Pennar Industries Ltd

Dear Members,

Your Directors are pleased to present the 48th Annual Report and the Company's audited financial statement (Standalone and Consolidated) for the financial year ended 31st March, 2024.

The Company's financial performance, for the year ended 31st March, 2024 is summarized below:

Amount in Rs. Lakhs

Your company has generated a consolidated net revenue of Rs. 3,13,057 Lakhs, EBITDA at Rs. 31,328 Lakhs, PAT at Rs. 9,835 Lakhs for the financial year 2023-24.

The Consolidated Financial Statements of the Company, its subsidiaries prepared in accordance with the Companies Act, 2013 and applicable Indian Accounting Standards along with all relevant documents and the Auditors' Report form part of this Annual Report. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies. The Financial Statements as stated above are also available on the website of the Company and can be accessed at the website viz., www.pennarindia.com.

The following are four subsidiaries of the company as on 31st March, 2024.

a. Pennar Global INC, USA (PGI)

b. Pennar GmbH, Germany (Pennar GmbH)

c. Enertech Pennar Defense and Engineering Systems Private Limited (Enertech)

d. Pennar Metals Private Limited

The performance of the subsidiaries is as hereunder:

Pennar Global Inc. is in the business of providing engineering services and marketing Pennar Products across the United States of America. The company has recorded consolidated net revenue of 88.61 Million USD for the financial year 2023-24.

Pennar Gmbh is in the business of providing engineering services to our European clients. The company has recorded a net revenue of 2.20 million Euros for the financial year 2023-24.

Enertech Pennar Defence and Engineering Systems Private Limited has recorded a net revenue of Rs 14.14 crores for the financial year 2023-24.

Pennar Metals Private Limited has recorded a net revenue of Rs. 0.01 crore for the period ended 31st March, 2024. The financial position of each of the subsidiaries, as per the Companies Act, 2013 is annexed. The Policy for determining material subsidiaries may be accessed on the Company's website at the link: https://www.pennarindia. com/policy-determining-material.php. The information on subsidiaries pursuant to Section 129(3) of the Act read with rule 5 of the Companies (Accounts) Rules, 2014 is annexed herewith as Annexure - A in Form AOC - 1.

The following are four step-down subsidiaries of the company as on 31st March, 2024.

a. Pennar Global Metals Inc b. Ascent Buildings LLC c. Cadnum SARL d. Pennar global Investments LLC

There are no material changes and commitments affecting the financial position of the Company.

The company has been investing in new capital to expand its product profile and increase the markets. This has already shown results by achieving highest sales and EBIDTA. Most of these activities are planned through internal sources. Therefore, your Directors are not recommending dividend on equity shares. Your Company has not accepted any fixed deposits and no amount has been carried to General Reserves during the year.

Particulars of loans given, investments made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient are provided in the standalone financial statement.

The details in respect of internal financial control and their adequacy are included in the Management Discussion & Analysis, which forms part of this report.

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. During the year, the Company had entered into contract / arrangement / transaction with material related party which could be considered material in accordance with the policy of the Company on materiality of related party transactions. The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link: https://www.pennarindia.com/ policy-related-party-transactions.php

The Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 are annexed herewith as Annexure - B in Form AOC-2.

There is no material change in the nature of business affecting the financial position of the Company for the year ended 31st March, 2024.

CARE has reaffirmed the ‘CARE A' Stable (Single A; Outlook: Stable) with rating assigned to long term bank facilities. Further, CARE has reaffirmed the ‘CARE A1' (A One) rating to short term bank facilities of the Company.

Your company has undertaken a number of steps to maintain strong liquidity levels. The consolidated cash profit is at Rs. 164.85 Crores. Your company continues to focus on generating strong cash flows to meet its future growth plans and is comfortable with its current liquidity positions.

None of the Directors of the company are disqualified under the provisions of the Act or under the Listing Regulations.

The Board of Directors of the Company at its meeting held on 9th February, 2024 appointed Mr. V S Parthasarathy as Non-Executive Independent Director, the appointment was regularized by the shareholders on 25th April, 2024 by postal ballot.

Mr. P V Rao who retire by rotation and being eligible offer himself for re-appointment. Your Board recommends his appointment.

Mr. B Kamalaker Rao, Non-Executive Independent Director of the company resigned from the office of directorship and same was taken note by the Board of Directors at its meeting held 9th February, 2024. Your Board place on record their appreciation and gratitude for the guidance and direction that Mr. B Kamalaker Rao has provided to Pennar Industries during his tenure as non-executive independent director.

Mr. Manish Sabharwal, has completed his second and final term as an Independent Director and consequently ceased to be a Director of the Company w.e.f. 31st March, 2024. The Board of Directors and the Management of the Company expressed deep appreciation and gratitude to Mr. Manish Sabharwal for his extensive contribution and stewardship.

Pursuant to the provisions of Listing Regulations, brief particulars of the Directors who are proposed to be appointed/re-appointed are provided as an annexure to the notice convening the Annual General Meeting.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section (6) of Section 149 of the Companies Act, 2013 and under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Company has devised a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors which includes criteria for performance evaluation of the Non-Executive Directors and Executive Directors. The details of programmes for familiarisation of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are put up on the website of the Company at the link: https://www.pennarindia. com/policy-familiarization-programme.php

Four meetings of the Board of Directors were held during the year. For further details, please refer the same in Corporate Governance report in this Annual Report.

In terms of Section 134 (3)(c) of the Companies Act, 2013, the Board of Directors state that:

a) in the preparation of the annual accounts for the year ended 31st March, 2024, the applicable accounting standards 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 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 31st March, 2024 and of the profit 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 Act 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 are operating effectively; and

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

The Company is committed to maintain the highest standard of corporate governance and adhere to the corporate governance requirements set out by Securities Exchange Board of India. The Report on corporate governance as stipulated under the Listing Regulations is annexed herewith as Annexure - C. The requisite certificate from a firm of Chartered Accountants confirming compliance with the conditions of corporate governance is annexed herewith as Annexure - D.

Pursuant to the provisions of Section 135 and Schedule VII of the Companies Act, 2013, CSR Committee of the Board of Directors had framed the policy on Corporate Social Responsibility. The same is hosted on the website of the Company viz., https:// www.pennarindia.com/csr-policy.php. The Company has a CSR Committee to monitor adherence to Corporate Social Responsibility Policy and to track transactions related to CSR activities etc. A detailed report on the CSR activities inter- alia disclosing the composition of CSR Committee and CSR activities is attached as Annexure - E to this Report.

The Nomination and Remuneration Committee of the Company identifies the persons, who are qualified to become Directors of the Company / who may be appointed in Senior Management in accordance with the criteria laid down and recommend to the Board for their appointment and removal. The Committee also carries out evaluation of every Director's performance. The Committee has formulated the criteria for determining qualifications, attributes, independence of the Directors and recommend to the Board a Policy, relating to the remuneration for the Directors, Key Managerial Personnel and other employees.

Pursuant to section 134 (3) (n) of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015, the company has formulated a policy on risk management and constituted a Risk Management Committee which lays down various risk mitigating practices that your Company is required to implement in the Company. At present, the company has not identified any element of risk which may threaten the existence of the company. The risk management policy is hosted on the website of the Company viz., https://www. pennarindia.com/risk-management-policy.php

M/s. M S K A & Associates, Chartered Accountants (Firm Registration No. 105047W) were appointed as the Statutory Auditors of the Company to hold office for a term of five consecutive years from the conclusion of the Annual General meeting held in the year 2022 till the conclusion of the Annual General Meeting to be held in the year 2027.

Pursuant to the Notification issued by the Ministry of Corporate Affairs on 7th May, 2018, amending section 139 of the Companies

Act, 2013, the mandatory requirement for ratification of appointment of Auditors by the Members at every AGM has been omitted and hence your Company has not proposed ratification of appointment of M S K A & Associates, Chartered Accountants, at the forthcoming AGM.

The Auditors' Report is unmodified i.e. it does not contain any qualification, reservation or adverse remark or disclaimer.

The Cost Audit Report for the year ended 31st March, 2023 was reviewed by the Audit Committee at its meeting held on 9th August, 2023 and has been filed with Registrar of Companies on 26th October, 2023. The Board of Directors at its meeting held on 24th May, 2023 appointed M/s. Kandikonda & Associates., Cost Accountants, Hyderabad as Cost auditors of the company for the year ending 31st March, 2024. The Cost Audit report for the year ended 31st March 2024 was approved by the Board of Directors at its meeting held on 12th August, 2024 and the same will be filed with the Registrar of Companies within the stipulated time.

The Board has appointed Mr. Subhash Kishan Kandrapu, Practicing Company Secretary, to conduct Secretarial Audit for the financial year 2023-24. The Secretarial Audit Report for the financial year ended 31st March, 2024 is annexed herewith as Annexure - F. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

The details pertaining to composition of audit committee are included in the Corporate Governance Report, which forms part of annual report.

Pursuant to Section 177 of the Companies Act, 2013 read with Rule 7 of Companies (Meetings of Board and its Powers) Rules, 2014, the Company has established a Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Whistle Blower Policy are explained in the Corporate Governance Report. The Policy on vigil mechanism and whistle blower policy may be accessed on the Company's website at the link: https:// www.pennarindia.com/vigil-mechanism.php and https://www. pennarindia.com/whistle-blower-policy.php.

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, is annexed herewith as Annexure - G.

Extract of Annual Return of the Company is annexed herewith as Annexure - H.

The Company complies with all applicable secretarial standards issued by the Institute of Company Secretaries of India.

The information required under section 197 of the Companies Act, 2013 read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed herewith as Annexure - I.

The Company has zero tolerance for sexual harassment of women at workplace and has adopted a Policy for prevention, prohibition and redressal of sexual harassment at workplace, in terms of provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules framed thereunder and constituted Internal Complaint Committee (ICC) for safe working environment where all employees treat each other with courtesy, dignity and respect, irrespective of their gender, race, caste, creed, religion, place of origin, sexual orientation, disability, economic status or position in the hierarchy.

The following is the summary of sexual harassment complaints received and disposed off during the year:

i) No. of complaints received : nil

ii) No. of complaints disposed off: nil

The Company's equity shares are listed at the Bombay Stock Exchange Limited, National Stock Exchange of India Limited.

99.50% of the company's paid-up equity share capital is in dematerialized form as on 31st March, 2024 and balance 0.50% is in physical form.

Pursuant to the provisions of Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a declaration by the Vice-Chairman and Managing Director of the company declaring that all the members of the board and the senior management personnel of the company have affirmed compliance with the Code of Conduct of the company is annexed herewith as Annexure - J.

The CFO certification to the board pursuant to Regulation 15 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed herewith Annexure - K.

The Company maintained cordial and harmonious relations at all levels at the offices and plants of the Company and its subsidiaries throughout the year under review.

In terms of sub rule 5(vii) of Rule 8 of Companies (Accounts) Rules, 2014, there are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

During the year under review, neither the statutory auditors nor the secretarial auditor has reported to the audit committee, under Section 143 (12) of the Companies Act, 2013, any instances of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned in the Board's report.

The "Management Discussion and Analysis Report" highlighting the industry structure and developments, opportunities and threats, future outlook, risks and concerns etc. is furnished separately and forms part of this Board's Report.

The Listing Regulations mandate the inclusion of the BRSR as part of the Annual Report for top 1000 listed entities based on market capitalization. In accordance with the Listing Regulations, we have integrated BRSR disclosures into our Annual Report.

The web link of the Dividend Distribution Policy has been provided below for the perusal of the shareholders. https://www. pennarindia.com/dividend-distribution-policy.php

Your directors take this opportunity to express their appreciation for the co-operation to all the suppliers and customers who have been associated with the Company as partners. The Directors would also like to take this opportunity to thank the financial institutions, banks, regulatory and government authorities as well as the shareholders for their continued co-operation and support. The Directors also wish to place on record their appreciation of the devoted and dedicated services rendered by all employees of the Company. We look forward to further support.

(Pursuant to the first provision to sub-section 3 of Section 129, read with Rule 5 of Companies (Accounts) Rules, 2014); Salient Features of Financial Statements of Subsidiary/associate companies/joint ventures as per Companies Act, 2013

* Pennar Global includes step down subsidiary Pennar Global Metals, Ascent Buildings LLC

* Pennar GMBH includes step down subsidiary Cadnum SARL.

** Pennar Global Inc . is a USA based foreign subsidiary and its local currency is USD.

** Exchange rate 82.79 INR/USD for profit and loss account and 83.37 INR/USD for Balance sheet items.

** Pennar GMBH is a Germany based foreign subsidiary and its local currency is EUROs.

** Exchange rate 89.80 INR/EURO for profit and loss account transactions and 90.21 INR/EURO for Balance sheet items.

(Pursuant to clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014)

1. Details of contracts or arrangements or transactions not at arm's length basis: M/s. Pennar Industries Limited has not entered into any contract or arrangement or transaction with its related parties which is not at arm's length during financial year 2023-24.

2. Details of material contracts or arrangement or transactions at arm's length basis: