Pennar Industries Ltd Directors Report.

Dear Members,

Your Directors are pleased to present the 43rd Annual Report and the Companys audited financial statement for the financial year ended 31st March, 2019.

Financial Results:

The Companys financial performance, for the year ended 31st March, 2019 is summarized below:

Amount in Rs. Lakhs

Particulars Consolidated Standalone
2018-19 2017-18 2018-19 2017-18
Revenue from Operations 2,13,311 1,79,841 2,11,612 1,78,017
Operating profit (PBIDT) 19,991 22,179 19,649 20,265
Profit before tax (PBT) 9,682 13,808 9,351 13,939
Income Tax and Deferred Tax 3,016 4,759 2,947 4,634
Profit after tax (PAT) 6,666 9,049 6,404 9,305
Other Comprehensive income (300) (44) (310) (44)
Total Comprehensive income for the year 6,366 9,005 6,094 9,261
Net profit attributable to Owners of the company 6,344 8,894 6,094 9,261
Profit brought forward from previous year 37,424 25,089 37,424 21,769
Surplus available for appropriation 44,068 37,424 43,828 37,424
Appropriations
Dividend 0 0 0 0
Corporate tax on proposed dividend 0 0 0 0
Transfer to General Reserve 0 0 0 0
Transfer to Capital Redemption Reserve 0 0 0 0
Balance of profit carried to Balance Sheet 44,068 37,424 43,828 37,424

Result of Operations and the state of Companys affairs:

Your company has recorded highest ever consolidated Net sales at Rs. 2,133 Crores and EBIDTA at Rs. 199.9 Crores. Pennar has expanded its activities and increased its addressable market all along its business units. The Business units such as Railways, Industrial Components and Tubes have shown double digits growth.

Consolidated Financial Statement:

The Consolidated Financial Statements of the Company, its subsidiaries prepared in accordance with the Companies Act, 2013 and applicable Indian Accounting Standards along with all relevant documents and the Auditors Report form part of this Annual Report. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies. The Financial Statements as stated above are also available on the website of the Company and can be accessed at the website viz., www.pennarindia.com.

Subsidiaries:

The following are two subsidiaries of the company as on 31st March, 2019. a. M/s. Pennar Global INC, USA b. M/s. Enertech Pennar Defense and Engineering Systems Private Limited

The performance of the subsidiaries is as hereunder:

(a) M/s. Pennar Global INC, USA

Pennar global INC (PGI) established in the year 2017, Pennar Global headquartered in Houston Texas with a clientele spanning across the United States of America. PGI is in business of providing engineering services and marketing Pennar products across the United States of America.

Pursuant to merger of Pennar Engineered Building Systems Limited with Pennar Industries Limited, Pennar Global INC becomes wholly owned subsidiary of Pennar Industries Limited.

(b) M/s. Enertech Pennar Defense and Engineering Systems Private Limited

Enertech Pennar Defence and Engineering systems private Ltd. Established in the year 2018. The Company is engaged in the business to manufacture, install various Defence Engineering systems and other related products both for domestic and overseas market.

The financial position of each of the subsidiaries, as per the Companies Act, 2013 is annexed. The Policy for determining material subsidiaries may be accessed on the Companys website at the link: http://www.pennarindia.com/policy-determining-material.html. The information on subsidiaries pursuant to Section 129(3) of the Act read with rule 5 of the Companies (Accounts) Rules, 2014 is annexed herewith as Annexure - A in Form AOC - 1.

Material Changes and Commitments if any affecting the financial position of the 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

There are no material changes and commitments affecting the financial position of the Company.

Dividend, Fixed Deposits and General Reserves:

The company has been investing in new capital to expand its product profile and increase the markets. This has already shown results by achieving highest sales and EBIDTA. Most of these activities are planned through internal sources.Therefore your Directors are not recommending dividend on equity shares. Your Company has not accepted any fixed deposits and no amount has been carried to General Reserves during the year.

Particulars of Loans given, Investments made, Guarantees given and Securities provided:

Particulars of loans given, investments made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient are provided in the standalone financial statement.

Internal Financial Controls:

The details in respect of internal financial control and their adequacy are included in the Management Discussion & Analysis, which forms part of this report.

Contract and Arrangement with Related Parties:

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arms length basis. During the year, the Company had entered into contract / arrangement / transaction with material related party which could be considered material in accordance with the policy of the Company on materiality of related party transactions. The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Companys website at the link: http:// www.pennarindia.com/policy-related-party-transactions.html.

The Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 are annexed herewith as Annexure - B in Form AOC-2.

Change in the nature of business, if any:

There is no material change in the nature of business affecting the financial position of the Company for the year ended 31st March, 2019.

Credit Rating:

CARE has reaffirmed the ‘CARE A (Single A; Outlook: Positive) with rating assigned to long term bank facilities. This rating is applicable to facilities having tenure of more than one year. Instruments with ‘CARE A rating are considered to have adequate degree of safety regarding timely servicing of financial obligations.

Further, CARE has also reaffirmed the ‘CARE A1 (A One) rating to short term bank facilities of the Company. This rating is applicable to facilities having tenure up to one year. Instruments with ‘CARE A1 rating are considered to have very strong degree of safety regarding timely payment of financial obligations and carry lowest credit risk.

Cash profit:

Your company has undertaken number of steps to maintain strong liquidity levels. The consolidated cash profit is at Rs. 94.56 Crore. Your company continues to focus on generating strong cash flows to meet its future growth plans and is comfortable with its current liquidity positions.

Board of Directors and Key Managerial Personnel:

None of the Directors of the company are disqualified under the provisions of the Act or under the Listing Regulations.

Appointment:

Mr. Eric James Brown, and Mr. P V Rao who retire by rotation and being eligible offer themselves for reappointment. Your Board recommends their appointment.

The Board of Directors appointed Mr. Chandrasekhar Sripada and Mrs. Bharati Jacob as Additional Non-Executive Independent Directors of the Company at its Meeting held on 12th February, 2019 and 27th May, 2019. Their appointment has to be ratified by the Members at the ensuing Annual General Meeting. Your Board recommends their appointment.

The Board of Directors at its meeting held on 12th February, 2019 appointed Mr. Manish Mahendra Sabharwal, Mr. B Kamalakar Rao, Mr. Varun Chawla as Non-Executive Independent Directors of the Company for the next term of 5 years w.e.f 12.02.2019 to 11.02.2024. Their appointment has to be ratified by the Members at the ensuing Annual General Meeting. Your Board recommends their appointment.

The Board of Directors reappointed Mr. Aditya Rao as Vice-Chairman and Managing Director of the Company at its meeting held on 12th February, 2019. The terms of appointment was revised in the Board Meeting held on 12th August, 2019. His appointment has to be ratified by the Members at the ensuing Annual General Meeting. Your Board recommends his appointment.

The Board of Directors appointed Mr. P V Rao as Joint Managing Director of the Company at its meeting held on 27th May, 2019. His appointment has to be ratified by the Members at the ensuing Annual General Meeting. Your Board recommends his appointment.

Resignation:

Mr. Ravi Chachra and Dr. Sita Vanka Non-Executive Independent Directors of the company resigned from the office of directorship on 12th February, 2019 and 27th May, 2019 the same was taken note by the Board of Directors at its meeting held 12th February, 2019 and 27th May, 2019. Your Board places on record their deep appreciation for the contribution made by them during their tenure as Directors.

Pursuant to the provisions of Listing Regulations, brief particulars of the Directors who are proposed to be appointed/re-appointed are provided as an annexure to the notice convening the Annual General Meeting.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section (6) of Section 149 of the Companies Act, 2013 and under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Company has devised a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors which includes criteria for performance evaluation of the Non-Executive Directors and Executive Directors. The details of programmes for familiarisation of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are put up on the website of the Company at the link: http://www.pennarindia.com/policy-familiarization-programme.html.

Meetings of the Board:

Four meetings of the Board of Directors were held during the year. For further details, please refer the same in Corporate Governance report in this Annual Report.

Scheme of Amalgamation

The Honble National Company Law Tribunal (NCLT), Hyderabad Bench approved the Scheme of Amalgamation of Pennar Engineered Building Systems and Pennar Enviro Limited with Pennar Industries Limited (‘the Company) and their respective shareholders under section 230 to 232 of the Companies Act, 2013 and other applicable provisions of the Companies Act, 2013 and the rules framed thereunder (‘Scheme) the approved date of the Amalgamation is 1st April, 2018. The Order of NCLT was filed in e-Form INC-28 with the Registrar of Companies on 23rd May, 2019 pursuant to the said filings the transferor companies viz., Pennar Engineered Building Systems Limited and Pennar Enviro Limited was dissolved without liquidation.

Subsequently, the Board of Directors at its meeting held on 27th May, 2019 fixed the record date as 10th June, 2019 and formed an Allotment committee to allot the shares pursuant to the scheme of amalgamation. The allotment committee at its meeting held on 12th June, 2019 allotted 3,20,07,717 equity shares to the shareholders of the transferor companies.

Directors Responsibility Statement:

Your Directors state that:

a) in the preparation of the annual accounts for the year ended 31st March, 2019, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same;

b) the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2019 and of the profit of the Company for the year ended on that date;

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

d) the Directors have prepared the annual accounts on a ‘going concern basis;

e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

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

Corporate Governance:

The Company is committed to maintain the highest standard of corporate governance and adhere to the corporate governance requirements set out by Securities Exchange Board of India. The Report on corporate governance as stipulated under the Listing Regulations is annexed herewith as Annexure - C. The requisite certificate from Statutory Auditors confirming compliance with the conditions of corporate governance is annexed herewith as Annexure - D.

Corporate Social Responsibility (CSR):

The brief outline of the Corporate Social Responsibility (CSR) Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure - E of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. The policy is available on the website of the Company.

Nomination and Remuneration Policy:

The Nomination and Remuneration Committee of the Company identifies the persons, who are qualified to become Directors of the Company / who may be appointed in Senior Management in accordance with the criteria laid down and recommend to the Board for their appointment and removal. The Committee also carries out evaluation of every Directors performance. The Committee has formulated the criteria for determining qualifications, attributes, independence of the Directors and recommend to the Board a Policy, relating to the remuneration for the Directors, Key Managerial Personnel and other employees.

Risk Management:

Pursuant to section 134 (3) (n) of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015, the company has formulated a policy on risk management. At present, the company has not identified any element of risk which may threaten the existence of the company.

Statutory Auditors:

M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (Registration No. 117366W/W-100018) were appointed as the Statutory Auditors of the Company to hold office for a term of 5 years from the conclusion of the 41st Annual General Meeting (AGM) held on 28th September, 2017 until the conclusion of the 46th AGM of the Company to be held in the year 2022.

Pursuant to the Notification issued by the Ministry of Corporate Affairs on 7th May, 2018, amending section 139 of the Companies Act, 2013, the mandatory requirement for ratification of appointment of Auditors by the Members at every AGM has been omitted and hence your Company has not proposed ratification of appointment of Deloitte Haskins & Sells LLP, Chartered Accountants, at the forthcoming AGM.

The Auditors Report is unmodified i.e. it does not contain any qualification, reservation or adverse remark or disclaimer.

Cost Auditors:

The Cost Audit Report for the year ended 31st March, 2018 was reviewed by the Audit Committee at its meeting held on 14th August, 2018 and has been filed with Registrar of Companies on 27th September, 2018. The Board of Directors at its meeting held on 18th May, 2018 appointed M/s. Shaik & Associates., Cost Accountants, Hyderabad as Cost auditors of the company for the year ending 31st March, 2019. The Cost Audit for the year ended 31st March 2019 is in progress and the Cost Audit Report will be filed with the Registrar of Companies within the stipulated time.

Secretarial Auditor:

The Board has appointed Mr. Subhash Kishan Kandrapu, Practicing Company Secretary, to conduct Secretarial Audit for the financial year 2018-19. The Secretarial Audit Report for the financial year ended 31st March, 2019 is annexed herewith as Annexure - F. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Audit Committee:

The details pertaining to composition of audit committee are included in the Corporate Governance Report, which forms part of annual report.

Vigil Mechanism/Whistle Blower Policy:

Pursuant to Section 177 of the Companies Act, 2013 read with Rule 7 of Companies (Meetings of Board and its Powers) Rules, 2014, the Company has established a Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Whistle Blower Policy are explained in the Corporate Governance Report. The Policy on vigil mechanism and whistle blower policy may be accessed on the Companys website at the link: http://www.pennarindia.com/vigil-mechanism.html

Conservation of energy, technology absorption and foreign exchange earnings and outgo:

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, is annexed herewith as Annexure - G.

Extract of Annual Return:

Extract of Annual Return of the Company is annexed herewith as Annexure - H.

Particulars of Employees and related disclosures:

The information required under section 197 of the Companies Act, 2013 read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed herewith as Annexure - I.

Disclosure under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013:

The Company has in place an Internal Complaints Committee which has been set up to redress complaints regarding sexual harassment. The following is the summary of sexual harassment complaints received and disposed off during the year:

i) No. of complaints received : nil ii) No. of complaints disposed off: nil

Listing of Equity Shares:

The Companys equity shares are listed at the Bombay Stock Exchange Limited, National Stock Exchange of India Limited.

Dematerialisation of Shares:

99.12% of the companys paid-up equity share capital is in dematerialized form as on 31st March, 2019 and balance 0.88% is in physical form.

Managing Directors Declaration:

Pursuant to the provisions of Regulation 17 of the SEBI (Listing Obligations and Disclosure

Requirements) Regulations, 2015, a declaration by the Vice-Chairman and Managing Director of the company declaring that all the members of the board and the senior management personnel of the company have affirmed compliance with the Code of Conduct of the company is annexed herewith as Annexure - J.

The CFO certification to the board pursuant to Regulation 15 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed herewith Annexure - K.

Personnel / Industrial Relations:

The Company maintained cordial and harmonious relations at all levels at the offices and plants of the Company and its subsidiaries throughout the year under review.

The details of significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and companys operations in future:

In terms of sub rule 5(vii) of Rule 8 of Companies (Accounts) Rules, 2014, there are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

Management Discussion and Analysis:

The "Management Discussion and Analysis Report" highlighting the industry structure and developments, opportunities and threats, future outlook, risks and concerns etc. is furnished separately and forms part of this Boards Report.

Appreciation:

Your directors take this opportunity to express their appreciation for the co-operation to all the suppliers and customers who have been associated with the Company as partners. The Directors would also like to take this opportunity to thank the financial institutions, banks, regulatory and government authorities as well as the shareholders for their continued co-operation and support. The Directors also wish to place on record their appreciation of the devoted and dedicated services rendered by all employees of the Company. We look forward to further support.

By Order of the Board
for Pennar Industries Limited
Place: Hyderabad Nrupender Rao
Date: August 12, 2019 Chairman

Annexure - A

Form No. AOC - 1

(Pursuant to the first provision to sub-section 3 of Section 129, read with Rule 5 of Companies (Accounts) Rules, 2014); Salient Features of Financial Statements of Subsidiary/associate companies/joint ventures as per Companies Act, 2013

Part "A": Subsidiaries

Amount in Rs. Lakhs

1 Name of Subsidiary Pennar Global Inc Enertech Pennar Defense and Engineering Systems Private Limited
2 Reporting period for the subsidiary concerned, if different from the holding companys reporting period Not Applicable Not Applicable
3 Reporting currency and Exchange rate as on the last date of the relevant Financial year in the case of foreign subsidiaries Not Applicable Not Applicable
4 Share Capital 277 1
5 Reserves & Surplus 216 43
6 Total Assets 2,211 328
7 Total Liabilities 1,719 283
8 Investments NIL NIL
9 Turnover 7,746 570
10 Profit Before Taxation 272 59
11 Provision for Taxation 54 15
12 Profit after Taxation 218 43
13 Proposed Dividend NIL NIL
14 % of Shareholding 100% 51%

Additional Information:

1 Names of subsidiaries which are yet to commence operations Nil
2 Names of subsidiaries which have been liquidated or sold during the year. Nil
3 Names of subsidiaries which have been dissolved during the year. Pennar Engineered Building systems limited and Pennar Enviro Limited have been merged in to Pennar Industries Limited.

Annexure - A

Part "B": Associates/Joint Ventures

1 Name of Associates/Joint Ventures
2 Latest audited Balance Sheet Date
3 Shares of Associate/Joint Ventures held by the company on the year end
4 Amount of Investment in Associates/Joint Venture
5 Extend of Holding %
6 Description of how there is significant influence Not Applicable
7 Reason why the associate/joint venture is not consolidated
8 Networth attributable to Shareholding as per latest audited balance sheet
9 Profit/Loss for the year
i. Considered in Consolidation
ii. Not Considered in Consolidation

Additional Information:

1 Names of associates or joint ventures which are yet to commence operations Nil
2 Names of associates or joint ventures which have been liquidated or sold during the year Nil

Annexure - B

Form No. AOC - 2

(Pursuant to clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014)

Form for disclosure of particulars of contracts / arrangements entered into by the company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arms length transactions under third proviso thereto:

1. Details of contracts or arrangements or transactions not at arms length basis: M/s. Pennar Industries Limited has not entered into any contract or arrangement or transaction with its related parties which is not at arms length during financial year 2018-19.

a Name(s) of the related party and nature of relationship
b Nature of contracts/arrangements/transactions
c Duration of the contracts / arrangements/ transactions
d Salient terms of the contracts or arrangements or transactions including the value, if any Not Applicable
e Justification for entering into such contracts or arrangements or transactions
f Date(s) of approval by the Board
g Amount paid as advances, if any
h Date on which the special resolution was passed in general meeting as required under first proviso to section 188

2. Details of material contracts or arrangement or transactions at arms length basis:

a Name(s) of the related party and nature of relationship 1. Pennar Global Inc. (Wholly-Owned Subsidiary Company)
2. Enertech Pennar Defense and Engineering Systems Private Limited (Subsidiary Company)
b Nature of contracts/arrangements/transactions Sale of Steel Products, Purchase of Steel products, Job works etc.
c Duration of the contracts / arrangements/ transactions April 2018 to March 2019
d Salient terms of the contracts or arrangements or transactions including the value, if any The contract was entered into in the ordinary course of business and on arms length basis. (for details of transactions during the year refer Note No. 34 to the Standalone financial statements).
e Date(s) of approval by the Board 18.05.2018, 14.08.2018, 13.11.2018 and 12.02.2019
f Amount paid as advances, if any -

Annexure - G

Conservation of Energy, Technology Absorption, and foreign exchange Earning and Outgo etc:

Information on conservation of energy, Technology absorption, Foreign Exchange earnings and outgo required to be disclosed under section 134 of the companies act, 2013 read with companies (accounts) Rules, 2014 are provided hereunder:

(A) Conservation of Energy: • We replaced 237 nos of Metal halide lamp fittings with LED fittings.
I. The steps taken or impact on conservation of energy • Used 40 Nos of Energy Efficient IE2 Motor for Newly Installed Equipment.
• Replaced 40W tube light fittings with 20W LED tube light fittings.
• Creating awareness among employees about energy saving
II. The steps taken by the company for utilizing alternate sources of energy NIL
III. The capital investment on energy conservation equipment; 52,50,000/- (750 Nos of New LED light Fittings Installed.)
(B) Technology absorption: 4-Hi Rolling Mill Up gradation with latest Drives and
I. The efforts made towards technology absorption Controls, Mechanical Presses are Replaced with SPMs, APFC Panels Installed.
II. The benefits derived like product improvement, cost reduction, product development or import substitution. Conservation of Energy, Power quality, and Reduced Power cost. Improved quality and Productivity
III. In case of imported technology (imported during the last three years reckoned from the beginning of the financial year)
a. The details of technology imported Nil
b. The year of import:
c. Whether the technology been fully absorbed
d. If not fully absorbed, areas where absorption has not taken place, and the reasons thereof
IV. The expenditure incurred on research and development Nil
(C) Foreign exchange earnings and outgo Total Foreign Exchange earnings: Rs. 7,222 Lakhs
Total Foreign Exchange Outgo: Rs. 5,655 Lakhs