AVT Natural Products Ltd

DIRECTORS' REPORT

Your Directors are pleased to present the Thirty Eighth Annual Report of the Company together with the Audited Accounts for the Financial Year ended March 31,2024.

FINANCIAL RESULTS

Proposed dividend on equity shares has not been recognized as a distribution of profit in the current year's accounts in accordance with the Indian Accounting Standard.

OPERATIONS REVIEW

Total income decreased by 11.82 % to Rs.515.50 crores in 2023-24 from Rs. 584.57 crores. The Profit after Tax for the year 2023-24 is Rs. 46.37 crores (previous year 2022-23 Rs. 75.04 crores), showing a decrease of 38.20 %. With Fixed Assets of Rs.80.41 crores (previous year 2022-23 Rs. 78.27 crores), our Fixed Asset Turnover ratio is healthy at 6.26 % with Return on Sales stood at 13.29%.

Dividend Distribution Policy

Pursuant to Regulation 43A of Listing Regulations, the Board adopted a Dividend Distribution Policy, which had been placed on the website of the Company and can be accessed at the link: https://www.avtnatural.com/policies/

Declaration and payment of dividend

Your Directors are pleased to recommend a final dividend of Re.0.50 per share (50%) with face value of Re.1/- each on Equity Share Capital, for the year ended 31.03.2024, amounting to Rs.761.42 Lakhs. During the year, the Board declared an Interim Dividend of Re.0.30 per share (30%) with face value of Re.1/- each, amounting to Rs.456.85 Lakhs. The aggregate of dividend declared during the year was Re. 1/-per share (80 %) with face value of Re.1/- each amounting to Rs.1218.27 Lakhs.

TRANSFER TO GENERAL RESERVE

Your directors are pleased to transfer a sum of Rs.25 crore for the year 2023-24 (previous year Rs.25 crore) to the General Reserve.

FINANCE

Cash and bank balances as at 31^st March 2024 was Rs. 955.42 lakhs (previous year Rs. 534.92 lakhs). The Company continues to focus on the judicious management of its working capital, receivables, inventories and other financial parameters and which were kept under strict check through continuous monitoring.

The outstanding term loan from Federal Bank Limited as on 31^st March 2024 is Rs. 8.05 crore, which is given in the note No.15 to the financial statements.

WINDMILL

The windmill of the Company located at Kokkampalayam village, Dharapuram Taluk, Erode District, Tamil Nadu generated 849,811 units of electricity in the year 2023-24 against 842,083 units generated in 2022-23. The Company utilised the 806,827units, generated as captive consumption during 2023-24 for its Sathyamangalam factory.

BOARD MEETING

The Board of Directors met Six times during the Financial Year. The details of the Board meeting are given in the Corporate Governance Report. The intervening gap between the meetings were within the period stipulated under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

AUDIT COMMITTEE MEETING

The Audit Committee of the Company met Six times during the current Financial Year. The details of the Audit Committee meetings are given in the Corporate Governance report. The intervening gap between the meetings were within the period stipulated under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

PARTICULARS OF LOANS, GUARANTEE, OR INVESTMENTS

The Company has not given any loans or guarantees covered under the provisions of section 186 of the Companies Act, 2013 and Schedule V of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirement) Regulations, 2015, except the 'Corporate Guarantee' given on behalf of its wholly owned subsidiary companies viz., AVT Natural Europe Limited, London and to AVT Natural S.A. DE C.V., Mexico which is given in the note No.37 to the financial statements.

The details of investments made by the Company are given in the note No.7 to the financial statements.

LISTING WITH STOCK EXCHANGES

The Company Shares are continued to be listed in both BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE). The Company has paid listing fees up to 31^st March 2025 to both the BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE).

DSIR APPROVAL FOR IN-HOUSE R&D FACILITY AT SOUTH VAZHAKULAM AND BANGALORE

The approval by the Department of Scientific and Industrial Research (DSIR), New Delhi for the Company's R&D facilities situated at South Vazhakulam, Aluva, Kerala and the Manchenahaili Village, Kasabe Hobari, Bangalore are valid upto 31.03.2025.

MATERIAL CHANGES AND COMMITMENTS

Mr. Rahul Thomas was appointed as an Additional Director of the Company with effect from 12^th June 2024.

DIRECTORS & KEY MANAGERIAL PERSONNEL

As on March 31, 2024, the Company has seven NonExecutive Directors out of which four are Independent Directors. There are two women directors.

i) Director retiring by rotation

In accordance with the provisions of Companies Act, 2013 and the Articles of Association of the Company, Mr. Habib Hussain, Director retires by rotation at the 38^th Annual General Meeting and being eligible, does not offer himself for re-appointment.

A resolution seeking shareholders' approval along with other required details forms part of the Notice.

ii) Declaration from Independent Directors on Annual Basis

The Company has received necessary declarations from all the four Independent Directors of the Company under Section 149 of the Companies Act, 2013 that the Independent Directors of the Company meet with the criteria of their Independence laid down in Section 149 of the Companies Act, 2013 and Regulation 25(8) of the SEBI (LODR) Regulations 2015.

iii) Key Managerial Personnel

As on March 31, 2024, following were the Key Managerial Personnel ("KMP") of the Company as per Sections 2(51) and 203 of the Act:

• Mr. B Krishna Kumar, President & COO - Manager

• Mr. A. Ramadas, Sr. Vice President and CFO

• Mr. Sharon Josh, Company Secretary

During the year under review, the non-executive directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fees, commission and reimbursement of expenses, if any.

a) AVT Natural SA DE C.V., Mexico (AVTN)

AVT Natural SA DE C.V, Mexico has been established with an aim to capture market for the Animal Nutritional products in South American market and other markets.

The paid-up capital of the Company as on 31^st March 2024 is Mexican Peso (Mxn) 0.54 million and there is no change therein since then. AVTN is the marketing arm of your Company for the animal nutrition products. The AVTN recorded sales of Rs. 15.72 crores and loss of Rs. 0.60 crores, for the year 2023-24.

b) AVT Natural Europe Limited, UK (AVTNEL)

The paid up capital of the Company as on 31^st March 2024 is Pound Sterling (GBP) 1.535 million and there is no change therein since then. AVTNEL is the marketing arm of your Company for de-caffeinated tea and instant tea. The AVTNEL recorded sales of Rs. 108.62 crores (previous year Rs. 107.82 crores) and profit of Rs.3.85 crores (previous year Rs. 2.42 crores) for the year 2023-24.

c) AVT Natural FZCO (AVT Dubai)

A wholly owned subsidiary was incorporated by the company on 28^th March 2023 in Dubai for marketing the Animal nutrition products, Instant tea, food additives, cosmetic and nutraceutical ingredients with a paid up capital of AED 200,000. Further capital of AED 2,030,000 was infused to the subsidiary on 24.07.2023 making the overall capital to AED 2,230,000.

The AVT Natural FZCO recorded sales of Rs. 17.95 crores and profit of Rs. 1.90 crores for the year 202324.

Step down subsidiary Companies

AVT Natural Europe Limited, London has one wholly owned subsidiary AVT Natural North America Inc.

i) AVT Natural North America Inc

The paid up capital of the Company as on 31^st March 2024 is USD 60,000 and there is no change therein since. During the year, the company recorded sales of Rs.12.75 crores and profit of Rs.0.93 crores for the year 2023-24.

d) Accounts of subsidiaries

Pursuant to Section 136 of the Companies Act, 2013, a copy of the Audited Financial Statements of AVT Natural Europe Ltd., AVT Natural S.A. DE C.V. and AVT Natural FZCO for the period ended 31.03.2024, shall be provided to any shareholder, free of cost on their request. The Audited Financial Statements are also available on the website of the Company. The Consolidated Financial Statements, audited by the statutory auditors of the Company, have been attached to this Report.

Pursuant to Section 129(3) of the Companies Act, 2013, a statement containing the salient features of the financial statements of AVTN, AVTNE & its step- down subsidiary and AVTFZCO in the prescribed Form AOC-1 is provided in the Page No. 142 of Annual report.

e) Joint Venture/Associate Company

The Company does not have any Joint Ventures/Associate Companies

f) Policy for determining material subsidiary

The Company has a Policy for determining Material Subsidiary, which is hosted on the Company website under the link www.avtnatural.com/investor_relations.

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

The particulars prescribed by the section 134 (3) (m) of the Companies Act 2013, read with Rule 8 of the Companies (Accounts) Rules, 2014 relating to Conservation of Energy, Technology Absorption, Foreign Exchange earnings and outgo are furnished in the Annexure-I to this Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR) Pursuant to the provisions of Section 135 of the

Companies Act 2013, a CSR Committee comprising Board of Directors was formed to recommend.

i. The policy on Corporate Social Responsibility (CSR) and

ii. Implementation of the CSR Projects

Annual Report on CSR in the prescribed format is enclosed as Annexure - II. The CSR policy of the Company has been uploaded on the web site: www.avtnatural.com/investor_relations.

CONTENTS OF CSR POLICY

The Company's CSR projects and programs will be the focus on the holistic development of host communities to create social, environmental and economic value to society.

The Company will invest resources in any program such as Skill Development, Infrastructure Development, Women Empowerment, Promotion of Health Care, Old age homes/day care facilities for Senior Citizens, Education, Swatch Bharath, and all other activities envisaged in the Schedule VII of the Companies Act 2013.

STATUTORY AUDITORS

Pursuant to section 139 and 142 of the Companies Act, 2013, the members in their 36^th Annual General Meeting held on 24.08.2022 appointed M/s. Suri & Co, Chartered Accountant (Firm Registration No.004283S) as the Statutory Auditors of the Company for a period of 5 years till the conclusion of the 41^st Annual General Meeting. In view of the amendment to the Companies Act 2013 notified by the Ministry of Corporate Affairs dated 7^th May 2018, no longer their appointment needs to be ratified by the Members.

AUDITORS' REPORT

There are no qualifications or adverse remarks mentioned in the Auditors' report. The notes to accounts, forming part of financial statements, are self-explanatory and need no further clarification.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Company has appointed Mr. V. Suresh Associates, Practicing Company Secretaries (C.P. No.6032), Chennai - 600 018 to undertake the Secretarial Audit of the Company.

The Secretarial Audit Report in form MR-3, submitted by the Secretarial Auditors for the financial year 2023-24, is annexed to this report as Annexure - III and forms an integral part of this Report.

There is no secretarial audit qualification, reservation or adverse remarks in the Secretarial Report for the period under review.

During the year, the Company has complied with the Secretarial Standard -1 (SS-1) and Secretarial Standard -2 (SS-2) issued by the Ministry of Corporate Affairs.

COST RECORDS & AUDIT REPORT

Cost Audit is not applicable to the Company as per the Companies (Cost Records & Audit) Rules, 2014, however, the cost records are maintained by the Company.

REPORTING OF FRAUD

The Auditors of the Company have not reported any fraud as specified under section 143 (12) of the Companies Act, 2013.

INSURANCE

The Company continues to carry adequate insurance for all assets, against unforeseeable perils.

RELATED PARTY TRANSACTIONS

All transactions entered with related parties for the year under review were at arm's length basis and in the ordinary course of business and hence the provisions of Section 188 of the Companies Act, 2013 are not attracted. There were no related party transactions exceeding 10% of the annual consolidated turnover as per the last audited financial statements during the year.

Further, there were no material related party transactions during the year under review with the Promoters, Directors or Key Managerial Personnel or other designated persons which may have a potential conflict in the interest with Company at large. The disclosure of Related Party Transactions to be provided under section 134 (3)(h) of the Companies Act 2013, read with Rule 8(2) of the Companies (Accounts) Rules, 2014 in Form AOC -2 is given in the Annexure - IV, forming part of this report.

As per the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, all the related party transactions were placed before the Audit Committee and also the Board of Directors. Prior approval of the Audit Committee was obtained on yearly/quarterly basis for the transactions entered with related parties, except with the wholly owned subsidiary Companies, whose accounts are consolidated with the Company. The transactions entered into pursuant to the omnibus approval so granted has been placed before the Audit Committee and the Board of Directors for their approval on a quarterly basis.

The Company has a Related Party Transaction policy and the same is hosted on the website of the Company under the link www.avtnatural.com/investor_relations.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS AND COURTS

There are no significant material orders passed by the Regulators/Courts which would impact the going concern status of the Company and its future operations.

ANNUAL RETURN

In terms of the requirements of Section 92(3) read with 134(3)(a) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 the copy of the Annual Return in prescribed format is available on the website of the Company www.avtnatural.com/investor_relations.

STATUTORY INFORMATION

The information under section 197 of Companies Act 2013 and pursuant to rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are given in the Annexure - V.

The information 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 in respect of the Company have been given in the Annexure - VI.

The statement containing remuneration paid to employees and other details as required 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, is provided in a separate annexure forming part of this report. Further, the report and the accounts are being sent to the members excluding the aforesaid annexure. In terms of Section 136 of the Act, the said annexure is open for inspection at the Company's Registered Office during, business hours of all the working days of the Company, upto the date of the forthcoming Annual General Meeting. Any member interested in obtaining a copy of the same may write to the Company Secretary and the same will be provided free of cost to the member.

INDUSTRIAL RELATIONS

Your Company during the year under review, enjoyed cordial relationship with technicians/workers and employees at all levels.

NOMINATION AND REMUNERATION POLICY

The Board on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management Personnel, Key Managerial Personnel and their remuneration etc. A copy of the policy is uploaded on the web site of the Company and the website link is www. avtnatural. com/investor_relations.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Company has a Vigil Mechanism/Whistle Blower Policy in place pursuant to Section 177 (9) of the Companies Act 2013 and as per the Regulation 22 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. The said policy is available on the website of the Company which can be accessed from the link - www. avtnatural.com/investor_relations. During the year no instances of unethical behavior were reported.

RISK MANAGEMENT

Pursuant to section 134(3)(n) of the Companies Act 2013 and Regulation 21 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, the Board of Directors has formed a Risk Management Committee to frame, implement and monitor the risk management plan. The Committee is responsible for reviewing the risk management plan and ensuring its effectiveness. The Committee considers the risks that impact mid to long-term objectives of the business, including those reputational in nature. The Audit Committee has additional oversight in the area of financial risks and controls.

The company has a risk policy defining risk management governance model, risk assessment and prioritization process. The Risk Management Committee adopted a follow-up risk management framework to review and monitor the key risks and their mitigation measures periodically and provide an update to the Board on Company's risks. The Audit Committee has an additional oversight on financial risks and controls.

ADEQUACY OF INTERNAL AUDIT AND INTERNAL FINANCIAL CONTROL

The Company has in place adequate Internal Audit and Internal Financial Controls with reference to the financial statements, which is evaluated by the Audit Committee as per Part C of Schedule II of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

Apart from Statutory Audit, your Company, in compliance with Section 138 of the Companies Act, 2013, had engaged M/s Sundar Sridhar Srini, Chartered Accountants, I Floor, New No 9, Rajamannar Street, T.Nagar, Chennai - 600017 as the Internal Auditors of the Company for the financial year 2023-24. Findings and observations of the Internal Auditors are discussed, and suitable corrective actions are taken as per the directions of the Audit Committee on an on-going basis to improve efficiency in operations.

The Company's internal control systems are well established and commensurate with the nature of its business and the size and complexities of operations and adequate with reference to the financial statements as envisaged under the Companies Act, 2013.

Your directors endorse that during the year under review, there were no reportable material weaknesses in the present systems or operations of internal controls.

ENVIRONMENT AND SAFETY

The Company is conscious of the importance of environmentally clean and safe operations. The Company's policy requires conduct of operations in such a manner, so as to ensure safety of all concerned, compliances environmental regulations and preservation of natural resources.

BOARD EVALUATION

The Board of Directors has made a formal annual evaluation of its own performance and that of its committees, individual Directors & CEO, (Manager) pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015. The evaluation was done based on the evaluation criteria formulated by Nomination and Remuneration Committee which includes criteria such as fulfilment of specific functions prescribed by the regulatory framework, adequacy of board meetings, attendance and effectiveness of the deliberations etc.

Each Board member completed a questionnaire providing feedback on the functioning and overall level of engagement of the Board and its committees on the parameters such as the composition, execution of specific duties, contribution of new ideas/insights, quality, quantity, and timeliness of flow of information, deliberations at the meeting, independence/non-partisan approach in decision making etc.,

Independent Directors met on 14^th February 2024 to review performance evaluation of Non-Independent Directors and the entire Board of Directors including the Chairman, Non-Executive Directors etc., The Independent Directors were satisfied with the overall functioning of the Board, flow of information to the Board, its various Committees and of the performance of other Non-executive Directors and the Chairman of the Board

DISCLOSURE OF ACCOUNTING TREATMENT

The Company has adopted the Indian Accounting Standards (Ind AS) with effect from 1^st April 2017, the Ind AS 115 with effect from 1^st April 2018 & the Ind AS 116 with effect from 1^st April 2019 and all its financial statements are made according to the said standards. Further, in the preparation of the financial statements, the Company has followed the Accounting Standards referred to in Section 133 of the Companies Act, 2013. The significant accounting policies which are applied are set out in the Notes to the Financial Statements.

DEPOSIT FROM PUBLIC

The Company has not accepted any deposits from the public during the year under review. No amount on account of principal or interest on deposits from the public was outstanding as on March 31, 2024.

BUSINESS RESPONSIBILITY & SUSTAINABILITY REPORT

The Business Responsibility and Sustainability Report indicates the Company's performance against the principles of the 'National Guidelines on Responsible Business Conduct'. This would enable the Members to have an insight into Environmental, Social and Governance initiatives of the Company.

The Business Responsibility and Sustainability Report in compliance with the regulation 34(f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 have been attached in the Annexure VII to this Report.

CORPORATE GOVERNANCE

Your Company has taken adequate steps to adhere to all the stipulations laid down in Regulation 27 read with Part E of Schedule II and Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 on Corporate Governance. The Management Discussion & Analysis Report, Report on Corporate Governance with Auditors' Certificate on compliance with conditions of Corporate Governance have been Annexed VIII, IX, X and XI to this Report.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013.

The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Act and that an Internal Complaints Committee has been set up for redressal of complaints and that all employees (permanent, contractual, temporary, trainees) are covered under this policy.

During the year under review Number of complaints received in the year: 01 Number of complaints disposed off during the year: 01 Number of cases pending for more than 90 days: Nil Number of Workshop or awareness Program: 02 Nature of Action taken by the employer or District Officer: Nil

CAUTIONARY STATEMENT

Statements in this Directors' Report & Management Discussion and Analysis Report describing the Company's objectives, projections, estimates, expectations, or predictions may be 'forward looking statements' within

the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make difference to the Company's operations include raw material availability and its prices, cyclical demand and pricing in the Company's principle markets, changes in Government regulations, Tax regimes, economic developments within India and the countries in which the Company conducts business and other ancillary factors.

During the year no application has been made and there are no proceeding pending as per Insolvency and Bankruptcy Code 2016.

The Company has not raised funds through preferential allotment or qualified institutions placement during the Financial Year 2023-24.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134 (3) (c) of the Companies Act, 2013, with respect to Directors' Responsibility Statement, it is hereby confirmed that:

1. In the preparation of the accounts for the financial year ended 31^st March 2024, the applicable accounting standards had been followed along with proper explanation relating to material departures;

2. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

3. The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. The Directors have prepared the accounts for the Financial Year ended 31^st March 2024 on a 'going concern' basis.

5. The directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively.

6. The directors have devised proper system to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

ACKNOWLEDGEMENT

The Directors sincerely acknowledge the contribution and support from customers, shareholders, farmers, BSE Ltd., National Stock Exchange of India Ltd., Cameo Corporate Services Ltd., National Securities Depository Ltd., Central Depository Services Ltd., and other stakeholders for the co- operation and assistance provided to the Company.

The Directors also place on record their gratitude to the employees for their continued support, commitment, dedication and co-operation.