major strengths of the company.

The company is following 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 form 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 with 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, the Business Responsibility & Sustainability Report (‘BRSR) is provided in a separate section and forms part of these 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 FY2024, 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 FY2024.

Internal Auditors:

The Internal Audit function is responsible for assisting the Audit Committee and 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 FY2024.

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 2023. 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 constituted a Risk Management Committee which has been entrusted with the responsibility to assist the Board in (a) approving the Companys Risk Management Framework and (b) Overseeing all the risks that the organization faces such as strategic, operational, financial, liquidity, security, regulatory, legal, reputational, cyber security, ESG and other risks that have been identified and assessed to ensure that there is a sound Risk Management Policy in place to address such concerns / risks. The Risk Management process covers risk identification, assessment, analysis, and mitigation. Incorporating sustainability in the process also helps to align potential exposures with the risk appetite and highlight risks associated with chosen strategies. The Audit Committee has additional oversight in financial risks and controls. Major risks identified by the business and functions are systematically addressed through mitigating actions on a continuing basis.

The Company has a robust Risk Management Policy in place which enables framing an appropriate action for the key risks identified, 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 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 and upgrading the talent and 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 abilities to keep pace with the demands of the digital world and continuously changing diverse labour laws and social scenarios are kept in mind while steering the human resource. HR should remain vibrant and flexible to adapt 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 SAP software in place to capture the attendance of employees and assist in carrying out payroll activity completely in 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. During this year, it is noteworthy that the HR team has successfully implemented HR modules in SAP at the India organization level. This makes HR procedures and transactions completely digital and transparent. All policies are made uniform for all the divisions and enforced through SAP workflow. Necessary training for the CTM and the end users has been provided. HR data and reports can be retrieved in real time. The comprehensible HR manual, which was documented and launched in January 2023, provided the basis for this digital platform.

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. The HR team organizes sensitization programs and encourages 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 labor unrest.

As part of our ongoing organizational development, many initiatives are planned to build a productive and progressive workforce in a structured manner. As a result of our continuous year-on-year efforts, our employees have grown into an engaged and result oriented team. Various ongoing activities have been scheduled and executed to build and retain competencies. Employees are encouraged towards a holistic growth in the organization.

The HR team organizes sensitization programs and encourages communication to ensure an organizational culture that always provides for a fair and safe working environment for all the employees.

Health and safety are the most important aspects of human resources management. It is our endeavor to ensure that employees are healthy both physically and mentally. Health insurance covering the employee and his/her family is managed periodically by the company. Well-equipped ambulances, a health care team, and pathological labs are made available to all employees by the company. While physical health is taken care of, mental wellbeing is also part of our focus. A well-known psychiatrist is retained by the company to intervene and engage our employees to develop mental and emotional wellness.

The Aerospace Skill Development Centre (ASDC) continues to thrive in training young boys and girls from rural areas around the ITI, Devanahalli, and Banglore. These students undergo intense training in aerospace structure assembly, CNC turning and machining, etc. The training will include both theory and practical classes. These trained youngsters are later placed in companies around KIADB, Devanahalli. All the students who have passed out of this ASDC have found jobs in one or another renowned aerospace industry in and around Bangalore.

CORPORATE SOCIAL RESPONSIBILTY (CSR):

Your company has a policy on corporate social responsibility, which has been posted on the companys website 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 FY2023, 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 the "Directorate of Employment and Training, Government of Karnataka" to support the Industrial Training Institute (ITI) as a center of excellence for skill development and vocational training. ITI is being supported with the provision of equipment for laboratories, the volunteering of employees for training sessions, the development of training modules, and the enrollment of women students who belong to rural communities along with students from underprivileged backgrounds. Dynamatic Technologies has strengthened its objectives in CSR and, through its Skill Development Initiative Team, has been imparting skills to trainees with ITI / Diploma backgrounds and 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-month-long bridge course. Dynamatic Technologies had two such batches complete 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-year trade (aerospace fitters) in Government ITIs all over the country. The course addresses technical skills in operations such as sheet metal forming, material handling, drilling, riveting, painting, 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 the Institute Management Committee, has further come up with two CNC program courses this year, one in turning and the other in milling. CNC machines are in place at the ITI facility, and the necessary cutting tools and raw materials for practicing on the machines have been provided by Dynamatic Technologies. Classes for a 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 the Chief Ministers Kaushalya Karnataka Yojane (CMKKY) in the Department of Skill Development and Entrepreneurship and Livelihood, is continuing to be provided during the year. Under health care activities, DTL has provided the front- line workers in police departments with necessary PPE periodically. The Annual Report on CSR activities in terms of the requirements of the 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 2022-23 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. Internal Complaints Committee (ICC) is in place for all works and offices of the Company to redress complaints received regarding sexual harassment. 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 a one-day workshop on Prevention of Sexual Harassment (POSH) of Women at Workplace: Provisions of Law and Complaint Redressal and Principles of Domestic Enquiry on 11th November 2021. Our ICC Committee members participated in this workshop. The company strives to create a safe, friendly, and inclusive work environment for its employees. During the financial year 2022 23, the company has not received any complaints of sexual harassment.

Womens Day was celebrated at the Sheraton Grand Bangalore Hotel at Brigade Gateway, Bangalore, on 13th March 2023, by engaging all women employees in the campaign "DigitAll: Innovation and Technology for Gender Equality." Dynamatic Technologies invited and honored women who have made achievements in their respective professional fields. 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 in the event. The CEO and MD addressed all the female employees on this occasion.

The HR team has more women in your company than men, proving the point that the company has the mandate to increase the number of 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 mechanisms are 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 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, and the 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.

Significant

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:

During the year, the Company 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, Atmanirbhar 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	IND BBB+ / Positive / IND
Limit	A2+
Non-Fund Based Working	IND A2+
Capital Limit
Term loan	IND BBB+/Positive

Listing with Stock Exchanges:

The Company confirms that it has paid the Annual Listing Fees for the year FY2023 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 48th Annual General Meeting of the Company including the Annual Report for FY 2022-23 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	Executive Director & COO-Hydraulics
DIN : 00053714	DIN : 05205364
Place: Schwarzenberg, Germany
Date: 9th August 2023