Pokarna Ltd Directors Report.

to the Shareholders

Dear Members,

Your Directors take pleasure in presenting their 28th Annual Report together with the annual audited consolidated and standalone financial statements for the financial year ended 31st March, 2019.

Financial Highlights

Rs in Lakhs
S. No Particulars

Standalone

Consolidated

2018-19 2017-18 2018-19 2017-18
1 Total Revenue 14767.62 15836.09 47129.85 34336.85
2 Less-expenditure 13767.99 14102.88 37005.98 29222.20
3 Profit/(Loss) Before tax and extra-ordinary items 999.63 1733.21 10123.87 5114.65
4 Tax expenses 311.84 499.42 2056.04 890.45
5 Profit /(Loss)After Tax 687.79 1233.79 8067.83 4224.20
6 Profit after tax for the year 687.79 1233.79 8067.83 4224.20
7 Total other comprehensive Income/(Loss) net of tax 52.44 45.58 58.36 52.88
8 Total comprehensive Income/(Loss) 740.23 1279.37 8126.19 4277.08

Consolidated Financial Performance

The Consolidated Income of the Company for the financial year ended 31st March, 2019 is Rs 47129.85 lakhs vis-a-vis Rs 34336.85 Lakhs in the previous year, thereby registering a growth of Rs 37.26%. Consolidated Net Profit for the financial year ended 31st March, 2019 is Rs 8126.19 Lakhs as compared to Rs 4277.08 Lakhs in the previous year, registering a growth of 90%.

Standalone Financial Performance

Your Companys total income during the year under review was Rs 14767.62 Lakhs as compared to Rs 15836.09 Lakhs in the previous year. The Profit before Tax for the year 2018-19 was Rs 999.63 Lakhs as against Rs 1733.21 Lakhs in the previous year. Profit after Tax in 2018-19 stood at Rs 740.23 Lakhs as against Rs 1279.37 Lakhs in the previous year.

Overview and The State of the Company Affairs

Granite sales in FY 2019 were lower than budgeted largely as a result of the slower than required growth in saleable production from quarries and lower sales of processed granite. Lower capacity utilisation of apparel manufacturing facility and extended gestation on retail stores as well as depreciation charged during the year has resulted in the Companys operational performance being further hit.

The business performance continues to be impacted mainly due to lower capacity utilisations in granite processing plants. Granite processing industry is getting overcrowded as entry barriers are now very limited. Going forward, the Companys revenue growth would strongly be dependent upon the performance of the US and Chinese economy, given the concentration of granite sales to these geographies. The companys profitability is also expected to remain under pressure owing to intense competition from both domestic and international players.

The Board of Directors of the Company have decided not to pursue restructuring solution for Apparel business of the Company as despite continuous efforts, no attractive restructuring solution could be identified. Accordingly, Apparel Business has been reclassified from discontinued operations to continuing operations. Consequently, in accordance with lnd AS 105 Noncurrent Assets held for Sale and Discontinued Operations, the assets and liabilities of Apparel Business have been restated in the financial statements as at 31st March, 2019 and corresponding previous periods.

The apparel industry has evolved rapidly over the past few years driven by the entry of international brands, emergence of E-commerce players with deep pockets and rapid growth of value fashion category. The company continues to invest in building brand STANZA, aspiring to get traction in sales in the present, as well as in the future. The Company will continue to consistently scout for new viable locations for its store additions, which continues to be a focus area. In the current environment, the Company has to work extremely hard to turnaround apparel business.

Dividend

The Directors are pleased to recommend the dividend of Rs 0.60/- per equity share for the Financial Year ended 31st March, 2019. The dividend is subject to the approval of the Members at the Annual General Meeting ("AGM") scheduled on 14th September, 2019.

The Register of Members and Share Transfer Books will remain closed from 10th September, 2019 to 14th September 2019. (both days inclusive) for the purpose of payment of the dividend for the Financial Year ended 31st March, 2019 and the AGM.

Transfer to Reserves

No amount is proposed for transfer to the general reserve. An amount of Rs 132.75 Lakhs has been transferred from the Debenture Redemption Reserve Account and an amount of Rs 7976.32 Lakhs is proposed to be retained in the profit and loss account.

Directors Responsibility Statement

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory, cost and secretarial auditors and the reviews performed by the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Companys internal financial controls were adequate and effective during the financial year 2018-19. Accordingly, pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, confirm that:

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures;

(b) that they have, in the selection of the accounting policies, consulted the Statutory Auditors and have applied their recommendations 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 at the end of financial year and of the profit of the Company for that period;

(c) they have taken proper and sufficient care to the best of their knowledge and ability, for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) they have prepared the annual accounts on a going concern basis;

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

(f) A proper system has been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Subsidiaries, Associates and Joint Venture Companies

Consolidated Financial Statements presented by the Company include the financial information of Pokarna Engineered Stone Limited ("PESL"), the wholly owned subsidiary company. There has been no material change in the nature of the business of PESL. The Company has adopted a Policy for determining the criteria of material subsidiaries which can be viewed on the Companys website at http://www.pokarna.com/wp- content/uploads/2014/07/Material-Subsidiary-Policy.pdf. As per the requirement of Section 129(3) of the Companies Act, 2013, a separate statement containing the salient features of the financial statements of the subsidiary in prescribed Form AOC-1 is attached to the financial statements of the Company. The Audited Accounts of PESL will be available on the website of the Company - www.pokarna.com.

During the financial year under review, PESL achieved revenue of Rs 32371.87 lakhs as against Rs 18500.75 Lakhs in the previous year, thereby registering a growth of 75%. EBIDTA for the year under review was H 12161.49 Lakhs as against Rs 6429.77 Lakhs in the previous year, representing a growth of 89 %. The net profit for the year 31st March, 2019 increased from Rs 2997.71 Lakhs to Rs 7385.96 Lakhs, showing a growth of 146%. PESLs research, design and development efforts are key factors in its success. PESL is committed to growing share in many markets through its differentiated designs strategy. PESLs differentiated designs strategy is aimed at developing products with exotic natural stone-like appearance and complex detailing while being high in performance and priced reasonably.

The Company does not have any Associate or Joint Venture Companies.

Corporate Governance

The Directors reaffirm their commitment to good corporate governance practices. During the year under review, the Company was in compliance with the provisions relating to corporate governance as provided under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("the Listing Regulations"). A detailed report on corporate governance as required under the Listing Regulations is provided in a seperate section and forms part of the Annual Report. The auditors certificate on compliance with the conditions of corporate governance of the Listing Regulations is given in Annexure, to this Report. In terms of the Listing Regulations, the certificate, as prescribed in Part B of Schedule II of the said Regulations, has been obtained from Mr. Gautam Chand Jain, Chairman & Managing Director and Mr. M. Vishwanatha Reddy, Chief Financial Officer, for the financial year 2018-19 with regard to the financial statements and other matters. The said certificate forms part of the report on Corporate Governance.

Management Discussion & Analysis Report

Managements Discussion & Analysis Report for the year under review is presented in a separate section forming part of the Annual Report.

Business Responsibility Report

The Business Responsibility Reporting as required by Regulation 34(2) of the Listing Regulations, is not applicable to your Company for the financial year ending 31st March, 2019.

Corporate Social Responsibility

The Company is a caring corporate citizen and lays significant emphasis on the development of the host communities around which it operates. The Company, with this intent, has identified projects relating to Health Care, Sanitation, and Education during the year and initiated various activities in neighbouring villages around its plant location. The Corporate Social Responsibility Policy is available on your Companys website, http://www.pokarna.com/wp-content/ uploads/2016/04/CSR-Policy.pdf.

The Annual Report on CSR activities is given in Annexure -II, to this Report.

At the end of the year, there is an unspent CSR amount of Rs 1,43,64,417/-Company proposes to accumulate the CSR funds, in order to take up the large projects, which would benefit the public at large.

Directors and Key Managerial Personnel

Board of Directors and Key Managerial Personnel

Your Company is managed and controlled by a Board comprising an optimum blend of Executive and NonExecutive Directors. As on 31st March, 2019, the Board of Directors consists of eight (8) Directors consisting of Chairman & Managing Director, Managing Director, Executive Director (Woman Director) and five (5) Non-executive Directors, out of which four (4) are Independent Directors. The composition of the Board is in conformity with Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) and the relevant provisions of the Companies Act, 2013.

In accordance with the provisions of Section 152 of the Act and the Articles of Association of the Company, Mrs. Apurva Jain (DIN06933924), Executive Director of the Company, retires by rotation at this Annual General Meeting of the Company and being eligible, has offered herself for re-appointment.

Mr. Gautam Chand Jain, Chairman & Managing Director, Mr. Rahul Jain, Managing Director, Mr. M Vishwanatha Reddy, Chief Financial Officer and Mr. Mahesh Inani, Company Secretary are the Key Managerial Personnel (KMP) within the meaning of Section 2(51) read with Section 203(1) of the Act.

The Directors possess requisite qualifications and experience in general management, strategy, mining, legal & finance, information technology and other allied fields which enable them to contribute effectively to the Company in their capacity as Directors of the Company. Declarations from all Independent Directors have been received confirming that they meet the criteria of independence as prescribed both under the Companies Act, 2013 and the Listing Regulations and the same have been considered and taken on record by the Board.

Formal Annual Evaluation

Pursuant to the provisions of the Companies Act, 2013 and Listing Regulations, the Board has carried out an evaluation of its own performance, Committees, and performance of individual Directors. The performance of the Board, Committees, and individual directors was evaluated by seeking inputs from all Directors. The performance of the individual Directors, including Independent Directors performance and role of the Board / Committees were also discussed at the Board Meeting.

Committees of The Board

Audit Committee

The Audit Committee comprises of Mr. Meka Yugandhar, Mr. Thati Venkataswamy Chowdary, Mr. Vinayak Rao Juvvadi and Mr. Mahender Chand, all Independent Directors. Further, details relating to the Audit Committee are provided in the Corporate Governance Report forming part of this Annual Report.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee("NRC") comprises of Mr. Meka Yugandhar, Mr. Thati Venkataswamy Chowdary, Mr. Vinayak Rao Juvvadi and Mr. Prakash Chand Jain Further, details relating to the NRC are provided in the Corporate Governance Report forming part of this Annual Report.

Stakeholder Relationship Committee

The Stakeholder Relationship Committee ("SRC") comprises of Mr. Meka Yugandhar, Mr. Thati Venkataswamy Chowdary, Independent Directors and Mr. Rahul Jain, Managing Director. Further, details relating to the SRC are provided in the Corporate Governance Report forming part of this Annual Report.

Corporate Social Responsibility Committee

The Corporate Social Responsibility Committee("CSRC") comprises of Mr. Meka Yugandhar, Mr. Vinayak Rao Juvvadi, Independent Directors, and Mr. Gautam Chand Jain, Chairman and Managing Director. Further, details relating to the CSRC are provided in the Corporate Governance Report forming part of this Annual Report.

Risk Management Policy

In terms of provisions of Section 134(3)(n) of the Companies Act, 2013, the Company has framed and put in place a Risk Management policy to mitigate the risks, both internal and external, which the Company is exposed to. The risk management policy of the Company is uploaded on the website of the Company i.e.http://www.pokarna.com/wp- content/uploads/2014/07/Risk-Management-Policy.pdf

Business Risk Assessment procedures have been set in place for self-assessment of business risks, operating controls and compliance with the Corporate Policies. The Company manages, monitors and reports on the principal risks and uncertainties that can impact the ability to achieve the objectives. This is an ongoing process to track the evaluation of risks and delivery of mitigating action plans.

Details of various risks faced by your Company are provided in the Management Discussion and Analysis. There is no identification of risks which in the opinion of the Board may threaten the existence of the Company.

Related Party Transactions

All transactions entered with Related Parties for the year under review were on arms length basis and there are no material related party transactions as per the provisions of Section 188 of the Companies Act, 2013 and the Rules made thereunder. Thus, disclosure in form AOC-2 in terms of Section 134 of the Companies Act, 2013 is not required. The Company has developed a framework through Standard Operating Procedures for the purpose of identification and monitoring of such Related Party Transactions.

All Related Party Transactions are placed before the Audit Committee as also to the Board for approval. Transactions entered into pursuant to omnibus approval are placed before the Audit Committee and the Board for review and approval on a quarterly basis.

The policy on Related Party Transactions as approved by the Board of Directors has been uploaded on the website of the Company http://www.pokarna.com/wp-content/ uploads/2016/04/RPT-policy.pdf

Your attention is drawn to the Related Party disclosures set out in Note no. 32, of the Standalone Financial Statements.

Internal Financial Controls

The Company has set up a proper and adequate system of internal control to ensure protection of assets against disposition or loss on account of unauthorized use and that all transactions are approved, recorded and rightly reported. Also, the system has been designed to ensure that financial and other records are accurate for preparing financial information and other data, and for maintaining accountability for assets and liabilities. The control system is also equally aided by rigorous internal audit, guidelines and procedures.

The Companys internal financial control system comprises in-house Internal Audit Division, supplemented by internal audit checks from M. Murali Jaganmohan, Chartered Accountant, the Internal Auditors. The Companys system of internal audit includes: covering quarterly verification of inventory, a monthly review of accounts and a quarterly review of critical business processes. The Internal Auditors also concurrently audit the majority of the transactions in value term.

Based on the information provided, nothing has come to the attention of the Directors to indicate that any material breakdown in the function of these controls, procedures or systems occurred during the year under review. There have been no significant changes in the Companys internal financial controls during the year that have materially affected or are reasonably likely to materially affect its internal financial controls.

There are inherent limitations to the effectiveness of any system of disclosure, controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their objectives. Moreover, in the design and evaluation of the Companys disclosure controls and procedures, the management was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Audit and Audit Reports

Statutory Auditors

The Members at the 27th Annual General Meeting of the Company held on 14th September, 2018 had appointed M/s. K.C. Bhattacharjee & Paul, Chartered Accountants (Firm Registration No. 303026E) as the Statutory Auditor of the Company to hold office for a term of four years i.e., from the conclusion of the 27th Annual General Meeting until the conclusion of 31st Annual General Meeting of the Company, subject to ratification of their appointment by the shareholders, every year. The Ministry of Corporate Affairs vide its Notification dated 7th May, 2018, has dispensed with the requirement of ratification of Auditors appointment by the shareholders, every year. Hence, the resolution relating to ratification of Auditors appointment is not included in the Notice of the ensuing Annual General Meeting. The Company has received a certificate from M/s. K.C. Bhattacharjee & Paul, Chartered Accountants confirming that they are not disqualified from continuing as Statutory Auditors of the Company.

Members are requested to authorize the Board of Directors of the Company to fix the Statutory Auditors remuneration for the remainder of their term, for which necessary proposal has been included in the Notice convening this Annual General Meeting.

Cost Auditors

Pursuant to the provisions of Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014, as amended, Notifications/ Circulars issued by the Ministry of Corporate Affairs from time to time, your Board has appointed M/s. DZR & Co., Cost Accountants, Cost Accountants, Hyderabad, as the Cost Auditors to conduct the cost audit of the quarrying operations of the Company for the financial year 2019-2020 at a remuneration as mentioned in the Notice convening the AGM.

Secretarial Auditors

During the year, Secretarial Audit was carried out by Mr. K.V. Chalamareddy Practicing Company Secretary, the Secretarial Auditor of the Company for the financial year 2018-19. There were no qualifications, reservations or adverse remarks given by Secretarial Auditors of the Company. The detailed report on the Secretarial Audit is appended as an Annexure IV to this Report.

DISCLOSURES

Vigil Mechanism / Whistleblower Policy

Your Company has established a robust Vigil Mechanism for reporting of concerns through the Whistleblower Policy of the Company. Adequate safeguards are provided against victimization to those who avail of the mechanism and access to the Chairman of the Audit Committee in exceptional cases is provided to them. The details of the Vigil Mechanism is also provided in the Corporate Governance Report and the Whistleblower Policy has been uploaded on the website of the Company http://www.pokarna.com/wp-content/ uploads/2014/07/Whistle-Blower-Policy.pdf.

Meetings of the Board

The Board of Directors of your Company met six times during the year (including the separate meeting of independent directors) to deliberate on various matters. The meetings were held on 04th May, 2018, 28th May, 2018, 10th August, 2018, 10th November, 2018, 29th January, 2019 and 26th March, 2019. Further details on the Board of Directors are provided in the Corporate Governance Report forming part of this Annual Report.

Particulars of Loans, Guarantees and Investments

During the period under review, the Company has neither provided any loans nor made investments under provisions of the Section 186 of the Companies Act, 2013. For details of corporate guarantee provided by the Company, to the lenders of Pokarna Engineered Stone Limited (wholly owned subsidiary), please refer to Note 43 to the Financial Statements.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

Information relating to the conservation of energy, technology absorption and foreign exchange earnings and outgo, as stipulated under Section 134(3)(m) of the Act read with the Companies (Accounts) Rules, 2014, is given in Annexure- V, to this Report.

Extract of Annual Return

The extract of annual return in Form MGT-9 as required under Section 92(3) and Rule 12 of the Companies (Management and Administration) Rules, 2014 is given in Annexure- I, to this Report.

Material Changes and Commitments affecting the Financial Position of the Company

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

Significant and Material Orders

During the financial year 2018-19, there were no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and the Companys operations in future.

No material changes and commitments which could affect the Companys financial position have occurred between the end of the financial year of the Company and the date of this Report.

Particulars of Employees

None of the employees of the company was in receipt of remuneration in excess of limits prescribed under Rule 5(2) read with Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

The Disclosure required under Section 197(12) of Companies Act 2013 read with the Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is given in Annexure -III, to this Report.

Prevention of Sexual Harassment at Workplace

As required by the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the Company has formulated and implemented a policy on prevention of sexual harassment at the workplace with a mechanism of lodging complaints. During the year under review, no complaints were reported to the Committee.

Compliance of Secretarial Standards

During Financial Year 2018-19, your Company has complied with the relevant provisions of Secretarial Standards issued by the Institute of Company Secretaries of India on Board Meetings and General Meetings.

Reporting of Frauds

There was no instance of fraud during the year under review, which required the Statutory Auditors to report to the Audit Committee and / or Board under Section 143(12) of the Act and the rules made thereunder.

Share Capital

The Companys paid-up Equity Share Capital continues to stand at Rs 620.08 Lakhs as on 31st March, 2019. During the year, the Company has not issued any shares or shares with differential voting rights or convertible securities. Also, the Company does not have any Scheme for issue of shares including sweat equity to the employees or Directors of the Company.

Revision in Financial Statements

There has been no revision in the financial statements.

Nature of Business

There has been no change in the nature of business of the Company.

Deposits

During the year under review, the Company has not accepted or renewed any amount falling within the purview of provisions of Section 73 of the Companies Act, 2013 (the Act) read with the Companies (Acceptance of Deposits) Rules, 2014. Hence, the requirement for furnishing details of deposits which are not in compliance with Chapter V of the Act is not applicable.

Human Resources

The company considers its human resources as the key to achieve its objectives. Keeping in view, your company takes utmost care to attract and retain quality employees. The employees are sufficiently empowered and such work environment propels them to achieve higher levels of performance. The unflinching commitment of the employees is the driving force behind the companys vision. The company appreciates the spirit of its dedicated employees.

Green initiative in corporate governance

The ministry of corporate affairs ( MCA) has taken a green initiative in corporate governance by allowing paperless compliance by the companies and permitted the service of annual reports and documents to the shareholders through electronic mode subject to certain conditions and the company continues to send annual report and other communications in electronic mode to the members having email addresses and for the members who have not registered their email addresses , physical copies are sent through the permitted mode.

ACKNOWLEDGMENT

Directors place on record their deep appreciation to employees at all levels for their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the employees have enabled the Company to attain this position. The Board places on record its appreciation for the support and co-operation your Company has been receiving from its Suppliers, Distributors, Business partners and others associated with the Company. It will be the Companys endeavour to build and nurture strong links with the trade based on mutuality of benefits, respect for and cooperation with each other, consistent with client interests. The Directors also take this opportunity to thank all Investors, Customers, Vendors, Banks, Government and Regulatory Authorities and Stock Exchange, for their continued support.