Megasoft Ltd

To,

The Members,

Your Directors have pleasure to present their Report of your Company on the business and operations for the year ended 31st March, 2024.

FINANCIAL HIGHLIGHTS:

(Rs. in Lakhs)

OVERVIEW:

During the financial year ended 31st March, 2024, your company did not have revenue. The consolidated loss was Rs. (1274.47) lakhs during the current year as compared to Rs. 880.26 lakhs profit in the previous year.

In response to the evolving market conditions and the need for sustainable growth, your company made a strategic decision in 2022-23 to transition from IT business to exploring opportunities in other high- potential sectors. Having made an investment in Extrovis AG, in addition to pharmaceuticals, your company is making strategic inroads into the defence sector.

Your company has been actively working to establish a strong foothold in the defence sector, recognizing the opportunities that can be leveraged in defence technologies. Over the coming years, we anticipate that our efforts in the defence sector will begin to bear fruit, contributing to overall growth and success.

Your company's financial performance for the year ended 31st March, 2024, reflects the transitional phase we are undergoing. Despite the current consolidated losses, we remain confident in our strategic direction and in potential defence sector. By focusing on the emerging opportunities in the defence area, we are poised to deliver sustained growth and create significant value for our stakeholders.

CHANGE IN THE NATURE OF BUSINESS, IF ANY:

There has been no change in the nature of Business of the Company during the year under consideration.

TRANSFER TO RESERVES IN TERMS OF SECTION 134(3) (J) OF THE COMPANIES ACT, 2013:

For the financial year ended on 31st March, 2024 the Company transferred Rs. (1274.47) lakhs to Reserves & Surplus.

DIVIDEND:

As the Company is intending to ploughing back of standalone profit, Board of Directors of the Company do not recommend any dividend.

TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND:

The provisions of Section 125(2) of the Companies Act, 2013 do not apply as there was no dividend declared and paid last year.

SHARE CAPITAL:

a) Authorized Share Capital:

The Authorized Share Capital of the Company as on 31st March, 2024 stands at Rs. 2,00,00,00,000 (Rupees Two Hundred crore only) comprising of 20,00,00,000 (Twenty Crore only) equity shares of Rs.10 (Rupees Ten only) each.

b) Paid up Share Capital:

The paid-up equity share capital of the Company as on 31st March, 2024 was Rs.73,77,00,410 (Rupees Seventy Three Crores Seventy Seven lakhs Four Hundred Ten only) comprising of 7,37,70,041(Seven

Crores Thirty Seven Lakhs Seventy Thousand and Forty one only), fully paid Equity shares of face value of Rs.10 (Rupees Ten only) each.

During the year under review, the company has not issued shares with differential voting rights nor granted stock options or sweat equity shares or bonus shares. The Company has not bought back any of its securities during the year under review.

DIRECTORS AND KEY MANAGERIAL PERSONNEL:

The company has received declarations from all the independent directors of the company confirming that they meet the criteria of independence as prescribed under section 149(6) of the Companies Act, 2013 and Schedule IV of the Companies Act, 2013 and Regulation 16(1)(b) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

In accordance with the provisions of the Companies Act, 2013 and in terms of the Memorandum of Association and Articles of Association of the Company, Mr. Sunil Kumar Kalidindi [DIN- 02344343] Director of your Company, retiring by rotation at the ensuing Annual General Meeting (AGM) and eligible, offers himself for reappointment.

BOARD MEETINGS:

The Board of Directors met Six (6) times during the financial year. Also, a separate meeting of Independent Directors as prescribed under Schedule IV of the Act, was held during the year under review. For details of the meetings of the Board and its Committees, please refer to the Corporate Governance Report forming part of this Report. The provisions of Companies Act, 2013 and Regulation 17(2) of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, Secretarial Standard - 1 issued by The Institute of Company Secretaries of India were adhered to in respect of meeting of Board of Directors of the company.

COMPLIANCE WITH SECRETARIAL STANDARDS:

During the year under review, the provisions of Secretarial Standard - 1 (Board Meetings) and 2 (General Meetings) issued by the Institute of Company Secretaries of India (ICSI) were adhered to while conducting the respective Meetings.

NOMINATION & REMUNERATION POLICY:

The Board had, on the recommendation of the Nomination & Remuneration Committee, framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is available on the website of the company and the terms of reference are given separately in the Corporate Governance Report.

BOARD EVALUATION:

Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of its committees. The manner in which the evaluation has been carried out has been detailed out in the Corporate Governance Report.

PERFORMANCE EVALUATION CRITERIA FOR INDEPENDENT DIRECTORS:

The performance evaluation criteria for independent directors are determined by the Nomination and Remuneration Committee. An indicative list of factors on which evaluation was carried out includes participation and contribution by a director, commitment, effective deployment of knowledge and expertise, integrity, experience (including the proficiency) and maintenance of confidentiality and Independence of behavior and judgment.

DIRECTORS' RESPONSIBILITY STATEMENT:

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of section 134(3)(c) of the Companies Act, 2013:

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

ii) the Directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at the end of the financial year and of the profit/loss of the company for the year;

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

iv) the Directors had prepared the annual accounts on a "going concern basis";

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

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

SIGNIFICANT TRANSACTIONS:

During the financial year 2023-24 your Board of Directors took your approval, through a postal ballot, for the sale of the company's property situated at Knowledge Capital, Nanakramguda, Hyderabad.

OUTLOOK:

A detailed discussion on the performance of the company, industry outlook, opportunities, risks and concerns, future outlook and strategy is given separately in the Management's Discussion and Analysis section, which forms a part of this annual report.

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

In terms of Section 134(3)(m) of the Companies Act, 2013 and the rules framed thereunder, your Directors furnish the required details below:

a) Conservation of Energy: Your company remains dedicated to the continuous improvement of resource utilization, striving to minimize the consumption of energy, water, and natural resources. We rely on electric energy for operating equipment such as air conditioners, computer terminals, lighting, and utilities within our work premises. To conserve energy, we have implemented several measures:

• Conducting periodic energy audits to identify potential areas for savings

• Incorporating energy-efficient equipment

• Automating processes with timers, automatic level controllers, and more

We are committed to sustainable business practices, actively contributing to environmental protection, and view energy conservation as a crucial pillar in preserving natural resources.

b) Technology Absorption: Technology absorption involves the adoption, integration, and effective use of advanced technologies to enhance capabilities and operations. This process includes acquiring cutting-edge tools and systems, customizing them for specific needs, and training personnel to ensure optimal use.

Through successful technology absorption, your company improves its operational efficiency and maintains a technological edge over potential adversaries. However, some of the challenges are high costs, complex integration with existing systems, and ensuring the security and reliability of new technologies. Your company is equipped to deal with such challenges in an efficient and timely manner.

c) Foreign exchange earnings and outgo: The details of foreign exchange earnings and outgo are given in note no. 34 and 35 of the Notes forming part of the standalone financial statements of the company.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES UNDER SECTION 188:

All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with the promoters, directors, key managerial personnel or other designated persons which may have a potential conflict with the interest of the company at large.

All related party transactions are placed before the Audit/ Risk Compliance Committee as also the Board for approval.

The Board ofDirectors of the company has, on the recommendation of the Audit/Risk Compliance Committee, adopted a policy to regulate transactions between the company and its related parties, in compliance with the applicable provisions of the Companies Act, 2013, the Rules framed thereunder and Regulation 23 of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015. This Policy was considered and approved by the Board and has been uploaded on the website of the company.

The Details of Related Party Transaction on arm's length basis has been annexed as ‘ Annexure-1' appended hereto and forms part of this report.

PARTICULARS OF LOANS, INVESTMENTS & GUARANTEE:

Details of Loans, Investments and Guarantees covered under the provisions of Section 186 of the Companies Act, 2013 are given in note no. 3, 4 and 32 of the Notes forming part of the standalone financial statements of the company.

RISK MANAGEMENT:

Your company has a comprehensive Risk Management framework designed to identify, assess, and mitigate risks effectively. These risks are prioritized based on their significance and likelihood.

Historically, the company has adhered to the principle of risk minimization, a standard practice across industries. However, it has now become imperative to formalize this approach.

In line with Section 134(3)(n) of the Companies Act, 2013, and Regulation 17(9) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Board members have formally adopted steps to frame, implement, and monitor the company's risk management policy.

A disciplined approach to risk is crucial for a diversified organization like ours to ensure alignment with our strategic objectives and to accept only those risks for which we are adequately compensated. We assess risk at the individual transaction level and evaluate aggregated risk across customers, industries, geographies, and collateral types where applicable.

The primary objective of our risk management policy is to ensure sustainable business growth with stability and to encourage a proactive approach in reporting, evaluating, and resolving business-related risks. To achieve this objective, the policy establishes a structured and disciplined approach to risk management, guiding decisions on risk-related issues. The risk governance structure is led by the Audit/Risk Compliance Committee, chaired by Mr. Kalyan Vijay Sivalenka.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit (IA) function is defined in the Internal Audit Charter. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit/Risk Compliance Committee of the Board.

The Internal Audit monitors and evaluates the efficacy and adequacy of internal control system in the company, its compliance with operating systems, accounting procedures and policies at all locations of the company and its subsidiaries. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit/Risk Compliance Committee of the Board. The details on Internal Control Systems and their adequacy are provided in the Management's Discussion and Analysis which forms part of this Report.

INTERNAL FINANCIAL CONTROL WITH REFERENCE TO THE FINANCIAL STATEMENTS:

The Company has in place adequate internal financial controls with reference to financial statements. During the year no material weakness in the design or operation was observed.

VIGIL MECHANISM / WHISTLE BLOWER POLICY:

The Company is committed to fostering a culture of integrity, safety, and ethical behavior across all its business activities. To this end, the Company has implemented a mechanism for reporting any instances of illegal or unethical conduct. Therefore, the Company has a Vigil Mechanism/Whistle Blower Policy under which the employees are encouraged to report any violations of applicable laws and regulations without fear and to promote a culture of accountability, transparency, and ethical conduct. This policy aims to ensure that the company's activities and the actions of its employees are carried out in a fair and transparent manner, adhering to the highest standards of professionalism, honesty, integrity, and ethical behavior. This policy is explained in the corporate governance report and also posted on the website of the company which can be accessed at https://www.megasoft.com/corporate-governance.html.

ENHANCING SHAREHOLDER VALUE:

Your company considers its shareholders among its most important stakeholders. Consequently, Company's operations are dedicated to achieve high levels of performance and cost competitiveness, fostering growth, and enhancing corporate reputation. Enhancing shareholder value is the core principle guiding all our activities, from innovating new products to successful restructuring efforts and improving working capital.

Delivering value to our shareholders has always been and will continue to be a top priority as we manage business. However, in recent years, declining revenues and performance have prevented the Company from declaring dividends. Company's corporate actions are primarily focused on creating value for all stakeholders. Additionally, we are committed to considering socio-economic and environmental factors, contributing to sustainable growth and development.

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES:

The Company has one wholly owned subsidiary company i.e., Velapan Systems Private Limited. The Company has one Associate Company i.e., Extrovis AG, Switzerland.

PERFORMANCE AND FINANCIAL POSITION OF EACH OF THE SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENT:

The Consolidated Financial Statements relate to the Company's subsidiary Velapan Systems Private Limited. The Financial Statements of the Subsidiaries covered in the Consolidation process are drawn upto the same reporting date as that of the Company i.e., 31st March, 2024. The Financial Statements of the Company and its Subsidiaries have been combined on a line-by-line basis by adding together like-items of assets, liabilities, income and expenses, after eliminating intra-group balances, intra-group transactions and resulting unrealized profits or losses, unless cost cannot be recovered. The statement pursuant to Section 129 of the Companies Act, 2013 in respect of subsidiaries and associates is annexed as ‘Annexure-2'.

DEPOSITS:

The Company has neither raised nor renewed any Deposits as on 31st March, 2024 or received any other monies construed to attract the provisions of Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 as amended from time to time.

ANNUAL RETURN:

The Annual Return pursuant to the provisions of Section 92(3) of Companies Act, 2013 read with Rule 12 of the Companies (Management and administration) Rules, 2014 can be accessed at https://www.megasoft. com/annual-return.html

AUDITORS' REPORT:

Except as specified and explained below, there are no other qualifications, reservations, or adverse remarks or disclaimers in the Auditors' Report. Observations made in the Auditors' Report are self-explanatory and therefore do not call for any further comments under Section 134(1) of the Companies Act, 2013.

STATUTORY AUDITORS:

Members at its 22nd Annual General Meeting held on 23rd September, 2022 Appointed M/s. N. C. Rajagopal & Co., [Firm Registration No.003398S], Chartered Accountants to hold office as auditors of the company till the conclusion of the 27th Annual General Meeting to be held in the year 2027.

Further, M/s. N.C. Rajagopal & Co. Chartered Accountants (Firm Registration No. 003398S) have confirmed that they hold a valid certificate issued by the Peer review Board of the Institute of Chartered Accountants of India (ICAI) as required under the SEBI (Listing Obligations Disclosure Requirements), 2015.

The Statutory Auditors have confirmed that they satisfy the independence criteria required under Companies Act, 2013 Code of Ethics issued by Institute of Chartered Accountants of India.

INTERNAL AUDITOR:

Mr. Vijay Parthasarathy of M/s. Vijay R & Co (FCA-235012), Chartered Accountants, performed the duties of Internal Auditors of the Company and their reports are reviewed by the audit committee from time to time.

SECRETARIAL AUDITOR:

Pursuant to the provisions of Sections 204 of the Companies Act, 2013 and the rules framed thereunder, the company has appointed M/s. M. Damodaran & Associates LLP, (COP-5081/FCS-5837), to undertake the Secretarial Audit of the company. The Secretarial Auditors' Report, in the prescribed format, for the year ended 31st March, 2024 is annexed as ‘Annexure-3'.

ANNUAL SECRETARIAL COMPLIANCE REPORT:

Pursuant to the provisions of Regulation 24A of the SEBI (LODR) Regulations, 2015 the Board of Directors of the Company have appointed M/s. M. Damodaran & Associates LLP, (COP-5081/FCS-5837), Practicing Company Secretary to undertake the Audit of Annual Secretarial Compliance of the Company for the year ended 31st March, 2024. The Annual Secretarial Compliance Report is annexed as ‘Annexure- 4'.

CORPORATE GOVERNANCE:

A report on Corporate Governance including the relevant Auditors' Certificate regarding compliance with the conditions of Corporate Governance as stipulated in Regulation 34(3) and Schedule V of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, is annexed as ‘Annexure-5'.

MANAGEMENT DISCUSSION AND ANALYSIS:

A detailed report relating to the Management Discussion and Analysis has been annexed herewith as ‘Annexure -6'

DETAILS IN RESPECT OF FRAUDS REPORTED BY AUDITORS OTHER THAN THOSE WHICH ARE REPORTABLE TO THE CENTRAL GOVERNMENT:

During the year under review, the Statutory Auditors of the Company have not reported any frauds to the Audit Committee or to the Board of Directors as prescribed under Section 143(12) of the Companies Act, 2013 and rules made thereunder.

DETAILS OF SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNAL IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE:

During the year 2022-23, the GST authorities made a demand in respect of TDR in relation to JDA, in respect of company property at Nanakramguda, Hyderabad. The officials of the Company had acted in accordance with law and had submitted the requisite documents, and cooperated with the agency. The Company preferred a writ petition in the Hon'ble High Court of Telangana challenging the above action and basis of demand by the GST department. The case is on going and the Company has been regularly filing disclosures with the exchanges in this matter.

MATERIAL CHANGES FROM END OF FINANCIAL YEAR TO DATE OF THIS REPORT:

Except as disclosed elsewhere in this report, there have been no other material changes and commitments, which can affect the financial position of the Company occurred between the end of the financial year of the Company and date of this report.

HUMAN RESOURCES DEVELOPMENT:

Human Assets play a critical role in the success of any organization. As one of the foundational pillars, a strong HR department ensures that a company can achieve its desired results and growth. By supporting employees in their professional development, HR contributes significantly to both individual and organizational success. Your company's commitment to providing a healthy work-life balance is a key strategy to optimize each employee's contribution, recognizing that balanced employees are more productive and engaged.

Rewarding and motivating employees is another essential aspect of your company's HR strategy. The organization firmly believes in recognizing the hard work and achievements of its staff. By offering rewards and incentives, the company not only acknowledges employee contributions but also encourages continuous high performance and dedication.

Understanding the importance of employee well-being, your company is committed to supporting its staff and their families during challenging times. This commitment is reflected in the provision of comprehensive medical health and life insurance policies. These benefits ensure that employees and their families have adequate financial support in the event of health issues or other difficulties, providing peace of mind and security.

In addition to financial support, the company prioritizes regular health awareness programs. These initiatives help employees manage their lifestyles and reduce workplace stress, contributing to their overall well-being. By promoting health awareness, the company fosters a culture of care and proactive health management.

PARTICULARS OF EMPLOYEES:

There are no employees falling within the provisions of section 134(3)(q) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

EMPLOYEE STOCK OPTION SCHEME:

The company has not issued any employee stock option during the year under review.

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

Your company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Internal Complaints Committee ("ICC") has been set up to redress the complaints received regarding sexual harassment. All employees are covered under this policy. During the year under review the ICC has not received any complaints.

AUDITORS CERTIFICATE ON CORPORATE GOVERNANCE:

Your Company has obtained a certificate relating to compliance of conditions of Corporate Governance for the year ended 31st March, 2024, as stipulated in terms of Regulation 34(3) and Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. from N.C. Rajagopal & Co. Statutory Auditors, the is annexed herewith as ‘Annexure -7'.

CORPORATE SOCIAL RESPONSIBILITY:

The provisions for Corporate Social Responsibility ("CSR") under the Companies Act, 2013, are applicable to the company for 2022-23. The Company had incurred CSR expenditure of Rs 10.81 lakhs during the financial year 2023-24. The Annual Report on CSR activities is annexed herewith as ‘Annexure -8' The Chief Financial Officer of the Company has furnished the certificate under Rule 4 of the Companies (CSR) Rules, 2014.

THE DETAILS OF APPLICATION MADE OR ANY PROCEEDING PENDING UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016 DURING THE YEAR ALONG WITH THEIR STATUS AS AT THE END OF THE FINANCIAL YEAR:

During the financial year, no application was made by or against the Company or any proceeding is pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016).

DISCLOSURE ABOUT THE DIFFERENCE BETWEEN THE AMOUNT OF THE VALUATION EXECUTED AT THE TIME OF ONE TIME SETTLEMENT AND THE VALUATION DONE WHILE AVAILING LOAN FROM THE BANKS OR FINANCIAL INSTITUTIONS ALONG WITH THE REASONS THEREOF:

During the year ended under the review, no such settlements and valuation were undertaken.

LISTING OF EQUITY SHARES:

The Company's equity shares are listed on the following Stock Exchanges:

The Company has paid the annual listing fees to the said stock exchanges for the financial year 2024-25.

MAINTENANCE OF COST RECORDS SPECIFIED BY THE CENTRAL GOVERNMENT UNDER SECTION 148 OF THE COMPANIES ACT, 2013:

The Central Government has not prescribed the maintenance of cost records under sub section (1) of section 148 of the Companies Act, 2013 for the products/services of the company.

ACKNOWLEDGMENTS:

Your Directors place on record their appreciation of the customers, bankers, Government of India and of other countries, Government of Telangana, Government of Tamil Nadu, Registrar and Share Transfer Agent, vendors and technology partners for the support extended. Your directors also wish to place on record their appreciation of the contribution made by employees at all levels without whom the growth of the company is unattainable. Your Directors seek and look forward to the same support during future years of growth.