Subros Ltd

Dear Members,

Your Directors are pleased to present the 39^th Annual Report of the Company together with the audited financial statements for the year ended March 31, 2024.

FINANCIAL RESULTS

BUSINESS OPERATIONS

The net revenue from operations for the financial year ended March 31, 2024 is Rs. 3070.57 Crores as against Rs. 2806.28 Crores in the previous financial year. The Net Profit before Tax is Rs. 140.70 Crores as compared to Rs. 71.02 Crores in the previous financial year.

The Indian automobile industry is setting out on a journey with hopes for a sustained growth momentum. Despite the challenging operating environment characterized by the ongoing geo-political issues and supply chain disruptions, the Company continued to demonstrate resilience and agility. It has successfully launched several new products tailored to meet the evolving needs of the customers, strengthening it's position in the automotive sector.

During the year, the Company continued to focus on enhancing operational efficiency and productivity across all it's manufacturing facilities. The Company relentless pursuit of excellence has enabled it to improve product quality, reduce lead times, and optimize costs, thereby enhancing the competitiveness in the market.

There has been no change in the nature of business of the Company.

EXTERNAL ENVIRONMENT AND ECONOMIC OUTLOOK

The Indian automobile industry has historically been a good indicator of how well the economy is doing, as the automobile sector plays a key role in both macroeconomic expansion and technological advancement. The rising logistics and passenger transportation industries are driving up demand for commercial vehicles. India is also a prominent auto exporter and has strong export growth expectations for the near future.

In addition, several initiatives by the Government of India such as the Automotive Mission Plan 2026, scrappage policy, and production-linked incentive scheme in the Indian market are expected to make India one of the global leaders in the coming years.

India enjoys a strong position in the global heavy vehicles market as it is the largest tractor producer, second-largest bus manufacturer, and third-largest heavy truck manufacturer in the world. India's annual production of automobiles in FY2023-24 was 23.8 million vehicles. India has a strong market in terms of domestic demand and exports.

The passenger vehicles (cars) in India reached an all-time high in the financial year 2023-24, totaling more than 4.2 million units. This surge was particularly notable in the sales of Sports Utility Vehicles (SUVs), which accounted for a significant portion of the overall sales.

SUVs remain the prime driver behind the healthy volumes in India. In 2024, SUV sales witnessed a remarkable 24% growth, reaching 2 million units and accounting for almost half of the country's passenger vehicle (PV) volume. This surge was driven by automakers' efforts to meet consumer preferences through the introduction of new SUV offerings that cater to various market segments. All major OEM's have followed the same strategy by following the customer preference resulted into this surge.

The Ministry of Road Transport and Heavy Industry has issued a notification for all new trucks to be manufactured on or after October 1, 2025, must be equipped with AC cabins for drivers. Truck drivers play a key role in the transport sector for India and there is a need to address issues regarding their working conditions and safety. This notification will boost Company's efforts to expand its base of customers and at the same time increase its share of business in this segment.

Indian Railway being a Lifeline of nation has been continually making innovations in its Technology, Service, Operations and Overall System to lead the nation on path to a modern and ever progressing future. Government push on Rail infrastructure has made it a priority segment for the Company and it has already received the product and facility approval from RDSO. The Company has secured orders for both coach and Cab AC that will be adding significant orders over a period of time both in terms of value and product range.

The future outlook for passenger vehicle and commercial vehicle remains positive, though growth is likely to moderate in FY 2024-25. The BEV/Hybrid/CNG (alternate fuel) vehicle penetration is expected to increase in coming years due to government push through various regulations & schemes and also increase in customer acceptability for clean or alternate fuel vehicles. Business development in EV and Hybrid space is key focus points with products segments including Passenger Vehicle, Bus, Truck and Tractor. It also presents unique export opportunities for the Company to have global presence.

EXPANSION AND FUTURE PROSPECTS

The Company is poised for a strategic expansion that will propel it into new markets and solidify it's position as a leader in the automotive sector. The Company's expansion plan is driven by a comprehensive market analysis that identifies opportunities for growth. The Company aim to capitalize on these opportunities by leveraging it's core strengths in innovation, quality, and customer service.

The Company is gearing up for meeting future customer demands in-line with customer plans and market outlook. New product development for IC engine & EV for Passenger vehicles, Bus, Truck and Off-road are in progress for various OEM Models and are in-line with their project milestones. New Projects for Rail Cab AC & Coach AC are also under development & currently in execution.

The Company's largest customer Maruti Suzuki has announced huge expansion which is part of their vision to achieve a production volume of 4 million vehicles by 2030, doubling its output over next six years. Regarding this, expansion plans in Haryana and Gujarat. The Company is also aligning with all these new opportunities and planning to expand it's capacities at all locations. The Company is focused on localization and cost optimization activities across all product segments to marginalize impact of global economic factors. This capacity expansion & product optimization with focus on Make in India will ensure sufficient capacity is available for all our customers in line with growing market demand across all the segments.

DIVIDEND

Your Company has earned a net profit (after tax) of Rs. 97.66 Crores as against Rs. 48.09 Crores in the previous year. The Board has recommended a dividend of Rs. 1.80 per share (90% on the face value of equity shares of Rs. 2 each) for the financial year ended March 31, 2024, as against Rs. 1.00 per share (50% on the face value of equity shares of Rs. 2 each) in the previous year.

The dividend, if approved by the Members at the ensuing Annual General Meeting (AGM), shall absorb a sum of Rs. 11.74 Crores.

The Dividend Distribution Policy of the Company is available on the Company's website at www.subros.com/investors.html.

TRANSFER TO RESERVES

Your Company proposes to transfer Rs. 1.50 Crores to the General Reserve.

MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION BETWEEN THE END OF THE FINANCIAL YEAR AND DATE OF THE REPORT

There were no material changes and commitments that affect the financial position of the Company subsequent to the date of financial statement.

CAPITAL STRUCTURE

During the year there is no change in the Capital Structure of your Company.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year under review the following changes took place in the Board and Key Managerial Personnel of your Company:

i. Mr. Arvind Kapur was re-appointed as Independent Director of the Company for a second consecutive term commencing from 6^th February, 2024.

ii. Mr. Girish Narain Mehra, Mr. K.R. Ramamoorthy, Mr. M.A. Pathan, Mr. Shailendra Swarup and Mrs. Meena Sethi, Independent Directors have completed their second term of five consecutive years on 31^st March, 2024.

iii. Justice Arjan Kumar Sikri (Retd), Ambassador Deepa Gopalan Wadhwa, IFS (Retd), Mr. Ashok Lavasa, IAS (Retd), Mrs. Vanaja Narayanan Sarna, IRS (Retd) and Ms. Smita Piyush Mankad were appointed as Independent Directors with effect from 1^st April, 2024.

iv. Mr. Kamal Samtani was appointed as Company Secretary & Compliance Officer (KMP) of the Company with effect from 28^th April, 2023.

The Board places on record the great appreciation for outgoing Independent Directors for their guidance as independent director(s) and thanked them for their dedication to the Company.

In the opinion of the Board, Independent Directors appointed/ re-appointed during the year possess requisite qualification, positive attributes, independence, relevant skills, knowledge, experience including the proficiency & competency, fulfillment of functions, ability to function as team, initiative, commitment, substantial contribution & integrity.

Pursuant to the provisions of Section 152 other applicable provisions of the Companies Act, 2013 and Articles of Association of the Company, Dr. Jyotsna Suri (DIN: 00004603) Director of the Company retires by rotation at the ensuing AGM and being eligible, offers herself for re-appointment.

Her brief resume as required under the Listing Regulations and Secretarial Standards is provided in the Notice of the 39^th AGM of the Company. The requisite resolution pertaining to the re-appointment appears at the respective item of the Notice along with the Statement and is recommended to the Members for approval.

Declaration from Independent Directors:

The Company has received declaration(s) from all the Independent Director(s) of the Company as laid down under Section 149(7) of the Companies Act, 2013 read with Rule 6 of the Companies (Appointment and Qualification of Directors), 2014 along with Regulation 16 and Regulation 26 of the listing Regulations, confirming that they meet the criteria as laid down under Section 149(6) of the Companies Act, 2013 and the Listing Regulations.

Board Meeting:

The Board of Directors met six times during the financial year 2023-24, the details of which are given in the Corporate Governance Report which forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed under the Companies Act, 2013.

COMMITTEES OF THE BOARD

The Board has Committees i.e Audit Committee, Nomination & Remuneration Committee, Stakeholders Relationship Committee, Corporate Social Responsibility Committee and Risk Management Committee. The Composition, terms of reference and number of meetings of the Board Committees is described in Corporate Governance Report as stipulated under Listing Regulations, which forms integral part of this Report.

Policy on Directors' Appointment and Remuneration: The policy of the Company on Directors' and Senior Management appointment and remuneration including criteria for determining qualification, positive attributes and other matters is available on the website www.subros.com/investors.html of the Company.

ANNUAL RETURN

The Annual Return as on March 31, 2024, in terms of provisions of Section 134(3) and other applicable provisions of the Companies Act, 2013, read with Rules thereto is available on website of the Company www.subros.com/investors.html and forms integral part of this Annual Report.

DIRECTORS' RESPONSIBILITY STATEMENT

As required under Section 134 (5) of the Companies Act, 2013, your Directors hereby confirm that:

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

b) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;

c) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

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

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

SUBSIDIARIES AND JOINT VENTURES

DENSO Subros Thermal Engineering Centre India Private Limited, a Joint Venture, achieved revenue of Rs. 17.48 Crores during the FY 2023-24 as against Rs. 17.62 Crores in the previous year. The Joint Venture achieved a profit of Rs. 0.31 Crores during the year as against Rs. 0.45 Crores decreased by 31% due to increase in staff cost, on account of early retirement, impact of actuarial valuation and expat bonus provision. Your Company is holding 26% shares in this Joint Venture.

The Company does not have any subsidiary.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Companies Act, 2013 and IND AS 110 - Consolidated Financial Statements read with IND AS 31 - Interest in Joint Ventures, your Directors have pleasure in attaching the Audited Consolidated Financial Statements, which forms a part of this Annual Report.

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

The information in terms of Section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Company (Accounts) Rules, 2014 relevant rules is annexed herewith as Annexure-1 and forms integral part of this report.

AUDITORS AND AUDITORS' REPORT

Statutory Auditors: As per the provisions of Section 139 of the Companies Act, 2013, the shareholders have approved the re-appointment of M/s Price Waterhouse Chartered Accountants LLP, as Statutory Auditors of the Company for the second term of five consecutive years from the conclusion of the 37^th Annual General Meeting till the conclusion of 42^nd Annual General Meeting.

The Auditors' Report to the Members for the year under review does not contain any qualification, reservation or adverse remark. The observations of the Auditors and the relevant notes on accounts are self-explanatory and therefore do not call for any further comments.

Cost Auditors: The Company has re-appointed M/s. Chandra Wadhwa & Company, Cost Accountants, as Cost Auditors of the Company to conduct the audit of cost records maintained by the Company for the FY 2024-25 in accordance with Section 148(1) of the Companies Act 2013. The ratification of remuneration payable to Cost Auditors for the FY 2024-25 is being sought from the Members of the Company at the ensuing AGM.

Secretarial Auditors: The Company has re-appointed

M/s. RSM & Co., Company Secretaries as Secretarial Auditors to conduct the audit of secretarial and related records of the Company for the FY 2024-25. The Secretarial Audit Report for the financial year ended March 31, 2024 is annexed as Annexure-2 and the same is self-explanatory. The said Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

The Statutory Auditors, Cost Auditors or Secretarial Auditors have not reported any frauds during the Financial Year 2023-24 under Section 143(12) of the Companies Act, 2013 and rules made thereunder.

DEPOSITS

During the year under review, your Company has neither invited nor accepted any deposits from the Public.

SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS

No significant material order was passed by the Regulators or Courts or Tribunals impacting the going concern status and Company's operations in future.

INTERNAL FINANCIAL CONTROLS

The adequacy of Internal Financial Controls is discussed in Management Discussion and Analysis, as stipulated under the Listing Regulations with the Stock Exchanges, which forms part of this Report.

LOANS, GUARANTEES OR INVESTMENTS

The Company has not given any inter- corporate loans and/or provided any guarantees. Details related to the investments made by the Company are given in Note 5(a)&(b)(ii) to the Standalone Financial Statements of the Company.

There is no proceeding pending under the Insolvency and Bankruptcy Code, 2016. There was no instance of one time settlement with any Bank or Financial Institution(s).

CORPORATE SOCIAL RESPONSIBILITY

The Company has formulated a Corporate Social Responsibility (CSR) Policy to undertake CSR initiatives as specified in Schedule VII of the Companies Act, 2013. The Company has constituted a robust and transparent governance structure to oversee the implementation of CSR Policy, in compliance with the requirements of Section 135 of the Companies Act, 2013. The Annual Report on CSR activities is annexed as Annexure-3 and forms integral part of this report. This Policy is placed on the website of the Company www.subros.com/ investors.html.

RISK MANAGEMENT

The Company has a risk management policy and framework is in place for identification and mitigations of risks. The Company's Enterprise Risk Management (ERM) framework aligns with ISO 31000:2018 Risk Standards to ensure proper identification & treatment of risk(s). The implementation of ERM Framework is continuously evolving and the Company has adapted the changing requirements & emerging risk(s). Every year Company carries the Benchmarking exercise for drawing insights from industry peers and forum which enable it to stay ahead of curve. The risk management process and structure ensure the identification & mitigation of Strategic, Operational, Financial & Regulatory risk(s).

The Company ensures the participation of teams across the organization to create culture of risk awareness and ownership. The Risk Registers and mitigation action implementation is reviewed at fixed frequency by the management and commitment to resource allocation ensure that risk management remains a priority.

VIGIL MECHANISM

Pursuant to Section 177(9) of the Companies Act, 2013, the Company has established a Vigil Mechanism/ Whistle Blower Policy for directors, employees, suppliers, contractors and other stakeholders of the Company. The purpose and objective of this Policy is to cover serious concerns, unethical behavior, actual or suspected fraud that would have a larger impact on image and values of the Company due to incorrect financial reporting or improper conduct. The Whistle Blower Policy has been placed on the website of the Company www.subros.com/investors.html.

SEXUAL HARASSMENT

The Company has in place a Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Internal Committee has been set up to redress complaints received regarding sexual harassment. During the year the Company did not receive any complaint.

RELATED PARTY TRANSACTIONS

The Board of Directors has formulated a Related Party Transaction Policy for determining material related party transactions. The Related Party Transaction Policy is available on the website of the Company www.subros.com/ investors.html. A statement of all particulars of Contracts or Arrangements with material related parties referred to in Section 188(1) of the Companies Act, 2013, is annexed as Annexure-4 and forms integral part of this report.

LISTING

The Equity Shares of your Company continue to be listed on BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE). The listing fees for the financial year 2024-25 have been paid to the said stock exchanges.

ANNUAL EVALUATION

In compliance with the provisions of the Companies Act, 2013, Listing Regulations and Guidance Note issued by SEBI the Board has formulated a framework, inter alia, for formal evaluation of its performance and effective functioning of its committees and the Board of Directors.

In this regard the Board has, inter alia, carried out an annual evaluation of the performance of all the independent director(s). The Nomination & Remuneration Committee ("NRC"), inter alia, reviewed the performance of every directors and the Board as a whole and its committee(s). The Independent Directors, inter alia, reviewed performance of non-independent directors, the Board as a whole and its committees and assessed the quality, quantity and timeliness of flow of information between the Company's management and the Board.

The evaluation criteria of the performance of every director, Board & its committees included, inter alia, their structure/ composition, meeting availability and attendance, Commitment, Contribution, integrity, ability to function as a team, expertise drawn from diverse domains banking, administration, strategic and technical and bring specific knowledge & competencies relevant to the Company's business. The Board members participation and overall functioning was quite satisfactory and effective during the year under review. There are no specific observations on the Board evaluation carried out during the year as well as for the previous year.

CREDIT RATING

ICRA has upgraded the Long Term Ratings as [ICRA] AA "Stable" and revised Outlook from Positive to stable and re-affirmed the Short Terms Ratings as [ICRA] A1 + "Positive".

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosure in respect to remuneration and other details as per the provisions of Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annexure-5 to this Report having regard to the provisions of the second proviso to Section 136(1) of the Companies Act, 2013, the Annual Report excluding the said statement of employees under Section 197(12) of Companies Act, 2013 is being sent to the Members of the Company. The said information is available for inspection at the registered office of the Company during working hours and any Member interested in obtaining said statement may write to the Company Secretary at the registered office of the Company.

CORPORATE GOVERNANCE AND SHAREHOLDERS INFORMATION

The Company is committed to maintain the highest standards of corporate governance. The Company has complied with the corporate governance requirements, as stipulated under the Listing Regulations. A report on Corporate Governance along with a Certificate from the Practicing Company Secretaries regarding compliance on the conditions of corporate governance prescribed under Listing Regulations is annexed herewith and forms integral part of this Report. All Policies of the Company are available on the website of the Company www.subros.com/investors.html.

MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis, as required in terms of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to this Report.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

A report on adoption of responsible business practices in the interest of the social, governance and environmental perspective are as vital as their financial and operational performance. conforming to the requirements of the clause (f) of subregulation (2) of Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Business Responsibility and Sustainability Report for Financial Year 2023-24 is annexed herewith and forms integral part of this Report.

INVESTOR EDUCATION AND PROTECTION FUND

The disclosure of IEPF related activities during the year under review forms a part of the report on Corporate Governance.

COMPLIANCE WITH SECRETARIAL STANDARDS

The Company has complied with all the mandatorily applicable Secretarial Standards issued by the Institute of Company Secretaries of India on meetings of Board of Directors, its Committee(s) and General Meetings.

ACKNOWLEDGMENT

The Board extends heartfelt gratitude to the Company's valued customers, Maruti Suzuki India Limited, Tata Motors Limited, Mahindra & Mahindra Limited, Ashok Leyland Limited, Force Motors Limited, Renault Nissan Automotive India Private Limited and many more, for the trust and confidence reposed by them in the Management for their cooperation and support provided to the Company.

The Board acknowledge cooperation and support of the supplier base, vendors and Company's bankers HDFC Bank, ICICI Bank, State Bank of India, Kotak Mahindra Bank & other Banks and our collaborators, DENSO Corporation, Japan and Suzuki Motor Corporation, Japan for their continued support.

The Board conveys appreciation to all the Company's employees for their hard work, support and commitment towards the achievement of the performance and overall growth of the Company.

Last but not the least, the Board wishes to thank all the shareholders, business associates and other stakeholders for their long association during the growth journey of the Company.