Esab India Ltd Directors Report.

to Shareholders

Your Directors take pleasure in presenting the Thirty Fourth Annual Report together with the audited accounts of the Company for the financial year ended 31 March, 2021.

1. FINANCIAL SUMMARY / HIGHLIGHTS

(Rs. in Lakhs)

Particulars 2020-21 2019-20
Total revenue 69,234 71,147
Profit before Interest expense and Depreciation 9,265 11,032
Provision for Depreciation (1,171) (1,258)
Finance cost (41) (50)
Profit before exceptional and prior period items and tax 8,053 9,724
Exceptional items - -
Profit before Tax from continuing operations 8,053 9,724
Provision for Tax (2,124) (2,583)
Net Profit After Tax 5,929 7,141

The financials of the Company for the year under review as also the financial statements of the previous year are prepared under IND AS.

2. EVENTS SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS

There were no reportable events subsequent to the date of the financial statements.

3. CHANGE IN THE NATURE OF BUSINESS, IF ANY

There has been no material change in the nature of business during the period under review.

4. DIVIDEND

The Board of Directors had approved an interim dividend of Rs. 19/- per equity share of Rs. 10/- each (190%) at its meeting held on 10 February, 2021 resulting in a cash outflow of about Rs. 29.25 Crores for the financial year ended 31 March, 2021.

This was disbursed on 10 March, 2021. The Board has proposed a final dividend of Rs. 25/- per equity share of Rs. 10/- each (250%) which dividend is subject to approval of the shareholders at the ensuing Annual General Meeting.

5. IND AS STANDARDS

Your Company had adopted IND AS in pursuance of Section 133 of the Companies Act, 2013 and in compliance with the Companies (Indian Accounting Standard) Rules, 2015. The financials for the current financial year ended 31 March 2021 and the comparative figures for the last financial year ended 31 March, 2020 have been prepared and published based on such INDAS standards.

The quarterly results are also published by the Company based on IND AS. These have been published in newspapers and also made available in the Companys website www.esabindia.com and the website of the stock exchanges where the shares of the Company are listed.

6. TRANSFERS TO THE INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Pursuant to the applicable provisions of the Companies Act, 2013 ("the Act") read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 ("The Rules"), all unpaid or unclaimed dividends are required to be transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government, after completion of seven years. Further, according to the Rules, the shares in respect of which dividend has not been paid or claimed by the Members for seven consecutive years or more shall also be transferred to the dematerialized account created by the IEPF authority.

The Company had sent individual notices and also advertised in the newspapers seeking action from the Members who have not claimed their dividends for seven consecutive years or more. Accordingly, the Company is in the process of transferring such unpaid or unclaimed dividends and corresponding shares up to Final Dividend 2013 to the IEPF shortly.

Members / claimants whose shares, unclaimed dividend, have been transferred to the IEPF Demat Account of the Fund, as the case may be, may claim the shares or apply for refund by making an application to the IEPF Authority in Form IEPF-5 (available on http:www.iepf.gov.in) along with requisite fee as decided by IEPF Authority from time to time. The Member / Claimant can file only one consolidated claim in a Financial year as per the IEPF Rules.

Due dates for transfer of Unclaimed Dividend to IEPF are provided elsewhere in the notice calling the Annual General Meeting.

Details of shares / shareholders in respect of which dividends have not been claimed, are provided on our website at www.esabindia.com. The shareholders are encouraged to verify their records and claim their dividends of all the preceding seven years, if not claimed.

7. BOARD MEETINGS

The Board of Directors met 7 times during the financial year 2020-21. The Meetings were held on 28 May, 24 June, 6 August, 18 September, 5 November of 2020, 10 February and 19 March of 2021.

8. DIRECTORS & KEY MANAGERIAL PERSONNEL

The Board of Directors of the Company has six members.

ESAB Holdings Limited withdrew the nomination of Mr.Scott Allen Grisham from the Board of Directors with effect from 24 March, 2021. The Board of Directors would like to place on record their sincere appreciation of the services rendered by Mr Scott Allen Grisham, during his tenure as Chairman of the Company.

In terms of the Articles of Association, the promoters of the Company, viz. Esab Holdings Limited have nominated Mr. Kevin Joseph Johnson as the Chairman of the Board in place of Mr. Scott Allen Grisham with effect from 24 of March 2021. Mr Kevin Joseph Johnson is a nominated Director of ESAB Holdings Limited and a non-retiring Director in terms of the provisions of the Articles of Association.

Mr Rohit Gambhir is the Managing Director of the Company. He was appointed for a period of five years with effect from 1 November, 2013. He was subsequently re-appointed for a term of 5 years with effect from 1 st November 2018 vide a postal ballot resolution of the shareholders dated 25 September 2018.

There are four Non-executive and Independent Directors on the Board of the Company.

In accordance with the provisions of Article 129 of the Companys Articles of Association, Mr Rohit Gambhir retires by rotation at the forthcoming Annual General Meeting and being eligible, has offered himself for re-appointment. The details as required under Regulation 36 (3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 regarding Mr. Rohit Gambhir are published as part of the Notice calling the Annual General Meeting.

Key Managerial Personnel

In compliance with Section 203 of the Companies Act, Mr Rohit Gambhir, Managing Director, Mr. B.Mohan, Vice-President Finance & Chief Financial Officer and Mr S Venkatakrishnan, Company Secretary have been designated as the Key Managerial Personnel of the Company.

Mr. B Mohan, Chief Financial Officer joined the Company on 1 February, 2005 and Mr. S Venkatakrishnan, Company Secretary joined the Company on 10 March, 2006.

9. DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS

As required under Section 149 (7) of the Companies Act, 2013 all the Independent Directors on the Board of the Company have individually issued the stipulated annual declaration confirming that they meet all the criteria of independence as stipulated under the Act. Further, the Independent Directors have completed their KYC confirmation on the MCA website and have also uploaded their profile in the Institute of Company Affairs before the stipulated date. All the Directors have been exempted from undergoing the mandatory online tests based on their quantum and areas of experience.

10. COMMITTEES OF THE COMPANY

A. AUDIT COMMITTEE

The Companys Audit Committee consists of three Independent Directors and one Non-executive Director. Mr K Vaidyanathan, is the Chairman of the said Committee. Mr. Vikram Tandon and Mr. Sudhir Chand are the other Independent Directors on the Committee. Mr. Kevin J Johnson was coopted as member of the Committee with effect from 24 March, 2021 in place of Mr Scott Allen Grisham and joined the audit committee at its meeting held on 21 May, 2021.

The said Committee met 6 times during the financial year 2020-2021, on the 24 June, 6 August,18 September, 5 November of 2020 and 10 February and 19 March of 2021. The constitution and the terms of reference of the Committee are in line with the requirements of Section 177 of the Companies Act and Regulation 18 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

There were no occasions during the year where the Board of Directors did not accept the recommendations of the Audit Committee.

B. NOMINATION AND REMUNERATION COMMITTEE

The Companys Nomination and Remuneration Committee consists of three Independent Directors and one Non-Executive Director. Mr. K Vaidyanathan is the Chairman of the said Committee while Mr. Sudhir Chand & Ms. Sabitha Rao, Independent Directors are the Members of the Committee. Mr. Kevin J Johnson, Chairman of the Board was coopted as Member of the Nomination and Remuneration Committee with effect from 24 March, 2021 in place of Mr Scott Allen Grisham.

This Committee met twice during the financial year 2020-2021 on the, 10 February, and 19 March of 2021.

This Committee lays down the policy on remuneration stating therein the attributes required for the Managing Director, Independent Directors and Key Managerial Personnel. The said policy also states the modus operandi for determining the remuneration for the above referred personnel. The remuneration policy of the Company can be viewed on the Companys website www.esabindia.com.

The said committee is constituted in compliance with Section 178 (4) of the Companies Act, 2013 and Regulation 19 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

C. STAKEHOLDERS RELATIONSHIP COMMITTEE

The Companys Stakeholders Relationship Committee consists of two Independent Directors, one Non-executive Director and the Managing Director. Mr Vikram Tandon is the Chairman of the Committee, Mr Sudhir Chand, Independent Director, and Mr Rohit Gambhir, Managing Director are the Members of the Committee. Mr Kevin J Johnson was coopted into the stakeholders relationship committee with effect from 24 March, 2021 in place of Mr Scott Allen Grisham.

The Committee met four times during the year on 24 June, 6 August, 5 November, of 2020 and on the 10 February 2021.

This Committee and the matters being placed before the said committee are in compliance with Section 178(5) of the Companies Act 2013 and Regulation 20 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

D. CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

The Companys Corporate Social Responsibility Committee consists of one Independent Director, one Non-executive Director and the Managing Director. Ms Sabitha Rao is the Chairperson of the said Committee and Mr Rohit Gambhir, Managing Director is the other Member of the said Committee. Mr Kevin J Johnson was coopted as Member of this Committee with effect from 24 March, 2021 in place of Mr Scott Allen Grisham.

The Committee met once during the financial year 2020-2021 on 24 June, 2020.

The Committee lays down the Policy on Corporate Social Responsibility stating therein the strategy, objectives, funding & allocation for the CSR projects, implementation, strategy and steps involved in achieving the CSR objectives. The Policy on Corporate Social Responsibility of the Company and the budget allocation for CSR projects for the year 2021-22 can be viewed on the Companys website www.esabindia.com.

The formation of the Committee and its terms of reference are in line with the requirements of Section 135 (1) of the Companies Act, 2013. The CSR Report which is attached as annexure to this report is in compliance with the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.

E. RISK MANAGEMENT COMMITTEE

The Company has a Risk Management Committee as stipulated by the Companies Act, 2013 and Regulation 21 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Companys Risk Management Committee consists of Mr Rohit Gambhir, Managing Director and Mr B Mohan, Vice President Finance & Chief Financial Officer of the Company. Mr Kevin J Johnson was coopted as Member of the Risk Management Committee with effect from 24 March, 2021 in place of Mr Scott Allen Grisham. A Risk Management Committee is now mandatory for the Company since it is now part of the Top 500 Companies in terms of market capitalization.

The said Committee met once during the Financial year on 10 February, 2021.

The said Committee lays down the Policy on Risk Management. The main objective of this policy is to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and mitigating those risks which are material in nature and are associated with the business. In order to achieve the key objective, the policy establishes a structured and disciplined approach to Risk Management.

The Risk Management Policy of the Company can be viewed on the Companys website www.esabindia.com.

11 .VIGIL MECHANISM

The Company has set up a whistleblower policy which can be viewed on the Companys website www.esabindia.com. In terms of the said policy the Directors and employees are given direct access to the Chairman of the Audit Committee to report on alleged wrongdoings. The said policy has been made available at the Offices / Plants of the Company at conspicuous places to enable the employees to report concerns, if any, directly to the Chairman of the Board and to the Chairman of the Audit Committee. Employees who join the Company newly are apprised of the availability of the said policy as a part of their induction schedule.

The above is in compliance of Section 177 (9) & (10) of the Companies Act, 2013 and in terms of Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Company did not receive any complaints under the whistle blower policy during the year under review.

12. DIRECTORS RESPONSIBILITY STATEMENT

To the best of their knowledge and belief, and according to the information and explanations obtained by them, your Directors make the following statements as per the requirements of Section 134 (5) of the Companies Act, 2013.

1. In the preparation of the annual accounts for the financial year ended 31 March, 2021 the applicable accounting standards have been followed;

2. The Directors have selected such accounting policies listed in Note 2.2 to the Notes to the Financial Statements and applied consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of the affairs of the Company at the end of the financial year on 31 March, 2021 and of the Profit of the Company for that year;

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

4. The Directors have prepared the annual accounts for the year ended 31 March, 2021 on a going concern basis;

5. The Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

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

13. MANAGEMENT DISCUSSION AND ANALYSIS

A. ECONOMIC & BUSINESS ENVIRONMENT

The financial year commenced with huge disruptions caused by Covid19 which turned into a raging pandemic as the year progressed. The Company had to contend with extreme levels of disruption on every front with a strong and sustained focus on health and safety. The Company had to adapt to remote working with increasing reliance on IT on its workflows. The Company had also to contend with challenges in the supply chain arising from restrictions on mobility and frequent lockdowns that were announced from time to time.

The year under review also witnessed a sharp and sustained surge in commodity prices with some metal prices hitting all time highs. This contributed to pressure on margins as prices of steel and alloys have a significant bearing on the profitability of the Company.

Capital goods went through a difficult cycle as well with low levels of capacity additions in the light of weak demand overall.

The economy reportedly contracted by about 8% during the Financial Year with several customer segments addressed by the Company reportedly contracting at much higher rates.

In the context of the above, the Company continued to maintain its position as a leading player in the domestic welding industry. The Companys geographical reach within the Country, strong financial profile & benefits derived from being part of a group which has wide presence across the globe helped deliver a strong performance in an extremely difficult economic environment.

B. OUTLOOK, OPPORTUNITIES AND THREATS

The Country is in the grip of a second wave of Covid 19 with catastrophic impact all around triggering a fresh and serious set of measures to contain its spread. The Company has been adapting to ever changing needs prioritizing health and safety while delivering on its commitments to customers. The Company continues to follow applicable guidelines on safety protocols as directed by the Government and also internal guidelines on health and safety.

Prices of raw materials continue to increase in the current financial year due to a combination of local and global factors. There are disruptions at customers end as well due to short term cessation of fabrication activities as mandated by Government guidelines.

We continue to see threats arising from excess capacities in the market and competition from Tier II and global players pursuing growth in an anemic environment. Additionally, volatilities in customer segments and any economy linked headwinds pose risks as well.

14. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Management evaluates the Companys internal controls from time to time and also works with independent internal auditors to test these and identify areas for improvement. Additionally, the Company is subjected to reviews applicable for Subsidiaries of US headquartered entities. The Company continues to list and evaluate key controls and process to an extent leveraging on the work done as part of its global reporting requirements. Key findings and actions taken to implement or remediate the same are reviewed by the Audit Committee periodically at its meetings. The scope and coverage of internal audits are aligned to have coverage in terms of key controls and locations. The endeavor is to align to the requirements of Internal Control on Financial Reporting (ICFR) framework while leveraging on work done as part of global reporting requirements. Management testing through independent audit teams followed by external testing were done during the year.

The scope of work of Internal Auditors includes review of controls on accounting, financial reporting, statutory and other compliances and operational areas in addition to reviews relating to efficiency and economy in operations. In the context of higher levels of work from home during the year, controls in Information Technology were a priority area as well during the Financial Year.

Our efforts on the above lines are expected to ensure compliance with the requirements of Internal Controls on Financial Reporting.

15. FINANCIAL PERFORMANCE OF THE COMPANY

A. INCOME AND EXPENDITURE

The Companys revenue from contract with customers was lower by 2.4% The reduction was seen across all key product categories and also driven by lack of large value orders as in the preceding financial year. Service income on support services on R&D and shared services grew over the previous year.

New product offerings and enhancements were areas of continuing focus as the Company pursued growth and market share. The Company saw good growth in income from services to related party entities which grew by 25.5%

Other income fell by about 9% driven by lower interest rates and lower surplus cash for investment.

Finance income was at comparable levels after adjusting for part repayment of loans by a related party.

Materials costs as a percentage to sales was higher due to higher input costs and product mix

Overheads including employee costs were lower by 2.9% over the previous year primarily due to significant reduction in travel costs. Transportation costs and power / fuel costs were lower in line with lower sales.

The Company has continued to provide for Depreciation at useful lives based on a technical evaluation of useful life of assets.

Profit before tax was lower by 17.2% over the previous year with the impact of lower sales and higher input costs with some offsets on overheads driven by restrictions on mobility.

B. BALANCE SHEET

The turbulence in the overall economy had a severe impact on manufacturing and more so on enterprises in the small and medium segment which had to deal with manpower constraints in addition to limited bandwidth for riding a difficult phase. For the Company, this meant having to deal with higher short-term working capital requirements and taking considered decisions on supply chain and distribution.

We continued to focus on cash flows and to monitor working capital closely through the year. Our spends on capital expenditure were aligned to the evolving environment. Our cash position of being a debt free enterprise stood us in good stead. Closing cash and equivalents including investments were at Rs. 83.3 Crores after dividend payments of Rs. 137 Crores during the financial year.

Capital Expenditure was about Rs. 13.15 Crores as against Rs. 13.35 Crores in the preceding year. The capital expenditure was primarily on productivity improvements, capacity enhancements and upgrading IT systems.

Inventories were lower in value terms and in terms of days to sales as the Company adapted to volatilities and disruptions through the year. The Company focused on monitoring and reduction of Inventory levels with emphasis on containing excesses and obsolescence.

Trade receivables were higher by 17% over the previous year in the light of difficult cycles in liquidity and consequently longer credit terms. The Management continued to focus on quality of receivables with rigorous monitoring of collections and overdue amounts.

16. SUBSIDIARY / JOINT VENTURE / ASSOCIATE COMPANY

The Company does not have any subsidiary, joint venture or an associate company.

17. HOLDING COMPANY

Colfax Corporation is a Delaware, USA based industrial group with existing global business interests in, medical devices, fabrication technology products and services. Colfax Corporation holds 73.72% of equity shares of your Company through ESAB Holdings Limited, UK and Exelvia Group India BV, Netherlands which are its indirect wholly-owned subsidiaries.

18. EXTRACT OF THE ANNUAL RETURN

The Extract of the Annual Return in form MGT-9 of the Company made up as on the Financial Year ended 31 March, 2021 is attached by way of Annexure-1. This is also made available in the website of the Company viz. www.esabindia.com. Those interested may visit our website and see the details of MGT-9.

19. STATUTORY AUDITORS

M/s. S R Batliboi & Associates, LLP, Chennai (Firm Regn No.101049W / E300004) were re-appointed for a period of four years by the shareholders at the Annual General Meeting held on 28 August, 2020 as the Statutory Auditors of the Company in compliance with Section 139 (1). The re-appointment of statutory auditors was informed to the Registrar of Companies through Form ADT 1 dated 29 August, 2020 vide SRN R51933133. The details of remuneration of the statutory auditors with break-up of fee paid to SRBA and its network firms as required by the provisions of amended SEBI (LODR) Regulations for the financial year 2020-2021 is given as part of the Corporate Governance Report.

This is the first year out of the four years that they have been re-appointed. Their remuneration is fixed in line with the recommendations of the audit committee and as duly approved by the Board of Directors.

M/s. S R Batliboi & Associates, LLP, Chartered Accountants, have given their written consent to continue as the Statutory Auditors of the Company and have also issued a certificate that the appointment if made shall be in accordance with the conditions and that they satisfy the criteria provided under Section 139(1), Section 141 and Chapter X of the Companies Act read with Companies (Audit and Auditors) Rules, 2014.

The Statutory Auditors have issued a clean report on the financials of the Company and have not issued any qualifications for the financial year ended 31 March, 2021. Members may please take note of the changes in the requirements with respect to the report of the Auditors including specific references to key audit matters.

20. SECRETARIAL AUDIT

In terms of Section 204 (1) of the Companies Act, 2013, the Company has appointed M/s. V Mahesh & Associates, Chennai to do the secretarial audit of the Company for the financial year 1 April, 2020 to 31 March, 2021. Their appointment was informed to the Registrar of Companies, Chennai vide SRN R44181733 form MGT-14 dated 2 July, 2020.

M/s. V Mahesh & Associates, have now completed their secretarial audit and have issued their certificate dated 8 May, 2021 as per the prescribed format in MR-3 to the shareholders of the Company, which is annexed to this Report as Annexure-2.

They have no adverse observations in their report and have confirmed that the Company has proper board processes and a compliance mechanism in place. They have also affirmed that the Company has complied with the relevant statutes, rules and regulations and secretarial standards, as applicable.

21. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO

The information required under Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is given in the Annexure-3 and forms part of this Report.

22. DETAILS RELATING TO DEPOSITS

The Company has not accepted any deposits during the period under review as envisaged under Section 73, 74 & 76 of the Companies Act, 2013. There have been additional filing requirements introduced with respect to liabilities not in the nature of deposits. The necessary form DPT 3 has been filed for the financial year 2019-20 on 25.06.2020 vide SRN No. R43113679

23. SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS

During the year under review, there have been no significant and material orders passed by any regulators / courts / tribunals that could impact the going concern status and the companys operations in future.

24. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The Company had made a loan of Rs.30 Crores to M/s. EWAC Alloys Limited, related party and a fellow subsidiary on an arms length basis at a rate not exceeding 9% per annum (Floater rate) as per Section 186 and 188 of the Companies Act, 2013 during the year under review. The Company has informed the same to Registrar of Companies by filing form MGT 14 dated 22 September, 2020 vide SRN R57728883.

The Board of Directors from time to time has authorized the Company to invest the surplus funds of the Company in deposits with Bank and investments in debt funds, liquid funds and fixed maturity plans with mutual funds for a tenor not exceeding 100 days. The investments are made in liquid and debt funds. The Company has earned an income of around Rs. 139 Lakhs for the period 1 April, 2020 to 31 March, 2021 in the form of dividends and fair value gains of investments. The Company has not given any guarantees other than bank guarantees in the normal course of business to meet contractual obligations.

25. RISK MANAGEMENT POLICY

In compliance with the requirements of Section 134 (3) (n) of the Companies Act, 2013 and as required under Regulation 21 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the Company has constituted a Risk Management Committee consisting of Mr Kevin J Johnson, as the Chairman (with effect from 24 March, 2021) Mr Rohit Gambhir, Managing Director and Mr. B Mohan, Chief Financial Officer as the Members of the Committee. The said Committee lays down the procedures to identify risks and the mitigation procedures and adopted a policy in this regard. The Board of Directors defines the roles and responsibilities of the Committee.

The policy on Risk Management has been hosted in the Companys website www.esabindia.com. The said committee updates the Board of Directors on a periodical basis on the material risks faced by the Company and the measures taken by the Company to mitigate the said risks. The Committee analysed various risks including those arising from COVID- 19, cyber security aspects and remote access control and other different controls necessary to be established with executives working from home. They suggested the actions to be taken to mitigate these risks which went a long way in the Company successfully managing all the risks. The Ministry of Home Affairs (MHA) had also during the pandemic had issued various guidelines for the plants to follow and the Company had complied with all these MHA guidelines to ensure that all the risks associated with the COVID 19 pandemic were adequately being addressed.

26. CORPORATE SOCIAL RESPONSIBILITY

As required under Section 134 (3) (o) read with Section 135 (1) of the Companies Act, 2013, the Company has constituted a Corporate Social Responsibility Committee. The Committee has Ms. Sabitha Rao, as the Chairperson and Mr Rohit Gambhir as the Member of the said Committee. Mr Kevin J Johnson was coopted as Member of the Committee in place of Mr Scott Allen Grisham with effect from 24 March, 2021.

The Committee formulated a policy on CSR and the Board of Directors approved the same. The policy as required under Section 135 (4) (a) of the Companies Act, 2013 has been uploaded on the Companys website www.esabindia.com.

As part of ongoing initiatives, the Company has been involved in promoting and educating safe welding practices including usage of all personal protective equipment during the process of welding to ensure total safety of the welders, especially at smaller towns through deployment of duly trained resources. The Company had also tied up with certain vocational institutions for educating the welders in Tier II and Tier III cities on welding through deployment of personnel.

The Company also tied up with All India Manufacturing Association at Irungattukottai for setting up a welding school which had given vocational training to the prospective welders to take welding as their profession for their livelihood. The Company also during the year 2021-2022 have planned various activities and have budgeted for these projects accordingly and had obtained the approval of the CSR Committee and the Board of Directors at its respective meetings held on 21 May, 2021 to carry out these activities. The CSR Report enclosed as annexure is in compliance with the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 amended with effect from 22 January, 2021.

During the year under review, the Company had also engaged budding engineers under the NEEM scheme for imparting vocational training in the neighbourhood of our Plant to provide training in welding consumables with the intent of providing skill sets relevant to employment.

The Company also initiated actions on environmental protection with expenditure on greenery and gardening outside of its plant locations.

The Company also initiated action in and around its plant at Ambattur on community and infrastructure development. The Company had also contributed towards prevention and control of COVID 19 and by providing sanitizers and necessary personal protective equipment.

The Companys spend on CSR increased from Rs. 70 Lakhs in the previous year to Rs. 133 Lakhs during the year under review. The Company had clear focus and tie up with various parties to expend the entire money on CSR Budget during the current year and shall carry forward its activities as envisaged in Schedule VII of the Companies Act, 2013, in a structured manner towards its stated objectives on CSR.

The Companys policy on CSR envisages expenditure in areas falling within the purview of Schedule VII of the Companies Act, 2013. The annual report on CSR activities is enclosed by way of Annexure - 4 to this report.

27. RELATED PARTY TRANSACTIONS

As required under Section 188 of the Companies Act, 2013 and Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the company places before the audit committee the list of related parties from whom they buy raw materials or finished goods, to whom the Company extends services or exports goods. The details of the basis of pricing and the margins on such transactions are also tabled. The Audit Committee accords its omnibus approval for such related party transactions on an annual basis. The updates on the transactions with the related parties are placed before the audit committee on a quarterly basis. The details are also placed before the Board of Directors for its information.

As required under Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the Company has formulated a policy on related party transactions and the same was approved by the Audit Committee and the Board of Directors. The said policy has been uploaded on the companys website www.esabindia.com.

All the transactions with the related parties entered into during the period under review have been in the ordinary course of business and at arms length basis. There have been no material related party transactions entered into during this period.

The details of related party transactions pursuant to Clause (h) of sub-section (3) of Section 134 of the Act, is enclosed in form no. AOC 2 as Annexure - 5.

28. FORMAL ANNUAL EVALUATION

As required under Section 134 (3) (p) of the Companies Act, 2013 and Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors had already approved the evaluation criteria for evaluating the performance of the Board of Directors, its committees and the performance of Independent Directors.

Accordingly, as required under Schedule IV of the Companies Act, 2013 and Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Independent Directors at their separate meeting held on 10 February, 2021 evaluated the performance of the non independent Directors and the Board as a whole. They also reviewed the performance of the Chairman of the Company and also assessed the quality, quantity and timeliness of flow of information between the Company Management and the Board that was necessary for the Board to effectively and reasonably perform their duties.

Also as required under Regulation 17 (10) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board assessed the performance of the Independent Directors as per the criteria laid down and has recommended their continuation on the Board of the Company at its meeting held on 21 May, 2021.

As required under the said regulations, the Board of Directors assessed the performance of the individual directors on the Board based on parameters such as, relevant experience and skills, ability and willingness to speak up, focus on shareholder value creation, high governance standards, knowledge of business, processes and procedures followed, openness of discussion / integrity, relationship with management, impact on key management decisions etc. The Members of the Committees of Audit, Nomination & remuneration, Stakeholders relationship, Corporate social responsibility and Risk management committee were also assessed on the above parameters and also in the context of the committees effectiveness vis-a-vis the Act and the listing regulations.

The Independent Directors fulfilled the independence criteria as specified under the above regulations and the Companies Act, 2013. The Board was satisfied with the evaluation results which reflected the overall engagement and the effectiveness of the Board and its committees. The Independent Directors also updated their current profiles by paying up the relevant fees in the website of the Ministry of Corporate Affairs on Independent Directors for a period of five years from 20202021. Since all the four Independent Directors possess the necessary experience and the expertise, they are exempted from taking up the online assessment test of the Ministry.

29. COST AUDITOR

As required under Section 148 of the Companies Act, 2013 the Board of Directors at its meeting held on 21 May, 2021 has appointed M/s. Geeyes & Co., Cost Accountants within the meaning of Cost & Works Accountants Act and holding a valid certificate of practice No.000044 as the Cost Auditor for conducting the Cost Audit for the financial year 2021-2022. The Audit Committee recommended the appointment subject to the compliance of the requirements stipulated in the relevant notifications issued by Ministry of Corporate Affairs.

The Company has received a letter dated April 16, 2021 from the Cost Auditor stating that the appointment, if made, will be within the limit prescribed under the Act.

The relevant Form CRA 2 for appointment of Cost auditor for the financial year 2020-21 was filed with the Registrar of Companies on 2 July, 2020 vide SRN R44250884.

The cost audit report issued by the Cost Auditor for the financial year ended 31 March, 2020 was filed with the Registrar of Companies vide form CRA - 4 dated 19 October, 2020 vide SRN R67693994.

30. RATIO OF REMUNERATION TO EACH DIRECTOR

As required under Section 197 (12) and Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the details of ratio of remuneration to each Director to the median employee remuneration are as given below:

A. Executive Director

Ratio of remuneration paid to Mr Rohit Gambhir, Managing Director vs the median employee is: 26:1 (24:1 for the year ended 31.3.2020).

B. The percentage increase in the median remuneration of employees in the financial year was 7.37%.

C. The number of management employees in the rolls of the Company as on 31 March 2021 is 545 (526 as on 31 March 2020).

D. Average percentile increase made in salaries of employees other than KMP in comparison to the percentile increase in the remuneration of KMP and the justification thereof.

The average percentile increases in salaries of employees other than KMP proposed was 8.03% while that of KMPs was 7.94%.

Justification thereof: Compensation revisions generally take into account performance metrics on sales, operating profits and working capital apart from specific elements attributable to various functions within the organization. Despite the difficulties in the operating environment, we exceeded the budget in all the three metrics. Taking into consideration the rate of inflation, it was decided to consider an average increase of 7.7%. This increase also includes a higher percentage of increase that has been considered for junior / middle level employees who have been considered for promotion.

As at the end of March 2021 the Company had 808 employees as against 755 at the end of 31 March 2020. The Company believes in providing a working environment that is focused on the customers, teamwork, continuous improvement, innovation and a competitive environment where employees strive to improve value for shareholders.

E. The key parameters for any variable component of remuneration availed by the Directors.

Variable Component to Mr Rohit Gambhir - This is linked to various parameters, financial and non-financial. Key elements include sales, operating profit, working capital, implementation of business systems.

Variable Component to Independent Directors - Is based on the roles and responsibilities and their contribution to the Company in their respective capacities. The Commission is individually determined based on their varying commitments of time and effort to the Board and to its committees.

The Board of Directors would like to affirm that the remuneration paid to the Executive and Non-executive Directors and the Key Managerial Personnel is in line with the Remuneration Policy of the Company.

Details of employees receiving the remuneration in excess of the limits prescribed under Section 197 of the Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed as a statement and given in Annexure - 6. In terms of first proviso to Section 136(1) of the Act, 2013 the Annual report, excluding the aforesaid annexure is now being sent. The annexure is available for inspection at the Registered Office of the Company and any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Company.

31. FINANCE

The Companys relationships with its Bankers viz. AXIS Bank Ltd. and HDFC Bank Ltd. continued to be cordial during the year. The Company would like to thank its Bankers for their support.

32. ENVIRONMENT, HEALTH AND SAFETY

The Company continued its commitment to industrial safety and environment protection and all its factories have obtained its ISO 14001 and OHSAS 18001 certification. Periodical audits are done by external and internal agencies to assess the continued levels of EHS efficiency of each of these plants and the OHSAS certification given is renewed after every such audit. The Company is also networked with the Group on EHS initiatives and works closely with them on initiatives and actions concerning EHS. During the year under review, the Companys Plants at Ambattur and Nagpur won global recognition for EHS initiatives.

Cautionary Statement

Certain statements in this Directors Report may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied in this Report.

33. LISTING WITH STOCK EXCHANGES

The Companys equity shares are listed with a) BSE Limited and b) National Stock Exchange of India Limited. The annual fees for both the exchanges have been paid promptly for the year 2020-2021. Pursuant to the requirements of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the company had executed fresh listing agreements with BSE Limited and National Stock Exchange of India Limited on 9 November, 2015.

The Company had 14,526 shareholders as at the end of the year 31 March, 2021. 98.99% of the shares are held in dematerialized form.

The Company is part of the Top 500 Companies by way of Market capitalization. The Company has adopted a dividend policy, formed a risk management committee and have also prepared a Business Responsibility Report for the year under review. The Companys dividend policy can be viewed in its website www.esabindia.com under investor relations.

As required under Regulation 39 (4) Read with Schedule VI of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the details of the shares issued by the Company consequent to amalgamation of erstwhile Maharashtra Weldaids Limited with the Company in 1994, the details of the physical shares which remains unclaimed and transferred to the Unclaimed Suspense Account and the reconciliation of the shares claimed by shareholders during the year 2020-2021 and the shares outstanding in the suspense account as on 31 March, 2021 is given below:

Sl. No. Details No. of shareholders No. of equity shares
1. Aggregate number of shareholders and the outstanding shares lying in the unclaimed suspense account at the beginning of the year i.e. as on 1.4.2020 55 4,010
2. Number of Shareholders who approached the Company during the year 1 50
3. Number of shareholders to whom shares were transferred from the unclaimed suspense account during the year 1 50
4. No. of shares transferred to Investor Education and Protection Fund 10 900
5. Aggregate Number of shareholders and the outstanding shares lying in the unclaimed Suspense Account at the end of the year i.e. 31.3.2021 44 3,060

44 shareholders holding 3,060 equity shares constituting about 0.02% of shares have not made their claim from the Company on the shares outstanding in the Unclaimed Suspense Account of ESAB India Limited. The voting rights for these shares shall remain frozen until these are claimed by the rightful owners.

34. CORPORATE GOVERNANCE

In terms of Chapter IV Regulation 15 Read with Schedule II of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 a Corporate Governance Report is made part of this Annual report.

A certificate from the Statutory Auditors of the Company regarding compliance of the conditions stipulated for Corporate Governance as required under Clause E of Schedule V read with Regulation 34 (3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is attached to this report.

The declaration by the Managing Director addressed to the Members of the Company pursuant to Clause D of Schedule V Read with Regulation 34 (3) Chapter IV of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 regarding adherence to the Code of Conduct by the Members of the Board and by the Members of the Senior Management Personnel of the Company is also attached to this Report.

35. POLICY ON PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE ACT

The Company has also adopted the mandatory policy on Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013. Employees have been sensitized on the provisions of this enactment and the Company has also constituted an internal complaints committee with effect from 30 October, 2013 to deal with complaints, if any, under the said Act. The Committee also has an independent external NGO representative as one of its members. The Committee meets as and when requirement arises. The Company believes in providing safe working place for the Women in the Company and adequate protection are given for them to carry out their duties without fear or favour. All the employees of the Company as a part of induction are sensitized about the provisions of the said Act.

As required under Section 21 of Chapter VIII of the said Act, the Committee has submitted its annual report in the prescribed format to the designated authority within the stipulated period.

36. SECRETARIAL STANDARDS

As on 31 March, 2021 all the applicable Secretarial Standards which have been notified have been complied with by the Company.

A certificate of compliances issued by the Secretarial Auditor M/s. V Mahesh & Associates dated 8 May, 2021 is enclosed as Annexure - 2 and forms part of this Report.

37. ISSUE OF SHARES

The Company during the year under review has not issued any SWEAT equity shares or shares with differential rights or under Employee stock option scheme nor did it buy back any of its shares.

38. ACKNOWLEDGEMENTS

Your Directors place on record their appreciation for the confidence reposed and continued support extended by its customers, suppliers and shareholders.

Your Board would like to place on record, its sincere appreciation to the employees for having played a very significant part in the Companys operations till date and more so in a difficult year that we went through.

For and on behalf of the Board of Directors
Kevin J Johnson
Chennai Chairman
21 May, 2021 Anm ml DK+ OH 00.0001