HFCL Ltd

Dear Members,

Your Board of Directors has pleasure in presenting the 37th Annual Report on the business and operations of your Company together with the Audited Financial Statements for the financial year ended March 31, 2024.

FINANCIAL HIGHLIGHTS

Your Company's financial performance (standalone and consolidated) for the financial year ended March 31, 2024 is summarised below:

(H in crore)

During FY24, total Consolidated Income of your Company was 14,565.64 crores as compared to 14,790.49 crores during the previous year, showing slight decrease of 4.69%.

Your Company has achieved Consolidated EBIDTA of 1682.13 crores in FY24 from 1665.86 crores in the previous year, recording an increase of 2.44%. Profitability, i.e.,

Consolidated PBT has increased by 5.44% to 1454.02 crores in FY24 from 1430.61 crores during the previous year.

In FY24, your Company reported a Consolidated PAT of 1337.52 crores, compared to 1317.71 crores in the previous year, making an increase of 6.24%.

Net Worth

The net worth of your Company has increased during the year under review to 13,821.69 crores from 12,993.02 crores in the previous year.

Gross Debt

The consolidated Debt in FY24 stood at 1977.26 crores as against 1748.31 crores in FY23.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the provisions of Section 129 read with Schedule III to the Companies Act, 2013 (hereinafter referred to as the "Act") and the Companies (Accounts) Rules, 2014, Regulation 33 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as the "SEBI Listing Regulations") and applicable Indian Accounting Standards, the Audited Consolidated Financial Statements of the Company for FY24, together with the Auditors' Report forms part of this Annual Report.

TRANSFER TO RESERVES

The Board of Directors has decided to retain the entire amount of profits for FY24, under Retained Earnings and has not transferred any amount to the General Reserves, during the year under review.

DIVIDEND

Your Board of Directors, at its meeting held on May 03, 2024, has recommended a Dividend @ 20% i.e., 10.20/- (Twenty Paise) per equity share of face value of 11/-, aggregating to dividend pay-out of 128.85 crores for the financial year ended March 31, 2024, subject to approval of shareholders at the ensuing annual general meeting ("AGM") of the Company. The above decision is in accordance with the Company's Dividend Distribution Policy.

The dividend shall be subject to deduction of TDS before payment to shareholders, as per applicable provisions of the Income-Tax Act, 1961.

Dividend Distribution Policy

As per Regulation 43A of SEBI Listing Regulations, top 1000 listed companies based on the market capitalisation, shall formulate a Dividend Distribution Policy.

Accordingly, the Policy has been adopted by the Board of Directors of the Company setting out the parameters and circumstances that will be taken into account by the Board in determining the distribution of dividend to its shareholders and/ or retaining profits earned by the Company.

The Dividend Distribution Policy is available on the Company's website at https://www.hfcl.com/wp-content/ uploads/2017/05/Dividend Distribution Policy.pdf

Investor Education and Protection Fund (IEPF)

In accordance with the applicable provisions of the Act read with the Investor Education and Protection Fund (Accounting, Audit, Transfer and Refund) Rules, 2016 ("IEPF Rules"), all unclaimed dividends are required to be transferred by the Company to the IEPF, which remain unpaid or unclaimed for a period of seven years, from the date of transfer to Unpaid Dividend Account.

Further, according to IEPF Rules, the shares on which dividend has not been claimed by the shareholders for seven consecutive years or more shall be transferred to the demat account of the Investor Education and Protection Fund Authority ("IEPF Authority").

During the year under review, no amount of the unclaimed/ unpaid dividend and any such share in the Company, was due to be transferred to the IEPF Authority.

The following table provides a list of years for which unclaimed dividends and their corresponding shares would become eligible to be transferred to the IEPF on the dates mentioned below:

Details of unpaid dividend for the FY2017-18, 2018-19, 202021, 2021-22 and 2022-23, can be accessed from the website of the Company at www.hfcl.com and claim can be made by making request to the Company.

Details of Nodal Officer

The Company has designated Mr. Manoj Baid, President & Company Secretary of the Company as a Nodal Officer for the purpose of IEPF Authority.

INDIAN ACCOUNTING STANDARDS (IND-AS)

Financial Statements of your Company and its subsidiaries, for the financial year ended March 31, 2024, have been prepared in accordance with Indian Accounting Standards (Ind-AS), as notified under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time.

FIXED DEPOSITS

During FY24, your Company has not accepted any deposit within the meaning of Section 73 and 74 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014.

SHARE CAPITAL AND CHANGES IN CAPITAL

STRUCTURE

Authorised Share Capital

As on March 31, 2024, the Authorised Share Capital of your Company stood at 1760 crores (Rupees Seven Hundred Sixty crores only) divided into 510 crores (Five Hundred Ten crores) equity shares of face value of 11/- (Rupee One) each, aggregating to 1510 crores (Rupees Five Hundred Ten crores only) and 2.50 crores (Two crores Fifty Lakhs) Cumulative Redeemable Preference Shares (CRPS) of 1100/- (Rupees Hundred) each, aggregating to 1250 crores (Rupees Two Hundred Fifty crores only).

Paid-up Share Capital

As on March 31, 2024, the Paid-up Equity Share Capital of your Company stood at 1144.10 crores comprising of 144,09,72,812 equity shares of face value of 11/- each.

Qualified Institutions Placement

In order to meet funding requirements of capital expenditure for capacity expansion of optic fiber and optic fiber cables by the Company or through its subsidiaries ("OFC Expansion"); funding expenditure towards research & development initiatives including acquisition of technologies; repayments/ pre-payments of short term borrowings availed from banks; funding working capital requirements and general corporate purposes, the Board of Directors of the Company at its meeting held on September 02, 2022 which was also approved by the Shareholders of the Company at its Annual General Meeting held on September 30, 2022, decided to raise funds up to 1650 crores by way of issue of Equity Shares, through various permissible modes under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 ("SEBI ICDR Regulations") and the Act and the rules made thereunder.

Subsequently, the Fund-Raising Committee of Directors has, at its meeting held on August 28, 2023, approved that the proposed fund raise shall be by way of issue of Equity Shares through a qualified institutions placement ("QIP") in accordance with the provisions of the SEBI ICDR Regulations and the Act and the rules made thereunder, each as amended.

Pursuant to above, the Fund-Raising Committee of Directors, has allotted 5,10,14,491 equity shares through QIP at an price of 169/- per equity share (including a premium of 168/- per equity share) aggregating to approximately 1352 crores, on August 31, 2023.

Pursuant to the said allotment, the paid-up equity share capital of the Company increased from 1137,77,58,321 divided into 137,77,58,321 equity shares of 11/- each to 1142,87,72,812/- divided into 142,87,72,812 equity shares of 11/- each, as at August 31, 2023.

Out of the proceeds amounting to 1342.69 crores (net of issue expenses), 1269.23 crores were utilised upto June 30, 2024, as per the objects and purpose of the QIP issue.

Allotment of Equity Shares

The Board of Directors and the Shareholders of the Company at their meetings held on September 02, 2022 and September 30, 2022, respectively, had approved raising of funds by way of preferential issue of securities (Warrants) to persons belonging to Promoter and Non-Promoter category in accordance with the SEBI ICDR Regulations and the Act and the rules made thereunder.

Pursuant to the aforesaid authorisations, the Private Placement Offer Cum Application Letter (PAS-4) dated October 10, 2022 and pursuant to the applications received from persons belonging to Promoter and Non-Promoter category in the preferential issue under Chapter V of the SEBI ICDR Regulations ("Issue"), and Section 42 and Section 62 of the Act, as amended, read with the rules issued thereunder, the Allotment Committee (Warrants) of the Board of Directors, vide its resolution dated October 15, 2022, had approved the allotment of 1,41,00,000 (One Crore Forty One Lakh) Warrants convertible into 1,41,00,000 equity shares at a price of 180/- per Equity Share (Warrant Exercise Price).

Further, the Allotment Committee (Warrants) of the Board of Directors, vide its resolutions dated February 07, 2024, March 22, 2024 and April 11, 2024 had approved the allotment of 1,00,00,000 (One Crore), 22,00,000 (Twenty Two Lakhs) and 17,00,000 (Seventeen Lakhs) equity shares, respectively, having face value of 11/- (Rupee One only) each, at a premium of 179/- per equity share, fully paid-up, upon conversion of warrants.

Pursuant to the said allotments, the paid-up equity share capital of the Company increased from 1142,87,72,812 divided into 142,87,72,812 equity shares of 11/- each to 1144,26,72,812/- divided into 144,26,72,812 equity shares of 11/- each, as at April 11, 2024.

Further, the warrants allotted to one of the warrant holders, belonging to the non-promoter category and being a part of the senior leadership team, holding 2,00,000 warrants, who sought early retirement from the Company, and since retired, did not exercise the conversion option within 18 months from the date of the allotment, i.e. on or before April 14, 2024. Therefore, the 25% of Warrant Exercise Price

i.e., 140,00,000/- received by the Company stands forfeited as per provisions of Regulation 169(3) of Chapter V of the SEBI ICDR Regulations.

The entire proceeds amounting to 1111.20 crores were utilised as per the objects and purpose of the Issue.

Your Company has not issued equity shares with differential rights as to dividend, voting or otherwise.

MANAGEMENT DISCUSSION AND ANALYSIS (MDA) REPORT

The Management Discussion and Analysis Report for the year under review, as stipulated under Regulation 34(2)(e) of the SEBI Listing Regulations, is presented in a separate section, forming part of this Annual Report.

CORPORATE GOVERNANCE

Your Company is committed to benchmark itself with global standards for providing good corporate governance. Your Board constantly endeavors to take the business forward in such a way that it maximises long term value for the stakeholders. The Company has put in place an effective corporate governance system which ensures that the provisions of SEBI Listing Regulations are duly complied with.

A detailed report on the Corporate Governance pursuant to the requirements of the SEBI Listing Regulations forms part of this Annual Report.

A Certificate from the Secretarial Auditor of the Company, confirming compliance of conditions of corporate governance as stipulated in SEBI Listing Regulations, is provided in the Report on Corporate Governance which forms part of the Corporate Governance Report.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

As stipulated under Regulation 34(2)(f) of the SEBI Listing Regulations, the Business Responsibility and Sustainability Report, describing the initiatives taken by the Company from environmental, social and governance perspective forms part of this Annual Report.

EMPLOYEES' LONG TERM INCENTIVE PLAN

In terms of the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("SEBI SBEB & SE Regulations"), as amended from time to time and with the objective to promote entrepreneurial behavior among employees of the Company, motivate them with incentives and reward their performance with ownership in proportion to the contribution made by them as well as align the interest of the employees with that of the Company, "Himachal Futuristic Communications Limited Employees' Long Term Incentive Plan-2017" ("HFCL Plan 2017") was approved by the Board of Directors of your Company on August 26, 2017, which was further approved by the members of the Company, in their 30th Annual General Meeting held on September 25, 2017.

The HFCL Plan 2017 comprises of the following three subsets:

1. Employee Stock Option Plan (ESOP) under which Options would be granted;

2. Restricted Stock Units Plan (RSUP) under which Units would be granted;

3. Employee Stock Purchase Scheme (ESPS) under which shares would be issued.

During the financial year ended March 31, 2024, your Company has not granted any ESOs and RSUs in terms of the HFCL Plan 2017. The Company has also not issued any shares under ESPS during the year under review.

Applicable disclosures as stipulated under the SEBI SBEB & SE Regulations with regard to the HFCL Plan 2017, are provided as Annexure - A to this Report.

Your Company has obtained a Certificate from Mr. Baldev Singh Kashtwal, Secretarial Auditor (FCS: 3616; C.P. No.: 3169) that the HFCL Plan, 2017 for grant of stock options has been implemented in accordance with the SEBI SBEB & SE Regulations and the resolution passed by the members in their 30th Annual General Meeting held on September 25, 2017.

The said Certificate would be placed at the ensuing annual general meeting for inspection by the members.

The Nomination, Remuneration and Compensation Committee of the Board of Directors, inter-alia, administers and monitors, the HFCL Plan 2017 of your Company.

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

As on March 31, 2024, your Company had ten subsidiaries and two associates viz.

1. HTL Limited,

2. Polixel Security Systems Private Limited,

3. Moneta Finance Private Limited,

4. HFCL Advance Systems Private Limited,

5. Raddef Private Limited,

6. DragonWave HFCL India Private Limited,

7. HFCL Technologies Private Limited,

8. HFCL B.V. Netherlands,

9. HFCL Inc. USA,

10. HFCL Canada Inc. - wholly owned subsidiary of HFCL B.V., a subsidiary (w.e.f. October 26, 2023),

11. Nimpaa Telecommunications Private Limited - Associate and

12. BigCat Wireless Private Limited - Associate.

HFCL B.V., a wholly owned subsidiary of HFCL Limited in Netherlands ('HFCL BV'), has acquired 100% stake in Blue Diwali Sp. z.o.o., a company registered in state of Warsaw, Poland.

Further, HFCL B.V., has also established a wholly owned subsidiary company namely HFCL UK Limited in the UK.

Consequently, Blue Diwali Sp. z.o.o., and HFCL UK Limited have become wholly owned subsidiaries of HFCL B.V. and also step-down wholly owned subsidiaries of the Company w.e.f. May 17, 2024 and July 05, 2024 respectively.

The Company regularly monitors the performance of these companies.

There has been no material change in the nature of the business of the subsidiaries.

A statement containing the salient features of the financial statements of subsidiary companies of the Company in the prescribed Form AOC-1 forms a part of the Consolidated Financial Statements (CFS) in compliance with Section 129(3) and other applicable provisions, if any, of the Act read with Rule 5 of the Companies (Accounts) Rules, 2014, as amended.

The said Form also highlights the financial performance of each of the subsidiaries, included in the CFS of the Company, pursuant to Rule 8(1) of the Companies (Accounts) Rules, 2014.

In accordance with the provisions of Section 136 of the Act, the financial statements of the subsidiaries are available for inspection by the members at the Registered Office of the Company during business hours on all days except Saturdays, Sundays and public holidays up to the date of the ensuing AGM. Any member desirous of obtaining a copy of the said financial statements may write to the Company Secretary at HFCL Limited, 8, Commercial Complex, Masjid Moth, Greater Kailash - II, New Delhi - 110048 and the same shall be sent by post.

The financial statements including the CFS and all other documents required to be attached to this Report have been uploaded on the website of the Company at www.hfcl.com.

Material Subsidiaries

The Company has adopted a 'Policy for determining Material Subsidiaries' as per requirements stipulated in Explanation to Regulation 16(1)(c) of the SEBI Listing Regulations.

The said policy may be accessed on the website of the Company at https://www.hfcl.com/wp-content/ uploads/2021/07/HFCL-Policy-on-Determining- Material-Subsidiaries Revised.pdf

The Company has one material subsidiary viz. HTL Limited, as on March 31, 2024.

DIRECTORS AND KEY MANAGERIAL PERSONNELS (KMPs)

Re-Appointments/Appointments

In accordance with the provisions of Section 152 of the Act and the Articles of Association of the Company, Mr. Arvind Kharabanda (DIN: 00052270), Director (Non-Executive), is liable to retire by rotation at the ensuing AGM and being eligible offers himself for re- appointment.

The brief resume of him and other related information are being given in the Notice convening the 37th AGM of your Company.

Your directors recommend his re-appointment as a non-executive director of your Company.

The Board of Directors at its meeting held on September 02, 2024 and on the recommendation of the Nomination, Remuneration and Compensation Committee, has re-appointed Mr. Mahendra Nahata as the Managing Director of the Company for a further period of 3 (three) years with effect from October 01, 2024, subject to approval of shareholders at the ensuing AGM, as his current term of office is expiring on September 30, 2024.

Further, Mr. Ajai Kumar (DIN: 02446976) was appointed as an Independent Director on the Board of your Company, w.e.f. November 25, 2021, for one term of three consecutive years, by the shareholders at the Extra Ordinary General Meeting ("EGM") of the Company, held on March 07, 2022, in terms of the provisions of Section 149 of the Act read with the Companies (Appointment and Qualifications of Directors) Rules, 2014, and the SEBI Listing Regulations.

Mr. Ajai Kumar holds office as an Independent Director of the Company up to November 24, 2024 ("First Term") in line with the explanation to Sections 149(10) and 149(11) of the Act.

The Nomination, Remuneration and Compensation Committee, on the basis of performance evaluation of independent director and taking into account the external business environment, the business knowledge, acumen, experience and the substantial contribution made by Mr. Ajai Kumar (DIN: 02446976) during his tenure, has recommended to the Board that continued association of Mr. Ajai Kumar as Independent Director would be beneficial to the Company.

Based on the above and the performance evaluation of independent director, the Board recommends reappointment of Mr. Ajai Kumar for a second term of consecutive three years, commencing from November 25, 2024 to November 24, 2027 to hold office as Independent Director of the Company, not liable to retire by rotation on the Board of the Company. The Company has received the requisite Notices in writing under Section 160 of the Act, from Members of the Company, proposing his re-appointment as a Director.

In the opinion of the Board, Mr. Ajai Kumar possess requisite qualifications, experience, expertise and holds highest standards of integrity.

Further Mr. Ajai Kumar is exempt to qualify on-line proficiency self-assessment test conducted by the Indian Institute of Corporate Affairs.

Mr. Ajai Kumar has given his consent, in prescribed form DIR-2, to act as Director and also declared that he is not disqualified to be appointed as a Director, in prescribed form DIR-8.

Mr. Ajai Kumar has registered his name in the data bank for Independent Directors maintained by the Indian Institute

of Corporate Affairs (IICA), Manesar (notified under Section 150(1) of the Act as the institute for the creation and maintenance of data bank of Independent Directors) and paid requisite fee therefor.

The Company has received declaration from Mr. Ajai Kumar confirming that he meets the criteria of independence as prescribed both under the Act and SEBI Listing Regulations.

Brief resume, nature of expertise, disclosure of relationships between directors inter-se, details of directorships and Committee membership held in other companies of the Directors proposed to be re-appointed, along with their shareholding in the Company, as stipulated under Regulation 36 of the SEBI Listing Regulations and Secretarial Standard on General Meetings (SS-2) issued by the Institute of Company Secretaries of India, is appended as an Annexure to the Notice of the ensuing AGM.

Appropriate resolutions for re-appointment of Directors are being placed for your approval at the ensuing AGM.

Cessation

Mr. Surendra Singh Sirohi (DIN:07595264) has completed his second term as an Independent Director on the close of business hours on August 26, 2024. The Board of Directors places on record its sincere appreciation for the support and valuable guidance given by Mr. Sirohi during his tenure as an Independent Director of the Company.

Key Managerial Personnel

During the year under review, Mr. Mahendra Nahata, Managing Director, Mr. Vijay Raj Jain, Chief Financial Officer and Mr. Manoj Baid, President & Company Secretary, continue to be the Key Managerial Personnel of your Company, in accordance with the provisions of Section 2(51) and 203 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Declaration by the Company

The Company has issued confirmation to its Directors, confirming that it has not made any default under Section 164(2) of the Act, as on March 31, 2024.

Declaration by Independent Directors

The Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under the provisions of the Act, read with the Schedules and Rules issued thereunder as well as clause (b) of sub-regulation (1) of Regulation 16 of the SEBI Listing Regulations (including any statutory modification(s) or re-enactment(s) thereof for the time being in force) and that they are independent of management.

In terms of Regulation 25(8) of the SEBI Listing Regulations, the Independent Directors have confirmed that they are not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact their ability to discharge their duties.

The Independent Directors have also confirmed that they have complied with the Company's Code of Conduct.

In the opinion of the Board, Independent Directors fulfil the conditions specified in the Act, Rules made thereunder and the SEBI Listing Regulations and are independent of the management.

Familiarisation Programme for Independent Directors

As per Regulation 25(7) of the SEBI Listing Regulations, the Independent Directors of the Company need to be imparted with familiarisation programme.

The familiarisation programme aims at making the Independent Directors of the Company familiar with the business and operations of the Company through various structured familiarisation Programmes.

The details of programmes for familiarisation of Independent Directors with the Company, their roles, rights, responsibilities in the Company and related matters are available on the website of the Company at the web-link: https://www.hfcl.com/wp-content/uploads/2023/04/ HFCL-Familiarisation-Prog.-ID 2024.pdf.

REMUNERATION OF DIRECTORS, KEY MANAGERIAL PERSONNEL AND PARTICULARS OF EMPLOYEES

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, information relating to percentage increase in remuneration, ratio of remuneration of each Director and Key Managerial Personnel to the median of employees' remuneration etc. is annexed as Annexure - B to this report.

The details of remuneration of top 10 employees of the Company as required to be disclosed under Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report.

Further, pursuant to second proviso to Section 136(1) of the Act, this Report is being sent to the members excluding the said Information.

Any member interested in obtaining a copy of the same may write to the Company Secretary and Compliance Officer at secretarial@hfcl.com.

The remuneration paid to the Directors is in accordance with the Remuneration Policy formulated in accordance with Section 178 of the Act and Regulation 19 of the SEBI Listing Regulations (including any statutory modification(s) or reenactments) thereof for the time being in force).

Disclosure under Section 197(14) of the Act

The Managing Director of your Company does not receive remuneration or commission from any of the subsidiaries of the Company.

Remuneration Policy

Pursuant to provisions of Section 178 of the Act and the SEBI Listing Regulations, the Nomination, Remuneration and Compensation Committee ('NRC Committee') of your Board has formulated a Remuneration Policy for the appointment and determination of remuneration of the Directors including criteria for determining qualifications, positive attributes, independence of a director, Key Managerial Personnel, Senior Management Personnel and other employees of your Company.

The NRC Committee has also developed the criteria for determining the qualifications, positive attributes and independence of Directors and for making payments to Executive and Non-Executive Directors and Senior Management Personnel of the Company.

The detailed Policy is available on the Company's website at https://www.hfcl.com/wp-content/uploads/2019/06/ Remuneration-Policy.pdf and the salient aspects covered in the Remuneration Policy have been outlined in the Corporate Governance Report, which forms part of this Report.

BOARD AND COMMITTEE MEETINGS

Seven meetings of the Board of Directors were held during the FY24.

The intervening gap between any two consecutive meetings of the Board was within the stipulated time frame prescribed under the Act and the SEBI Listing Regulations.

Details of meetings held and attendance of directors are mentioned in Corporate Governance Report, which forms part of this Annual Report.

Separate Meeting of Independent Directors

In terms of requirements of Schedule IV to the Act and Regulation 25 of the SEBI Listing Regulations, a separate meeting of the Independent Directors was held on March 27, 2024 for FY24.

The meeting of the Independent Directors was attended by all the four independent directors, namely, Mr. Bharat Pal Singh, Mr. Ajai Kumar, Mr. Surendra Singh Sirohi, and Dr. (Ms.) Tamali Sengupta.

Board Committees

Your Company has constituted several Committees of the Board which have been established as part of the best corporate governance practices and are in compliance with the requirements of the relevant provisions of applicable laws and statutes.

As on March 31, 2024, your Board has 05 (five) mandatory Committees, namely,

1. Audit Committee;

2. Nomination, Remuneration & Compensation (NRC) Committee;

3. Stakeholders' Relationship Committee (SRC);

4. Corporate Social Responsibility (CSR) Committee; and

5. Risk Management Committee (RMC).

The details with respect to the composition, powers, roles, terms of reference, number of meetings etc. of the Committees held during FY24 and attendance of the Members at each Committee Meeting, are provided in the Corporate Governance Report which forms part of the Annual Report.

All the recommendations made by the Committees of the Board including the Audit Committee were accepted by the Board except recommendation made by the NRC Committee at its meeting held on May 08, 2023 regarding payment of remuneration based on the net profits of the Company for the FY23 to its Managing Director.

While discussing the said recommendation at the Board meeting held on May 08, 2023, Mr. Mahendra Nahata, Promoter & Managing Director of the Company, expressed his desire to put away any such proposals relating to payment of remuneration based on net profits as part of his overall remuneration at this point of time and instead suggested that such money should be utilised for the benefits of needy employees of the Company.

The Board was pleased with the commitment and outlook of Mr. Nahata towards the HFCL family and accordingly, this business item was dropped out.

Also, details pertaining to Risk Management & Internal Financial Control are mentioned in Management Discussion & Analysis, which forms part of the Annual Report for FY24 of the Company.

PERFORMANCE EVALUATION

The Act mandates formal annual evaluation by the Board of its own performance and that of its committees and individual directors. Schedule IV to the Act provides that the performance evaluation of independent directors shall be done by the entire board of directors, excluding the directors being evaluated.

Pursuant to the provisions of the Act read with relevant rules issued thereunder, Regulation 17(10) of the SEBI Listing Regulations and the Master Circular issued by SEBI on July 11, 2023, the evaluation of the annual performance of the Directors/ Board/Committees was carried out for FY24.

The parameters for the performance evaluation of the Board, inter-alia, include performance of the Board on deciding long term strategy, rating the composition and mix of Board members, discharging of governance and fiduciary duties, handling critical and dissenting suggestions, etc.

The performance of the Board was evaluated after seeking inputs from all the directors on the basis of above parameters.

The performance of the Committees was evaluated after seeking inputs from the Committee members on the basis of criteria such as the composition of Committees, effectiveness of Committee meetings, etc.

The Nomination, Remuneration and Compensation Committee reviewed the performance of the Individual Directors, the Committees of the Board and the Board as a whole. A questionnaire for the evolution of the Board, its committees and the individual members of the Board, covering various aspects of the performance of the Board and its Committees, including composition and quality, roles and responsibilities, processes and functioning, adherence to Code of Conduct and Ethics and best practices in corporate governance was sent to the Directors.

The Board of Directors reviewed the performance of the Independent Directors. Performance Evaluation was done on the basis of criteria such as the contribution of the individual director to the Board and Committee meetings like preparedness on the agenda items, technical knowledge on the subject matter, meaningful and constructive contribution and inputs in meetings, etc.

In a separate meeting of the Independent Directors, performance of Non-Independent Directors and the Board as a whole was evaluated, taking into account the views of Executive Directors and Non-Executive Directors.

Basis the feedback received on questionnaire from all the Directors, the performance of the Board as a whole, Committees of the Company and individual directors was found satisfactory.

The Directors expressed their satisfaction with the evaluation process.

The details of the evaluation process are set out in the Corporate Governance Report which forms part of this Annual Report.

AUDITORS AND AUDITORS' REPORT Statutory Auditors & their Report

M/s S. Bhandari & Co. LLP, Chartered Accountants (FRN: 000560C/C400334) and M/s Oswal Sunil & Company, Chartered Accountants (FRN: 016520N) were re-appointed as Statutory Auditors for second term of 05 (five) consecutive years, at the 35th Annual General Meeting (AGM) of the Company, held on September 30, 2022, for auditing the accounts of the Company from the financial year 2022-23 to 2026-27.

The Auditors' Report does not contain any qualification, reservation or adverse remark.

Further, there were no frauds reported by the Statutory Auditors to the Audit Committee or the Board under Section 143(12) of the Act.

Secretarial Auditors & their Report

Pursuant to provisions of Section 204 of the Act read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (as amended or re-enacted from time to time), your Company had appointed Mr. Baldev Singh Kashtwal, Company Secretary in whole-time practice, having COP No. 3169 and Membership No. F-3616, for conducting the Secretarial Audit of your Company for FY24.

The Secretarial Audit Report in prescribed form MR-3, issued by the Secretarial Auditor is annexed herewith as Annexure - C to this Report. Further, as required under Regulation 24A of the SEBI Listing Regulations, the Secretarial Audit Report of HTL Limited, a material subsidiary of the Company is also annexed herewith as Annexure - Cl to this Report.

Remarks by Secretarial Auditor

The Secretarial Audit Report does not contain any qualification, reservation or adverse remark for FY24, except for a fine levied by BSE Limited vide their email dated March 26, 2024, of Rs.80,000/-, for a delay of 04 days in filing of the Trading Application of 1,00,00,000 equity shares issued and allotted upon conversion of warrants, under a preferential issue, on February 07, 2024.

Explanation by the Board pursuant to Section 134(3)(f) of the Act

It is informed that the Company has submitted the Trading Application with National Stock Exchange of India Limited (NSE) on March 22, 2024, well within the stipulated period of seven working days from the latest listing approval granted by the stock exchanges and made simultaneous attempts to file the Trading Application with BSE Limited ("BSE") as well. However, due to technical issues on the Listing Portal of BSE, the Company could not file the Trading Application on BSE on the same day as it was filed with the NSE.

Further, despite of numerous attempts to contact BSE's officials at the provided contact numbers for preferential issues on their website, communication remained unestablished.

Furthermore, the challenges were compounded by the weekly off on March 23, 2024, March 24, 2024, due to Saturday and Sunday, and on March 25, 2024, due to the festival of Holi, making it more difficult for the Company to coordinate with BSE officials.

Following communication with BSE officials on March 26, 2024, the Trading Application was duly submitted with BSE.

Further, the Company, vide its email dated March 27, 2024, had suitably replied to BSE and requested to reconsider the imposition of fine. Further, as informed by BSE, pre-payment of fine is mandatory for granting trading approval, therefore, the Company had paid the aforesaid fine on April 02, 2024.

Cost Records and Cost Audit

The Company is not required to maintain cost accounts and records as specified by the Central Government under subsection (1) of Section 148 of the Act and the relevant rules made thereunder. Further, the Requirement of Cost Audit as stipulated under the provisions of Section 148 of the Act, are not applicable for the business activities carried out by the Company.

INSOLVENCY AND BANKRUPTCY CODE, 2016

There is no application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 during FY24.

DETAILS OF DIFFERENCE BETWEEN THE AMOUNT OF VALUATION DONE

The requirement to disclose the details of difference between amount of the valuation done at the time of onetime settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof, is not applicable during FY24.

VIGIL MECHANISM/ WHISTLE-BLOWER POLICY

The Board of Directors of your Company has formulated a Whistle-Blower Policy, which is in compliance with the provisions of Section 177(9) & (10) of the Act and Regulation 22 of the SEBI Listing Regulations.

The Company, through this Policy envisages to encourage the Directors and employees of the Company to report to the appropriate authorities any unethical behaviour, improper, illegal or questionable acts, deeds, actual or suspected frauds or violation of the Company's Codes of Conduct for the Directors and the Senior Management Personnel.

During FY24, no complaint was received and no individual was denied access to the Audit Committee for reporting concerns, if any.

The Policy on Vigil Mechanism/Whistle-Blower Policy may be accessed on the Company's website at the link: https:// www.hfcl.com/wp-content/uploads/2020/01/HFCL- Whistle-Blower-Policy Revised1.pdf

Brief details of establishment of Vigil Mechanism in the Company, is also provided in the Corporate Governance Report which forms part of this Report.

CREDIT RATINGS

CARE Ratings Limited (a SEBI Registered Credit Rating Agency) ("CARE") vide its letter dated July 03, 2023, has enhanced the credit rating for the short-term bank facilities of the Company to CARE A1 (A One) from CARE A2+ (A Two Plus).

Further, CARE has also reaffirmed the credit rating for the long-term bank facilities of the Company.

Care has also withdrawn the credit rating for the Non-Convertible Debentures (NCDs) of the Company since

the Company had already repaid its NCDs in full and there is no outstanding NCD as on date.

The details of Credit ratings assigned to the Company for bank facilities are as under:

Further, CARE vide its letter dated August 21, 2024 has also reaffirmed the above credit ratings for the long-term and short-term bank facilities of the Company.

Infomerics Valuation and Rating Pvt. Ltd. (RBI & SEBI Registered Credit Rating Agency) vide its letter dated February 05, 2024, has reaffirmed the credit ratings for the Bank Loan facilities of the Company, the details of which are as below:

ANNUAL RETURN

The Annual Return of the Company as on March 31, 2024, in prescribed e-Form MGT-7 in accordance with Section 92(3) of the Act, read with Section 134(3)(a) of the Act, is available on the Company's website at www.hfcl.com.

Further the Annual Return (i.e., e-form MGT-7) for FY24 shall be filed by the Company with the Registrar of Companies, Himachal Pradesh, within the stipulated period.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

Details of loans, guarantees and investments, as on March 31, 2024, as stipulated under Section 186 of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014, are as follows:

Loans given, Guarantees provided and Investments made during FY24:

* As on March 31, 2024, outstanding corporate guarantee was H 309.95 Crores.

For more details, please refer Note No.7, 8, 9, 14, 47(c) and 51 to the Standalone Financial Statements for FY24 of the Company.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

Your Company has adopted a "Policy on Dealing with and Materiality of Related Party Transactions", in accordance with the provisions of the Act and Regulation 23 of the SEBI Listing Regulations, inter-alia, providing a framework for governance and reporting of Related Party Transactions including material transactions and threshold limits for determining materiality.

The said Policy is available on the website of the Company at the web-link: https://www.hfcl.com/wp-content/ uploads/2022/06/HFCL-Policy-on-RPTs Revised.pdf

During the year under review, all contracts/ arrangements/ transactions entered into by the Company with related parties were in ordinary course of business and on arm's length basis.

The Company has entered into contracts/ arrangements/ transactions with related parties which qualify as material in accordance with the Policy of the Company on materiality of related party transactions.

Thus, there are transactions required to be reported in prescribed Form AOC-2 pursuant to Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014, the details of which is annexed herewith as Annexure - D to this Report.

All transactions with related parties were reviewed and approved by the Audit Committee and are in accordance with the Policy on Related Party Transactions, formulated by the Company.

There are no materially significant related party transactions that may have potential conflict with interest of the Company at large.

The details of the transactions with person(s) or entities forming part of the Promoter(s)/Promoter(s) Group, which individually hold 10% or more shareholding in the Company and other related parties as per Indian Accounting Standards (IND-AS) - 24 are set out in Note No. 51 to the Standalone Financial Statements of the Company.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The details of energy conservation, technology absorption and foreign exchange earnings and outgo as required under Section 134(3)(m) of the Act, read with the Rule 8 of the Companies (Accounts) Rules, 2014, are annexed herewith as Annexure - E to this Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company has been proactively carrying out CSR activities since more than two decades.

The Company is undertaking CSR activities through registered societies, NGOs, Section 8 companies and directly.

In compliance with requirements of Section 135 of the Act, the Company has laid down a Corporate Social Responsibility (CSR) Policy. The CSR Policy is available on the website of the Company and may be accessed at the web-link https:// www.hfcl.com/wp-content/uploads/2022/09/CSR Poliicy 2022.pdf

The composition of the CSR Committee, brief contents of CSR Policy, unspent amount and reason thereof, if any, and report on CSR activities carried out during the FY24, in the format, prescribed under Rule 9 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed herewith as Annexure - F.

For other details regarding the CSR Committee, please refer to the Corporate Governance Report, which forms part of this Report.

MATERIAL CHANGES AFFECTING THE COMPANY

A. Change in nature of business

The Company has not undergone any change in the nature of the business during FY24.

B. Material changes and commitments, if any, affecting the financial position of the Company

There are no material changes and commitments affecting the financial position of the Company, which have occurred between the end of FY24 and the date of this Report.

SIGNIFICANT/MATERIAL ORDERS PASSED BY THE REGULATORS, COURTS, TRIBUNALS AFFECTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE

There is no significant/material order passed by the Regulators, Courts, Tribunals affecting the going concern status and the Company's operations in future.

PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE

The Company has in place a Policy on Prevention of Sexual Harassment at Workplace, in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 and the rules made thereunder.

Internal Complaints Committee(s) (ICCs) at each workplace of the Company, have been set up to redress complaints, if any, received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this Policy.

ICC of each workplace of the Company has also filed Annual Return for the calendar year 2023 at their respective jurisdictional offices, as required under Section 21(1) of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 read with Rule 14 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Rules, 2013.

There was no complaint received from any employee of the Company during FY24.

SIGNIFICANT DEVELOPMENTS

Although, the Company has achieved various milestones which have already been set out in the Management Discussion and Analysis forming part of the Annual Report,however there were no other significant developments during the year under review.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirements under Section 134(3)(c) of the Act, the Directors confirm that:

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed and there were no material departures from the same;

(b) the Directors had selected such accounting policies and applied them consistently and made judgements 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 March 31,2024 and of the profits of the Company for that period;

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

(d) the Directors had prepared the annual accounts on a going concern basis;

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

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

LISTING

The equity shares of your Company are presently listed on the BSE Limited ('BSE') and the National Stock Exchange of India Limited ('NSE'). The Company has paid annual listing fee for FY25 to BSE and NSE.

DEPOSITORY SYSTEMS

Your Company's Scrip has come under compulsory dematerialisation w.e.f. November 29, 1999 for Institutional Investors and w.e.f. January 17, 2000, for all Investors. So far, 99.97% of the equity shares have been dematerialised.

The ISIN allotted to the equity shares of the Company is INE548A01028.

IMPLEMENTATION OF CORPORATE ACTION

During the year under review, the Company has not failed to implement any Corporate Action within the specified time limit.

COMPLIANCE WITH SECRETARIAL STANDARDS

Pursuant to the provisions of Section 118(10) of the Act, the Company has complied with the applicable provisions of the applicable Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI).

REPORTING PRINCIPLE

The Financial and Statutory Data presented in this Report is in line with the requirements of the Act (including the rules made thereunder), Indian Accounting Standards (Ind AS) and the Secretarial Standards (SS).

REPORTING PERIOD

The Financial Information is reported for the period April 01, 2023 to March 31, 2024. Some parts of the Non-Financial Information included in this Board's Report are provided as on the date of this Report.

CAUTIONARY STATEMENT

Statements in the Management Discussions & Analysis Report describing the Company's projections, estimates, expectations or predictions may be 'forward looking statements' within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that would make a difference to the Company's operations include demand supply conditions, raw material prices, changes in government regulations, tax regimes and economic developments within the Country and abroad and such other factors.

PERSONNEL

Your Directors wish to place on record their sincere appreciation for the devoted services of all the employees and workers at all levels and for their dedication and loyalty, which has been critical for the Company's success.

ACKNOWLEDGEMENTS

Your Company's organisational culture upholds professionalism, integrity and continuous improvement across all functions as well as efficient utilisation of the Company's resources for sustainable and profitable growth.

Your Directors wish to place on record their appreciation for the valuable co-operation and support received from the Government of India, various State Governments, the Banks and other stakeholders such as, shareholders, customers and suppliers, among others. The Directors look forward to their continued support in future.

The Directors thank the Central Government, Government of Goa, Government of Telangana, Government of Himachal Pradesh, State Bank of India, Punjab National Bank, Bank of Baroda, Union Bank of India, Indian Bank, IDBI Bank Limited, Yes Bank Limited, ICICI Bank Limited, KEB Hana Bank, Axis Finance Limited and other Banks for all co-operations, facilities and encouragement they have extended to the Company.

Your Directors acknowledge the continued trust and confidence you have reposed in the Company.