sudarshan chemical industries ltd Directors report

DIRECTORS REPORT 2022-23

Your Directors are pleased to present the 72^nd Annual Report together with the Audited Financial Statements of the Company for the year ended 31^st March, 2023.

The annexed Financial Statements comply in all material aspects with the Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act), the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time and other relevant provisions of the Act.

1. FINANCIAL HIGHLIGHTS:

		Rs. in Lakhs
Particulars	FY 2022-23	FY 2021-22
Revenue from Operations	197,610.5	191,891.1
Earning Before Interest, Tax, Depreciation and Amortisation	18,562.3	24,166.4
Less: Interest	3,668.9	1,731.1
Less : Depreciation	11,110.7	8,689.5
Less : Provision for Tax	641.7	3,708.2
Total Profit After Tax	3,141.0	10,037.6
Other Comprehensive Income	(2,202.4)	187.1
Total Comprehensive Income	938.6	10,224.7
Add : Surplus Brought Forward	59,123.7	53,322.2
Transfer from OCI to Hedge Reserve	2,235.8	(269.6)
Net Profit available for appropriation	62,298.1	63,277.3
Appropriation
Final Dividend	(3,461.4)	(4,153.6)
Surplus to be carried forward	58,836.7	59,123.7

2. (A) FINANCIALS:

Revenue from operations for the year ended 31^st March, 2023 aggregated to RS.197,610.5 lakhs as against RS.191,891.1 lakhs achieved during the previous year. Profit after tax from for the year ended 31^st March, 2023 was Rs.3,141.0 as against RS.10,037.6 lakhs earned during the previous year.

For Subsidiary Companies performance please refer to Annexure I.

On a Consolidated basis, your Companys Total Income for the year ended 31^st March, 2023 stood at RS.230,652.2 lakhs, as compared to RS.220,580.8 lakhs in FY 2021-22.

During the year under review, your Company faced many challenges viz. complex geo-political situation arising out of Russia-Ukraine crisis, leading to adverse impact on global demand and unprecedented increases in prices of raw materials and indirect materials. Further, strict lock-down restrictions imposed in China resulted in drastic reduction in domestic demand in China for pigment products. Global markets were flooded with excess supplies which also had an adverse impact on demand. The commercialization of capital expansion programmes of the Company were delayed on account of global restrictions imposed on account of two waves of Covid-19. These factors primarily resulted in lower sales volumes and lower margins.

(B) EXPORTS:

Your Company continues to focus on export markets. Initiatives are directed towards engaging with overseas markets with a view to testing and demonstrating international competitiveness and seeking profitable opportunities for growth. The performance of the Companys Wholly Owned Subsidiaries had an impact on account of weak global demand arising from the evolving complex geo-political situation.

Your Company is confident that the overseas subsidiaries have entered a consolidation phase and will play a crucial role in positioning the Company as a dominant player in the Global Pigment Industry once there is improvement in the scenario of complex geopolitical situation.

(C) OPERATIONS:

Information on the operations of the Company and details on state of affairs of the Company are covered in the Management Discussion and Analysis Report.

(D) CAPACITY EXPANSION:

During the year, the Company continued its expansion plans and has incurred capex spend of RS.184.5 crores during the year under review. This capital expenditure is primarily aimed at augmenting production capacities at Roha and Mahad facilities.

(E) HIGHLIGHTS OF PERFORMANCE OF SUBSIDIARY/ASSOCIATE/JOINT VENTURE COMPANIES:

Shareholders are requested to refer Annexure II for highlights of performance of abovementioned companies and their contribution to the overall performance of the Company during the year under review. The Company has Wholly Owned Subsidiaries viz., RIECO Industries Limited, Sudarshan CSR Foundation, Sudarshan Europe B.V., Sudarshan (Shanghai) Trading Company Limited, Sudarshan Japan Limited and Step-Down Subsidiaries viz., Sudarshan North America Inc. and Sudarshan Mexico S de R. L. De CV.

3. SALE OF FREEHOLD LAND AND SHIFTING OF REGISTERED OFFICE WITHIN THE LOCAL LIMITS

On 6^th April, 2023, the Company completed the sale of Companys freehold, clear and marketable titled land admeasuring approximately 5.76 acres along with the structures standing thereon located at 162 Wellesley Road, Pune-411 001, Maharashtra, India, for a total consideration of RS.356,00,00,000/- (Rupees Three Hundred and Fifty-Six Crores only). The buyer is a third-party buyer and not belonging to the Promoter or Promoter Group / Group Company(ies) and the transaction does not fall under the ambit of Related Party Transaction(s).

The Board of Directors also approved shifting of the Registered Office of the company from "162 Wellesley Road, Pune - 411 001, Maharashtra, India" to "7^th Floor, Eleven West Panchshil, Survey No. 25, Near PAN Card Club Road, Baner, Pune - 411045, Maharashtra, India", i.e. within the local limits of Pune City and within the same jurisdiction of office of the Registrar of Companies, Pune (Maharashtra), with effect from closing business hours on 6^th April, 2023.

4. DIVIDEND:

The Board of Directors at its meeting held on 23^rd May, 2023, had recommended a Final Dividend of RS.1.50/- (One Rupee and Fifty Paise only) per Equity Share of RS.2/- each (i.e. 75 %) for FY 2022-23. A proposal seeking shareholders approval for declaration and payment of the said Final Dividend for FY 2022-23 is forming part of the Notice. If approved by shareholders, the Final Dividend shall be paid on or before 4^th September, 2023. In view of the changes made under the Income Tax Act, 1961, by the Finance Act, 2020, dividend paid or distributed by the Company shall be taxable in the hands of shareholders. The Company shall accordingly, make the payment of Final Dividend after deduction of tax at source. The dividend payout is in accordance with the Companys Dividend Distribution Policy.

For the year ended 31^st March 2022, the dividend paid was RS.5/- per Equity Share of RS.2/- each, (i.e. 250%). The Dividend Distribution Policy of the Company is provided as Annexure III to this Report, and is also available on the website of the Company https://www. sudarshan. com/perch/resources/dividend-distribution-policy-1.pdf

5. (A) SHARE CAPITAL:

The paid-up Equity Share Capital as on 31^st March, 2023 was RS.1,384.5 lakhs. There was no public issue, rights issue, bonus issue or preferential issue etc. during the year. The Company has not issued shares with differential voting rights or sweat equity shares.

(B) NON - CONVERTIBLE DEBENTURES:

The Board of Directors at its meeting held on 28^th March, 2022, had accorded its approval for issue of unsecured non-convertible debentures on private placement basis upto RS.200 Crores, in one or more tranches / series, subject to approval of shareholders. Approval of shareholders by way of Special Resolution through Postal Ballot was received on 13^th May, 2023. The Finance Committee of the Board of Directors vide its resolution dated 18^th July, 2022, approved allotment of 990 (Nine Hundred and Ninety only) Unsecured, Rated, Listed, Taxable, Redeemable Non-Convertible Debentures ("NCDs") with face value of RS.10,00,000/- each on private placement basis. The said NCDs are listed on the Wholesale Debt Market Segment of BSE Limited effective 21^st July, 2022 (ISIN: INE659A08036; BSE Scrip Code: 974058).

6. TRANSFER TO RESERVE:

As permitted by the Companies Act, 2013, and Rules made thereunder, the Directors do not propose to transfer any amount to the General Reserve pertaining to FY 2022-23 .

7. FIXED DEPOSITS:

During the year under review, the Company has not accepted any deposit from the public / members pursuant to Section 73 and Section 76 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014, as amended from time to time, and hence as on 31^st March, 2023, there are no deposits outstanding, except as required statutorily and which have been unclaimed at the end of the year under review.

8. DIRECTORS RESPONSIBILITY STATEMENT:

As required under Section 134(3)(c) of the Companies Act, 2013, Directors of the Company, to the best of their knowledge and belief with respect to FY 2022-23, state that :

i. in the preparation of the annual accounts, the applicable accounting standards have been followed with proper explanation relating to material departures;

ii. the Directors have 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 financial year and of the profit and loss of the Company for that period;

iii. the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. the Directors have prepared the annual accounts on a going concern basis;

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

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

9. CORPORATE GOVERNANCE:

Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations, 2015") a separate chapter titled ‘Report on Corporate Governance has been included in this Annual Report, along with the reports on the Management Discussion and Analysis and Shareholders Information.

A certificate from a Practicing Company Secretary regarding compliance with the conditions of corporate governance is given separately in this Annual Report.

10. MANAGEMENT DISCUSSION AND ANALYSIS:

A Management Discussion and Analysis Report covering a wide range of issues relating to industry trends, Company Performance, Business and Operations is given separately in the Annual Report.

11. BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT:

Regulation 34(2) of the SEBI Listing Regulations, 2015, as amended, inter alia, provides that the annual report of

the top 1000 listed entities based on market capitalisation (calculated as on 31^st March of every financial year), shall include a Business Responsibility and Sustainability Report ("BRSR") with effect from FY 2022-23.

Since the Company is amongst the top 1000 listed entities as on 31^st March, 2023, the Company has presented its BRSR for FY 2022-23, which forms part of this Annual Report.

12. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES:

All transactions entered into with related parties during the financial year were in the ordinary course of business and at arms length basis, which were approved by the Audit Committee. The Board has approved a policy for related party transactions which is available on the Companys website at http://www.sudarshan.com/ perch/resources/related-party-transaction-policy. pdf The particulars of contracts or arrangements made with related parties pursuant to Section 188 is covered in Notes to the Financial Statements and material contracts / arrangements made with related parties is given in Form AOC-2 which is attached as Annexure IV to this report. None of the transactions with any of the related parties were in conflict with the interest of the Company. Attention of the members is drawn to the disclosure set out in Notes to Financial Statements forming part of the Annual Report.

The particulars of loans / advances / investments etc., required to be disclosed pursuant to Para A of Schedule

V of the SEBI Listing Regulations, 2015, are furnished as a part of the Financial Statements.

The transaction(s) of the Company with any person or entity belonging to the promoter / promoter group which hold(s) more than 10% shareholding in the Company as required pursuant to Para A of Schedule

V of the SEBI Listing Regulations, 2015 is disclosed separately in the Financial Statements of the Company.

13. AUDIT COMMITTEE:

Pursuant to the provisions of Section 177 of the Companies Act, 2013, and Rules made thereunder and Regulation 18 of the SEBI Listing Regulations, 2015, the Company has in place an Audit Committee.

As on 31^st March, 2023, the composition of the Audit Committee is as under -

a) Mrs. S. A. Panse - (Non-Executive and Independent Director) Chairperson

b) Mr. D. N. Damania - (Non-Executive and

Independent Director) Member

c) Mr. S. Padmanabhan - (Non-Executive and

Independent Director) Member (inducted effective 9^th February, 2023)

d) Mr. S. K. Asher - (Non-Executive and Independent Director) Member

All recommendations made by the Audit Committee were deliberated and accepted by the Board during FY 2022-23.

14.CORPORATE SOCIAL RESPONSIBILITY:

The Company has in place a Corporate Social Responsibility ("CSR") Committee constituted as per the provisions of Section 135 of the Companies Act, 2013, and Rules made thereunder, details of which are mentioned in the Report on Corporate Governance forming part of this Annual Report.

The Company has been carrying out various CSR activities in the areas specified in terms of Section 135 read with Schedule VII of the Companies Act, 2013, and Rules made thereunder. The details of CSR activities undertaken by the Company are annexed herewith as Annexure V. The CSR Policy of the Company is available on the Companys website at http://www.sudarshan. com/perch/resources/csr- policy.pdf

CSR Policy in brief:

The focus of the CSR activities is on women empowerment, environment, health, community development, and education etc, and the projects would be planned and implemented accordingly.

The Company shall spend at least 2% (two per cent) of the average net profits, calculated in accordance with the provisions of the Companies Act, 2013, and Rules made thereunder, made by it in three immediately preceding financial years.

The Annual Report on CSR activities is annexed herewith as Annexure V.

15.RISK MANAGEMENT AND CONTROL:

The Company has put in place appropriate risk assessment and minimisation procedures, which are reviewed by the Risk Management Committee, Audit Committee and the Board. As per the requirements of SEBI Listing Regulations, 2015, a Risk Management Committee has been constituted with responsibility of preparation of Risk Management Plan, reviewing and monitoring the same on regular basis, to identify and review critical risks on regular basis, to report key changes in critical risks to the Board on an ongoing basis, to report critical risks to Audit Committee in detail on yearly basis and such other functions as may be prescribed by the Board. The Committee is supported by an Enterprise Risk Management ("ERM") team which provides advice on various risks and the appropriate governance framework and ensures that risks are identified, measured and managed in accordance with the Companys policies and risk objectives. The Committee holds meetings periodically where the gap between two meetings does not exceed 180 days. The risks faced by the Company and their minimization procedures are assessed periodically.

According to Section 134(5)(e) of the Companies Act, 2013, and rules made thereunder, the term Internal Financial Control ("IFC") means the policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. The Company has a well-placed, proper and adequate internal financial control system which ensures that all assets are safeguarded and protected and that the transactions are authorised, recorded and reported correctly. The Companys internal financial control system also comprises due compliances with Companys policies and Standard Operating Procedures ("SOPs") and audit and compliance checks by the Statutory Auditors and the Internal Auditors. The Internal Auditors independently evaluate the adequacy of internal controls and concurrently audit the majority of the transactions in value terms. Independence of the audit and compliance is ensured by direct reporting of Internal Auditors to the Audit Committee of the Board. To further strengthen the

compliance processes, the Company has an internal compliance tool for assisting statutory compliances. This process is automated and generates alerts for proper and timely compliance.

Risk Management Policy is available on the Companys website at http://www.sudarshan.com/perch/ resources/ risk-management-policy-2.pdf

Details of the Risk Management Committee are given in the Report on Corporate Governance.

16.POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION AND OTHER DETAILS:

The Companys policy on Appointment of Directors, including criteria for determining qualifications, positive attributes, independence of a Director is available on the website of the Company at https://www. sudarshan. com/ perch/resources/ remuneration-policy. pdf.

The policy on Remuneration and other matters provided in Section 178(3) of the Act, is available on https://www. sudarshan.com/perch/resources/remuneration-policy. pdf.

The managerial remuneration amounting to 7500.8 Lakhs paid to Mr. R. B. Rathi, Managing Director (DIN: 00018628) is in excess of limits prescribed under Section 197 of the Companies Act, 2013, by 7277.3 Lakhs. The said remuneration is also marginally in excess of the limits prescribed by the provisions of Regulation 17(6)(e) of the SEBI Listing Regulations, 2015. The payment of remuneration has been recommended by the Nomination and Remuneration Committee and approved by the Board of Directors. Approval of the shareholders by way of Special Resolution has been requested at the ensuing Annual General Meeting for such payment. Further, Mr. P. R. Rathi, Chairman and Non-Executive Director (DIN: 00018577) has been paid pension amounting to 745.9 Lakhs in terms of the approved Pension Policy of the Company. The said payment amounts to managerial remuneration in terms of Section 197 of the Companies Act, 2013 and the same is in excess of the limits prescribed by Section 197 of the Companies Act, 2013. The said payment has been recommended by the Nomination and Remuneration Committee and approved by the Board of Directors. However, Mr. P. R. Rathi has voluntarily returned amount of 745.9 Lakhs paid on account of pension and hence approval of shareholders is not required for this payment.

17.CHANGES IN DIRECTORS AND KEY MANAGEMENT PERSONNEL:

Mr. A. N. Rathi (DIN: 00018683), Non - Executive and Non - Independent Director, was liable to retire by rotation, and being eligible, had offered himself for the re-appointment at the 71^st Annual General Meeting held on 9^th August, 2022. The shareholders approval was sought at the 71^st Annual General Meeting for reappointment of Mr. A. N. Rathi as a Non - Executive and Non - Independent Director, based on the recommendation of the Nomination and Remuneration Committee and Board.

As per the provisions of Section 152 of the Companies Act, 2013, and Rules made thereunder and as per the Articles of Association of the Company, Mr. A. Vij (DIN: 08140194) Wholetime Director of the Company retires by rotation and being eligible, offers himself for re-appointment. A resolution seeking shareholders approval for his re-appointment forms part of the Notice.

Based on the recommendation of the Nomination and Remuneration Committee and Board of Directors, the shareholders appointed Mr. R. B. Rathi (DIN: 00018628) as Managing Director at 67^th Annual General Meeting for a term of 5 years i.e. from 1^st June, 2018 upto 31^st May, 2023. Since the term as Managing Director is expiring on 31^st May, 2023, based on the recommendation of the Nomination and Remuneration Committee, considering his skills, experience and knowledge he possessed and the report of performance evaluation for the Financial Year 202223, the Board of Directors at its meeting held on 23^rd May, 2023, re-appointed Mr. R. B. Rathi as Managing Director, not liable to retire by rotation, for a further term of 5 years effective 1^st June, 2023 upto 31^st May, 2028. A resolution seeking approval of shareholders forms part of the Notice.

Based on the recommendation of the Nomination and Remuneration Committee and Board of Directors, the shareholders appointed Mr. A. Vij (DIN: 08140194) as Wholetime Director at 67^th Annual General Meeting for a term of 5 years i.e. from 24^th May, 2018 upto 23^rd May, 2023. Since the term is expiring on 23^rd May, 2023, based on the recommendation of the Nomination and Remuneration Committee, considering his skills, experience and knowledge he possessed and the report of performance evaluation for the Financial Year 2022-23, the Board of Directors at its meeting held on 23^rd May, 2023,

re-appointed Mr. A. Vij as Wholetime Director, liable to retire by rotation, for a further term of 5 years effective 24^th May, 2023 upto 23^rd May, 2028. A resolution seeking approval of shareholders forms part of the Notice.

Based on the recommendation of the Nomination and Remuneration Committee and Board of Directors, the shareholders appointed Mr. N. T. Raisinghani (DIN: 00568298) as an Independent Director at 67^th Annual General Meeting for a term of 5 years. Since the first term as Independent Director is expiring, based on the recommendation of the Nomination and Remuneration Committee, considering his skills, experience and knowledge he possessed and the report of performance evaluation for the Financial Year 2022-23, the Board of Directors at its meeting held on 23^rd May, 2023, re-appointed Mr. N. T. Raisinghani as an Additional Director (Independent) with effect from 24^th May, 2023, till the ensuing 72^nd Annual General Meeting, and further recommended for approval of shareholders, the re-appointment of Mr. Raisinghani as an Independent Director for a second term of 5 years effective 24^th May, 2023 upto 23^rd May, 2028, so as to ensure that his total tenure as Independent Director does not exceed 10 years, as stipulated by the provisions of the Companies Act, 2013, and Rules made thereunder. A resolution seeking approval of shareholders forms part of the Notice.

Based on the recommendation of the Nomination and Remuneration Committee and Board of Directors, the shareholders appointed Dr. D. Parikh (DIN: 06504537) as an Independent Director at 68^th Annual General Meeting for a term of 5 years i.e. from 1^st April, 2019 upto 31^st March, 2024. Since the first term as Independent Director is expiring on 31^st March, 2024, based on the recommendation of the Nomination and Remuneration Committee, considering his skills, experience and knowledge he possessed and the report of performance evaluation for the Financial Year 2022-23, the Board of Directors at its meeting held on 23^rd May, 2023, re-appointed Dr. D. Parikh as an Independent Director for a second term of 5 years effective 1^st April, 2024 upto 31^st March, 2029. A resolution seeking approval of shareholders forms part of the Notice.

During the year under review, the Non-Executive Directors of the Company had no material pecuniary relationship or transactions with the Company, other than sitting fees, commission, if any and reimbursement of expenses incurred by them for the purpose of attending meetings of the Board / Committee

of the Company.The Board has made the recommendation for the above appointment(s) / re-appointment(s) of Directors based on the recommendation of the Nomination and Remuneration Committee ("NRC"). NRC has made its recommendation after ensuring that none of the Directors seeking appointment(s) / re-appointment(s) is debarred from holding the position of a Director by virtue of any Order from Securities and Exchange Board of India ("SEBI"), The Ministry of Corporate Affairs ("MCA") or any other Regulatory Authority. The Board is of the opinion that the Independent Directors appointed / re-appointed are of integrity and possess the requisite expertise and experience (including the proficiency). Details of the Directors seeking appointment(s) / re-appointment(s) including profile of such Directors, are given in the Notice convening the 72^nd Annual General Meeting of the Company.

KEY MANAGERIAL PERSONNEL:

In accordance with the provisions of Section 203 of the Companies Act, 2013, and Rules made thereunder, following are the Key Managerial Personnel of the Company for the year ended 31^st March, 2023:

a. Mr. R. B. Rathi, Managing Director

b. Mr. A. Vij, Wholetime Director

c. Mr. Nilkanth Natu, Chief Financial Officer

d. Mr. Mandar Velankar, General Counsel and Company Secretary

DECLARATION BY INDEPENDENT DIRECTORS:

Pursuant to the provisions of Section 149 of the Act, the Independent Directors have submitted declarations that each of them meets the criteria of independence as provided in Section 149(6) of the Act along with Rules framed thereunder and Regulation 16(1)(b) of the SEBI Listing Regulations, 2015. The Independent Directors have also confirmed that they have complied with the Code for Independent Directors prescribed in Schedule IV of the Companies Act, 2013. There has been no change in the circumstances affecting their status of Independent Directors of the Company.

The Independent Directors have also given declaration of compliance with Rules 6(1) and 6(2) of the Companies (Appointment and Qualification of Directors) Rules, 2014, as amended from time to time, with respect to their name appearing in the data bank of Independent Directors maintained by ‘The Indian Institute of Corporate Affairs, Manesar ("IICA").

In the opinion of the Board, all Independent Directors possess requisite qualifications, experience, expertise and hold high standards of integrity to required to discharge their duties with an objective independent judgment and without any external influence. List of key skills, expertise and core competencies of the Board, including the Independent Directors forms part of the Report on Corporate Governance.

Annual Evaluation of Board of Directors, its Committees and Individual Directors:

The Board of Directors upon recommendation of Nomination and Remuneration Committee has laid down the criteria for performance evaluation of Board of the Company, its Committees and the individual Board members, including Independent Directors, and accordingly, an annual evaluation of the performance of the Board, Committees and individual Directors has been carried out pursuant to the provisions of the Act and SEBI Listing Regulations, 2015.

The performance of the Board was evaluated by the Board after seeking inputs from all the Directors on the basis of criteria such as the board composition and structure, effectiveness of board processes, information and functioning etc.

The performance of the committees was evaluated by the Board after seeking inputs from the committee members on the basis of criteria such as the composition of committees, effectiveness of committee meetings, etc.

The above criteria are broadly based on the Guidance Note on Board Evaluation issued by the Securities and Exchange Board of India on 5^th January, 2017.

In a separate meeting of Independent Directors, performance of Non-Independent Directors, the Board as a whole and the Chairman of the Company was evaluated, taking into account the views of Executive Directors and Non-Executive Directors.

The Board and the Nomination and Remuneration Committee reviewed the performance of individual Directors on the basis of criteria such as the contribution of the individual Director to the Board and committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc.

At a separate Board Meeting, the performance of the Board, its Committees, and individual Directors was also discussed. Performance evaluation of Independent Directors was done by the entire Board, excluding the Independent Director being evaluated. The Directors were satisfied with the evaluation results, which reflected the overall commitment and sense of duty. The Board has also adopted a Board Diversity Policy. The policies of Board diversity and performance evaluation of Directors of the Company can be accessed from the Companys website at https://www.sudarshan. com/ perch/resources/remuneration- policy.pdf

18. EMPLOYEE STOCK OPTIONS:

The Board of Directors of the Company had discussed and approved the Employee Stock Options Plan i.e. ‘Sudarshan Employee Stock Option Plan 2018, in terms of applicable regulations.

During the year under review, the Nomination and Remuneration Committee did not approve any options / SARs to eligible employees.

Disclosures pursuant to Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 are given in the Notes to Accounts section of this Annual Report.

19.INDUSTRIAL RELATIONS:

Industrial relations continue to remain cordial at Roha and Mahad plants and at R & D Laboratory situated at Ambadvet (Sutarwadi), Dist. Pune. The Board of Directors record its appreciation of the commitment and support of employees at all levels.

20.FAMILIARISATION PROGRAM FOR INDEPENDENT DIRECTORS:

The Company believes that a Board, which is well informed / familiarised with the Company and its affairs, can contribute significantly and effectively discharge its role of trusteeship in a manner that fulfils stakeholders aspirations and societal expectations. In pursuit of this, the Directors of the Company are updated on changes / developments in the domestic / global corporate and industry scenario including those pertaining to statutes / legislations and economic environment and on matters affecting the Company. The details of the programmes, are placed on http://www.sudarshan.com/perch/ resources/ familiarisation-of-independent-directors.pdf

21. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013:

Pursuant to the provisions of ‘The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the Company has complied with the provisions relating to the constitution of the Internal Complaints Committee under the said act. During the year under review, no complaint was received by the Internal Complaints Committee of the Company. To build awareness amongst its employees, the Company has been conducting induction/training programmes in the organisation on a continuous basis.

The Company has the Policy on Prevention of Sexual Harassment at Workplace which is available on the website of the Company at http://www.sudarshan. com/perch/resources/policy-on-prevention-of-sexual- harassment-at- workplace.pdf

Pursuant to the provisions of ‘The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, Annual Report for calendar year 2022 was submitted for all locations of the Company within the statutory timelines.

22. AUDITORS AND AUDITORS REPORT:

Pursuant to the provisions of Section 139 of the Companies Act, 2013, and rules made thereunder, B S R & Associates, LLP, Chartered Accountants, (Firm Registration No.: 116231W/W-100024) were appointed as Statutory Auditors of the Company for a period of 5 (five) years i.e. from the conclusion of 66^th Annual General Meeting, till the conclusion of the 71^st Annual General Meeting.

As per the provisions of Section 139, 142 of the Companies Act, 2013, and Rules made thereunder and based on the recommendation of the Audit Committee, the Board of Directors at its meeting held on 26^th May 2022, had appointed M/s. S R B C & CO LLP (Firm Registration No.: 324982E/E300003), Chartered Accountants, Pune, as Statutory Auditors of the Company for a term of 5 (Five) years i.e. from the conclusion of 71^st Annual General Meeting upto the conclusion of the 76^th Annual General Meeting to be held in year 2027, which was approved by shareholders at the 71^st Annual General Meeting which was held on 9^th August, 2022.

The notes on the Audited Financial Statements referred to in the Auditors Report are self-explanatory and hence do not call for any further comments. The Auditors Report does not contain any qualifications, reservations, adverse remarks or disclaimer.

23.COST AUDITORS:

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014, as amended, the cost audit record maintained by the Company is required to be audited. The Board of Directors had on the recommendation of the Audit Committee, appointed Mrs. Ashwini Kedar Joshi (Sole Proprietor), Cost Accountant, Pune (Registration No.: 102387) for conducting the cost audit of the Company for FY 2023-24.

Mrs. Joshi has confirmed that her appointment is within the limits of Section 141 (3)(g) of the Companies Act, 2013, and Rules made thereunder, and has also certified that she is free from any disqualifications specified under Section 141(3) and proviso to Section 148(3) read with Section 141(4) of the Act.

As required under the Companies Act, 2013, the remuneration payable to the Cost Auditor is required to be ratified by the members of the Company. Accordingly, resolution seeking members ratification for remuneration to be paid to Cost Auditor is included in the Notice convening the Annual General Meeting.

Further, the Board hereby confirms that the maintenance of cost records specified by the Central Government as per Section 148(1) of the Companies Act, 2013, and rules made thereunder, is required and accordingly, such accounts / records have been made and maintained.

The Cost Auditors Report for the Financial Year 2021-22 did not contain any qualifications, reservations, adverse remarks or disclaimers.

24.SECRETARIAL AUDIT AND SECRETARIAL STANDARDS:

Dr. K. R. Chandratre, a Practicing Company Secretary, (FCS No. 1370, C. P. No. 5144) Pune, was appointed as the Secretarial Auditor of the Company for the financial Year 2022-23 as per Section 204 of the Companies Act, 2013, and Rules made thereunder. The Secretarial Audit Report submitted in the prescribed form MR - 3 is attached as Annexure VI and forms part of this report.

The Secretarial Audit Report does not contain any qualifications, reservations, adverse remarks or disclaimer.

The Company is compliant with the Secretarial Standard on Meetings of the Board of Directors ("SS-1") and Secretarial Standard on General Meetings ("SS-2"), issued by ‘The Institute of Company Secretaries of India.

25.INTERNAL AUDITORS

Pricewaterhouse Coopers Pvt. Ltd., Chartered Accountants, Pune, were appointed as Internal Auditors of the Company for the Financial Year 2022-23.

As prescribed under Section 138 of the Companies Act, 2013, and Rules made thereunder, Pricewaterhouse Coopers Pvt. Ltd. carried out the Internal Audit of the Company. The Internal Audit was completed as per the scope defined by the Audit Committee from time to time.

26. DETAILS IN RESPECT OF FRAUDS REPORTED BY AUDITORS UNDER SECTION 143(12):

During the year under review, there were no frauds reported by the auditors to the Audit Committee or the Board under Section 143(12) of the Companies Act, 2013, and rules made thereunder.

27. DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIAL STATEMENTS:

Your Company has clearly laid down policies, guidelines and procedures that form part of internal control systems, which provide for checks and balances. The Company has maintained a proper and adequate system of internal controls. The system is designed to provide a reasonable degree of assurance regarding the effectiveness and efficiency of operations, the reliability of financial controls and compliance with applicable laws and regulations. The organisation is well structured and the policy guidelines are well documented with pre- defined authority where monetary decision is involved. Structured management information and reporting systems together with an exhaustive budgetary control process for all major operational activities form part of the overall control mechanism to ensure that requisite information related to all operations are reported and are available for control and review. The Company has established a well- laid out policy to maintain the highest standards of

environment, safety and health while maintaining operational integrity. This policy is strictly adhered to at all locations of the Company. The Companys internal control systems commensurate with the nature and size of its business operations. The Audit Committee of the Board of Directors regularly reviews the adequacy of internal control system.

The Company, with a view to encourage independent approach, has appointed a team of qualified professionals in the form of Internal Auditors duly supported by the Finance Department who conduct operational and system audits in accordance with an audit plan approved by the Audit Committee. Internal Auditors as part of their assignment, evaluate and assess the adequacy and effectiveness of internal control measures and the compliance with policies, plans and statutory requirements. The internal audit reports are reviewed at Audit Committee Meetings and appropriate action on the recommendations is initiated by the Management.

28.RESEARCH AND DEVEOPMENT:

The Company recognises the need to have well equipped Research & Development ("R&D") facilities to meet customer requirements and developing cutting edge products. As a natural corollary, your Company continues to invest in a comprehensive R&D Programme leveraging its world-class infrastructure, benchmarked processes, state-of-the-art technology and a business- focused R&D strategy.

The Company has spent RS.34.0 Crores during the year under review on R&D. Companys in-house R&D facilities are recognised by the Ministry of Science and Technology, New Delhi, on behalf of Government of India.

Details related to Research and Development are mentioned in Annexure I to this Report.

Details of Expenditure incurred on Research and Development are as follows:

		(H in Crores)
Particulars	2022-23	2021-22
Capital	6.7	4.7
Recurring	27.3	22.5
Total	34.0	27.2

29.DISCLOSURES:

Board and its Committees:

The details of the Board and its Committees are given in the Report on Corporate Governance.

Meetings of the Board:

During the Financial Year 2022-23, 5 (Five) Board Meetings were held, details of which are given in the Report on Corporate Governance, which is a part of this Annual Report.

The maximum interval between any two meetings did not exceed 120 days as prescribed in the Companies Act, 2013.

Material changes and commitments if any, affecting the financial position of the Company:

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

Annual Accounts of Subsidiary Companies:

A copy of the Audited Financial Statements for each of the Subsidiary Companies for the year ended 31^st March, 2023, wherever applicable, will be made available to the members of the Company seeking such information at any point of time and will also be available for inspection at the Registered Office of the Company during working hours till the date of the Annual General Meeting. The same shall also be placed on the website at www.sudarshan.com. The salient features of Financial Statements of Subsidiary Companies is given in Annexure II of this report.

Sudarshan Europe B. V. is the Material Subsidiary of the Company for the year ended 31^st March, 2023. The Company has complied with all the legal requirements in respect of the Material Subsidiary.

In conformity with the provisions of the SEBI Listing Regulations, 2015, the Board has formulated a policy for determining "Material Subsidiaries". The Policy can be accessed from the Companys website at http://www. sudarshan.com/perch/resources/material- subsidiary- policy.pdf

There has been no material change in the nature of the business of Subsidiaries.

Consolidated Financial Statements:

Your Companys Board of Directors is responsible for the preparation of the Consolidated Financial Statements of your Company and its Subsidiaries ("the Group"), in terms of the requirements of the Companies Act, 2013 and in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards specified under Section 133 of the Act. The respective Board of Directors of the companies included in the Group are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets and for preventing and detecting frauds and other irregularities, the selection and application of appropriate accounting policies, making judgments and estimates that are reasonable and prudent, and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error, which have been used for the purpose of preparation of the Consolidated Financial Statements by the Directors of your Company, as aforesaid. The Consolidated Financial Statements of the Company and its subsidiaries is provided separately and forms part of the Annual Report.

Vigil Mechanism / Whistle Blower Policy:

Your Companys Whistle Blower Policy encourages Directors and employees and business associates to bring to the Companys attention, instances of unethical behaviour, actual or suspected incidents of fraud or violation of the Code of Conduct that could adversely impact your Companys operations, business performance and / or reputation. The Policy provides that the Company investigates such incidents, when reported, in an impartial manner and takes appropriate action to ensure that requisite standards of professional and ethical conduct are always upheld. It is your Companys Policy to ensure that no employee is victimised or harassed for bringing such incidents to the attention of the Company. The practice of the Whistle Blower Policy is overseen by the Audit Committee and no employee has been denied access to the Committee.

During the year under review, no complaint was received from a whistleblower.

The vigil mechanism / whistle blower policy is available on the Companys website at http:// www.sudarshan. com/perch/resources/whistle-blower-vigil-mechanism- policy.pdf

Annual Return:

Pursuant to Section 92(3) read with Section 134(3)(a) of the Companies Act, 2013, and Rules made thereunder, the Annual Return of the Company in Form MGT-7 for the year under review is available on the website of the Company at www.sudarshan.com

Particulars of loans, guarantees or investments under Section 186:

Information regarding loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013, have been disclosed in the Audited Financial Statements.

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

Information regarding conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 and Rule 8 of the Companies (Accounts) Rules, 2014 is attached to this Report vide Annexure I.

Particulars of Employees and Related Parties:

The information required pursuant to Section 197(12) of the Companies Act, 2013, read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, has been provided as Annexure I and VII.

Disclosure pursuant to Section 197(14) of the Companies Act, 2013, and Rules made thereunder:

The Managing Director and Wholetime Director of the Company are not in receipt of any remuneration and / or commission from any Holding / Subsidiary Company, as the case may be.

Significant and Material Orders passed by the Regulators and Courts:

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

Restriction on purchase by Company or giving of Loans by it for purchase of its Shares:

Pursuant to the provisions of Section 67(3)(c) of the Companies Act, 2013, and rules made thereunder, the Company has not given any loan exceeding the limit mentioned therein, to persons in the employment of the Company other than its Directors or Key Managerial Personnel, for purchase or subscribe shares of the Company.

Statement of Deviation(s) and Variation(s):

During the year under review, the Company allotted 990 Rated, Listed, Taxable, Unsecured, Redeemable Non - Convertible Debentures ("NCDs") on 18^th July, 2022, on private placement basis. The said NCDs are listed on the Wholesale Debt Market Segment of BSE Limited effective 21^st July, 2022. During the year under review, there is no deviation / variation in use of debt issue proceeds. The Company has made necessary disclosures to the Stock Exchanges, Debenture Trustees, within statutory timelines, as per the provisions of SEBI Listing Regulations, 2015, and any other rules & regulations as may be applicable confirming no deviation / variation in use of debt issue proceeds.

Details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016, during the year along with their status as at the end of the Financial Year: Nil, hence not applicable.

Details of difference between amount of the valuation done at the time of one-time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof: Nil, hence not applicable.

30. RECOGNITION:

Details of the awards received during the year under review are disclosed separately in this Annual Report.

31. APPRECIATION:

The Directors thank the Companys employees, customers, vendors, investors and business partners for their continuous support.

The Directors also thank the Government of India, Governments of various states in India, Governments of various countries and concerned Government departments and agencies for their co-operation.

Your Directors place on record their gratitude to Bank of Maharashtra, State Bank of India, ICICI Bank Limited, HDFC Bank Limited, The Hongkong and Shanghai Banking Corporation Limited, Citi Bank N.A., IDFC First Bank, Kotak Mahindra Bank Limited, Axis Bank Limited and The Federal Bank Limited for their co- operation and assistance. Your Directors also place on record their appreciation of the services rendered by BMGI.

The Directors appreciate and value the contribution made by every member of the Sudarshan family.

For and on behalf of the Board of Directors
Date: 23rd May, 2023	P. R. RATHI
Place: Pune	CHAIRMAN

SECRETARIAL AUDIT REPORT

FOR THE FINANCIAL YEAR ENDED 31 MARCH 2023

[Pursuant to Section 204(1) of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014]

To

The Members,

Sudarshan Chemical Industries Limited,

7^th Floor, Eleven West Panchshil,

Survey No. 25, Near PAN Card Club Road,

Baner, Pune - 411045,

Maharashtra, India

I have conducted the Secretarial Audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by Sudarshan Chemical Industries Limited (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 31^st March, 2023 (‘Audit Period) 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 31 March, 2023 according to the provisions of:

(i) The Companies Act, 2013 (‘the Act) and the rules made thereunder;

(ii) The Securities Contracts (Regulation) Act, 1956 (‘SCRA) and the rules made thereunder;

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

(iv) The Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Overseas Direct Investment and External Commercial Borrowings transactions. (There were no Foreign Direct

Investment transactions in the Company during the

Audit Period);

(v) The following Regulations 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 Audit Period);

(d) The Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021;

(e) The Securities and Exchange Board of India

(Issue and Listing of Non-Convertible Securities) Regulations, 2021;

(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;

(g) The Securities and Exchange Board of India

(Delisting of Equity Shares) Regulations, 2021; (Not applicable to the Company during the Audit Period) and

(h) The Securities and Exchange Board of India

(Buyback of Securities) Regulations, 2018 (Not applicable to the Company during the Audit Period).

(vi) I further report that, having regard to the compliance system prevailing in the Company and on examination of the relevant documents and records in pursuance thereof on test-check basis, the Company has complied with the following laws applicable specifically to the Company:

(a) The Water (Prevention and Control of Pollution) Act, 1974 and the Water (Prevention and Control of Pollution) Rules, 1975.

(b) The Air (Prevention and Control of Pollution) Act, 1981 and the Air (Prevention and Control of Pollution) Rules, 1982.

(c) The Environment Protection Act, 1986 and Rules & Regulations thereunder.

(d) The Manufacture, Storage and Import of Hazardous Chemicals Rules, 1989.

(e) The Public Liability Insurance Act, 1991;

(f) The Petroleum Act, 1934 and the Petroleum Rules, 2002;

(g) The Explosives Act, 1884 and the Gas Cylinders Rules, 2016;

(h) The Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016.

I have also examined compliance with the applicable clauses of the following:

(i) Secretarial Standards with respect to Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) issued by The Institute of Company Secretaries of India; and

(ii) Listing Agreements entered into by the Company with BSE Limited and the National Stock Exchange of India Limited read with the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

During the period under review the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc. mentioned above.

I further report that

The Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non-Executive Directors and Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act.

Adequate notice is given to all directors to schedule the Board Meetings, agenda and detailed notes on agenda were

generally sent at least seven days in advance, and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.

All decisions at Board Meetings and Committee Meetings were carried out unanimously as recorded in the minutes of the meetings of the Board of Directors or Committees of the Board, as the case may be.

I further report that there are adequate systems and processes in the Company commensurate with the size and operations of the Company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines.

I further report that during the audit period pursuant to sections 42, 71 and other applicable provisions, if any, of the Companies Act, 2013 and the related rules thereunder, the Securities and Exchange Board of India [SEBI] (Issue and Listing of Non-Convertible Securities) Regulations, 2021, the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and related SEBI circular, the members, approved issue of unsecured non-convertible debentures aggregating up to an amount not exceeding 7 200 Crores (Rupees Two Hundred Crores only) on a private placement basis. Consequently, Unsecured, Rated, Listed, Taxable, Redeemable Non-Convertible Debentures of 7 99 Crores were issued.

Further, during the financial year 2023-24, the Board of Directors at its Meeting held on 5 April, 2023, approved shifting of the Registered Office of the company from "162 Wellesley Road, Pune - 411 001, Maharashtra, India" to "7^th Floor, Eleven West Panchshil, Survey No. 25, Near PAN Card Club Road, Baner, Pune - 411045, Maharashtra, India",

i.e. within the local limits of Pune city and same jurisdiction of office of the Registrar of Companies, Pune (Maharashtra), with effect from 6 April, 2023.

The Company has sold Companys freehold, clear and marketable land admeasuring approximately 5.76 acres along with the structures standing thereon, located at 162 Wellesley Road, Pune - 411 001, Maharashtra, India, for a total net consideration of 7 356 Crores by executing the Deed of Conveyance on 6 April, 2023 with a third-party buyer - Birla Estates Private Limited.

Dr. K. R. Chandratre

FCS No.: 1370, C. P. No.: 5144 Place: Pune UDIN: F001370E000360619

Date: 23 May, 2023 Peer Review Certificate No. : 1206/2021

This report is to be read with my letter of even date which is annexed as Annexure and forms an integral part of this report.

Annexure to the Secretarial Audit Report

To:

The Members,

Sudarshan Chemical Industries Limited,

7^th Floor, Eleven West Panchshil,

Survey No. 25, Near PAN Card Club Road,

Baner, Pune - 411045,

Maharashtra, India

My report of even date is to be read along with this letter:

1. Maintenance of secretarial records is the responsibility of the management of the Company. My responsibility is to express an opinion on these secretarial records based on my audit.

2. I have followed the audit practices and processes as were appropriate to obtain reasonable assurance about the correctness of the contents of the secretarial records. The verification was done on test-check basis to ensure that correct facts are reflected in secretarial records. I believe that the process and practices I followed provide a reasonable basis for my opinion.

3. I have not verified the correctness and appropriateness of financial records and books of accounts of the Company.

4. Wherever required, I have obtained Management Representation about the compliance of laws, rules and regulations and happening of events, etc.

5. The compliance of the provisions of corporate and other applicable laws, rules, regulations, standards is the responsibility of management. My examination was limited to the verification of procedures on test-check basis.

6. The Secretarial Audit report is neither an assurance as to future viability of the Company nor of the efficacy or effectiveness with which the management has conducted the affairs of the Company.

	Dr. K.R. Chandratre
	FCSNo.:1370, C. P. No.: 5144
Place: Pune	UDIN: F001370E000360619
Date: 23 May, 2023	Peer Review Certificate No. : 1206/2021