Aro Granite Industries Ltd

The Directors have pleasure in presenting the 36^th Annual Report together with Audited Accounts of the Company for the year ended on 31^st March, 2024.

FINANCIAL RESULTS

(Rs. in Lakhs)

WORKING RESULTS

The first quarter of the year began positively, with sales across various sectors showing a strong recovery from the turmoil caused by the unstable freight rates over the previous 18 months. This period of instability had significantly disrupted supply chains and increased costs, leading to widespread economic challenges. However, as Q1 progressed, businesses started to regain their footing, benefiting from more stable and predictable shipping costs. Globally, inflation rates remained under control, which was a crucial factor in this recovery. Central banks and Governments had implemented effective monetary and fiscal policies to keep inflation in check, ensuring that consumer purchasing power was not eroded. This stability in inflation rates provided a favorable environment for both consumers and businesses, fostering economic growth and confidence in the markets. The recovery was evident across various industries, from manufacturing and retail to technology and services. Companies reported increased demand for their products and services, leading to higher sales volumes and improved financial performance. This positive trend indicated a robust rebound from the previous period of economic uncertainty, setting a hopeful tone for the rest of the year.

By the second quarter, however, rising inflation rates prompted central banks across the globe to increase interest rates in an effort to curb consumption. These rate hikes were necessary to control inflation but had significant side effects, particularly on industries that are sensitive to borrowing costs. One of the most affected sectors was the construction and renovation industry. Higher interest rates led to increased costs for financing projects, which in turn caused delays and cancellations of both residential and commercial construction activities. This slowdown was felt acutely, as construction Companies struggled with reduced demand and higher expenses. In addition to these challenges, Germany announced that it was experiencing recessionary effects during Q1, which had a ripple effect across Western Europe. By Q2, these effects manifested as a noticeable slump in sales across the region. This downturn in the European market added to the pressures faced by businesses already grappling with higher interest rates and inflation. The compounded economic difficulties were particularly severe for our Company. By the end of Q2, our banks reduced our credit limits, significantly straining our working capital. This reduction in available financing restricted our ability to purchase raw materials, directly impacting our production capabilities and overall operations. The tighter credit conditions forced us to reassess our financial strategies and seek alternative ways to manage cash flow and maintain business continuity. Overall, the second quarter presented a stark contrast to the optimism of Q1, highlighting the volatility and interconnectedness of global economic conditions. The combination of rising interest rates, regional recessions, and tighter credit conditions underscored the challenges businesses face in navigating an unpredictable economic landscape.

The third quarter, typically a seasonally slow period for many businesses, was marked by several significant challenges. Among the most impactful was the outbreak of renewed conflict in the Israel-Palestine region. This geopolitical instability had far-reaching consequences on global trade and logistics. The conflict led to increased shipping rates as insurers and freight companies adjusted their risk assessments. The heightened risks associated with the region caused a surge in shipping costs, which in turn affected the pricing and availability of goods worldwide. Additionally, shipping times lengthened considerably due to increased security checks, rerouted shipping lanes, and port congestion. These delays disrupted supply chains, making it difficult for businesses to receive materials and deliver products on schedule. The escalation of shipping rates and prolonged shipping times compounded the existing economic pressures from earlier in the year. Businesses that were already struggling with higher interest rates and reduced working capital found it even more challenging to manage their logistics and maintain inventory levels. The increased costs and delays in shipping further strained profit margins and operational efficiency. Compounding these logistical challenges, the Israel-Palestine conflict directly impacted our sales, as Palestine and surrounding countries accounted for close to 10% of our total sales. The disruptions in these markets led to a significant drop in revenue from the region. With consumers and businesses in these areas facing uncertainty and reduced purchasing power, our sales efforts were severely hampered. The overall impact of these developments during Q3 underscored the vulnerabilities in global supply chains and the significant influence of geopolitical events on economic stability. Companies had to navigate these complexities by seeking alternative supply routes, renegotiating contracts, and adjusting their operational strategies to mitigate the disruptions caused by the conflict and rising shipping costs. This period highlighted the importance of flexibility and resilience in business operations, as well as the need for robust risk management strategies to cope with unforeseen geopolitical and economic challenges.

The fourth quarter was significantly impacted by the limited cash flow resulting from the challenges faced in Q3 and the banks' reduction in credit limits. The combined effects of a slow Q3, driven by geopolitical instability and disrupted supply chains, alongside tighter financial constraints, created a difficult operating environment. In Q3, the renewed conflict in the Israel-Palestine region had already strained our resources. Shipping rates surged, shipping times increased, and a critical market that constituted close to 10% of our sales was severely disrupted. These factors led to a downturn in revenue and increased operational costs. As Q4 began, these issues had a lingering impact on our cash flow. The banks' decision to reduce our credit limits at the end of Q2 continued to create significant pressure on our working capital. With reduced access to funds, we struggled to finance the purchase of raw materials and other essential inputs needed for production. This constrained our ability to maintain inventory levels, meet customer demand, and invest in growth opportunities. As a result, Q4 saw a cautious approach to expenditure across the board. Investments in new projects were delayed or scaled back, and operational budgets were tightened. We focused on optimizing existing resources, improving efficiency, and finding cost-saving measures wherever possible. This period demanded stringent financial management and strategic prioritization to navigate the cash flow limitations.

Despite these efforts, the limited cash flow affected various aspects of our business operations. Production schedules were disrupted, leading to delays in fulfilling orders. Our ability to respond to market opportunities and customer needs was constrained, which further impacted sales performance. The overall financial strain also led to challenges in maintaining supplier relationships and negotiating favorable terms. In summary, Q4 was marked by the significant impact of limited cash flow, a consequence of the slow Q3 and the reduction in credit limits by banks. This period highlighted the critical importance of liquidity and financial flexibility in maintaining business continuity and adapting to economic pressures. The experiences of Q4 reinforced the need for robust financial planning and risk management strategies to mitigate the effects of unforeseen disruptions.

DIVIDEND

Your directors have not recommended any dividend for the year 2023-2024.

INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

During the year amount of Rs. 372,849/- for the Financial Year 2015-16 transferred to Investor Protection Fund under sub-section (2) of Section 125 of the Companies Act, 2013 and IEPF (Accounting, Audit, Transfer and Refund) Rules 2016. Shri Sabyasachi Panigrahi, Company Secretary is the Nodal Officer appointed by the Company under the Provisions of the IEPF Act.

FIXED DEPOSIT

The Company has not accepted any fixed deposit from the public.

ANNUAL RETURN

The Annual Return referred to Section 134(3)(a) as per the Companies Act, 2013 is available on the website of the Company www.arotile.com

LOANS, GUARANTEES AND INVESTMENTS

The Company has not granted any Loans, Guarantees and made any Investments during the year.

RELATED PARTY TRANSACTIONS

All contracts/arrangements and transactions entered by the Company with related parties were in ordinary course of business and at arm's length basis. Your directors draw attention of the members to Notes to accounts of financial statement which sets out related party disclosures. The related Party Transactions Policy as approved by the Board is available on the website of the Company www. arotile.com.

DIRECTORS

During the financial year 2023-24 there was no change in the Board.

However, in the Board meeting held on 26^th July, 2024, the Board has appointed Shri Keshava Murthy Kalasachar (DIN: 10694491) and Shri Ashish Jyotindra Bhuta (DIN: 02149827) as Additional Directors in the category of Non-Executive Independent w.e.f. 26^th July, 2024 for a consecutive period of five years subject to approval of the members in the ensuing Annual General Meeting.

DIRECTORS' RESPONSIBILITY STATEMENT

As required under Section 134(3)(c) of the Companies Act, 2013, your Directors state that:

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

b) the accounting policies have been selected and applied consistently and judgments and estimates made 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 the financial year and of the profit and loss of the Company for that period;

c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the said Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the annual accounts have been prepared on a going concern basis;

e) the internal financial control to be followed by the Company have been laid down and that such internal financial control are adequate and were operating effectively; and

f) the proper systems to ensure compliance with the provisions of all applicable laws have been devised and that such systems were adequate and operating effectively.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

A Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company which has been approved by the Board. The CSR policy may be access from the website of the Company i.e. www.arotile.com. The Annual Report on CSR activities is annexed herewith marked as Annexure I.

AUDITORS AND AUDITORS' REPORT (a) Statutory Auditor

M/s Alok Mittal & Associates, Chartered Accountants, New Delhi was appointed as the Statutory Auditor of the Company for a period of Five Years from the Conclusion of Thirty Fourth Annual General Meeting. The Notes on the financial statements referred to in the Auditors' Report are self-explanatory and do not call for any further comments. The Auditors' Report does not contain any qualifications, reservations or adverse remark.

(b) Secretarial Auditor

Practicing Company Secretary Ms. Latika Jetley (CP No.: 3074) was appointed as the Secretarial Auditor by the Board for the financial year 2023-24 to conduct the Secretarial Audit. The Secretarial Audit Report along with the Annual compliance Secretarial Audit Report under SEBI Regulation for the year 2023-24 is annexed herewith as Annexure II. The Secretarial Audit Report does not contain any qualifications, reservations or adverse remarks.

(c) Internal Auditor

The Board had appointed M/s Sreekantha & Co., Chartered Accountants, Hosur as the Internal Auditor of the Company for the year 2023-2024. Internal Audit report does not contain any qualifications, reservations or adverse remarks.

COMPLIANCEWITHSECRETARIALSTANDARDS

Secretarial Standards on Meeting of Board of Directors (SS-1) and General Meeting (SS-2) issued by The Institute of Company Secretaries of India has been adopted by the Company.

PRACTISING COMPANY SECRETARY'S CERTIFICATE ON CORPORATE GOVERNANCE

As required by SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, the Practicing Company Secretary's Certificate on Corporate Governance is enclosed as Annexure III to the Board's Report. The Auditors' Certificate for the year 2023-24 does not contain any qualifications, reservations or adverse remarks.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

During the period under review, there were no significant material orders passed by the Regulators or courts or tribunals which would impact the going concern status of the Company and its future operations.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE

Additional information on conservation of energy, technology absorption, foreign exchange earnings and outgo as required as per the provisions of Companies Act, 2013 and Rules there under is annexed herewith in Annexure IV and form part of this report.

PARTICULARS OF REMUNERATION

Statement of particulars of employee pursuant to the provisions of Section 197 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 for the year ended 31^st March, 2024.

Employed throughout the financial year, ended 31^st March, 2024 in receipt of remuneration not less than One Crore Two Lakhs rupees per annum.

Pursuant to the provisions of Section 197(12) of the Companies Act, 2013 read with Rule 5 of Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014, the details regarding the ratio of remuneration of each Director to the median employee's remuneration and such other details as required therein are as under:

1. The ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year: The Board of Directors of the Company comprises of Non-Executive Directors who has been paid commission in the form of Remuneration and sitting fee from the Company.

2. The percentage increase in remuneration of each Director, Chief Financial Officer, Company Secretary in the financial year: The Board of Directors of the Company comprises of Non-Executive Directors who has been paid Commission and sitting fee from the Company.

3. The percentage increase in the median remuneration of employees in the financial year: 0.63

4. The number of permanent employees on the roll of Company: 248

5. Average percentile increase already made in the salaries of employees other than the managerial personnel in the financial year ended 31^st March, 2024:NIL

6. The Company affirms that the remuneration is as per the remuneration policy of the Company.

CORPORATE GOVERNANCE INCLUDING DETAILS PERTAINING TO BOARD MEETINGS, NOMINATION AND REMUNERATION POLICY, AUDIT COMMITTEE AND VIGIL MECHANISM

Your Company re-affirms its Commitment to the highest standards of Corporate Governance practices. Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, Management Discussion and Analysis, Corporate Governance Report and Auditors' Certificate regarding compliance of conditions of Corporate Governance are made a part of this Annual Report.

The Corporate Governance Report which forms part of this report also covers the following:

a) Particulars of the Six Board Meetings held during the financial year.

b) Policy on Nomination and Remuneration of Directors, Key Managerial Personnel and Senior Management.

c) The details with respect to composition of Audit Committee and establishment of Vigil Mechanism.

INTERNAL FINANCIAL CONTROL

The Company has in place adequate internal financial control with reference to financial statements and no material reportable weakness was observed in the system. Further, the Company has in place adequate internal financial control commensurate with the size and nature of its operations. The Company also has a robust Budgetary Control System and Management Information System (MIS) which are backbone of the Company for ensuring that your Company's assets and interests are safeguarded.

LISTING

The Equity Shares of the Company are listed in BSE Limited and National Stock Exchange of India Limited. Listing fees for the year 2024-2025 have already been paid to BSE Limited and National Stock Exchange of India Limited.

ACKNOWLEDGEMENT

Your Directors wish to thank and acknowledge the Banks, Government Authorities, Dealers, Suppliers, Business Associates and the Company's Valued Customers for their assistance and cooperation and the esteemed Shareholders for their continued trust and support. The Directors also wish to acknowledge the committed and dedicated team of Aro granite whose unstinted work, efforts and ideas have taken the Company on a path of steady growth and development.