Precot Ltd

Directors' Report and Management Analysis

Dear Shareholders,

Your Directors hereby present the 63^rd Annual Report of your Company along with the financial results for the year ended 31^st March, 2025.

(Rs. In lakhs)

The Board has recommended a dividend of Rs. 3/- per share (30% on face value of Rs. 10/-each) for the financial year 2024-25 which is subject to the approval of shareholders at the Annual General Meeting (AGM). The Directors have not recommended any transfer to the reserves.

FY 2024-25 saw a marginal improvement in the performance of the spinning industry. Demand for yarn from the domestic market was stable while export demand continued to be muted. Cotton prices remained stable for most of the year, although there was a drop of around 7% from the closing price of the previous season compared to the opening price of the 2025 season. The Cotton Corporation of India was a major player this year as cotton prices dipped below the MSP. CCI purchased just over 100 lac bales, accounting for almost one third of the total crop. Despite this quantity being held in the hands of one buyer, there was no dearth of availability as mills were in no hurry to procure given the fact that there was abundant availability globally with Brazil, US, West Africa and Australia all registering bumper crops. Even today, CCI continues to hold around 70 lac bales in stock. Despite maintaining good operating efficiency throughout the year, the profitability of the spinning division improved only marginally compared to the previous year.

Indian textile and apparel exports registered a growth of 6.3% in FY 24-25, increasing to $ 36.6 Billion. This growth was driven primarily by apparel which grew at 10% while growth in textile exports was 3.6%. Bangladesh continued to be the largest market for Indian yarns while USA was the major market for garments and made ups.

During the year under review, your Company had to take the difficult decision to discontinue operations of our spinning unit situated in Hindupur, Andhra Pradesh. Although this unit has been operating since 1983, its performance over the past seven to eight years has not been satisfactory and has resulted in continuous losses. Despite improvements in productivity and yarn realization over the past two years, losses continued to mount, primarily due to high power tariffs and wage costs. Given the situation, this decision was taken keeping in mind the best long term interests of the Company and to ensure the sustainability and viability of the spinning division going forward. The Company has reached an agreement for a full and final settlement with its employees and will utilize some of the machinery and other fixed assets to modernize and strengthen its other spinning units. As part of this plan, the Company will add 8400 spindles in its A unit in Kanjikode, Kerala during the current year.

The technical textile division performed well for the year, aided by good orders and strong operational performance. The planned capacity expansion was held back due to delays in receiving key machinery. The new capacity was commissioned in the fourth quarter and production and quality has stabilized.

The Company registered revenues of Rs. 87,251 lakhs in FY 24-25 compared to Rs. 84,982 lakhs in the previous year FY 23-24. This is the total revenue of the Company of Rs. 98,992 lakhs less the revenues from discontinued operations of the Hindupur unit amounting to Rs. 11,741 lakhs. Comparable figures for the previous year are Rs. 98,791 lakhs and Rs. 13,809 lakhs respectively.

EBITDA earned by the Company was Rs. 11,525 lakhs in FY 24-25 compared to Rs. 7,906 lakhs in FY 23-24. This is the total EBITDA of the Company of Rs. 9,840 lakhs less loss of Rs. 1,685 lakhs from discontinued operations. Comparable figures for the previous year EBITDA was Rs. 7,312 lakhs and loss of Rs. 594 lakhs respectively. Closure expenses incurred in our Hindupur unit including an amount of Rs. 1,119 lakhs towards settlement of employees have been accounted for.

The year began with significant uncertainty because of the threat of US tariffs. As expected, all financial markets reacted sharply and were in turmoil due to the higher-than-expected tariffs levied on nearly all countries that supply goods to the US. However, the global outcry and spike in US treasury yields forced the US government to react and they responded by announcing a 90-day hiatus while retaining only a 10% tariff for most goods and countries. Various countries, including India, are now in talks with the US government in the hope of securing trade deals which will keep tariffs in abeyance for the medium and long term. Despite this, there are clear signs that the US economy is headed towards a recession. This is certain to weigh down consumer spending and business sentiment in the US going forward.

FY 25-26 will be a year of consolidation for your Company. The technical textile division will start to derive the additional revenues and benefits of the expanded capacity while the spinning division will benefit from the asset shifting from the Hindupur unit which will bring about a degree of modernization and cost optimization to our spinning operations. A good monsoon and improved rural economic demand will hopefully spur consumer confidence and consumption in the domestic market. Coupled with interest rate cuts on the horizon, this should lead to higher GDP growth in the coming year.

The Company has been able to continue maintaining cordial relations with its labour force in all its units. The Company has 1608 permanent employees on the roll as on 31^st March, 2025.

The Company has adequate internal control systems to monitor business processes, financial reporting and compliance with applicable Regulations. The systems are periodically reviewed by the Audit Committee of the Board, for identification of deficiencies and necessary timely corrective actions were taken to improve controls at all levels. The committee also reviews the statutory auditors' report, key issues, significant processes and accounting policies.

The Audit Committee of the Board constantly reviews internal control systems and their adequacy, significant risk areas, observations made by the internal auditors on control mechanism and the operations of the Company and recommendations made for corrective action through the internal audit reports. The Directors confirm that the Internal Financial Controls are adequate with respect to the operations of the Company. A report of Statutory Auditors reporting on the adequacy of Internal Financial Controls is annexed with the Auditors Report.

The Company adopted a policy on risk management for identifying and managing risk under section 134(3)(n) of the Companies Act,2013. The Board identifies and reviews the various elements of risk which the company has to face and has laid out the procedures and measures for mitigating those risks. The elements of risk threatening the company's existence are 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 purchase and the ability to pass on raw material price increases to its customers has minimised the risk relating to the volatility in raw material prices.

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

Details of the number of meetings of the Board and Committees thereof and the attendance particulars of the Directors in such meetings are provided under the Corporate Governance Report.

The Independent Directors have submitted their disclosures to the Board confirming that they fulfill the requirements enumerated under Section 149(6) of the Companies Act, 2013 (hereinafter “the Act”) and Regulation 25 of The Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

There is no cessation of office by any Director due to death or resignation. However, Mr. Prashanth Chandran, Vice Chairman and Managing Director retired by rotation, and being eligible, offered himself for reappointment and was reappointed as Director at the AGM held on 20^th August 2024.

Shareholders have appointed Mrs. Suguna Ravichandran and Mr. V Prakash as Independent Directors of the Company for a term of 5 (five) consecutive years effective from 01^stJun 2024.

Mr. Ravi Kumar Abburu has been appointed as Director - Technical Textiles by the shareholders of the Company.

The Board of Directors at their meeting held on 23^rd May, 2025, on the recommendation of the Nomination and Remuneration committee, re-appointed Mr. Ashwin Chandran, as the Chairman and Managing Director, Mr. Prashanth Chandran as Vice Chairman and Managing Director, Mr. T Kumar as Executive Director and Mr. Ravi Kumar Abburu as Director - Technical Textiles of the company for a term of three years effective from 01^st April 2026. Necessary resolutions are being moved at the ensuing annual general meeting for shareholders' approval.

The following are the whole-time key managerial personnel of the Company as per Section 203 of the Act as on 31^st March,2025,

(i) Mr. Ashwin Chandran, Chairman and Managing Director

(ii) Mr. M.K.Ravindra Kumar, Chief Financial Officer &

(iii) Mrs. S Kavitha, Company Secretary.

The Board of Directors at their meeting held on 12^th February, 2025, had carried out an annual evaluation of its own performance and the performance of the Committees of the Board and the individual Directors pursuant to the provisions of the Act and the corporate governance requirements as prescribed by Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements), Regulations 2015 (hereinafter "Listing Regulations").

The performance of the Board was evaluated by the Board of Directors after seeking inputs from all the Directors on the basis of criteria such as Board composition and structure, effectiveness of the Board meetings and process and contributions made by the Directors.

The performance evaluation of each Director was done by the entire Board of Directors, excluding the Director being evaluated, taking into consideration inputs received from the other Directors, covering various aspects of the Board's functioning such as active participation and contribution during discussions, effective deployment of knowledge and expertise towards the growth and betterment of the Company, impact and influence on the growth of the Company and performance of specific duties, obligations and governance.

The performance of the committees was evaluated by the Board after seeking inputs from the committee members on the basis of criteria such as the composition of the committees and effectiveness of the committee meetings.

In a separate meeting of Independent Directors held on 24^th March, 2025 performance of the non-independent Directors, performance of the Board as a whole and performance of the Chairman were evaluated, taking into account the views of the executive Directors and non-executive Directors.

The Board also carried out an evaluation on the performance of the Independent Directors and also verified the fulfilment of the criteria for independence as specified under listing Regulations and their independence from the management. This evaluation of Independent Directors was done by the entire Board, excluding the Independent Directors being evaluated.

The Company's policy on Director's appointment and remuneration and other matters provided in Section 178(3) of the Act has been disclosed in the Corporate Governance Report.

The auditors' report and secretarial auditors' report do not contain any qualifications, reservation or adverse remarks. During the year under review, neither the Statutory auditors nor the Secretarial Auditor have reported to the Audit Committee, any instances of fraud committed against the Company by its officers or employees.

The report of the Secretarial Auditor is furnished as Annexure A and forms part of this report.

During the year under review all the Executive Directors have received commission from the Company. They have not received any commission/ remuneration from subsidiaries during the year under review.

The extract of the annual return pursuant to Section 92 read with rule 12 of the Companies (Management and Administration) Rules, 2014 is available on the website of the Company https://www.precot.com/wp-content/uploads/2025/07/Annual- Return-2025.pdf.

The Company complies with all the applicable mandatory secretarial standards issued by the Institute of Company Secretaries of India.

The particulars as required under rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in Annexure B.

The Company has control over "Suprem Associates", a partnership firm by holding majority of the Capital in the firm. The accounts of the said firm are consolidated as per the requirement of Indian Accounting Standards (IndAS).

The Company is maintaining the cost records as specified under Section 148(1) of the Companies Act, 2013.

The Company has constituted an Audit Committee as per Section 177 of the Act and Listing Regulations.

The details pertaining to vigil mechanism, composition and meetings of the Audit Committee are included in the Corporate Governance Report.

The details as required under Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014, is detailed in Annexure C.

A report on corporate governance is furnished as Annexure D and forms part of this report. This includes other disclosures as required under the provisions of the Act. The Company has complied with the conditions relating to corporate governance as stipulated in Regulation 34 of the Listing Regulations.

The CSR Committee comprises of

1. Mr. Ashwin Chandran,

2. Mr. Prashanth Chandran and

3. Mr. Vijay Raghunath. This committee takes care of CSR policy execution to ensure that the CSR objectives of the Company are met. The CSR policy deals with allocation of funds, activities, identification of programmes, approval, implementation, monitoring and reporting.

For the financial year 2024-25, the Company spent Rs. 79.09 lakhs on CSR activities as per the provisions of the Companies Act. Annual report on Corporate Social Responsibility is provided in Annexure E.

The CSR policy is available on the Company's website http://www.precot.com/investors.

Details as per the provisions of Section 186 of the Act, is given under notes to financial statements.

None of the transactions with related parties falls under the scope of Section 188(1) of the Act. Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 are given in Annexure F in Form AOC-2 and the same forms part of this report.

The Board has approved a policy for related party transactions which is available on the Company's website http://www.precot.com/investors.

In pursuance of Section 134 (5) of the Companies Act, 2013, the Directors hereby confirm that:

a) In the preparation of the annual accounts, 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 and of the profit and loss of the company for that period;

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

d) The Directors had prepared the annual accounts 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 are adequate and operating effectively;

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;

M/s VKS Aiyer & Co., Chartered Accountants (Firm Registration No. 000066S), pursuant to the provisions of Section 139 of the Act, were appointed as the statutory auditors of the Company for a term of 5 years from the conclusion of the 61^st AGM till the conclusion of the 66^th AGM to be held in the year 2028.

They have confirmed that they are not disqualified and are eligible to continue in the office for the year 2025-26.

Pursuant to Section 148 of the Act, read with the Companies (Cost Records and Audit) Rules 2014, the Board of Directors, on the recommendation of the Audit Committee, appointed Mr. R Krishnan, Cost Accountant (Associate regn. no. 7799), as the cost auditor of the Company for the financial year 2025-26.

Accordingly, a resolution seeking member's ratification for the remuneration payable to Mr. R Krishnan, Cost Auditor is included as Item No.10 of the AGM notice.

Pursuant to Section 204 of the Act and SEBI Listing Regulations, the Board of Directors have recommended the appointment of M/s KSR & Co Company Secretaries LLP, Coimbatore as secretarial auditors of the Company for a term of 5 (five) consecutive years from financial year 2025-26 till 2029-30 to shareholders for their approval.

Resolution for the appointment of Secretarial is included as Item No.9 of the AGM notice.

Based on the requirements under SEBI (Prohibition of Insider Trading) Regulations, 2015, the 'Insider Trading Code' to regulate, monitor and report trading by insiders and the 'Code of Practices and Procedures for fair disclosure of Unpublished Price Sensitive Information' are in force.

There was no change in the nature of the business of the Company during the year under review.

Considering the unsustainable losses over the past several years and no improvement in the outlook, the Board of Directors have decided to close operations of spinning unit located at Hindupur, Andhra Pradesh. This decision has been taken after due evaluation and consideration of the profitability of other units in the Company. While there will be a temporary reduction in operational revenues, it will be compensated by shifting productive assets to other units.

The Company is confident that this decision will strengthen the Spinning Division and improve its profitability going forward.

The Company has not accepted any deposits from the public and as such, no amount on account of principal or interest on deposits from public was outstanding as on the date of the balance sheet.

No material changes or commitments affecting the financial position of the Company occurred between the end of the financial year (i.e.31^st March, 2025) and the date of this report.

The Company has formulated and published a Whistle Blower Policy to provide Vigil Mechanism for employees including Directors of the Company to report genuine concerns and to ensure strict compliance with ethical and legal standards across the Company. The provisions of this policy are in line with the provisions of the Section 177(9) of the Act and Listing Regulations, are available on the website of the Company at http://www.precot.com/investors. The details of Whistle Blower Policy forms part of the Corporate Governance Report annexed with this report.

The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of the with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013 and constituted an Internal Committee to address the complaints regarding sexual harassment. All employees are covered under this policy.

The details relating to Complaints forms part of the Corporate Governance report.

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

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.

In accordance with the requirement of Regulation 34(3) and Schedule V Part F of Listing Regulations, the details in respect of equity shares lying in the suspense account is as follows. .

The voting rights on the shares outstanding in the suspense account as on 31^st March, 2025 shall remain frozen till the rightful owner of such shares claims the shares.

Your Directors thank the Shareholders, Customers, Suppliers and Bankers for their continued support during the year. Your Directors also place on record their appreciation of the contributions made by Employees at all levels towards the growth of the Company.