Thejo Engineering Ltd

The Board of Directors is pleased to present the Thirty-Eighth Annual Report of the Company (hereinafter referred to as "Thejo"/"Thejo Engineering"/"the Company"/"your Company"/"we"/"us") and its audited financial statements (standalone and consolidated) for the Financial Year ended 31^st March, 2024. The summarised financial results for the year ended 31^st March, 2024 are given below:

' in lakhs

* Dividend pertains to the Financial Year 2022-23. No appropriation for dividend has been made in the Accounts for the dividend recommended for the Financial Year 2023-24, pending approval by the Members at the ensuing Annual General Meeting.

REVIEW OF FINANCIAL PERFORMANCE AND STATE OF COMPANY'S AFFAIRS

During the year under review, the Company continued its focus on value-added products under the Manufacturing Division and on profitable operations at site level in respect of the Services and Operation and Maintenance Division. The Company incorporated its subsidiary at UAE with the objective of targeting further growth in the overseas markets. The Company also focussed closely on cost control and working capital management. This enabled the Company to increase its turnover and profitability. The financial performance of the Company at standalone and consolidated levels are given below.

STANDALONE

Your Company recorded revenue (from operations) of ' 39,157.26 lakhs for the year ended 31^st March, 2024 as against ' 33,269.82 lakhs in the previous year. It achieved an EBITDA of ' 7,105.40 lakhs (previous year ' 4,883.68 lakhs), resulting in a net profit of ' 3,805.04 lakhs as against ' 2,758.17 lakhs in 2022-23, registering a growth of 45.49% in terms of EBITDA and 37.95% in terms of net profit.

CONSOLIDATED

The Consolidated Financial Statements of the Company have been prepared as per Ind-AS 110. The Company's consolidated revenue from operations in the year under review aggregated ' 55,940.49 lakhs (previous year ' 47,445.59 lakhs) on which it made EBITDA of ' 10,350.05 lakhs (previous year ' 6,257.25 lakhs) and net profit (attributable to the Owners of the Company) of ' 5,563.87 lakhs as against ' 3,241.75 lakhs in 2022-23, registering a growth of 65.41% and 71.63% in terms of EBITDA and net profit (attributable to the Owners of the Company), respectively.

DIVIDEND

The Board of Directors is pleased to recommend payment of dividend of 30% i.e., ' 3/- per equity share of ' 10/- each for the Financial Year ended 31^st March, 2024 (previous year: 20%). Based on the equity shares outstanding as on 31^st March, 2024, the dividend would absorb an amount of ' 322.92 lakhs (previous year - ' 214.02 lakhs). Pursuant to the Finance Act, 2020, the dividend income will be taxable in the hands of the Shareholders with effect from 1^st April, 2020 and the Company is required to deduct tax at source ("TDS") from dividend payable to the Members at the rates prescribed in the Income-tax Act, 1961. The dividend payment is subject to the approval of the Members at the ensuing Annual General Meeting.

EMPLOYEES STOCK OPTION SCHEME

The Members of the Company at their 29^th Annual General Meeting held on 26^th August, 2015 had approved the Thejo Employees Stock Option Scheme 2015 ("ESOP 2015"), with a view to attract and retain the best talent and promote increased participation by the employees in the growth of the Company.

The Compensation / Nomination and Remuneration Committee of the Board inter alia administers and monitors the ESOP 2015.

During the year under review, there were no material changes in the ESOP 2015 and the Scheme is in compliance with the SEBI Regulations on ESOPs.

Information in respect of options granted under the Thejo Employee Stock Option Plan 2015 is given in Note 26.9 forming part of the Financial Statements. As per Regulation 14 of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, the details of the ESOPs are uploaded on the Company's website https://www.thejo-engg.com/sites/ESOPs2024.pdf

The total shareholding of the Company changed due to the allotments made under ESOP 2015. The details of movement in shareholding are as follows:

A Certificate from the Secretarial Auditors of the Company as required under Regulation 13 of the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, is attached as Annexure 12 to the Board's Report.

CREDIT RATING

During the Financial Year 2023-24, CRISIL has re-affirmed the long-term credit rating on the bank facilities as CRISIL A/Stable and short-term credit ratings on the bank facilities as CRISIL A1.

REPORT ON MANAGEMENT DISCUSSION AND ANALYSIS GLOBAL ENVIRONMENT

Global trade is set to increase this year, driven by low inf i ation and a booming US economy, according to three major international economic organizations, viz. IMF, OECD, and WTO, all of which forecast an uptick in global trade flows in 2024. Despite lower inflation, interest rates, and increased economic activity, persistent risks and divergences between economies still threaten international trade. Slow but steady economic growth at 3.2% for 2024 and 2025 is predicted by the IMF in its World Economic Outlook - with a small uplift for the advanced economies but slightly lower growth in emerging and developing economies. The geopolitical tensions and trade fragmentation must be mitigated to keep growth on track. The Red Sea crisis and confi ict in the Middle East are causing delays and increasing shipping costs for some sectors. Environmental risks such as the low water levels in the Panama Canal - one of the world's main shipping arteries - add to the geopolitical issues affecting this and another major trade channel, the Suez Canal. The significant shifts and new challenges for businesses and policymakers caused by Generative AI could help advanced economies offset their lack of labour and emerging economies raise their workers' productivity and income levels (Source: World Economic Forum, May 2024).

India

India's core sector growth eased to 5.2% in March 2024, impacted by various industries. The Index of Industrial Production (IIP) is likely to see a moderate growth of 3.5-5% in the same period. The slow growth in eight core industries, which have a 40% weight in the IIP, is likely to lead to slower industrial growth as well. With respect to steel sector, one of the major sectors catered by the Company, India remains a bright spot in the global steel industry and the steel demand in the country is expected to show a healthy growth of 7.7% in 2024 compared to a global growth of 1.9%, according to the Outlook of the World Steel Association.

Australia

The outlook for Australia remains positive but weaker growth is expected for 2024. Inflation has been higher than expected and labour market conditions have proven stronger than anticipated. Overall, higher interest rates have led people to cut back on spending. This is slowing economic growth and bringing demand into better balance with supply. Considering the potential market size in Australia, Thejo Australia Pty Ltd has a good growth potential over the long-term.

Saudi Arabia

The Saudi Arabian mining sector is expected to expand substantially in the coming years and play a crucial role in the Kingdom's economic diversification efforts. The government is focused on accelerating exploration and mining activity and reducing the Kingdom's dependency on oil revenue. The government's ambition to transform mining into the third pillar of the country's economy, is expected to provide us with robust opportunities in the coming years. Thejo Hatcon Industrial Services Company is expected to capitalise on the business opportunity and enhance growth.

Brazil

Despite downside risks from exports to China, the Brazilian economy is likely to grow further this year, thanks to the falling interest rates and a tight labour market. The Brazilian Industry Institute IBRAM predicts that investments in the country's mining industry will amount to $64.5 billion in 2024-2028 (Report: S&P Global). On the back of low base and steady establishment of our products with key clients, our subsidiary in Brazil, Thejo Brasil Comercio E Servicos Ltda, could target further growth in this geography.

Chile

Chile continues to be a strong trading partner and export market for U.S. companies, largely due to its open market policies, zero tariffs, solid business practices, and low corruption index. The expected upturn in activity in 2024 should ensure that growth comes close to its potential, driven by household consumption, private investment and mining exports. On the back of the steady establishment of our products and our brand in the market, our subsidiary in Chile, Thejo Engineering LatinoAmerica SpA, is expected to perform well in the coming years.

United Arab Emirates (UAE)

The 2024 economic outlook for UAE remains positive, with expected GDP growth of 4% driven by sustained public infrastructure investments, and expansion of non- oil sectors such as tourism, financial services and technology. With better logistics and connectivity to European and African markets, our new subsidiary TE Global FZ-LLC at Ras Al-Khaimah has robust opportunities for future growth and profitability.

With quality and safety as top priorities, our Subsidiaries are expected to grow in the long term.

INDUSTRY STRUCTURE AND DEVELOPMENT

As the Company primarily caters to core sector industries, especially the customers in mineral and steel industry, the fortunes of the Company are closely tied to the fortunes of these industries. World Steel Association expects India to be the main driver of demand growth as Chinese demand continues to decline. Global steel demand is expected to rise by 1.7% to 1.793 billion metric tons in 2024 and to increase further in 2025 (Source: Reuters). The country's rapid economic development, urbanisation, and growing population will sustain metals and steel production in the mid to long term. Sustainability-led demand for metals like copper and aluminium should lead to higher sales prices and margins in the long-term. The Company continues to focus on value-added products along with high volume products. The focus is on increasing services business with robust working capital management. The Company continues to develop its overseas markets and pay attention to exports as domestic growth is expected to be average in the long run.

COMPANY PROFILE AND KEY DEVELOPMENTS PROFILE

Thejo Engineering Limited is a premium engineering solution provider to mining, mineral processing and bulk material handling industries through manufacturing products and offering onsite maintenance through technical as well as operations and maintenance services. The Company serves a variety of industries like steel, mining, mineral processing, aggregates and sand, power, chemical and fertiliser, cement, ports, etc. The Products business of the Company centres around design, development, manufacture and supply of rubber and polyurethane-based engineered products for belt cleaning, spillage control, flow enhancement, impact and abrasion protection, and screening applications. Thejo Engineering is one of the few companies in the sub-continent offering manufacturing, marketing, and servicing activities under one roof.

Thejo Engineering was listed in the SME-EMERGE platform of the National Stock Exchange of India Limited (NSE) in 2012. The Company migrated to the Main Board (Capital Market Segment) of NSE with effect from 10^th October, 2023. The Company has global presence with subsidiaries in Australia, Saudi Arabia, Brazil, Chile and Ras Al-Khaimah, UAE. The Company caters to India, Australasia, Middle East, South America, North America, Sub-Sahara and West Africa markets. The Company has manufacturing facilities and in-house R&D Centre in Chennai. The Company has distributor networks in various geographies.

RESEARCH AND DEVELOPMENT

The R&D Centre of the Company is focusing on developing new and innovative products, as well as bringing about continuous improvement of existing products to meet the needs of customers and tap into new markets. One of the primary functions of the centre is to spearhead innovation through researching and developing new techniques, equipment, and processes aimed at improving efficiency, reducing environmental impact, and enhancing safety in operations. The focus is on developing sustainable practices and technologies to mitigate environmental impact. The sustained efforts of the R&D Team have helped the Company to develop diverse product ranges capable of withstanding some of the hardest working conditions in core sector industries.

The Company has applied for patents in respect of several products/inventions. As at the end of the financial year, the Company had applied for 33 product patents and three design protections, of which 25 product patents have been awarded and the balance are in process.

Collaboration with industry stakeholders, academia, and government agencies is integral to the functioning of the R&D centre. By fostering partnerships and sharing knowledge, the centre is engaging in collaborative basic research projects with academic universities.

SAFETY

As part of its policy of giving utmost importance to safety, the Safety Department of your Company is continuously evaluating every process at its manufacturing as well as work sites and taking necessary steps for the safety of personnel as well as of properties. The Company conducts safety reviews on regular basis and takes appropriate steps based on the findings.

The Company has its Excellence Centre to train the technicians of the Company on safety and various technical aspects of the job. Safety, quality and speed are key to our services business.

OPPORTUNITIES AND THREATS

Opportunities

The Company has been leveraging its experience for long term planning by uncovering new global opportunities and consolidating single-source solutions. Thejo has been broadening and deepening customer relationships by continually looking for new opportunities and newer areas in their businesses to add value, proactively investing in building newer capabilities, exploring new markets, re-skilling its workforce and launching newer services towards long-term sustainability goals.

Majority of the product division output goes to steel sector and mines. The products as well as services offerings of the Company are primarily intended for the core sector industries. The opportunities for the industry in which the Company operates go hand in hand with the opportunities for the core sector industries. The Indian steel processing industry stands at a pivotal juncture, poised to leverage emerging opportunities while navigating through an array of challenges. The Indian government is vigorously advancing the second phase of the Production Linked Incentive (PLI) scheme, aimed at further expanding the operational capacities of the metallurgical sector. This move is anticipated to significantly boost steel production in 2024, providing an impetus not only for enhanced domestic capabilities but also for elevating the international competitiveness of Indian steel companies through innovation and capacity enhancement.

The Company has a balanced portfolio of products and services, which helps to moderate the impact of cyclicality experienced by its customers. The Company looks at taking services business to the international markets and expanding the distributorship for its products in overseas geographies as the key areas of opportunity for the future. With the expansion of operations and penetration into the UAE market through the new subsidiary, connectivity to international clients is likely to enhance, resulting in newer business opportunities and growth in exports over the medium term.

Services sector fi nds talent supply as a challenging area in terms of technical competency, culture, and efficiency. Cost cutting through multiskilled manpower and preventive maintenance through training on safety and skill upgradation could enhance quality service and sustainable, consistent growth and development in the future. International market has good potential for services sector with skilled manpower, for the Company to capitalise.

The Company's bet on Operation and Maintenance (O&M) as the mainstay for the future is yet to materialize on the ground as O&M continues to be viewed as a commodity with consequent price pressures bordering on manpower contract. Under these circumstances, the Company intends to focus primarily on such O&M contracts that would add value to the Company as well as to the customers. The Company continues to expect good potential in O&M in the long term as and when the market matures.

The Company has been offering bundled products and is taking various measures to establish its products and services in the overseas markets as well. Mill liners and pipe conveyor maintenance are other areas where the Company believes there will be good growth opportunities. Improved distributorship networks, sustainable operations with concern for environment and focus on Environment, Social and Governance(ESG) aspects are the value additions and qualitative factors that provide competitive edge in the market in the long run.

Threats

The global economy continues to show resilience despite facing several strong headwinds, the lingering impact from the pandemic; Russia's invasion of Ukraine; China's economic slowdown; surging financial stress with high inflation, high costs, falling household purchasing power, and forceful monetary tightening; rising geopolitical uncertainties; trade fragmentation and global climate change.

On the customer front, the steel industry is facing a complex interplay of factors, which are expected to mould steel prices. Disruptions in supply chain, fluctuating raw material costs, coupled with declining iron ore prices and elevated coal prices in Europe due to the Ukraine war pose contrasting challenges for production costs. The global momentum towards green steel projects signifies a transformative phase in the industry.

Rising inflation trend in the global market can have an adverse impact on the price of raw materials, inventory and labour. It can make it difficult for the market to gauge the current value of the companies that make up market indexes. Any adverse movements in economic cycles in the Company's target markets is mitigated to some extent due to the Company's presence in multiple and diverse markets.

The domestic product business is prone to cyclicality in the economy, especially the core sector. The competition from the unorganized sector is a challenge for the services business of the Company. In Operation & Maintenance, there is intense competition with manpower-based contracts being bagged by industry players at lower prices, especially during times of economic downturn.

The Company could be susceptible to strategy, innovation, and business or product portfolio related risks if there is any significant and unfavourable shift in industry trends, customer preferences, or returns on R&D investments. Thejo does have the benefit of being very well entrenched with many of its customers with years of established relationship. Therefore, client concentration related risks are mitigated to an extent.

Policy changes in respect of core sector industries will have a direct impact on the business of the Company as it primarily caters to core sector industries in the domestic market.

In the backdrop of the global fi uctuations in pricing, the prices of most of the raw materials used by the Company are volatile. The Company is doing its best to address this risk of material prices by framing appropriate procurement and pricing policies.

FUTURE OUTLOOK

The last two years have seen the global economy struggling to deal with various challenges caused due to aggressive monetary tightening, normalisation of energy prices, flat infiation rates, unfavourable demographics, climate adaptation, digital transformation and the fragmentation of global trade. While the impact appears to have been contained, these uncertainties continue to undermine the confidence among consumers and businesses to spend, therefore impacting economic growth. With the tighter monetary conditions continuing, global activity is proving relatively resilient. Brighter prospects are expected to be around the corner with modest growth.

India has been one of the fastest-growing major economies over the past two decades. Maintaining economic stability by improving the quality of fiscal expenditure has been a priority for India's authorities in recent years. The strategy appears to have been effective and estimates suggest that India's GDP can continue to grow at 6.7% per year on average over the next decade. The expectation on the Indian economy continues to remain positive and so is the Company and the Management.

Sustainability management with focus on environment will play a crucial role in future. Digitisation driven by AI is expected to replace manpower globally. AI-powered automation and IOT is being deployed to streamline processes, reduce operational costs, improve the quality of products and services, and enhance productivity and efficiency in various industries. Despite geopolitical crises, supply chain reorientations, global inflation, and climate change, the outlook for the future is positive combined with a high degree of uncertainty and unpredictability. The Company and the Management are prepared to take swift decisions based on emerging situation, keeping the interest of all stakeholders in mind.

FINANCIAL PERFORMANCE

The financial performance of the Company during the year under review has shown good growth in terms of turnover and profitability. The turnover from Manufacturing Division has increased. The Services Division also witnessed a better performance with increase in turnover. With expansion in manufacturing facilities and increase in operations, corresponding increase is witnessed in depreciation costs. Marginal increase in other costs is commensurate to the increase in operations. The Company has also stepped up its Information Technology spending focussing on enhanced digitization and digitalization. Exports registered a marginal dip of about 5% compared to the previous year.

The production of moulded and extruded products was 2,648 tonnes during 2023-24, registering a growth of 16% over the previous year (2,289 tonnes). The production of adhesives during the year under review was 438 tonnes, showing a growth of 19% over the previous year (369 tonnes).

SEGMENT WISE PERFORMANCE

Your Company has 3 segments of revenue - Manufacturing Units, Service Units and Others. The segment reporting in respect of these segments is furnished in Note 26.3, forming part of the Financial Statements.

RISKS AND CONCERNS

The Company has a Risk Management Committee in place, which was constituted by the Board of Directors at their Meeting held on 25^th May, 2023. The Company has put in place a Risk Management Policy encompassing the Enterprise Risk Management Framework for identification, assessment, management, monitoring and minimization of risks. It has identified potential risks under various categories like Business Dynamics, Operations, Liquidity, Market/Industry, Human Resources, Systems and Disaster Management. The Company is periodically reviewing the risks and their identification, assessment, monitoring and mitigation procedures. It does not perceive any major technological, operational, fi nancial or environmental risks in the near future except for the US market fluctuations, climate changes/challenges, prevailing geopolitical challenges like Russian-Ukraine confi ict, Israel-Palestine confi ict, China-Taiwan tensions, etc and their impact on the global economy.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Your Company has adequate internal control systems combined with delegation of powers and periodical review of the process. The control system is also supported by internal audits and management reviews of documented policies and procedures.

DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Company continues to look at, identify, create and execute initiatives that enhance productivity and efficiency. To enthuse the employee base and increase the linear relationship between performance and reward, increments/incentives and ESOP are being provided based on performance. The Company has been presented with the ‘Tamil Nadu Best Employer Brand Award 2023' by the Employer Branding Institute, India, as part of its 18^th Employer Branding Award.

The Company will invest as hitherto in people through various initiatives which enable the workforce to meet the production and service expectations and challenges related thereto and to infuse positive enthusiasm towards the organisation, with keen focus on the training and safety of the employees.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

During the Financial Year 2023-24, the Company registered good growth in product and services revenue, resulting in better profitability. As a result, the profitability of the Company stood at ' 3,805.04 lakhs during FY24 as against ' 2,758.17 lakhs in the previous year.

As a result of the above factors, the Return on Net Worth increased to 19.17% in FY24 compared to 16.51% in FY23.

During FY24, there was significant change (i.e. change of 25% or more as compared to the previous year) in none of the key financial ratios.

CAUTIONARY STATEMENT

Certain statements in the Management Discussion and Analysis, describing the Company's views about the industry, objectives and expectations, etc. may be considered as ‘forward looking statements.' The Company has tried to identify such statements by using words such as ‘expect', ‘anticipate', ‘hope', ‘likely', ‘plan', ‘projected', ‘believe', ‘estimated', etc. While making these statements, the Management has made certain assumptions which it believes are prudent. There is no guarantee that the assumptions would prove to be accurate. Actual results may differ substantially or materially from those expressed or implied in the statements. The Company undertakes no obligation to update any of the statements, whether as a result of any future events, change in assumptions or for any other reason, whatsoever. These statements are purely intended to put certain things in perspective based on the assumptions and estimates of the Management and in no way solicit investment or guarantee any performance or returns. Members and others are requested to make their own judgment before taking any decision to invest in the shares of the Company.

INTERNAL FINANCIAL CONTROL SYSTEM

The Company has in place adequate internal financial controls commensurate with its size. During the year, such controls were tested and no reportable material weaknesses were observed.

SUBSIDIARY COMPANIES

During the year under review, the Company incorporated TE Global FZ-LLC ("TE Global") at Ras Al-Khaimah, UAE and subscribed 1000 shares of AED 1000 each in TE Global at face value, representing 100% stake.

As on the date of this Report, the Company has five subsidiaries, namely, Thejo Hatcon Industrial Services Company, Kingdom of Saudi Arabia (Thejo Hatcon) with 51% shareholding, Thejo Australia Pty Ltd, Australia (Thejo Australia) with 90% shareholding, Thejo Brasil Comercio E Servicos Ltda, Brazil (Thejo Brasil) with 99.99% shareholding, Thejo Engineering LatinoAmerica SpA, Chile (Thejo Chile) with 99.86% shareholding and TE Global FZ-LLC, Ras Al-Khaimah, United Arab Emirates (TE Global) with 100% shareholding.

PERFORMANCE OF SUBSIDIARY COMPANIES

Thejo Hatcon Industrial Services Company (Thejo Hatcon) is engaged primarily in rubber lining and related industrial services activities. During the period, 1^st April, 2023 to 31^st March, 2024, Thejo Hatcon achieved a turnover of SAR 10.61 million (' 2,341.79 lakhs) on which it made a net profit of SAR 2.66 million (' 587.91 lakhs).

Thejo Australia Pty Ltd (Thejo Australia) is a servicing Company, primarily engaged in belt splicing, belt jointing, maintenance and related activities including sale of associated products and spares. During the period, 1^st April, 2023 to 31^st March, 2024, Thejo Australia achieved a turnover of AUD 25.40 million (' 13,888.62 lakhs) with a profit of AUD 0.73 million (' 401.35 lakhs).

Thejo Brasil Comercio E Servicos Ltda (Thejo Brasil) is mainly engaged in selling materials used in core sector industries for bulk material handling, mineral processing and corrosion protection. During the period, 1^st April, 2023 to 31^st March, 2024, Thejo Brasil achieved a turnover of BRL 10.85 million (' 1,776.33 lakhs) with a profit of BRL 6.24 million (' 1,021.86 lakhs).

Thejo Engineering LatinoAmerica SpA (Thejo Chile) is primarily engaged in selling materials used in core sector industries for bulk material handling, mineral processing and corrosion protection. During the period, 1^st April, 2023 to 31^st March, 2024, Thejo Chile achieved a turnover of CLP 1,582.76 million (' 1,495.63 lakhs) with a profit of CLP 198.98 million (' 188.02 lakhs).

TE Global FZ-LLC (TE Global) is primarily engaged in selling various products that are manufactured by Thejo Engineering Limited to various customers in the Middle East and other nearby/ related geographies. During the period from 12^th October, 2023 to 31^st March, 2024, being a newly incorporated entity, TE Global did not register sales and reported a loss of AED 0.28 million (' 62.68 lakhs).

CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as prescribed under Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 are given in Annexure 1, forming part of the Board's Report.

RISK MANAGEMENT POLICY

The Company has developed and implemented an Enterprise Risk Management Policy in line with the requirements of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations"). The Policy, inter alia, envisages identification, assessment, and treatment of risks.

CORPORATE SOCIAL RESPONSIBILITY

In terms of Section 135 of the Companies Act, 2013, the Board has constituted a Corporate Social Responsibility Committee (CSR Committee) with Mr. Sridhar Ganesh as Chairman and Mr. Thomas John, Mr. V.A. George and Mr. Srinivas Acharya as Members. (Note: Mr. V.K. Srivastava was a Member and Chairman of the CSR Committee till he completed his second term of five years as Independent Director on 31^st March 2024. Mr. Sridhar Ganesh was elected as the Chairman of the Committee on 27^th May, 2024).

The Committee has been entrusted with the responsibility of formulating and recommending to the Board, a Corporate Social Responsibility Policy (CSR Policy) and a CSR Annual Action Plan indicating the activities to be undertaken by the Company, monitoring the implementation of the framework of the CSR Policy and recommending the amount to be spent on CSR activities. The CSR Policy is provided in the Corporate Governance Report.

During the year 2023-24, the Company was required to incur CSR expenditure of ' 69.93 lakhs, being 2% of the average net profits for the immediately preceding three Financial Years. In compliance with this requirement, the Company spent ' 70 lakhs on eligible projects approved by the Board on the recommendation of the CSR Committee, thus fully meeting the CSR target for the year under review. Annual Report on CSR Activities for the Financial Year 2023-24 is given in Annexure 2, forming part of the Board's Report. Brief particulars of the CSR projects undertaken is also given as part of Annexure 2.

DIVIDEND DISTRIBUTION POLICY

The Company has formulated a Dividend Distribution Policy in compliance with Regulation 43A of the SEBI Listing Regulations. The same is uploaded on the Company's website at https://www.theio-engg.com/theio-admin/upload/allstatutorv/DivDisbPolicv.pdf

ANNUAL RETURN

Pursuant to Section 92(3) read with Section 134(3)(a) of the Companies Act, 2013, the Annual Return of the Company is available on the Company's website at https://www.thejo-engg.com/investors/AnnRet

NUMBER OF MEETINGS OF BOARD

Five meetings of the Board of Directors were held during the year. Particulars of the Meetings held and the Directors present are given in the Corporate Governance Report, which forms part of the Board's Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Your Directors state that:

a) in the preparation of the annual accounts for the year ended 31^st 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 31^st 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 Companies Act, 2013 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 fi nancial 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.

POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION

The Policy of the Company on Directors' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under Section 178(3) of the Companies Act, 2013, adopted by the Board of Directors is given in the Corporate Governance Report forming part of the Board's Report.

AUDITORS' REPORT

The Auditors' Report for the year ended 31^st March, 2024 does not contain any qualification. During the year under review, the Auditors have not reported any matter under Section 143 (12) of the Companies Act, 2013.

AUDITORS

M/s. Brahmayya & Co., Chartered Accountants, were re-appointed as Auditors at the 36^th Annual General Meeting of the Company held on 27^th August, 2022 to hold off i ce up to the conclusion of the 41^st Annual General Meeting of the Company.

SECRETARIAL AUDIT

The Board has appointed Mrs. Sindhuja Porselvam, Practising Company Secretary, to conduct Secretarial Audit for the Financial Year 2023-24. The Secretarial Audit Report of Mrs. Sindhuja Porselvam for the Financial Year is attached as Annexure 3 to the Board's Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

SECRETARIAL STANDARDS

The Company complies with all applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

COST AUDIT

For the financial year 2023-24, the Company is required to maintain cost records as specified by the Central Government under Section 148 of the Companies Act, 2013 and get them audited as per the rules framed under the Act. The Company is accordingly making and maintaining such accounts and records. The Board of Directors, based on the recommendation of the Audit Committee, have appointed Ms. Latha Venkatesh, Latha Venkatesh & Associates, Cost Accountant in practice (FRN 101017), as the Cost Auditor of your Company for the financial year 2023-24.

COST AUDITOR

As per Section 148 of the Companies Act, 2013, your Company is required to have the audit of its cost records conducted by a Cost Accountant in practice for the financial year 2024-25. Accordingly, the Board of Directors, based on the recommendation of the Audit Committee, have approved the re-appointment of Ms. Latha Venkatesh, Latha Venkatesh & Associates, Cost Accountant in practice (FRN 101017), as the Cost Auditor of your Company for the financial year 2024-25. As required under the Companies Act, 2013, a resolution seeking ratification of the remuneration payable to the Cost Auditor forms part of the Notice convening the ensuing 38^th Annual General Meeting.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

Particulars of loans given, investments made and guarantees given which are required to be disclosed under Section 186 (4) of the Companies Act, 2013 are given in Annexure 4, forming part of the Board's Report.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES

Particulars of contracts or arrangements with related parties required to be given under Section 188 (2) of the Companies Act, 2013, in Form No. AOC-2, are set out in Annexure 5, forming part of the Board's Report.

COMMITTEES OF THE BOARD

Currently, the Company has eight Committees of the Board of Directors, namely, the Audit Committee, Compensation/Nomination and Remuneration Committee, Corporate Social Responsibility Committee, Stakeholders' Relationship Committee, Allotment Committee, Risk Management Committee, Strategy Committee and Business Opportunity Evaluation Committee. The terms of reference of the Committees are provided in the Corporate Governance Report, forming part of the Board's Report. The composition of the Committees, as at 31^st March, 2024, is as follows:

Notes:

1. The tenure of Mr. V.K. Srivastava, Independent Director, ended on 31^st March 2024, on completion of his second term as an Independent Director. He was the Chairman/Member of the Committee until 31^st March, 2024.

2. The tenure of Mr. A. Satyaseelan, Independent Director, ended on 31^st March 2024, on completion of his second term as an Independent Director. He was the Chairman/Member of the Committee until 31^st March, 2024.

3. Prof. N. Venkiteswaran was appointed as an Independent Director on the Board of the Company with effect from 31^st March, 2024 and was inducted to the Committee with effect from 31^st March, 2024.

4. Mr. K. Jairaj was appointed as an Independent Director on the Board of the Company with effect from 31^st March, 2024 and was inducted to the Committee with effect from 31^st March, 2024.

5. Prof. N. Venkiteswaran has been elected as the Chairman of the Audit Committee at the Meeting of the Committee held on 27^th May, 2024.

6. Mr. Sridhar Ganesh has been elected as the Chairman of the Corporate Social Responsibility Committee at the Meeting of the Committee held on 27^th May, 2024.

7. Mr. Srinivas Acharya has been elected as the Chairman of the Allotment Committee at the Meeting of the Committee held on 08^th May, 2024.

8. Mr. Sridhar Ganesh was the Chairman of the Strategy Committee until 30^thMarch, 2024. Prof. N. Venkiteswaran assumed the Chairmanship of the Strategy Committee with effect from 31^st March, 2024 upon joining the Committee as its Member.

9. Mr. V.A. George has been elected as the Chairman of the Business Opportunity and Evaluation Committee at the Meeting of the Committee held on 02^nd April, 2024.

10. Mr. Rajesh John, Whole-time Director designated as ‘Director - Sales' was re-designated as ‘Deputy Managing Director' with effect from 01^st April, 2024.

All the recommendations made by the Audit Committee during the year were accepted by the Board of Directors, without any exception.

VIGIL MECHANISM

The Company has put in place a Whistle Blower Policy and established the requisite Vigil Mechanism for the stakeholders, including employees and Directors, for reporting concerns about unethical, unlawful, or improper practices, acts or activities in the Company to a designated Committee. The Committee consists of Mr. M.D. Ravikanth, Chief Financial Officer & Secretary, Mr. S Premjit - Senior Vice President- Services and Mr. Thomas K Abraham - Senior Vice President- HR & Admin. This mechanism also provides for adequate safeguards against retaliatory adverse action against those who report such practices in good faith. The Policy is available on the Company's website at https://www.thejo-engg.com/thejo-admin/upload/policies/WB Policy.pdf

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. Manesh Joseph (DIN 07599476), Director, retires by rotation at the ensuing Annual General Meeting and, being eligible, offers himself for reappointment.

Mr. Manoj Joseph (DIN 00434579), Managing Director, retires by rotation at the ensuing Annual General Meeting and, being eligible, offers himself for reappointment.

A brief resume of Mr. Manesh Joseph and Mr. Manoj Joseph together with related information is given in the Notice convening the ensuing Annual General Meeting.

The Board recommends their re-appointment as Directors of the Company.

The details of Directors and Key Management Personnel, who were appointed or have resigned during the Financial Year 2023-24 are as follows:

Mr. Nilesh Shivji Vikamsey (DIN 00031213) was appointed as an Additional Director designated as Independent Director of the Company for a period of 5 years with effect from 08^th March, 2023, by the Board at its meeting held on 08^th March, 2023 based on the recommendation of the Compensation/Nomination and Remuneration Committee. The appointment of Mr. Nilesh Shivji Vikamsey as an Independent Director was approved by the Members of the Company, by means of Postal Ballot through remote e-voting that concluded on 01^st July, 2023.

Mr. Srinivas Acharya (DIN 00017412) was appointed as an Additional Director designated as Independent Director of the Company for a period of 5 years with effect from 08^th March, 2023, by the Board at its meeting held on 08^th March, 2023 based on the recommendation of the Compensation/Nomination and Remuneration Committee. The appointment of Mr. Srinivas Acharya as an Independent Director was approved by the Members of the Company, by means of Postal Ballot through remote e-voting that concluded on 01^st July, 2023.

Mr. Manesh Joseph (DIN 07599476), Whole-time Director designated as Director - Services and Operations & Maintenance, resigned from his Whole-time Directorship (Key Managerial Personnel) effective 31^st December, 2023, without relinquishing his Directorship on the Board of the Company, as he was appointed as Chief Executive Officer of Thejo Hatcon Industrial Services Company, Saudi Arabia, a subsidiary of the Company effective 01^st January, 2024. Mr. Manesh Joseph continues on the Board of the Company as a Non-executive Director.

Prof. N. Venkiteswaran (DIN 00056000) was recommended by the Compensation/Nomination and Remuneration Committee and the Board of Directors for appointment as an Independent Director, for a continuous period of five years with effect from 31^st March, 2024. The appointment of Prof. N. Venkiteswaran as an Independent Director was approved by the Members of the Company, by means of Postal Ballot through remote e-voting that concluded on 23^rd March, 2024.

Mr. K. Jairaj (DIN 01875126) was recommended by the Compensation/Nomination and Remuneration Committee and the Board of Directors for appointment as an Independent Director, for a continuous period of five years with effect from 31^st March, 2024. The appointment of Mr. K. Jairaj as an Independent Director was approved by the Members of the Company, by means of Postal Ballot through remote e-voting that concluded on 23^rd March, 2024.

In the opinion of the Board, the Independent Directors appointed during the year, possess requisite expertise, skills, experience, proficiency and integrity.

The Company has received declarations from all the Independent Directors of the Company, confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of SEBI Listing Regulations.

None of the Directors on the Board of the Company have been debarred or disqualified from being appointed or continuing as Directors of the Company by the SEBI/Ministry of Corporate Affairs or any such statutory authority in accordance with SEBI Listing Regulations.

None of the Independent Directors will retire by rotation at the ensuing Annual General Meeting.

BOARD EVALUATION

A formal annual evaluation is required to be made by the Board, of its own performance and that of its Committees and individual Directors. Section 178(2) of the Companies Act, 2013 requires the Compensation/

Nomination and Remuneration Committee to specify the manner for effective evaluation of the performance of the Board, its committees and individual directors to be carried out either by the Board, by the Nomination and Remuneration Committee or by an independent external agency and review its implementation and compliance. Schedule IV of the Companies Act, 2013 states that the performance evaluation of the Independent Directors is to be done by the entire Board of Directors, excluding the Director being evaluated.

Accordingly, the Board of Directors carried out the annual performance evaluation of the Board, its Committees, Individual Directors and Chairpersons during the year under review pursuant to the provisions of the Companies Act, 2013 and SEBI Listing Regulations. As approved by the Compensation/ Nomination and Remuneration Committee, the evaluation of the performance of the Board, its committees and individual directors, for the current year was done through web by filling the questionnaire uploaded in the web module.

The performance of the Non-Independent Directors and of the Board as a whole was evaluated by the Independent Directors at a separate meeting held by them. The evaluation of all the Directors made was on the basis of the criteria and framework adopted by the Compensation/Nomination and Remuneration Committee based on the Guidance Note on Board Evaluation issued by the Securities and Exchange Board of India on 5^th January, 2017.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures relating to remuneration and other details as required 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 are attached as Annexure 6 to the Board's Report.

In terms of provisions of Section 197(12) of the Companies Act, 2013 and Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing names of the employees drawing remuneration and other particulars, as prescribed in the said Rules forms part of this report. However, in terms of proviso to Section 136(1) of the Companies Act, 2013 and Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Annual Report, excluding the aforesaid information is being sent to the Members of the Company. The said information is available for inspection at the Registered Office of the Company during working hours and any Member who is interested in obtaining these particulars may write to the Company Secretary of the Company. During the Financial Year, no employee (excluding Managing Director / Executive Directors / Kay Managerial Personnel) received remuneration in excess of the limits prescribed under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

CORPORATE GOVERNANCE

Your Company is committed to the well-being of the Environment, Society and upholding high standards of Governance. The Company's philosophy on Corporate Governance guides its business strategies and ensures fiscal accountability, ethical corporate behaviour and fairness to all stakeholders comprising employees, investors, customers, regulators, suppliers and the society at large. Strong leadership and effective Corporate Governance practices have been the Company's hallmark to success.

The securities of the Company got listed on the Emerge-SME Platform of National Stock Exchange of India Limited (NSE) in 2012. The Company migrated to the Main Board (Capital Market Segment) of NSE with effect from 10^th October, 2023 after obtaining all necessary approvals. The Company is in compliance with the applicable Corporate Governance requirements stipulated under the SEBI Listing Regulations. A Report on Corporate Governance is attached as Annexure 7 to the Board's Report. Compliance Certificate from Practicing Company Secretary regarding compliance of conditions of Corporate Governance stipulated under the SEBI Listing Regulations is attached as Annexure 9 to the Report.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORTING

The Business Responsibility and Sustainability Report ("BRSR") for the Financial Year is attached as Annexure 10 to the Board's Report. The BRSR indicates the Company's performance in respect of the principles of the ‘National Guidelines on Responsible Business Conduct'.

GENERAL

Your Directors state that there were no transactions in respect of the following items during the year under review requiring disclosure or reporting:

1. Deposits covered under Chapter V of the Companies Act, 2013.

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

3. Receipt of remuneration or commission by the Managing Director or the Whole-time Directors of the Company from any of its subsidiaries.

4. Amounts proposed to be carried to any reserves.

5. Material changes and commitments that affect the financial position of the Company which have occurred between the end of the financial year and the date of this report.

6. Significant or material orders passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future.

7. Application made or proceeding pending under Insolvency and Bankruptcy Code, 2016.

8. Difference between amount of valuation done at the time of one-time settlement and valuation done while taking loan from the Banks or Financial Institutions.

Your Directors further state that the Company has constituted an Internal Complaints Committee and during the year under review, there was no case filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

ACKNOWLEDGEMENT

The Directors wish to thank the Company's Bankers for their continued support. The Directors also wish to thank the Company's customers and stakeholders for their patronage.

Your Directors place on record their appreciation of the good work done by the employees of the Company at all levels.