Andrew Yule & Company Ltd

Dear Shareholders,

It is my privilege to present, on behalf of the Board of Directors of Andrew Yule & Co. Ltd, the 75^th Annual Report of your Company for the Financial Year 2022-23, highlighting the Company?s performance in operational, financial, social, environmental aspects.

The year 2022-23 witnessed intense geo-political and economic volatility. The ongoing Russia-Ukraine conflict and geo-political tensions have disrupted the smooth functioning of global supply chains. There has been a surge in inflation, especially in the developed markets. The global economic outlook for 2023 appears to have downside risk and the global GDP is expected to grow at 2.9%.

The outlook for the Indian economy remains positive. The estimated GDP growth in India expected to be 6.1% in 2023-24 and will remain one of the fastest growing economies.

Highlights and achievements of the Company

Your Company has performed consistently despite growing complexities in the industry and the continued uncertainty surrounding global economies. Profit before Tax (PBT) during the financial year 2022-23 stood at Rs.8.98 crore [Rs11.13 crore in 2021-22] and Total Comprehensive Income (TCI) stood at Rs. (67.09) lakh [Rs.(16.41) lakh in 2021-22] after making necessary income tax provisions and other adjustment.

During the financial year 2022-23, your Company earned total revenue of Rs. 405.79 crore as against Rs. 470.98 crore in 2021-22

i.e. a decrease of 16.06% but considering that the FY22 figure included a write-back of Rs.77.55 crore for Electrical - Kolkata unit closure through voluntary retirement scheme (VRS), actual performance for FY23 can be said better.

Income from operations of Tea Division has decreased to Rs.213.72 crore during the financial year 2022-23 from Rs.231.25 crore during the previous financial year thereby decreased by Rs.17.53 crore due to decrease in production caused by inclement weather condition in June, July and November, 2022 and corresponding decrease in sale.

However, despite several hurdles, your Company achieved a growth of 431% in export value of Tea from Rs.5.11 crore in FY 22 to Rs.27.16 crore in FY 23. This has earned accolades for the Company both from the esteemed offices of the Hon?ble Prime Minister and Hon'ble Minister of Heavy Industries.

During the FY 2022-23, though Tea division has made loss due to lower sale and increase in wages by Govt. orders, but expected to do well in the coming years considering the following measures being taken for:

a) improvement in quality of tea,

b) improved brand image,

c) cost control in spite of bearish tea prices in the Indian market.

d) This year, in spite of Sri Lankan and Kenyan Tea are back in International Market, AYCL has been working hard to maintain same or higher level of export compared to last year.

e) Retail presence to be increased gradually across India. The Company is implementing various strategies for retail market share expansion and brand building and also exploring engagement of Retail Market Associates, Business channel partner and Operating more Kiosks.

f) With various certification, market penetration with AYCL teas (both domestic and international) and bigger presence through digital marketing and e-commerce outlets, the division consistently endeavor to enhance its brand equity as well as value addition.

g) All the 15 Garden Managers have been sensitized to maximize crop with quality and any deficit should be made up by bought leaf production to achieve targeted Capacity Utilization, Revenue and PBT.

h) Tea Tourism: AYCL has started Tea Resort/Guest House Project at MIM Tea Garden, Darjeeling. Under the expansion project, one premium Bungalow (4 rooms) has started operation while 2 new Bungalows (total 6 rooms) are ready for starting operation. Further expansion is also in AYCL?s plan with identification of suitable non-tea area for the same.

With initiation of the steps stated above, AYCL has scope for doubling the tea business till FY32 with a growth of 7% CAGR compared to industry growth by 2.1% CAGR.

This will be achieved by enhancement of own production and Bought-Leaf capacity through optimum use of existing/upgraded infrastructure as well as by acquisition of new Tea Estates.

Growth is also expected from Retail tea business from present 0.74% to 10% (i.e. 14 times) by FY27 in value terms.

Export growth is expected to grow from present 12% to 20% by FY27.

Better process control with sensor-based technologies to be adopted for monitoring operating parameters and quality.

R&D for integrated pest control, soil health and bush vigor along with use of botanicals are also assuming more significance in view of sustainable business model and environmental protection needs.

Tea Research Association (TRA) is closely working with AYCL in the above-mentioned fields to make us "Future Ready".

The Engineering Division?s expertise in retrofitting for improving energy efficiency has improved order booking in Steel and Cement sector. With increase in order trend in Engineering division, 300 nos impellers were made in FY23 vis-a-vis 263 nos in FY22. AYCL also plans to enhanced capacity further to 360 impellers by FY24. With continuous endeavour on all these fronts, order booking in Engineering division has improved by 9.73% (INR 54.70 crore in FY23 vis-a-vis INR 49.85 crore in FY22). As the Division has customer base in all demographics except South India, renewed effort is on to included South India as a new customer base.

The Engineering division has:

a) planned for augmenting and modernizing its testing facilities which would remove the bottleneck for further expansion of capacity along with introduction of 2/3 shift working.

b) The unit will explore the possibilities to do business in mine ventilation. The unit has already participated in 3 enquiries. Presently it is planned with our own design.

c) Business Development /Expansion in Air Pollution and Water Pollution Control Projects. AYCL had partnered earlier with other Companies and successfully completed Air Pollution Control (APC) project in Tata Steel; and Water pollution control (WPC) projects in Indian Railways. To enter in a big way in these fields, AYCL has taken up with SAIL-Bokaro for one of their INR 100 crore+ APC project job on nomination basis. One WPC and drinking water project have been completed /on verge of completion at Indian Railway, Howrah and Kharagpur respectively (valued INR 10 crore each). The Company will float timely EOI for partners with shared scope of work for big APC projects like SAIL-Bokaro; WPC project design, manufacturing and installation shall also be done through experienced sub-vendors as has been done in two cited projects. Sufficient vendor base will be developed to scale up the number of projects and to bid for bigger projects as well.

With strength and opportunities stated above, Engineering division has prospect or sound growth in coming years.

Electrical-Chennai Operation (E-CO) has make a history becoming the first (+) INR 100 crore turnover unit of AYCL and expected to do well in the coming years considering improvement in in- house higher production, cost control etc. Unit has stepped up marketing effort to increase customer base across several states and participated in various tenders for getting more job orders.

Current Order in hand is INR 74.65 crore and the unit has recently bagged INR 28.11 crore worth of order. In the current year, further orders will be taken depending on execution status of orders in hand.

This unit has a plan for:

a) Setting up of Retail Fuel outlet at existing premises of E-CO. For that floating of Expression of interest (EOI) is under process for appointment of Advisor to advise AYCL for setting up a most modern fuel retail outlet at various sites owned by AYCL in Assam, West Bengal and Chennai.

b) Exploring the possibilities for setting up EV charging stations (funded by the Customers who will operate them). For that floating of Expression of interest (EOI) is under process for empanelment of technological partner for setting up of e-vehicle charging stations

Electrical-Chennai Operation business is estimated to have a top line growth of over 20% by FY24. Considering expected momentum in Tariff Based Competitive Bidding (TBCB) projects and overall transmission program due to increased evacuation of RE generation, demand for power transformer is expected to grow moderately in medium term.

With Tea Division, Engineering Division and Electrical-Chennai Operations' estimated business growth as stated above, AYCL's business is estimated to have a top line growth of 33% by FY24.

Business Responsibility and Sustainability: During the year, your Company has published its ‘Business Responsibility and Sustainability Report' (BRSR) in the Annual Report. The BRSR indicates the Company's performance against the principles of the ‘National Guidelines on Responsible Business Conduct'. This would enable the members to have an insight into Environmental, Social and Governance initiatives of the Company.

Corporate Governance: Your Company always strives to attain the highest level of corporate governance practices. Implementation of integrity pact, adoption of code of conduct and a well-defined internal control framework add to the transparency of the Company?s business practices. AYCL is complying the conditions of Corporate Governance, as stipulated in the Guidelines on Corporate Governance for Central Public Sector Enterprises (CPSEs) issued by the Department of Public Enterprises, Government of India and Regulation 34(3) read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 with the Stock Exchanges. However, filling up of vacant posts of Directors, which is one of the requirements of corporate governance, is under process at Government level. A report on corporate governance compliances has been made part of the Boards' Report. AYCL has got excellent rating from Department of Public Enterprises (DPE), Government of India for corporate governance compliance for FY'22 and expects the same for FY'23 also.

Before I conclude, on behalf of the Board of Directors, I wish to convey our sincere regards and deep gratitude to our valued stakeholders for their continued support and trust. You always have been the motivational force that has facilitated us to move ahead. I also put my heartfelt appreciation for all AYCL employees who took on a courageous responsibility to achieve the goals even during the worst COVID-19 situation and in the years thereafter.

At the same time, I wish to acknowledge the valuable guidance given by the Board of Directors of the company and Ministry of Heavy Industries, Govt. of India, without which it would have not been possible to lead the Company with energy and enthusiasm. We look forward to continued support and commitment from all stakeholders of the Company to reach new heights and enhancing stakeholders' value.