H P Cotton Textile Mills Ltd Directors Report

Remuneration of the Executive Directors for the financial year 2025-26

Notes:

(1) The above remuneration includes Rs. 7.32 lacs and Rs. 5.69 lacs payable to Mr. Kailash Kumar Agarwal and Mr. Raghavkumar Agarwal, respectively, for FY 202526, which was paid in FY 2026-27.

(2) The above remuneration includes Bonus and Leave Travel Allowance for the FY 2024-25, paid in FY 202526.

(3) The tenure of Mr. Kailash Kumar Agarwal and Mr. Raghavkumar Agarwal is for five (5) years from their respective date of appointment and can be terminated by either party by giving the other party three months notice in writing. They are also eligible for re-appointment. There is no separate provision for payment of severance fees.

(4) No Commission was paid to any of the Executive Director during the FY 2025-26.

(5) No performance linked incentive was paid to any of the Executive Director during the FY 2025-26.

(6) The Company does not have any stock option plan. Accordingly, none of the Executive Directors hold stock options as on March 31,2026.

Remuneration of the Non-Executive Directors for the

financial year 2025-26

Notes:

(1) During FY 2025-26, the Company did not have any material pecuniary relationship or transactions with Non-Executive Directors apart from paying Directors remuneration.

(2) No Commission was paid to any of the Non-Executive Director during the FY 2025-26.

(3) No performance linked incentive was paid to any of the Non-Executive Director during the FY 2025-26.

(4) The Company does not have any stock option plan. Accordingly, None of the Non-Executive Directors hold stock options as on March 31, 2026.

(5) None of the Non-Executive Director holds any Equity Share(s) or Convertible Instrument(s) of the Company as on March 31,2026.

PERFORMANCE EVALUATION AND ITS CRITERIA

In terms of the provisions of the Section 178(2) of the Act, the Board has adopted a formal mechanism for evaluating its performance as well as that of its Committees and individual directors, including the Chairman of the Board. A structured questionnaire was prepared and circulated to the Directors for each of the evaluation.

Performance of the Board was evaluated by each Director on the parameters such as Structure and Composition of Board, Meetings of the Board, Functions of the Board, Board & Management etc.

Board Committees were evaluated on the parameters such as Mandate and Composition of Committee, Effectiveness of the Committee, Structure of the Committee and meetings, Independence of the Committee from the Board, Contribution to decisions of the Board etc.

Performance of the Chairman was evaluated by all other Directors (except the Director himself) on the parameters such as Knowledge and Competency, Fulfilment of

Functions, Ability to function as a team, Initiative, Availability and attendance, Commitment, Contribution, Integrity, Impartiality, Commitment, Ability to keep shareholders interests in mind etc.

Directors were also evaluated individually by all other Directors (except the Director himself) on the parameters such as Knowledge and Competency, Fulfilment of

Functions, Ability to function as a team, Initiative, Availability and attendance, Commitment, Contribution, Integrity etc.

Meeting of Independent Directors without the attendance of Non-Independent Directors, and members of the management of the Company was held on March 18, 2026. The Independent Directors, inter-alia, evaluated performance of Non-Independent Directors, the Chairman of the Company and the Board as a whole for FY 2025-26. They also assessed the quality, content and timeliness of flow of information between the Management and the Board that is necessary for the Board to effectively and reasonably perform its duties.

Outcome of the evaluation was submitted to the Chairman of the Company. The Directors discussed and expressed their satisfaction with the entire evaluation process.

CORPORATE SOCIAL RESPONSIBILITY

During the year under review, the provisions of Section 135 of the Act and rules made thereunder, regarding Corporate Social Responsibility("CSR") are not attracted to the Company as the Company does not fall under the threshold

limit of net worth of Rs. 500 crore or turnover of Rs. 1,000 crores or a net profit of Rs. 5 Crore during the financial year 2025-26.

INTERNAL FINANCIAL CONTROLS

A well-established, independent, multi-disciplinary Internal Audit team operates in line with governance best practices. It reviews and reports to management and the Audit Committee about compliance with internal controls and the efficiency and effectiveness of operations as well as the key process risks.

The Company has in place adequate internal financial controls with reference to Financial Statements and such controls were operating effectively as at March 31, 2026. These controls have been designed to provide a reasonable assurance with regard to maintaining of proper accounting controls for ensuring reliability of financial reporting, monitoring of operations. During the year, such controls were tested and no reportable weaknesses in the design or operations were observed.

WEBLINK OF ANNUAL RETURN

PARTICULARS OF REMUNERATIONTO EMPLOYEES AND RELATED DISCLOSURES

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 annexed herewith as Annexure - I forming integral part of this report.

Statement containing particulars of top 10 employees and particulars of employees as required under Section 197 (12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided as a separate Annexure forming part of this report. In terms of proviso to Section 136(1) of the Act, the Report and Accounts are being sent to the Shareholders, excluding the aforesaid Annexure. The said Statement is also open for inspection. Any member interested in obtaining a copy of the same may write to the Company Secretary. The

Managing Director and the Executive Director, listed in the said Annexure, are related to each other. However, none of the employee drawing remuneration in excess of the limits set out in the Rule 5(2)(i), Rule 5(2)(ii) and Rule 5(2)(iii) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 during the year under review.

LOANS, GUARANTEES AND INVESTMENTS

Particulars of investments made under the provisions of Section 186 of the Act have been disclosed in Note No. 4 to the Financial Statements forming integral part of the Annual Report. Further, no loans or guarantees were extended in the financial year 2025-26 under the provisions of Section 186 of the Act.

RELATED PARTY TRANSACTIONS

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in compliance with all the applicable provisions of the Act in respect of such transactions. Requisite approval of the Audit Committee and the Board (wherever required) was obtained by the Company for all Related Party Transactions. Prior omnibus approval of the Audit Committee and the Board is obtained for the transactions which are foreseeable and of a repetitive nature. Further, your Company has not entered into any arrangement / transaction with related parties which could be considered material in accordance with the provisions of the Act and accordingly, there are no transactions under sub-section (1) of section 188 of the Act that are required to be reported in Form AOC-2, hence the said form does not form part of this report. However, names of Related Parties and details of transactions with them have been included in Notes to the financial statements provided in the Companys financial statements under Indian Accounting Standards 18.

AUDITORS AND AUDITORS REPORT

Statutory Auditors

M/s D. Kothary & Co., Chartered Accountants (FRN: 105335W) were appointed as the Statutory Auditors of the Company to hold office for a term of 5 years from the conclusion of the 42^nd Annual General Meeting (AGM) held on 28^th September, 2023 until the conclusion of the 47^th AGM of the Company.

As required under the provisions of Section 139(1) and 141 of the Act, read with the Companies (Accounts and Auditors) Rules, 2014, the Company has received a written consent and certificate from M/s D. Kothary & Co., Chartered Accountants (FRN: 105335W) to the effect that they are eligible to be appointed as Statutory Auditors of the Company.

The Auditors Report read together with Annexure referred to in the Auditors Report do not contain any qualification, reservation, adverse remark or disclaimers.

Cost Auditors

In terms of Section 148 of the Act, the Company is required to maintain cost records of the Company. Cost records are prepared and maintained by the Company as required under Section 148(1) of the Act.

However, in accordance with the provisions with the Rule 4(3) of the Companies (Cost Records and Audit) Rules, 2014 as amended thereto, the requirement for Cost Audit under the Rules shall not apply to a Company whose revenue from export, in foreign exchange, exceeds 75% of its total revenue or which is operating from a SEZ or which is engaged in generation of electricity for captive consumption through Captive Generating PIant.

Your Companys turnover is above Rs. 100 crore during the year under review but more than 75% of the Companys turnover is earned from exports in foreign exchange by the Company. Therefore, the Company is exempted from the said requirement of cost audit.

Therefore, the Company has not appointed any Cost Auditor for auditing the cost records of the Company.

Secretarial Auditors

Mr. Tarun Jain (Membership No. F4645; CoP No. 4317), Proprietor of M/s. Tarun Jain & Associates, Company Secretaries, was appointed as Secretarial Auditors of the Company by the Board of Directors of the Company at its meeting held on August 08, 2025, for the FY 2025-26.

The Secretarial Audit Report for the financial year ended March 31, 2026 received from Mr. Tarun Jain, Proprietor of M/s Tarun Jain & Associates, Company Secretaries, Secretarial Auditors of the Company is annexed herewith as Annexure - II forming integral part of this report.

The said report is self-explanatory and does not contain any qualification, reservation, adverse remark or disclaimers.

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

Your Company has only one wholly owned subsidiary Company with a name "HP MMF TEXTILES LIMITED" and it has not commenced its operations yet. Further, there are no Associates and Joint Ventures during the financial year 2025-26.

The Company has, in accordance with Section 129(3) of the Act prepared Consolidated Financial Statements of the Company and its subsidiary which form part of the Annual Report. Further, the report on the performance and financial position of the subsidiary company of your Company is presented in Form AOC-1 is annexed herewith as Annexure - III forming integral part of this report.

MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION THE COMPANY

Except as disclosed elsewhere in the Annual Report, there have been no material changes and commitments which can affect the financial position of the Company between the end of the financial year and the date of report.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information required under Section 134(3)(m) of the Act, read with the Companies (Accounts) Rules, 2014 is provided as follows and forms part of this report.

A) Conservation of Energy:

i. Steps taken or impact on conservation of energy:

• Ensured sustained equipment efficiency through structured preventive maintenance practices.

• Implemented energy-saving measures to minimize idle load across facilities.

• Optimized production processes to reduce energy consumption and improve resource efficiency.

• Conducted awareness programs to promote energy-conscious behavior among employees.

ii. Steps taken by the Company for utilizing alternate sources of energy:

• Adoption of biomass as an alternative fuel in boiler operations

• Consumption of biomass at the manufacturing facility

iii. Capital investment on energy conservation equipment:

The Company has not incurred major capital investment on energy conservation equipments but focused on optimum utilization of available resources.

B) Technology Absorption:

i. Efforts made towards technology absorption: The

Company utilizes advanced technology to assess raw material quality and implements precision control systems across all stages of thread and yarn manufacturing, ensuring high product quality and operational efficiency.

ii. Benefits derived from technology absorption:

The integration of advanced technologies drives higher productivity, optimizes operational costs, fosters innovation, and supports continuous product development.

iii. Information regarding imported technology (Imported during last three years reckoned from the beginning of the financial year):

iv. Expenditure incurred on Research and Development:

None

C) Foreign Exchange Earning and Out-Go:

DIRECTORS RESPONSIBILITY STATEMENT

The Directors hereby confirm:

a) that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b) that they have selected such accounting policies as mentioned in the Notes to the financial statements have been applied consistently and judgments and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of

affairs of the Company at the end of the financial year and of the profit of the Company for that period;

c) that proper and sufficient care has been taken 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;

d) that the annual accounts have been prepared on a going concern basis;

e) that proper internal financial controls were followed by the Company and that such internal financial controls are adequate and were operating effectively; and

f) that proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively.

RISK MANAGEMENT

Risk mitigation continues to be a key area of concern for the Company, which has regularly invested in insuring itself against unforeseen risks. The Companys stocks and insurable assets like building, plant & machinery, computer equipment, office equipment, furniture & fixtures, lease hold improvements and upcoming projects have been adequately insured against major risks.

The Board of Directors of the Company has also formulated Risk Management Policy in accordance with the Act. The aim of risk management policy is to maximize opportunities in all activities and to minimize adversity. The policy includes identifying types of risks and its assessment, risk handling, monitoring and reporting, which in the opinion of the Board may threaten the existence of the Company.

VIGIL MECHANISM

The Company has established a robust Vigil Mechanism and a whistle blower policy in accordance with the provisions of the Act, with a view to provide its directors and employees an avenue to report genuine concerns of unethical behavior, actual or suspected fraud or violation of the codes of conduct and to provide adequate safeguard for protection from any victimization.

Accordingly, the Company has established a Compliance Task Force to evaluate and investigate the actual or suspected fraud or violation of the of applicable laws and regulations and the Code of Conduct and Ethics. The Compliance Task Force operates under the supervision of the Audit Committee.

Employees are required to report actual or suspected violations of applicable laws and regulations and the Code of Conduct and Ethics. Such genuine concerns disclosed as per Policy are called "Protected Disclosures" and can be raised by a Whistle-blower through an e-mail or a letter to the Chairman of Compliance Task Force or to the Chairman of the Audit Committee.

This Policy inter-alia provides a direct access to the Chairman of the Audit Committee and affirms that no Director/employee have been denied access to the Chairman of the Audit Committee and that no complaints were received during the year.

PREVENTION OF SEXUAL HARASSMENT

The Company has adopted a policy on sexual harassment at workplace in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("POSH Act"). All the employees (permanent, contractual, temporary, trainees) are covered under this policy.

Details of complaints under the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 for the FY 2025-26 are as follows:

(a) Number of complaints of sexual harassment received in the year: Nil

(b) Number of complaints disposed off during the year: Nil

(c) Number of cases pending for more than ninety days: Nil

The Company has complied with the provisions relating to the constitution of Internal Complaints Committee under the POSH Act to redress complaints received regarding sexual harassment. The Internal Complaints Committee was reconstituted by the Board of Directors of the Company during the year under review.

CORPORATE GOVERNANCE

In terms of provision of regulation 15(2) of SEBI Listing Regulations, compliance with the Corporate Governance provisions as specified under regulations 17 to 27 and clause

(b) to (i) of sub-regulation (2) of regulation 46 and para C, D and E of Schedule V are not applicable to the Company as the Companys paid-up equity share capital was below Rs. 10 crores and the Net worth was below Rs. 25 crores as on the last date of each preceding three financial years

2022-23, 2023-24 and 2024-25. Therefore, the Company is not required to comply with the Corporate Governance provisions of the SEBI Listing Regulations w.e.f. April 01, 2025 till the Company exceeds the criteria again as specified under Regulation 15(2) of SEBI Listing Regulations after the financial year 2024-25 Hence, Corporate Governance report does not form part of this Annual Report.

DECLARATION ON CODE OF CONDUCT AND ETHICS

All the Boards Members and the Senior Management have confirmed compliance with the Code for the Financial Year ended March 31,2026. The declaration to this effect signed by Chief Executive Officer (CEO), forming integral part of this report.

OTHER STATUTORY DISCLOSURES

During the year under review:

1. No significant and material orders were passed by the Regulators/ Courts/ Tribunals which impact the going concern status and Companys operations in future.

2. No equity shares were issued with differential rights as to dividend, voting or otherwise.

3. No sweat equity shares were issued.

4. The Company has not issued any shares pursuant to the Employee Stock Options Scheme.

5. The Company has not issued any Bonus Shares.

6. The Company does not have any scheme of provision of money for the purchase of its own shares by employees or by trustees for the benefit of employees.

7. No deposits have been accepted by the Company from the public. The Company had no outstanding, unpaid or unclaimed public deposits at the beginning and end of FY 2025-26.

8. Neither the Managing Director nor the Whole-time Directors of the Company receive any remuneration or commission from any of its subsidiaries as on March 31,2026.

9. No Change in nature of Business of Company.

10. No fraud has been reported by the Statutory Auditors and Secretarial Auditors to the Audit Committee or the Board.

11. No Corporate Insolvency Resolution Process initiated under the Insolvency and Bankruptcy Code, 2016.

12. No instance of onetime settlement with any Bank or Financial Institution.

13. There was no revision of financial statements and Boards Report of the Company.

14. The Company has complied with the provisions of the Maternity Benefit Act, 1961 and rules made thereunder.

The Company has complied with the applicable Secretarial Standards on Meetings of the Board of Directors (SS-1) and on General Meetings (SS-2) issued by the Institute of Company Secretaries of India.

CAUTIONARY STATEMENT

Certain statements in the Directors Report describing the Companys objectives, projections, estimates, expectations or predictions may be forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operations include labour and material availability, and prices, cyclical demand and pricing in the Companys principal markets, changes in government regulations, tax regimes, economic development within India and other incidental factors.

ACKNOWLEDGEMENTS

We extend our sincere thanks to our customers, vendors, dealers, investors, business partners, and bankers for their unwavering support throughout the year. We also wish to place on record our appreciation for the valuable contributions of our employees across all levels, whose commitment, collaboration, and resilience have been instrumental in overcoming challenges.

We gratefully acknowledge the continued support of the Government of India, State Governments, and other regulatory authorities and agencies, and look forward to strengthening this association in the years ahead.