Praj Industries Ltd

To

The Members of Praj Industries Limited,

Your Directors are pleased to present the 38th Report together with the Audited Financial Statements of Praj Industries Limited ("the Company") for the financial year ended on 31st March, 2024.

Performance of the Company (Standalone)

The financial statements of the Company have been prepared in accordance with the Indian Accounting Standards ("Ind AS") notified under Section 133 of the Companies Act, 2013 ("the Act"), read with rule 7 of the Companies (Accounts) Rules, 2014 ("the Accounts Rules").

During the year under review, your Company has recorded total income of Rs.30,580 Mn. (previous year Rs.32,032 Mn.). Profit after Tax increased by 18% to Rs.2,804 Mn. (previous year Rs.2,376 Mn.). The performance summary (standalone) is presented herewith:

(Rs. in Mn.)

* including balance in Debt instruments through other comprehensive income.

Summary of Consolidated Results

During the year, the Total Income stood at Rs.35,098 Mn. (previous year Rs.35,636 Mn.). Profit after tax was Rs.2,834 Mn. (previous year Rs.2,398 Mn.) registering an increase of 18% over last year. The performance summary is presented herewith:

(Rs. in Mn.)

State of Company's Affairs

Management Discussion and Analysis Report (MDA) is annexed to this report dealing with the state of Company's affairs at length. (Refer Annexure 1).

Dividend

The Board of Directors at its meeting held on 30th May, 2024 has recommended final Dividend of Rs.6/- per share (300%) of face value of Rs.2/- each for the financial year 2023-24. The dividend is payable subject to shareholders' approval at the ensuing Annual General Meeting (AGM). The final dividend pay-out, if approved by the shareholders in the ensuing AGM, will be around Rs.1102.879 Mn.

The dividend pay-out is in line with the Company's Dividend Distribution Policy.

Dividend Distribution Policy

In accordance with the Regulation 43A of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 ("the Listing Regulations"), the Company has formulated a Dividend Distribution Policy and the same is annexed herewith as Annexure 9. The Policy is also hosted on the website of the Company and can be viewed at www.praj.net

Secretarial Standards

The Company has Complied with the applicable Secretarial Standards (as amended from time to time) issued by the Institute of Company Secretaries of India on meetings of Board of Directors and General Meetings.

Investor Education and Protection Fund (IEPF)

During the year under review, pursuant to and in compliance with the provisions of sections 124 and 125 of the Act and Rules made thereunder, the Company has transferred 36,174 equity shares whose dividend has remained unclaimed / unpaid for a consecutive period of seven (7) years to IEPF and Rs.15,25,700/- (Rupees Fifteen Lakhs Twenty Five Thousand Seven Hundred only), being the unclaimed dividend, pertaining to the final dividend for the financial year 2015-16 to IEPF after giving notice to the members to claim their unclaimed / unpaid dividend. As on 31 st March, 2024, 2,69,661 equity shares are lying with IEPF.

Details of Nodal Officer

Mr. Dattatraya Nimbolkar was Nodal Officer till 31st December, 2023. Due to his retirement, Mr. Anant Bavare has been appointed as Nodal Officer w.e.f. 1st January, 2024. Details in this regard are available on the website of the Company at www.praj.net.

Reserves

The Company is not proposing any transfer to the General Reserve for the year 2023-24.

Credit Rating

a) CRISIL has re-affirmed "A1+" rating to the Company's short-term banking facilities which signifies that the degree of safety regarding timely payment of instruments is very strong.

b) CRISIL has also re-affirmed its rating of the Company's long-term bank facilities to "AA/stable".

The "AA/Stable" rating signifies high safety with regard to timely payment of long-term financial obligations.

Subsidiaries

Praj Engineering & Infra Ltd., India, Praj HiPurity Systems Ltd., India, Praj GenX Ltd., India, Praj Americas Inc., U.S.A., Praj Far East Co. Ltd., Thailand, Praj Far East Philippines Ltd. Inc., The Philippines, continue to be subsidiaries of your Company.

Consolidated Financial Statements of the Company, which include the results of the said Subsidiary Companies, are included in this Annual Report. Further, a statement containing the details of performance, financial position for each of the Company's subsidiaries in the prescribed format AOC-1 is also enclosed as Annexure 6. Copies of Annual Accounts and related detailed information of all the subsidiaries can also be sought by any member of the Company or its Subsidiaries by making a written request to the Company Secretary on the address of the Registered Office of the Company in this regard. The Annual Accounts of the Subsidiary Companies are also available for inspection at the Company's and/or the concerned Subsidiary's Registered Office.

The Company has formulated a policy for determining 'material' subsidiaries and such policy is hosted on the Company's website

i.e. www.praj.net

Amendment in Articles of Association

During the year, the Company has substituted the existing Articles of Association with the new Articles of Association which incorporate various provisions of the Companies Act, 2013.

Corporate Governance

Pursuant to Regulation 34 of the Listing Regulations, Report on Corporate Governance along with the certificate from a Practicing Company Secretary certifying compliance with conditions of Corporate Governance is annexed to this Report as Annexure 3.

Business Responsibility and Sustainability Report

Pursuant to Regulation 34(2)(f) of the Listing Regulations, the Business Responsibility and Sustainability Report (BRSR) on initiatives taken from an environmental, social and governance perspective, in the prescribed format is annexed to this Report as Annexure 8.

Directors

Ms. Parimal Chaudhari (DIN: 00724911) retired at 37th Annual General Meeting held on 26th July, 2023 and was re-appointed as Director of the Company. Further, she will retire at 38th Annual General Meeting and being eligible, has offered herself for re-appointment as Director of the Company.

Members at 37th Annual General Meeting held on 26th July, 2023, have approved re-appointment of Mr. Shishir Joshipura (DIN: 00574970) as a CEO & Managing Director for a period of 27 months w.e.f 1st April, 2023 till 30th June, 2025.

Further, Members at 37th Annual General Meeting held on 26th July, 2023, have approved re-appointment of Dr. Shridhar Shukla (DIN: 00007607) as an Independent Director of the Company for a further period of five (5) years w.e.f. 12th April, 2023 till 11th April, 2028.

During the year, due to completion of the tenure, Ms. Mrunalini Joshi (DIN: 00957617) ceased to be an Independent Director of the Company w.e.f. 10th August, 2023. Further, Mr. Berjis Desai (DIN: 00153675) and Mr. Sivaramakrishnan Iyer (DIN: 00503487) ceased to be the Independent Directors w.e.f. 31st March, 2024 due to completion of their tenure.

Based on the recommendation of Nomination and Remuneration Committee ("NRC") and the Board, the members through Postal Ballot on 17th November, 2023, approved the appointment of Ms. Rujuta Jagtap (DIN: 00861890) as an Independent Director of the Company for the first term of three (3) years. w.e.f. 21st August, 2023.

Further, based on the recommendation of NRC and the Board, the members through Postal Ballot on 20th May, 2024, approved the appointment of Mr. Vinayak Deshpande (DIN: 00036827) and Mr. Utkarsh Palnitkar (DIN: 00170004) as the Independent Directors of the Company for the first term of three (3) years. w.e.f. 31st March, 2024.

Composition of Key Managerial Personnel (KMP)

The Company has the following KMPs as on 31st March 2024;

Declaration from Independent Directors

The Independent Directors have submitted their annual declaration to the Board confirming that they fulfill all the requirements as stipulated in Section 149(6) and (7) of the Act read with rules framed thereunder and Regulations 16(1)(b) and 25 of the Listing Regulations.

Board Meetings

The Board met four (4) times during the financial year, the details of which are given in the Corporate Governance Report that forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Act and the Listing Regulations as amended from time to time. During the year, the Board approved nine (9) resolutions by circulation as follows:

Composition of Audit, Nomination & Remuneration Committee

The information about the composition of Audit Committee, Nomination & Remuneration Committee and other details are given in the Corporate Governance Report, which forms a part of this Annual Report.

a) Statutory Auditors

P. G. BHAGWAT LLP Chartered Accountants, (Firm Regn. No. 101118W), were appointed as the Statutory Auditors of the Company for a period of five (5) years from 34th AGM until the conclusion of 39th AGM to be held in the calendar year 2025.

The Auditors' Report does not contain any qualifications, reservations, adverse remarks or disclaimer.

b) Internal Auditors

The Internal Auditors, Khare Deshmukh & Co., Chartered Accountants, Pune have conducted internal audits periodically during financial year 2023-24 and submitted their reports to the Audit Committee.

Their reports have been reviewed by the Statutory Auditors and the Audit Committee.

The Board has appointed Khare Deshmukh & Co., Chartered Accountants Pune, as Internal Auditors of the Company for the financial year 2024-25.

c) Cost Auditors

Your Company has appointed Dhananjay V. Joshi & Associates, Cost Accountants as Cost Auditors of the Company for the financial year 2024-25 at the remuneration of Rs.3.25 lakhs (Rupees Three Lakhs Twenty Five Thousand only) which is subject to ratification by the Members at the ensuing AGM.

The maintenance of cost records as specified under Section 148 of the Act is applicable to the Company, and accordingly, all the cost records are maintained by the Company and audited by the Cost Auditors.

d) Secretarial Auditors

M/s KANJ & Co., LLP, Pune, were appointed to conduct the Secretarial Audit of the Company for the financial year 2023-24, as required under Section 204 of the Act read with rules framed thereunder. The Secretarial Audit Report (MR-3) for the financial year 2023-24 forms part of the Annual Report as Annexure 5.

The Auditors' Report does not contain any qualifications, reservations, adverse remarks or disclaimer.

Material Changes and Commitments

There were no material changes and commitments, affecting the financial position of the Company occurred between the end of the financial year to which these financial statements relate and the date of the report.

Risk Management

Pursuant to Regulation 21 of the Listing Regulations, the Company has constituted a Risk Management Committee. The Company has framed a Risk Management Policy to ensure sustainable business growth and to promote a pro-active approach in identifying, reporting, evaluating and mitigating risks associated with the business of the Company.

The policy establishes a structured and disciplined approach to Risk Management, in order to guide decisions on risk related issues.

In today's challenging and competitive environment, strategies for mitigating inherent risks associated with business and for accomplishing the growth plans of the Company are imperative. The common risks interalia, are risks emanating from Regulations, Cyber Risks, Competition, Business, Technology obsolescence, Investments, Retention of talent, Finance, Politics and Fidelity etc. In today's complex business environment, Cyber risks have considerably increased. During the year, we continued our efforts to keep ourselves upto date with cyber security events globally to achieve higher compliance and its continued sustenance.

As mentioned in Risk Management Policy, these risks are assessed and steps, as appropriate, are taken to mitigate the same.

The Risk Management Policy is hosted on the Company's website i.e. www.praj.net.

The Company has instituted adequate Internal Controls and processes to have a cohesive view of risks, optimal risk mitigation responses and efficient management of internal control and assurance activities.

In the opinion of the Board, there are no risks which may threaten the existence of the Company.

Internal Financial Controls

The Company has in place, adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weaknesses in the design or operation were observed.

Remuneration Policy for Directors and KMPs

The Company's remuneration policy for Directors/KMPs is directed towards rewarding performance based on periodical review of achievements. The remuneration policy is in consonance with the existing industry practice.

The said policy is available on Company's website i.e. www.praj.net and is also attached as Annexure 7 to this report.

Employee Stock Option Plan (ESOP)

During the year, your Company allotted 1,00,000 shares on exercise of options under the Employee Stock Option Plan 2011. Consequent to the above, the Issued, Subscribed and Paid-up Share Capital of your Company increased from 183,713,088 (number of shares) (Value Rs.367.426 Mn.) as of 31st March, 2023 to 183,813,088 (number of shares) (Value Rs.367.626 Mn.) as of 31st March, 2024.

The particulars required to be disclosed pursuant to Rule 12(2) of the Companies (Share Capital and Debentures) Rules, 2014 and Regulation 14 of SEBI (Share Based Employee Benefits) Regulations, 2014 are provided in Annexure 4.

Vigil Mechanism/Whistle Blower Policy

To ensure that the activities of the Company and its employees are conducted in a fair and transparent manner by adoption of highest standards of professionalism, honesty, integrity and ethical behaviour, the Company has adopted a Vigil Mechanism/ Whistle Blower Policy. This policy is explained in Corporate Governance Report and is also hosted on the website of Company at www.praj.net

Corporate Social Responsibility (CSR)

Pursuant to and in compliance with Section 135 of the Act and Rule 5 of the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board has constituted a CSR Committee. CSR Policy is placed on the Company's website at www.praj.net. The details of the CSR Committee constitution, CSR activities and other details, as required under Section 135 of the Act and the CSR Rules, are given in the CSR Report in Annexure 2.

Particulars of Loans, Guarantees and Investments

The details of loans, guarantees and investments covered under Section 186(4) of the Act are given in the notes to the Audited Standalone Financial Statements. (Please refer Note Nos. 4, 11 & 30 to the Standalone Financial Statements).

Contracts and arrangements with Related Parties

All contracts / arrangements / transactions entered by the Company during the financial year 2023-24 with related parties were in the ordinary course of business and on an arm's length basis. Such transactions form part of the notes to the financial statements provided in this Annual Report. (Please refer Note No. 30 to the Standalone Financial Statements).

During the year, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions which is available on the Company's website at www.praj.net.

As provided under section 134(3)(h) of the Act and Rules made thereunder, disclosures of particulars of transaction in the prescribed Form No. AOC-2 are provided below:

FORM AOC-2

(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:

There were no contracts or arrangements or transactions entered into with related parties during the year under review, which were not on an arm's length basis.

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

There were no material contracts or arrangements or transactions entered into with related parties during the year under review, which were at arm's length basis.

Performance Evaluation

Pursuant to and in compliance with the provisions of the Act and Rules made thereunder and as provided in Schedule IV to the Act and the Listing Regulations, the Board works with the NRC to lay down the evaluation criteria for the performance of Executive / Non-Executive / Independent Directors.

Independent Directors have three key roles -Governance, Control and Guidance. Some of the performance indicators based on which the Independent Directors are evaluated include:

a) Ability to contribute to and monitor the Company's corporate governance practices.

b) Ability to contribute by introducing international best practices to address top-management issues.

c) Active participation in medium to long-term strategic planning.

d) Commitment to the fulfillment of Directors' obligations and fiduciary responsibilities, which include participation in the Board and the Committee Meetings.

The evaluation of all the Directors, Committees and the Board as a whole was conducted based on the criteria and framework adopted by the Board. The Board noted the Summary of Performance Evaluation collated by the NRC, at its meeting held on 30th May, 2024.

Annual Return

Pursuant to Section 92(3) read with Section 134(3)(a) of the Act, Annual Return for the financial year ended on 31st March, 2024, in prescribed Form No. MGT-7 is available on the website of the Company at www.praj.net.

Directors' Responsibility Statement

In accordance with the provisions of Section 134(5) of the Act, the Board hereby submits its responsibility statement for the financial year 2023-24 as follows:

(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 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 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 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.

Details in respect of frauds reported by auditors under Section 143(12) of the Act

During the year, the Auditors have not reported to the Audit Committee, any incidence of fraud as defined under Section 143(12) of the Act, committed against the Company by its officers or employees.

Deposits

The Company has not accepted any deposits from public as per the provisions of Sections 73 and 74 of the Act read with Rules made thereunder and as such, no amount on account of principal or interest on deposits from public was outstanding as on the date of the balance sheet.

Remuneration ratio of the Directors / KMPs / Employees

The information required pursuant to Section 197 of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, duly amended, in respect of Directors & KMPs of the Company is furnished hereunder.

* Impact of ESOP perquisites not considered while working out the percentage in order to facilitate like to like comparison.

The median remuneration of employees of the Company for the financial year was Rs. 1.269 Mn. In the financial year 2023-24, there was an increase of around 4% in the median remuneration of employees.

There were 1295 permanent employees on the rolls of Company as on 3181 March, 2024.

Average percentage increase made in the salaries of employees other than the managerial personnel during the financial year 2023-24 was around 10% whereas the managerial remuneration for the same financial year increased by around 18%.

The key parameters for the variable component of remuneration paid to the Directors are considered by the Board of Directors based on the recommendations of NRC as per the Remuneration Policy for the Directors, KMPs and other Employees.

It is hereby affirmed that the remuneration paid is as per the Remuneration Policy for Directors, KMPs and other Employees.

Particulars of Employees

The information required pursuant to Section 197 of the Act read with Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, duly amended, in respect of employees of the Company, will be provided upon request. In terms of Section 136(1) of the Act and the Rules made thereunder, the Annual Report, excluding the aforesaid information, is being sent to all the members and others entitled to receive it. Any shareholder interested in obtaining such particulars may write to the Company Secretary.

Significant and Material Orders Passed by the Regulators or Courts or Tribunals

During the year, there were no significant material orders passed by the regulators and courts, which would impact the going concern status of the Company.

Insolvency and Bankruptcy Code (IBC)

There were no proceedings admitted against the Company under IBC 2016.

Prevention of Sexual Harassment Policy

The Company has in place Prevention of Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

The Company has constituted Internal Committee as per the aforesaid Act.

The following is a summary of Sexual Harassment Complaints received and disposed during the financial year 2023-24, under the aforesaid Act:

Energy Efficiency and Conservation initiatives across operations

• All the operation premises including office spaces are retrofitted with LEDs to enhance energy efficiency

• Replacement of diesel-based heat treatment operations to LPG based heat treatment at our Kandla operations to reduce the emissions

• Explore Solar Open Access: Solar Open Access for Pune office and operation spaces is underway. This will contribute to the 100% green energy availability for operations.

• Awareness among employees: All meeting rooms and office spaces are provided with simple guidelines for employees and visitors to save energy.

Technology Development Perspective

Producing low carbon intensity (CI) ethanol is a crucial step towards achieving net-zero emissions. To ensure that low CI ethanol can be marketed in leading international markets, it is essential for our customers to have their operations evaluated and to provide technology solutions for the reduction of CI.

Technology Absorption and Innovation

Praj focuses on designing and engineering plants and machinery that minimize energy and water consumption. The plants are designed to meet regulatory norms for environment, health, and safety, thereby reducing customers' compliance risks.

Our Business Sustainability Systems monitor critical norms, demonstrating that every new generation plant surpasses previous benchmarks for yield, water consumption, energy use, and effluents. Infusing sustainability principles into the design and engineering of plants and machinery and providing sustainability solutions to customers is of prime significance.

Technologies Developed During Financial Year 2023-24

• Energy Integration (EI): For starchy feedstock based plant, PRAJ has developed a thermal energy reduction technique using mechanical vapor recompression for energy integration. This technology helps reduce thermal energy by up to 80%, thereby reducing fossil fuel requirements and leading to a 15-20% reduction in greenhouse gas emissions.

• Process Integration (PI): PRAJ has developed technology for RNG production from the liquid streams from the distillation section for grain-based distilleries. Liquid streams containing mainly fats, fiber, residual starch, and protein, which were conventionally concentrated and used for DDGS production, will now be converted into valuable renewable natural gas, achieving a 30% additional reduction in GHG emissions.

• Developed whole stillage to biogas technology for wheat as raw material, resulting in multiple fuel streams as output and reducing the overall carbon intensity.

• Process Optimization (PO): For the USA market, in line with Renewable Identification Numbers (RIN) and Low Carbon Fuel standards (LCFS) benefits, PRAJ has developed technology for the conversion of fiber to ethanol, resulting in a 6-7% higher ethanol yield. This technology also enhances protein content in the DDGS stream, which can be sold as high-protein DDGS, improving economics and CI numbers.

• Co-product Maximization: In India, broken rice is used for ethanol and DDGS production. PRAJ has developed technology for the front-end separation of rice protein as a valuable co-product, which will be used for food nutrition.

Corn oil is an important co-product for corn-based distilleries. For the domestic market, PRAJ has developed technology for efficient distiller's corn oil extraction from stillage.

• CBG/RNG Technology: In response to market requirements, PRAJ's biomethanation technology has been upgraded to process multiple feedstocks, including agri-residue, poultry and farm waste, grasses, and industrial wastes like press mud, napier grass, rice straw, cow dung, cotton stalk, etc. Depending on plant capacities and the characteristics of the feedstock, multiple gas cleaning technologies such as VPSA, chilled water systems, and membrane-based gas upgrading systems will be offered as part of the end-to-end CBG offering. PRAJ has successfully demonstrated bio manure (FOM) production meeting FCO specifications as part of RenGas technology.

• Sustainable Aviation Fuel (SAF): An integrated bench-scale facility built at the PRAJ R&D center has been successfully commissioned and is being operated for the production of SAF based on the ATJ pathway. This facility will also be upgraded to operate on multiple feedstocks like ethanol, IBA, 2,3-BDO, etc.

Key Highlights for Financial Year 2023-24

1. Successful demonstration of technology for production of bioethanol from Brazilian corn at the Bioenergy Complex, Brazil.

2. Received a significant order from Brazil for multi-feed-to-biofuels technology represents a breakthrough in the conversion of diverse feedstocks such as corn or wheat, into biofuels.

3. Cutting-edge technology viz SHIFT, PIB, EcoCOOL has achieved the production of ethanol with the lowest water and energy footprint in the industry. This innovation not only reduces environmental impact but also sets a new standard for sustainability in biofuel production. In Addition to ethanol, RenGas technology for the production of Compressed Bio-gas (CBG) from sugar mill waste stream namely press mud was demonstrated successfully. The end to end integrated and optimized process demonstrated consistent and reliable yield of CBG from multiple feedstock.

4. Receipt of order based on state-of-the-art water recycle reuse technology designed to minimize water usage for Press Mud to Biogas plant.

5. Napier Grass-to-biogas technology harnesses the potential of this fast-growing, high-yield grass species to produce renewable biogas through anaerobic digestion. By leveraging this abundant and readily available feedstock, your company has developed a cost-effective and environment friendly solution for bioenergy production.

6. Successfully commissioned demonstration plant for the end to end production of SAF. These advancements underscore our commitment to energy conservation, technology absorption, value maximization, and innovation. Our continuous efforts in these areas are crucial for achieving a sustainable and low-carbon energy future.

7. In the year gone by, the Company was granted Five (5) Indian and Eleven (11) International patents bringing the total to Thirty (30) granted Indian patents and Seventy Four (74) granted International patents and over 300 patent applications till date.

The total number for patents is less due to abandonment of 10 granted International Patents.

Foreign Exchange Earnings & Outgo

(Rs. in Mn.)

Your company nas retained its status as a net forex earner consecutively for past 20 years.

Acknowledgements

Your Directors wish to place on record their appreciation towards all associates including Customers, Collaborators, Government Agencies, Bankers, Suppliers, Shareholders, Auditors, Employees and others who have reposed their confidence in the Company.