Elgi Rubber Company Ltd

The Board of Directors have pleasure in presenting the 18th Annual Report and the Audited Financial Statements of the Company for the year ended March 31,2024.

Financial Highlights

(Rs in million)

Review of Business Operations and Future Outlook

The company has recorded a revenue of INR 2,119.31 million for the year against INR 2,230.21 million in the previous year, a reduction of 5% in the revenue. This is mainly on account of the exit of the business with the Tamil Nadu State Transport Undertakings. We have not participated in their tender since the terms and conditions are not viable. Most of the loss in revenue has been compensated by increased sales in both domestic and international markets. The net profit was INR 179.28 million compared to INR 148.19 million in the previous year. Ongoing aggressive cost reduction and reorganization has improved the bottom line.

The operations of wholly owned subsidiary companies in USA and Brazil continue to show good improvement. However, the Netherland subsidiary made a minor loss due to the slowdown in the Europe economy. Efforts are underway to overcome this issue.

The new reclaimed rubber manufacturing facility at Sriperumbudur has started production and will part of the operations.

As a part of strategic restructuring, the Company has obtained necessary approval from its members by means of a special resolution passed through postal ballot on October 28, 2023 to sell or otherwise dispose off the Aircraft Tyre Retreading business of the Company as a going concern basis / on an "as is where is" basis to any prospective buyer(s), not being related parties.

Change in the nature of Business

There was no change in the nature of business of the company during the financial year ended March 31,2024.

Transfer to Reserve

During the year under review, the company has not transferred any amount to the general reserves and the amount of INR 1,659.65 million (including the current profit of INR 179.28 million) has been retained under surplus in the Statement of Profit and Loss.

Dividend

In order to conserve reserves to overcome expected disruptions expected currently for unexpected events in the future, the Board of Directors has not recommended any dividend for the financial year 2023-24.

Transfer of Unclaimed Dividend to Investor Education and Protection Fund

The company had transferred an amount of INR 0.311 million, being the amount of dividend relating to FY 2015-16 remained unclaimed for a period of 7 years and 28,135 equity shares, to the Investor Education and Protection Fund during the financial year 2023-24. As stipulated under the Act, the amount of dividend relating to the financial year 2016-17 that is remaining unclaimed for a period of 7 years will be transferred to the Investor Education and Protection Fund established by the Central Government within the due date. The shares in respect of such unclaimed dividend will also be transferred to the designated Demat Account of the Investor Education and Protection Fund Authority

in accordance with the provisions of Section 124(6) of the Companies Act, 2013 read with Rule 6 of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules,2016, within the stipulated time. The details are also made available on the website of the Company www.elgirubber.com

Share Capital

The paid-up capital of the company as on March 31,2024 stood at INR 50.05 million dividend into 50,050,000 equity shares of Re.1/- each. During the year under review, the company has not made any fresh issue of shares or any other securities.

Copy of Annual Return

As per the requirements of Section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014 (as amended), the copy of the Annual Return in the prescribed Form MGT-7 for the financial year ended March 31,2024 is placed on the company's website www.elgirubber.com.

Board and Committee meetings

During the year under review, 6 meetings of the Board of Directors, 6 meetings of the Audit Committee, 4 meetings of the Nomination and Remuneration Committee, 12 meetings of the Stakeholders Relationship Committee and 8 meetings of the Finance and Administrative Committee were held. Further details of the Board and committee meetings as applicable, have been enumerated in the Corporate Governance Report annexed herewith and forms part of this Report.

Statement on Compliance of applicable Secretarial Standards

The Directors have devised proper systems to ensure compliance with the provisions of all applicable Secretarial Standards and that such systems are adequate and operating effectively. The Company has duly complied with Secretarial Standards issued by the Institute of Company Secretaries of India on the meeting of the Board of Directors (SS-1) and General Meetings (SS-2).

Directors' Responsibility Statement

Pursuant to the requirement of section 134(3)(c) of the Companies Act, 2013 with respect to Directors Responsibility Statement, the Board hereby confirms that:

i. In the preparation of the annual accounts, the applicable accounting standards have been followed and there were no material departures from those standards;

ii. the Directors have selected such accounting policies, 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;

iii. the Directors have 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;

iv. the Directors have prepared the annual accounts for the financial year ended 31st March 2024 on a going concern basis;

v. the Directors have laid down internal financial controls to be followed by the company and such internal financial controls are adequate and were operating effectively; and

vi. the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Details in respect of frauds reported by Auditors under Section 143(12) of the Companies Act, 2013 other than those which are reportable to the Central Government

During the year under review, there were no instances of fraud identified or reported by the Statutory Auditors during the course of their audit pursuant to Section 143(12) of The Companies Act, 2013.

Declaration of Independent Directors

All the Independent directors have given necessary declarations under section 149(7) of the Companies Act, 2013 that they meet the criteria of independence as laid down under section 149(6) read with applicable Schedule and Rules made thereunder and Regulation 25 of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 (as amended) and that their name is included in the data bank as per Rule 6(3) of the Companies (Appointment and Qualification of Directors) Rules, 2014 (as amended).

Statement regarding opinion of the board with regard to integrity, expertise and experience (including the proficiency) of the Independent Directors appointed during the year

The Board of Directors has evaluated the performance of the Independent Directors during the year 2023-24 based on the criteria and framework adopted by the Board and opined that the integrity, expertise and experience (including proficiency) of the Independent Directors was satisfactory.

There was no appointment of Independent Directors made during the year under review.

Company's policy relating to Directors' appointment, payment of remuneration and other matters provided under Section 178(3) of the Companies Act, 2013

The Board, on the recommendation of the Nomination and Remuneration Committee, had framed a policy which inter alia provides the criteria for selection and appointment of Directors, Key Managerial Personnel, Senior Management and the criteria for evaluation of their performance and the remuneration payable to them and other matters provided under Section 178(3) of the Act and SEBI Listing Regulations. The criteria for determining qualifications, positive attributes and independence of Directors have been outlined in the Corporate Governance Report annexed to this report. The salient features of the nomination and remuneration policy of the company is annexed herewith as Annexure I and the full policy can be accessed on the company's website www.elgirubber.com.

Comments on Statutory Audit Report

The report of the Statutory Auditor for the year ended March 31,2024 does not contain any qualifications, reservations, adverse remarks or disclaimers.

Particulars of loans, guarantees or investments made under Section 186 of the Companies Act, 2013

Details of loans given, investments made, guarantees given and securities provided pursuant to the provisions of section 186 of the Companies Act, 2013 have been given in the notes to the financial statements. The Company has not made any investments during the year under review and the loans / guarantees given to its wholly-owned subsidiaries during the year were in accordance with Section 186 of the Companies Act, 2013. The details of the investments made and loans / guarantees given are disclosed in the relevant notes to the financial statements.

Particulars of contracts or arrangements made with related parties

All transactions entered into with related parties as defined under the Companies Act, 2013 and Regulation 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 during the financial year 2023-24 were in the ordinary course of business and on an arm's length pricing basis. Since there are no transactions which are material in nature, Form AOC-2 is not being annexed. The details of transactions entered with related parties are disclosed in the relevant notes to the financial statements.

Further, the Company has formulated a policy on related party transactions for identification and monitoring of such transactions. The policy on related party transactions, as approved by the Board of Directors of the company, is available on the company's website www.elgirubber.com.

Material changes and commitment if any affecting the financial position of the company occurred between the end of the financial year to which these financial statements relate and the date of the Report

There have been no material changes and commitments which affect the financial position of the Company since the end of the financial year and till the date of Report.

Conservation of energy, technology absorption, foreign exchange earnings and outgo

The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo as required under section 134(3)(m) of the Companies Act, 2013 read with rule 8(3) of the Companies (Accounts) Rules, 2014 is furnished in Annexure II of this report.

Statement on Risk Management

The Board identifies and reviews the various elements of risk which the company has to face and laid out the procedures and measures for mitigating those risks. The elements of risk threatening the company's existence are very minimal.

The company does not face any risk other than those that are prevalent in the industry and has taken all possible steps to overcome such risks. The main concerns are volatility in raw material prices and fluctuations in foreign exchange rates. Effective planning in raw material purchasing and the ability to pass on raw material price increases, have minimised the risk relating to the volatility in raw material prices.

Foreign exchange fluctuation risk is minimised through proper planning and natural hedging. As a part of the overall risk management strategy, all assets are appropriately insured.

Details about the policy developed and implemented by the company on Corporate Social Responsibility initiatives

Pursuant to the provisions of Section 135 of the Companies Act, 2013 and all other applicable provisions, if any, the Corporate Social Responsibility Committee ("CSR Committee") was dissolved with effect from 10th November, 2021 and all the roles, responsibilities and functions of the Corporate Social Responsibility Committee, as provided under the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 (as amended from time to time) are being discharged by the Board of Directors of the Company in terms of the said provisions of the Act and its Rules with effect from the said date.

The requisite information has also been provided in the Corporate Governance Report forming part of this Directors' Report. The Corporate Social Responsibility (CSR) Policy of the Company is available on the website of the Company www.elgirubber.com.

As part of its initiatives under its CSR Policy, the company has undertaken various projects towards CSR initiatives and the said projects are by and large in accordance with Schedule VII of the Companies Act, 2013 and the CSR Policy of the Company. The annual report on CSR activities is annexed herewith as Annexure III.

Annual performance evaluation of the Board, its committees and of the individual directors

The Board has made a formal annual evaluation of its own performance, its Committees and of every individual Directors including the Independent Directors of the Company based on a structured questionnaire, formulated in accordance with the performance evaluation criteria approved by the Nomination and Remuneration Committee. The Board's own performance was evaluated based on the criteria like structure, governance, dynamics and functioning and review of operations, financials, internal controls etc.

The performance of the individual Directors including Independent Directors were evaluated based on the evaluation criteria laid down under the Nomination and Remuneration Policy and the Code of Conduct as laid down by the Board. Further, the Independent Directors, at their separate meeting held during the year 2023-24, has evaluated the performance of the Board as a whole, its Chairman and Non-Executive Non-Independent Directors and other items as stipulated under Schedule IV of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Committees of the Board were evaluated based on the terms of reference specified by the Board to the said Committee. The Board of Directors were satisfied with the evaluation process which ensured that the performance of the Board, its Committees, Individual Directors including Independent Directors adheres to their applicable criteria.

The criteria for evaluation of the performance of the Non-Executive Directors and Independent Directors have also been explained in the Corporate Governance Report annexed to this Report.

Directors and Key Managerial Personnel

As per the provisions of section 152 of the Companies Act, 2013 and the Articles of Association of the Company, Harsha Varadaraj (DIN: 06856957), Executive Director, retires by rotation at the ensuing 18th annual general meeting and being eligible, he has offered himself for re-appointment. Your Directors recommend his re-appointment.

Based on the recommendation of the Nomination and Remuneration Committee and the approval of the Audit Committee and the Board of Directors and pursuant to the approval of the members, by means of passing a special resolution at their 17th Annual General Meeting held on August 18, 2023, Sudarsan Varadaraj (DIN: 00133533) has been re-appointed as Chairman and Managing Director of the Company for a further period of 3 (three) years effective from January 01,2024 and has complied with the provisions of the Act.

Based on the recommendation of the Nomination and Remuneration Committee and the approval of the Audit Committee and the Board of Directors and pursuant to the approval of the members, by means of passing a special resolution at their 17th Annual General Meeting held on August 18, 2023, Harsha Varadaraj (DIN: 06856957) has been re-appointed as Whole-time Director (designated as "Executive Director") of the Company for a further period of 3 (three) years effective from November 06, 2023 and has complied with the provisions of the Act.

Based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors, at their meeting held on May 30, 2024, has recommended the appointment of Sarathraj Selvakumar (DIN: 08904057) as a Non-Executive Independent Director to hold such office for a first term of 5 consecutive years effective from August 14, 2024 for the approval of the members of the Company at the ensuing 18th Annual General Meeting by way of passing a special resolution in accordance with the provisions of Section 149 of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Company has also received necessary declaration from the appointee Independent Director that he fulfils the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013 read with Regulation 16(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Accordingly, necessary special resolution is included in the notice of the ensuing 18th Annual General Meeting for the approval of the members. Your Directors recommends his appointment.

G Sasikumar has tendered his resignation as Company Secretary and Compliance Officer of the Company and the Board of Directors has accepted his resignation with effect from the close of business hours of June 07, 2023.

Based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors, at their meeting held on August 10, 2023, had appointed Faizur Rehman Allaudeen as Company Secretary and Compliance Officer of the Company with effect from August 10, 2023 and has complied with the provisions of the Act.

Other than the above, there was no change in the in the composition of Board of Directors and the Key Managerial Personnel during the year under review.

The following are the Key Managerial Personnel of the Company as on March 31,2024:

Subsidiaries, Joint Ventures and Associate Companies

The company has 7 wholly-owned subsidiaries and 2 step-down subsidiaries. The statement pursuant to section 129(3) of the Companies Act, 2013 containing the salient features of the financial statements of the said subsidiary companies in the prescribed Form AOC-1 forms part of this annual report. As required under Section 134 of the Act read with its relevant Rules, the said disclosure also highlights the performance of the subsidiaries.

The Board has approved a policy for determining material subsidiaries which is available on the company's website www.elgirubber.com.

The consolidated financial statements prepared in accordance with the applicable accounting standards have been annexed to the Annual Report. The annual accounts of the subsidiary companies are also available on the website of the company www.elgirubber.com and kept for inspection by the members at the registered office during normal business hours of the company. The company shall provide a copy of the annual accounts of subsidiary companies to the shareholders upon their request.

Companies which have become or ceased to be Subsidiaries, joint ventures or associate companies during the year;

The closure of operations has been initiated in respect of Elgi Rubber Company Limited, Kenya. However, none of the subsidiary(ies) of the Company has ceased to exist during the year under review. Further, the Company does not have any joint ventures or associate companies during the year.

Deposits

The Company had obtained approval to invite, accept and renew deposits from public and/or its members within the limits as stipulated under the provisions of Sections 73 and 76 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 (as amended) by means of a special resolution passed in the 14th Annual General Meeting held on August 28, 2020.

Accordingly, the Company has renewed the deposits accepted from its members during the year ended March 31, 2024 within the limits prescribed under the Companies Act, 2013 and the rules framed there under. There were no fresh deposits accepted during the year under review. The details relating to the unsecured deposits accepted from the members of the Company as covered under Chapter V of the 2013 Act are given hereunder:

(Rs in millions)

There were no default in the payment of interest to the deposit holders during the year under review. The Company has obtained Credit Rating on the fixed deposits [IVR BBB- with Negative Outlook] as assigned by Infomerics Valuation and Rating Pvt. Ltd.

In accordance with the Companies (Acceptance of Deposits) Rules, 2014 (as amended), the monies received from the Directors, if any, has been disclosed under relevant notes to the financial statements.

Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operation in future

There were no significant or material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future.

Details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 during the year under review

No applications have been made and no proceedings were pending against the Company under the Insolvency and Bankruptcy Code, 2016 during the year under review.

Details of difference between the 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

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

Adequacy of internal financial controls with reference to the financial statements

The company has implemented and evaluated the internal financial controls which provide a reasonable assurance in respect of providing financial and operational information, complying with applicable statutes and policies, safeguarding of assets, prevention and detection of frauds, accuracy and completeness of accounting records. The company has appointed internal auditors with a dedicated internal audit team. The internal audit reports were reviewed periodically by the Board. Further, the Board annually reviews the effectiveness of the company's internal control system.

The Board of Directors confirm that the internal financial controls are adequate with respect to the operations of the company. A report of auditors pursuant to Section 143(3)(i) of the Companies Act, 2013 certifying the adequacy of internal financial controls is annexed with the Auditors report.

Statutory Auditors

M/s. Arun & Co (FRN: 014464S) Chartered Accountants, Tirunelveli, was appointed as the Statutory Auditor of the Company at the 16th Annual General Meeting to hold such office for a period of 5 consecutive years from the conclusion of the 16th Annual General Meeting till the conclusion of the 21st Annual General Meeting to be held in the year 2027. Accordingly, no resolution for appointment of statutory auditors is included in the Notice convening the 18th Annual General Meeting.

The Company has also obtained necessary consent under Section 139 and eligibility certificate under Section 141 from M/s. Arun & Co., (FRN: 014464S) Chartered Accountants, Tirunelveli to the effect that their appointment would be in conformity with the provisions of the Companies Act, 2013. Further, the Statutory Auditor has confirmed that they are holding a valid Peer Review Certificate issued by the Institute of Chartered Accountants of India.

Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and Regulation 24A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, C N Paramasivam (FCS No.: 4654; C P No.: 3687; Peer Review No.3167/2023) Company Secretary in Practice, was appointed as the Secretarial Auditor of the company to carry out the secretarial audit for the financial year ended March 31, 2024. Accordingly, the secretarial audit report given in the prescribed Form No. MR-3 is enclosed with this report as Annexure IV. With respect to the observations of the Secretarial Auditor of the Company in his report, which are self-explanatory, your Directors wish to state that necessary steps has been initiated to ensure compliance with all applicable statutory requirements.

Further, the Secretarial Auditor has confirmed that he is holding a valid Peer Review Certificate issued by The Institute of Company Secretaries of India.

Cost Auditor

The Company has made and maintained cost records as specified by the Central Government under Section 148(1) of the Companies Act, 2013. Based on the recommendation of the Audit Committee, the Board of Directors, at their meeting held on May 30, 2024, had re-appointed M/s. P Mohan Kumar & Co (Firm Registration No.100490), Cost Accountants, Coimbatore as the Cost Auditor of the company for the financial year 2024-25 and had approved the remuneration payable to the Cost Auditor. Pursuant to Section 148 of the Companies Act, 2013 read with Rule 14 of the Companies (Audit and Auditors) Rules, 2014, the remuneration payable to the Cost Auditors of the company is subject to the ratification by the members at the ensuing 18th Annual General Meeting. Necessary resolution has been included in the notice of the ensuing 18th Annual General Meeting for the approval of the members. The Board recommends the ratification of remuneration payable to the Cost Auditors.

The Cost Audit Report for the financial year 2023-24 will be filed with the Central Government within the period stipulated under the Companies Act, 2013.

Disclosure under section 197 (12) and rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

The requisite details relating to ratio of remuneration, percentage increase in remuneration etc., as stipulated under Section 197(12) and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed as Annexure V to this Report.

In terms of provisions of Section 197(12) and Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the statement showing the names of the top ten employees in terms of remuneration drawn forms part of this report. Pursuant to the second proviso to section 136(1) of the Act, the Annual Report excluding the said information is being sent to the members of the company. Any member interested in obtaining such information may send an email to info@in.elgirubber.com

Further, there were no employees who are in receipt of remuneration in the aggregate at the rate of not less than Rs 10,200,000/- if employed throughout the year or Rs 850,000/- per month if employed for part of the year.

Human Resources and Industrial Relations

The company continues to enjoy a cordial relationship with all its employees. The employee count as on March 31,2024 is 448.

Disclosure under the Sexual Harassment of Women at Work place (Prevention, Prohibition and Redressal) Act, 2013

The company has put in place a policy for prevention of sexual harassment of women at workplace in line with the requirements of the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee has been set up to redress complaints received, if any, under the said Act. There were no complaints received during the financial year 2023-24 and there were no unresolved complaints as on 31st March, 2024.

Corporate Governance

A report on Corporate Governance along with Management Discussion & Analysis Report (MD&A) as per regulation 34(3) read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed as Annexure VI and forms part of this report. The company has complied with the conditions relating to corporate governance as stipulated in Clause C of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Audit Committee

The Audit committee has been constituted in accordance with the provisions of Section 177 of the Companies Act, 2013 and Regulation 18 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. The particulars relating to the composition, meetings and functions of the committee has been disclosed in the Report on Corporate Governance under the head ‘Audit committee' and forms part of this report. The Board has accepted all the recommendations made by the Audit Committee during the year and hence no disclosure is required under Section 177(8) of the Companies Act, 2013 with respect to rejection of any recommendations of Audit Committee by Board.

Vigil Mechanism/ Whistle Blower Policy

Pursuant to the provisions of Section 177(9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulations 4 and 22 of the SEBI Listing Regulations and in accordance with the requirements of SEBI (Prohibition of Insider Trading) Regulations, 2015, the company has a Whistle Blower Policy to deal with unethical or improper practice or violation of Company's Code Of Business Conduct or any complaints regarding accounting, auditing, internal controls or disclosure practices of the company. The policy gives a platform to the whistle blower to report the complaints on the above-mentioned practices to the chairman of the audit committee. Although the complainant is not expected to prove the truth of an allegation, the complainant aims to demonstrate that there are sufficient grounds for concern and is not done as a malicious act against an individual. The audit committee reviews the complaints received, redressed, objected, withdrawn and dismissed, if any, for every quarter in their meeting. The whistleblower policy is available on the company's website www.elgirubber.com.

Cautionary Statement

Statements in this report, especially those relating to MD&A giving details of company's objectives, projections, estimates and expectations may be construed as "forward looking statements" within the realm of applicable laws and regulations. Actual results are liable to differ materially from those either expressed or implied.

Acknowledgement

Your Directors thank the company's shareholders, customers, suppliers, business associates, bankers and other stakeholders for their continued support to the company during the year. Your Directors also wish to place on record their appreciation of the contributions made by all the employees towards the growth of the Company