Kokuyo Camlin Ltd

To,

The Shareholders of Kokuyo Camlin Limited

Your Directors have pleasure in presenting the 78th Annual Report on the business and operations of the Company together with the Audited Financial Statements for the financial year ended 31st March, 2025.

During the financial year 2024–25, your Company's sales growth was moderated by a confluence of factors, including cautious consumer sentiment and restrained discretionary spending. In addition, the Company incurred a loss on sales due to adverse market price adjustments necessitated by elevated competitive intensity. The Company has consciously chosen not to engage in deep discounting practices, thereby reinforcing its commitment to value-driven growth and the preservation of long-term brand equity.

Despite these challenges, certain product categories such as Fine Art, Markers, Notebooks, Adhesives, and Wooden Pencils delivered strong performance, achieving both revenue growth and increased market share over the year. Additionally, during the year, an internal review led to the identification of discrepancies between recorded and physical inventory at one of the Company's manufacturing facilities. The financial impact arising from misstated entries and record manipulation was assessed at Rs. 2,356.81 lakhs (including indirect tax), which has adversely impacted the Company's bottom line for FY 2024–25. The Board has taken cognizance of the observations made by the Auditors in this regard, and appropriate corrective measures have been initiated.

For the year ended 31st March, 2025, the Company reported gross sales/income of Rs. 81,009.04 lakhs, as compared to Rs. 86,452.89 lakhs in the previous financial year. The profit after tax for FY 2024–25 stood at Rs. 583.30 lakhs, compared to Rs. 4,383.20 lakhs in FY 2023–24.

Despite these headwinds, the Company maintains a fundamentally strong financial position, underpinned by a solid and stable balance sheet, along with improved current and debt-to-equity ratios.

The Board remains confident in the Company's long-term growth trajectory and is firmly committed to the execution of its strategic objectives with focus and discipline. Your Company continues to demonstrate resilience and the ability to navigate operational and market challenges effectively.

In view of the Company's performance and upcoming strategic initiatives aimed at addressing growth expansion, the Board has not recommended any dividend for the financial year ended on 31st March, 2025.

The Dividend Distribution policy is available on the website of the Company at https://www.kokuyocamlin.com/policies.

The Board does not propose to transfer any amount to general reserve and has decided to retain the entire amount of profit for the financial year 2024-25 in the profit and loss account.

The Management Discussion and Analysis forms an integral part of this report and is presented separately. It gives details of the overall industry structure, economic developments, performance and state of affairs of your Company's operations and their adequacy, risk management systems and other material developments during the financial year 2024-2025.

During the year under review, there was no change in the share capital structure and the paid-up capital of the Company as on 31st March, 2025 was Rs. 1003.04 lakhs.

The Company does not have any subsidiary, associate or joint venture and hence, the Company is not required to prepare Consolidated Financial Statements.

At present, the Company does not have any subsidiary. No new subsidiary was incorporated or acquired by the Company during the year under review. Since the Company does not have any subsidiary, associate or joint venture, Form AOC-1 pursuant to the provisions of Section 129(3) of Companies Act, 2013 (the Act) is not applicable to your Company.

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 31st March, 2025.

During the year under review, there has been no change in the nature of business of the Company.

There have been no material changes or commitments that have affected the financial position of the Company subsequent to the close of FY 2024-25 till the date of this report. There is no change in the nature of the business of the Company.

The Company has not granted any Loans, Guarantees or Investments during the financial year ended 31st March, 2025.

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, is annexed herewith as "Annexure – A".

All Related Party Transactions are placed before the Audit Committee as also the Board for approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are audited and a statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors for their review on a quarterly basis.

The details of the transactions with related parties are provided in the accompanying financial statements. The policy on Related Party Transactions as approved by the Board is uploaded on the Company's website at https://www. kokuyocamlin.com/policies.

Corporate Governance is all about ethical conduct, integrity and accountability. Good Corporate Governance involves a commitment of the Company to run the business in a legal, ethical and transparent manner and runs from the top and permeates throughout the Organization. It is a key element improving the economic efficiency of Organization. As per SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations'), a separate section on Corporate Governance forms part of this report. A Certificate from M/s. JHR & Associates, Practicing Company Secretaries confirming compliance of Corporate Governance forms part of this Report. The certificate of the Managing Director/CFO, confirming the correctness of the financial statements and the certificate from Managing Director on compliance with the Company's Code of Conduct in terms of Regulation 17 of the Listing Regulations is attached in the Corporate Governance report and forms part of this report.

In terms of the provisions of the Act, Mr. Dilip Dandekar, Non-Executive Director of the Company, retires by rotation at the ensuing Annual General meeting and, being eligible, offers himself for re-appointment. You are requested to appoint him. The profile of Mr. Dilip Dandekar, seeking re-appointment forms part of the Notice.

During the year under review, Mr. Satish Veerappa, was appointed as Managing Director with effect from 1st April, 2024 for a period of three years as approved by the Board of Directors at its meeting held on 8th February, 2024 and by the Shareholders by passing a resolution through postal ballot on 28th March, 2024.

During the year under review, the Board of Directors redesignated Mr. Shriram Dandekar as Non-Executive Director in view of his cessation as Director in Whole-time employment designated as Executive Director of the Company with effect from 1st April, 2025 while, he continued to act as the Vice Chairman of the Company. The Board of Directors placed on record its appreciation for the valuable services rendered by Mr. Shriram Dandekar during his tenure of office as Executive Director.

During the year under review, Mr. Nilesh Kumar Choudhary was appointed as Chief Financial Officer with effect from 8th July, 2024.

The following persons have been designated as Key Managerial Personnel of the Company pursuant to Section 2(51) and Section 203 of the Act, read with rules framed thereunder:

1. Mr. Satish Veerappa – Managing Director

2. Mr. Nilesh Kumar Choudhary – Chief Financial Officer

3. Mr. Vipul Bhoy – Company Secretary & Compliance Officer The disclosure required under Section 197(12) of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as "Annexure – B" forming an integral part of this report.

During the financial year 2024-25, five Board meetings were held, the details of which are given in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Act.

As on 31st March, 2025, the Board had five committees: Audit committee, Remuneration and Nomination committee, Stakeholders Relationship committee, Corporate Social Responsibility committee and Risk Management Committee. During the year, all recommendations made by the committees were approved by the Board. A detailed note on the composition of the Board and its committees is provided in the Corporate Governance Report.

In compliance with the requirements of Listing Regulations, the Company has put in place a familiarization program for the Independent Directors to familiarize them with their role, rights and responsibilities as Directors, the working of the Company, nature of the industry in which the Company operates, business model etc. The details of the familiarization program are explained in the Corporate Governance Report.

The same is also available on the website of the Company and can be accessed by web link https://www.kokuyocamlin. com/policies.

Pursuant to applicable provisions of the Act and the Listing Regulations, the Board has carried out an annual evaluation of its own performance, its Committees, individual Directors including Independent Directors and Chairman of the Board. Feedback from Directors was sought by way of structured questionnaire covering various aspects of the Board's functioning viz. Board composition, Board procedure, strategy, flow of information etc. and performance of Directors including but not limited to knowledge, skills, contribution to the discussions, Independence etc. The result of the evaluation was presented by the Chairman to the Board and the Board has agreed on the action plan for further improvement in functioning of the Board.

Further, the Independent Directors met separately without the presence of Non-Independent Directors and the members of management and discussed the performance evaluation of the Non-Independent Directors and the Board as a whole.

Your Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under the applicable provisions of the Act as well as Listing Regulations. In the opinion of the Board, all the Independent Directors possess the integrity, expertise and experience including the proficiency required to be Independent Directors of the Company.

The Independent Directors of the Company have registered themselves with the data bank maintained by Indian Institute of Corporate Affairs (IICA).

The Board has, on the recommendation of the Remuneration and Nomination Committee framed a policy for selection, appointment, and remuneration of Directors and KMPs. The Remuneration Policy is stated in the Corporate Governance Report and is also available on the website of the Company at https://www.kokuyocamlin.com/policies.

Pursuant to the requirement under section 134(3)(c) of the Act, your Directors to the best of their knowledge and belief and according to the information and explanations obtained by them, hereby confirm that:

a) in the preparation of the annual accounts for the financial year ended 31st March, 2025, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b) the Directors had 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 ended 31st March, 2025 and of the profit of the Company for the year ended on that date.

c) 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.

d) the Directors had the annual accounts prepared on a going concern basis;

e) the Directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls were intended to be adequate and operating effectively. During the year under review, certain instances of deviation from these controls, with apparent mala fide intent, by certain employees were observed. Your Company has taken due cognizance of the observations made by the Auditors in this regard. Corrective actions have already been initiated. Further, measures including targeted personnel training and process enhancements are underway to reinforce the internal control framework. The Board of Directors is committed to ensuring the establishment of robust and effective internal financial control systems.

f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively, except in respect of the certain instances controls with mala fide intention by certain employees as mentioned above for which appropriate actions are being taken.

Pursuant to Section 135(1) of the Act, the Company has constituted the Corporate Social Responsibility (CSR) Committee. The Composition of the CSR Committee is disclosed separately in the Corporate Governance report forming part of this Annual Report. The Company has in place, the CSR policy which outlines Company's philosophy towards Company's CSR program implementation. The CSR policy is available on the Company's website https://www. kokuyocamlin.com/policies. Pursuant to Section 135(5) of the Act and in accordance with the CSR policy, the Company has spent 2% of the average net profits of the Company during the three immediately preceding financial years. An annual report on CSR containing details as required under rule 8(1) of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed as "Annexure – C" and forms part of this report.

Pursuant to the provisions of Section 139(2) of the Act read with Companies (Audit and Auditors) Rules, 2014, M/s. B S R & Co. LLP, Chartered Accountants (Firm Registration No.101248W/ W100022) were appointed as the Statutory Auditors of the Company for a second term of five consecutive years to hold office from the conclusion of 75th Annual General meeting held on 29th June, 2022 till the conclusion of 80th Annual General meeting of the Company.

There have been no instances of fraud by the Company or on the Company except one-o_ event of inventory variance, at one of the plants of the Company, as identified by proactive internal review, which has been reported by the statutory auditors under Section 143(12) of the Act. The statutory auditor's remarks in their audit report are as follows: During the course of our examination of the books and records of the Company and according to the information and explanations given to us, no fraud by the Company or on the Company has been noticed or reported during the year except that the Company following an internal assessment, suo moto, had identified discrepancies of Rs. 2,356.81 lakhs between physical quantity recorded in the books of account and the physical inventory (including indirect tax impact). The Company appointed an external firm to carry out forensic audit and terminated the services of the concerned employees. Further, following qualified opinion has been reported by the statutory auditors: During the year, the management had identified discrepancies between physical quantity recorded in the books of account and the physical inventory. Accordingly, an expense (including indirect taxes) of Rs. 2,356.81 lakhs has been recognised for the year ended 31 March 2025. Management has not identified the possible impact, if any, of the discrepancy on the prior periods presented or opening balances as at 1 April 2023. As a result, no adjustment is made to the comparative information. This constitutes a departure from Indian Accounting Standard prescribed under section 133 of the Companies Act, 2013 ("the Act") which requires correction of material prior period errors retrospectively.

ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS: The statutory auditors have, in their report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Act made the following Adverse Opinion.

Adverse Opinion:

In our opinion, because of the effects of the material weaknesses described in paragraph (a) of Basis for Adverse Opinion section below on the achievement of the objectives of the control criteria, the Company has not maintained adequate internal financial controls with reference to financial statements and because of the effects of the material weaknesses described in paragraphs (a) and (b) of Basis for Adverse Opinion section below, such internal financial controls with reference to financial statements were not operating effectively as of 31 March 2025, based on the internal financial controls with reference to financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (the "Guidance Note").

Basis for Adverse Opinion

(a) According to the information and explanations given to us and based on our audit, the following material weaknesses have been identified as at 31 March 2025: The Company did not have an appropriate internal control system: For creation and alteration of Bill of Material (BOM) which could potentially result into in the Company incorrectly valuing its inventory of work-in-progress and finished goods; For approval for recording difference exceeding the tolerance level between actual and standard consumption in the books of account which could potentially result into incorrect consumption being recorded.

For certain General IT controls which, collectively, could potentially result in unauthorized access and changes in Company's IT systems.

(b) According to the information and explanations given to us and based on our audit, the following material weaknesses have been identified in the operating effectiveness of the Company's internal financial controls with reference to financial statements as at 31 March 2025:

– The Company's internal control system for approval of physical movement of goods from stores to production was not operating effectively which could potentially result into incorrect consumption being recorded;

– The Company's internal control system for approval of purchase orders by the person other than the creator of the purchase order and of a designated authority was not operating effectively which could potentially result in unauthorized purchases being recorded;

– The Company's internal control system for physical verification of inventory lying at job workers' location was not operating effectively which has resulted in physical verification not performed as per the approved frequency;

Board's response to the comments of the statutory auditors in the Audit Report: Your Company had initiated the forensic audit to examine the matter. According to the forensic review report, there was an involvement of few employees of the Company and some of the Job workers in manipulation of the operational documents and erroneous recording of production entries leading to irregularities in inventory management. Some of the employees have confessed to having received kickbacks from vendors. Apart from this, instances of conflict of interest and violation of Company's code of conduct have also been reported. These events were found to have led to fraud against the Company. The financial impact recognised due to misstated entries and manipulation of records was around Rs. 2,356.81 lakhs (including indirect taxes). Given the nature of the identified discrepancies in the forensic report, the management has concluded not to reinstate the financial statements of earlier years, as the impact is not precisely ascertainable.

Taking cognizance of the observations made in the forensic report, Your Company has taken appropriate disciplinary action against employees and vendors involved including termination. Re-structuring of the factory operations have been done to tighten the controls. Your Company has explored IT capabilities to strengthen operational controls and streamline processes which are in the phase of implementation. Your Company is committed to uphold highest standards of corporate governance and protect the interest of its stakeholders.

M/s. JHR & Associates, a firm of Company Secretaries, were appointed as Secretarial Auditor for the financial year 2024-25 pursuant to Section 204 of the Act. The Secretarial Audit Report submitted by them in the prescribed form MR-3 is attached as "Annexure – D" and forms part of this report. There are no qualifications or observations or adverse remarks or disclaimer of the Secretarial Auditors in the Secretarial Audit/Compliance Report issued by them for the financial year 2024-25.

In terms of Regulation 24A of the Listing Regulations as amended by SEBI (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2014 effective from 13th December, 2024, a Listed entity shall appoint or reappoint an individual as Secretarial Auditor for not more than one term of five consecutive years or a Secretarial Audit firm as Secretarial Auditor for not more than two terms of five consecutive years, with the approval of its shareholders in its Annual General Meeting. Accordingly, an ordinary resolution, proposing the appointment of M/s JHR & Associates, Practising Company Secretaries (Firm registration number: S2015MH296800) as Secretarial Auditors of the Company for Audit period of 5 years commencing from financial year 2025-26 till financial year 2029-30 forms part of the AGM notice. The Company has received their consent and their eligibility confirmation and that the appointment, if made, shall be in accordance with the applicable provisions of the Act and Listing Regulations.

As directed by the Securities and Exchange Board of India (SEBI), Reconciliation of Share Capital Audit has been carried out at the specified period, by a Practicing Company Secretary.

The Company was not required to transfer any amount to the Investor Education and Protection Fund established by the Central Government (IEPF) during the financial year 2024-25 except the dividend declared for the financial year 2023-2024 on the shares already transferred to IEPF.

The Company has not transferred any shares to IEPF during the financial year 2024-25. Details of shares transferred prior to the financial year 2024-25 have been uploaded on the website of IEPF as well as the Company.

The Company is an equal opportunity employer and consciously strives to build a work culture that promotes the dignity of all employees. As required under the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules framed thereunder, the Company has implemented a policy on prevention, prohibition and redressal of sexual harassment at the workplace. All women, permanent, temporary or contractual including those of service providers are covered under the policy. An Internal Committee comprising management staff has been set up at office and factory locations to redress complaints relating to sexual harassment. The Committee also includes an outside woman representative from an NGO. There was no case reported during the financial year 2024-25.

There are no significant or material orders passed by any regulator, tribunal or court that would impact the going concern status of the Company and its future operations.

The Company has adopted a code of ethics and business conduct which lays down principles and standards that should govern the actions of the Company and employees. The Company has a vigil mechanism called "Whistle Blower Policy" with a view to provide a mechanism for employees of the Company to raise concerns of any violations of any legal or regulatory requirement, incorrect or misrepresentation of any financial statements and reports etc. The Company is committed to adhering to the highest standard of ethical, moral and legal conduct of business operations.

The Company has taken steps to establish Vigil Mechanism for Directors and Employees of the Company. The details of the Policy are posted on the website of the Company at https://www.kokuyocamlin.com/policies

The Company has also adopted a code of conduct for prevention of insider trading. All the Directors, Senior Management employees and other employees who have access to the unpublished price sensitive information of the Company are governed by this code. During the year under review, there has been due compliance with the said code of conduct for prevention of insider trading based on the SEBI (Prohibition of Insider Trading) Regulations, 2015.

The Company's plant, property, equipments and stocks are adequately insured against major risks. The Company also has appropriate liability insurance covers particularly for product liability. The Company has also taken Directors' and Officers' Liability Policy to provide coverage against the liabilities arising on them.

The Company operates in a dynamic business scenario that gives rise to external and internal risk factors. It has in place an integrated risk management approach called the ERM framework for risk identification, assessment and reporting. Your Company has constituted a Risk Management committee of the Board with delegated responsibilities in relation to risk management processes within the Company. The said committee is responsible for formulating a detailed risk management policy and its implementation, putting in place a system for monitoring and evaluation of associated risks etc. As required by the Risk Management policy, the Company initiates risk identification and control testing exercise to provide briefing and reporting to the Board through Risk Management Committee.

The Risk Management policy is implemented by various department heads who take the risk ownership and monitor the risks on a periodical basis. The ERM Framework enables achievement of strategic objectives by identifying, analysing, assessing, mitigating, monitoring and governing any risk or potential threat to these company objectives. Systematic and proactive identification of risks and mitigation thereof enables effective and quick decision making and boosts the performance of the organization. The ERM framework acts as a decision enabler which not only seeks to minimize the impact of risks but also enables effective resource allocation based on risk ranking and risk appetite. Strategic decisions are being taken after careful consideration of risks based on secondary risks and residual risks.

There are no risks which in the opinion of the Board threaten the existence of the Company. However, some of the risks which may pose challenges are set out in the Management Discussion and Analysis Report which forms part of this Annual Report.

Your directors confirm that the Secretarial Standards issued by the Institute of Company Secretaries of India have been duly complied with.

Pursuant to Section 134(3)(a) and Section 92(3) of the Act read with Rule 12 of the Companies (Management and

Administration) Rules, 2014, a copy of the annual return is placed on the website of the Company and can be accessed at https://www.kokuyocamlin.com/policies.

The information required pursuant to Section 197(12) of Act read with Rule 5(2) & 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, will be provided upon request. In terms of Section 136 of Act, the Report and Accounts are being sent to the Members and others entitled thereto, excluding the information on employees' particulars which is available for inspection by the Members through electronic mode on the website of the Company at https:// www.kokuyocamlin.com/camel/.

Pursuant to regulation 34(2)(f) and other applicable provisions of the Listing Regulations, separate section on the Business Responsibility & Sustainability Report forms part of this report. Your Company is not falling under top 1000 listed entities based on the market capitalization as on 31st December, 2024.

Your Directors express their gratitude to the members, bankers, customers, financial institutions and other business constituents for their continued faith, assistance and support extended to the Company. Your Directors also sincerely appreciate the high degree of professionalism, commitment and dedication displayed by employees at all levels, thereby contributing largely to the growth and success of the Company. Your Directors also wish to place on record their appreciation for the support and guidance provided by its parent Company Kokuyo Co., Ltd. Japan.