rajapalayam mills ltd Directors report

TO THE MEMBERS

Your Directors have pleasure in presenting their 87^th Annual Report and the Audited Accounts of the Company for the year ended 31^st March, 2023.

1. FINANCIAL RESULTS

The financial results for the year ended 31^st March, 2023 after charging all expenses but before deducting finance cost and depreciation have resulted in operating profit (EBITDA) of $ 15,253.40 Lakhs against $ 14,423.04 Lakhs for the previous financial year 2021-22. Summary of Separate Financial Results of the Company is furnished below:

($ in Lakhs)

Financial Results - Separate	Year ended 31-03-2023	Year ended 31-03-2022
Revenue	88,231.85	70,525.97
Operating Profit : Profit before Interest, Depreciation and
Tax (PBIDTA)	15,253.40	14,423.04
Less: Interest	5,505.72	4,295.82
Profit before Depreciation and Tax (PBDT)	9,747.68	10,127.22
Less: Depreciation	5,661.90	5,048.43
Profit before Exceptional Items	4,085.78	5,078.79
Exceptional Items	742.49	2,586.77
Profit Before Tax	4,828.27	7,665.56
Less: Tax Expenses Current Tax	155.00	15.20
Excess Income Tax provisions related to earlier years withdrawn	(15.56)	_
Withdrawal of MAT Credit relating to earlier years	-	3,273.11
Deferred Tax Expenses	450.60	549.33
Profit after Tax	4,238.23	3,827.92
Other Comprehensive Income for the Year (Net of Tax)	(23.31)	16.36
Total Comprehensive Income for the Year (TCI)	4,214.92	3,844.28

2. SHARE CAPITAL

The Paid-up Capital of the Company is $ 922.02 Lakhs (PY: $ 860.55 Lakhs) consisting of 92,20,200 Shares of $ 10/- each.

3. RIGHTS ISSUE

In order to fund the margin money for various capex proposals, the Company raised Equity Shares for an amount of $ 34.98 Crores by way of Rights Issue in the ratio of 1 :14 (1 Rights Share for every 14 Equity Shares held by Shareholders). The issue was opened on 18-01-2023 and closed on 07-02-2023 with 127% subscription. The Company made allotment of Equity Shares raised through Rights Issue on 15-02-2023 and the Shares have been approved for trading by BSE Limited with effect from 21-02-2023. There is no deviation or variation in the use of proceeds of the Rights Issue from the objects stated in the Letter of Offer dated 06-01-2023 and the proceeds have been fully utilized for the objects as stated in the Offer Document.

The Board of Directors are grateful to the Shareholders of the Company for showing their overwhelming response to the Rights Issue and for reposing their faith and confidence in the Management.

4. DIVIDEND

Your Directors have pleasure in recommending a Dividend of $ 1/- per share (PY: $ 1/- per share). The total amount of Dividend outgo for the year will be $ 92.20 Lakhs (PY: $ 86.06 Lakhs). As per Income Tax, 1961, the dividend will be taxable in the hands of the Shareholders and the Company will make the payment of dividend after deducting applicable TDS. The distribution of dividend works out to 2% of Net Profit after tax for the financial year 2022-23.

As per the "Dividend Distribution Policy" of the Company, it shall strive to distribute atleast 5% of the post-tax profit as Dividend in each financial year. However, the Company proposes a Dividend payout at 2% of the Net Profit after tax in order to conserve cash for meeting margin money for its ongoing projects, for repayment of its term loan and to fund the incremental working capital requirements caused by wide fluctuation in the cotton and yarn prices. The Dividend Distribution Policy is available on the website of the Company under web link http://www.rajapalayammills.co.in/wp-content/themes/ramco/pdf/dividend-distribution-policy.pdf

5. TRANSFER TO GENERAL RESERVE

After appropriations, a sum of $ 2,500.00 Lakhs (PY: $ 631.79 Lakhs) has been transferred to General Reserve for the financial year 2022-23. As on 31-03-2023, the General Reserve stands at $ 27,500.00 Lakhs (PY: $ 25,000.00 Lakhs).

6. TAXATION

The Company has opted to pay tax under Section 115BAA of the Income Tax Act. The Company has provided an amount of $ 139.44 Lakhs (net of withdrawal of excess provision of taxes of $ 15.56 Lakhs) towards Current Tax under Section 115BAA (PY: $ 15.20 Lakhs) and Deferred Tax of $ 450.60 Lakhs has been provided for the financial year 2022-23 (PY: $ 549.33 Lakhs & withdrawal of MAT credit of $ 3,273.11 Lakhs).

7. MANAGEMENT DISCUSSION AND ANALYSIS

TRADE CONDITIONS

7.1 COTTON

The cotton production in India for the cotton season 2021-22 (October to September) dropped to 307 Lakh bales (170 Kgs) as against 360 Lakh bales produced in the previous cotton season, resulted in a 14% lower production. This is the lowest cotton production in India in the last 14 years. The major reason for lower crop size was due to low yield of cotton in main cotton growing centres due to unseasonal rainfall and an extended monsoon. As a result, the cotton prices were pushed to an 11 year high and prevailed at an elevated level throughout the cotton season that ended on 30-09-2022.

Spinning Mills were expecting the cotton prices to come down during the new cotton season 2022-23 as the Cotton Association of India (CAI), the apex cotton body in India, has estimated a higher sowing area for cotton at 128.35 Lakh hectares, an increase of about 10 Lakh hectares as compared to the last season. At the beginning of the cotton season, the CAI estimated that the cotton crop for the new season will be higher at 344 Lakh bales (PY: 307 Lakh bales). However, cotton arrivals in the market were very slow during the first 6 months of the new cotton season as the cotton growers held back the kappas, expecting better prices. The arrivals of cotton from October, 2022 to March, 2023 were lower by 30% as compared to the last season due to the holding of stocks by the farmers. The CAI also revised the cotton crop size for the season 2022-23 from its earlier estimate of 344 Lakh bales to 313 Lakh bales. All these factors triggered speculation over cotton prices and it did not come down to the expected level. Though there was some price correction in the cotton, the fall in yarn prices was much sharper than that of cotton, leading to wider disparity that affected the margins of yarn spinners across India.

The Company strategically shifted its focus on more value added counts and more volume high quality cotton was imported when the prices were at a reasonable level. The volume of imported cotton consumption for the financial year 2022-23 has increased by 10% (60% in value terms) as compared to the last financial year. This strategy has helped the Company to procure diversified varieties of cotton across the globe and to quote competitive prices for our yarn, which helped the Company to protect the operating margin in the financial year 2022-23.

7.2 YARN PRODUCTION

The Company has maintained its yarn production volume at 137.60 Lakhs Kgs during the financial year 2022-23, which is the same level of 136.36 Lakhs Kgs of last year, despite producing more volume of finer counts.

7.3 SALE OF YARN

During FY 2022-23, the Companys sale volume was 127.51 Lakh Kgs, a slight decrease from the 133.75 Lakh Kgs sold in the previous year. However, the sale value of yarn increased to $ 678.64 Crores, up 23% from $ 550.10 Crores of last year. The Company achieved the growth in sales value primarily by increasing production of value-added items and expanding its spindles / looms capacity.

The recovery of demand for textile products during the last year could not be sustained for long due to various factors like an increase in the cotton prices, geopolitical conditions and high inflation across the globe. However, the Companys focus on producing a flexible and wide range products helped it to protect its sales volume during this sluggish period. The Company has established its position in fine / super fine counts in both domestic and export markets and it consumed more imported cotton to achieve consistent quality. Indias yarn export recorded robust growth during the previous FY 2021-22 of USD 5.2 billion, a 92% increase. However, the exports volume of yarn started to moderate during the current fiscal year, with yarn exports from India only reaching USD 2.6 billion, a 51% decrease. The main reason for lower exports in the current year was Indias loss of competitive advantage due to higher domestic cotton prices compared to International prices, coupled with global slowdown in the major advanced economies. This situation forced many spinning mills across India to operate at lower capacity, with many spinning mills cutting down their production due to huge losses in yarn production.

The Companys focus on strengthening its infrastructure to produce diverse products, including various high-quality value-added yarn and collaborating with customers to manufacturer innovative products helped it maintain an optimum level of capacity utilization and grow sales volume in export market. Although India imposed a duty on imported cotton during the last fiscal year, the Company was able to mitigate this by using the Advanced License Scheme available to it under Foreign Trade Policy of the Government of India. Sales volume of value-added yarn such as Elitwist, Gassing, High twist, Melange, Core yarn and Mercerized yarn increased to 2,650 Tonnes during the FY 2022-23, a 12% growth from 2,362 Tonnes during the previous year. This growth rate is achieved on the top of strong growth rate posted during the previous year of 91%.

7.4 EXPORTS

The Company achieved its highest export of Cotton Yarn (including merchant exports) during the financial year 2022-23 with a value of $ 325.99 Crores compared to $ 187.55 Crores in the previous year, registering a growth of 74%. The Companys focus on Product enhancement through technology advancement, traceability of entire production process, continuous customer- centricity and production of unmatched quality helped it to achieve this export growth.

Your Directors are thankful to M/s. Asahi Kasei Advance Corporation, M/s. Doko Spinning Co. Ltd., and M/s. Unitika Ltd., Japan for their continued support and efforts towards promoting exports to Japan.

7.5 FABRIC DIVISION

The Fabric Unit is successfully running with the capacity of 154 Looms. The division maintained an optimum utilization level throughout the Financial Year 2022-23.

The order flow for special value added fabric, especially Jacquard Fabrics, is very much encouraging and all our Jacquard Loom capacity, including the newly commissioned 32 Looms is fully booked for the calendar year 2023. The Fabric unit produced 96 Lakhs Meters of Fabric (PY: 79 Lakhs Meters) and sold 95 Lakhs Meters of Fabrics (PY: 91 Lakhs Meters), registering a growth of 4%. The total revenue generated by the Fabric unit for the financial year 2022-23 was $ 170.93 Crores (PY: $ 121.95 Crores), registering a growth of 39%. The export turnover of Fabric for the financial year 2022-23 was $ 64.45 Crores (PY: $ 33.80 Crores), registering a growth of 91%. The fabric division achieved an export growth rate of more than 90% for two consecutive years.

7.6 POWER COST

During the financial year 2022-23, the Company was able to consume power from its own wind farms to the extent of 55% (PY: 58%) of the total power requirement. The power cost increased during the financial year 2022-23 to $ 50.95 Crores, compared to $ 39.79 Crores in the previous year, due to increase in the production capacity and a steep increase in the power tariff by Tamil Nadu Electricity Board (TNEB), by more than 15% during the financial year 2022-23. Additionally, TNERC, the regulatory authority for approving the power tariff in Tamil Nadu, has also approved to increase the power tariff for charges related to windmills by 6% for the financial year 2022-23 and also for next 5 years. In order to mitigate the higher power cost, the Company made arrangements with Solar Power developers for supplying the power on long term basis at a fixed cost under group captive arrangement, which is cheaper as compared to TNEBs Rate.

7.7 FINANCE COST

The finance cost of the Company increased to $ 55.06 Crores during the financial year 2022-23 from $ 42.96 Crores in the previous financial year. The increase is attributed to additional borrowings for expansion and modernization programs and general trend of increasing interest rates. The Reserve Bank of India (RBI) increased monetary policy rates continuously during the financial year 2022-23 and the Repo rate, which was at 4% p.a. as on 01-04-2022 was increased 6.50% p.a, resulting in higher borrowing costs. A similar trend was observed globally, which made the cost of foreign currency-denominated borrowings equal to working capital loans availed in Indian Rupee.

In addition to the increase in interest rates, additional working capital requirements due to increased commodity prices, enhanced Spinning / Fabric capacity and additional term loan borrowings had resulted in an increased outflow of finance costs during the FY 2022-23 compared to FY 2021-22.

7.8 DIVIDEND INCOME

During the financial year 2022-23, the Company received dividend income of $ 11.56 Crores (PY: $ 2.25 Crores) and the particulars of dividend received are provided under Note No.50(a) (ix).

7.9 KEY FINANCIAL RATIOS

Pursuant to Schedule V(B) of SEBI (LODR) Regulations, 2015, the Key Financial Ratios for the financial year 2022-23 are given below:

S.No.	Particulars	31-03-2023	31-03-2022	Formula adopted
1	Debtors Turnover Ratio (Days)	56	48	365 Days / (Net Revenue / Average Trade Receivables)
2	Inventory Turnover Ratio (Days)	130	100	365 Days / (Net Revenue / Average Inventories)
3	Interest Coverage Ratio	2.36	2.66	(Profit Before Tax + Interest)/ (Interest + Interest Capitalised)
4	Current Ratio	1.08	1.08	Current Assets / (Total Current Liabilities - Other Financial Liabilities - Current maturities of Long Term Debt)
5	Debt - Equity Ratio	2.44	1.96	Total Debt / Total Equity
6	Operating Profit Margin	19%	20%	EBITDA / Net Revenue
7	Net Profit Margin	5%	5%	Net Profit / Net Revenue
8	Return on Networth	10%	1 2%	Total Comprehensive Income / Average Net worth
9	Total Debt / EBITDA	7.33	4.86	Total Debt / EBITDA
10	Return on Capital Employed	6%	8%	(TCI + Interest)/ (Average of Equity plus Total Debt)
11	Price Earnings Ratio	12	21	Market Price per share as at 31st March / Earning per share

Notes:	a) For serial no. 2,3,9,10 & 11, there have been significant change (ie., 25% or more) in the ratios as compared to the previous financial year. The increase in the inventory turnover ratio during the current year is due to accumulation of stock and high value imported cotton, which has resulted in a high average inventory value. The interest
	coverage has decreased due to higher interest costs, which is explained in para
	7.7 above. The increase in Total debt to EBITDA and decrease in Return on Capital
	are due to additional borrowings for ongoing projects; however, there is no
	corresponding revenue or margins earned for the FY 2022-23. The decrease in
	Price earnings ratio is due to low market price of the Companys Shares as on 31-03-2023 compared to the price as on 31-03-2022.
b)	i EBITDA denotes Profit Before Tax + Interest + Depreciation

8. MODERNISATION / EXPANSION

As part of Companys continuous modernization programme, it has invested in 28 TFO Machines, Gassing and Soft Package Winding Machines to increase the volume of value added products. The Company has also modernized other back process machines to improve the quality of yarn. Moreover, the third line of yarn mercerizing machinery was installed and commissioned in September, 2022.

Additionally, the Company has added 8 Nos. of Airjet Jacquard Looms, which resulted in increasing the existing looms capacity from 146 Looms to 154 Looms in the existing loom-shed without incurring any additional construction cost.

The total capital expenditure spent by the Company during the FY 2022-23 for these projects was $ 66.17 Crores (PY: $ 155.14 Crores), which was funded from internal accruals and term loan from Banks.

9. EXPANSION OF FABRIC DIVISION

As previously reported, the Company is implementing looms expansion / establishment of new fabric processing unit and both projects are expected to be commissioned during Q2 of current fiscal year 2023-24. The quality of fabric produced by the Company has been well accepted both in domestic and export markets and the Company receives a lot of enquiries from leading brands across the globe for supply of processed fabric. Given the encouraging demand for the Companys quality fabric, the Company is confident of running the new expansion with full utilization of machineries within a short period of time. In order to strengthen the electrical infrastructure, the Company has commissioned its own 110 KV / 11 KV substation inside its Mills premises at Rajapalayam.

Total outlay for all the above capex proposals is $ 400 Crores, which are being funded from proceeds of Rights Issue, internal accruals and term loan from Banks.

10. PROSPECTS FOR THE CURRENT YEAR

The volatility in cotton prices are continuing and the prices of cotton and yarn are widely fluctuating. Although there was an improved arrival of cotton in the market during later part of the current cotton season, prices continue to rule higher due to improved domestic demand for cotton.

The ongoing unfavorable weather conditions in the cotton growing regions of the USA is a matter of concern, as the Company imports a large volume of long stable cotton from the USA for its value-added production.

The higher than expected inflation rate across the globe has resulted in the tightening of monetary policy rates by Central Banks, leading to reduced consumer spending. Demand for textile products remains stagnant due to global macroeconomic factors such as rising interest rates, fallout of major banks and fears of recession. Large volume orders are not being placed by buyers due to uncertainty and high inflation all over the world. Additionally, the rise in the raw material prices has resulted in high priced textile items, which are not absorbed in the retail value chain.

To combat these challenges, the Company is continuously monitoring various process parameters and implementing various system controls to deliver consistent quality of yarn and fabric to the end customers and leading brands. The Company has also strengthened its the product lines with more automation like fully automatic contamination removal system at blow room stage, 100% ring spindle monitoring system, installation of link coners, which has resulted in overall improvement in the operating efficiency of the Company. Strengthening of its product lines with more value-added customized yarn counts such as Mercerized Yarn, Melange Yarn, Core Yarn etc., will help the Company to isolate against the headwinds of falling demand for commodity count.

The Companys modernisation of spinning mills and forward integration by setting up fabric manufacturing / fabric processing are expected to help the Company to grow its top line and protect the margins during the current year. The Companys efforts to adopt sustainable manufacturing processes, which includes reuse of water, zero-liquid-discharge system, bio treatment of waste water in recycling, ensuring environmental sustainability has put the Company among the top-rated textile Companies in the world. The Companys spinning and fabric capacities are expected to complement each other in the coming years and enable the Company to offer wide range of textile products in a quick turnaround time. Many brands in domestic and international markets are approaching the Company for sourcing yarn and fabric. The Company is confident that these measures will help to post a decent growth in its top line and enable sustainable profitability in the years to come.

11. WIND MILL

The Company has windmills with installed capacity of 35.15 MW for its captive power consumption. During the financial year 2022-23, the wind farm generated 578 Lakhs Kwh, which is lower than the 589 Lakhs Kwh generated in the previous year. This was due to lower wind availability / velocity during the peak wind season. All the units generated by the windmills were adjusted for captive consumption at the Companys Spinning / Fabric Division. The income generated by the windmill division during the year was $ 39.09 Crores, as compared to $ 39.27 Crores in the previous year.

12. ASSOCIATE COMPANY

The Company has three Associate Companies: M/s. The Ramco Cements Limited, M/s. Ramco Industries Limited and M/s. Ramco Systems Limited.

As per Rule 5 of Companies (Accounts) Rules, 2014, a statement containing the salient features of the financial statements of the Companys Associates is attached in Form AOC-1 as Annexure - I.

CONSOLIDATED FINANCIAL STATEMENTS>

As per provisions of Section 129(3) of the Companies Act, 2013 and Regulation 34 of SEBI (LODR) Regulations, 2015, Companies are required to prepare consolidated financial statements of its Subsidiaries and Associates to be laid before the Annual General Meeting of the Company.

Accordingly, the consolidated financial statements incorporating the accounts of Associate Companies, viz. M/s. The Ramco Cements Limited, M/s. Ramco Industries Limited, M/s. Ramco Systems Limited, along with the Auditors Report thereon, form part of this Annual Report. As per Section 136 (1) of the Companies Act, 2013, the Financial Statements including Consolidated Financial Statements are available on the Companys website at the following link: http://www.rajapalayammills.co.in.

The consolidated profit of the Company amounted to $ 8,188.36 Lakhs for the year ended 31^st March, 2023 as compared to $ 16,657.61 Lakhs of the previous year.

The Consolidated Total Comprehensive Income for the year under review is $ 8,253.23 Lakhs as compared to $ 16,628.50 Lakhs of the previous year.

13. INTERNAL FINANCIAL CONTROLS

In accordance with Section 134(5)(e) of the Companies Act, 2013, the Company has Internal Financial Controls Policy by means of Policies and Procedures commensurate with the size & nature of its operations and pertaining to financial reporting. In accordance with Rule 8(5)(viii) of Companies (Accounts) Rules, 2014, it is hereby confirmed that the Internal Financial Controls are adequate with reference to the financial statements. The ERP System developed by Ramco Systems Limited has been installed for online monitoring of all functions and management information reports are being used to have better internal control system and to make timely decisions.

14. VIGIL MECHANISM / WHISTLE BLOWER POLICY

In compliance with Section 177(9) and (10) of the Companies Act, 2013 and Regulation 22 of SEBI (LODR) Regulations, 2015, the Company has established a Vigil Mechanism and Whistle Blower Policy. The Policy provides a mechanism for the receipt, retention and treatment of complaints and to protect the confidentiality and anonymity of the stakeholders. The complaints can be made in writing and dropped into Whistle Blower Drop Boxes or sent through e-mail to dedicated e-mail addresses accessible only by the Corporate Ombudsman. The Policy also provides complainants with access to the Chairman of the Audit Committee. The web link for the Vigil Mechanism is disclosed in the Corporate Governance Report.

15. DIRECTORS

Smt. P.V. Nirmala Raju (DIN:00474960) was appointed as Managing Director of the Company for a period of five years starting from 01-06-2022 at the AGM held on 20-08-2022.

According to the provisions of the Companies Act, 2013 and the Memorandum and Articles of Association of the Company, the following Directors will retire by rotation at the ensuing Annual General Meeting and are eligible for re-appointment:

1. Shri P.R. Venketrama Raja (DIN: 00331406),

2. Shri P.V. Abinav Ramasubramaniam Raja (DIN: 07273249)

Smt. R Sudarsanam (DIN:00433926) resigned from the position of Managing Director and Directorship position of the Company with effect from 31-05-2022.

Pursuant to Rule 8(5)(iii) of Companies (Accounts) Rules, 2014, there have been no changes in the Directors or Key Managerial Personnel during the year, except as mentioned above.

The Independent Directors hold office for a fixed term of 5 years from the date of their appointment and are not liable to retire by rotation.

The Company has received necessary declarations from all the Independent Directors under Section 149(7) of the Companies Act, 2013, stating that they meet the independence criteria provided in Section 149(6) of the Companies Act, 2013.

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

The Company has formulated a Code of Conduct for the Directors and Senior Management personnel, which has been complied with.

The Audit Committee has four members, out of which three are Independent Directors. Pursuant to Section 177(8) of the Companies Act, 2013, it is reported that there has not been an occasion, where the Board had not accepted any recommendation of the Audit Committee.

The Company has a policy relating to appointment and remuneration of Directors, Key Managerial Personnel and other employees duly approved by the Board of Directors, based on the recommendation of the Nomination and Remuneration Committee, in accordance with Section 178(3) of the Companies Act, 2013.

As per Provision to Section 178(4), the salient features of the Nomination and Remuneration Policy should be disclosed in the Boards Report. Accordingly, the following disclosures are given:

Salient Features of the Nomination and Remuneration Policy:

The objective of the Policy is to ensure that:

(a) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate Directors of the quality required to run the Company successfully;

(b) the relationship of remuneration to performance is clear and meets the appropriate performance benchmarks;

(c) remuneration to directors, key managerial personnel and senior management involves balance between fixed and incentive pay reflecting short and long term performance objectives shall be appropriated to the working of the Company and its goals.

The Nomination and Remuneration Committee and this Policy are in compliance with the Companies Act, 2013 and SEBI (LODR) Regulations, 2015. The web address of the Policy is http:// www.rajapalayammills.co.in/wp-content/themes/ramco/pdf/nomination-and-remuneration- policy.pdf.

As required under Regulation 25(7) of LODR, the Company has programmes for familiarisation for the Independent Directors about the nature of the industry, business model, roles, rights and responsibilities of Independent Directors and other relevant information. As required under Regulation 46(2)(i) of LODR, the details of the Familiarisation Programme for Independent Directors are available at the Companys website, at the following link - http://www.rajapalayammills.co.in/wp-content/uploads/2023/03/Familiarisation-Programme-for-

Independent-Directors1.pdf

The details of familiarization programme are explained in the Corporate Governance Report also.

16. EVALUATION OF BOARD

Pursuant to Section 134(3)(p) of the Companies Act, 2013, and Regulation 25(4) of SEBI (LODR) Regulations, 2015, Independent Directors have evaluated the quality, quantity and timeliness of the flow of information between the Management and the Board, Performance of the Board as a whole and its Members and other required matters.

Pursuant to Schedule II, Part D of SEBI (LODR) Regulations, 2015, the Nomination and Remuneration Committee has laid down evaluation criteria for performance evaluation of Independent Directors, which will be based on attendance, expertise and contribution brought in by the Independent Director at the Board Meeting, which shall be taken into account at the time of re-appointment of Independent Director.

Pursuant to Regulation 17(10) of SEBI (LODR) Regulations, 2015, the Board of Directors have evaluated the performance of Independent Directors and observed the same to be satisfactory and their deliberations beneficial in Board / Committee meetings.

As per Section 178(2) of the Companies Act, 2013, the Board of Directors have evaluated the performance of the Committees of the Board.

Pursuant to Regulation 4(2)(f)(ii)(9) of SEBI (LODR) Regulations, 2015, the Board of Directors have reviewed and observed that the evaluation frame work of the Board of Directors was adequate and effective.

The Boards observations on the evaluations for the year were under review similar to their observations for the Previous year. No specific actions have been warranted based on current year observations. The Company would continue to familiarize its Directors on the industry, technological and statutory developments, which have a bearing on the Company and the industry, so that Directors would be effective in discharging their expected duties.

17. MEETINGS

During the year, four Board Meetings were held. The details of the Meetings of the Board and its various Committees held during the financial year including the number of meetings attended by each Director are given in Corporate Governance Report.

18. SECRETARIAL STANDARD

As required under Clause 9 of Secretarial Standard 1, the Board of Directors confirms that the Company has complied with applicable Secretarial Standards.

19. PUBLIC DEPOSITS

Pursuant to Rule 8(5)(v) & (vi) of Companies (Accounts) Rules, 2014, it is reported that the Company has not accepted any deposit from public during the financial year under review. There was no outstanding of deposits as on 31-03-2023 (Previous year: NIL). The Company has no deposit, which is not in compliance with the Chapter V of the Companies Act, 2013.

20. ORDERS PASSED BY REGULATORS

Pursuant to Rule 8(5)(vii) of Companies (Accounts) Rules, 2014, it is reported that, no significant and material orders have been passed by the Regulators or Courts or Tribunals, impacting the going concern status and Companys operations in future.

21. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

Pursuant to Section 186(4) of the Companies Act, 2013, it is reported that:

(a) the particulars of loans are provided under Note No. 50 (b) (i).

(b) the particulars of the guarantees and investments are provided under Note No.46 and Note No. 12 & 13 respectively of Notes forming part of financial statements. The guarantees are provided to secure the loans from Banks / Financial Institutions at a competitive pricing by the borrowers.

22. CORPORATE SOCIAL RESPONSIBILITY

In terms of Section 135 and Schedule VII of the Companies Act, 2013, the Board of Directors have constituted a Corporate Social Responsibility (CSR) Committee and adopted a CSR Policy which is based on the philosophy that "As the Organization grows, the Society and Community around it also grows."

The Company has undertaken various projects in the areas of eradication of hunger, promotion of healthcare including preventive healthcare, education, water and sanitation, promotion and development of traditional arts, protection of national heritage, livelihood enhancement projects, environmental sustainability, etc. largely in accordance with Schedule VII of the Companies Act, 2013.

The CSR obligations pursuant to Section 135(5) of the Companies Act, 2013, for the year 2022-23 is $ 2.03 Lakhs as against the statutory requirement of $ 2.03 Lakhs, the Company has spent an amount of $ 11.17 Lakhs (PY: $ 42.88 Lakhs) on CSR activities during the FY 2022-23. The Company had also spent a sum of $ 5.53 Lakhs (PY: $ 20.05 Lakhs) on other social causes and projects, which do not qualify as CSR expenditure under the classifications listed out in Schedule VII of the Companies Act, 2013.

The CSR policy is available at the Companys website at the following link: http://www.rajapalayammills.co.in/wp-content/uploads/2022/07/corporate-social-responsibility- policy.pdf.

The Annual Report on CSR activities as prescribed under Companies (Corporate Social Responsibility Policy) Rules, 2014 is attached as Annexure - II.

23. AUDITS STATUTORY AUDIT

M/s. N.A. Jayaraman & Co. Chartered Accountants (FRN: 001310S) and M/s. SRSV Associates, Chartered Accountants (FRN: 015041S), who have been appointed as the Statutory Auditors of the Company for second term of five consecutive years at the 86^th Annual General Meeting, would be the Auditors of the Company till the conclusion of 91^st Annual General Meeting to be held in the year 2027.

As required under Regulation 33(1 )(d) of SEBI (LODR) Regulations, 2015, the Auditors have confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India.

The report of the Statutory Auditors for the year ended 31^st March, 2023 does not contain any qualification, reservation or adverse remark and no instance of fraud has been reported by Auditors under Section 143(12) of Companies Act, 2013.

SECRETARIAL AUDIT

Shri M.R.L. Narasimha, a Practicing Company Secretary is the Secretarial Auditor of the Company. Pursuant to Section 204(1) of the Companies Act, 2013, the Secretarial Audit Report submitted by the Secretarial Auditor for the year ended 31^st March, 2023 is attached as Annexure - III. The report does not contain any qualification, reservation or adverse remark.

COST AUDIT

As per Section 148(1) of the Companies Act, 2013 read with Rule 3 of Companies (Cost Records and Audit) Rules,2014, the Company is required to maintain cost records and accordingly such records and accounts are made and maintained.

The Board of Directors had approved the appointment of Shri M. Kannan, Cost Accountant as the Cost Auditor of the Company to audit the Companys Cost Records relating to manufacture of textile products for the year 2023-24 at a remuneration of $ 2,25,000/- (Rupees Two Lakhs Twenty Five Thousand only) exclusive of GST and out-of-pocket expenses.

The remuneration of the cost auditor is required to be ratified by the members in accordance with the provisions of Section 148(3) of the Companies Act, 2013 and Rule 14 of Companies (Audit and Auditors) Rules, 2014. Accordingly, the matter is being placed before the Members for ratification at the ensuing Annual General Meeting.

The Cost Audit Report for the financial year 2021-22 due to be filed with Ministry of Corporate Affairs by 27-08-2022, had been filed on 25-08-2022. The Cost Audit Report for the financial year 2022-23 due to be submitted by the Cost Auditor within 180 days from the closure of the financial year will be filed with the Ministry of Corporate Affairs, within 30 days thereof.

24. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Pursuant to Section 134(3)(m) of the Companies Act, 2013 and Rule 8(3) of Companies (Accounts) Rules, 2014, the information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is attached as Annexure - IV.

25. ANNUAL RETURN

In Accordance with Section 92(3) of the Companies Act, 2013, read with Rule 12 of Companies (Management and Administration) Rules, 2014, the copy of the Annual Return for the year ended 31-03-2022 has been placed on the website of the Company and web link of such Annual Return is- http://www.rajapalayammiMs.co.in/wp-content/uploads/2023/01/Annual-Return-31-03-2022.pdf.

26. CORPORATE GOVERNANCE

The Company has complied with the requirements regarding Corporate Governance as stipulated in SEBI (LODR) Regulations, 2015. As required under Schedule V(C) of SEBI (LODR) Regulations, 2015, a Report on Corporate Governance being followed by the Company is attached as Annexure - V.

As required under Schedule V(E) of SEBI (LODR) Regulations, 2015, a Certificate from the Auditors confirming compliance of conditions of Corporate Governance is also attached as Annexure - VI to this Report.

As required under Regulation 34(3) read with Schedule V Para C (10)(i) of SEBI (LODR) Regulations, 2015, Certificate from the Secretarial Auditor that none of the Companys Directors have been debarred or disqualified from being appointed or continuing as Directors of Companies, is enclosed as Annexure - VIA.

During the year under review, no complaints had been received regarding sexual harassment. The relevant statutory disclosure related to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, are available at Point No.10(l) of Corporate Governance Report.

27. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

The disclosures in terms of provisions of Section 197(12) of the Companies Act, 2013 read with Rule 5(1), (2) and (3) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, relating to remuneration are provided in Annexure- VII.

28. INDUSTRIAL RELATIONS AND PERSONNEL

The Company has 4,713 employees as on 31-03-2023 (PY: 4,173). Industrial relations with employees remained cordial during the year. The Company focused more on Human Resources Development activities and imparted training to develop the skill-set of the employees to enable them to face the challenges in the work environment.

The Company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

29. RELATED PARTY TRANSACTION

Prior approval / Omnibus approval is obtained from the Audit Committee for all related party transactions and the transactions are periodically placed before the Audit Committee for its approval. No transaction with the related party is material in nature, in accordance with Companys "Related Party Transaction Policy" and Regulation 23 of SEBI (LODR) Regulations, 2015. In accordance with Indian Accounting Standard - 24 (Related Party Disclosure), the details of transactions with the related parties are set out in Note No: 50 of disclosures forming part of Financial Statements.

As required under Regulation 46(2)(g) of SEBI (LODR) Regulations, 2015, The Companys Related Party Transaction Policy is disclosed in the Companys website and its web link is http://www.rajapalayammiMs.co.in/wp-content/themes/ramco/pdf/related-party-transaction- policy-2022.pdf.

30. RISK MANAGEMENT POLICY

Pursuant to Section 134(3)(n) of the Companies Act, 2013 and Regulation 17(9) of SEBI (LODR) Regulations, 2015, the Company has developed and implemented a Risk Management Policy. The Policy envisages identification of risk and procedures for assessment and minimization of risk thereof. The Risk Management policy of the Company is available at the Companys website at the following web link-

http://www.rajapalayammills.co.in/wp-content/themes/ramco/pdf/risk-management-policy.pdf.

31. INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Dividend amount remaining unclaimed/unpaid for a period of over 7 years was transferred to IEPF as detailed below:

Dividend Details	Amount Transferred (in $)	Date of Transfer to IEPF
Dividend 2014-2015	6,47,625	02-09-2022
Interim Dividend 2015-2016	8,43,564	10-04-2023

Shares corresponding to the said dividend were transferred to IEPF, as detailed below:

No. of Shares	Date of Transfer to IEPF
44,520	21-09-2022
534	27-09-2022
2,300	13-04-2023

Year wise amount of unpaid / unclaimed dividend lying in the unpaid account and corresponding shares, which are liable to be transferred to IEPF and due dates for such transfer, are tabled below:

Year	Type of Dividend	Date of Declaration of Dividend	Last date for claiming Unpaid Dividend	Due date for transfer to IEP Fund	No. of Shares of $10/- each	Amount of unclaimed / unpaid Dividend as on 31-03-2023 - $
2016-2017	Dividend	10-08-2017	09-08-2024	08-09-2024	2,80,517	11,22,068
2017-2018	Dividend	10-08-2018	09-08-2025	08-09-2025	1,17,307	4,69,228
2018-2019	Dividend	14-08-2019	13-08-2026	12-09-2026	1,17,840	4,71,360
2019-2020	Dividend	15-09-2020	14-09-2027	14-10-2027	1,38,177	1,37,351*
2020-2021	Dividend	25-08-2021	24-08-2028	23-09-2028	2,55,369	1,26,839*
2021-2022	Dividend	20-08-2022	19-08-2029	18-09-2029	2,38,588	2,34,873*

* Net of TDS

32. APPOINTMENT OF REGISTRAR AND SHARE TRANSFER AGENT

Share transfer and other related matters had been handled by the Company in-house till 19-04-2022. The Company has appointed M/s. Cameo Corporate Services Limited as its Registrar and Share Transfer Agent. The shifting of electronic connectivity to M/s. Cameo Corporate Services Limited has been made effective 20-04-2022. The Contact details of M/s. Cameo Corporate Services Limited is given in the Corporate Governance report.

33. MATERIAL CHANGES SINCE 1^st APRIL, 2023

There have been no changes affecting the financial position of the Company between the end of

the financial year (31-03-2023) and till the date of this report (24-05-2023).

34. DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Companies Act, 2013, the Directors confirm that:

(a) they had followed the applicable accounting standards along with proper explanation relating to material departures, if any, in the preparation of the annual accounts for the year ended 31^st March, 2023;

(b) they had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as on 31^st March, 2023 and the profit of the Company for the year ended on that date;

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

(d) they had prepared the Annual Accounts on a going concern basis;

(e) they had 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) they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

ACKNOWLEDGEMENT

The Directors are grateful to the various Departments and agencies of the Central and State

Governments for their help and co-operation. They are thankful to the Financial Institutions and

Banks for their continued help, assistance and guidance. The Directors wish to place on record their appreciation of employees at all levels for their commitment and their contribution.