Kandagiri Spinning Mills Ltd

Your directors hereunder submit their 48^thAnnual Report together with the audited accounts for the year ended March 31,2024 (the year).

Dividend

In view of the loss incurred during the past years and erosion of networth, no dividend is recommended by your Board of Directors for the financial year 2023-24.

Retained Earnings

The current year loss of (Rs. 176.74 lakhs) is added to the negative retaining earnings as at the beginning of the year of (Rs. 3632.74 lakhs) and the negative retained earnings as at the end of the year is (Rs. 3809.48 lakhs).

Financial Performance with respect to Operational Performance :

During the financial year 2023-24, the Company carried out trading of yarn and earned revenue of Rs. 150.31 lakhs. During the financial year 2023-24, the Company continued to lease out its immovable property (land and building) to M/s Sambandam Spinning Mills Limited upto 31.10.2023 and lease was terminated with effect from 31.10.2023 and Company earned lease rental income of Rs 82.00 lakhs upto the referred period.

The sale of a portion of windmill land asset measuring about 2.701 acres situated at Pazhavoor village, Tirunelveli District was executed during the year for which the Company received an advance amount of Rs 62.77 lakhs in earlier years as reported and an amount of Rs 54.21 lakhs was forfeited on windmill land sale advances (as per terms of agreement) during the financial year 2023-24. The total income of the Company during the FY 2023-24 is Rs. 297.51 lakhs as against the previous year income of Rs. 448.59 lakhs. The Company has incurred loss after tax of (Rs 176.74 lakhs) in the financial year 2023-24 as against the previous year profit after tax of Rs. 152.93 lakhs. MANAGEMENT DISCUSSION AND ANALYSIS

(a) Industry structure and developments and future outlook:

During the financial year 2023-24, the Company continued to carry out yarn trading business and generated revenue. High raw material prices, input cost escalation, quality control orders and import of garments were the major challenges faced by the Indian Textile and Clothing Industry in the financial year 2023-24. Currently, most of the textile mills are operating at only 60-70% due to lack of demand. The country's textile giants, recognizing the looming threat, has shifted its focus from the Indian market to prioritize export markets due to its heavy reliance on the spinning industry. Value added yarns also witnessed sluggish markets during the year. After a year of rough journey of business during FY 2023-24, textile Industry is expected to witness a breathier this year 2024-25 with the improved revenue growth and operating margins, gradual recovery in exports, lower cotton prices, evolving market conditions etc., reaffirming the status as a cornerstone of the textile ecosystem. It is predicted that the textile Industry will recover in FY 2024-25 with 6-8% growth driven by increased volume and mild realisation gains. Following two years of decline, improved domestic demand and stabilized exports will boost the industry.

(b) Strategies and Future plans

The quality of goods produced hitherto by company has generated goodwill and brand image. The Board of Directors hope to continue to use these advantages by continuing trading business and also exploring new business in the coming years. The Promoter Directors started infusing funds and will continue to contribute additional funds as and when necessary and exploring various possibilities for settling the outstanding liabilities and revival of the Company in the near future.

(d) Risks and Concerns

Your Company has devised risk management policy which involves identification of the business risks as well as the financial risks, its evaluation, monitoring, reporting and mitigation measures. The Audit Committee and Board of Directors of the Company periodically review the risk management policy of the Company so that management controls the risk through properly defined network. Head of Departments are responsible for implementation of the risk management system as may be applicable to their respective areas of functioning and report to the Board and the Audit Committee. The details of risk management mechanism and key risks faced by the Company are enumerated in the risk management policy. Risk management policy is uploaded in the company's website www.kandagirimills.com.

(e) Internal control systems

The Company has in place a well established internal control procedures. Necessary checks and balances have been instituted for timely correction with an effective internal audit system.

(f) Human resources management

Employees are your company's most valuable resource. Your Company continues to create a favourable environment at work place.

The company also recognises the importance of training and consequently deputes its work force to training and development. The fact that the relationship with the employees continued to be cordial is testimony to the company's ability to retain high quality workforce.

(g) Environmental Protection, Health and Safety (EHS)

EHS continues to receive the highest priority in all operational and functional areas at all locations of your Company. Systematic process safety analysis, audits, periodic safety inspections are carried out by expert agencies and suitable control measures adopted for ensuring safe operations at the site. Various processes as required for Pollution Control and Environmental Protection are strictly adhered to.

(h) Corporate Social Responsibility

The CSR provisions became inapplicable to the Company and accordingly, the CSR Committee was dissolved by the Board with effect from 18.06.2020. There is no CSR obligation for the Company for the FY 2023-24 in accordance with the provisions of section 135 of the Companies Act, 2013. Accordingly, requirement of CSR disclosure in required format is not applicable for the Company

(i) Change in Key ratios

Details of significant changes on following ratios (i.e., changes if 25 % or more as compared to immediately previous financial year

Explanations

The Company let its immoveable property of land and building for lease and had earned lease income only upto 31.10.2023 and the lease was terminated thereon. The Company carried out yarn trading business and generated revenue during the financial year 2023-24. There was reduction in current liabilities during the FY 2023-24. The current year loss is mainly due to increase in interest cost. During the FY 2022-23, the Company earned profit of Rs. 139.35 lakhs is mainly because of forfeiture of advances and net gain on fair value of investments and still there was an erosion of networth. Because of the stated reasons, there had been significant changes in the key ratios as compared to previous year.

Annual Return

Annual Return in the prescribed Form MGT-7 has been placed in the Company's website, under the web link: https://www.kandagirimills.com/myadmin/investers/KSML%20MGT-7%2031-03-2024.pdf

Number of Board Meetings

Four Board Meetings were held during the year under review and the gap between two meetings did not exceed one hundred and twenty days. The said meetings were held on May 29, 2023, August 11, 2023, November 9, 2023, and February 14, 2024. The necessary quorum was present for all the meetings.

Establishment of Vigil Mechanism

The Company has established a vigil mechanism for Directors and employees to report their genuine concerns. The policy has been uploaded on the Company's web site under the web link: http://www.kandagirimills.com/investors/ksml2014-wbp.pdf

Declaration by Independent Directors

Independent directors of the Company have submitted a declaration that each of them meets the criteria of independence as provided in Sub-Section (6) of Section 149 of the Act. Further, there has been no change in the circumstances which may affect their status as Independent director during the year.

The Board of Directors of the Company is of the opinion that the existing Independent Directors and the Independent Directors proposed for appointment/reappointment possess integrity, expertise and experience including the proficiency.

Compliance with Secretarial Standards

The Company has adhered compliance on applicable Secretarial Standards.

Secretarial Audit Report

Company has appointed CS T. Saraswathi, Practising Company Secretary as Secretarial Auditor, to conduct Secretarial Audit particularly with reference to compliance with Companies Act, 2013, and relevant SEBI Regulations for the financial year 2023-24. The report of the Secretarial Audit for the financial year 2023-24 in FORM MR-3 is annexed to this report and forms part of this report.

Audit Committee

Audit Committee as on 31^st March, 2024 comprises of three members viz., CA S. Elangovan, Independent Director as Chairman, Sri. S. Gnanashekaran, Independent Director and Dr. A. Sarayu, Non-Executive Director as Members. Further, during this year all the recommendations of the Audit Committee have been accepted by the Board.

Policy of Directors Appointment and Remuneration

Company's policy on Directors' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under section 178(3) of the Act are covered under Nomination and Remuneration Policy and it is available in the web-link of the Company http://www.kandagirimills.com/investors/ksml2015-nrp.pdf. Further, information about elements of remuneration package of individual directors is provided in the Annual Return in prescribed form MGT-7 uploaded in the Company's website www.kandagirimills.com.

Independent Auditors' Report and Secretarial Audit Report

The Independent Auditors report and Secretarial Audit Report contains qualified opinion with respect to 'Material uncertainty related to going concern', the explanation is provided as follows:

Though the Company incurred loss of Rs 176.74 lakhs and erosion in networth for the year ended March 31,2024, your Directors continued their effort to overcome the losses. As a part of measure, your Directors continued to do the yarn trading business and also exploring new business in the coming years. The promoters also started infusing funds and assured to contribute additional funds as and when necessary. Considering the above, the Board of Directors deem it fit to continue adoption of Going Concern Concept in preparation of the financial statements although the Statutory auditors have qualified their opinion with respect to the same.

The Auditors of the Company have not reported any fraud as specified under section 143(12) of the Companies Act, 2013.

Particulars of Employees

The information required under section 197 of the Act and rules made there-under, in respect of employees of as shown below:

(a) Employed throughout the year and in receipt of remuneration aggregating to Rs.1,02,00,000 or more - Nil

(b) Employed for part of the year and in receipt of remuneration of Rs.8,50,000 or more per month - Nil Note : Remuneration includes salary and value of perquisites and nature of employment is contractual.

Managerial Remuneration

Statistical Disclosures pursuant to Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 with subsequent amendments thereto is annexed with this report and forms part of this report.

Related Party Transactions

Transactions entered with related parties have been explained in Form AOC -2 annexed with this report and forms part of this report. Further, Policy on dealing with Related Party Transactions has been uploaded on the Company's website, under the web link: http://www.kandagirimills.com/investors/ksml2014-rptp.pdf

Board Evaluation

In accordance with the provisions of Companies Act, 2013 and SEBI (LODR) Regulations, 2015 read with "Guidelines on Board Evaluation issued by SEBI vide its Circular dt. January 5, 2017, In the separate meeting of the Independent directors, performance of non-independent directors, performance of the board as a whole and performance of the Chairman was evaluated taking into account the views of executive directors and nonexecutive directors.

The same was discussed and noted by the Board at the next Board Meeting followed the meeting of the Independent directors. Further, Board carried out an annual evaluation of its own performance, Board committees and individual directors pursuant to the provisions of Companies Act, 2013 and SEBI (LODR) Regulations, 2015 read with "Guidelines on Board Evaluation issued by SEBI vide its Circular dt. January 5, 2017

The performance of the Board was evaluated by the Board after seeking inputs from all the directors on the basis of criteria such as the Board Composition and structure, effectiveness of the Board processes, information and functioning etc. The performance of the Committees was evaluated by the Board after seeking inputs from the Committee members on the basis of the criteria such as the composition of committees, effectiveness of committee meetings etc. The Independent Directors were evaluated without the presence of the director getting evaluated.

Independent Director CA S. Elangovan is proposed for reappointment this year.

Exemptions from certain regulations of SEBI (LODR) Regulations, 2015

Since the Company's paid-up capital is less than Rupees Ten crores and networth is less than rupees twenty five crores, the regulations 17 to 27, clauses (b) to (i) and (t) of sub-regulation (2) of regulation 46 and para C, D and E of Schedule V of SEBI (LODR) Regulations, 2015 are not applicable to the Company. Accordingly, report on Corporate Governance Report is not provided.

Deposits

There is no Outstanding / fresh deposits accepted from the shareholders) covered under Chapter V of the Act and the same has been furnished herein below:-

i. Deposits at the beginning of the year on 01^st April, 2023 : NIL

ii. Deposits Accepted from shareholders during the year (2023-24) : NIL

iii. Deposits repaid during the year (2023-24) : NIL

iv. Deposits outstanding at the end of the financial year on 31^st March, 2024 : NIL

v. Remained unpaid or unclaimed as at the end of the year : NIL

vi. Any default in repayment of deposits or payment of interest thereon during the year : NIL

Company has duly complied with the provisions of section 73 of the Companies Act, 2013 read with relevant rules with respect to fixed deposits.

The following are the details of deposits accepted/renewed from the Directors:

i. Deposits at the beginning of the year on 01^st April, 2023 : Rs. 1441.57 lakhs

ii. Deposits accepted from Directors during the year (2023-24) : Rs 4.70 lakhs

iii. Deposits repaid during the year (2023-24) : Rs 35.00 lakhs

iv. Deposits outstanding at the end of the financial year on 31^st March, 2024 : Rs. 1411.27 lakhs

v. Remained unpaid or unclaimed as at the end of the year : NIL

vi. Any default in repayment of deposits or payment of interest thereon during the year : NIL Cost Audit Report

The total income of the Company for the FY 2022-23 is Rs. 4.49 crore which is below Rs. 35 crore and accordingly the company did not come under the purview of both maintenance of cost records and audit of cost records for the FY 2023-24. Further, the total income of the Company for the FY 2023-24 is Rs. 2.96 crores which is below Rs. 35 crore and accordingly the company will not come under the purview of both maintenance of cost records and audit of cost records for the FY 2024.25.

Directors

On the recommendation of Nomination and Remuneration committee, Board has appointed Sri S. Sivakumar as an Additional Director (Non-Executive) of the Company with effect from 14.02.2024 to hold office upto the ensuing 48^th AGM of the Company. Except this appointment, there is no other change in the Board of Directors during the FY 2023-24.

On the recommendation of Nomination and Remuneration committee, Board has recommended for appointment of Sri S. Sivakumar as a Non-Executive Director of the Company, liable to retire by rotation and included the resolution in the notice of 48^th AGM for member's approval.

At the 43^rd AGM of the Company held on 11.08.2019, Independent Director Sri. S. Gnanasekharan was reappointed for five consecutive years from 11.08.2019 to 10.08.2024. Accordingly the tenure of Independent Director Sri. S. Gnanasekharan ends on 10.08.2024

At the 44^th AGM of the Company held on 23.09.2020, with the approval of shareholders Dr. A. Sarayu was appointed as Non-Executive Director of the Company, liable to retire by rotation and CA S. Elangovan was appointed as Non-Executive Independent Director of the Company to hold office upto the conclusion of 48^th AGM of the Company. On the recommendation of Nomination and Remuneration Committee, Board of Directors have recommended for reappointment of Independent Director for a term of one year from 28.09.2024 to 27.09.2025 and included the resolution in the notice of 48^th AGM for member's approval. Considering the tenure completion of Chairman - Non-Executive Independent Director CS S. Gnanashekaran on 10-08-2024, on the recommendation of Nomination and Remuneration Committee, Board of Directors at their meeting held on 08.08.2024 passed resolution for appointment of Non-Executive Independent Director CA S. Elangovan as Chairman of the Company with effect from 10.08.2024.

Non-Executive Director Sri S. Devarajan retires by rotation at this ensuing (48^th) Annual General Meeting of the Company and being eligible offers himself for reappointment. The resolution has been placed in the notice of 48^th AGM for member's approval.

On the recommendation of Nomination and Remuneration committee, Board has appointed CS Nattery Srinivasan Poornima as an Additional Director (Non-Executive, Independent) of the Company with effect from 08.08.2024 to hold office upto the ensuing 48^th AGM of the Company. Further, on the recommendation of Nomination and Remuneration committee, Board has recommended for appointment of CS Nattery Srinivasan Poornima as a Non-Executive Independent Director of the Company for a term of one year from 08/08/2024 to 07/08/2025, not liable to retire by rotation and included the resolution in the notice of 48^th AGM for member's approval.

Company's Code of Conduct applicable to the board has been adopted by the board and all directors of the company have confirmed compliance with the Code of Conduct.

Sri R. Selvarajan was reappointed as Managing Director of the Company at the 45^th AGM of the Company held on 25.09.2021 for a period of three years (from 01.10.2021 to 30.09.2024). On the recommendation of Nomination and Remuneration Committee, Board of Directors have recommended for reappointment of Managing Director for a period of one year from 01.10.2024 to 30.09.2025 and included the resolution in the notice of 48^th AGM for member's approval.

Key Managerial Personnel

MD and CFO didn't receive any remuneration during the financial year 2023-24.

Auditors

At the 46^th AGM of the Company held on 24-09-2022, the members had approved the appointment of M/s Krishnen & Associates, Chartered Accountants as Statutory Auditors of the Company for conduct of Statutory Audit of the Company for five consecutive years from the financial year 2022-23 to financial year 2026-27.

Statutory Auditors M/s Krishnen & Associates, Chartered Accountants have confirmed their eligibility and willingness to continue their office for the FY 2024-25. On the recommendation of the Audit Committee, Board is placing the resolution for the remuneration payable to the statutory Auditors for the FY 2024-2025 before the member's for approval

Particulars of Loans, Guarantees or Investments under Section 186 of the Companies Act, 2013

Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the note 41 of the notes to the Standalone financial statements.

Disclosure as per Sexual Harassment of Women at Workplace (Prevention, Prohibition and 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 Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules framed thereunder. The Company has set up a Committee for addressing issues related to women and during the financial year 2023-24, there were no complaints received on sexual harassment.

Performance of Associate Company

Your Company has an associate M/s SPMM Healthcare Services Private Limited within the meaning specified under Section 2 (6) of Companies Act, 2013. M/s SPMM Healthcare services private Limited has recorded a total revenue of Rs. 300.62 lakhs during the year 2023-24 as against Rs. 319.32 lakhs in the previous year and profit after tax of Rs. 10.31 lakhs during the year 2023-24 as against Rs. 10.00 lakhs in the previous year. A separate statement containing the salient features of the financial statement of the associate in FORM AOC -1 has also been annexed with this report as per the requirements of provisions of section 129 of the Companies Act, 2013 and forms part of this report.

Significant and Material Orders passed by the Courts or Tribunals impacting the Company : NIL

Material Changes and Commitments during the year, if any, occurred between the end of the year and the date of this report

There were no material changes and commitments between the end of the period under review and the date of this report which could have an impact on the Company's operation in the future or its status as a "going concern".

Conservation of energy, technology absorption, Research and development and foreign exchange earnings and outgo : NIL

Credit rating of securities

The necessary to obtain credit rating does not arise to the Company during the year under review.

Designated Person for Significant Beneficial Ownership

Pursuant to the Companies (Management and Administration) 2^nd Amendment Rules, 2023, Ms. J. Asifa, Company Secretary of the Company shall be responsible for furnishing and extending cooperation for providing information to the Registrar of Companies or any other authorised officer with respect to beneficial interest in shares of the Company.

General Disclosures

• There is no proceeding initiated or pending under the Insolvency and Bankruptcy Code, 2016

• There was no instance of onetime settlement with any Bank or Financial Institution

Annexures to this Report

The following are the annexures to this report

1. Director's Responsibility Statement in Annexure 1

2. Statement containing salient features of the financial statement of associate company (Form AOC - 1) in Annexure 2

3. Form AOC - 2 in Annexure 3

4. Secretarial Audit Report (Form MR-3) in Annexure 4

5. Particulars of Remuneration in Annexure 5

6. MD/CFO Certification in Annexure 6

Cautionary Note

Statements in the Directors' report and the Management discussion and analysis describing the Company's objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Actual results might differ materially from those either expressed or implied in the statement. Important factors that could influence the Company's operations include global and domestic economic conditions, government regulations, tax laws, economic developments within the country and other related factors such as litigation and industrial relations.

Acknowledgement

Directors of your Company record their sincere appreciation of the dedication and commitment of all employees. Your directors thank the Management, Shareholders, Customers, Suppliers, Bankers and other stakeholders for their continued support during the year. The directors of your company thank Central/State Governments and other government agencies for their support and look forward to their continued support in future.