Kernex Microsystems India Ltd Directors Report

To

The Members,

Kernex Microsystems (India) Limited.

Your Directors take pleasure in presenting the Thirty-Fourth Annual Report, along with the audited financial statements of your Company for the year ended 31st March 2026.

1. Financial Results

During the year under review, the Company registered a Profit before tax of Rs. 10,942.47 lakhs for the year ended March 31, 2026, on a standalone basis. A summary of the financial performance of the

Company on a standalone and consolidated basis for the financial below:

(Rs. In Lakhs)

	Standalone		Consolidated
Particulars	2025-26	2024-25	2025-26	2024-25
	Current Year	Previous Year	Current Year	Previous Year
Revenue from Operations	42,580.96	18,965.11	43,022.12	18,977.39
Other Income	276.56	218.02	224.66	144.71
Total Revenue	42,857.52	19,183.13	43,246.78	19,122.10
Total Expenditure Before Interest,	28,518.60	14,885.91	28,145.23	14,896.77
Depreciation and Exceptional Item
Profit/(Loss) before Interest,	14,338.91	4,297.22	15,101.55	4,225.33
Depreciation and Exceptional Items, Prior Period Items & tax
Less: Prior period Items	-	-	-	-
Profit/(Loss) Before Interest,	14,338.91	4,297.22	15,101.55	4,225.33
Depreciation and Exceptional Item
Finance Charges	2,814.22	677.01	2,815.07	691.94
Gross Profit/(Loss) before Depreciation and Exceptional Item	11,524.69	3,620.21	12,286.48	3,533.39
Depreciation	582.22	282.78	582.22	282.79
Net Profit(Loss) Before Tax and	10,942.47	3,337.43	11,704.26	3,250.60
Exceptional Item
Exceptional Item	-	-	-	-
Provision for Tax	2,879.96	(1,754.28)	2,879.96	(1,754.28)
Net Profit/(Loss) After Tax	8,062.52	5,091.71	8,824.30	5,004.88
EPS
Basic	48.072	30.381	52.71	29.975
Diluted	48.068	30.353	52.67	29.947
Proposed Dividend on Equity Shares	-	-	-	-
Tax on proposed Dividend	-	-	-	-

The Standalone and Consolidated Financial Statements of the Company for the financial year ended March 31, 2026 have been prepared in accordance with the Indian Accounting Standard (Ind AS) as notified by the Ministry of Corporate Affairs and as amended from time to time.

Standalone

During the year under review, on standalone basis, the total Income from the operations increased by 224.52%. The same was Rs. 42,580.96/- Lakhs for the current FY 2025-26 as compared to Rs. 18,965.11/- Lakhs for the previous FY 2024-25. Total Net Profit increased by 158.35%, the same was Rs. 8,062.52/- Lakhs for the current FY 2025-26 as compared to Rs. 5,091.71/- Lakhs for the previous FY2024-25.

Consolidated

During the year under review, on consolidated basis, the total Income from the operations increased by 226.70%. The same was Rs.43,022.12 Lakhs for the current FY 2025-26 as compared to Rs. 18,977.39 Lakhs for the previous FY 2024-25. Total Net Profit increased by 176.31%, the same was Rs. 8,824.30 Lakhs for the current FY 2025-26 as compared to Rs. 5,004.88 Lakhs for the previous FY2024-25.

2. Amount, if any, which the Board proposes to, carry to any reserves

The Directors of the Company have not proposed to transfer any amount to reserves for the year under review.

3. Dividends

During the period under review, the Directors of the Company have not declared any dividend for the financial year

4. State of Company s Affairs

Your Company recorded a turnover of Rs.42,580.96 Lakhs for the financial year 2025-26. The Company has reported a profit before tax of Rs. 10,942.47 Lakhs, compared to a profit of Rs. 5,004.88 Lakhs in the previous financial year.

North Central Railways (NCR Projects):

1. NCRA 382/408 RKM:

The supply and installation works for the entire section is complete along with the supply of maintenance spares.

The commissioning is completed for the below mentioned sections:

Chipyana Burgz (Excluding) - Tundla (Excluding) [2-Jun-26] : 175 RKm

Tundla (Excluding) - Pankidham (Excluding) [1-Jul-26] : 207 RKm The work in the balance section is in progress as planned.

All the locos were installed and maintenance phase has started The ISA documentation for the balance section is in progress

2. NCRB 250/343 RKM:

The supply and installation works for the entire section is complete along with the supply of maintenance spares. The commissioning is completed for the below mentioned sections: Kanpur (Excluding)-Prayagraj (Excluding) [22-Mar-26] : 190 RKm

Mirzapur (Including)- Block Hut K (Including) [30-Jul-26] : 60 RKm

The work in the balance section is in progress as planned. All the locos were installed and maintenance phase has started The ISA documentation for the balance section is in progress

3. NCRD 108.66 RKM

The supply of units for the entire section is complete and installation is in progress

Three milestones have been completed, and the fourth milestone is progressing as planned

The ISA documentation is in progress as planned

Total no. of Kms commissioned in NCR section was 632 RKM Kernex has emerged as : First OEM interfaced Kavach with 4 Electronic Interlocking systems First OEM to run Vandhe Bharath commercially

4. South Central Railways (SCR)

The handing over and commissioning activities for the SCR projects is complete and the sign off activities are in progress

The Company continued support and maintenance activities in respect of commissioned sections.

5. ICF (Integral Coach Factory, Chennai)

A total of 55 TCAS units have been supplied, out of which 50 units have been successfully installed and commissioned at designated locations, in compliance with all functional and tech- remaining units is currently in progress and is beingnical carried out as per the planned schedule by ICF (as per the applicable JIT clause)

The company continues to do the maintenance support in respect of commissioned locos allocated to various Zonal railways

6. Chittaranjan Locomotive Works (CLW) – Supply and Installation of Loco TCAS

Your company has bagged order for Supply, Installation, Testing and commissioning and defect liability and long term annual maintenance of On-Board KAVACH equipment along with supply and installation of CAB roof antenna including complete wiring, harnessing, cabling and connection with Loco KAVACH System from Chittaranjan Locomotive Works. Total no. of units to be supplied is for 3,024 with a value of approximately Rs.2465.70 crores across 37 loco sheds in India The company has supplied 44% of the units to various loco sheds and 34% of the installations were complete.

The Production and supply of balance units is progressing as planned.

7. South Eastern Railways (SER) - (GD & GQ Routes)

Kernex Microsystems (India) Limited, in consortium with MRT Signals Limited, has successfully secured a major contract valued at approximately 325.33 crores. This prestigious order involves the Supply, Installation, Testing, and Commissioning of Kavach across GO & GO routes covering 688 RKM in the Kharagpur and Chakradharpur Divisions of South Eastern Railway. expertise and execution capabilities of both con Thissignificant -sortium partners in the field of advanced railway signaling and safety systems. It also marks a key milestone in their contribution to the Indian Railways modernization and safety enhancement initiatives.

The first two milestones were completed successfully, and third milestone work is in progress as planned. The units related to three milestones were delivered and installation work is in progress.

Two FAT setups were done as scheduled. One Lab setup was completed for training purpose. Another FAT setup & Lab setup material is planned during the Milestone 3.

The installation work at different stations is in progress as planned. The appointment of assessor for the ISA activity was finalized and the documentation is in progress

8. MAS-GDR, MAS-AJJ, AJJ-RU SR Section of Chennai Division in Southern Railways – (SR)

KERNEX-VRRC CONSORTIUM has bagged order for Provision Of Kavach (Train Collision Avoidance System), In MAS-GDR, MAS-AJJ, AJJ-RU Sections (271km) Of Chennai Division in SR valued at approximately 173.11 crores.

The work related to first two milestones is complete and the activities planned for milestone

3 are in progress. The units were supplied as per the milestones and the installations are in progress.

The FAT setup & Lab setup is complete as scheduled. The training activities using lab (Coim-batore) have commenced.

Appointment of assessor for the ISA activity is finalized and the documentation is in progress

9. Arakkonam (AJJ Jn)-Jolarpettai(JTJ Jn) Section of Chennai Division in South Railways (SR)

KERNEX-VRRC CONSORTIUM has bagged order for Provision of KAVACH (Train Collision

Avoidance System) along with Tower and 48 Fiber OFC as backbone Network in Arakkonam

(AJJ Jn)-Jolarpettai(JTJ Jn) Section of Chennai Division in SR valued at approximately 135 crores. The survey of stations in the entire section is complete.

The work related to first two milestones is complete and the activities planned for milestone 3 are in progress. The units, FAT & Lab setup material are planned and supplied as per the Milestone 3 commitments

Appointment of assessor for the ISA activity is finalized and the documentation is in progress

10. Palanpur - Samakhiyali – Gandhidham Section (300.71 Km) On Ahmedabad Division of Western Railway

KERNEX-KEC Consortium has bagged order for Provision of KAVACH Version 4.0 or latest (formerly known as Train Collision Avoidance System-TCAS), including provision of communication back bone based on UHF and OFC on Palanpur Samakhiyali Gandhidham Section on Ahmedabad Division of Western Railway valued at approximately 182.81 crores.

Two Milestones were completed and the work was completed as planned. The survey of all stations is complete and the materials were dispatched as per the milestone commitments. The towers are erected as planned. The installation work in Stations & LC s is in progress and the production of balance material is progressing as planned.

Appointment of assessor for the ISA is finalized and the documentation is in progress.

11. Itarsi (Excl) – Khandwa (Excl) – Bina (Excl) – Ruthiyai (Excl) Section (355 Km) On Bhopal division of Western Central Railway

KERNEX-KEC Consortium has bagged order for Provision of KAVACH Version 4.0 or latest (formerly known as Train Collision Avoidance System-TCAS), including provision of communication back bone based on UHF and OFC on Itarsi (Excl) Khandwa (Excl) Bina (Excl) Ruthiyai (Excl) Section (355 Km) On Bhopal division of Western Central Railway valued at approximately 151.4 crores.

Three milestones were completed as planned. The survey activity of entire section is complete.

The setup of PMIS offices at 3 locations is complete.

Materials were dispatched as per the milestone commitments. The erection of towers & installations at Stations & LCs is in progress as planned.

Appointment of assessor for the ISA is finalized and the documentation is in progress.

12. ISA Activity:

Kernex has completed interoperability tests at Lab and in field during Kavach 4.0 Development. As per directive from Railway Board and RDSO, the interoperability shall be certified by Independent safety assessor (ISA). The witness trials were completed and the safety assessment report, followed by approval is awaited.

International

Status of the Project -

EGYPTIAN NATIONAL RAILWAYS (ENR), CAIRO Project Overview:

Total Gates Supplied: 136

Total Gates Installed and Commissioned: 124

Final Handover Status: In Progress (Only 1 Left)

Material Supply and Adjustments:

100% Material Supply Completed.

The project was mutually agreed to be shortened from 136 Lx gates to 124 Lx gates.

2 Lx gates were repaired and rebuilt.

Remaining material related to the 10 Lx gates that were not installed is currently being handed over to ENR. So far, 102 wheel sensors have been handed over.

Warranty Maintenance:

Warranty maintenance for three groups (totaling 102 Lx gates) has been completed.

Warranty maintenance for the fourth group (22 Lx gates) has also been completed.

SIL Certification

The Company has successfully received Safety Integrity Level (SIL) Certification for the ENR Level Crossing (LC) Gates, demonstrating compliance with the prescribed functional safety and reliability requirements for safety-critical railway applications.

5. Change in Nature of business

Your Company primarily operates in the business of manufacturing safety systems for railways. During the period under review, there has been no change in the business activities of the Company.

6. Transfer of unclaimed dividend

There is no unclaimed dividend requiring transfer to the Investor Education and Protection Fund (IEPF) in the FY 2025-26.

7. Annual Return

The Annual Return of the Company as on March 31, 2026, in the Form MGT-7 in accordance with Section 92(3) and 134(3)(9) of the Act as amended from time to time and the Companies (Management and Administration) Rules, 2014 is available on the website of the Company at www.kernex.in.

8. Material changes and commitments, if any, affecting the financial position of the company, having occurred since the end of the Year and till the date of the Report

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

9. Subsidiary and Joint Venture details with consolidated financial statement

Your Company has one 100% wholly owned subsidiary, Avant-Garde Info systems Inc., in the USA, and Three Joint Ventures (KERNEX TCAS JV, VRRC-KERNEX-CE-RVR-JV, KERNEX-BHEPL JV, & KERNEX VRRC JV). There were no associate companies as of 31st March 2026. There has been no change in the business activities of the subsidiary and the Joint Ventures during the year under review.

In accordance with Section 129(3) of the Companies Act, 2013, the Company has prepared consolidated financial statements, including the financials of the Company, the subsidiary, and the Joint Ventures, in the same form and manner as its own, in compliance with the Accounting Standards and the listing regulations of the stock exchanges. These consolidated financial statements are forming part of the

Annual Report and will be laid before the Annual General Meeting.

A report containing detailed information about the subsidiary is annexed to this report as Annexure–A . Companies which have become or ceased to be subsidiaries, associates, and joint ventures.

During the period under review, no company has become or ceased to be a subsidiary, associate, or joint venture of the Company.

10. Directors and Key Managerial Personnel

The following are the Key Managerial Personnel (KMP) of the Company pursuant to the provisions of

Section 203 of the Companies Act, 2013, as on 31st March, 2026:- 1. Ms. Sreelakshmi Manthena, Managing Director 2. Mr. Manthena Badari Narayana Raju, Whole-Time Director 3. Mr. Sitarama Raju Manthena, Whole-Time Director 4. Mr. Pamidi Srikanth, Chief Financial Officer 5. Mr. Prasada Rao Kalluri, Company Secretary & Compliance Officer

The following are the Directors of the Company as on 31st March 2026 apart from Key Managerial Personnel mentioned above: 1. Mr. Adabala Seshagiri Rao 2. Mr. Pasupuleti Dinakara Rao 3. Mr. Ayyagari Viswanadha Sarma 4. Mr. Anji Raju Manthena 5. Mr. Janardhana Reddy Vinta

Independent Director Declaration:

All the Independent Directors of your Company, viz., Mr. A Seshagiri Rao, Mr. P Dinakara Rao and Mr. A

V Sarma have registered themselves with the databank maintained by the Indian Institute of Corporate

Affairs, in terms of the provisions of amended Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2019 and the Companies (Creation and Maintenance of Databank of Independent Directors) Rules, 2019. Additionally, these Directors have successfully completed/exempted the test conducted by the Indian Institute of Corporate Affairs.

The Company has received the necessary declaration from each Independent Director in accordance with Section 149(7) of the Companies Act, 2013, read with Regulations 16 and 25(8) of the Listing Regulations that they met the criteria of independence as laid out in Section 149(6) of the Companies Act, 2013 and Regulations16(1)(b) and 25(8) of the Listing Regulations(LODR), 2015 and the same have been taken on record by the Board after undertaking due assessment of the veracity of the same.

The criteria for determining qualifications, positive attributes and independence of Directors is provided in the Nomination and Remuneration Policy of the Company is available on the website, viz., www.kernex. in at the web link https://www.kernex.in/company/investor-relations/#1664360427519-a34ca597-61d7

All the Independent Directors of the Company have complied with the Code for Independent Directors prescribed in Schedule IV to the Companies Act, 2013.

Appointments/Re- Appointments:

In accordance with the provisions of Section 152 of the Companies Act, 2013, Mr. Anji Raju Manthena and Mr. Sitarama Raju Manthena, Directors of the Company, retire by rotation at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-appointment Further also, based on the recommended of Nomination and Remuneration Committee and remuneration approved by Audit Committee, the Board appointed Ms. Sreelakshmi Manthena as a Managing Director of the Company for a period of three years, effective from 23rd May 2025. This appointment was subsequently approved by the members through postal ballot conducted on 9th August 2025 (i.e. Last date of receipt of Postal Ballot).

Further, members are aware that the Company has co-opted Mrs. Parvathi Manthena as an Additional Director on the Board on 29.05.2026. The Members have approved the appointment of Mrs. Parvathi Manthena as a Director by passing special resolution through postal ballot on 29th July 2026 (i.e. Last date for receipt of Postal Ballot).

Further, the present term of Mr. M B Narayana Raju, Whole Time Director and Mr. M Sitarama Raju, Whole-Time Director will expire on 1st September 2026. The Nomination and Remuneration Committee at its meeting held on 13.08.2026, considered and recommended the re-appointment of Mr. M B Narayana Raju, and Mr. M Sitarama Raju as Whole-Time Directors of the Company for further period of Three years w.e.f. 2nd September 2026. Accordingly, the Board of directors at its meeting held on 13.08.2026, considered the recommendations of the Nomination and Remuneration Committee and approved the proposed re-appointment of Mr. M B Narayana Raju, and Mr. M Sitarama Raju as Whole-Time Directors of the Company for further period of Three years w.e.f. 2nd September 2026, subject to the approval of the members of the Company.

The Board recommends the reappointment of Mr. M B Narayana Raju, and Mr. M Sitarama Raju as Whole-Time Directors of the Company for further period of Three years w.e.f. 2nd September 2026 for approval of members at the ensuing Annual General Meeting

The brief profiles of the Directors who are to be appointed or re-appointed and necessary resolutions have been included in the notice convening the Annual General Meeting (AGM).

Familiarization Programs for Independent Directors

The Company undertakes a comprehensive familiarization program for all Independent Directors, ensuring they are well-acquainted with their roles, rights, and responsibilities within the Company. This program includes detailed briefings on various aspects such as the nature of the industry, risk management, board evaluation processes, financial controls, management, board effectiveness, and strategic direction.

Directors are thoroughly informed about the regulatory compliances required under the Companies Act, SEBI (LODR) Regulations, 2015, andother relevant regulations, with their affirmation obtained for the same. To provide a deeper understanding of the Company s operations, Directors are given insights into the functioning of various divisions and departments, the Company s market share, the markets it operates in, as well as governance and internal control processes.

The Whole-Time Directors engage in personal discussions with Independent Directors from time to time, further enhancing their understanding of the Company s business and the regulatory framework in which it operates. These initiatives are designed to equip Independent Directors with the knowledge roles, contributing to and context needed to effectively fulfill informed decision-making and robust governance within the Company.

11. Compliance with Secretarial Standards

The Company is adhering to the applicable Secretarial Standards as prescribed by the Institute of Company Secretaries of India (ICSI).

12. Meetings

During the year, four meetings of the Board of Directors were held on 23rd May 2025, 14th August 2025, 13th November 2025 and 12th February 2026. Attendance and other details are mentioned in the Corporate Governance section of this Report. The intervening gap between the two consecutive Board Meetings was within the prescribed period of 120 days as specified under the provisions of Section 173 of the Act and the Listing Regulations.

The number and dates of meetings held by the Board and its Committees, the attendance of Directors, and details of remuneration paid to them are provided separately in the Corporate Governance Report, in accordance with Section 134(3)(b) of the Companies Act, 2013.

None of the Directors are disqualified under Section 164(2) of the Companies Act, 2013. A certificate under Regulation 34 of the SEBI (Listing Obli confirmingnon-disqualification -gations & Disclosure Requirements) Regulations, 2015, is annexed to this Annual Report.

13. Committees of the Board

The Board of Directors has established the following Committees:

a. Audit Committee b. Nomination and Remuneration Committee

c. Stakeholders Relationship Committee

d. Risk Management Committee

e. Corporate Social Responsibility Committee

Details of these Committees, including their composition, number of meetings held, and attendance at the meetings, are provided in the Corporate Governance section of this Report.

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

In accordance with Section 178(1) of the Companies Act, 2013, the Board, on the recommendation of the Nomination and Remuneration Committee, has approved the criteria and policy for the selection and appointment of Directors, Key Managerial Personnel (KMPs), and their remuneration. The Remuneration Policy is detailed in the Report on Corporate Governance.

15. Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and the Listing Regulations, the Board has conducted an annual performance evaluation of its own members, including the Chairman of the Board, individual Directors, as well as the Audit Committee, Nomination and Remuneration Committee, and other Committees. The evaluation was based on various factors such as attendance, contribution, independence of judgment, and preparedness for meetings.

16. 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 Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are provided separately and annexed as Annexure–B to this Report.

In accordance with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company does not have any employees who were employed throughout the financial year and received remuneration of Rs.1.02 Crores or more, nor does it have employees employed for part of the year who received Rs.8.50 Lakhs or more per month.

Furthermore, the Company does not have any employee who, during the financial year under review, received remuneration which, in aggregate or at a rate in excess of that drawn by the Managing Director or Whole-Time Director, and holds, either individually or along with his spouse and dependent children, not less than 2% of the equity shares of the Company.

Remuneration received by Managing Director/Whole time Director from holding or subsidiary company.

The Managing Director/Whole-Time Directors have not received any remuneration from the subsidiary company. Details regarding this are provided in the Report on Corporate Governance.

17. Directors Responsibility Statement

The Directors, to the best of their knowledge and belief, hereby state and confirm that: a. In the preparation of the annual accounts, the applicable accounting standards have been followed, with proper explanations provided for material departures. b. The Directors have selected appropriate accounting policies and applied them consistently. They have made reasonable and prudent judgments and estimates to provide a true and fair view of the Company s financial position at the end of the financial year and the loss incurred during that period.

c. Proper and sufficient care has been taken for accordance with the provisions of the Act, to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. d. The annual accounts have been prepared on a going concern basis. established. and are adequate, and such controls are operating Internal effectively. f. Proper systems have been devised to ensure compliance with all applicable laws, and these systems are adequate and operating effectively.

18. Share Capital

During the year under review, there was no change in the Authorized Capital of the Company. Further, during the year the Company has allotted 43,000 equity shares to the employees to whom grants were allotted under KMIL ESOS -2023. Accordingly the issued, subscribed and paid up capital of the Company has been increased to Rs. 1,680.24 Lakhs.

Issue of equity shares with differential rights:

During the period under review, the Company did not issue any equity shares with differential rights.

Issue of Sweat Equity Shares

During the period under review, the Company did not issue any sweat equity shares.

Details of Employee Stock Options

During the year under review, on 23rd May 2025, the Company had granted 1,200 stock options to its employees under Kernex Microsystems (India) Limited Employee Stock Option Scheme 2023 (KMIL ESOS 2023/ESOS 2023) after taking necessary approvals.

Following are the particulars of ESOP required to be disclosed as per Rule 12(9) of Companies (Share Capital and Debentures) Rules, 2014: -

Details required to be disclosed	Particulars
Description of the scheme	KMIL ESOS 2023
Date of shareholders\u2019 approval	23.08.2024
Total options approved	1,50,000
Options Granted during the year	1,200
Option Vested during the year	43,000
Option Exercised during the year	43,000
Option Lapsed during the year	Nil
Total number of Option in force at the end of	Nil
the year
The exercise price	Rs. 25/-

The Total Number of shares arising as a Result of Exercise of Option	43,000
Variation of terms of Option	There is no variation of terms of options
Money realized by exercise of Option	Rs. 10,75,000/-
Employee wise Details of Options Granted to (During FY 2025-26)
i) To Key Managerial Personnel	Nil
ii) Any other employee who receives a grant of options in anyone year of the Option amounting to 5% or more of Options granted during the year.	No employee was granted options amounting to 5% or more of options granted during the year
iii) Identified employees who were granted Option, during any one year, equal to or exceeding 1% of the issued capital (excluding warrants and conversions) of the Company at the time of grant.	No employee was granted options equal to or exceeding 1% or more of issued capital (excluding warrants and conversions) of the Company

During the year, a reserve was made towards the outstanding of Employee Stock Options (ESOPs) and Employee Compensation Expenses (Share based payment expenses) for the year ended March

31, 2026, of Rs.247.17 lakhs, which includes Employee Benefit expenses detailed in Note No.32 in standalone financial statements and Note No.30 in consolidated financial statements.

Further, information pursuant to Section 62 of the Companies Act, 2013 read with Rules made there under and details of the Scheme as specified in Part F of Schedule I of SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 are available on Company s website and may be accessed at www.kernex.in/

Further, it is confirmed that the Scheme is in compliance with SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, and during the year under review there were no material changes in the Scheme.

Company Secretary, Secretarial Auditor of your Company ACertificate confirming that the scheme has been implemented in accordance with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, forms part of the is also placed on the website of your Company at www.kernex.in

19. Particulars of Loans, Guarantees and Investments.

During the period under review, the company has not provided Loans and Guarantees covered under the provisions of Section 186 of the Companies Act, 2013. During the year our Company has formed Joint Venture with BHEPL and other details are provided in the Form AOC-1 annexed as Annexure-A to this report. Further, the details of Loans, Guarantees and Investments are provided in the notes forming part of the financial statements.

20. Related Party Transactions

During the financial year 2025-26, all related party transactions entered by the Company were on an arm s length basis and in the ordinary course of business. There were no materially significant -ed party transactions involving Promoters, Directors, Key Managerial Personnel, or other designated persons during the year. Details of related party transactions under Section 188 of the Companies Act, 2013 are provided in Form AOC 2, annexed as Annexure–C to this report.

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

As required under Section 134(3)(m) of the Companies Act, 2013 and Rule 8(3) of the Companies (Accounts) Rules, 2014, the information related to conservation of energy, technology absorption, and foreign exchange earnings and outgo is provided and annexed as Annexure–D to this report.

22. Risk Management

Your Company has established a comprehensive risk management framework to identify, assess, monitor, and mitigate various risks to its key business objectives. The major risks identified by the business and functional units are systematically addressed through ongoing mitigating actions. These risk management activities are discussed regularly at the meetings of the Audit Committee and the Board.

The Company has implemented robust internal control systems and processes to optimize risk mitigation measures. These systems are reviewed by the Audit Committee and approved by the Board. The executive management receives periodic guidance from the Board to enhance risk mitigation strategies and take timely action as needed.

23. Corporate Social Responsibility (CSR)

During the financial year 2025-26, the provisions of Section 135 of the Companies Act, 2013 were applicable to the Company. Our Company has established a Corporate Social Responsibility (CSR) Policy and constituted a CSR Committee in accordance with Section 135 of the Companies Act, 2013. The details of the CSR Policy and Committee are available on the Companys website at www.kernex.in.

As per the provisions of Section 135 of the Companies Act, 2013 and the rules made there under, the Company is not required to spend any amount towards CSR during the financial year 2025-26, since the Company has incurred losses in the computation of average net profits of the three immediately preceding financial years. Hence CSR reporting is not required. by the Regulators / Courts / Tribunal impacting the 24. DetailsofSignificant going concern status and companys operation in future:

No significant or material orders were passed by regulators, courts, or tribunals that would impact the going concern status of the Company or its future operations.

Further, on 26th June 2025, the Company has received approval from both the stock exchanges (i.e. BSE Limited and National Stock Exchange of India Limited) for Re-Classification of some of the Promoters/Promoters Group Shareholders to Public Category under Regulation 31A of SEBI (LODR) Regulations, 2015

25. Whistle Blower Policy / Vigil Mechanism

In compliance with Section 177(9) of the Companies Act, 2013, your Company has established a Whistle

Blower Policy/Vigil Mechanism to facilitate the reporting of illegal or unethical behavior. Employees are encouraged to report violations of applicable laws, regulations, and the Company s Code of Conduct.

The Audit Committee oversees and reviews reports received through this mechanism. Employees have the option to report directly to the Chairman of the Audit Committee. Throughout the year under review, no employee was denied access to the Audit Committee. The Directors and senior management are committedtomaintainingtheconfidentialityof the reporting process and ensuring that whistleblowers are protected from any form of discrimination.

26. Deposits

During the year under review, your Company has not accepted any deposits within the meaning of Section 73 of the Companies Act, 2013, read with the Companies (Acceptance of Deposits) Rules, 2014. As such, no amount on account of principal or interest on deposits from the public was outstanding as of the Balance Sheet date.

Additionally, the Company has availed an amount of Rs. 1,390.00 lakhs as Inter Corporate Deposits, during the period 2025-26. These amounts were exempted from the definition of deposit. The outstanding balances exempt from the definitionof deposits, including Inter-Corporate Deposits (ICDs) and Secured and Unsecured loans, as on 31st March 2026, amount to Rs.16,192.31 Lakhs

27 . Registrar and Share Transfer agent:

During the year under review, Kfin Technologies Limited is the Registrar and Transfer Agent of the Company.

28. Auditors

Statutory Auditors

Members are aware that in terms of Section 139, 141 and 142 of the Companies Act, 2013 ( the Act ), and the Companies (Audit and Auditors) Rules, 2014 made there under, appointed M/s. NSVR & Associates LLP (FRN:008801S/S200060), Chartered Accountants as Statutory Auditors of the Company to fill the casual vacancy caused by the M/s. P R S V & Co LLP (FRN: S200016), Chartered Accountants.

Further members of the Company at their 32nd Annual General Meeting appointed M/s. NSVR &

Associates LLP (FRN:008801S/S200060) , Chartered Accountants as Statutory Auditors of the Company to hold officefor a period of 5 years from the Company.

M/s. NSVR & Associates LLP (FRN:008801S/S200060), Chartered Accountants, Hyderabad, have confirmed that they are eligible to conduct and within the prescribed limits under Section 141 of the Companies Act, 2013

The financial statements have been audited by M/s. NSVR & Associates LLP, Chartered Accountants, Statutory Auditors of the Company. The auditors have not made any qualifications or comments.

Secretarial Auditors

In accordance with Section 204 of the Companies Act, 2013, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Regulation 24A of SEBI (LODR) Regulations, 2015 and Shareholders Resolution dated 29th September, 2025, Mr. D. S. Rao, Practicing Company Secretary, has conducted Secretarial Audit for the financial year 2025-26.

The Secretarial Audit Report is annexed as Annexure–E to this report.

Reply to the Comments made in the Secretarial Auditors Report

In accordance with SEBI Circular No. Cir/ISD/3/2011, the entire shareholding of Promoters/Persons Acting in Concert (PACs) has not been dematerialized. Consequently, the stock exchanges have placed the trading of the Company s shares under the trade-to-trade category.

The Company is actively pursuing compliance with SEBI Circular No. Cir/ISD/3/2011 by working towards the dematerialization of the entire shareholding of Promoters/Persons Acting in Concert (PACs). Promoter has submitted the required documents and waiting for the response from the RTA

Mr. D S Rao continues to act as Secretarial Auditor of the Company in terms of the shareholders resolution dated 29th September, 2025 and confirmed that his continuation would be within the prescribed limits under the Companies Act, 2013 & Rules made there under and SEBI (LODR) Regulations, 2015 for the financial year 2026-27. He also confirmed that he is not disqualified to be appointed as Secretarial Auditor in terms of provisions of the Companies Act, 2013 & Rules made thereunder and SEBI (LODR) Regulations, 2015.

Internal Auditors:

On the recommendation of the Audit Committee, the Board of Directors appointed M/s. Thirupathi and Associates, Chartered Accountants, Hyderabad, as the Internal Auditors of the Company. The Internal Auditors submit their reports on a quarterly basis to the Audit Committee.

At the beginning of each financial year, an audit plan is rolled out with approval of the Company s Audit Committee. The plan is aimed at evaluation of the efficacy and adequacy of internal control systems and compliance thereof, robustness of internal processes, policies and accounting procedures and compliance with laws and regulations. Based on the reports of internal audit, process owners undertake audit observations and correctiveactionintheirrespectiveareas. Significant corrective actions are periodically presented to the Audit Committee of the Board.

Maintenance of Cost Records

In accordance with Section 148(3) and other applicable provisions, if any, of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014, the Board of Directors pursuant to the recommendation of the Audit Committee, had appointed M/s. MPR & Associates, Cost Accountants (Firm Registration No. 000413), Hyderabad, as Cost Auditors of the Company, to carry out the audit of the cost records of the products manufactured by the Company for the financial year ending March 31, 2027 at a remuneration of Rs.1,50,000/-.

The remuneration payable to the cost auditor is required to be placed before the Members in the general meeting for their ratification. Accordingly, a resolution seeking Members ratification for the remuneration payable to M/s. MPR & Associates, Cost Accountants, is included in the Notice convening the Annual General Meeting.

Accountants, Certificate has been received to the effect that their appointment as Cost Auditor of the Company, if made, would be in accordance with the limits specified under Section 141 of the Companies Act, 2013 and the Rules framed there under. Cost auditors have given their report for the financial year 2025-26 without qualifications.

Reporting of Frauds:

During the year under review, there have been no frauds reported by the Statutory Auditors/Secretarial Auditors and Internal Auditors of the Company under sub-section (12) of Section 143 of the Act.

29. Internal Financial Controls

The Company has established policies and procedures to ensure the orderly and efficient conduct of its business. These measures include adherence to the Company s policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, and timely preparation of reliable financial information. The adequacy of internal controls is reviewed by an independent Audit Committee of the Board.

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

Your Company has implemented a Policy for the Prevention of Sexual Harassment of Women at the Workplace, in accordance with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. An Internal Complaints Committee (ICC) has been established to address and resolve any complaints related to sexual harassment. During the period under review, the Company has not received any complaints in this regard.

31. Compliance with the Maternity Benefit Act, 1961

The Company has complied with the provisions of the Maternity Benefit applicable amendments and rules framed there under. The Company is committed to ensuring a safe, inclusive, and supportive workplace for women employees. All eligible women employees are provided with maternity benefits as prescribed under the Maternity Benefit Act, 1961, including paid maternity leave, nursing breaks, and protection from dismissal during maternity leave.

The Company also ensures that no discrimination is made in recruitment or service conditions on the grounds of maternity. Necessary internal systems and HR policies are in place to uphold the spirit and letter of the legislation.

32. Gender-Wise Composition of Employees

In alignment with the principles of diversity, equity, and inclusion (DEI), the Company discloses below the gender composition of its workforce as on the March 31, 2026.

Male Employees	:	532
Female Employees	:	77
Transgender Employees	:	Nil

This disclosure reinforces the Company s efforts to promote an inclusive work place culture and equal opportunity for all individuals, regardless of gender.

33. Downstream Investment

During the period under review, the Company neither has any Foreign Direct Investment (FDI) nor invested as any Downstream Investment in any other Company in India.

34. Details of revision of financial statement or the Report

During the period under review, there was no revision of the financial statement or the Report.

35. Corporate Insolvency Resolution process initiated under the Insolvency and Bankruptcy Code, 2016 (IBC)

During the period under review, no Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC) was initiated against the Company.

36. Failure to implement any Corporate Action

There were no instances of Corporate Insolvency Resolution Process (CIRP) initiated against the Company during the period under review.

37. Other General Disclosures a. Consolidated Financial Statements

The Company is presenting Consolidated Financial Statements in addition to the Standalone Financial Statements for the financial year ended 31st March 2026. This inclusion aligns with the applicable accounting standards and regulatory requirements, providing a comprehensive view of the financial performance of the Company, its subsidiary, and its joint ventures. The consolidated statements offer shareholders a broader perspective on the results of the entire group. b. Timely Holding of the Annual General Meeting

The Company has adhered to the statutory requirements by holding its Annual General Meeting (AGM) for the financial year 2024-25 within the prescribed timeframe. There was no delay in convening the AGM, demonstrating the Company s commitment to compliance with regulatory obligations and its efforts to maintain transparency and timely communication with its shareholders. c. Cost Records Maintenance

As per the provisions of the Companies Act, 2013, the Company is required to maintain cost records for the financial year 2025-26. d. There were no instances where Your Company required the valuation for one time settlement or while taking the loan from the Banks or Financial institutions.

38. Statement of deviation or variation

During the year, the Company has not raised any funds from the public through private placement and preferential issue basis.

39. Management Discussion & Analysis (MDA)

The Management s Discussion and Analysis Report for the year under review, as stipulated under Regulation 34(2)(e) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is presented in a separate section forming part of this Annual Report. This report provides a detailed analysis of the Company s performance, industry trends, opportunities, risks, and outlook for the future.

The Managements Discussion and Analysis Report is annexed as Annexure–F to this report for the shareholders reference.

40. Corporate Governance Report

Your Company is committed to adhering to corporate governance requirements and maintaining the highest standards of integrity and transparency. In line with this commitment, the report on Corporate Governance, as stipulated under Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is provided separately in this Annual Report. The detailed Corporate Governance Report outlines the Company s governance structure, board composition, committee functions, and other governance practices, and is annexed as Annexure–G to this report.

Practicing Company Secretary, confirming compliance Additionally,therequisitecertificate with the conditions of corporate governance as prescribed under the SEBI (LODR) Regulations, 2015 as an affirmation of the Company s adherence to the isattachedtothisreport.Thiscertificate prescribed governance norms.

41. Suspension of Trading

The shares of the Company are listed and actively traded on both BSE Limited ( BSE ) and the National Stock Exchange of India ( NSE ). During the period under review, there has been no suspension of trading of the Companys securities on either of these stock exchanges.

42. Acknowledgements:

Your Directors would like to express their sincere appreciation for the valuable guidance, assistance, and cooperation received from the Indian Railways, RDSO, South Central Railways, NCR EDFC, SER, W Rly, WCR, SR, CLW, BLW, PLW, ICF, Egyptian National Railways, State Bank of India, HDFC

Bank Limited, ICICI Bank Limited, CSB Bank Limited, Union Bank of India, Federal Bank Limited, Yes Bank Limited, Kotak Mahindra Bank Ltd, Axis Bank Limited Government authorities, and our esteemed 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, whose hard work and commitment have been integral to the Companys success.

By order of the Board
For Kernex Microsystems (India) Limited

Sd/-	Sd/-	Sd/-
Sreelakshmi	Badari Narayana	Sitarama Raju
Manthena	Raju Manthena	Manthena
Managing Director	Whole Time Director	Whole Time Director
DIN : 07996443	DIN : 07993925	DIN : 08576273

Place : Hyderabad
Date : 13th August 2026