sona blw precision forgings ltd share price Directors report


DIRECTORS REPORT

Dear Members,

The Board of Directors have pleasure in presenting their twenty sixth (26th) Annual Report along with the audited Financial Statements (Standalone and Consolidated) of the Company for the Financial Year ended 31st March, 2022.

1. FINANCIAL HIGHLIGHTS & PERFORMANCE

The financial performance of the Company (Standalone and Consolidated) for the Financial Year ended 31st March, 2022 is as under:

(INR in million)
Particulars

Standalone

Consolidated

1 2021-22 2020-21 2021-22 2020-21
Revenue from Operations 19,390.49 14,000.44 21,306.40 15,663.00
Other Income 509.98 368.75 200.26 23.41
Total Income 19,900.46 14,369.19 21,506.66 15,686.41
Total expenses 15,865.46 11,316.70 17,317.60 12,547.38
Profit before exceptional Items and tax 4,035.01 3,052.49 4,189.05 3,139.02
Less: Exceptional Items (132.70) 139.06 (132.70) 139.06
Profit before tax 4,167.71 2,913.43 4,321.75 2,999.96
Less Total Tax Expenses 632.32 753.04 706.325 848.31
Profit for the period/year 3,535.38 2,160.39 3,615.43 2,151.65
Other comprehensive (loss)/income for the period/ year (11.52) (15.49) 28.70 (12.44)
Total comprehensive income for the period/ year 3,523.86 2,144.90 3,644.13 2,139.21
Earnings per share (Basic) (in INR) 6.08 3.77 6.22 3.76
Earnings per share (Diluted) (in INR) 6.08 3.77 6.21 3.75

Standalone

The standalone revenue from operations increased by 39% to INR 19,390.49 million for Fiscal 2022 from INR 14,000.44 million for Fiscal 2021, due to ramp-up of sales volume for some of the new contracts especially in the EV segment and growth in sales in the Indian passenger vehicle and commercial vehicle markets. Profit before exceptional items and tax in Fiscal 2022 was INR 4,035.01 million as compared to INR 3,052.49 million in Fiscal 2021, reflecting an increase of 32% from the previous year. Profit after tax (PAT) in the Fiscal Year 2022 was INR 3,535.38 million as compared to INR 2,160.39 million in Fiscal 2021, reflecting an increase of 64% from the previous year due to certain one-time tax impact.

Consolidated

The consolidated revenue from operations increased by 36% to INR 21,306.40 million for Fiscal 2022 from INR 15,663.00 million for Fiscal 2021, primarily due to the ramp up of sales volume for some of the new contracts especially in EV segment and growth in sales in the Indian passenger vehicle and commercial vehicle markets. Profit before exceptional items and tax in Fiscal 2022 was INR 4,189.05 million as compared to INR 3,139.02 million in Fiscal 2021, reflecting an increase of 33% from the previous year. Profit after tax (PAT) in the Fiscal Year 2022 was INR 3,615.43 million as compared to INR 2,151.65 million in Fiscal 2021, reflecting an increase of 68% from the previous year due to certain one-time tax impact.

2. PERFORMANCE OF THE COMPANY AND INDUSTRY OVERVIEW

In Fiscal 2022, Your Company continued its growth momentum as it scaled new benchmarks in Revenue and Profitability. Its Consolidated Revenue, EBITDA and Profits (before tax and exceptional items) were INR 21,306.40 million, INR 5,591.01 and INR 3,615.43 million respectively. Growth was led by the strong traction in the EV business which witnessed revenues more than double compared to the prior year.

Further, the Motor business also contributed to the EV growth trajectory. This performance was achieved in the backdrop of a challenging operating environment characterised by stop start economic activity due to subsequent waves of COVID-19, high inflation and an all-round rise in operating costs. This was accentuated by the disruption in the global supply chain which constrained availability of inputs, most notably causing a shortage of semi-conductors for the auto industry worldwide.

Encouragingly, it was witnessed that most countries and regions experienced more rapid recovery in economic activity following subsequent waves. Further, the scale-up and success of vaccination Programmes enabled faster resumption by mitigating the severity of subsequent waves. The auto industry responded to the constrained availability in semi-conductors by prioritising production of higher value vehicles and those with newer technologies. As a result, global sales of automobiles have started to recover due to the pent-up demand, preference for personal mobility and increasing acceptance of newer technologies like EVs and hybrid vehicles.

While the multiple factors such as subsequent waves of the pandemic, disruption in supply chain, constraints to timely availability and transportation of raw materials and the compounding effect on vendors, suppliers and contractors intensified the challenges, your Company did not experience any interruption in the ability to supply systems and components and ensured that customers did not experience any disruption to their product lines. Your Company was able to continue to drive business development and won 43 new programmes during the last three quarters for the Fiscal 2022. As of 31st March, 2022, we have total 30 EV Programmes, out of which 9 EV programmes are under serial production and 21 Programmes will undergo serial production in the Fiscal 2023 or later depending upon customer production schedules.

Your Company undertook active measures to promote health and safety and social distancing efforts and enforced all guidelines and protocols stringently. Another significant area of focus remains to train and create enough learning opportunities for its workforce as well as undertaking initiatives to maintain harmony in the workplace. During the Fiscal 2022, your Company has added to its workforce with focus on augmenting R&D capabilities through significant additions to the R&D team.

During the year under review, your Company commenced construction of its new facility at Chakan (Pune), which will be the tenth facility globally and the seventh in India. Further, your Company has made exciting progress in new product areas including winning its maiden order for an Integrated Motor Controller Module and expanding driveline products portfolio with two new products namely Spool Gear and Epicyclic Geartrain, which find application in the EV drivetrains. The Company also launched its next generation of motors and controllers with high efficiency, torque and power density, including the introduction of its maiden motor T-REF, which is made without use of rare earth elements. Besides these, the Company has also formed three technology partnerships for the development of different technology of motors. These partnerships were 1) with IRP of Israel to co-develop a magnet-less motor for electric two- and three-wheelers, 2) with Enedym Inc., a Canadian company for development of next-generation switched reluctance motors, and 3) with C-Motive, a US based company, for the development of motors based on electrostatic technology.

As per Nomura research reports data, global light vehicle sales declined by 3% to 79.5 million in the Fiscal 2022 from 82.3 million in the Fiscal 2021, whereas the Companys revenue from operations grew by 36% in the same period.

By 2025, IEA expects global electric vehicle sales to reach ~15 million, accounting for ~15% of global light-vehicle sales by volume. By 2030, IEA expects global electric vehicle sales to cross 27 million, accounting for ~22% of light-vehicle sales.

The outlook for the Fiscal 2023 is one of continued industry recovery, principally in terms of underlying demand. This should be supported with build-back by OEMs gaining speed through the year as supply chain issues related to semiconductors are expected to ease. As per Nomura, the global light vehicle market is expected to grow to around 85.5 million in the calendar year 2022.

3. MANAGEMENT DISCUSSION AND ANALYSIS

A detailed analysis of your Companys performance is discussed in the Management Discussion and Analysis Report for the Financial Year 2021-22, pursuant to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, which forms part of this Annual Report.

4. CORPORATE DEVELOPMENTS

Initial Public Offer

Your Company has successfully completed the initial public offering of its equity shares ("IPO") which comprised of fresh issue of 10,309,278 equity shares aggregating to INR 3,000 million by the Company ("Fresh Issue") and an offer for sale of 180,412,371 equity shares aggregating to INR 52,500 million through book building process.

The net proceeds from the Fresh Issue were fully utilised for the objects as disclosed in the Prospectus, viz; INR 2,411.17 million towards repayment and pre-payment of identified borrowings of the Company and INR 523.13 million towards general corporate purpose and INR 65.70 million towards IPO expenses.

Scheme of Amalgamation of Comstar Automotive Technologies Private Limtied with the Company

Your Company has filed a Scheme of Amalgamation (Scheme) of Comstar Automotive Technologies Private Limited ("Comstar"), a wholly-owned subsidiary with itself before the Honble National Company Law Tribunal, Chandigarh Bench (NCLT) on 10th January, 2020. The Scheme was sanctioned by NCLT vide its Order dated 7th January, 2022. The certified true copy of the Order was filed by the Company and Comstar with the Registrar of Companies NCT of Delhi & Haryana on 28th January, 2022. The Scheme has become effective from 28th January, 2022 with the appointed date of 5th July, 2019.

5. TRANSFER TO RESERVES

The Board of Directors of the Company do not propose to transfer any amount to reserves.

6. DIVIDEND

The Board of Directors at their meeting held on 5th May, 2022 has recommended the payment of INR 0.77 per equity share of the Company having the face value of INR 10/- each as final dividend for the Financial Year ended 31st March, 2022. The final dividend will be paid to the shareholders who are holding the shares of the Company as on Thursday, 30th June, 2022. The payment of final dividend is subject to the approval of the shareholders in the ensuring Annual General Meeting of the Company.

During the year under review, the Board of Directors of the Company at their meeting held on 1st February, 2022, declared an interim dividend of INR 0.77 per equity share of the Company having face value of INR 10/- each. The interim dividend was paid to the shareholders on 25th February, 2022.

In view of the changes made under the Income-tax Act, 1961, by the Finance Act, 2020, dividends paid or distributed by the Company shall be taxable in the hands of the Shareholders.

The abovesaid dividend declared is in accordance with the Dividend Distribution Policy of the Company.

The Board has adopted the Dividend Distribution policy in its meeting held on 27th January, 2021 in accordance with the provisions of regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended from time to time. The policy can be accessed on the Companys website at https:// sonacomstar.com/policies-and-codes.

7. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

During the year under review, no amount was required to be transferred to the Investor Education and Protection Fund by the Company.

8. CHANGE IN SHARE CAPITAL OF THE COMPANY

Allotment of equity shares pursuant to Initial public offer

During the year under review, your Company has allotted 10,309,278 equity shares at an offer price of INR 291/- each, as part of IPO of the Company. With the said allotment, the paid-up equity share capital has increased to INR 5,832,898,380 consisting of 583,289,838 equity shares of INR 10/- each from INR 5,729,805,600 consisting of 572,980,560 equity shares of INR 10/- each.

Allotment of Equity Shares under Sona BLW Precision Forgings Limited-Employee Stock Option Scheme -2020

During the year under review, your Company has allotted 1,062,872 equity shares of the Company having face value of INR 10/- each fully paid-up to the eligible employees of the Company upon exercise of the vested options, as granted to them, under the Sona BLW Precision Forgings Limited-Employee Stock Option Scheme-2020 ("ESOP Scheme-2020").

As a result, the paid-up share capital of the Company increased from INR 5,832,898,380 consisting of 583,289,838 equity shares of INR 10/- each to INR 5,843,527,100 consisting of 584,352,710 equity shares of INR 10/- each. The equity shares allotted under the ESOP Scheme-2020 rank pari-passu with the existing equity shares of the Company.

The Company has not issued equity shares with differential rights as to dividend, voting or otherwise.

The Company has not issued any sweat equity shares to its directors or employees.

Consolidation of Authorised Share Capital due to Merger of Comstar with the Company

During the Financial Year under review, Comstar Automotive Technologies Private Limited, an erstwhile wholly-owned subsidiary, merged with the Company, and pursuant to the Scheme of Amalgamation, the authorised share capital of Company increased from INR 10,000,000,000 to INR 11,500,000,000.

9. CHANGE IN NATURE OF BUSINESS

During Financial Year 2021-22, there was no change in the nature of Companys business.

10. SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES

As at 31st March, 2022, the Company has 4 (four) directly held subsidiaries and 5 (five) step down subsidiaries, the details of which is given in the Annual Return (Form MGT- 7) of the Company which is available on the website of the Company at https://sonacomstar.com/investor/annual- reports-and-returns.

Pursuant to Section 129(3) of the Companies Act, 2013 (‘Act), the Company has prepared the Consolidated Financial Statements, which forms part of this Annual Report. Further, a statement containing salient features of Standalone Financial Statements of subsidiaries in Form AOC-1, is attached to the Consolidated Financial Statements of the Company and therefore not repeated in this report for the sake of brevity.

in accordance with Section 136 of the Act, the audited Financial Statements, including the Consolidated Financial Statements and related information of the Company and audited Financial Statements of each of its subsidiaries, are available on the website of the Company viz. https:// sonacomstar.com/investor /subsidiary-companies- financial-statements.

Cessation of Comstar Automotive Technologies Private Limited as subsidiary of the Company

Consequent to the merger of Comstar Automotive Technologies Private Limited (Comstar), an erstwhile wholly-owned subsidiary with the Company, during the year under review, Comstar ceases to be the wholly-owned subsidiary of the Company and the two subsidiaries of Comstar i.e Comstar Automotive USA LLC and Comstar Automotive Technology Services Private Limited, became the direct subsidiary of the Company.

Save and except as provided herein above, no other company has become or ceased to be subsidiary, joint venture or associate of the Company during the year under review.

Material subsidiaries

As on 31st March, 2022, your Company had one material subsidiary viz. Comstar Automotive USA LLC (‘Comstar USA).

Pursuant to Regulation 24(1) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Mr. Jeffrey Mark Overly, Independent director of the Company was appointed as Director on the Board of Comstar USA with effect from 16*h February, 2021.

However, pursuant to the definition of material subsidiary under Regulation 24 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the income or networth of Comstar USA has fallen below the threshold limit of 10 % of consolidated income or networth of the Company of the Financial Year ending 31st March, 2022. Accordingly, Comstar USA ceases to be the material subsidiary of the Company with effect from 1st April, 2022.

The policy for determining material subsidiaries, as approved by the Board, is uploaded on the Companys website and can be accessed at the web-link: https:// sonacomstar.com/policies-and-codes

11. CORPORATE GOVERNENCE

The Company is committed to pursue and adhere to the highest standard of Corporate Governance as set out by the Securities and Exchange Board of India (SEBI) and the Companies Act, 2013. The report on the Corporate Governance as stipulated in regulation 34 read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is enclosed as Annexure-A to this Report.

12. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Board of Directors

Your Board comprises eight Directors, including four Independent Directors (including one woman Independent Director), one Executive Director, and three Non-Executive Directors.

All Directors take active part in the deliberations at the Board and Committee Meetings by providing valuable guidance and expert advice to the Management on various aspects of business, governance, etc. and play a critical role on strategic issues and add value in the decisionmaking process of the Board of Directors.

Re-appointment of Mr. Vivek Vikram Singh (DIN: 07698495) as the Managing Director & Group CEO

The tenure of Mr. Vivek Vikram Singh (DIN: 07698495) as the Managing Director & Group Chief Executive Officer shall expire on 4th July, 2022. The Board at its meeting held on 9th June, 2022, based on the recommendation of the Nomination and Remuneration Committee (‘NRC), has re-appointed Mr. Vivek Vikram Singh (DIN: 07698495) as Managing Director & Group CEO of the Company with effect from 5th July, 2022, to hold office for a term of 5 consecutive years commencing from 5th July, 2022 to 4th July, 2027 (both days inclusive), and approved the remuneration payable to Mr. Vivek Vikram Singh, subject to approval of the Shareholders of the Company in the ensuing Annual General Meeting.

Re-appointment of Mr. Amit Dixit as Director

i n accordance with the provisions of Section 152 and other applicable provisions, if any, of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Amit Dixit (DIN: 01798942), Non-Executive Director of the Company, is liable to retire by rotation at the ensuing Annual General Meeting and being eligible, offer himself for re-appointment.

In accordance with the provisions of Section 152 and other applicable provisions, if any, of the Companies Act, 2013 and the Articles of Association of the Company and on the recommendation of the Nomination and Remuneration Committee, the Board recommends re-appointment of Mr. Amit Dixit (DIN: 01798942) as director liable to retire by rotation.

In the opinion of the Board, all the Directors as well as the Directors proposed to be appointed/re-appointed, possess the requisite qualifications, experience and expertise and hold high standards of integrity.

The list of key skills, expertise and core competencies of all Directors and number of Board and its Committee meetings attending by them is provided in the Corporate Governance Report forming the part of this Boards Report.

None of the Directors of the Company have resigned during the year under review.

Key Managerial Personnel

As on 31st March, 2022 following are the Key Managerial Personnel (‘KMP) of the Company as per Section 2(51) and 203 of the Companies Act, 2013:

Name of the KMP Designation
Mr. Vivek Vikram Singh Managing Director and Group Chief Executive Officer
Mr. Rohit Nanda Group Chief Financial Officer
Mr. Ajay Pratap Singh Vice President (Legal), Company Secretary and Compliance Officer

During the year under review, there were no changes in the KMP of the Company.

13. DECLARATION BY INDEPENDENT DIRECTORS

The Independent Directors on the Board of the Company have submitted requisite declarations to the Board that they fulfil all the requirements as stipulated in Section 149(6) of the Act and regulation 16(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

All Independent Directors of the Company have affirmed compliance with the Schedule IV of the Act and Companys Code of Conduct for Directors and Senior Management.

All the Independent Directors of the Company have complied with the requirement pertaining to the inclusion of their names in the data bank of independent directors maintained by Indian Institute of Corporate Affairs and they meet the requirements of proficiency self-assessment test.

i n the opinion of Board of Directors of the Company, Independent Directors on the Board of Company hold highest standards of integrity and are highly qualified, recognised and are doyen of the industry. There is an optimum mix of expertise (including financial expertise), leadership and professionalism.

14. REMUNERATION OF DIRECTORS, KEY MANAGERIAL PERSONNEL AND SENIOR MANAGEMENT

The remuneration paid to the Directors, Key Managerial Personnel and Senior Management is in accordance with the Nomination and Remuneration Policy of the Company formulated in accordance with Section 178 of the Act and regulation 19 read with Schedule II of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Further, details on the same are given in the Corporate Governance Report which forms part of this Annual Report.

Further, the Managing Director & Group CEO of the Company is not in receipt of remuneration and commission from holding company or subsidiary company.

The erstwhile holding company (and now a major shareholder) of the Company namely Singapore VII Topco III Pte. Ltd. (Singapore VII) has adopted an exit return incentive plan (ERI Plan) pursuant to which Singapore VII rewarded/will reward certain identified employees of the Company and/or its subsidiaries (including each of Key Managerial Personnel and Executive Director(s) who are not promoters of the Company) with cash rewards based on certain disposition event(s) in relation to its interest in the Company. These cash awards were paid/ will be paid to such employees entirely by Singapore VII (without any recourse or liability to the Company). None of the promoters, nominee director or shareholder of the Company, having significant influence, is beneficiary of the ERI Plan.

The Board of Directors and Shareholders of the Company have approved the ERI Plan, in its meeting held on 6*h August, 2021 and 9th September, 2021 respectively, in compliance with regulation 26(6) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Accordingly, Singapore VII paid part of cash reward to the identified employees (including the Managing Director and Group CEO) of the Company.

The Remuneration Policy is available on the website of the Company at https://sonacomstar.com/policies-and-codes.

15. DISCLOSURE UNDER RULE 5(1) AND 5(2) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

The disclosure pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (Rules) is provided in a separate Annexure-B forming part of this Report.

As per second proviso to Section 136(1) of the Act and second proviso of Rule 5 of Rules, the Report and Financial Statements are being sent to the Members of the Company excluding the statement of particulars of employees under Rule 5(2) and 5(3) of Rules. Any member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company or by way of e-mail at investor@sonacomstar. com.

16. BOARD EVALUATION

The Board of Directors of the Company in its meeting held on 1st February, 2022 amended the policy for evaluation of the performance of the board of directors ("Policy") in compliances with the provision of Section 178 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The criteria of evaluation are based on "Guidance note on Performance Evaluation" issued by the Securities and Exchange Board of India on 5th January, 2017.

Pursuant to the provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the Board has carried out an annual evaluation of its own performance and that of its Committees as well as performance of all the Directors individually and the Chairperson.

Feedback

Feedback was sought by way of a structured questionnaire covering various aspects of the Boards functioning and the evaluation was carried out based on responses received from the Directors.

Evaluation of Committees

The performance evaluation of Committees was carried out by the Board after seeking inputs from the committee members, on the basis of the criteria such as structure and composition of Committees, fulfilment of the functions assigned to Committees by the Board and applicable regulatory framework, frequency of meetings, adequacy of time allocated at the Committee Meetings, adequacy and timeliness of the agenda and minutes circulated, efl^ectiveness of the Committees recommendation to the Board etc.

Evaluation of Directors and Board

A separate exercise was carried out by the Nomination and Remuneration Committee of the Board to evaluate the performance of Individual Directors.

The performance evaluation of the Non-Independent Directors and the Board as a whole was carried out by the Independent Directors. The performance evaluation of the Chairperson of the Company was also carried out by the Independent Directors, taking into account the views of the Executive Directors and Non-Executive Directors.

The evaluation of directors was based on, inter-alia, various criteria such as qualification and experience, fulfilment of functions as assigned, attendance at Board and Committee Meeting, contribution to strategy and other areas impacting Companys performance, availability and attendance etc.

The evaluation of the Board was based on the criteria such as structure and composition of the Board, frequency of meetings, adequacy of time allocated at the Board Meetings, adequacy and timeliness of the agenda and minutes circulated, functions of the Board, governance and compliance etc.

Evaluation for Independent Directors

The performance evaluation of Independent Directors was carried out by the Board of Directors based on various criteria, inter-alia, including attendance at Board and committee meetings, qualification, experience, ability to function as a team, commitment, roles performed and understanding of industry.

Results of Evaluation

The outcome of such performance evaluation exercise was discussed at a separate meeting of the Independent Directors held on 23rd March, 2022 and was later tabled at Nomination and Remuneration Committee and the Board of Directors of the Company held on the same day.

The Directors expressed their satisfaction with the evaluation process. During the year under review, the Nomination and Remuneration Committee ascertained and reconfirmed that the deployment of "questionnaire" as a methodology, is effective for evaluation of performance of Board and Committees and Individual Directors. The overall performance of the Board as whole, Independent Directors, Non-Executive Directors and Chairman of the Board was positive.

17. FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS

All Independent Directors are familiarised with the operations and functioning of the Company. The details of the training and familiarization program are provided in the Corporate Governance Report.

18. DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134 of the Companies Act, 2013, the Directors of the Company state that:

1. in the preparation of the annual accounts for the Financial Year ended 31st March, 2022, the applicable accounting standards were followed, along with proper explanation relating to material departures;

2. they have selected such accounting policies and applied 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 as at 31st March, 2022 and of the profit and loss for that period;

3. t hat proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

4. that the annual accounts for the Financial Year ended 31st March, 2022 have been prepared on a going concern basis;

5. that they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating eff^ectively; and

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

19. EMPLOYEE STOCK OPTION SCHEME-2020

i n terms of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021/ SEBI (Share Based Employee Benefits) Regulations 2014, (to the extent applicable), as amended, from time to time, the Nomination and Remuneration Committee of your Board (also designated as the Compensation Committee) inter- alia administers and monitors the Sona BLW Precision Forgings Limited- Employee Stock Option Scheme-2020" ("ESOP Scheme-2020") of your Company.

During the year under review, no fresh grants were made under the ESOP Scheme-2020.

Applicable disclosures as stipulated under the SEBI (Share Based Employee Benefits) Regulations, 2014 and SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("SEBI SBEB Regulations") (wherever applicable) with regard to the ESOP Scheme are available on the Companys website at https://sonacomstar.com/ investor/annual-reports-and-returns.

The Company has received a certificate from M/s. PI & Associates, Secretarial Auditor of the Company as required under Regulation 13 of SEBI SBEB Regulations and confirm that the ESOP Scheme-2020 has been implemented in accordance with these Regulations. The Certificate is available for inspection during the AGM of the Company and also placed at the website of the Company at: https:// sonacomstar.com/investor/annual-reports-and-returns.

20. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013

Pursuant to Section 186 of the Companies Act, 2013, disclosures on particulars relating to loans, advances, guarantees and investment form part of the Standalone Financial Statements in the Annual Report.

21. DEPOSITS

During the year under review, the Company has not accepted any deposit within the meaning of Sections 73 and 74 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014.

22. MATERIAL CHANGES

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

23. RELATED PARTY TRANSACTIONS

All transactions with related parties were reviewed and approved by the Audit Committee and are in accordance with the Policy on Related Party Transactions, formulated and adopted by the Company. An omnibus approval from the Audit Committee is obtained for the related party transactions.

There were no contracts, arrangements or transactions entered into during the year under review that fall under the scope of Section 188(1) of the Companies Act, 2013 except transfer of 15 Nos of AC induction motor to Comstar Automotive Technologies Private Limited (erswhile wholly-owned subsidiary of the Company) for a consideration of approximately INR 308,557/- which was not in the ordinary course of business.

As required under the Companies Act, 2013, the prescribed Form AOC-2 is appended as Annexure-G to this Report.

The Board has amended the policy on Related Party Transactions as required under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, which is available on the website of the Company at https://sonacomstar.com/policies-and-codes.

The Company in terms of regulation 23 of the Listing Regulations submitted disclosures of related party transactions on a consolidated basis, in the format specified in the relevant accounting standards to the stock exchanges. The said disclosures can be accessed on the website of the Company at https://sonacomstar. com/investor/financial-information.

Related party Transactions are detailed in Note 36 to the Standalone Financial Statements of the Company.

24. MEETINGS OF THE BOARD

During the year under review, nine (9) meetings of the Board were held. The details of the meetings of the Board of Directors during the Financial Year 2021-22 are given in the Corporate Governance Report, which forms the part of this Report.

The Board met quarterly and the gap intervening between two meetings was within the time prescribed under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The details and attendance of meetings of the board, its committees and the annual general meeting are mentioned in the Corporate Governance Report, which forms part of this Report.

25. COMMITTEES OF THE BOARD

The Board of Directors of the Company have the following committees:

• Audit Committee;

• Nomination and Remuneration Committee;

• Corporate Social Responsibility Committee;

• Stakeholders Relationship Committee;

• Risk Management Committee;

• Environment, Social Governance Committee;

• Capex Committee.

During the year under review, the Board of Directors constituted a committee called the Environment, Social Governance (ESG) Committee to have an oversight over the implementation of ESG Framework of the Company.

The details with respect to the composition, powers, roles, terms of reference, etc. of the aforesaid committees are given in details in the Corporate Governance Report, which forms part of this Report.

During the year under review, all recommendations made by the committees were accepted by the Board.

26. DOWNSTREAM INVESTMENT

During the Financial Year 2021-22, the Company has not made any downstream investment which tantamount to indirect foreign investment. Hence, the requirement of obtaining certificate from the statuary auditors under the extant Foreign Exchange Management (Non- debt Instruments) Rules, 2019 is not applicable.

27. AUDITORS AND AUDIT REPORT Secretarial Auditors

Pursuant to the provisions of Section 204 of the Act, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors have appointed M/s. PI & Associates, Practicing Company Secretaries, as Secretarial Auditors to undertake the audit of the secretarial records for the Financial Year 2021 -22.

The Secretarial Auditors Report for the Financial Year 2021- 22 does not contain any qualification, reservation or adverse remark and enclosed as Annexure-D to this report.

Further, the Board of Directors in their meeting held on Thursday, 5th May, 2022 re-appointed M/s. PI & Associates, Company Secretaries, as Secretarial Auditors, to undertake the audit of the secretarial records for the Financial Year 2022- 23.

Statutory Auditors

M/s. Walker Chandiok & Co., Chartered Accountants (FRN No. 001076N) was appointed as statutory auditors for a period of 5 (Five) years in the 21st annual general meeting held on 28th September, 2017 till the conclusion of ensuring 26th Annual General Meeting.

M/s. Walker Chandiok & Co., Chartered Accountants (FRN No. 001076N) are eligible to be re-appointed for another term of 5 (five) years in terms of the provisions of Section 139 and 141 of the Act.

Accordingly, the Board of Directors of the Company at their meeting held on 9th June, 2022, on the recommendation of the Audit Committee and subject to the approval of the shareholders of the Company in the ensuing AGM, have approved the re-appointment of M/s. Walker Chandiok & Co. LLP, Chartered Accountants (Firm Registration No. 001076N/N500013) as Statutory Auditors, for a second term of 5 consecutive years i.e., from the conclusion of the 26th AGM till the conclusion of 31st AGM of the Company.

The Statutory Auditors Report on standalone and consolidated financials for Financial Year 2021-22, does not contain any qualification, reservation or adverse remark or disclaimer and the same forms part of this Annual Report.

Cost Auditors

Consequent to the merger of Comstar with the Company, the Company is required to maintain cost records for certain products of Motor business, for Financial Year 2022-23 as specified by the Central Government under sub- Section (1) of Section 148 of the Act.

The Board of Directors of the Company at its meeting held on Thursday, 5th May, 2022, on the recommendations made by the Audit Committee, have appointed M/s. Jayaram & Associates, as Cost Auditors of the Company to conduct the audit of cost records of certain products for the Financial Year 2022-23.

M/s. Jayaram & Associates, being eligible, have consented to act as the Cost Auditors of the Company for the Financial Year 2022-23.

Internal Auditors

The Board of Directors have in their meeting held on 09th June, 2022, appointed M/s. BDO India LLP (Firm Registration No. MCA: AAB-7880), as Internal Auditors of the Company for the Financial Year 2022-23.

28. INTERNAL CONTROL SYSTEM

The Company has in place internal control system, which is commensurate with its size, scale and complexities of its operations M/s. BDO India LLP (Firm Registration No. MCA: AAB-7880), was appointed as Internal Auditor of the Company for the Financial Year 2022-23.

The main thrust of internal audit is to test and review controls, appraisal of risks and business processes, besides benchmarking controls with best practices in the industry.

The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same. The Audit Committee of the Board of Directors are periodically apprised of the internal audit findings and corrective actions are taken accordingly. Significant audit observations and corrective actions taken by the management are presented to the Audit Committee of the Board. For more details, refer to the ‘internal control systems and its adequacy section in Managements Discussion and Analysis Report, which forms part of this Annual Report.

29. REPORTING OF FRAUD

During the year under review, none of auditors have reported any instances of fraud committed in the Company by its officers or employees to the Audit Committee, under Section 143 (12) of the Companies Act, 2013.

30. CORPORATE SOCIAL RESPONSIBILITY (CSR)

The total CSR Obligations of the Company, including the CSR obligations of the erstwhile wholly owned subsidiary of the Company; i.e. Comstar Automotive Technologies Private Limited ("Comstar"), which was merged with the Company w.e.f January 28, 2022, for the Financial year 2022 was INR 55.10 million. Out of which, the Company had spent INR 40.11 million, during the Financial Year ended 31st March, 2022 and the remaining unspent amount of INR 15 million for the Financial Year 2021-22, which pertains to ongoing projects was transferred to the Unspent CSR Account of the Company on 26th April, 2022.

The CSR Committee has been entrusted with the prime responsibility of recommending to the Board, the CSR activities to be undertaken by the Company in terms of CSR Policy, the amount of expenditure to be incurred and monitoring the implementation of the framework of the CSR Policy.

The Annual Report on CSR activities having a brief overview of the projects undertaken, as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 has been annexed as Annexure-E of this Report.

The Board of Directors of the Company amended the CSR Policy of the Company pursuant to amendments in the Companies (Corporate Social Responsibility Policy) Rules, 2014 and Section 135 of the Act. The CSR Policy of the Company is available on the website of the Company at https://sonacomstar.com/investor/corporate-social- responsibilities.

31. AWARDS AND RECOGNITIONS

We are happy to inform that your Company has received the following recognitions/awards during the period under review:

S. No. Award Category Awarded by
1. 2020 Vision Award League of American Communications Professionals LLC (LACP)
2. Best Supplier of the Year Award - 2021 Indian Tier 1 Supplier for CVs
3. Overall Performance Award Indian OEM of PVs
4. Export Excellence Award 2019-20 - Highest Investment in Engineering Sector MEPZ
5. Export Excellence Award 2018-19 - Highest Employment in Engineering Sector MEPZ
6. VC Circle Awards 2022 in the category, "Industrial Company of the Year" VC Circle
7. Best in Class Quality and Delivery Performance - Financial Year19 Global OEM of OHVs

32. RISK MANAGEMENT

Pursuant to Section 134(3)(n) of the Companies Act, 2013 and Regulation 17(9) of SEBI (LODR) Regulations, 2015, the Company has formulated and adopted a Risk Management policy. The primary objectives of the policy include identification and categorisation of potential risks, their assessment and mitigation and to monitor these risks.

The Board has entrusted the Risk Management Committee (RMC) with overseeing the processes of identification, evaluation and mitigation of risks. The RMC inter alia periodically reviews the organisational risks that are spread across operational, financial, technological and environmental spheres and shall provide guidance to the management team. Further, the RMC in its meeting held on 23rd March, 2022 appointed Mr. Rohit Nanda, Chief financial officer of the Company as the Chief Risk Officer of the Company.

Your Company is committed to protect the interests of its customers, stakeholders, investors, shareholders, employees and each person or entity with whom it is associated. Towards this goal, your Company will further strengthen the internal processes and evaluate even more innovative ways to blunt the risk impact. The details of the RMC along with its charter are set out in the Corporate Governance Report, forming part of this Report.

33. VIGIL MECHANISM

Your Company is committed to highest standards of professionalism, honesty, integrity, transparency and ethical behaviour. Pursuant to the provisions of Section 177(9) & (10) of the Act read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014, and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors had approved the Policy on vigil mechanism/whistle blower which provides mechanism to its directors, employees and other stakeholders to raise concerns about any wrongdoing in the Company and provide for adequate safeguards against victimisation of employees and other persons who avail this mechanism.

The mechanism under the policy has been appropriately communicated within the organisation. The Audit Committee of the Board shall review the functioning and implementation of the Whistle-blower mechanism, on quarterly basis.

During the year under review, the Company has not received any complaints under the said mechanism. The whistle blower policy of the Company has been displayed on the Companys website at the link: https://sonacomstar. com/policies-and-codes.

34. ANNUAL RETURN

In accordance with the provisions of Companies Act, 2013, the Annual Return of the Company in the prescribed format is available at: https://sonacomstar.com/investor/annual- reports-and-returns.

35. COMPLIANCE WITH SECRETARIAL STANDARDS

The Company is in compliance with all applicable secretarial standards issued by the Institute of Company Secretaries of India.

36. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANYS OPERATIONS

No significant and material order has been passed by any regulator or court or tribunal, which might impact the going concern status and Companys operations in future.

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

The information pertaining to conservation of energy, technology absorption, Foreign exchange Earnings and outgo as required under Section 134 (3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is provided in the Annexure-P forming part of this Report.

38. HUMAN RESOURCES

The Company is committed to living the Sona values in the true spirit by integrating them with the people practices delivering superior quality to our employees, customer, and shareholders. Our Company considers the employees as its true partner in success.

Our world is in motion fighting climate change at a pace that is gathering speed. The Company undertakes various employee engagement Programmes and fosters a culture of learning and continuous improvement so that we give our customers, business partners, employees, executives, and shareholders an idea of the path that we want to pursue over the next few years.

The year under review, has been one of the toughest years due to COVID-19 2nd wave, that we have ever faced. Very few events in human history have had such a profound impact on the way we operate.

Despite the volatility through the first quarter of Financial Year 2021-22, we showed great resilience, quickly adapted to the new ways of working, and delivered the customer demands. Our focus remained high on three important areas: Employee Safety & Wellness, Effective Communication & Managing teams, and staying committed to the customer demand.

This year we strengthen our focus on Company processes and systems. We inducted bright talent from Tier - I institutes like BITS Pilani and NIFFT at the entry level in Engineering and Manufacturing. We uplifted the infrastructure and enhanced the employee experience by introducing a professionally managed cafeteria service to cater healthy and hygienic food.

To achieve the Companys goals, we cascaded organisation goals (Managing Points) to KPIs till the last mile. We initiated the Quality visit to strengthen our processes for continuous improvement and for the immediate action plan. We introduced technical skill-based online training Programmes, and Future Skill Prime by covering 36% of the staff and man-days.

39. POLICY ON PREVENTION OF SEXUAL HARASSMENT OF WORKMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013

As per the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("Prevention of Sexual Harassment Act"), The Company has formulated a Policy on Prevention of Sexual Harassment at Workplace ("POSH") for prevention, prohibition and redressal of sexual harassment at workplace and an Internal Complaints Committees has also been set up to redress any such complaints received.

The Company is committed to providing a safe and conducive work environment to all of its employees and associates.

The Company periodically conducts sessions for employees across the organisation to build awareness about the POSH policy and to sensitise the employees of the existing POSH framework.

During the year under review, no complaints have been received by the Company under the POSH.

40. BUSINESS RESPONSIBILITY & SUSTAINABILITY REPORT

In terms of the provision of regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company voluntary submit the Business Responsibility & Sustainability Report ("BRSR") for the Financial Year 2021-22 in place of the Business Responsibility Report. The BRSR is attached to this report as Annexure-K.

41. CAUTIONARY STATEMENT

The Annual Report including those which relate to the Directors Report, Management Discussion and Analysis Report may contain certain statements on the Companys intent, expectations or forecasts that appear to be forwardlooking within the meaning of applicable securities laws and regulations while actual outcomes may differ materially from what is expressed herein. The Company bears no obligations to update any such forward looking statement. Some of the factors that could affect the Companys performance could be the demand and supply for Companys product and services, changes in Government regulations, tax laws, forex volatility etc.

42. ACKNOWLEDGEMENT

The Board of Directors acknowledges and places on record their sincere appreciation to all stakeholders, customers, vendors, banks, Central and State Governments, and all other business partners, for their continued co-operation and for the excellent support received from them.

The Board also wishes to place on record its appreciation to the esteemed investors for showing their confidence and faith in the management of the Company.

Your Directors recognise and appreciate the efforts and hard work of all the employees of the Company and their continued contribution to promote its development.

By order of Board of Directors
For Sona BLW Precision Forgings Limited
Place: Gurgaon Sunjay Kapur
Date: 9th June, 2022 (Chairman)