Harsha Engineers International Ltd

To,

The Members,

The Board of Directors are pleased to present Integrated Annual Report together with the Audited Annual Accounts of the Harsha Engineers International Limited ("The Company") for the financial year ended March 31,2024.

1. FINANCIAL RESULTS

The Audited Standalone and Consolidated Financial Statements of the Company as on March 31,2024 are prepared in accordance with the relevant applicable IND AS and provisions of the Companies Act, 2013 ("the Act").

The Standalone and Consolidated performance during the financial year ended March 31,2024 has been as under:

2. PERFORMANCE AND OPERATION REVIEW CONSOLIDATED

The Company has achieved revenue from operations of Rs. 139,230 lakhs for the financial year ended March 31, 2024, an increase of 2.07% as compared to Rs. 136,402 lakhs in the previous financial year.

Profit after tax (PAT) for the financial year ended March 31, 2024 is Rs. 11,143 lakhs, a decrease of 9.61% as against Rs. 12,328 lakhs in the previous financial year.

Basic earnings per share (EPS) for the financial year ended March 31,2024 is Rs. 12.24 as against Rs. 14.59 in the previous financial year.

Diluted earnings per share (EPS) for the financial year ended March 31,2024 is Rs. 12.24 as against Rs. 14.59 in the previous financial year.

STANDALONE

The Company has achieved revenue from operations of Rs. 108,094 lakhs for the financial year ended March 31,2024, increase of 5.49% as compared to Rs. 102,472 lakhs in the previous financial year.

Profit after tax (PAT) for the financial year ended March 31,2024 is Rs. 12,691 lakhs, decrease of 1.15% as against Rs. 12,839 lakhs in the previous financial year.

Basic earnings per share (EPS) for the financial year ended March 31,2024 is Rs. 13.94 as against Rs. 15.19 in the previous financial year.

Diluted earnings per share (EPS) for the financial year ended March 31,2024 was Rs. 13.94 as against Rs. 15.19 in the previous financial year.

3. SIGNIFICANT ACTIVITIES IN 2023-24

The year under review would be remembered for the following significant activities in your Company:

• The Company has updated its registered office address. The new address is now Sarkhej- Bavla Road, Changodar, Sanand, Ahmedabad, Gujarat-382213, India.

• M/s. Harsha Engineers Advantek Limited, a wholly owned subsidiary of the Company ("Harsha Advantek") has acquired/agreed to acquire a nonagricultural land spanning approximately 100,161 sq. mtrs. near Bavla, Ahmedabad, Gujarat, India.

This land is intended for industrial use. Additionally, Harsha Advantek has commenced commercial production at its lease site in 4^th quarter of 202324.

• The Company has entered into a Share Subscription Agreement with M/s. Harsha Engineers Advantek Limited, a wholly owned subsidiary of the Company ("WOS"), on May 25, 2023. According to the agreement, the company has committed to investing up to a total amount of Rs. 350 crores in the WOS. This investment will be made through the subscription of Optionally Convertible NonCumulative Redeemable Preference Shares ("OCRPS") of WOS in one or more installments. The funds invested will be utilized by WOS to enhance its long-term capital base and support its working capital requirements. This investment aims to strengthen WOS's financial stability and provide the necessary funds for operational expenses. The Company has invested ' 70 crores in WOS as of March 31,2024 through issuance of OCRPS.

• The Company has entered into agreement with Goldi Solar Private Limited to jointly bid for the tender ACE (Ele/Mech)/Light &EEC/09/2023- 2024 issued by SMC (Surat Municipal Corporation for EPC of 10 MW (AC) Ground Mounted Grid Connected Solar Photovoltaic Power Plant with Land on lease at any location of Gujarat with comprehensive maintenance up to 10 years including free Maintenance during first year.

• The Company has transferred its equity investment of 3,297,050 shares, equivalent to a 25.9999% stake, in Sunstream Green Energy One Private Limited, an associate of the Company. The transfer was made to Sunstream Green Energy Private Limited ("Transferee") as per the Agreement for Sale of Shares dated February 16, 2024, at a price of Rs. 10 per share. As of March 31, 2024, the Company owns 10 equity shares in Sunstream Green Energy One Private Limited. Under the provisions of Companies Act 2013, the Company no longer holds the status of being an associate with said company.

• The Company has entered into an Agreement ("the Agreement") with Umbra Group S.p.A ("Umbra Group") on April 12, 2024. In accordance with the Agreement, the Company has been appointed as the exclusive authorized agency of Umbra Group for repair, marketing, promotion, and sale of industrial ball screws, linear actuators, electrospindles, milling heads or other manufactured components ("Products") within the territory of India and the Company wishes to market, promote, repair and sell the Products.

• M/s. HASPL Americas Corporation, a wholly owned subsidiary of the Company, has been officially terminated in accordance with the applicable laws. This has been confirmed by the certificate issued by the State Corporation Commission of Virginia on February 29, 2024.

• National Company Law Tribunal, Ahmedabad Bench (NCLT), in its order dated January 29, 2024, has dismissed Company Petition 156 of 2021 filed by Ganges International Private Limited (Operational Creditor) for the amount of Rs. 30,855,708 (inclusive of interest).

• The Company has been honored with an award in the category of "Most Improved Supplier" by Timken.

• The Company has been honored with the "Partner Performance Award" by JTEKT India for their exceptional efforts in "Best in Delivery".

• The Company has been recognized by ZF India with the "Outstanding Support to Materials Management India Strategy" award on January 8, 2024.

• The Company has been awarded the prestigious "Three Star Export House Status" by DGFT for a remarkable duration of 5 years.

• The Company was honored with the prestigious "Intelligent & Agile" category award by SKF India on March 18, 2024, during their Supplier Day.

• The Company was honored with the prestigious Best Supplier Award across all categories by NEI India during their Supplier Meet on March 22, 2024.

• The Company has successfully attained the ISO : 45001 certification on September 24, 2023.

• The Company has successfully obtained the TISAX label as issued by ENX portal in January 2024, after undergoing an assessment by Bureau Veritas (India) Pvt. Ltd., Auditor of TISAX.

• Mr. Altaf D. Ghachi, a skilled CNC Operator in the Stamping Division of the Company has been recognized with the esteemed RAJYA SHRAM SHRI AWARD for 2022-23 by the Department of Labour, Skill Development, and Employment, Government of Gujarat, Gandhinagar, on March 11, 2024 in recognition of his outstanding contributions to the field.

• The Company has been recognized for its commitment to sustainability by Schaeffler, earning an award in the 'Sustainability' category.#

#The award was presented in April 2024.

4. UTILISATION OF NET PROCEEDS OF THE INITIAL PUBLIC OFFER ("IPO")

As on March 31,2024, the main objects and utilisation of net proceeds of the IPO are as follows:

Note: The Company has not fully utilized the net proceeds from its Initial Public Offering (IPO) for the purposes stated in the Prospectus dated September 19, 2022, during 2023-24. Consequently, the Board of Directors and the Audit Committee, in their meeting held on February 8, 2024, have approved an extension of the deployment period for the IPO proceeds towards the objectives outlined in the Prospectus dated September 19, 2022, up to March 31,2026.

5. SHARE CAPITAL

The Authorised Share Capital of your Company as on March 31, 2024 stood at Rs. 1,000,000,000 divided into 100,000,000 equity shares of Rs. 10 each. The Issued Share Capital of your Company is Rs.910,441,050 divided into 91,044,105 equity shares of Rs. 10 each and the Subscribed and Paid-up Capital is Rs.910,441,050 divided into 91,044,105 equity shares of Rs. 10 each fully paid-up.

6. DIVIDEND

The Board of Directors have recommended a final dividend of Rs. 1 per equity share of Rs. 10 each fully paid up for the financial year ended on March 31,2024. The proposal is subject to the approval of shareholders at the ensuing Annual General Meeting. The final dividend on equity shares, if approved by the shareholders, would involve a cash outflow of Rs.910.44 lakhs.

7. DIVIDEND DISTRIBUTION POLICY

In terms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations"), the Board of the Company has adopted a Dividend Distribution Policy, which

is available on the website of the Company at https://www.harshaengineers.com/InvestorRelations/ company-policies.php

8. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

In terms of Section 125 of the Act and other applicable provisions, if any, of the Act including any statutory modifications or re-enactments thereof, during the financial year ended March 31,2024 the Company has not required to transfer any amount in the Investor Education and Protection Fund.

9. TRANSFER TO RESERVES

As permitted under the provisions of the Act, the Board does not propose to transfer any amount to general reserve for the financial year ended on March 31,2024.

10. MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITIONS BETWEEN THE END OF FINANCIAL YEAR AND DATE OF THE REPORT

There have been no other material changes and commitments which affect the financial position of the Company, that have occurred between the end of financial year to which the financial statements relates and the date of this report.

11. DETAILS OF SUBSIDIARY/HOLDING, ASSOCIATE AND JOINT VENTURE CEASED AND ACQUIRED DURING THE FINANCIAL YEAR

As on March 31,2024, the Company has three subsidiaries and a Joint Venture, the details of which are given below:

Note:

M/s HASPL Americas Corporation, a wholly owned subsidiary of the Company, has been officially terminated in accordance with the applicable laws. This has been confirmed by the certificate issued by the State Corporation Commission of Virginia on February 29, 2024.

The Company has transferred its equity investment of 3,297,050 shares, equivalent to a 25.9999% stake, in Sunstream Green Energy One Private Limited, an associate of the Company. The transfer was made to Sunstream Green Energy Private Limited ("Transferee") as per the Agreement for Sale of Shares dated February 16, 2024, at a price of Rs. 10 per share. As of March 31, 2024, the Company owns 10 equity shares in Sunstream Green Energy One Private Limited. Under the provisions of Companies Act, 2013, the Company no longer holds the status of being an associate with said company.

During the year under review, the Board of Directors reviewed the affairs of subsidiaries and joint venture. In accordance with Section 129(3) of the Act, the Company has prepared consolidated financial statements of the Company and all its subsidiaries and joint venture, which form part of the Annual Report. Further a statement containing the salient features of the financial statements of subsidiaries and joint venture in the prescribed Form no. AOC-1 is appended as ANNEXURE-A. The separate audited financial statements in respect of the subsidiary shall be kept open for inspection at the Registered Office of the Company. The Company will also make available these documents upon request by any Member of the Company interested in obtaining the same. The separate audited financial statements in respect of the subsidiary are also available on the website of the Company at https://www.harshaengineers.com/ InvestorRelations/financial-information.php. The Company has framed a policy for determining material subsidiaries, which has been available on the website of the Company at https://www.harshaengineers.com/ InvestorRelations/company-policies.php

12. DIRECTORS

The Board of Directors consists of 10 Directors, out of which 5 are Non-Executive and Independent Directors including one women Director and 5 are Executive and Non-Independent Directors including one women Director. The composition is in compliance with the Act and SEBI Listing Regulations.

In accordance with the provisions of Section 152 and other applicable provisions, if any, of the Act and the Articles of Association of the Company, Mr. Harish Rangwala (DIN:00278062) Managing Director and Mr. Vishal Rangwala (DIN:02452416) CEO & Whole-time Director of the Company are liable to retire by rotation at the ensuing Annual General Meeting, being eligible for re-appointment and both have offered themselves for the same.

13. PERFORMANCE EVALUATION

Pursuant to the provisions of the Act and SEBI Listing Regulations, the following performance evaluations were carried out:

a. Performance evaluation of the Board, Chairman and non-Independent Directors by the Independent Directors;

b. Performance evaluation of the Board, its committees, and Independent Directors by the Board of Directors.

The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report which forms part of this Annual Report.

14. REMUNERATION POLICY

The Board has, on the recommendation of the Nomination and Remuneration Committee, framed a policy for selection and appointment of Directors, Key Managerial Personnel and Senior Management and their remuneration. The Nomination Remuneration Evaluation Policy is available on the website of the Company at https://www.harshaengineers.com/ InvestorRelations/company-policies.php.

15. KEY MANAGERIAL PERSONNEL ("KMP")

Pursuant to the provisions of Section 2(51) and 203 of the Companies Act, 2013 read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 following persons are acting as Key Managerial Personnel ("KMP") of the Company as on March 31,2024.

During the year under review, there was no change to the KMP of the Company.

The term of Mr. Rajendra Shah, Mr. Harish Rangwala, Mr. Vishal Rangwala, Mr. Pilak Shah and Ms. Hetal Naik as a KMP will be expired on December 24, 2024. Hence proposal of their re-appointment for the period of five years with effect from December 25, 2024 has been attached in the Notice which forms part of this Annual Report.

16. NUMBER OF BOARD MEETINGS HELD

The Board of Directors duly met 4 (four) times during the financial year 2023-24. All the Board Meetings were held as per Section 173 of Act with all the relevant rules & regulations related to that. Secretarial Standard-1 (Board Meeting) and SEBI Listing Regulations are duly complied with.

The details of the meetings of the Board of Directors of the Company held and attended by the Directors during the financial year 2023-24 are given in the Corporate Governance Report which forms part of this Annual Report.

17. INDEPENDENT DIRECTOR

The Company has complied with the definition of Independence according to the provisions of Section 149(6) of the Act and SEBI Listing Regulations. The Company has also obtained declarations from all the Independent Directors pursuant to Section 149(7) of the Act and SEBI Listing Regulations. All Independent Directors have provided declarations that they meet the criteria of independence as laid down under Section 149(6) of the Act and SEBI Listing Regulations.

18. FAMILIARIZATION PROGRAM FOR THE INDEPENDENT DIRECTOR

The Independent Directors have been updated with their roles, rights and responsibilities in the Company by specifying it in their appointment letter along with necessary documents, reports and internal policies to enable them to familiarize with the Company's procedures and practices. The Company has through presentations, at regular intervals, familiarized and

updated the Independent Directors with the strategy, operations and functions of the Company and Engineering Industry as a whole. The details of such familiarisation programs for Independent Directors are explained in the Corporate Governance Report which forms part of this Annual Report.

19. COMMITTEES

During the financial year, the Board has 6 Committees: Audit Committee, Nomination & Remuneration Committee, Stakeholder Relationship Committee, Corporate Social Responsibility Committee, Risk Management Committee and Management Committee. During the financial year, all recommendations of the Committees of the Board which were mandatorily required have been accepted by the Board.

A detailed note on the composition of the Board and its Committees, including its terms of reference is in line with the provisions of the Act and the SEBI Listing Regulations and provided in the Corporate Governance Report which forms part of this Annual Report.

20. RISK MANAGEMENT FRAMEWORK

The Company has a Risk Management framework to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhance the Company's competitive advantage. The risk framework defines the risk management approach across the enterprise at various levels including documentation and reporting. The framework has different risk models which help in identifying risks trend, exposure and potential impact analysis at the Company level as well as for business segments.

The Company has a Risk Management Committee and Risk Management Policy consistent with the provisions of the Act and the SEBI Listing Regulations. The Risk Management Policy is available on the website of the Company at https://www. harshaengineers.com/InvestorRelations/company- policies.php. The Committee facilitates the execution of risk management practices in the Company, in the areas of risk identification, assessment, monitoring, mitigation and reporting and also provide guidance to the management team. The Company has laid down procedures to inform the Audit Committee as well as the Board of Directors about risk assessment and related procedures & status.

The details of Risk Management Committee along with other details are set out in Corporate Governance Report, forming part of this Annual report.

21. DISCLOSURE UNDER SECTION 67(3)(C) OF THE COMPANIES ACT, 2013

No disclosure is required under Section 67(3)(c) of the Act read with Rule 16(4) of Companies (Share Capital and Debentures) Rules, 2014 in respect of voting rights not exercised directly by the employees of the Company as the provisions of the said section are not applicable.

22. DEPOSIT

During the year, the Company has not accepted deposits under the provisions of the Companies Act, 2013.

23. RELATED PARTY TRANSACTIONS

All Related Party Transactions that were entered into during the financial year 2023-24 were on an arm's length basis and were in the ordinary course of business and are in compliance with the applicable provisions of the Act and the SEBI Listing Regulations. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel, etc. which may have potential conflict with the interest of the Company at large or which warrants the approval of the shareholders. Accordingly, no transactions are being reported in Form No. AOC-2 in terms of Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014. However, the details of transactions with Related Parties are provided in the Company's financial statements in accordance with the Accounting Standards.

All Related Party Transactions are presented to the Audit Committee and the Board. Omnibus approval is obtained for the transactions which are foreseen and repetitive in nature. A statement of all related party transactions is presented before the Audit Committee and the Board on a quarterly basis, specifying the nature, value and terms and conditions of the transactions.

The Related Party Transactions Policy is available on our website, at https://www.harshaengineers.com/ InvestorRelations/company-policies.php

24. ANNUAL RETURN

Pursuant to Section 92(3) read with Section 134(3)(a) of the Companies Act, 2013, the Annual Return as on March 31, 2024 in the prescribed Form no. MGT-7 is available on the Company's website at https://www. harshaengineers.com/InvestorRelations/financial- information.php

25. PARTICULARS OF LOANS, GUARANTEE AND INVESTMENTS

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act are provided in the notes to the Financial Statements.

26. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Act, Directors of the Company hereby state and confirm that:

a) in the preparation of the annual accounts for the financial year ended March 31, 2024, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year and of the profit of the Company for the same 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; and

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

27. AUDITORS AND AUDITORS' REPORT Statutory Auditor

M/s. Pankaj R. Shah & Associates, Chartered Accountants (FRN:107361W) was appointed as Statutory Auditor of the Company for a period of five consecutive years from the conclusion of 11 ^th Annual General Meeting until the conclusion of the 16^th Annual General Meeting of the Company with such remuneration as may be decided by the Board of Directors.

The notes on Financial statements referred to in the Auditors' Report are self-explanatory and do not call for any further comments. The Auditors' Report does not contain any qualification, reservation or adverse remarks.

Cost Auditor

M/s. Kiran J. Mehta & Co., Cost Accountants (FRN:000025) were appointed as Cost Auditors to carry out the audit of cost records of the Company for the financial year ending March 31,2024.

Secretarial Auditor

M/s. Chirag Shah & Associates, Company Secretaries were appointed as Secretarial Auditor to carry out Secretarial Audit of the Company for the financial year ending March 31,2024.

According to the provisions of Section 204 of the Act read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Secretarial Audit Report is enclosed as a part of this Board's Report as an ANNEXURE-B.

The observations and comments, appearing in the Secretarial Auditor's Report are self-explanatory and do not call for any further comments. The Secretarial Auditor's Report does not contain any qualification, reservation or adverse remarks.

Internal Auditor

M/s. Talati & Talati LLP Chartered Accountants (FRN:110758W) and M/s. MAR & Co., Chartered Accountants (FRN:138633W) were appointed as Internal Auditors of the Company for Engineering Business Division and Solar EPC Business Division respectively for the financial year 2023-24. The Board of Directors of the Company in consultation with the Internal Auditors formulated the scope, functioning, periodicity and methodology for conducting an Internal Audit.

28. INSURANCE

The Company has taken adequate insurance cover of all its movable & immovable assets (except Land) to cover various type of risks.

29. CREDIT RATING

There has been no revision in credit ratings of the Company during the financial year ended March 31, 2024, details of which are as under:

30. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION, AND FOREIGN EXCHANGE EARNING AND OUTGO

Information required under Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, is disclosed in the ANNEXURE-C to this Board's Report.

31. CORPORATE SOCIAL RESPONSIBILITY ("CSR")

In accordance with the provisions of Section 135 of the Act and rules made thereunder the Company has adopted a policy for CSR and the Board has constituted a committee for implementing the CSR activities. The Annual Report on the CSR activities is appended as ANNEXURE-D to this Board's Report.

32. CORPORATE GOVERNANCE REPORT AND BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

In compliance with Regulation 34 of the SEBI Listing Regulations, a separate Report on Corporate Governance and the Business Responsibility and Sustainability Report, forms part of this Annual Report.

33. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management Discussion and Analysis Report as stipulated under the SEBI Listing Regulations is presented in a separate section forming part of this Annual Report.

34. PARTICULARS OF EMPLOYEES

The information required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is attached as ANNEXURE-E to this Board's Report. The statement containing names of the top 10 employees, in terms of remuneration drawn and the particulars of employees as required under the 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, is provided in a separate annexure forming part of this report. Further, the report and the accounts are being sent to the Members, excluding the aforesaid Annexure. In terms of Section 136 of the Act, the said Annexure is open for inspection and any member interested in obtaining a copy of the same may write to the Company Secretary at sec@harshaengineers.com.

35. DISCLOSURE AS PER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company is committed to provide and promote a safe and healthy work environment for all its employees.

The Company has a 'Prevention of Sexual Harassment' (POSH) policy which is in line with the statutory requirement. The Company has put in place a structured reporting and redressal mechanism. The POSH policy is communicated to all employees of the Company. During the financial year 2023-24, no complaints in respect of the same has been received by the Company.

36. VIGIL MECHANISM / WHISTLE BLOWER

Pursuant to the provisions of the Act and rules made thereunder and SEBI Listing Regulations, the Company has framed and adopted vigil mechanism policy to deal with instance of fraud and mismanagement, if any and is available on the website of the Company at https://www.harshaengineers.com/InvestorRelations/ company-policies.php. The Company has also provided adequate safeguards against victimisation of employees and directors who express their concerns.

37. INTERNAL FINANCIAL CONTROLS

Your Company has implemented Internal Financial Controls over Financial Reporting through policies, procedures and guidelines. The approved schedule of powers are used to control the approval process for various activities, based on hierarchical value limits. A combination of these systems will enable your Company to maintain a robust design of controls and its operating effectiveness is ensured from time to time through internal checks and audit.

The Statutory Auditor of your Company has also given an opinion that the Internal Financial Controls over Financial Reporting are adequate and are operating effectively during the financial year.

38. NOTES TO ACCOUNTS

The notes forming part of the accounts are selfexplanatory and therefore do not call for any further comments. ANNEXURE-A to ANNEXURE-E forms part of this Board's Report.

39. ACKNOWLEDGEMENT

The Directors are thankful for the co-operation and assistance received from the Financial Institutions, Bankers, Collaborators, Central and State Government Departments, Local Authorities, Shareholders, Employees and other stakeholders of the Company.