Swaraj Engines Ltd

Performance Review

As per the current reports on macroeconomics for fiscal 2024, the Indian economy, testifying to the resilience to the post-pandemic period, is poised to register another year of consistent growth in its GDP. The Indian tractor industry for FY24, which the Company serves, posted a degrowth of 7% over last year and closed at around 8,75,700 units. The decline was mainly attributed to erratic and uneven rainfall distribution and to some extent also due to a large industry base of FY23. At the same time, your Company, on the strength of good engine demand from its customers, achieved its highest-ever engine sales volume of 1,38,761 units compared to last year's sales of 1,37,005 units. Benefitted with this higher sale, your Company yet again posted an overall good financial performance for fiscal 2024 - the fourth successive year of growth in engine sales volume and profit over respective previous years.

In the above backdrop, the Company's net operating revenue for the financial year 2023-24 stood at Rs. 1419.24 crores as against Rs. 1421.82 crores for the previous year. While the Operating profit was Rs. 188.17 crores (previous year Rs. 186.41 crores), Profit before tax at Rs. 184.97 crores (previous year Rs. 179.74 crores) was up by 2.9%. As a result, the Company posted its highest ever Profit after tax of Rs. 137.87 crores (previous year Rs. 133.61 crores), translated into Basic Earning Per Share of Rs. 113.50 (previous year Rs. 110.02). The total comprehensive income (net of tax) stood at Rs. 137.92 crores against the previous year's Rs. 133.52 crores - up 3.3%.

To meet the expected customer demand, the Company had earlier announced that it would enhance its capacity to 1,95,000 engines per annum. The new capacity is near completion and will be operational in the first quarter of the current fiscal year 2025. This expansion is fully financed through internal generation/surplus available with the Company.

No material changes and commitments which could affect your Company's financial position for FY 2023-24 have occurred between the end of the financial year of your Company and date of this report.

Finance

The fund position of the Company remained comfortable throughout the year under review. The Company, after meeting the capital expenditure & working capital requirements to support operations, has earned an income of Rs. 15.18 crores (previous year - Rs. 12.56 crores) on its surplus funds.

Dividend

Your Directors are pleased to recommend an equity dividend of Rs. 95.00 per share of the face value of Rs. 10.00 for the financial year ended 31st March, 2024 (previous year - Rs. 92.00 per share).

If approved by the Shareholders at the ensuing Annual General Meeting, the above equity dividend will be paid to those shareholders whose names shall appear in the Register of Members as on the Book Closure date. The total equity dividend outgo for the financial year 2023-24 will absorb a sum of Rs. 115.40 crores (previous year - Rs. 111.74 crores). Further, the Board of your Company has decided not to transfer any amount to the General Reserves for the year under review.

Dividend Distribution Policy

The Board approved Dividend Distribution Policy containing the parameters mentioned in Regulation 43A(2) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("the Listing Regulations"). The same is attached as "Annexure A" and forms part of this Annual Report.

The same has also been hosted on the website of the Company and can be assessed at the web-link https://www.swarajenterprise.com/policies

Current Year's Review

The Government announcement of increased advance estimate of horticulture production and Rabi wheat output higher than last year is expected to bring positive sentiments among farmers. Also, the forecast of above normal monsoon with well spread rainfall in most parts of the country is expected to further boost tractor demand.

B. HOLDING COMPANY

Mahindra & Mahindra Limited (M&M) is the holding Company of Swaraj Engines Limited and holds 52.12% of the paid-up capital equity share capital of the Company as on 31st March, 2024.

C. INTERNAL FINANCIAL CONTROL SYSTEMS

The Company has laid down adequate internal financial controls with reference to financial statements, commensurate with the size, scale and complexity of its operations. Based on the results of such assessments carried out by Management, no reportable material weakness or significant deficiencies in the design or operation of internal financial controls was observed. Nonetheless your Company recognizes that any internal control framework, no matter how well designed, has inherent limitations and accordingly, regular audits and review processes ensure that such systems are reinforced on an ongoing basis. Your Company uses SAP ERP Systems as a business enabler and to maintain its Books of Account. The transactional controls built into the SAP ERP system also help to strengthen the processes related to segregation of duties, appropriate level of approval mechanisms and maintenance of supporting records. Further, as mandated in the recent amendment under Companies (Accounts) Rules, 2014, effective 1st April, 2023, the SAP ERP System also has feature of recording an Audit Trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.

D. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report for the year under review, as stipulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms part of this Annual Report.

E. RELATED PARTY TRANSACTIONS

All related party transactions that were entered during the financial year 2023-24 were in the ordinary course of the business and were on arm's length basis. All such related party transactions are placed before the Audit Committee for approval, wherever applicable. Prior omnibus approval for normal transactions is also obtained from the Audit Committee for the related party transactions which are of repetitive nature as well as for the transactions which cannot be foreseen and the same are subsequently shared with Audit Committee on quarterly basis. The policy on materiality of and dealing with related party transactions as approved by the Audit Committee and the Board of Directors is uploaded on the website of the Company and the link for the same is https://www.swarajenterprise.com/policies. The disclosure of material related party transactions pursuant to Section 134(3)(h) of the Companies Act, 2013 in Form AOC-2 is annexed as "Annexure B" to this report.

F. BOARD AND COMMITTEES Directors

Mrs. Neera Saggi, Non-Executive Independent Director of the Company, on completion of her second term, ceased to be a Director of the Company with effect from 1st October, 2023. The Board of Directors placed on record its sincere appreciation of the valuable contributions made by Mrs. Neera Saggi during her long association with the Company as Independent Director since October 2014.

Taking note of the retirement of Mrs. Saggi, the Board appointed Ms. Smita Mankad as Additional Director (Non Executive & Independent) with effect from 1st August, 2023 and subsequently the shareholders of the Company also approved her appointment as Independent Director for a period of 5 years effective 1st August, 2023 through postal ballot.

In terms of Section 152 of the Companies Act, 2013, Mr. Harish Chavan and Mr. Puneet Renjhen shall retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment.

Independent Directors

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Board is of the opinion that the Independent Directors of the Company hold highest standards of integrity and possess requisite expertise and experience required to fulfil their duties as Independent Directors. In terms of Section 150 of the Companies Act, 2013 read with Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014, Independent Directors of the Company have confirmed that they have registered themselves with the databank maintained by The Indian Institute of Corporate Affairs, Manesar ('IICA'). Further, the Independent Directors of the Company are exempt from the requirement to undertake online proficiency self-assessment test as per the provisions of Rule 6(4) of the Companies (Appointment and Qualification of Directors) Rules, 2014.

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a system has been put in place to carry out an annual performance evaluation of the Board, its Committees and individual Directors. Criteria for performance evaluation is covered in the Corporate Governance Report.

Remuneration Policy

The Board has, on the recommendation of the Nomination and Remuneration Committee, framed policy on appointment of Directors and Senior Management and policy for remuneration of the Directors, KMP and other employees. These policies are available at https://www.swarajenterprise.com/policies. The Remuneration Policy is also covered in the Corporate Governance Report.

Board Meetings and Annual General Meeting

A calendar of Meetings is prepared and circulated in advance to the Directors. During the year, four Meetings of Board and four meetings of the Audit Committee were convened and held. The details are covered in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013.

The Independent Directors of the Company meet at least once in every financial year without the presence of Non-Independent Directors, Executive Director and any other management personnel. The meeting(s) is conducted in a manner to enable the Independent Directors to discuss matter pertaining to, inter alia, review of performance of Non-Independent Directors and the Board as a whole, assess the quality, quantity and timeliness of flow of information between the Company's management and the Board that is necessary for the Board to effectively and reasonably perform their duties. During the year, one meeting of Independent Directors was held on 27th February, 2024.

The 37th Annual General Meeting of the Company was held on 28th July, 2023.

Directors' Responsibility Statement

Pursuant to Section 134(5) of the Companies Act, 2013, your Directors, based on representations received from the Operating Management, and after due enquiry, confirm that: a) in the preparation of Annual Accounts for the financial year ended 31st March, 2024, the applicable accounting standards have been followed; b) in the selection of accounting policies, consulted the Statutory Auditors 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 as at 31st March, 2024 and of the profit of the Company for the year ended on that date; 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 irregularities; d) the Annual Accounts have been prepared on a going concern basis; e) adequate Internal Financial Controls to be followed by the Company have been laid down and such Internal Financial Controls were operating effectively during the Financial Year ended 31st March, 2024; f) proper systems have been devised to ensure compliance with the provisions of all applicable laws and such systems were adequate and operating effectively throughout the Financial Year ended 31st March, 2024.

Audit Committee

The Audit Committee of the Company at the beginning of financial year 2023-24 was comprising 5 Directors viz. Mr. Dileep C. Choksi (Chairman of the Committee), Mrs. Neera Saggi, Mr. S. Nagarajan, Mr. Nikhilesh Panchal and Mr. Puneet Renjhen. Consequent to the retirement of Mrs. Saggi as Independent Director on 30th September, 2023, Ms. Smita Mankad was inducted as Member of the Audit Committee in place of Mrs. Saggi with effect from 1st October, 2023. In the current composition of the Audit Committee, except Mr. Puneet Renjhen, all the Members of the Committee are Independent Directors. All the Members of the Committee possess strong accounting and financial management knowledge.

The Company Secretary of the Company is the Secretary of the Committee. All the recommendations of the Audit Committee were accepted by the Board.

G. CORPORATE GOVERNANCE Corporate Governance

A Report on Corporate Governance along with a Certificate from the Auditors of the Company regarding the compliance of conditions of Corporate Governance as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms part of this Annual Report.

Vigil Mechanism / Whistle Blower Policy

The Company has a vigil mechanism through Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Policy is explained in the Corporate Governance Report and also posted on the website of the Company.

The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Company has put in place anti sexual harassment policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The policy is gender neutral. Internal Complaints Committee (ICC) has been set up to redress the complaints received, if any, regarding sexual harassment.

During the year, one complaint was received and resolved by the ICC by taking appropriate action as per the provisions of the aforesaid Act.

Risk Management

The Risk Management Committee of the Company at the beginning of financial year 2023-24 was comprising 3 Directors viz. Mrs. Neera Saggi, Non-Executive Independent Director (Chairperson of the Committee), Mr. Harish Chavan, Non-Executive Non-Independent Director and Mr. Giju Kurian, Whole Time Director & CEO. Consequent to the retirement of Mrs. Saggi as Independent Director on 30th September, 2023, Mr. Nikhilesh Panchal, Non-Executive Independent Director, was inducted as Member & Chairman of the Risk Management Committee in place of Mrs. Saggi with effect from 1st October, 2023. The other details and terms of reference of the Committee are covered under the Corporate Governance Report which forms part of the Annual Report. In accordance with the requirement of Regulation 17 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company is having Risk Management framework covering identification, evaluation and control measures to mitigate the identified business risks.

H. EMPLOYEES

Key Managerial Personnel (KMP)

During the financial year under review, there was no change in Key Managerial Personnel (KMP) of the Company and the following have been designated as the KMPs of the Company in accordance with Section 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014: Mr. Giju Kurian, Whole Time Director & Chief Executive Officer Mr. Mahesh Gupta, Chief Financial Officer Mr. Rajesh K. Kapila, Company Secretary

Employees' Stock Option Scheme

The Nomination and Remuneration Committee of the Board of Directors of the Company, inter alia, administers and monitors the Employees' Stock Option Scheme-2015 ("the Scheme") of the Company which gets covered under the provisions of SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("SBEB Regulations 2021"). Pursuant to the said Scheme, the Nomination and Remuneration Committee during FY 2023-24 have granted 1409 options to eligible employee and allotted 1339 equity shares against the vesting. No employee has been issued stock options during the year, equal to or exceeding 1% of the issued capital of the Company at the time of grant. Information as required under the SBEB Regulations is provided in the Annual Accounts which has been uploaded on the Company's website and can be accessed at the web-link https://www.swarajenterprise.com/annualreports

Industrial Relations

Industrial relations remained cordial throughout the year under review.

Particulars of Employees

The statement of Disclosure of Remuneration under Section 197(12) 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 C". Details of employee remuneration as required under provisions of Section 197(12) of the Companies Act, 2013 read with Rule 5(2) & 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, forms part of this report and in terms of the provisions of Section 136 of the Companies Act, 2013, the Report and Accounts are being sent to the Shareholders excluding the aforesaid statement. Any Shareholder interested in obtaining such details may write to the Company Secretary of the Company and the same will be made available during 21 days before the Annual General Meeting.

SWARAJ ENGINES LIMITED

Safety, Health and Environmental Performance

Your Company's commitment towards Safety, Occupational Health and Environment is being continuously enhanced. The Company encourages involvement of all its employees in activities related to safety, including promotion of safety standards. This is also to ensure sustainable business growth. The Company has a well-established Safety, Occupational Health and Environmental Policy which inter alia ensures safety of public, employees, plant and equipment by ensuring compliance with all statutory rules and regulations on regular basis. During the year, no major accident has occurred. Your Company also imparts training to its employees as per the predefined training calendar, carries out statutory safety audits of its facilities as per legal requirement and promotes eco-friendly activities.

The Company's plant is certified under OHSAS 45001:2018 and EMS ISO 14001:2015.

I. AUDITORS

Statutory Auditors and Auditors' Report

M/s B.K. Khare & Co., Chartered Accountants (ICAI Firm Registration Number 105102W), were reappointed as the Statutory Auditors of the Company for the second term to hold office for another term of 5 years from the conclusion of the 36th Annual General Meeting ("AGM") held on 25th July, 2022 until the conclusion of the 41st AGM of the Company to be held in the year 2027.

The Report given by the Auditors on the financial statements of the Company for the financial year 2023-24 is part of the Annual Report. There has been no qualification, reservation or adverse remark or disclaimer given by the Auditors in their Report.

Secretarial Auditors

Pursuant to Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s A. Arora & Co., Company Secretaries in practice (CP No. 993) to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit is annexed herewith as "Annexure D". The Secretarial Audit Report does not contain any qualification, reservation or adverse remark or disclaimer.

Further, pursuant to SEBI Circular dated 8th February 2019, as amended, read with regulation 24A of the Listing Regulations and Circulars issued by Stock Exchanges in this regard, M/s A. Arora & Co., Company Secretaries in practice (CP No. 993) has issued the Annual Secretarial Compliance Report for FY 2023-24 confirming compliance with all applicable SEBI Regulations and Circulars/Guidelines issued thereunder. The Annual Secretarial Compliance Report is available on the Company's website on https://www.swarajenterprise.com/DisclosureunderReg30andOthers.

Cost Records and Cost Audit

The Company is maintaining cost records as prescribed under the provisions of Section 148(1) of the Companies Act, 2013. The Board, on the recommendation of Audit Committee, had appointed M/s SDM & Associates, Cost Accountants (Firm Registration Number 000281), as Cost Auditor for conducting the audit of cost records of the Company for the Financial Year 2024-25 under Section 148 of the Companies Act, 2013. M/s SDM & Associates have confirmed that their appointment is within the limits of Section 141(3)(g) of the Companies Act, 2013 and have also certified that they are free from any disqualifications specified under Section 141(3) and proviso to Section 148(3) read with Section 141(4) of the Companies Act, 2013.

The Audit Committee has also received a Certificate from the Cost Auditors certifying their independence and arms length relationship with the Company.

As per the provisions of the Companies Act, 2013, the remuneration payable to the Cost Auditor is required to be placed before the Members in a General Meeting for their ratification. Accordingly, a Resolution seeking Members' ratification for the remuneration payable to M/s SDM & Associates, Cost Auditors is included in the Notice convening the Annual General Meeting.

J. CORPORATE SOCIAL RESPONSIBILITY AND RELATED MATTERS Corporate Social Responsibility (CSR)

Keeping with Company's core value of Good Corporate Citizenship, your Company is committed to its social responsibility by taking various initiatives that would benefit society. In line with the Company's CSR Policy and CSR thrust areas, your Company's CSR efforts continue to be directed towards education, including vocational skills training, public health, environment and community welfare. Most of the activities, particularly relating to education, skill learning and health, being planned by giving due attention to women as key beneficiaries.

Under education and vocational training initiative to support the youth to get suitable earning opportunities, your Company imparted training through various short-term courses to more than 250 students at Company's Skill Development Centre and Govt. ITI in association with State Govt. Further, the Company provided 31 engines to the nearby ITIs which benefitted more than 1000 students of mechanical wing for their practical training.

On Public health front, the Company with the support of Homi Bhabha Cancer Hospital and Research Centre covered ~2600 females for Mammography test. Besides this, Company organized various medical camps and covered around 3000 people and also provided medical equipments & material to the premier Govt. Institutions for the welfare of the community. Women empowerment is also one of the core focus areas for the Company. Under this initiative called "Prerna", various trainings were organized to empower women farmers through integrated rural development programme. With a view to provide and promote innovative farm practice knowledge & technology, the Company extended necessary support to 600+ women farmers through 40 Self Help Groups (SHGs). Your Company was also awarded with the prestigious "Economic Times (ET) Ascent National Award in CSR initiative on women empowerment & making special children earn their livelihood".

In order to contribute towards a clean environment, the Company continued its Swachh Bharat activity in nearby adopted villages for collection of door-to-door garbage, cleanliness of public utilities, and sapling plantation at various locations. Other activities include improvement in basic infrastructure at ITIs/Polytechnics, distribution of the sanitary napkin through already installed vending machines, refurbishing of washrooms at nearby Govt. schools, development of sensory garden at Government Rehabilitation Institute for Intellectual Disabilities, celebration of festivals with under privileged, public awareness camps for road safety and pollution etc.

Further, in compliance with Section 135 of the Companies Act, 2013, read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company's Corporate Social Responsibility (CSR) Committee at the beginning of the year was comprising of Mr. S. Nagarajan (Chairman), Mr. Nikhilesh Panchal, Mr. Harish Chavan and Mr. Giju Kurian. During the year, the Committee was reconstituted with effect from 1st October, 2023 by inducting Ms. Smita Mankad, an Independent Director, as Member of the Committee in place of Mr. Nikhilesh Panchal. The Annual Report on CSR activities is annexed as "Annexure E" to this report.

Sustainability Initiative

Your Company is conscious of its responsibility towards preservation of natural resources and continuously taking various initiatives to reduce the consumption of electricity and water. As required under Regulation 34(2)(f) of the Listing Regulations, the Business Responsibility and Sustainability Report of your Company in the prescribed format is available as a separate section as "Annexure F" and forms part of this Annual Report.

Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo

Particulars in respect of the above activities stipulated under Section 134(3)(m) of the Companies Act, 2013, read with Rule 8 of the Companies (Accounts) Rules, 2014, is annexed herewith as "Annexure G".

K. SECRETARIAL Share Capital

Consequent to allotment of 1339 equity shares of Rs. 10/- each to eligible employees during the year against the exercise of the options vested to them under the Company's Employees' Stock Option Scheme-2015, the Paid-up Equity Share Capital of the Company as on 31st March, 2024 stood at 1,21,47,255 equity shares of Rs. 10/- each fully paid up (previous year -1,21,45,916).

Annual Return

Pursuant to Section 92(3) read with Section 134(3)(a) of the Companies Act, 2013, the Annual Return as on 31st March, 2024 is available on the Company's website on https://www.swarajenterprise.com/annualreports

Particulars of Loans, Guarantees and Investments

During the year under review, the Company has not extended any loans, given guarantees or provided securities or made investments which would be covered by Section 186 of the Companies Act, 2013.

Deposits

The Company has not accepted deposit from the public falling within the ambit of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014.

The Company has not made any loans / advances and investment in its own shares, associates, etc. during the year.

Compliance with Secretarial Standards on Board and General Meetings

During the Financial Year, your Company has complied with applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

Change in the Nature of Business

There has been no change in the nature of business of the Company during the year.

General

The Company is not paying any commission to the Whole Time Director(s). However, Whole Time Director(s) is eligible for grant of Stock Options of the Company, subject to approval of the Nomination and Remuneration Committee. Further, the Whole Time Director of the Company does not draw any commission or remuneration from its Holding Company.

The Company does not have any subsidiary or joint venture company.

There was no revision of financial statements and Board's Report of the Company during the year under review.

During the year, the Company has not made any application and there are no proceedings pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016).

The Company has no borrowings, and hence the requirement of providing details of difference between amount of the valuation done at the time of one-time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof is not applicable.

Your Directors further state that no disclosure or reporting is required in respect of the following items as there were no transactions / events happened on these items during the year under review: 1. issue of equity shares with differential voting rights or sweat equity.

2. raising of funds through public issue, rights issue, preferential issue and qualified institutional placement.

3. significant or material orders passed by the Regulators / Courts / Tribunal which impact the going concern status of the Company and its future operations.

4. voting rights which are not directly exercised by the employees in respect of shares for the subscription / purchase for which loan was given by the Company (as there is no scheme pursuant to which such person can beneficially hold shares as envisaged under Section 67(3)(c) of the Companies Act, 2013).

5. fraud reporting by the auditors.

ACKNOWLEDGEMENTS