Sobhagya Mercantile Ltd

To,

The Members,

Sobhagya Mercantile Limited

The Board of Directors hereby presents the report of the business and operations of your Company ('the Company' or 'Sobhagya') along with the audited financial statements for the financial year ended 31st March, 2024.

1. Financial summary/highlights:

The highlights of the standalone performance of the Company during the fiscal are given hereunder:

(f in Lakhs)

2. Overview & State of the Company's Affairs

During the year under review, the Company achieved a total income of Rs. 12,010.61 Lakhs, with a corresponding profit of Rs. 1,161.63 Lakhs. This marks an increase from the previous financial year, where the income stood at Rs. 11,208.01 Lakhs and the profit at Rs. 1,072.25 Lakhs. We anticipate continued improvement in profit margins in the coming years, driven by our strategic initiatives and a comprehensive approach to fostering sustainable growth.

3. Dividend:

The Company has earned profit of Rs. 1161.63 Lakhs in the financial year 2023-24. The Board of directors has decided to plough back the profit in the operations of the company. The Board therefore does not recommend any dividend on equity capital for the financial year 2023-24.

4. Transfer to reserves:

Pursuant to provisions of Section 134(3)(j) of the Companies Act, 2013, the company has not transferred any amount to reserves of the company during the year under review.

5. Material changes & commitment affecting the financial position of the Company:

During the period under review, following are the material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year and the date of this report: -

a. The Board of Directors, in its meeting held on 27th May 2024, approved the issue of 81,60,000 fully paid-up equity shares at a price of Rs. 21 per rights equity share (comprising a premium of Rs. 11 and a face value of Rs. 10 each). This issue aggregates to Rs. 1,713.60 Lakhs. The rights issue was made available to all eligible equity shareholders in the ratio of 34 (Thirty-Four) rights equity shares for every 1 (One) equity share held by an eligible equity shareholder of the Company, and it was fully subscribed.

Subsequent to the said allotment, Paid-up equity share capital of the Company has increased from Rs.24,00,000 to Rs.8,40,00,000 divided in 84,00,000 Equity Shares of Rs. 10 each.

b. Mr. Niresh Maheshwari (DIN: 06735182) tendered his resignation as Non-Executive Independent Director of the Company, effective 07th June 2024, through a letter dated 07th June 2024. His resignation also includes stepping down from his memberships in various committees where he served as a member.

c. The Board of Directors, at its meeting held on 9th August 2024, considered and approved the appointment of Mr. Rupesh Malpani (DIN: 08471166) as an Additional Director in the category of Non-Executive, Independent Director for a term of five consecutive years, effective from 9th August 2024. This appointment is subject to the approval of the shareholders of the Company.

6. Significant & material orders passed by the regulators or courts or tribunals:

No significant or material orders have been passed against the Company by the Regulators, Courts or Tribunals, which impacts the going concern status and company's operations in future.

7. Transfer of un-claimed dividend to Investor Education and Protection Fund:

There is no such amount of Un-paid or Unclaimed Dividend to be transferred to Investor and Education and Protection Fund for the financial year ended 31st March 2024.

8. Revision of financial statements:

There was no revision of the financial statements for the year under review.

9. Change in the nature of business, if any:

There was no change in the nature of Business during the year under review.

10. Deposits from public:

Your Company has not accepted any deposits from public 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.

11. Subsidiary companies:

Your Company has no subsidiaries as on 31st March, 2024.

12. Selection and procedure for nomination and appointment of directors:

The Company has a Nomination and Remuneration Committee ("NRC") which is responsible for developing competency requirements for the Board, based on the industry and strategy of the Company. The Board composition analysis reflects an in-depth understanding of the Company, including its strategies, environment, operations, and financial condition and compliance requirements.

The NRC makes recommendations to the Board in regard to appointment of new Directors and Key Managerial Personnel ("KMP") and senior management. The role of the NRC encompasses conducting a gap analysis to refresh the Board on a periodic basis, including each time a Director's appointment or re-appointment is required. The NRC is also responsible for reviewing the profiles of potential candidates' vis-a-vis the required competencies; undertake a reference and due diligence and meeting of potential candidates prior to making recommendations of their nomination to the Board.

The appointee is also briefed about the specific requirements for the position including expert knowledge expected at the time of appointment.

13. Criteria for determining qualifications, positive attributes and independence of a director:

In terms of the provisions of Section 178(3) of the Act, and Regulation 19 of the Listing Regulations, the NRC has formulated the criteria for determining qualifications, positive attributes and independence of Directors, the key features of which are as follows:

Qualifications - The Board nomination process encourages diversity of thought, experience, knowledge, age and gender. It also ensures that the Board has an appropriate blend of functional and industry expertise.

Positive Attributes - Apart from the duties of Directors as prescribed in the Act the Directors are expected to demonstrate high standards of ethical behaviour, communication skills and independent judgment. The Directors are also expected to abide by the respective Code of Conduct as applicable to them.

Independence - A Director will be considered independent if he / she meets the criteria laid down in Section 149(6) of the Act, the Rules framed thereunder and Regulation 16(1) (b) of the Listing Regulations.

14. Independent director's familiarization programmes:

The familiarization program aims to provide the Independent Directors with the scenario within the Companies Business Activity, the socio-economic environment in which the Company operates, the business model, the operational and financial performance of the Company, significant development so as to enable them to take well-informed decisions in timely manner. The familiarization programme also seeks to update the Directors on the roles, responsibilities, rights and duties under the Act and other statutes.

The policy on Company's familiarization programme for Independent Directors is hosted on your Company's website and its web link is www.sobhagyaltd.com.

15. Performance evaluation:

Pursuant to the provisions of Section 134 (3) (p) of the Companies Act, 2013 and under Regulation 17(10) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015; the Board of Directors has undertaken an annual evaluation of its own performance, performance of its various Committees and individual Directors. The mannerin which the evaluation has been carried out has been explained in the repo.

16. Managerial Remuneration and particulars of employees:

The information required under Section 197 of the Act read with Rule 5 (1) of Companies (Appointment and

Remuneration of Managerial Personnel) Rules, 2014 is furnished in Annexure II and annexed to the Directors' Report.

Particulars of employees drawing remuneration in excess of limits prescribed under Section 197 of the Act read with Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014:

There are no employees drawing remuneration exceeding Rupees One crore and two Lakhs per annum if employed throughout the financial year or Rupees Eight Lakh and Fifty Thousand per month if employed for part of the financial year or draws remuneration in excess of Managing Director or Whole time Director or Manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the Company.

17. Number of Board Meetings:

During the year, eight (8) meetings of the Board of Directors of the Company were held on 30/05/2023, 12/08/2023, 02/09/2023, 12/10/2023, 14/11/2023, 25/01/2024,14/02/2024 and 27/02/2024.The details of the meetings are furnished in the Corporate Governance Report which is attached to this Report.

18. Statutory Committees of the Board:

The detailed information with regard to the composition of Board and its Committee(s) and their respective meetings etc. are stated in the Corporate Governance Report of the Company which forms part of this Annual Report.

19. Directors and Key Managerial Personnel: Reappointments: Nil

Director liable to retire by rotation:

In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mrs. Sonal Kirtikumar Bhangdiya, Non-executive Director retires by rotation at the ensuing AGM and being eligible, offers herself for re-appointment.

Resignation: - Nil

Changes occurred after the Closing the Financial year: -

Mr. Niresh Maheshwari (DIN: 06735182) tendered his resignation as Non-Executive Independent Director of the Company with effect from 07th June 2024 along with his membership in various Committees, where he served as a member.

Mr. Rupesh Malpani (DIN: 08471166) was appointed as an Additional Director in the capacity of Non-Executive Independent Director for a term of five consecutive years with effect from 09th August, 2024 subject to the approval of the shareholders at the ensuing Annual General Meeting.

20. Statutory Auditors:

M/s. Joshi & Shah, Chartered Accountants, Mumbai (Firm Registration No. 144627W) were appointed as Statutory Auditor of your Company in 36th Annual General Meeting to hold office until the conclusion of the 41st Annual General Meeting.

The report given by the Auditors on the financial statements of the Company is a part of the Annual Report.

The Auditors have not expressed a qualified opinion in their Audit Report for Financial Year ended 31st March, 2024.

The Statutory Auditor of the Company has not reported any instances of fraud as specified under Section 143(12) of the Companies Act, 2013.

21. Internal auditors:

Pursuant to provisions of Section 138 read with Rule 13 of the Companies (Accounts) Rules, 2014 and Section 179 read with Rule 8(4) of the Companies (Meetings of Board and its

Powers) Rules, 2014; M/s. Ashish Mittal & Associates, Chartered Accountants (Firm Registration No. 019185C) were appointed as Internal Auditors of the Company for the Financial Year 2023-24.

Deviations are reviewed periodically and due compliance ensured. Summary of Significant Audit Observations along with recommendations and its implementations are reviewed by the Audit Committee and concerns, if any, are reported to Board.

22. Secretarial auditors:

Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, based upon the recommendations of the Audit Committee, the Board of Directors had appointed M/s. Parag Dasarwar, Practicing Company Secretary, Nagpur to undertake the Secretarial Audit of the Company for financial year 2023-24.

23. Audit reports:

Explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made, if any —

(a) Statutory Auditors Report:

The Board has duly reviewed the Statutory Auditor's Report on the Accounts for the financial year ended 31st March, 2024 and has noted that the same does not have any reservation, qualification or adverse remarks. However, the Board decided to further strengthen the existing system and procedures to meet all kinds of challenges and growth in the market expected in view of the rapid global challenges.

The Auditors Report annexed with this Annual Report does not contain any qualification, reservation or adverse remarks.

(b) Secretarial Audit Report:

The Secretarial Audit was carried out by M/s. Parag Dasarwar, Practicing Company Secretary, for the financial year ended 31st March, 2024. The Report given by the Secretarial Auditor is annexed herewith as Annexure III and forms integral part of this Report.

24. No Frauds Reported by Statutory Auditors:

During the Financial Year 2023-24, the Auditors have not reported any matter under section 143(12) of the Companies Act, 2013, therefore no detail is required to be disclosed under section 134(3) (ca) of the Companies Act, 2013.

25. Conservation of energy, technology absorption and foreign exchange outgo:

The required information as per Sec.134 (3) (m) of the Companies Act 2013 is provided hereunder and Rule 8 of the Companies (Accounts) Rules, 2014:

(a) Conservation of Energy:

Your Company's operations are not energy intensive. Adequate measures have been taken to conserve energy wherever possible by using energy efficient computers and purchase of energy efficient equipment.

(b) Technology Absorption:

1. Research and Development (R&D): NIL

2. Technology absorption, adoption and innovation: NIL

(c) Foreign Exchange Earnings and Out Go:

1. Foreign Exchange Earnings: Nil

2. Foreign Exchange Outgo: Nil

26. Management discussion and analysis report:

Management Discussion and Analysis Report for the financial year 2023-24 is as annexed hereto.

27. Risk management policy:

The Board of Directors has developed risk management policy so as to identify elements of risk in different areas of operations and to take necessary actions to mitigate the risks. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continual basis.

28. Corporate governance:

The Company has taken adequate steps to ensure that all mandatory provisions of Corporate Governance as prescribed under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 are complied with.

As per Regulation 34(3) Read with Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Report on Corporate Governance along with certificate from Practicing Company Secretary confirming the Compliance of the condition of Corporate Governance as stipulated in the Listing Regulations, 2015 is annexed and forms an integral part of this Annual report.

29. Code of Conduct for Prevention of Insider Trading:

In compliance with the provisions of the SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended, the Company has formulated and adopted the revised 'Code of Conduct to regulate, monitor and report trading by designated persons in Listed or Proposed to be Listed Securities' of the Company. The object of the Code is to set up framework, rules and procedures to be followed, and disclosures to be made while dealing with shares of the Company. The code has been formulated to protect the interest of shareholders at large and to prevent misuse of any unpublished price sensitive information ('UPSI') and to prevent any insider trading activity by dealing in shares of the Company by its Directors, Designated Persons, Employees and their immediate relatives and to maintain the highest ethical standards of dealing in Company securities.

The Company has also adopted the Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information in line with the SEBI (Prohibition of Insider

Trading) Amendment Regulations, 2018 and Policy and procedure for Inquiry into leak or suspected leak of UPSI. Code of conduct for the prevention of insider trading is available on the Company's website www.sobhagyaltd.com.

30. Annual Return:

The Annual Return pursuant to the provision of Section 92 of the Companies Act, 2013 read with Rule 12 of the Companies(Management and Administration) Rules, 2014, will be available on the website of the Company at www.sobhagyaltd.com.

31. Share Capital:

During the year under review, the authorized share capital of the company has increased from existing Rs. 50,000,000/- (Rupees Five Crores Only) divided into 5,000,000 (Fifty Lakhs) Equity Shares of Rs. 10/- (Rupees Ten Only) each to Rs. 200,000,000/- (Rupees Twenty Crores Only) divided into 20,000,000 (Two Crores) Equity Shares of Rs. 10/- (Rupees Ten Only) each and paid-up share capital of the Company is Rs.24,00,000/- (Rupees Twenty-four Lakhs only) divided into 2,40,000 equity shares of Rs. 10/- each.

32. Declaration of Independence:

The Company has received declarations from all the Independent Directors of the Company under section 149(7) of the Companies Act, 2013, confirming that they meet with criteria of independence as prescribed both under subsection (6) of Section 149 of the Companies Act, 2013 and under Regulation 16(1)(b) read with Regulation 25 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

33. Policy on Directors appointment and Remuneration and other details:

The Board Governance, Nomination & Remuneration Committee has framed a policy for selection and appointment of Directors including determining qualifications and independence of a Director, Key Managerial Personnel (KMP), senior management personnel and their remuneration as part of its charter and other matters provided under Section 178(3) of the Companies Act, 2013.

Pursuant to Section 134(3) of the Companies Act, 2013, the nomination and remuneration policy of the Company which lays down the criteria for determining qualifications, competencies, positive attributes and independence for appointment of Directors and policies of the Company relating to remuneration of Directors, KMP and other employees is available on the Company's website at www.sobhagyaltd.com.

34. Director's Responsibility Statement:

In accordance with the provisions of Section 134(5) of the Companies Act, 2013, your Directors confirm that:

a) in the preparation of the annual accounts for the financial year ended 31st March 2024, the applicable accounting standards and schedule III of the Companies Act, 2013 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 judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company as on 31st March 2024 and the profit of the Company for the financial year ended 31 March 2024;

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

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

e) proper internal financial controls laid down by the Directors were followed by the Company and that such internal financial controls are adequate and were operating effectively; and

f) proper systems to ensure compliance with the provisions of all applicable laws were followed and that such systems were adequate and operating effectively.

35. Vigil Mechanism/Whistle Blower Policy:

The Company has adopted Whistle Blower policy/Vigil Mechanism. The details of establishment of such mechanism are disclosed on the website of the Company at www.sobhagyaltd.com.

36. Employee stock option scheme:

The Company has not issued any equity shares under Employees Stock Option Scheme during the year under review and hence no information as per provisions of Section 62(1)(b) of the Act read with Rule 12(9) of the Companies (Share Capital and Debenture) Rules, 2014

37. Corporate social responsibility:

Since, the company has earned a net profit of Rs.5 crore or more during financial year 2023-2024, hence Section 135 of the Companies Act, 2013 relating to Corporate Social Responsibility is applicable for F.Y. 2023-2024 and the company will comply with the same as per CSR policy and Section135 of the Companies Act, 2013.

The brief outline of the Corporate Social Responsibility ("CSR") Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out as Annexure IV to this report in the format prescribed in the Companies (CSR Policy) Rules, 2014. For other details regarding the CSR Committee, refer to the Corporate Governance Report, which is a part of this report. The policy is available on the website of the Company.

38. Secretarial Standards:

The company is in compliance with Secretarial Standards issued by The Institute of Company Secretaries of India on Meetings of the Board of Directors and General Meetings.

39. Insurance:

The properties and assets of your Company are adequately insured.

40. Particulars of loans, guarantees and investments under section 186 of the Companies Act, 2013:

During the year, there are no loans, guarantees and investments made under section 186 of the Companies Act, 2013 read with the Rules issued thereunder.

41. Internal Financial Control Systems:

Your Company has well laid out policies on financial reporting, asset management, adherence to Management policies and also on promoting compliance of ethical and well-defined standards. The Company follows an exhaustive budgetary control and standard costing system. Moreover, the management team regularly meets to monitor goals and results and scrutinizes reasons for deviations in order to take necessary corrective steps. The Audit Committee which meets at regular intervals also reviews the internal control systems with the Management and the internal auditors. The internal audit is conducted at the Company and covers all key areas. All audit observations and follow up actions are discussed with the Management as also the Statutory Auditors and the Audit Committee reviews them regularly.

42. Related Party Transactions:

All related party transactions that are entered into during the financial year are on arm's length basis and in the ordinary course of business. Approval of Audit Committee is obtained for Related Party Transactions. The Related Party transactions effected during the financial year are disclosed in the notes to the Financial Statement.

The Form AOC-2 pursuant to Section 134(3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014 is annexed herewith as Annexure- I to this report.

43. The Details of the difference between the amount of the Valuation done at the time of One-Time Settlement and the Valuation done while taking a loan from the Banks or Financial Institutions along with the reasons thereof.

The disclosure under this clause is not applicable as the Company has not undertaken any one-time settlement with the banks or financial institutions.

44. The Details of an 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.

As on the date of this Report the Company has no proceedings pending cases under the Insolvency and Bankruptcy Code, 2016.

45. Prevention of sexual harassment at workplace:

The Company has adopted a Policy on Prevention, Prohibition, and Redressal of Sexual Harassment at workplace.

This is in line with provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ('POSH Act') and the Rules made thereunder. A Committee has been set up to redress complaints received regarding Sexual harassments. During the year under review, there were no Complaints pertaining to sexual harassment.

46. The Details of the difference between the amount of the Valuation done at the time of One-Time Settlement and the Valuation done while taking a loan from the Banks or Financial Institutions along with the reasons thereof.

The disclosure under this clause is not applicable as the Company has not undertaken any one-time settlement with the banks or financial institutions.

47. The Details of an 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.

As on the date of this Report the Company has no proceedings pending cases under the Insolvency and Bankruptcy Code, 2016.

48. Right Issue :

On 12th August, 2023, the Board of Directors approved the raising of funds through the issuance of equity shares of the company for an amount not exceeding Rs. 25 crores by way of a rights issue to the eligible equity shareholders of the Company. The proceeds of the said issue are proposed to be utilised towards inter alia, working capital requirements, general corporate purposes and expenses related to the Issue. The draft letter of offer dated October 18, 2023 duly approved by the Rights Issue committee was filed by the company with Securities and Exchange Board of India ('SEBI') and BSE Limited ('BSE') for an amount aggregating up to Rs. 1900.00 lakhs on a Rights basis to the eligible equity shareholders of the Company. The company received letter dated December 26, 2023 from BSE granting in-principle approval for undertaking the Issue.

On 16th April, 2024, the Board of directors approved the various terms of the Rights Issue and Letter of Offer for the Rights Issue. The issue was opened for the eligible equity shareholders from Monday, May 06, 2024 to Tuesday, May 21, 2024 and pursuant to the finalization of the Basis of Allotment of the Rights Issue, in consultation with the Designated Stock Exchange, BSE Limited, the Board of Directors approved the allotment of 81, 60,000 Fully Paid -up Equity Shares at a price of Rs.21 per Rights Equity Share (including a premium of Rs. 11 per Right Equity Share and face value Rs. 10 each) aggregating to Rs. 1713.60 Lakhs, to all the Eligible Equity Shareholders in the ratio of 34 (Thirty-Four) Rights Equity Shares for every 1(One) Equity Share held by an Eligible Equity Shareholder of the Company on 27th May, 2024 and obtained the listing approval from BSE Limited on May 30, 2024 and trading approval on May 31, 2024.

49. Green Initiative:

In the line with the 'Green initiative', the Company has affected electronic delivery of the Annual Report 2023- 24 are sent to all members whose email addresses are registered with Depository Participants M/s Purva Sharegistry (I) Private Limited (Company's Registrar and Share Transfer Agent). Your Company would encourage other Members also to register themselves to receive the Annual Report in electronic form.

50. Other Disclosures:

Your directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

a. Issue of equity shares with differential rights as to dividend, voting or otherwise.

b. Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except ESOS referred to in this Report.

c. Neither the Managing Director nor the Whole-time Directors of the Company receive any remuneration or commission from any of its subsidiaries.

51. Appreciation & acknowledgement:

Your directors place on records their appreciation for the overwhelming co-operation and assistance received from the investors, customers, business associates, bankers, vendors, as well as regulatory and governmental authorities. Your Directors also thanks the employees at all levels, who through their dedication, co-operation, support and smart work have enabled the company to achieve a moderate growth and is determined to poise a rapid and remarkable growth in the year to come. Your directors also wish to place on record their appreciation of business constituents, banks and other "financial institutions and shareholders of the Company like SEBI, BSE, NSDL etc. for their continued support for the growth of the Company.