Kernex Microsystems (India) Ltd Directors Report.

To

The Members,

Kernex Microsystems (India) Limited.

Your Directors have pleasure in presenting the Twenty Ninth Annual Report together with the audited financial statements of your company for the year ended 31 March 2021.

(Rs. in Lakhs)

Particulars 2020-21 2019-20
Sales and Other Income 1,740.95 3,288.45
Pro t/Loss before Depreciation, Finance Cost and Tax 289.35 1103.48
Less:- Finance Cost 91.44 127.72
Less:- Depreciation 155.46 173.08
Less: Exceptional items - -
Pro t/Loss after Depreciation, Interest and before tax 42.45 802.68
Tax expense 5.27 (3.39)
Pro t / Loss after Tax 37.18 806.07
Add: Balance brought forward from previous year (3,703.25) (4,470.41)
Adjustment consequent to revision of useful life of certain assets pursuant to Schedule II of Companies Act, 2013 - -
Balance carried forward to Balance sheet (3,662.13) (3,664.34)
Pro t available for appropriation - -
Earnings Per Share (Rs.)
- Basic 0.30 6.45
- Diluted 0.30 6.45
Appropriations:
Transfer to General Reserve - -
Proposed Dividend - -
Income Tax on proposed Dividend - -
Balance carried to the Balance sheet (3,662.13) (3,664.34)

2. Subsidiary and Joint Venture details with consolidated financial statement

Your Company has one 100% wholly owned subsidiary Avant Garde Infos ystems Inc, In USA and one Joint Venture named KERNEX TCAS JV in India and there were no associate Companies as of 31 March 2021. There has been no change in the nature of business of subsidiary and JV during the year under review. In accordance with section 129 (3) of the Companies Act, 2013, the Company has prepared Consolidated financial statements of the Company and the JV & subsidiary in the form and manner as that of its own in compliance with the accounting standards and the listing regulations of the stock exchanges which forms part of the Annual Report for laying before the Annual General Meeting.

A report on the information about the subsidiary and Joint Venture is annexed as Annexure A to this report.

3. Material changes and commitments affecting the financial position of the company

There have been no material changes and commitments affecting the financial position of your Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the Report.

4. Share Capital

There was no change in Share Capital of your Company during the year.

5. Dividend and Reserves

Your company in the absence of distributable profits, hence not declared any dividend during the year. And no amount was transferred to reserves also.

6. Directors and Key Managerial Personnel

In accordance with the provisions of Section 152 of the Companies Act, 2013 Sri. Sitarama Raju Manthena and Ms. Sreelakshmi Manthena, Directors of the company retires by rotation and being eligible offers themselves for re-appointment.

The brief pro les of the Directors who are to be appointed/re-appointed have been furnished in the notice convening AGM.

Members are aware that during the year under review Sri. Sitarama Raju Manthena has been appointed as Whole-Time Director of the Company on 02.09.2020 and the same was approved by the shareholders of the Company at their 28th Annual General Meeting held on 30th September 2020.

7. Declaration by Independent Directors

All the Independent Directors have submitted their disclosures to the Board that they fulfill all the requirements as stipulated in Section 149 (6) of the Companies Act 2013 so as to qualify themselves to be appointed as Independent Directors under the provisions of the Companies Act, 2013 and the rules framed there under. In terms of Section 150 of the Act read with Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014, as amended, Independent Directors of the Company have enrolled their names in the data bank of Independent Directors maintained with the Indian Institute of Corporate Affairs.

8. Nomination and Remuneration Policy of Directors, Key Managerial Personnel and other Employees

In terms of section 178 (1) of the Companies Act 2013 the Board on the recommendation of the Nomination and remuneration committee approved the criteria and policy for selection and appointment of directors, key managerial persons and their remuneration. The remuneration policy forms part of the report on corporate governance.

9. Board Evaluation

Pursuant to the provisions contained in the Companies Act 2013 and listing regulations the Board has carried out annual performance evaluation of its own members, The chairman of the Board, individual directors as well as the evaluation of the working of the Audit, Nomination and Remuneration committee and other committees. The evaluation was based on the attendance, contribution, independence of judgment and preparedness for the meetings

10. Number of Meetings of the Board of Directors

During the financial year 2020-21 the Board of Directors of the Company met 4 times on 30/07/2020, 02/09/2020, 13/11/2020 and 13/02/2021. A separate meeting of the Independent Directors of the Company held during the year on 30/01/2021 as required under Section 149 (8) read with the Schedule IV (VII) of the Companies Act 2013 and clause 25 (3) of Securities Exchange Board of India (Listing obligations and disclosure requirements) Regulations 2015. Further, due to covid 19 pandemic, the statutory authorities have given a relaxation for the time gap between two meetings. The Company has complied with the relaxations given by the statutory authorities

11. Deposits

During the year, your Company has not accepted any deposits, within the meaning of Section 73 of the Companies Act, 2013 read with Companies (Acceptance of Deposits) Rules, 2014. No amount on account of principal or interest on deposits from public was outstanding as on Balance Sheet date. Further, the Company has availed an amount of Rs. 5.19 crores as an unsecured loan from Sri. Anji Raju Manthena, Director of the Company which is exempted from the de nition of Deposit. The outstanding unsecured loan balances which were exempted from the de nition of Deposit as on 31st March 2021 is Rs. 10.60 crores.

12. Regulatory / Court Orders

No significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status of the Company and its future operations.

13. Disclosure under the sexual harassment of women at workplace (prevention, prohibition and redressal) Act, 2013

Your Company has put in place a Policy for prevention of Sexual Harassment of Women at the Workplace in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) of the Company has been constituted to redress complaints regarding sexual harassment.

During the period under review, the Company has not received any complaints.

14. Director’s Responsibility Statement

Pursuant to section 134 (3) (c) of the Companies Act, 2013 the Directors to the best of their knowledge hereby state and con rm that

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

b) the Directors had 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 loss of the Company for that period

c) the Directors had 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

d) the Directors had prepared the annual accounts on a going concern basis and

e) the internal financial controls to be followed by the Company were laid down and such financial controls were adequate and were operating effectively

f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and were operating effectively

15. Internal Financial Controls

The Company has laid down policies and procedures to be adopted for ensuring the orderly and efficient conduct of its business, including adherence to companys policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information. An independent audit committee of the Board reviews the adequacy of internal controls.

16. Particulars of Loans, Guarantees and Investments.

The details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in notes forming part of the financial statements.

17. Committees of the Board

The Board of Directors has the following Committees:

1. Audit Committee

2. Nomination and Remuneration Committee

3. Stakeholders Relationship Committee

4. Risk Management Committee

5. Corporate Social Responsibility Committee

The details of the Committees along with their composition, number of meetings and attendance at the meetings are provided in the Corporate Governance section of this Report.

18. Corporate Social Responsibility (CSR)

The Company had adopted a Corporate Social Responsibility Policy and constituted a CSR Committee as per the provisions of Section 135 of the Companies Act 2013. Further the Company was not required to spend any amount towards CSR as the average three years net profits of the Company is in negative. Hence, the requirement of disclosure under the said provisions and rules are not applicable to the Company.

19. Related Party Transactions

All the related party transactions by the Company during the year 2020-21 were on an arms length basis and were in the ordinary course of business and as such the provisions of section 188 are not attracted. There are no materially significant Related Party Transactions with Promoters, Directors, Key Managerial Persons or other designated persons during the year. The details of the related party transactions entered by the company during the year under the provisions of section 188 of the Companies Act, 2013 in Form AOC 2 is annexed as Annexure B to this report.

20. Vigil Mechanism

Your Company in compliance with the provisions of Section 177 (9) of the Companies Act, 2013 framed a whistle Blower Policy/Vigil Mechanism for reporting illegal or unethical behavior. The employees are free to report violations of applicable laws and regulations and the Code of Conduct. The Audit Committee reviews reports received from the employees who may also report to the Chairman of the Audit Committee. During the year under review, no employee was denied access to the Audit Committee. The Directors and senior management staff are to maintain confidentiality of the reporting and ensure that the whistle blowers are not subjected to any kind of discrimination.

21. Familiarization Programs for Independent Directors,

The Company familiarizes all the independent directors about their roles, rights and responsibilities in the Company, nature of Industry, Risk Management, Board evaluation process and procedures, financial controls and management, Board effectiveness, strategic direction etc., The Directors also were explained in detail the compliances required from them under the Companies Act, SEBI (LODR) Regulations, 2015 and other relevant regulations and their af rmation taken with respect to the same. With a view to familiarize with the Companys operations, the Directors also were given detailed presentations giving the organizational set up of the Company, the functioning of various divisions / departments, the Companys market share and the markets in which it operates, governance and internal control processes and other relevant information pertaining to the Companys business. The Whole time Director/ CEO also has personal discussions from time to time with the Independent Directors. The above initiatives help the Directors to understand the Company, its business and the regulatory framework in which the Company operates and equips them to effectively fulfill their role as Independent Directors of the Company.

22. Annual Return

The Annual Return of the Company as on 31 March, 2021 is available on the Companys website and can be accessed at www.kernex.in

23. Risk Management

Your Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. These are also discussed at the meetings of the Audit Committee and the Board, Your Company has put in place internal control systems and processes to optimize the risk mitigation measures for review by the audit Committee and approval by the Board. The executive management is guided from time to time by the Board to improve the risk mitigation measures and initiate timely action

24. Transfer of unclaimed dividend

There is no Un-claimed dividend to be transferred to IEPF (Investor Education and Protection Fund).

25 . Auditors

Statutory Auditors

M/s P.R.S.V & Co., LLP, Chartered Accountants, are the statutory auditors of your Company and they hold office until the conclusion of the thirtieth AGM to be held in the year 2022.

Reply to the Comments made in the Statutory Auditors Report

1. Other financial assets amounting to Rs. 6.00 crores which has been outstanding for more than 3 years has been subject to balance confirmation from the respective party/(s).

The management of Company is con dent of recovering these amounts.

Secretarial Audit

In terms of section 204 of the Companies Act2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company has appointed M/s. P S Rao & Associates, Company Secretaries to conduct Secretarial Audit for the year 2020-21 and their report is annexed as Annexure C to this report.

Reply to the Comments made in the Secretarial Auditors Report

1. in terms of SEBI Circular No.Cir/ISD/3/2011 the entire shareholding of Promoters/ Persons Acting in- Concert (PACs) has not been dematerialized. Therefore, the stock exchanges have kept the trading in the shares of the Company under trade-to-trade.

The Company is pursuing the same but unable to fulfill the condition as the promoters were not responded

INTERNAL AUDITORS:

The Board of Directors based on the recommendation of the Audit Committee has appointed M/s. Thirupathi and Associates. Chartered Accountants, Hyderabad, as the Internal Auditors of your Company. The Internal Auditors are submitting their reports on quarterly basis.

26. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and outgo:

The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo as required under section 134 (3) (m) of the Companies Act 2013 read with Rule 8 (3) of the Companies (Accounts) Rules 2014 is furnished and annexed as Annexure D to this report.

27. Particulars Relating to Remuneration of Directors/Key Managerial Personnel and Employees.

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 are provided separately and annexed as Annexure E to this report.

In terms of Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company does not have any employee who is employed throughout the financial year and in receipt of remuneration of Rs.102 Lakhs or more, or employees who are employed for part of the year and in receipt of Rs. 8.50 Lakhs or more per month.

The Company does not have any employee who is employed throughout financial year or part thereof, who was in receipt of remuneration in financial year under review which in aggregate, or as the case may be, at a rate which in the aggregate is in excess of that drawn by the Managing Director or Whole time director and holds by himself or along with his spouse and dependent children not less than 2% of the equity shares of the Company.

28. Other General Disclosures

No disclosure or reporting is required of the following as:-

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

b. No sweat equity shares were issued

c. No remuneration or commission was received by the Managing Director/Whole-time Director of the Company from subsidiary Company.

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

29. Corporate Governance Report

Your Company is committed to adhere to the corporate governance requirements. The report on Corporate Governance as stipulated under Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is given separately and annexed as Annexure F to this report.

The requisite certificate from the Practicing Company Secretary confirming compliance with the conditions of corporate governance is attached.

30. Management Discussion & Analysis (MDA)

Managements Discussion and Analysis Report for the year under review, as stipulated under Regulation 34(2) (e) of the Listing Regulations is presented in a separate section forming part of the this report and annexed as Annexure G.

31. Acknowledgements:

Your Directors would like to express their sincere appreciation for the guidance, assistance and cooperation received from the Indian Railways, South Central Railways, RDSO, Egyptian Railways, Sri Lanka Railways, State Bank of India, Government authorities and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the commendable and dedicated contribution of all employees.

By order of the Board
For Kernex Microsystems (India) Limited
Sd/- Sd/-
M Badari Narayana Raju Sitarama Raju Manthena
Whole-Time Director Whole-Time Director
DIN: 07993925 DIN: 08576273
Place: Hyderabad Place: Hyderabad
Date: 01.08.2021 Date: 01.08.2021