Shahlon Silk Industries Ltd Directors Report

The Disclosure required under Section 197(12) of the Companies Act, 2013 read with the Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, relating to percentage increase in remuneration, ratio of remuneration of each Director and Key Managerial Personnel to the median of employees remuneration is provided in, is annexed as Annexure - 1 and forms an integral part of this Report.

A statement comprising the names of top 10 employees in terms of remuneration drawn in terms of Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in a separate annexure forming part of this report. However, in terms of Section 136 of the Act, the Integrated Annual Report is being sent to the shareholders and others entitled thereto, excluding the said annexure, Members who are interested in obtaining these particulars may write to the Company Secretary at the Registered Office of the Company. The aforesaid Annexure is also available for inspection by Members at the Registered Office of the Company, 21 days before and up to the date of the ensuing Annual

General Meeting during the business hours on working days.

There were no employees whose remuneration was in excess of the limits in pursuance of section 197(12) of the Companies Act, 2013 read with Rule 5(2) of The Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014.

The details relating to the number of employees as on the closure of financial year and gender wise bifurcation thereof is as follows:

During the year under review, the Company has made Political contribution of Rs. 30,00,000/- (Rupees Thirty Lakhs Only) to a political party, which is in compliance with the Section 182 and other applicable provisions of the Companies Act, 2013.

Your Company does not have any Subsidiary, Joint Ventures or Associate Company.

As required under section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 the particulars relating to conservation of energy, Technology Absorption and foreign exchange earnings and outgo is appended as an Annexure-2 to this Boards Report.

To the best of their knowledge, belief and according to the information and explanations obtained, your

Directors make the following statements in terms of

Section 134(3) (c) & 134 (5) of the Companies Act, 2013:

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

b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

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

d) The directors had prepared the annual accounts on a going concern basis;

e) The directors had laid down internal financial controls to be followed by the company and that

such internal financial controls are adequate and were operating effectively.

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

M/s Rasesh Shah & Associates, Chartered Accountants (Firm Registration No. 0108671W) completed their second term and have been retired as the Statutory Auditors of the company w.e.f. 30.09.2024 i.e. on conclusion of the 16th AGM of the company.

Based on the recommendation of Audit Committee and Board of Directors, Shareholders approved the appointment of M/s. HTKS & Co., Chartered Accountants (Firm Registration No 111032W), at the 16th AGM, as the Statutory Auditors of the Company, for a term of 5 consecutive years commencing from the conclusion of 16th AGM till the conclusion of 21st AGM of the Company.

Accordingly, M/s. HTKS & Co., Chartered Accountants, Statutory Auditors of the Company will continue as such till the conclusion of Annual General Meeting to be held in the Year 2029. In this regard, the Company has received a Certificate from the Auditors to the effect that their continuation as Statutory Auditors would be in accordance with the provisions of Section 141 of the Companies Act, 2013.

> Statutory Auditors Observations in Audit Report:

There are no qualifications, reservations or adverse remarks or disclaimers made by M/s. HTKS & Co., Chartered Accountants (Firm Registration No 111032W), Statutory Auditors in their report for the Financial Year ended March 31, 2025.

Moreover, there is no incident of fraud requiring reporting by the Auditors under Section 143(12) of the Act.

> Boards response on Auditors qualification, Reservation or adverse Remark or disclaimer made

There are no qualifications, reservations or adverse remarks made by the statutory auditors in their report for the reporting financial year.

The Company has appointed Shri Bhairav H. Shukla, Practicing Company Secretary, (CP: 5820) Surat to conduct the Secretarial Audit of the Company as required by Section 204 of the Companies Act, 2013 and Rules made thereunder. The Company provided all assistance and facilities to the Secretarial Auditors for conducting their audit. Shri Bhairav H. Shukla, has also conducted the Annual Secretarial Compliance pursuant to Regulation 24A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Secretarial Audit Report, in Form MR-3, for the financial year ended March 31, 2025 is annexed herewith as Annexure- 3.

Pursuant to the amended provisions of Regulation 24A of the SEBI (LODR) Regulations and Section 204 of the Act read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Based on the recommendation of the Audit Committee, the Board of Directors have approved and recommended the appointment of M/s. JDM and Associates LLP, Peer Reviewed Firm of Company Secretaries in Practice as Secretarial Auditors of the Company for a term of up to 5 (Five) consecutive years to hold office from the conclusion of ensuing 17th AGM till the conclusion of 22nd AGM of the Company to be held in the Year 2030, for approval of the Members at ensuing AGM of the Company. Brief resume and other details of M/s. JDM and Associates LLP, Company Secretaries in Practice, are separately disclosed in the Notice of ensuing AGM.

M/s. JDM and Associates LLP have given their consent to act as Secretarial Auditors of the Company and confirmed that their aforesaid appointment (if made) would be within the prescribed limits under the Act & Rules made thereunder and SEBI (LODR) Regulations. They have also confirmed that they are not disqualified to be appointed as Secretarial Auditors in terms of provisions of the Act & Rules made thereunder and SEBI (LODR) Regulations.

> Secretarial Auditors Observations in Audit Report:

The Secretarial Audit Report for the financial year ended March 31, 2025 issued by Shri Bhairav H. Shukla, Practicing Company Secretary, (CP: 5820) Surat, is annexed herewith as Annexure- 3. The report is self-explanatory and does not call for any further explanation / comments as required under Section 134(3)(f) of the Companies Act, 2013.

Moreover, there is no incident of fraud requiring reporting by the Secretarial Auditor under Section 143(12) of the Act.

In terms of the provisions of Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014 as amended from time to time, the Board of Directors, on the recommendation of the Audit Committee, has appointed M/s. PNR & Co. LLP, Cost Accountants, Surat (Firm Registration No: 006470) as Cost Auditor of the Company, for the financial year ending March 31, 2026, on a remuneration as mentioned in the Notice convening the 17th Annual General Meeting for conducting the audit of the cost records maintained by the Company.

A Certificate from M/s. PNR & Co. LLP, Cost Accountants, has been received to the effect that their appointment as Cost Auditor of the Company, if made, would be in accordance with the limits specified under Section 141 of the Act and Rules framed thereunder.

A resolution seeking Members approval for remuneration payable to Cost Auditors forms part of the Notice of the 17th Annual General Meeting of the Company and the same is recommended for your consideration.

Cost Audit Report for the year March 2024 was filed with the Central Government, within the prescribed time limit AND The Cost Audit Report for the year ended on 31st March 2025, shall be filed within prescribed time after completion of Cost Audit by Cost Auditors.

The company has made and maintained books of account and records pursuant to the rules made by the Central Government for the maintenance of cost records under section 148(1) of the Companies Act, 2013.

> Cost Auditors Observations in Audit Report:

There are no qualifications, reservations or adverse remarks or disclaimers made by M/s. PNR & Co. LLP, Cost Accountants, Surat (Firm Registration No: 006470), in his Cost Audit Report for the Financial Year ended March 31,2024.

Moreover, there is no incident of fraud requiring reporting by the Cost Auditor under Section

143(12) of the Act.

> Boards response on Auditors qualification, Reservation or adverse Remark or disclaimer made

There are no qualifications, reservations or adverse remarks made by the Cost auditors in their report.

The Company believes that Internal Control is one of the key pillars of governance, which provides freedom to the management within a framework of appropriate checks and balances. The Company has a robust internal control framework, which has been developed considering the nature, size and risks in the business.

The Company has adequate internal control systems in place and also has reasonable assurance on authorizing, recording and reporting transactions of its operations. The Company has well-placed, proper and adequate internal controls environment, commensurate with its size, scale and complexities of its operations. The Company had already developed and implemented a framework for ensuring internal controls over financial reporting. This framework includes entity level policies, processes and operating level standard operating procedures (SOP). Internal control systems are an integral part of your Companys Corporate Governance structure. Information Technology (IT) policies and processes also ensure that they mitigate the current business risks. The Company has in placed ERP software system, supported by BI tools. The systems and processes are continuously improved by adopting best in class processes and automation and implementing the latest IT tools which help further for maintaining financial and commercial discipline. These have been designed to provide reasonable assurance with regard to credibility of data and compliances, inter-alia:

a) Recording and providing reliable financial and operational information;

b) Complying with the applicable statutes;

c) Safeguarding assets from unauthorized use;

d) Executing transactions with proper authorization, and ensuring compliance with corporate policies;

e) Prevention and detection of Frauds / errors;

f) Continuous updating of IT software/systems.

These are aimed at giving the Audit Committee a reasonable assurance on the reliability of financial reporting and statutory & regulatory compliances, effectiveness and efficiency of your Companys operations. The Internal Financial Control Systems are reviewed periodically and revised to keep in tune with the changing business environment.

Statutory Auditors of the company has conducted audit of internal financial control system over financial reporting and operating effectiveness of such controls. Separate audit report on internal financial control is annexed to Auditors Report and forming part of this report.

The Company has laid down a Risk Management Policy and identified threat of such events which if occur may adversely affect either or value to shareholders, ability of Company to achieve objectives, ability to implement business strategies. Such inherent risks are categorized into Strategic risk, Operating risk and Regulatory risk. Managing Director and other Directors of the Company in consultation with Audit Committee will review from time to time the risk and suggest steps to be taken to control and mitigate the same through a properly defined framework. It may be noted that none of the identified risks is of a nature which would threaten the existence of the Company. We consistently and periodically review our systems and policies in order to establish sound risk management

and internal control systems.

The company has not given any guarantees or provided any security covered under the provisions of section 185 and 186 of the Companies Act, 2013 during the year under review.

The Company has complied with provisions of the Companies Act, 2013 with respect to loans granted, investments made or guarantee given.

All the related party transactions are entered on arms length basis, in the ordinary course of business and are in compliance with the applicable provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel etc. which may have potential conflict with the interest of the Company at large or which warrants the approval of the shareholders.

The Company has developed a Policy on Related Party Transactions for the purpose of identification and monitoring of such transactions.

The particulars of contracts or arrangements with related parties referred to in sub section (1) of Section 188 entered by the Company during the Financial Year ended March 31, 2025, in prescribed Form AOC-2 is annexed to this Boards Report as "Annexure - 4".

All Related Party Transactions are presented to the Audit Committee and the Board. Omnibus approval is obtained for the transactions which are foreseen and repetitive in nature. A statement of all related party transactions presented before the Audit Committee on a quarterly basis, specifying the nature, value and terms and conditions of the transactions.

The Company has devised a Policy for performance evaluation of the Board as a whole, Committees and individual Directors (including Independent Directors) which include criteria for performance evaluation of Non-executive Directors and Executive Directors. The exercise was carried out through a structured evaluation process covering various aspects of the Boards functioning such as composition of the Board & committees, experience & competencies, performance of specific duties & obligations, governance issues etc. Separate exercise was carried out to evaluate the performance of individual Directors including the Board Chairman who were evaluated on parameters such as attendance, contribution at the meetings and otherwise, independent judgment, safeguarding of minority shareholders interest etc.

The evaluation of the Independent Directors was carried out by the entire Board and that of the Chairman and the Non-Independent Directors were carried out by the Independent Directors.

The Directors were satisfied with the evaluation results, which reflected the overall engagement of the Board and its Committees with the Company.

Further, The Chairperson, based on the Evaluation done by the Directors, informed that the performance of the Directors is satisfactory, and they are recommended for continuation as Directors of the Company.

During the financial year under review, your Company has not proposed or considered or approved any Scheme of Merger / Amalgamation / Takeover / Demerger or Arrangement with its Members and/or Creditors.

During the financial year under review, there was no application made and proceeding initiated / pending

by any Financial and/or Operational Creditors against your Company under the Insolvency and Bankruptcy Code, 2016.

As on the date of this Report, there is no application or proceeding pending against your Company under the Insolvency and Bankruptcy Code, 2016.

During the financial year under review, the Company has not made any settlement with its bankers for any loan(s) / facility(ies) availed or / and still in existence.

The Company complies with all applicable mandatory Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI).

There are no significant and material orders passed by the Regulators or Courts or tribunals which would impact the going concern status of the Company and its future operations.

There have been no material changes and commitments affecting the financial position of the Company between the end of the financial year and date of this report.

The Company has zero tolerance for sexual harassment at work place and has adopted a policy against sexual harassment in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules framed thereunder. An Internal Complaints Committee (ICC) has been set up in compliance with the said Act.

The following is a summary of sexual harassment complaints received and disposed of during the year:

a) number of complaints filed during the financial year - Nil

b) number of complaints disposed of during the financial year - Nil

c) number of complaints pending as on end of the financial year - Nil

The Company declares that it has duly complied with the provisions of the Maternity Benefit Act, 1961. All eligible women employees, if any, have been extended the statutory benefits prescribed under the Act, including paid maternity leave, continuity of salary and service during the leave period, and post-maternity support such as nursing breaks and flexible return-to- work options, as applicable. The Company remains committed to fostering an inclusive and supportive work environment that upholds the rights and welfare of its women employees in accordance with applicable laws.

During the year, the Company has transferred the unclaimed and unpaid dividend of 266496.25/-. Further, the corresponding equity shares on which dividends were unclaimed for seven consecutive years were also transferred as per the requirements of the IEPF Rules.

An Annual Report on CSR activities of the Company for the Financial Year 2024-25 as Required to be given under Section 135 of the Companies Act, 2013 read with Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 has been provided as an "Annexure - 5" to this Report.

During the F.Y.2024-25 the Company was required to spend an amount of Rs. 7.05 Lakhs for implementation of various CSR activities in terms of Section 135 of the Companies Act, 2013. In this regard the Company has

spent an amount of Rs. 7.25 Lakhs on CSR activities which is in excess of the minimum amount required to be spent by the Company.

A separate report on Corporate Governance pursuant to Regulation 34(3) of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, read with Part C of Schedule V thereof, along with a certificate from Shri Bhairav H. Shukla, Practicing Company Secretary, (CP: 5820) Surat confirming compliance of the conditions of Corporate Governance is provided as a distinct section of this Annual Report.

Pursuant to Regulation 34(2)(e) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Management Discussion and Analysis Report is given in Annexure- 6 to this Report.

Your Directors express their grateful appreciation for the assistance and co-operation received from the Banks, Financial Institutions, Government Authorities, Customers, Suppliers and Shareholders during the year under review. Your Directors also wish to place on record their deep sense of appreciation for committed services of employees of the Company at all the levels.

(v) average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration;

The average percentage increase in the salaries of employees other than Managerial Personnel in Financial Year 2024-25 was 7.00%. The increments given to employees are based on their potential, performance, and contribution, which are benchmarked against applicable Industry norms. Whereas the remuneration of the Managerial Personnel remained unchanged, except for the Company Secretary and Chief Financial Officer, whose average remuneration increased by 7.87%. There is no exceptional increase in remuneration of key Managerial Personnel.

(vi) Affirmation that the remuneration is as per the Remuneration policy of the Company: It is hereby affirmed that the remuneration paid is as per the remuneration policy for Directors, Key Managerial Personnel and other employees of the Company.

(I) the steps taken or impact on conservation of

energy;

> Maintaining power factor and accordingly obtained rebate from DGVCL of Rs. 1182697. 70/- during the year.

> Further, following steps taken to save energy:

> ETP Aeration Tank 2 motor connect with 2 no. VFD - which saves 185 kwh per day i.e. Rs.39,960/- per month.

> Replaced 11 Nos. Waterjet Humidity motor (consuming 878 kwh per day) with 11 New Exhaust Fan motor (consuming 275 kwh per day), which saves Rs. 1,29,360/- per month.

> Replaced 9 Nos. TFO Humidity motor (consuming 492 kwh per day) with 9 New Exhaust Fan (consuming 152 kwh per day), which saves Rs. 76,962/- per month.

> Replaced 850 Nos. 28 w Tube light (consuming 570 kwh per day) with 850 new 16 w LED light (consuming 325 kwh per day), which saves Rs. 61,005/- per month.

> Replaced 8 Nos. 250 w Sidium lamp (consuming 48 kwh per day) with 8 new 100w Flude light (consuming 19.2 kwh per day), which saves Rs. 7,171.20/- per month.

(ii) the steps taken by the company for utilising alternate sources of energy;

> The Company is exploring potential of using alternate source of energy, which may be considered for implementation in future. The company has installed in past two 0.6MW, one 1.2MW and one 2.1MW windmills for captive generation of power.

(iii) the capital investment on energy conservation equipments; - NIL

(I) The efforts made towards technology absorption; and

(ii) the benefits derived

Your company is keeping a close eye on the new product development and upgradation of technology in existing products. Upgradation in various areas of plant and machinery is continuously carried out. The company has adopted standard cost for each product quality and comparing it with actual cost from time to time. If there is any major deviation, then proper and prompt remedial action is taken to improve it. These developments will result in improvement in the quality of the product and yield resulting in superior cost competitiveness.

(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year) - NIL

(iv) the expenditure incurred on Research and Development. - NIL

Total Foreign Exchange used and earned.

To,

The Members,

(CIN - L17120GJ2008PLC053464)

Plot No. 5, C.S. Nondh No. 451/A, R.S. No. 33/1 paiki,

Nr. Narendra Dyeing Mill, B/h. Old Sub-Jail, Khatodara,

Ring Road, Surat-395002, Guiarat, India.

I have conducted the Secretarial Audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by SHAHLON SILK INDUSTRIES LIMITED (CIN - L17120GJ2008PLC053464) (hereinafter called the "company"). Secretarial Audit was conducted in a manner that provided me a reasonable basis for evaluating the corporate conducts/statutory compliances and expressing my opinion thereon.

Based on my verification of the Companys books, papers, minute books, forms and returns filed and other records maintained by the company and also the information provided by the Company, its officers, agents and authorized representatives during the conduct of Secretarial audit, I hereby report that in my opinion, the company has, during the audit period covering the financial year ended on 31st March, 2025, complied with the statutory provisions listed hereunder and also that the Company has proper Board-processes and compliance- mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:

I have examined the books, papers, minute books, forms and returns filed and other records maintained by the Company for the financial year ended on 31st March, 2025, according to the provisions of:

(I) The Companies Act, 2013 (the Act) and the rules made there-under;

(ii) The Securities Contracts (Regulation) Act, 1956 (SCRA) and the rules made there-under;

(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed there-under;

(iv) Foreign Exchange Management Act, 1999 and the rules and regulations made there-under to the extent of Foreign Direct Investment;

(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (SEBI Act)

a. The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;

b. The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015;

c. The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018; (Not applicable to the Company during the financial year under review);

d. The Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021; [Not applicable as the Company has not issued shares to the Employees during the financial year under review];

e. The Securities and Exchange Board of India (Issue and Listing of Non-Convertible Securities) Regulations, 2021. [Not applicable as the Company had not issued and listed any debt securities, non-convertible securities or commercial paper during the financial year under review];

f. The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents)

Regulations, 1993 regarding the Companies Act and dealing with client. [Not applicable as the company is not registered as Registrar to Issue and Share Transfer Agent during the financial year under review;]

g. The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2021. [Not applicable as the Company has not delisted / proposed to delist its equity shares from Stock Exchange during the financial year under review];

h. The Securities and Exchange Board of India (BuyBack of Securities) Regulations, 2018. [Not applicable as the Company has not bought back / proposed to buy-back any of its securities during the financial year under review];

I. The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

(vi) Other laws specifically applicable to the Company

namely -

1. Factories Act, 1948

2. The Environment (Protection) Act, 1986

3. Air (Prevention and Control of Pollution) Act, 1981

4. Water (Prevention and Control of Pollution) Act, 1974

5. Foreign Trade Regulation Act, 1992

I have also examined compliances with the applicable

clauses of the following:

(I) Secretarial Standards pursuant to section 118(10) of the Act, issu ed by the Institute of Company Secretaries of India.

(ii) The Listing Agreement entered into by the company with the BSE Ltd.

I report that, during the year under review, the company has complied with the provisions of the Acts, rules, regulations and guidelines, standards mentioned above subject to the following observations:

The impact assessment is not applicable to the Company.

(b) Two per cent of average net profit of the company as per section 135(5): 7.05 Lakhs

(c) Surplus arising out of the CSR Projects or programmes or activities of the previous financial years. : N.A.

(d) Amount required to be set-off for the financial year, if any. : N.A.

(e) Total CSR obligation for the financial year [(b)+(c)-(d)]. : 7.05 Lakhs

6. (a) Amount spent on CSR Projects(both Ongoing and other than Ongoing Project): 7.25 Lakhs

(b) Amount spent in Administrative Overheads: Nil

(c) Amount spent on Impact Assessment, if applicable: Not Applicable

(d) Total amount spent for the Financial Year [(a)+(b)+(c)]. : 7.25 Lakhs

8. Whether any capital assets have been created or acquired through Corporate Social Responsibility amount spent in the Financial Year: No

If Yes, enter the number of Capital assets

created/acquired: Not applicable

Details relating to such asset(s) so created or acquired through Corporate Social Responsibility amount spent in the Financial Year

(All the fields should be captured as appearing in the revenue record, flat no, house no, Municipal Office/Municipal Corporation/ Gram panchayat are to be specified and also the area of the immovable property as well as boundaries)

9. Specify the reason(s), if the Company has failed to spend two per cent of the average net profit as per section 135(5): N.A.