varroc engineering ltd share price Directors report

DIVIDEND AND TRANSFER TO RESERVE

In view of the losses sustained during the year, and with a view to conserve resources for expansion of business, your Directors have thought it prudent not to recommend any dividend for the financial year under review. Further, no transfer to the General Reserve before declaration of Dividend has been considered.

Pursuant to Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 [SEBI Listing Regulations], the Board of Directors of the Company had formulated a Dividend Distribution Policy (‘the Policy). The Policy is available on the Companys website URL: https://varroc. com/investors/corporate-governance

CHANGE IN THE NATURE OF BUSINESS

The Company is engaged in the business of manufacturing automotive components. There has been no change in the business of the Company during the financial year ended March 31, 2023.

CAPITAL & DEBT STRUCTURE

There has been no change in the authorised and paid-up share capital of the Company during the financial year ended March 31, 2023. The paid-up Equity Share capital of the Company as on March 31, 2023 is Rs. 15,27,86,400/- comprising of 15,27,86,400 Equity Shares of Re. 1/- each.

The Company has not issued shares with differential voting rights. The Company has neither issued employee stock options nor sweat Equity Shares and does not have any scheme to fund its employees to purchase the shares of the Company.

Further, the Company has not issued any debt instruments during the year under review.

In the month of April 2023, the Company has acquired additional Equity Shares in its subsidiary Company, CarIQ Technologies Pvt. Ltd. increasing the stake to 95% from its original promoters. Necessary formalities, including intimation, have been completed under Regulation 30 of the Listing regulations to the Stock Exchanges.

MANAGEMENTS DISCUSSION AND ANALYSIS REPORT

The Industry outlook and the operational performance of the Company have been comprehensively covered in the Management Discussion and Analysis section of the Report (MD&A). A separate section on MD&A is included in the Annual Report as required under Regulation 34(2) (e) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the "Listing Regulations").

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

Pursuant to Regulation 34(2)(f) of the SEBI Listing Regulations, the initiatives taken by the Company from an environmental, social, and governance perspective are provided in the Business Responsibility and Sustainability Report [BRSR] which is included as a separate section in the Annual Report.

CORPORATE GOVERNANCE

The Board of Directors affirm their continued commitment to good corporate governance practices. During the year under review, the Company complied with the provisions relating to corporate governance as provided under the Listing Regulations. The Corporate Governance Report, together with the requisite certificate from Uma Lodha

& Co., practicing Company Secretaries, confirming the compliance, is provided in the Report on Corporate Governance, which forms part of the Annual Report.

CREDIT RATING

The Credit rating of the Company is managed by ICRA Limited. During the Financial Year under review, your Companys long rating, including NCD was at ‘[ICRA]A

(stable). The rating on the Companys short-term bank facilities and commercial paper programme has been reaffirmed at ‘[ICRA]A2+.

In addition to this, India Rating has assigned ‘IND A1 commercial paper programme in February 2023. The Company has also been assigned credit rating of IND A+(Stable)/IND A1 by India Rating for long term/ short term facilities in April 2023.

INVESTOR RELATIONS (IR)

The Company strives for excellence in its investor relations ("IR") engagement with international and domestic investors. There is a structured conference call every quarter to discuss published results. The management has periodic interactions with the financial Community, including investors and analysts, through individual meetings and investor conferences.

The Company participated in investor meetings and conferences organized by reputed broking houses during the year. It is ensured that critical information related to the Company is uploaded on the Companys website and made available to the stock exchanges so that it can be accessed easily and equally by all.

DEPOSITS FROM PUBLIC

During the year under review, the Company has not accepted any deposits from the public. As on March 31, 2023, there were no deposits that were unclaimed and due for repayment.

NUMBER OF MEETINGS OF THE BOARD

The Board of Directors met 9 (Nine) times during the Financial Year 2022-23 and the particulars of the meetings held and attended by each Director are given in the Corporate Governance Report which forms part of this Annual Report. The intervening gap between consecutive meetings was not more than one hundred and twenty (120) days as prescribed by the Companies Act, 2013 ("the Act"), and the Listing Regulations. The details of the Board and various Committee meetings are given in the Corporate Governance Report.

COMPOSITION OF AUDIT COMMITTEE

The Board has constituted the Audit Committee, which has Mr. Gautam Khandelwal as Chairman, Mrs. Vijaya Sampath and Mr. Vinish Kathuria Independent Directors as Members and Mr. Tarang Jain, Chairman & Managing Director as Member. More details on the committee are given in the Corporate Governance Report forming part of this annual report. During the year under review, the recommendations made by the Audit Committee were duly accepted by the Board.

DIRECTORS & KEY MANAGERIAL PERSONNEL

At the Thirty Fourth Annual General Meeting (AGM) of the Company held on September 29, 2022, the shareholders approved the following appointment/ re-appointment:

? Re-appointment of Mr. Rohit Prakash (DIN: 02425849) as Director of the Company, liable to retire by rotation.

? Re-appointment of Mr. Tarang Jain (DIN 00027505) with the designation of Chairman & Managing Director of the Company, being liable to retire by rotation, for a further period of three (3) consecutive years from February 6, 2023 to February 5, 2026.

? Re-appointment of Mr. Arjun Jain (DIN 07228175) with the designation of whole-time Director of the Company, being liable to retire by rotation, for a further period of three (3) consecutive years from August 7, 2023, to August 6, 2026.

? Re-appointment of Mr. Vinish Kathuria (DIN 01951771) as an Independent Director of the Company, not being liable to retire by rotation, for his second term from February 6, 2023 upto February 5, 2028.

? Appointment of Mr. Dhruv Jain (DIN 09710448) with the designation of Non-executive Non-independent Director of the Company, being liable to retire by rotation.

? In accordance with the provisions of the Act and in terms of the Articles of Association of the Company, Mr. Tarang Jain (DIN 00027505) is liable to retire by rotation at the ensuing AGM and is eligible for re-appointment. A Resolution seeking the Shareholders approval for his re-appointment along with other required details forms part of the Notice.

In terms of Section 149 of the Act and the Listing Regulations, Mr. Gautam Khandelwal, Mrs. Vijaya Sampath, Mr. Marc Szulewicz and Mr. Vinish Kathuria are the Independent Directors of the Company as of the date of this report. All the Independent Directors have submitted declarations that each of them meets the criteria of independence as laid down under Section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations, and there has been no change in the circumstances that may affect their status as independent Directors during the year. The profile of the Independent Directors forms part of the Corporate Governance Report.

During the year, the Independent Directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fees, commission and reimbursement of expenses incurred by them for the purpose of attending meetings of the Board of Directors and Committee(s) of the Company. The details of remuneration of the Independent Directors are mentioned in the Corporate Governance Report.

In the opinion of the Board, the Independent Directors possess the requisite expertise and experience and are persons of high integrity and repute. They fulfil the conditions specified in the Act as well as the Rules made thereunder and are independent of the management.

KEY MANAGERIAL PERSONNEL

Based on the recommendation of the Nomination and Remuneration Committee and the Audit Committee, the Board of Directors of the Company had approved the appointment of:

? Mr. T.R.Srinivasan resigned as Group Chief Financial

Officer of the Company w.e.f. close of working hours on August 31, 2022. The Board of Directors places on record its appreciation for the services rendered by him over the years.

? Mr. K. Mahendra Kumar appointed as Group Chief Financial

Officer of the Company w.e.f. September 28, 2022.

In terms of the provisions of Section 203 of the Act, as on March 31, 2023, the Company has the following Key Managerial Personnel:

(a) Mr. Tarang Jain, Chairman & Managing Director (b) Mr. Arjun Jain, Whole-time Director (c) Mr. Rohit Prakash, Whole-time Director (d) Mr. K. Mahendra Kumar, Group Chief Financial Officer

(e) Mr. Ajay Sharma, Group General Counsel and Company Secretary

FORMAL ANNUAL EVALUATION OF THE PERFORMANCE OF THE BOARD, ITS COMMITTEES AND DIRECTORS

The Board, the Committees of the Board and independent Directors continuously endeavour for the efficient functioning of the Board and its Committees and better corporate governance practices. A formal performance evaluation was carried out at the meeting of the Board of Directors held on May 23, 2023, where the Board made an annual evaluation of its own performance, the performance of Directors individually, as well as the evaluation of the working of its various Committees for the Financial Year 2022-23 on the basis of a structured questionnaire on performance criteria. The Board expressed its satisfaction with the evaluation process.

The evaluation process endorsed showiness amongst Directors, the openness of the management in sharing the information with the Board (including committees thereof) and placing various proposals for the Boards (including committees thereof) consideration and approval.

The Independent Directors met on May 23, 2023, without the presence of other Directors or Members of management. All the Independent Directors were present at the meeting. In the meeting, the Independent Directors reviewed the performance of Non–Independent Directors, the Board as a whole, and the Chairman. They assessed the quality, quantity, and timeliness of the flow of information between the management of the Company and the Board. Post the review by the Independent Directors, the results were shared with the entire Board and its respective committees. The Independent Directors expressed satisfaction over the performance and effectiveness of the Board, individual non-Independent Directors, and the Chairman. They also expressed satisfaction with regard to the flow of information between the management of the Company and the Board.

The Members of the Audit Committee without the presence of Members of management also had a separate meeting with credit rating agencies.

POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION

In adherence to the provisions of Section 134(3)(e) and 178(1) & (3) of the Act, the Board of Directors upon recommendation of the Nomination and Remuneration Committee, has approved a policy on Directors appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a Director and other matters. The said Policy is uploaded on the Companys website at https://varroc.com/ investors/corporate-governance/.

The main objective of the said Policy is to ensure that the level and composition of remuneration are reasonable and sufficient to attract, retain, and motivate the Directors, Key Managerial Personnel (KMP) and senior management employees. The remuneration involves a balance between fixed and incentive pay, reflecting short and long-term performance objectives appropriate to the workings of the Company and its goals. The extract of the said Policy is also covered in the Corporate Governance Report which forms part of this Report.

POLICIES AND CODE ADOPTED BY THE COMPANY

The Board of Directors has, from time to time, framed and approved policies/codes as required by the Listing Regulations as well as under the Act. These policies/codes will be reviewed by the Board at periodic intervals. The Company has adopted the following policies/codes:

(i) Policy for Board Diversity-Appointment-Remuneration-Training and Evaluation of Directors and Employees (ii) Material Subsidiary Policy (iii) Policy for determination of materiality threshold for Disclosure of Events (iv) Code for Disclosure of Unpublished Price Sensitive Information (v) Code of Conduct for Insider Trading (vi) Policy on Preservation of Information and Archival of documents (vii) Policy on Related Party Transactions (viii) Code of Conduct for Directors and Senior Management Personnel (ix) Enterprise Risk Management Policy (x) Whistle Blower Policy (xi) Dividend Distribution Policy (xii) Environment, Social & Governance [ESG] policy (xiii) Corporate Social Responsibility [CSR] policy (xiv) Policy on prevention of sexual harassment.

The above policies are available on the Companys website on the link https://varroc.com/investors/ corporate-governance/

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Act, the Board of Directors, based on the representation received from the Management to the best of their knowledge and ability, confirm that:

(a) in the preparation of the annual accounts for the year ended March 31, 2023, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(b) they 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 as at March 31, 2023 and of the loss of the Company for the year ended on that date; (c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (d) they have prepared the annual accounts on a going concern basis; (e) they have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively; and (f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

AUDITORS & AUDITORS REPORT a. STATUTORY AUDITOR

M/s SRBC & Co. LLP, Chartered Accountants (ICAI Firm Registration No. 324982E/E300003), were appointed as Statutory Auditors of the Company for a term of 5 (five) years at the 30th AGM held on September 05, 2018, to hold office from the conclusion of the said meeting till the conclusion of the 35th AGM to be held in the year 2023. The term of office of M/s SRBC & Co. LLP, Chartered Accountants, as Statutory Auditors of the Company will conclude with the close of the forthcoming AGM of the Company.

The Board of Directors at their meeting held on May 23, 2023, re-appointed M/s S R B C & Co. LLP, Chartered Accountants, as the Statutory Auditors of the Company to hold office from the conclusion of the 35th AGM till the conclusion of the 40th AGM to be held in the year 2028, based on the recommendation of the Audit Committee and subject to the approval of the shareholders at the ensuing 30th AGM. The Statutory Auditors have confirmed their independent status and eligibility for the said re-appointment. The Audit report on theConsolidated financial statements of the Company contains the following qualifications:

? As disclosed in Note no. 50 to the consolidated financial statements for the year ended March 31, 2023, the Financial Results and other financial information for the year ended March 31, 2023, in respect of Varroc TYC Corporation BVI ("China JV"), a joint venture accounted for under the equity method, considered for the purpose of preparation of the consolidated financial statements, are unaudited. Hence, we are unable to determine the possible impact of Groups share of profit/loss from China JV on the consolidated profit/loss before tax, profit/loss after tax, total comprehensive income, and earnings per share for the year ended March 31, 2023 and Groups share of net assets of China JV on the investment in China JV as at March 31, 2023.

Management Response:

The Groups investment in Varroc TYC Corporation BVI (‘VTYC or ‘China JV), a joint venture accounted for under the equity method, which is carried at Rs. 3,751.57 million as at March 31, 2023, and the Groups share of VTYCs net profit of Rs. 15.58 million, which is included in the Groups income for the year then ended, are based on management certified accounts and were not subjected to audit. The Group is currently undertaking negotiations with the JV partner for resolution of certain matters regarding the operation of the JV, pending which the Group is unable to obtain audited financials and other information from the China JV.

? As provided in Note no. 51 to the Consolidated

Financial Statements for the year ended March 31, 2023, regarding the sale of Varroc Lighting Systems Business, there is disagreement between the parties on the final adjustments against the agreed consideration, and both parties have agreed to negotiate to reach an agreement. Pending the conclusion of these negotiations, we are unable to comment on the impact of the same on the consolidated loss and financial position as of and for the year ended March 31, 2023.

Management Response:

As per the terms of the Securities Purchase Agreement ("SPA") entered into among Varroc Engineering Limited ("VEL") and VarrocCorp Holding BV, Netherlands ("VCHBV", wholly owned subsidiary of VEL) (together referred to as "Sellers") and Compagnie Plastic Omnium SE, France ("Buyer"), a specific ‘Adjustment Escrow has been provided for the Final Closing Statement and the Final Closing Adjustment Statement to be prepared as of the Closure Date, i.e., October 6, 2022. The Buyer had a period of 90 working days to come up with the same, duly supported by the requisite information/ documentation.

The Buyer submitted the final adjustments during the current quarter but failed to provide the necessary supporting details to enable the Sellers to understand these adjustments. Hence, Sellers sent a Dispute Notice in accordance with the SPA disputing the proposed adjustments. Pursuant to the amendment to the SPA dated May 12, 2023, both parties have mutually agreed to attempt the Resolution of their disagreements in accordance with the provisions of the SPA. Considering the disagreement between the parties and the fact that the negotiations with the Buyer are in progress, the effect of the proposed adjustments cannot be ascertained for recognition in the consolidated Financial Results as of March 31, 2023.

The Audit report on theStandalone financial statements of the Company contains the following qualifications:

? As provided in Note no. 52 to the standalone financial statements regarding the sale of Varroc Lighting Systems Business, there is disagreement between the parties on the final adjustments against the agreed consideration, and both parties have agreed to negotiate to reach an agreement. Pending the conclusion of these negotiations, we are unable to comment on the impact of the same on the net loss and financial position as of and for the year ended March 31, 2023.

Management Response:

As per the terms of the Securities Purchase Agreement ("SPA") entered into among Varroc Engineering Limited ("VEL") and VarrocCorp Holding BV, Netherlands ("VCHBV", wholly owned subsidiary of VEL) (together referred to as "Sellers") and Compagnie Plastic Omnium SE, France ("Buyer"), a specific ‘Adjustment Escrow has been provided for the Final Closing Statement and the Final Closing Adjustment Statement to be prepared as of the Closure Date i.e., October 6, 2022. The Buyer had a period of 90 working days to come up with the same, duly supported by the requisite information/documentation.

The Buyer submitted the final adjustments during the current quarter but failed to provide the necessary supporting details to enable the Sellers to understand these adjustments. Hence, Sellers sent a Dispute Notice in accordance with the SPA disputing the proposed adjustments. Pursuant to the amendment to SPA dated May 12, 2023, both parties have mutually agreed to attempt the Resolution of their disagreements in accordance with the provisions of the SPA. Considering the disagreement between the parties and the fact that negotiations with the Buyer are in progress, the effect of the proposed adjustments cannot be ascertained for recognition in the standalone Financial Results as of March 31, 2023.

Apart from the above, there are no further qualifications, reservations, or adverse remarks on the financial statements for the year ended March 31, 2023. The notes on the financial statement referred to in the Auditors Report are self-explanatory and do not call for any further comments. The Auditors Report is enclosed with the financial statements.

The total fees for all the services paid by the Company and its subsidiaries, on a consolidated basis, to the statutory auditor, and all entities in the network firm/network entity of which the statutory auditor is a part, is given below:

b. COST AUDITOR

The cost accounts and records are required to be maintained under Section 148(1) of the Act. They are duly made and maintained by the Company. In terms of the provisions of Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014, the Board of Directors of the Company has, on the recommendation of the Audit Committee, appointed M/s S. R. Bhargave & Co., (Partnership Firm based in Pune Registration No. M – 000218), Cost Accountants, as Cost Auditor of the Company to conduct the cost audit of the Company for the financial year ending

March 31, 2024, at a remuneration as mentioned in the Notice convening the 35th AGM.

As required under the Act read with the Companies (Cost Records and Audit) Rules, 2014, the remuneration payable to Cost Auditors must be placed before the Members at a general meeting for ratification. Hence, a Resolution for the same forms part of the notice of the ensuing AGM.

M/s S. R. Bhargave & Co., has confirmed the cost records for the financial year ended March 31, 2023, are free from any disqualifications as specified under Section 141 (3) and the proviso to Section 148(3) read with Section 141(4) of the Act. They have further confirmed their independent status. The Cost Audit Report for the Financial Year 2022-23 will be filed within the stipulated period. c. SECRETARIAL AUDITOR

In terms of the provisions of Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board has appointed Uma Lodha & Co. (C.P. No.2593), Company Secretary in Practice, Mumbai, as the Secretarial Auditor for conducting the Secretarial Audit of the Company for the Financial Year ended March 31, 2023.

The Secretarial Audit Report of the Company and Varroc Polymers Ltd. ("VPL"), a material subsidiary of the Company, for the Financial Year 2022-23 is annexed herewith and forms an integral part of this report. The Secretarial Audit Report does not contain any qualification, reservation, or adverse remark. The Company is in compliance with the Secretarial Standards, specified by the Institute of Company Secretaries of India (‘ICSI).

ANNUAL SECRETARIAL COMPLIANCE REPORT

As per Regulation 24A of the Listing Regulations, the Company has undertaken an audit for the Financial Year 2022-23 for all applicable compliances as per SEBI Regulations and Circulars/Guidelines issued thereunder. The Annual Secretarial Compliance Report has been submitted to the Stock Exchanges.

The annual secretarial compliance report contains the following qualifications:

• Non-disclosure of the extent and nature of security created and maintained with respect to secured listed NCDs in the financial statements

Management response: "This was an inadvertent error and going forward, due care will be taken in this regard.

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 Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is provided in Annexure – I to this report.

INVESTMENT

The particulars of loans given, investments made, guarantees given, and securities provided as per Section 186 of the Act by the Company are disclosed in the standalone financial statements.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures required under the provisions of Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, containing, inter-alia, the ratio of remuneration of Directors to median remuneration of employees, percentage increase in the median remuneration, are annexed to this Report as Annexure-II.

A statement containing the particulars of the top ten employees and the employees drawing remuneration in excess of limits prescribed under Section 197(12) of the Act, read with Rules 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is an annexure forming part of this Report. In terms of the proviso to Section 136(1) of the Act, the Report and Accounts are being sent to the Members excluding the aforesaid annexure. The said statement is kept open for inspection during working hours at the Registered Office of the Company. Any member who is interested in obtaining these, may write to the Group General Counsel & Company Secretary at the Registered Office of the Company.

The said statement is also available on your Companys website, the weblink to which is https://varroc.com/ investors/corporate-governance/.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All related party transactions that were entered into during the financial year were in the ordinary course of business and on an arms length basis. In accordance with Section 188 of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014, there were no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or others, that may have a potential conflict with the interests of the Company at large or that warrant the approval of the shareholders. No material contracts or arrangements with related parties were entered into during the year.

The Company has nothing to report in Form AOC-2, hence, the same is not annexed.

The related party transactions are placed before the Audit Committee for prior approval, as required under applicable law. Only independent Directors who are Members of the Audit Committee approve the same. Prior omnibus approval of the Audit Committee is also obtained for transactions that are repetitive in nature and entered in the ordinary course of business on an arms length basis. A statement of all related party transactions is placed before the Audit Committee for review on a quarterly basis, specifying the nature and value of the transactions.

In line with the requirements of the Companies Act, 2013 and Listing Regulations, the Company has formulated a Policy on Related Party Transactions (RPTs), including any amendments thereto for identifying, reviewing approving and monitoring of RPTs. The said policy has been revised in line with the amendment in Listing Regulations and the same is available on the Companys website https://varroc.com/wp-content/uploads/bsk-pdf-anager/ 2022 /2/ Policy on Related Party Transactions.pdf

The details of RPTs during FY 2022-23, including transaction(s) with persons or entities belonging to the promoter/ promoter group that hold 10% or more shareholding in the Company are provided in the accompanying financial statements.

WHISTLE BLOWER POLICY/VIGIL MECHANISM

On recommendations of the Audit Committee, the Board of Directors has approved and adopted a Whistle Blower Policy that provides a formal mechanism for the Directors, employees, and other stakeholders of the Company to report their concerns about unethical behaviour, actual or suspected fraud, or violations of the Companys Code of

Conduct or Ethics Policy. The Policy provides for adequate safeguards against victimisation of employees who avail themselves of the mechanism. The Audit Committee oversees the functioning of this policy. The Whistle Blower Policy has been uploaded on the website of the Company at www.varroc.com.

RISK MANAGEMENT

Your Company has a defined risk control and management policy in place that is consistent with the provisions of the Act and the SEBI Listing Regulations. The Company has established procedures to periodically place before the Board/Audit Committee, the risk assessment and minimisation procedures being followed by the Company and the steps taken by it to mitigate the Risks. The Board of Directors of the Company have constituted a Risk Management Committee consisting of Board Members and Senior Management Personnel and has delegated the function of formulating, implementing, monitoring, and reviewing the risk management policy to the Committee. Further details in respect of the Committee are covered under the heading "Risk Management Committee" in the Corporate Governance Report.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUECY

The Company has a defined organisational structure, documented policy guidelines, and a defined authority matrix that ensures efficiency of operations, compliance with internal policies and applicable laws and regulations, as well as protection of resources. The Company believes that a strong internal control system and processes play a critical role in the day-to-day operations of the Company.

To this end, the Company has put in place an effective internal control system to synchronise its business processes, operations, financial reporting, fraud control, and compliance with extant regulatory guidelines and compliance parameters. The Company ensures that a standard and effective internal control framework operates throughout the organisation, providing assurance about the safekeeping of the assets and the execution of transactions as per the authorisation in compliance with the internal control policies of the Company.

The internal control system is supplemented by extensive internal audits, regular reviews by the management, and guidelines that ensure the reliability of financial and all other records. The management periodically reviews the framework, efficacy, and operating effectiveness of the Internal Financial Controls of the Company.

The Internal Audit reports are periodically reviewed by the Audit Committee. The Company has, in material respects, adequate internal financial control over financial reporting, and such controls are operating effectively. Internal Audits are carried out to review the adequacy of the internal control systems and compliance with policies and procedures. Internal Audit areas are planned based on inherent risk assessment, risk score, and other factors such as probability, impact, significance, and strength of the control environment. Its adequacy was assessed, and the operating effectiveness was also tested.

COMPANIES

Pursuant to a fresh certificate of incorporation issued by the Registrar of Companies, Maharashtra, Mumbai, on September 13, 2022, the status of Varroc Polymers Pvt. Ltd. was changed to Varroc Polymers Ltd.

The Company has 14 subsidiaries, including step-down subsidiaries, and 3 joint venture Companies as on March 31, 2023. During the year, the Board of Directors has reviewed the affairs of its material subsidiaries.

As stipulated by Regulation 33 of the Listing Regulations, the Consolidated Financial Statements have been prepared by the Company in accordance with the applicable Accounting Standards. The audited Consolidated Financial Statements, together with Auditors Report, form part of the Annual Report.

Pursuant to Section 129(3) of the Companies Act, 2013, the report on the performance and financial position of each of the subsidiary and joint venture companies and the salient features of their financial statements is provided in the prescribed Form AOC- 1 and forms part of the Financial Statements of the Company. Details of subsidiaries of the Company and their performance are covered in the Management Discussion and Analysis section of the Annual Report.

Further, pursuant to the provisions of Section 136 of the Act, the standalone and consolidated financial statements of the Company and separate audited financial statements in respect of subsidiaries are available on the website of the Company https://varroc.com/investors/financial-results/.

The details of changes in Companys subsidiaries, joint venture or associate companies, for the FY 2022-23, are as following:

Companies which have become subsidiaries:

? Varroc Germany GmBH

? Varroc Poland S.p.z.oo

? VL Lighting Solutions Private Limited

Companies which have ceased to be subsidiaries of the Company:

? Varroc Lighting Systems SRO, Czech Republic

? Varroc Lighting Systems S.de.R.L.De.C.V., Mexico

? Varroc Lighting Systems Inc. USA

? Varroc Lighting Systems GmBH, Germany

? Varroc Lighting Systems Morocco SA

? Varroc Lighting Systems s.p.z.oo, Poland

? Varroc Lighting Systems Turkey Endustriyel Urunler malat ve Ticaret Anonim irketi

? Varroc Do Brasil Industria E Comercia LTDA

? VL Lighting Solutions Private Limited

Companies which have become a Joint Venture of the Company: Nil Companies which have ceased to be a Joint Venture of the Company: Nil Entities which have ceased to be an Associate of the Company: Nil Entities which have become an Associate of the Company: Nil

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Corporate Social Responsibility (CSR) is an integral part of Varroc culture. The Company is committed to undertaking various need-based activities in compliance with Section 135 of the Act read with Schedule VII to the Act and the Companys Corporate Social Responsibility ("CSR") Policy. The Company continued its efforts on promoting and nurturing young and emerging sports talents by providing financial assistance, which helps them get the best training and makes them competent to participate in national and international sporting events. Further, the Company has also undertaken rejuvenating the Kham River to build a sustainable environment in Aurangabad, Maharashtra.

The CSR Policy is uploaded on the Companys website www.varroc.com. The CSR Report for the Financial Year 2022-23 is annexed to this report as Annexure-III. In terms of Section 135 of the Act read with Rule 4(5) of the Companies (Corporate Social Responsibility Policy) Rules, 2015, the Director and Group Chief Financial Officer of the Company have provided the requisite certificate that the funds disbursed by the Company to Varroc Foundation and for other CSR activities during the financial year 2022-23 have been utilised for the respective purposes and in the manner as approved by the Board.

During the year under review, the Company was required to spend Rs. 15.00 million on CSR activities, against which it has spent Rs. 19.42 million.

AFFIRMATIONS DURING THE YEAR UNDER REVIEW

? There were no material changes and commitments affecting the financial position of the Company, that occurred between the end of the financial year of the Company to which the financial statements relate, viz., March 31, 2023, and the date of this Report.

? There were no significant material orders passed by the regulators or courts or tribunals impacting the Companys going concern status and its operations in the future.

? The Company has complied with the Secretarial

Standards issued by the Institute of Company Secretaries of India on Board Meetings and Annual General Meetings.

? There was no fraud reported by the Statutory Auditors and the Secretarial Auditors of the Company under Section 143(12) of the Act to the Audit Committee.

? The Certificate duly signed by the Chairman &

Managing Director and Chief Financial Officer on the Financial Statements of the Company for the year ended March 31, 2023, as submitted to the Board of Directors at its meeting held on May 23, 2023, is annexed to this report.

? The declaration by the Chairman & Managing Director regarding compliance by the Board Members and senior management personnel with the Companys Code of Conduct is annexed to this report.

? The details of an application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 during the year – Nil.

? The details of the difference between the amount of the valuation done at the time of one-time settlement and the valuation done while taking a loan from the Banks or Financial Institutions along with the reasons thereof: Nil

? During FY 2022-23, Mr. Tarang Jain, Chairman &

Managing Director, and Mr. Arjun Jain, Whole-Time Director, received remuneration of Rs. 32.31 million and Rs. 1.11 million, respectively, from material subsidiary Varroc Polymers Ltd.

REDEMPTION / DEBENTURE INTEREST TO IEPF:

As required under Section 124 of the Act, no Unclaimed Dividend/ Debenture redemption/ Debenture Interest has been lying with the Company for a period of seven years. Accordingly, no amounts have been transferred to the Investor Education and Protection Fund established by the Central Government. b) TRANSFER OF SHARES TO IEPF

As required under Section 124 of the Act, no Equity Shares, in respect of which dividends have not been claimed by the Members for seven consecutive years or more, have been transferred by the Company to the Investor Education and Protection Fund Authority (IEPF) during the Financial Year 2022-23.

ANNUAL RETURN

As required under Sections 92(3) and 134(3)(a) of the Act and Rule 12(1) of the Companies (Management and Administration) Rules, 2014 (as amended), Annual Return in Form MGT - 7 is available on Companys website at the link https://varroc.com/investors/corporate-governance/.

DISCLOSURE AS REQUIRED UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has a Sexual Harassment Policy in place in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013. The Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contract, temporary, and trainees) are covered under this Policy.

During the year under review, the Company had arranged an online orientation programme under the POSH Act at the PAN India level in order to make the employees and the committee Members proficient to discharge their duties. The training was attended by all the Internal Committee Members & employees at PAN India. The Company has in place a module on "PREVENTION OF SEXUAL HARASSMENT IN THE WORKPLACE (POSH) at its internal platform, for sensitising the employees with the provisions under POSH.

The Policy is gender neutral. During FY 2022-23, the Committee received 2 (Two) complaints pertaining to sexual harassment. Both complaints were resolved with appropriate action. No cases of child labour, forced labour, involuntary labour, and discriminatory employment were reported during the period.

GREEN INITIATIVES

In commitment to keeping in line with the Green Initiative and going beyond it to create new green initiations, an electronic copy of the Notice of the 35th Annual General Meeting of the Company shall be sent to all Members whose email addresses are registered with the Company/ Depository Participant(s).

ACKNOWLEDGEMENTS

Your Directors place on record their acknowledgement for the co-operation received from the Customers, Vendors, Bankers, Associates, Collaborators and the Employees of the Company, without which it would not have been possible for the Company to achieve its performance and growth.