Essen Speciality Films Ltd

Dear Members,

Your Directors have pleasure in presenting their 22nd Annual Report on the business and operations of the Company and the accounts for the Financial Year ended March 31, 2024.

1. Financial Summary or Highlights

(Rs. In Lakhs except EPS)

2. State of Company's Affair :

The year under review was remained very good for the Company. The revenue for the year has been increased to Rs. 14,267.89 Lakh as compared to Rs. 11,943.56 Lakh in the previous year at the same time expenditure also increased to Rs. 12,586.26 Lakh as compared to Rs. 10,521.83 lakhs in the previous year. The company has earned net profit of Rs. 1,424.23 Lakh in the current year as compared to the profit of Rs. 1,420.77 Lakh in the previous year.

3. Initial Public Offer of Equity Shares :

During the financial year, the Company floated Initial Public Offer (“IPO”) of its Equity Shares. The IPO was completed, and the Company got listed at the Emerge platform of National Stock Exchange of India Limited (“NSE Emerge”) on July 06, 2023. The IPO opened on June 23, 2023 and closed on June 27, 2023 and the Equity shares were allotted/ allocated at a price of Rs. 107 per Equity Share (including a share premium of Rs. 97 per Equity Share) on July 03, 2023.

The total size of the IPO was Rs. 6,633.14 Lakh comprising of 61,99,200 equity shares including fresh issue of 46,99,200 equity shares aggregating to Rs. 5,028.14 Lakh and offer for sale of 15,00,000 equity shares aggregating to Rs. 1,605.00 Lakh by selling shareholders. The proceeds realised by the Company from the IPO are being utilised as per objects of the offer disclosed in the Prospectus of the Company.

Out of the proceeds of fresh issue of Rs. 5,028.14 Lakh, the Company has utilised the funds as detailed herein below:

Amounts in Lakhs

Funds unutilised as on March 31, 2024 is Rs. 767.57 Lakh. There has been no deviation or variation in the utilisation of the IPO proceeds of the Company.

4. Dividend :

The Board of the Company, in its meeting held on June 29, 2024, has recommended a final dividend of Rs. 0.75 per equity share of the face value of Rs. 10 each fully paid up for the financial year ended March 31, 2024, subject to the approval of the Shareholders at the Annual General Meeting (AGM).

Final Dividend on equity shares for FY 2023-24, if approved, would result in a cash outflow of approximately Rs. 155.24 Lakh.

In view of the changes made under the Income-Tax Act, 1961, by the Finance Act, 2020, dividends paid or distributed by the Company shall be taxable in the hands of the Shareholders. The Company shall, accordingly, make the payment of the Final Dividend after deduction of tax at source. For more clarity on deduction of tax, please refer para on Note No. 10 in the notes to the Notice of 22nd AGM.

5. Share Capital :

Authorised Share Capital

During the year under review, there has been no change in the Authorised Capital of the Company. The Authorised Capital as on March 31, 2024 was Rs. 25,00,00,000 (Rupees Twenty Five Crore only) divided into 2,50,00,000 (Two Crore Fifty Lakhs) equity shares of Rs. 10 (Rupees Ten only).

Changes in issued, subscribed and paid-up share capital

During the year under review, Issued, Subscribed and Paid-up share capital of the company was increased from Rs. 16 Crores to Rs. 20.70 Crores pursuant to fresh issue of 46,99,200 equity shares of Rs. 10 each by way of Initial Public Offer in compliance with applicable provisions of Companies Act, 2013 and SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

6. Transfer to Reserves :

During the year under review, the Company has not made transfer to any Reserves.

7. Web Address of Annual Return :

Draft of the Annual Return in Form MGT-7 for FY 2023-24 is available on https://www.essenspeciality.com/investorszone.html.

8. Board of Directors and Key Managerial Personnel :

The Company has an appropriate mix of Executive Directors, Non-Executive Directors and Independent Directors in compliance with the applicable provisions of the Companies Act, 2013 and the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015 (“SEBI Listing Regulations”). The Board of the Company consists of eminent individuals of diverse backgrounds with skills, experience and expertise in various areas as detailed in the Corporate Governance Report forming part of the Annual Report.

During the year under review, Mr. Romit A. Shah, Company Secretary & Compliance Officer (Membership No. A65641) resigned due to personal reasons w.e.f. July 15, 2023 and Mr. Sunny D. Mamtora (Membership No. A62890) was appointed as Company Secretary & Compliance Officer of the Company w.e.f. July 16, 2023.

Directors and KMPs as on March 31, 2024 are as under :

In accordance with provisions of the Companies Act, 2013, Mr. Pallav Kishorbhai Doshi (DIN: 02542047), Chairman and Wholetime Director of the Company retires by rotation at the ensuing AGM and being eligible, offers himself for re-appointment.

9. Declaration from Independent Directors

The Company has received declaration from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed under sub-section (6) of Section 149 of the Companies Act, 2013 read with rule 6 of the Companies (Appointment and Qualification of Director) Rules, 2014 and Regulation 16 of SEBI Listing Regulations.

In the opinion of the Board, all the Independent Directors possess the integrity, expertise and experience including the proficiency required to be Independent Directors of the Company, fulfil the conditions of independence as specified in the Act and the SEBI Listing Regulations and are independent of the management and have also complied with the Code for Independent Directors as prescribed in Schedule IV of the Companies Act, 2013.

10. Board Evaluation :

The Nomination and Remuneration Committee (“NRC”) has formulated a Policy and laid down the criteria for evaluation of the Board and its Committees and the same has been adopted by the Board. Their performance of the Board and its Committees were evaluated after seeking inputs from all the Directors on the basis of criteria such as the composition and meetings, role & responsibilities and overall effectiveness of the Board & Committees. Evaluation of the performance of all Individual Directors (including Independent Directors and Chairperson) was also done this year. The details of the Board Evaluation process are mentioned in the Corporate Governance Report forming part of the Annual Report.

11. Board Meetings :

The meeting of the Board of Directors was duly convened and held 17 (Seventeen) times during the year under review. The details of the meetings and the attendance of the Directors are mentioned in the Corporate Governance Report forming part of the Annual Report.

12. Management Discussion and Analysis :

In terms of Regulation 34(2)(e) of SEBI Listing Regulations, a detailed report on Management Discussion and Analysis (MDA) Report is included in this Report as Annexure-I.

13. Business Responsibility and Sustainability Report :

In accordance with provisions of Regulation 34(2)(f) of SEBI Listing Regulations the Company being SME listed, requirement of Business Responsibility and Sustainability Report is not applicable to the Company.

14. Directors' Responsibility Statement :

Pursuant to Section 134 (5) of the Companies Act, 2013, it is hereby confirmed that :

a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; 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 at the end of the financial year and of the profit of the company for the year under review; c) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; d) the directors have prepared the annual accounts on a going concern basis; and e) the directors have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and are operating effectively. 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.

15. Auditors and Auditors Report :

a. Statutory Auditors

Pursuant to the provisions of section 139 of the Companies Act, 2013 and the Rules framed there under, M/s. Rushabh R. Shah and Co., Chartered Accountants (Membership No.: 607585, FRN: 156419W), were appointed as statutory auditors of the Company for a period of five years at the 20th AGM held on 30th September, 2022 until the conclusion of the 25th AGM. Rushabh Shah has confirmed his eligibility to remain continue as the auditor of the Company for his remaining term.

Report given by M/s. Rushabh R. Shah and Co., Chartered Accountants on Financial Statements of the Company for FY 2023-24 are part of the Annual Report. The Notes on financial statement referred to in the Auditors' Report are self explanatory and therefore, do not call for any further explanation or comments from the Board.

b. Cost Auditors

The Company made and maintained cost account and records as specified by the Central Government under Section 148(1) of the Companies Act, 2013. For the financial year 2023-24, M/s. Sagar M. Kapadiya & Co., Cost Accountants (FRN: 103615) having Mr. Sagar M. Kapadiya (Membership No: 36767) have conducted the audit of the cost records of the Company.

Further, the Board of Directors, on the recommendation of Audit Committee, re-appointed M/s. Sagar M. Kapadiya & Co., to conduct the audit of the cost records of the Company for the financial year 2024-25.

The remuneration payable to the Cost Auditor is subject to ratification by the Members at ensuing General Meeting. Accordingly, remuneration payable to M/s. Sagar M. Kapadiya & Co. proposed to be ratified by members in 22nd AGM.

c. Secretarial Auditors

Pursuant to the provisions of section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and Regulation 24A of the Securities and Exchange of Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, Board of Directors, on the recommendation of the Audit Committee, have appointed CS Nirav D. Vekariya, Practising Company Secretary (CP No. 17709 and Peer Review No. 2442/2022) as Secretarial Auditor of the Company for the financial year ended March 31, 2025. The Secretarial Audit Report for the FY 2023-24 is included in this Report as Annexure-II.

In the Secretarial Audit Report, the Secretarial Auditor has observed that the company is regular in filing of applicable forms, returns, intimations, applications, resolutions etc. with the Registrar Of Companies except the following forms which was filed after due dates with applicable additional fees :

The Company has taken note of the observation, in future the Board shall ensure compliance in filings as required under the Companies Act, 2013 and rules made thereunder with Registrar of Companies. Further, the Company and the Board of Directors are serious about ensuring compliances of applicable laws and regulations.

d. Internal Auditors

Pursuant to the provisions of section 138 of the Companies Act, 2013 and the Rules framed there under, Board of Directors, on the recommendation of the Audit Committee, have appointed M/s. Savjani & Associates, Chartered Accountants (FRN: 133389W) as Internal Auditors of the Company for the financial year 2023-24.

16. Reporting of Fraud :

During the year under review, the Statutory Auditors and Cost Auditors have not reported any instances of frauds committed in the Company by its Officers or Employees, to the Audit Committee or the Board of Directors under Section 143(12) of the Act, details of which needs to be mentioned in Director's Report.

17. Particulars of Loans, Guarantees or Investments :

Details of Investments made by the Company during the year under review are described in Note No. 15 of Annual Financial Statements attached to Annual Report. Further, the Company has not given any loan or provided any guarantee or security in favour of other parties under Section 186 of Companies Act, 2013.

18. Particulars of Contracts or Arrangements with Related Parties :

All contracts/ arrangements/ transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. There were no material related party transactions entered, during the year under review, which require disclosure in Form AOC-2.

19.Deposits :

During the year under review, the Company has not accepted any deposits under Chapter V of the Act and, as such no amount on account of principal or interest on deposit were outstanding as of the Balance Sheet date.

20. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo :

The details of conservation of energy, technology absorption, foreign exchange earnings and outgo are as follows:

A) Conservation of Energy :

i. The steps taken or impact on conservation of energy: The Company has continued its efforts to improve energy efficiency with more vigour and depth. The Company continually took necessary steps to absorb and adopt the latest technologies and innovations in the Plastic Processing for Manufacturing home decor products. All machinery and equipment are continuously serviced, updated and overhauled in order to maintain them in good condition. This resulted in lesser energy consumption. Energy audits and Inter unit studies are carried out on a regular basis for taking steps for reduction of the energy consumption.

ii. The steps taken by the Company for utilizing alternate sources of energy:

a. The company has installed and commissioned 275.20 KW (DC) capacity Solar Power Plant in the state of Gujarat at Village HADAMTALA, Taluka Kotda-Sangani, District Rajkot.

b. All efforts are made to use more natural lights in offices/Factory/stores premises to optimize the consumption of energy.

c. the Company along with group entities of the Company has formed a Limited Liability Partnership "SHRUTINA NEXGEN SOLAR LLP (LLPIN: ACH-3671)", which is registered with Registrar of Companies, Gujarat on May 26, 2024. Shrutina Nexgen Solar LLP is formed by Essen Speciality Films Limited Limited (holding 18%) along with Promoter Group Entities viz. Shrutina Nexgen LLP (holding 74%), Rajoo Engineers Limited (holding 7%) and Rajoo Innovation Centre LLP (holding 1%) as its Partners. The LLP is incorporated for business purpose: To carry on the business of generating, accumulating, distributing and supplying Solar Energy for its own use or for sale to Governments, State Electricity Boards, Intermediaries in Power Transmission/ Distribution, Companies, Industrial Units, or to other types of users/ consumers of Energy.

iii. The capital investment on energy conservation equipment: Nil

B) Technology Absorption :

i. The efforts made towards technology absorption: The Company continues to adopt and use the latest technologies to improve the productivity and quality of its products.

ii. The benefits derived like product improvement, cost reduction, product development or import substitution: Due to integrated facility and infusion of new technology, the Company is in position to offer most energy efficient products to consumers.

iii. In case of imported technology (imported during the last three years reckoned from the beginning of the financial year): No technology was imported during last four years

iv. The expenditure incurred on Research and Development :

Amount in Lakhs

C) Foreign Exchange Earnings and Outgo :

Amount in Lakhs

21. Nomination and Remuneration Policy :

For the purpose of selection of any Director, the Nomination & Remuneration Committee identifies persons of integrity who possess relevant expertise, experience and leadership qualities required for the position. The Committee also ensures that the incumbent fulfils such other criteria with regard to age and other qualifications as laid down under the Companies Act, 2013 or other applicable laws.

The Board has framed a policy for selection, appointment/ reappointment and remuneration of Directors & Senior Management, which is available at https://www.essenspeciality.com/pdf/Policies/ Nomination_and_Remuneration_Policy.pdf

22. Risk Management Policy :

The Company has adopted a Risk Management Policy which is available at https://www.essenspeciality.com/pdf/Policies/Risk_Management_Policy.pdf.

Directors are taking appropriate steps to manage various identified and unidentified potential risks affecting assets and business activities of the company. Considering the present assets positions and business volume Directors are of the opinion that the same is adequate for the Company. More details on risk management are furnished in the MDA Report forming part of this Report. There are no risks which in the opinion of the Board threaten the existence of the Company.

23. Corporate Social Responsibility :

The Company has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Act, comprising of three Directors including Independent Directors. The composition and report on CSR is attached herewith as Annexure III.

24. Vigil Mechanism/ Whistle Blower Policy :

Pursuant to the provisions of Section 177 of the Act and Regulation 22 of SEBI Listing Regulations, the Company has established a Vigil Mechanism/ Whistle Blower Policy for Directors, employees, vendors, customers and other stakeholders of the Company to raise and report concerns regarding any unethical conduct, irregularity, misconduct, actual or suspected fraud or any other violation of the Policy within the Company. The vigil mechanism provides for adequate safeguards against victimisation of persons who use such mechanism and for direct access to the chairperson of the Audit Committee in appropriate or exceptional cases. The Whistle Blower Policy can be accessed on the Website of the Company at https://www.essenspeciality.com/pdf/Policies/Whistle_Blower_Policy.pdf.

25. Details of Subsidiary, Joint Venture or an Associate Companies :

During the year under review, no Company became or ceased to be subsidiaries, joint ventures or associates of the Company.

26. Internal Financial control & its adequacy :

Internal financial control systems of the Company are commensurate with its size and the nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable accounting standards and relevant statutes, safeguarding assets from unauthorised use, executing transactions with proper authorisation and ensuring compliance of corporate policies. The Company has a well-defined delegation of authority with specified limits for approval of expenditure, both capital and revenue.

Details of internal control system are given in the MDA Report forming part of this Report.

27. Details of Remuneration of Directors and KMPs and Particulars of Employees :

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

In terms of the provisions of 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, during the financial year 2023-24 there were no employees drawing remuneration in excess of the limits set out in the said rules.

28. Changes in Nature of Business :

During the year under review, there were no changes in the nature of business of the Company.

29. Material Changes and Commitments :

There were no material changes during the year affecting the Financial Position of the Company other than issuance of fresh shares as detailed in this report.

30. Details of Significant and Material Orders Passed by the Regulators, Courts and Tribunals :

No significant and material order has been passed by the regulators, courts, tribunals impacting the going concern status and Company's operations in future.

31. Disclosures under Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013:

The Company has zero tolerance for sexual harassment at workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder and same is posted on the website of the Company and can be accessed at https://www.essenspeciality.com/pdf/Policies/Prevention_of_Sexual_Harressment_Policy.pdf.

The Company has constituted an Internal Complaints Committee (“ICC”) in accordance with the Section 4 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. No complaint pertaining to sexual harassment was received during FY 2023-24.

32. Details of Proceedings under the Insolvency and Bankruptcy Code, 2016 :

There are no proceedings initiated/ pending against the Company under the Insolvency and Bankruptcy Code, 2016 which materially impact the business of the Company.

33. Difference between Valuation on One Time Settlement and while availing Loan from Banks and Financial Institution :

There were no instances where the Company required the valuation for one time settlement or while taking the loan from the Banks or Financial institutions.

34. Disclosure about Secretarial Standard :

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

35. Appreciation :

The Directors express their appreciation to all employees of the various divisions for their diligence and contribution to performance. The Directors also record their appreciation for the support and co-operation received from franchisees, dealers, agents, suppliers, bankers and all other stakeholders. Last but not the least, the Directors wish to thank all shareholders for their continued support.