Lotus Chocolate Company Ltd

Dear Members,

The Board of Directors present the Company's Thirty Fourth Annual Report and the Company's audited financial statements for the financial year ended on March 31,2023.

The Company's financial performance for the year ended March 31, 2023 is summarized below:

The Financial Statements of the Company for the financial year ended March 31, 2023, have been prepared in accordance with the applicable Indian Accounting Standards (Ind AS) and the provisions of Companies Act, 2013.

During the year under review, the operating turnover of the Company decreased by 27.88% to Rs. 62.72 crore as compared to Rs. 86.98 crore in the previous year.

The Company incurred a loss for the year amounting to Rs. 6.95 crore as compared to profit of Rs. 6.01 crore in the previous year.

The Company continues its business of manufacturers of the finest chocolates, cocoa products and cocoa derivatives. The Company supplies cocoa and chocolate products, starting from the sourcing of fine quality cocoa beans to processing of cocoa beans and delivering the finest chocolates. The Company has a fully integrated manufacturing facility and is built with the best technologies and expertise from across the globe.

In view of the losses incurred, the Board of Directors of your Company has not recommended any dividend for the financial year 2022-23. TRANSFER TO RESERVES

During the year under review, no amount has been transferred to the Reserves of the Company.

There was no change in the nature of business carried on by the Company during the year under review.

There have been no material changes and commitments affecting the financial position of the Company between the end of the financial year to which the financial statements relates and date of this Report.

Reliance Consumer Products Limited (Rs.RCPLRs.) entered into a Share Purchase Agreement (SPA) dated December 29, 2022, with Mr. Ananth P Pai and Mr. Prakash P Pai (Rs.Erstwhile PromotersRs.) to acquire from the Erstwhile Promoters 65,49,065 Equity Shares of the Company constituting 51% of the total equity share capital of the Company. Further, RCPL also entered in an Investment Agreement with the Company and certain members of the promoter group of the Company and their affiliate entity (Rs.Promoter Group SubscribersRs.), in terms of which RCPL and the Promoter Group Subscribers would each infuse Rs.25,39,66,000 and subscribe to 2,53,96,600, 0.01% - 20 year non-convertible non-cumulative redeemable preference shares of INR 10 each, at par. Additionally, RCPL entered into a Shareholders Agreement (SHA) dated December 29, 2022, with the erstwhile Promoters and the other members of the promoter group of the Company in terms of which on the Closing Date (as defined in the SPA), RCPL shall become the Rs.PromoterRs. of the Company and shall be in sole control over the Company.

Further to the execution of the SPA and SHA, RCPL made an open offer to the public shareholders of the Company in terms of the SEBI Takeover Regulations and on April 6, 2023, completed the acquisition of 130 equity shares of the Company under the open offer.

The Company also entered into a share purchase agreement dated December 29, 2022, with Soubhagya Confectionary Private Limited (Rs.SCPLRs.) and its shareholders consisting of the erstwhile Promoters and certain members of the promoter group of the Company for acquiring 100% of the equity share capital of SCPL for an aggregate consideration of Rs.18 crore

Management Discussion and Analysis Report for the year under review as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Rs.Listing RegulationsRs.) is presented in a separate section forming part of the Annual Report.

The Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013, i.e. within the meaning of Section 2(31) of the Companies Act, 2013 read with Rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014 and as such there are no such overdue deposits outstanding as on 31^st March 2023.

The Board as on March 31, 2023 comprised of 6 (Six) Directors out of which 2 (Two) are Independent Directors, 3 (Three) are NonExecutive Directors and 1 (One) is an Executive Director.

During the year under review, based on the recommendations of the Nomination and Remuneration Committee, the Board had appointed Mr. Admala Surya Prakash Reddy (DIN: 07567290) as Non-Executive Director of the Company with effect from August 05, 2022 and his appointment was approved by the shareholders of the Company in subsequent annual general meeting on September 30, 2022.

During the year under review, Mr. Vivekanand Narayan Prabhu resigned as the Chief Financial Officer with effect from June 30, 2022 and was re-inducted as the Chief Financial Officer of the Company with effect from December 5, 2022.

As on March 31, 2023, the following are the Key Managerial Personnel of the Company as per the provisions of the Act and rules made thereunder:

• Mr. Ram Subramanya Ganpath (DIN: 02395478), Whole-time Director

• Mr. Vivekanand Narayan Prabhu, Chief Financial Officer

• Mr. Subodhakanta Sahoo, Company Secretary

The Company has received requisite declarations from Independent Directors of the Company, confirming that:

a) they meet the criteria of independence prescribed under the Act and the Listing Regulations; and

b) they have registered their names in the Independent DirectorsRs. Databank.

The Company has devised, inter alia, the following policies viz.

i) Policy on Appointment of Directors and Senior Managerial Personnel and their Remuneration

ii) Policy relating to the Remuneration for the Whole-time Director, KMP and Senior Management Personnel

The aforesaid policies are available on the Company's website and can be accessed at https://www.lotuschocolate.com/documents/policies/Nominations-and-Remuneration-Policv.pdf

There has been no change in the aforesaid policies during the year.

As per the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended from time to time the Nomination and Remuneration Committee laid down criteria for performance evaluation of individual director(s), the board and its committee(s). Accordingly, an annual evaluation was carried out for the BoardRs.s performance, its Committees and individual director(s). The Board has carried out the annual performance evaluation on parameters such as level of engagement and contribution, independence of judgement, safeguarding the interests of the Company and its minority shareholders etc.

The Company has followed the applicable Secretarial Standards, i.e. SS-1 and SS-2, relating to Rs.Meetings of the Board of DirectorsRs. and Rs.General MeetingsRs. respectively.

8 (Eight) Meetings of the Board of Directors were held during the year under review. The particulars of the meetings held and attended by each Director are detailed in the Corporate Governance Report forming part of the Annual Report.

The Company has several committees, which have been established as part of best Corporate Governance practices and to comply with the requirements of the relevant provisions of applicable laws and statutes:

The Committees and their composition as on March 31,2023 are as follows:

• Audit Committee

The Audit Committee comprised of Mr. Bharathan Rajagopalan Thatai (Chairman), Mr. Venkatapathi Raju Gottemukkala and Ms. Usha Abbagani.

During the year under review, all the recommendations made by the Audit Committee were accepted by the Board.

• Corporate Social Responsibility Committee

The Corporate Social Responsibility Committee comprised of Mr. Bharathan Rajagopalan Thatai (Chairman), Mr. Gangasani Sudhakar Reddy and Ms. Usha Abbagani.

• Nomination and Remuneration Committee

The Nomination and Remuneration Committee comprised of Mr. Venkatapathi Raju Gottemukkala, (Chairman), Mr. Bharathan Rajagopalan Thatai and Ms. Usha Abbagani.

• StakeholdersRs. Relationship Committee

The StakeholdersRs. Relationship Committee comprised of Ms. Usha Abbagani, (Chirperson), Mr. Venkatapathi Raju Gottemukkala and Mr. Subramanya Ram Ganpath.

• Risk Management Committee

The Risk Management Committee comprised of Mr. Gangasani Sudhakar Reddy, (Chairman), Ms. Usha Abbagani and Mr. Subramanya Ram Ganpath.

The details of the dates of the meetings, attendance and terms of reference of each of the Committees and changes in the composition of the Committees during the year under review are given in the Corporate Governance Report forming part of the Annual Report.

Further, during the year under review, there are no such cases where the recommendation of any Committee of the Board, has not been accepted by the Board.

The Company has not given any loan or guarantee, made investment or provided security in connection with loan to any other body corporate or person as prescribed under Section 186(2) of the Act.

All the contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an armRs.s length basis.

During the year under review, the Company had not entered into contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on Materiality of Related Party Transactions or which is required to be reported in Form No. AOC-2 in terms of Section 134(3)(h) read with Section 188 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014.

The Company has made full disclosure of transactions with the related parties as set out in Note 30 and 33 of Financial Statement, forming part of the Annual Report.

There were no materially significant related party transactions which could have potential conflict with interests of the Company at large.

The Company's Policy on Materiality of Related Party Transactions and on dealing with Related Party Transactions is available on the website of the Company and can be accessed at: https://www.lotuschocolate.com/documents/policies/Policv-of-Materialitv-of-RPT.pdf

M/s. VDNR & Associates, Chartered Accountants (Firm Registration No. 011251S) were appointed as the Statutory Auditors of the Company for a term of 5 consecutive years at the Annual general Meeting held on September 30, 2022. The Auditors have confirmed that they are not disqualified from continuing as Auditors of the Company.

The Notes on financial statements referred to in the Auditor'sReport are self-explanatory and do not call for any further comments. The Auditor'sReport does not contain any qualification, reservation, adverse remark or disclaimer.

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company had appointed Mrs. Rakhi Agarwal, Company Secretary in Whole-time Practice to undertake the Secretarial Audit of the Company for the financial year 2022-23. The Secretarial Audit Report is annexed to this report as “Annexure-IFRs..The Secretarial Audit Report does not contain any qualification, reservation or adverse remarks.

The Company is committed to maintain the highest standards of Corporate Governance and adheres to the Corporate Governance requirements set out by the Securities and Exchange Board of India (Rs.SEBIRs.). The report on Corporate Governance as stipulated under the Listing Regulations forms part of this Annual Report.

The Certificate from a Practicing Company Secretary confirming compliance with the conditions of Corporate Governance is attached to the report on Corporate Governance annexed to the Annual Report as “Annexure-IV”.

Pursuant to Section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014 (as amended), a copy of the draft Annual Return of the Company for the financial year 2022-23 is available on the website of the Company and can be accessed at: http://www.lotuschocolate.com/investor relation.

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations.

The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby further strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.

The Board has laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively. Your Company has adopted policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures.

The Board of the Company has formed a Risk Management Committee to frame, implement and monitor the risk management policy/ plan for the Company and ensuring its effectiveness. The Risk Management Committee oversees the risk management process including risk identification, impact assessment, effective implementation of the mitigation plans and risk reporting. The Audit Committee has an additional oversight in the area of financial risks and controls. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. The development and implementation of risk management policy has been covered in the Management Discussion and Analysis Report, which forms part of this Annual Report.

The Company has adopted a Whistle Blower Policy to provide a formal mechanism to the Directors and employees to report concerns about unethical behaviour, actual or suspected fraud or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism and provides direct access to the Chairperson of the Audit Committee in exceptional cases. It is affirmed that no personnel of the Company has been denied access to the Audit Committee. The Whistle Blower Policy aims at conducting the affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behaviour. The Policy is available on the Company's website and can be accessed at: https://www.lotuschocolate.com/documents/policies/Whistle-blower-Policv.pdf.

During the year under review, no protected disclosure concerning any reportable matter in accordance with the Vigil Mechanism and Whistle Blower Policy of the Company was received by the Company.

The Corporate Social Responsibility (Rs.CSRRs.) CommitteeRs.s prime responsibility is to assist the Board in discharging its social responsibilities by way of formulating and monitoring implementation of the objectives set out in the Rs.Corporate Social Responsibility PolicyRs. (Rs.CSR PolicyRs.).

During the year under review, on the recommendation of CSR Committee, the Board of Directors of the Company at its meeting held on January 31, 2023 approved and adopted revised CSR Policy of the Company, which may be accessed on the Company's website at https://www.lotuschocolate.com/documents/policies/LCCL-CSR-Policy.pdf.

The CSR Policy of the Company, inter alia, covers CSR objectives, vision, mission and also provides for governance, implementation, monitoring and reporting framework.

The Annual Report on CSR activities is annexed herewith and marked as Annexure-I to this Report.

The information on Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo required to be disclosed under Section 134(3)(m) of the Companies Act, 2013, read with Rule 8 of the Companies (Accounts) Rules, 2014 are provided in the “Annexure-In” forming part of this Report.

Your DirectorsRs. state that:

a) in the preparation of the accounts for the financial year ended March 31, 2023, the applicable accounting standards read with the requirements set out under Schedule III to the Act have been followed and there are no material departures from the same;

b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31,2023 and of the loss of the Company for the year ended on that date;

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 Rs.going concernRs. basis;

e) the Directors have laid down internal financial controls to be followed by the Company and that the financial controls are adequate and are operating effectively; and

f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws in place and were adequate and operating effectively.

In accordance with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 (Rs.POSH ActRs.) and Rules made thereunder, the Company has in place a policy which mandates no tolerance against any conduct amounting to sexual harassment of women at workplace. The Company has constituted Internal Complaints Committee to redress and resolve any complaints arising under the POSH Act. Training/awareness programs are conducted throughout the year to create sensitivity towards ensuring respectable workplace. During the year, no complaint was received by the Company.

The Company has not employed any individual whose remuneration falls within the purview of the limits prescribed under the provisions of Section 197 (12) of the Companies Act, 2013, read with Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Disclosures relating to remuneration and other details 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 forms part of this Report.

Having regard to the provisions of the second proviso to Section 136(1) of the Act and as advised, the Annual Report excluding the aforesaid information is being sent to the members of the Company. Any member interested in obtaining such information may address their email to: info@lotuschocolate.com.

During the year under review:

1) The Company had not issued any equity shares with differential rights as to dividend, voting or otherwise.

2) The Company had not issued any shares (including sweat equity shares) to directors or employees of the Company under any scheme.

3) The Company had not issued any debentures, bonds, warrants or any other convertible securities.

4) The Company does not have any scheme of provision of money for the purchase of its own shares by employees or by trustees for the benefit of employees.

5) No significant and/or material order was passed by any Regulator/Court/Tribunal which impacts the going concern status of the Company or its future operations.

6) No fraud has been reported by Auditors to the Audit Committee or the Board.

7) There is no application made / proceeding pending under the Insolvency and Bankruptcy Code, 2016.

8) There was no instance of one-time settlement with any Bank or Financial Institution.

9) The Company does not have any subsidiary, joint venture or an associate company.

10) Maintenance of cost records as prescribed by the Central Government under Section 148(1) of the Act is not applicable to the Company.

Your Directors wish to place on record their appreciation to all employees for their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the employees have enabled the Company to remain at the forefront of the industry, despite increased competition from several existing and new players.

Place : Hyderabad

Date : 22.05.2023