Varroc Engineering Ltd Directors Report.

Dear Shareholders,

The Directors of your Company take pleasure in presenting the 32nd Annual Report on the business and operations of the Company together with the financial statements for the Financial Year ended March 31, 2020. The consolidated performance of the Company and its subsidiaries has been referred to wherever required.

Financial Results & Appropriation

The summarised financial results for the year ended March 31, 2020 and for the previous year ended March 31, 2019, are as follows:

STANDALONE

CONSOLIDATED

Particulars Financial Year 2019-20 (in million) Financial Year 2018-19 (in million) Financial Year 2019-20 (in million) Financial Year 2018-19 (in million) (Restated)
Revenue from operations 23,039.47 25,731.53 1,11,218.68 1,20,364.65
Total Income 23,722.24 26,246.37 1,12,207.54 1,21,272.53
Profit before finance cost, depreciation, exceptional items and extraordinary expenses 2,951.19 3,205.94 9,105.17 11,810.07
Depreciation and amortisation (-) 1,316.90 1,075.19 7,318.64 5,656.42
Finance cost (-) 423.76 392.01 1,391.67 968.45
Share of Net Profit/(Loss) of Investment accounted for using the Equity Method 0 0 (91.65) 314.54
PROFIT BEFORE TAX 1,210.53 1,738.74 394.86 5,185.20
Less: Current tax expense 149.16 387.60 490.75 1,381.58
Less: Short/(excess) provision for tax relating to prior periods (24.22) (5.68) (146.49) 63.08
Less: Deferred tax 95.32 161.42 25.54 (546.24)
NET PROFIT FOR THE YEAR 990.27 1,195.40 25.06 4,286.78
Less: Profit attributable to Non-controlling interest 0 0 23.15 34.59
Profit attributable to owners of the Company 990.27 1,195.40 1.91 4,252.19
Add: Profit brought forward from last year 2,995.16 1,818.60 13,147.02 9,639.98
Less: Re-measurements of defined benefit plans, net of tax 18.43 11.81 205.91 46.84
Less: Impact of change in accounting policy 12.66 0 66.22 689.92
Add: Transfer from Debenture Redemption Reserve (DRR) 200.00 0 325.00 0
Appropriation: Dividend on Equity Shares 943.68 5.84 943.68 5.84
Tax on Dividend 122.27 1.19 193.99 2.55
Balance carried forward in Balance Sheet 3,088.37 2,995.16 12,064.14 13,147.02

Operations and Performance

On consolidated basis for the Financial Year 2019-20, your Company achieved total revenue of Rs 1,12,218.68 million, resulting in a decline of 7.6 % over the revenue of Rs 1,20,364.65 million in the previous Financial Year ended March 31, 2019. The net profit for the year was at Rs 25.06 million.

On standalone basis for FY20, your Company achieved total revenue of Rs 23,039.47 million, resulting in a decline of 10.46% over the total revenue of Rs 25,731.53 million in FY19. The net profit for FY20 was Rs 990.27 million.

The Industry outlook and the operational performance of the Company have been comprehensively covered in the Management Discussion and Analysis Section, which, as stipulated under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the “Listing Regulations”) and is presented in a separate Section forming part of the Annual Report.

COVID - 19

The COVID-19 pandemic has caused an unprecedented health and economic crisis across the globe. The severity of its impact on business activity is still evolving, and companies are working to protect their positions, while reviewing strategy and setting priorities for the year ahead.

The impact of COVID-19 has been comprehensively covered in the Management Discussion and Analysis Section.

Change in the Nature of Business

The Company is engaged in the business of manufacturing and supply of automotive components. There has been no change in the nature of business of the Company during the Financial Year 2020.

Dividend and Transfer to Reserve

The Board of Directors vide its resolution dated February 13, 2020 had declared and paid an Interim Dividend @ Rs 3/- per equity shares for the Financial Year 2019-20. The total cash outflow on account of interim dividend of equity shares was Rs 487.56 million, including dividend distribution tax of Rs 83.13 million.

The Board recommends that the interim dividend, which has already been declared and paid, be considered as the final dividend for the Financial Year 2019-20. Accordingly, no transfer to the General Reserve before declaration of Dividend has been considered.

Credit Rating

During the year under review, the credit rating of the Companys short-term and long-term debt was maintained by ICRA at Rs ICRA AA- Rs for long-term loan and Rs ICRA A1+ Rs for short-term loan. In the month of April 2020, ICRA, has put our ratings on watch with negative implications considering the impact of Covid on the automotive industry.

Shares and Share Capital

During the year under review, the Company has not altered/modified the share capital of the Company.

The Company has not issued any shares with differential rights and hence no information as per provisions of Section 43(a)(ii) of the Companies Act, 2013 (Act) read with Rule 4(4) of the Companies (Share Capital and Debenture) Rules, 2014 is required to be furnished.

The Company has not issued any sweat equity shares during the year under review and hence no information as per provisions of Section 54(1)(d) of the Act read with Rule 8(13) of the Companies (Share Capital and Debenture) Rules, 2014 is required to be furnished.

The Company has not issued any equity shares under any Employees Stock Option Scheme during the year under review and hence, no information as per provisions of Section 62(1)(b) of the Act read with Rule 12(9) of the Companies (Share Capital and Debenture) Rules, 2014 is required to be furnished.

During the year under review, there were no instances of non-exercising of voting rights in respect of shares purchased directly by employees under a scheme pursuant to Section 67(3) of the Act read with Rule 16(4) of the Companies (Share Capital and Debentures) Rules, 2014.

Deposits from Public

The Company has not accepted any deposits from public and as such, no amount on account of principal or interest on deposits from public was outstanding as of the date of the balance sheet.

Acquisitions of Shares

(A) CarlQ Technologies Pvt. Ltd.

The Company acquired 74% stake in telematics solutions provider CarIQ Technologies Pvt. Ltd. (CarIQ) in August, 2019.

CarIQ is one of the few Indian tech startups that pioneered technology solutions for connected mobility. CarIQ Rs s proprietary solution is a seamless combination of hardware, software and IoT platform that enables safer driving, optimising uptime and personal and commercial mobility. Its data analytics platform helps gather technical data from a car into useful format for vehicle users, OEMs, fleet owners and Insurance Companies. This transaction complement Varroc Rs s connected vehicle product offerings such as instrument clusters, telematic devices and other data based analytical products.

(B) Team Concepts Pvt. Ltd.

In September 2019, the Companys subsidiary Varroc Polymers Pvt. Ltd. ( Rs VPPL Rs ) acquired the remaining shares of Team Concepts Pvt. Ltd. (TCPL) held by the original promoters of TCPL. By virtue of the said acquisition of shares, TCPL has become a 100% wholly owned subsidiary of VPPL.

(C) Varroc Dell Rs Orto Pvt. Ltd:

In September, 2019, the Company has subscribed 15,00,000 Equity Shares of Rs 10/- each of Varroc Dell Rs Orto Pvt. Ltd. on rights basis. Varroc Dell Rs Orto is a 50:50 Joint Venture between the Company and Dell Rs Orto S.p.A., Italy

Merger

1. Aries Mentor Holding B.V. with VarrocCorp Holding B.V.

In order to optimise the legal entity structure more aligned with the business by reducing the number of legal entities, the Companys subsidiary in Amsterdam, Netherlands, Aries Mentor Holding B. V. ( Rs AMHBV Rs ) was merged with VarrocCorp Holding B.V. ( Rs VCHBV Rs ). The said merger was effective from March 4, 2020. By virtue of the said merger, VCHBV has become the holding Company for Varroc Lighting Systems, Italy S.p.A. which is basically engaged in the business of manufacturing of 2W lighting, including its step down subsidiaries in Romania and Vietnam.

2. Varroc Lighting Systems (India) Pvt. Ltd. with Varroc Engineering Ltd.

The Board of Directors of the Company have approved the Scheme of Amalgamation of Varroc Lighting Systems (India) Pvt. Ltd. (a wholly owned subsidiary Company) with the Company under Sections 230 to 232 and other applicable provisions, if any, of the Act. The appointed date of the Scheme is April 1, 2020. The proceedings are underway before the National Company Law Tribunal, Mumbai Bench.

3. Team Concepts Pvt. Ltd. with Varroc Polymers Pvt. Ltd.

The Companys subsidiary Varroc Polymers Pvt. Ltd. ( Rs VPPL Rs ) had filed the Scheme of Amalgamation of Team Concepts Pvt. Ltd. with VPPL under Sections 230 to 232 and other applicable provisions, if any, of the Act. The Appointed date of the Scheme is April 1, 2020.

The proceedings are underway before the National Company Law Tribunal, Mumbai and Bengaluru Benches.

4. Voluntary Liquidation of TRI.O.M., Mexico

During the year under review, the Companys second level step-down subsidiary TRI.O.M., Mexico S.A.de.C.V. ( Rs TRIOM, Mexico Rs ), had initiated the process with the Public Registry of Commerce in Mexico for cancellation of the Company itself by virtue of the completion of the voluntary liquidation of the Company. The said Company was voluntarily liquidated by public deed dated September 27, 2019.

Consolidated Financial Statements

In accordance with the Act and Ind AS 110 - Consolidated Financial Statements read with Ind AS 28 - Investments in Associates and Ind AS 31 - Interests in Joint Ventures, the Audited Consolidated financial statements are included in the Annual Report.

The performance of the Company on consolidated basis is elaborated at length in the Management Discussion and Analysis section.

Subsidiaries, Joint Venture and Associate Companies

The Company has 21 subsidiaries including step- down subsidiaries and 6 Joint Ventures Companies as on March 31, 2020. During the year, the Board of Directors have reviewed the affairs of material subsidiaries.

Further, the report on the performance and financial position of each of the subsidiary and joint venture companies and salient features of their financial statements are provided in the prescribed Form AOC- 1 and it forms part of the Financial Statements of the Company. Details of subsidiaries of the Company and their performance are covered in Management Discussion and Analysis section forming part of this 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 2019-20, are as following:

Companies which have become Subsidiaries: CarlQ Technologies Pvt. Ltd.

Companies which have ceased to be Subsidiaries of the Company: TRIOM, Mexico S.A.de.C.V. and Aries Mentor Holding B.V., The Netherlands

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

In accordance with Section 129(3) of the Act, the consolidated financial statements of the Company including its subsidiaries, associate and joint venture companies form part of the Annual Report.

Fire at Hinjewadi (Pune) Plant

A major fire broke out in our Hinjewadi, Pune plant of our Global Lighting Systems business in the early hours of February 18, 2020. The plant was completely destroyed in the fire. There were minor injuries to few employees and there was no loss of life. We have shifted partial operations to our new plant in Chennai and partially to a new location at Chakan, Pune. We were able to gradually resume supplies in small quantities from March 2020 and are now able to meet customer demands to a substantial extent. The Hinjewadi plant was fully insured and the insurance claim for the loss due to fire is under settlement.

Directors

As per provisions of the Act and the Articles of Association of the Company, Mr. Tarang Jain (DIN 00027505), Managing Director of the Company, being the longest in the office amongst the Directors liable to retire by rotation, retires from the Board by rotation at the ensuing Annual General Meeting and is eligible for re-appointment.

The members, at their 29th Annual General Meeting (“AGM”) held on August 29, 2017, inter-alia, appointed Mr. Gautam Khandelwal (DIN 00270717), Mr. Marc Szulewicz (DIN 01911768) and Mrs. Vijaya Sampath (DIN 00641110) as Independent Director(s) on the Board of the Company to hold office for a period of three (3) years. Based on the Performance evaluation and recommendation of the Nomination and Remuneration Committee, the Board of Directors have recommend to the members of the Company the re-appointment of Mr. Gautam Khandelwal, Mr. Marc Szulewicz and Mrs. Vijaya Sampath as Independent Director(s) for a period of 5 (Five) years, as mentioned in the notice convening the 32nd AGM of the Company, through special resolution(s).

Mr. Ashwani Maheshwari (DIN 07341295) resigned as Director/Whole-time Director and Chief Executive Officer of the Company w.e.f. April 29, 2020. The Board places on record its appreciation for the valuable contribution made and services rendered by him as Director/Whole-time Director and Chief Executive Officer of the Company.

Mr. Rohit Prakash (DIN 02425849) was appointed as Additional Director/Whole-time Director of the Company by the Board w.e.f. April 29, 2020. The Company has sought the approval of the members by way of special resolution for his appointment as Whole-Time Director and for the terms and conditions of remuneration payable to him.

The details of appointment/re-appointment of the Directors of the Company are mentioned in the Explanatory Statement under Section 102 of the Act.

Key Managerial Personnel

In terms of the provisions of Section 203 of the Act, during the Financial Year under review, the Company has the following Key Managerial Personnel:

(a) Mr. Tarang Jain, Managing Director

(b) Mr. Ashwani Maheshwari, Whole-time Director and Chief Executive Officer;

(c) Mr. Arjun Jain, Whole-time Director

(d) Mr. T. R. Srinivasan, Chief Financial Officer;

(e) Mr. Rakesh Darji, Company Secretary till September 10, 2019

(f) Mr. Ajay Sharma was appointed as Company Secretary effective February 13, 2020.

Statement of Declaration by Independent Directors

The Board of Directors have received declarations from all the Independent Directors of the Company confirming that they meet with criteria of independence as prescribed both under sub-section (6) of Section 149 of the Act, and under Regulation 16(1)(b) read with Regulation 25 of the Listing Regulations.

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.

Material changes between the end of Financial year and the date of this report

There has been no material change and commitment affecting the financial position of the Company which occurred between the end of the Financial Year to which these financial statements relate and the date of this report.

Number of Meetings of the Board

The Board of Directors met 5 (Five) times during the Financial Year 2019-20 and the details of same are given in the Corporate Governance Report forming 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 Act, and the Listing Regulations.

Audit Committee

The Audit Committee of the Board is comprised of Mr. Gautam Khandelwal as Chairman, Mrs. Vijaya Sampath and Mr. Vinish Kathuria Independent Directors as Members and Mr. Tarang Jain, Managing Director as Member. During the year the recommendations made by the Audit Committee were duly accepted by the Board.

Formal Annual Evaluation of the Performance of the Board, its Committees and Directors

The Ministry of Corporate Affairs vide its General Circular No. 11/2020 dated March 24, 2020, has provided a relaxation for holding the Independent Directors Meeting for FY 2019-20 in view of the COVID 19 situation.

Accordingly the meeting was convened on June 25, 2020.

The performance of the Board was evaluated by the Board Members 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 Committee(s) 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 based on the Guidance Note on Board Evaluation issued by the Securities and Exchange Board of India. In a separate meeting of Independent Directors held on June 25, 2020, the 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 the 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, inputs in meetings, etc.

In the Board meeting that followed the meeting of the Independent Directors and meeting of Nomination and Remuneration Committee, 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.

Policy on Directors Rs 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, have approved a policy on Director Rs s 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/.

Directors Rs 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, 2020, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(b) 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 as at March 31, 2020 and of the profit of the Company for the year ended on that date;

(c) the Directors 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) the Directors have prepared the annual accounts on a going concern basis;

(e) the Directors have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively; and

(f) the Directors 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

In accordance with Section 139 of the Act, M/s S R B C & CO LLP, Chartered Accountants (Firm Registration No: 324982E/E300003), were appointed as statutory auditors by the shareholders of the Company at the 30th Annual General Meeting held on September 5, 2018, to hold office for a period of 5 years from the conclusion of that AGM till the conclusion of the 35th AGM of the Company to be held in calendar year 2023.

The Ministry of Corporate Affairs, vide its Notification dated May 7, 2018, has dispensed with the requirement of annual ratification of Auditors appointment by the shareholders. Hence, the approval of the Members for the ratification of Auditors appointment is not being sought at the ensuing AGM.

The Audit report on the Consolidated financial statements of the Company contains the following qualification:

As provided in Note no. 40 to the Consolidated Ind AS Financial Statements for the year ended March 31, 2020, the Group is disputing a warranty claim received from a customer aggregating to Rs 943.68 million. Due to the technical nature of the dispute and non-availability of detailed assessment of the claim, the Auditors are unable to assess the probability of the outcome and the consequential impact on the provision for warranty and profit for the year ended March 31, 2020.

Management response: One of the overseas subsidiaries of the Group has received a warranty claim of Rs 943.68 million from its customer. Upon a legal examination of the relevant contractual provisions and connected correspondence, the group has disputed the claim as it believes that the claim is without any substance and group does not have any warranty obligation as per the agreed contract terms. The final settlement of the above claim is not expected to have any material impact on the financial statements and hence, no provision in respect of the above claim has been recorded as at March 31, 2020

Apart from the above, there are no further qualifications, reservation or adverse remark on the financial statements for the year ended March 31, 2020. The Notes on the financial statement referred to in the Auditors Rs 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:

Particular As at March 31, 2020
( Rs in million)
Fees for audit and related services 76.55
Other fees 2.64
Reimbursement of expenses 4.48
Total 83.67

b. Cost Auditor

As per the provisions of Section 148 of the Act and Rule 3 of the Companies (Cost Records and Audit) Rules, 2014 (“the Rules”), the Company is required to maintain cost records with respect to certain products of the Company and get the same audited.

Based on the recommendation of the Audit Committee, the Board, at its meeting held on April 29, 2020, has appointed M/s S. R. Bhargave & Co., (Partnership Firm based in Pune - Registration No. M - 000218), Cost Accountants as Cost Auditor of the Company for the Financial Year 2020-21 at a remuneration of Rs 3,50,000 (Rupees Three Lakhs Fifty Thousand only). The said fee is exclusive of applicable taxes and reimbursement of out-of-pocket expenses, which shall be payable at actuals.

A proposal for ratification of the cost audit fee for the audit of cost records for the Financial Year 2020-21 has been proposed at the forthcoming Annual General Meeting. The Cost Audit Report for the Financial Year 2018-19 was filed within the stipulated period.

c. Secretarial Auditor

In terms of the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, based on the recommendations of the Audit Committee, the Board of Directors had appointed M/s Uma Lodha & Co. (C.P. No.2593), Company Secretary in Practice, Mumbai as Secretarial Auditor to undertake the Secretarial Audit for the Financial Year 2019-20.

The Secretarial Audit Report for the Financial Year 2019-20 is annexed herewith and forms an integral part of this report. The comment made in the Secretarial audit report regarding submission of Annual Report to the Stock exchanges was later than the day of commencement of dispatch to its shareholders. However, the Company had on the date of commencement its dispatch, published the Annual Report along with the notice of Annual General Meeting on its website only the submission of the same to the Stock Exchange was made on the date of completion of dispatch.

Details in respect of frauds Reported by Auditors

During the year under review, there have not been any instances of fraud and accordingly, the Statutory Auditors have not reported any frauds either to the Audit Committee or to the Board under Section 143(12) of the Act.

Particulars of Loans, Guarantees and Investment

Particulars of loans given, Investments made, guarantees given and securities provided, along with the purpose for which the loan or guarantee or security is proposed to be utilised by recipient, are provided in notes to standalone financial statements.

Particulars of Contracts or Arrangements with related parties

All contracts/ arrangements/ transactions entered by the Company during Financial Year with related parties were on arm Rs s length basis and were in the ordinary course of the business. During the year, the Company had not entered into any contract / arrangement/ transaction with related parties which could be considered material for which shareholders Rs approval is required in accordance with the policy of the Company on materiality of related party transactions. Thus, provisions of Section 188(1) of the Act, are not applicable to the Company.

Pursuant to the provision of applicable Listing Regulations, all related party transactions are placed before the Audit Committee for approval including the transaction under Section 188 of the Act and Regulation 23 of Listing Regulations, i.e. the transactions which are unforeseen and within the limit of Rs 10 million. Prior omnibus approval of the Audit Committee has been obtained for transactions which are foreseen and repetitive in nature. The transactions entered into pursuant to omnibus approval are presented to the Audit Committee by way of a statement giving details of all related party transactions.

The Policy on Related Party Transactions as approved by the Board is uploaded on the Companys website. Your Directors draw attention of the members to Note No. 47 to standalone financial statement which sets out related party disclosures.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and outgo

The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo as required under Section 134 (3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are provided in Annexure - I to this report.

Particulars of Employees and Related Disclosures

Disclosure of remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed herewith as Annexure - II.

A statement containing particulars of employees as required under Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided as separate annexure forming part of this Report. In terms of Section 136 of the Act, the Annual Report and financial statements are being sent to the Members excluding the aforesaid annexure. The said annexure is available for inspection at the registered and corporate office of the Company during business hours and will be made available to shareholder(s), on request.

The said statement is also available on your Companys website, the weblink to which is https://www.varroc. com/shareholdersinformation#tab2.

Corporate Governance

Your Company has taken adequate steps to ensure compliance with the provisions of Corporate Governance as prescribed under the Listing Regulations. A separate section on Corporate Governance, forming a part of this Report, and the requisite certificate from Uma Lodha & Co., practicing Company Secretaries, confirming compliance with the conditions of Corporate Governance, is attached to the report on Corporate Governance.

The Managing Director and Group Chief Financial Officer have certified to the Board with regard to financial statements and other matters as required under Regulation 17(8) read with Schedule II to the Listing Regulations.

Corporate Social Responsibility (CSR)

In accordance with the requirements of Section 135 of the Act, your Company has constituted a Corporate Social Responsibility (CSR) Committee. The CSR Committee comprises of Mr. Tarang Jain (Chairman), Mr. Gautam Khandelwal (Independent Director) and Mr. Arjun Jain, Whole time Director.

The brief terms of reference of the Corporate Social Responsibility (CSR) Committee is provided in the Corporate Governance Report. Your Company has also formulated a Corporate Social Responsibility Policy (CSR Policy) which is available on the website of the Company at https://varroc.com/investors/ corporate-governance/. During the year under review the Company was required to spend Rs 22.92 million towards CSR activities against which, the Company has spent Rs 23.67 million.

The Annual Report on CSR activities as required to be given under Section 135 of the Companies Act, 2013 and Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 has been provided in an Annexure - III to this Report.

Whistle Blower Policy/Vigil Mechanism

The Company has adopted a Whistle Blower Policy to provide a formal mechanism to the employees to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Companys Code of Conduct or Ethics Policy. The Policy provides for adequate safeguards against victimisation of employees who avail of the mechanism and also provides for direct access to the Audit Committee. It is affirmed that no personnel of the Company have been denied access to the Audit Committee. The Whistle Blower Policy has been uploaded on the website of the Company at www.varroc.com.

Risk Management

The Company has set up a Risk Management Committee (RMC) at the Board level to periodically review operating, financial, regulatory and strategic risks in the business and their mitigating factors. The Company has adopted a Risk Management Policy in accordance with the provisions of the Act and Regulation 21 of the Listing Regulations. The policy outlines the risk management framework to help minimise the impact of uncertainty on the Companys strategic goals. The framework enables a structured and disciplined approach to risk management.

Incorporating sustainability in the process also helps to align potential exposures with the risk appetite and highlight risks associated with chosen strategies. The Audit Committee has additional oversight in the area of financial risks and controls. Major risks identified by the business and functions are being systematically addressed through mitigating actions on continuing basis. The successful management of opportunities and risks is part of operating a business and is the primary task of all management personnel. During the regular management meetings at all management levels, opportunities, risks and optimisation measures are reviewed in detail. Any exceptional situations having potential risk are identified and treated at the early stage to minimise their impact on financial and income positions.

Internal Control System

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, the work performed by the internal, statutory and secretarial auditors and external consultants, including the audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by management and the relevant board committees, including the audit committee, the Board is of the opinion that the Companys internal financial controls were adequate and effective during FY 2020.

Significant and Material Orders Passed by the Regulators or courts or Tribunal

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

Disclosure Requirement and other Statutory Information

Dividend Distribution Policy

As per Regulation 43A of the Listing Regulations your Company has formulated a Dividend Distribution Policy which is available on the website of the Company at weblink https://varroc.com/investors/ corporate-governance/ under the tab Policies.

Compliance with Secretarial Standards

Your Directors confirm that the Secretarial Standards issued by the Institute of Company Secretaries of India have been complied with.

Business Responsibility Report

The Business Responsibility Report of your Company for the financial year 2019-20, as required under Listing Regulations, is annexed as Annexure IV to this report.

Policies and code Adopted by the Company

The Board of Directors has from time to time framed and approved policies as required by the Listing Regulations as well as under the Act. These policies will be reviewed by the Board at periodic intervals. Some of the key policies that have been adopted are as follows:

(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.

The above policies are available on the Companys website on the link http://www.varroc.com/ corporate governance.

Transfer to Investor Education and Protection Fund

a) Transfer of Unclaimed Dividend / Debenture Redemption / Debenture Interest to IEPF:

As required under Section 124 of the Act, no Unclaimed Dividend/ Debenture redemption/ Debenture Interest is 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 dividend has 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 2019-20.

Extract of Annual Return

As required under Section 92(3) and 134(3)(a) of the Act and Rule 12(1) of the Companies (Management and Administration) Rules, 2014 (as amended), an extract of Annual Return in Form MGT - 9 is available on Companys website on the link https://varroc. com/investors/financial-results/.

Occupational health & safety

The organisation believes in Rs Zero Harm Rs . The aim is to improve health and safety standards of people who are working with the organisation in their capacity as employees, contractors or in any other role. Efforts are taken to minimise activities which may affect the health and safety in working place.

Disclosure as required under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

Your Company is committed towards providing a healthy working environment to all its employees and thus does not tolerate any discrimination and/or harassment in any form. The Company has in place a robust Policy on Prevention of Sexual Harassment at Workplace, which is in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. All employees (permanent, contractual, temporary, trainees) alongwith consultants are covered under this Policy. The Policy is gender neutral.

The employees are sensitised from time to time on matters relating to prevention of sexual harassment. Awareness programmes are conducted at unit levels to sensitise the employees to uphold the dignity of their colleagues at workplace. Further, the Company has constituted an Internal Complaints Committee to, inter-alia, prevent sexual harassment at the workplace and redress the complaints received in this regard.

Details of complaints with allegations of sexual harassment for Financial Year 2019-20 are as follows:

a. Number of complaints pending as on April 1, 2019 Nil
b. Number of complaints filed during the Financial Year Nil
c. Number of complaints disposed of during the Financial Year Nil
d. Number of complaints pending as on March 31, 2020 Nil

Green Initiatives:

In commitment to keep in line with the Green Initiative and going beyond it to create new green initiations, an electronic copy of the Notice of 32nd 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.

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

For and on behalf of the Board of Directors

Varroc Engineering Limited
Tarang Jain Rohit Prakash
Date: 25th June, 2020 Managing Director Whole Time Director
Place: Aurangabad (DIN 00027505) (DIN 02425849)