Z F Steering Gear (India) Ltd

To the Members,

The Board of Directors (the Board) is delighted to present 44th Annual Report on the business and operations of ZF Steering Gear (India) Limited (the Company) along with the summary of Standalone and Consolidated financial statements for the financial year (FY) ended on March 31, 2024.

I) Performance Review and state of the Company's affairs

II) Dividend

The Board is pleased to recommend a Dividend of Rs. 8 per equity share, having face value of Rs. 10 each, for the Financial Year ended on March 31, 2024, subject to the approval of the Members at 44th Annual General Meeting. In the previous year, the Company paid a dividend of Rs. 5 per equity share, having face value of Rs. 10 each.

III) Share Capital

During the year under review, there was no change in the paid-up capital of the Company.

As on March 31, 2024, the paid-up share capital of the Company stood at Rs. 9,07,73,000 (Nine crore Seven Lakh Seventy-Three Thousand only), comprising 90,73,300 (Ninety Lakh Seventy-Three Thousand and Three Hundred) equity shares of face value of Rs. 10 fully paid- up. Out of the above, the Promoters held 60,94,198 equity shares comprising 67.2% of the equity share capital of the Company.

During the year, the Authorised Share Capital of the Company was increased from Rs. 10 crore comprising 1 crore equity shares of Rs. 10 each to Rs. 20 crore comprising 2 crore equity shares of Rs. 10 each.

IV) Consolidated Financial Statements

Subsidiaries, Associates and Joint Ventures

The Company has prepared Consolidated Financial Statements for the Financial Year ended on March 31, 2024, in addition to the Standalone Financial Statements, as there were three Subsidiaries of the Company as of March 31, 2024.

The detailed information on Subsidiaries of the Company along with Loans and Investments made therein is provided under the para ‘Investment in Subsidiaries' of the Management Discussion and Analysis Report, forming part of this Report. Form AOC-1 is attached to the Consolidated Financial Statements for the Financial Year ended on March 31, 2024, forming part of this Annual Report, giving key financials of the subsidiaries.

The Company did not have any Associate Company as of March 31, 2024.

V) Management discussion and Analysis

1. Indian Economy

FY 2023-24 (the year under review)

India is now the world's fifth largest economy in terms of nominal GDP (Gross Domestic Product) and the third largest in terms of Purchasing Power Parity (PPP). As per the Economic Survey for FY 2023-24 released in July 2024 by Ministry of Finance, India's real GDP grew by 8.2% for FY 2023-24, posting a growth of over 7% for third consecutive year. With this, India has further consolidated its position as the fastest growing major economy. One of the major contributors to the growth rate was Manufacturing sector.

FY 2024-25 (Outlook)

The Government is expecting real GDP growth of 6.5%-7% in FY 2024-25. IMF (International Monetary Fund) too, had recently raised India's GDP growth forecast for FY 2024-25 to 7%.

Major factors propelling economic growth in India are robust private consumption growth, robust investment activity, increased foreign direct investments (FDI) in various sectors (including Automobiles) and manufacturing resurgence, thanks to initiatives like 'Make in India' program and PLI schemes. India is fast emerging as an attractive alternative destination for manufacturing.

Reserve Bank of India (RBI) has highlighted risks of geopolitical tensions, volatility in international financial markets, geo-economic fragmentation, rising Red Sea disruptions and extreme weather events, which may operate as headwinds to the economic growth.

2. Industry Overview

Number of Commercial Vehicles (CV) Sold

Your Company caters to requirements of steering gear systems for a range of Commercial Vehicles (including buses) and Tractors. The Company's Power Steering Systems are fitted on Commercial Vehicles as well as some models of Tractors having less than 45 HP Mechanical Steering Gear Systems of the Company are fitted on various types of Tractors.

The overall Commercial Vehicle sales dropped to 10.34 lakh units in FY 2023-24, as compared to 10.41 lakh units in FY 2022-23, registering decline of 0.7%. Sales of Medium and Heavy Commercial Vehicles increased from 3.81 lakh to 3.91 lakh units (2.7% increase) and Light Commercial Vehicles dipped from 6.60 lakh to 6.42 lakh units (2.7% decrease) in FY-2023-24, compared to the previous year. (Source: SIAM)

Decline in sales of Commercial Vehicles was due to the base effect, coupled with perceived slowdown in the infrastructure activities ahead of the implementation of the Model Code of Conduct for the General Elections held in 2024. Moreover, Light Commercial Vehicles Segment faced volume contraction owing to continued slowdown in the e-commerce demand and due to some market share captured by Three-Wheeler Electric Vehicles.

3. Company Overview

Your Company Sales: (Numbers)

4. Renewable Energy Solar Energy

The Company's 5 MW Solar Power Project at Gujarat Solar Park, Charnka Village, District Patan (Kutch), Gujarat, generated 0.74 crore Units of Electricity with sales-revenue of Rs. 7.94 crore in the FY 2023-24. The entire electricity is purchased by Gujarat Urja Vikas Nigam Limited (GUVNL), a Government of Gujarat Company, in terms of the multi-year Power Purchase Agreement.

The Company's rooftop solar project, situated at its Vadu Budruk plant, generated around 0.09 crore units of electricity in FY 2023-24, which are captively consumed in the said plant.

Wind Energy

Wind Turbine Machines, owned and operated by the Company, located in districts of Satara, Ahmednagar and Aurangabad, having aggregate capacity of over 8.10 MW generated a total of 1.07 crore units in FY 2023-24. Out of this, 0.65 crore units were used as captive consumption, which accounted for approximately 42.4% per cent of the energy- consumption of the Company's factory at Village Vadu Budruk, and remaining 0.42 crore units were sold to Maharashtra State Electricity Board.

5. Financials of the Company Revenue from Operations

During the financial year under review, revenue from sales of auto-components, that is Steering Gear Systems and its components, went up by 6.3%, and

Revenue from Renewable Energy declined by 2.2%. Consequently, Total Revenue from Operations went up by 6.1%.

Finance Cost

Finance cost was Rs. 0.91 crore (1.6% of PBT) for FY 2023-24 (compared to Rs. 0.72 crore (1.9% of PBT) in FY 2022-23.

Other Income

During the year under review, Other Income was Rs. 37.78 crore as against Rs. 13.98 crore in the Financial Year 2022-23. Other Income (mainly) is aggregate of the realised gains during the financial year, on sale of financial investments & investment property during the year and the unrealised gains, based on mark to market valuation as of March 31,2024, on the financial investments held as of that date. For details of Other Income, kindly refer to Note No. 16 to the Financial Statements.

Financial Investments

As of March 31, 2024, Financial Investments of the Company stood at Rs. 142.12 crore as against Rs. 155.46 crore as of March 31, 2023. Both the amounts reflect the fair/ market value of the financial investments held by the Company, at the end of the respective financial years, apart from the bonds and equity investments in the subsidiaries held by the Company, which are valued at cost. For complete list of Investments held by the Company at year-end, kindly refer to Note No. 5[a] of the Financial Statements.

Profitability

In view of the surge in the Other Income, as explained above, Profit before Tax soared to Rs. 56.04 crore for FY 2023-24, in comparison to Rs. 37.20 crore for FY 2022-23. Profit for the year (after tax) is Rs. 47.72 crore (up 88%) and Total comprehensive income was Rs. 48.10 crore (almost doubled). Earnings per share was Rs. 52.59.

6. Credit Rating

In the Month of May 2024, ICRA - the Credit Rating Agency, retained the Credit Rating, in respect of the various credit facilities sanctioned to the Company, as A+ for Long Term Fund based and Non-Fund based Credit Facilities and A1+ for Short Term Non-Fund Based Credit Facilities. Further, the outlook on ratings of the Long Term Credit facilities was also retained as Stable'.

7. Key Financial Ratios

In accordance with Regulation 34 read with Schedule V, Part C to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements)

Regulations, 2015 (the Listing Regulations), the key financial ratios are as under:

Debt Equity Ratio:

Improvement in Debt equity ratio is attributable to reduction in Borrowings and increase in Net Worth, compared to previous year.

Net Profit Margin:

Net profit Margin has spiraled up mainly due to Other Income.

8. Return on Net Worth

The return on net worth spiraled up due to increase in Profit for the year/ Net Profit by Rs.22.28 crore, due to better return on investments of the Company.

9. Segment wise Profitability

Auto-Components Segment reported Profit before Tax (PBT) of Rs. 14.91 crore. Renewable Energy Segment reported PBT of Rs. 10.06 crore and PBT from other (Un-allocable) segment/ Other Income was Rs. 31.07 crore.

10. Outlook, Opportunities and Threats

Indian economy vis-a-vis Commercial Vehicle (CV) Industry (Forecast)

As the dealers are carrying higher inventory, Commercial vehicle (CV) sales in India are likely to marginally decline in financial year 2024-25 (FY25) in volume by 4-7 per cent, according to ICRA - the Rating Agency.

Demand is expected to pick up in the second-half of the financial year.

VI) Communication received from ZF Friedrichshafen AG

As reported earlier, the Company had received a communication dated 19 October 2022, from ZF Friedrichshafen AG ('ZF AG'), regarding alleged infringement and passing off, of the trademark/mark "ZF" and/or "ZF India" and amongst other alleged demands, ZF Friedrichshafen AG, has claimed a sum of Rs.100 crores in damages from the Company. The Company continues to be of the opinion that, it has not committed any act of infringement and/or passing off, in any manner whatsoever. The Company vide communication dated 12 April 2023, had sent a detailed reply to ZF Friedrichshafen AG. The allegations of ZF Friedrichshafen AG and/or ZF India Private Limited are neither accepted nor acceptable to the Company. The Company has also sent a letter to certain affiliates of ZF Friedrichshafen AG, to cease and desist the use of the name "ZF" and/or "ZF India", in relation to certain products, as per the terms of the No-Objection Letter dated 28 July 2006, issued by the Company to ZF Friedrichshafen AG. In addition to the same, the Company has filed 2 (two) commercial suits against ZF Friedrichshafen AG and others, before the Hon'ble District Court, Pune and the same are pending for adjudication before the Hon'ble District Court, Pune. This disclosure is made, without prejudice to the rights of the Company and only in order to comply with the applicable disclosure requirements to the Company, as a listed entity.

VII) Strategic Initiatives, Expansion and Capital Expenditure

1. Investment in Subsidiaries

The Company, as a strategy, has chalked out an Expansion Plan, by way of backward integration, mainly for manufacturing of some of the key components, required for the Company's end product i.e. Steering Gear Systems. This backward integration is being undertaken through its three subsidiaries.

Names of the Subsidiaries are:

(i) DriveSys Systems Private Limited (DriveSys)

(ii) NexSteer Systems Private Limited (NexSteer)

(iii) Metacast Auto Private Limited (Metacast)

DriveSys - Wholly Owned Subsidiary

DriveSys has been formed to ensure in-house reliable source of supply of semi-finished components required for the Company's existing business line. External market is planned to be tapped once internal requirement is fulfilled. DriveSys manufactures Machined Components viz. housing machining, sector shaft machining, piston machining, oil tanks, plastic injection moulding, Steering Pump Assembly etc.

As of March 31, 2024, your Company has invested, in DriveSys, Rs. 8 crore by way of capital and Rs 19.17

crore by way of loans. DriveSys has also availed Rs. 27.49 crore loan from a bank at the year-end.

DriveSys, under its Phase I Program, has commenced commercial production from the Month of March 2024. Thereafter, it has rammed up its operations with additional set of Machinery from the Month of June 2024.

Phase II of DriveSys is expected to be completed by end of March 2026. Estimated additional investment in DriveSys is expected to be around Rs. 100 crore, over a period of 2 years, which will be funded through loans from your Company/ banks. In Phase II, Metacast - your Company's another subsidiary will partner DriveSys as its Captive Process Vendor for supply of castings required by DriveSys, for manufacturing of machined components. This would ensure reliable source of supply of castings to DriveSys.

Metacast - 51% Subsidiary and Joint-Venture

Metacast, formed in May 2023, is a Joint-Venture with Supreme Iron (India) Private Limited. It is in the foundry business.

As stated above, Metacast will operate as the Captive Process Vendor (CPV) for DriveSys for supply of castings. The estimated outlay for Metacast is around Rs. 50-60 crore to be infused by the promoters of Metacast and loan from Bank.

Your Company has invested Rs. 2.55 lakh by way of 51% equity participation. As of March 31, 2024, Metacast has availed Loans from (both) the Promoters of Rs. 20.37 crore. Additionally, Metacast has availed bank-loans of Rs 10.16 crore.

Factory building is almost ready. Most of the machineries have arrived and are installed/ being installed. Metacast is expected to commence production by end of September 2024.

NexSteer - Wholly Owned Subsidiary

Total project cost for NexSteer is Rs. 25 crore. Construction work for the factory is delayed and the same is expected to be completed by December 2024.

As of March 31,2024, your Company has invested Rs.

0.8 crore in equity share capital of NexSteer. Further, your Company has also given Loan of Rs. 13.03 crore to NexSteer.

2. Capital Expenditure

In the current Financial Year, your Company has planned Rs 50 crore towards replacement of old machinery, procuring balancing equipment etc. for its Pune and Pithampur factories.

3. Financing of Projects and Fund Raising

In order to finance the above mentioned projects and with a view to have a pool of growth capital for expanding the Company's businesses and seize the business opportunities emerging from time to time, the Board has decided to make further issue of equity shares, in one or more tranches, for an amount not exceeding Rs. 200 crore (including share premium) through permissible modes such as private placement, preferential issue, qualified institutions placement etc. Notice of 44th AGM contains this item of business for the Members' consideration and approval.

VIII) Internal Control System and its Adequacy

Your Company has aligned its current systems of internal financial control with the requirement of the Companies Act, 2013 (the Act). The Internal Control framework is intended to increase transparency and accountability in the Company's process of designing and implementing systems of internal control. The framework requires a company to identify and analyse risks and manage appropriate responses.

The Company has successfully laid down the framework and ensured its effectiveness.

The Company has an effective Internal Control System commensurate with the size, scale and complexity of its operations. The Company's Audit Committee periodically reviews adequacy and effectiveness of the Internal Control System. Further, the Internal Audit Department of the Company checks all the vouchers, financial reports, registers etc. To maintain its objectivity and independence, the Board has also appointed an external Chartered Accountant firm, M/s. Kirtane & Pandit LLP, Chartered Accountants, as Internal Auditors, which report to the Audit Committee of the Board. The scope of the Internal Audit is decided by the Audit Committee and the Board.

The Internal Auditors monitor and evaluate the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies for various functions in the organisation of the Company. The Audit Committee, Statutory Auditors and the process owners are periodically apprised of the internal audit findings, and important internal audit observations are also placed before the Audit Committee and the Board at their Meetings. Based on the report of Internal Auditor, process owners undertake corrective action, wherever required, in their respective areas and thereby strengthen the controls further. Audit observations and actions taken thereof are presented to the Audit Committee.

The Company's Audit Committee regularly reviews the financial management reports and data and interacts with the External and Internal Auditors for ascertaining the adequacy of internal controls.

Based on its evaluation, the Company's Audit Committee has concluded that, as of March 31, 2024, the Company's internal financial controls were adequate and operating effectively.

IX) Cautionary Statement

The above 'Management Discussion and Analysis Report' is a forward looking Statement based on the Company's projections, estimates and perceptions. These statements reflect the Company's current views with respect to the future events and are subject to risks and uncertainties. Actual results may vary materially from those projected here.

X) Conservation of Energy, Research and Development, Technology Absorption and Innovation, Foreign Exchange Earnings and Outgo:

The details as required under the Companies (Accounts) Rules, 2014, are given in Annexure-I to this Report.

XI) Board of Directors and Key Managerial Personnel:

As at March 31, 2024 as well as on the date of this Report, the Company's Board comprised seven Directors, all professionals in their own right, who bring in a wide range of skills and experience to the Board. Two of them are Executive Directors, four are Independent Directors (including one Woman Independent Director) and one being Non-Executive/ Non-Independent Director.

Following are the changes in composition of the Board of Directors the Company, after the last Board Report of July 22, 2023.

Mr. Adit Rathi, Non-Executive, Independent Director of the Company, ceased to be a Director, following his resignation, for personal reasons, with effect from close of business hours on January 31, 2024.

Mr. Manish Motwani, Non-Executive, Independent Director, ceased to be a Director of the Company, pursuant to the conclusion of his second consecutive term, as an Independent Director of the Company, with effect from April 1, 2024. The Board places on record the appreciation for the valuable contribution, support and guidance rendered by Mr. Manish Motwani and Mr. Adit Rathi during their tenures as Directors of the Company.

Based on recommendation of the Nomination and Remuneration Committee of the Board, Dr. Dinesh Bothra, was appointed as a Non-Executive, Non-Independent Director of the Company, by the Board, with effect from February 3, 2024. The Members of the Company have approved the appointment of Dr. Bothra as Director of the Company by way of Postal Ballot on April 19, 2024.

Pursuant to the requirements under Section 152(6) of the Act, Mr. Utkarsh Munot retires by rotation and he offers himself for reappointment at the ensuing 44th Annual General Meeting of the Company. The Nomination and Remuneration Committee and the Board of Directors of the Company have recommended the reappointment of Mr. Utkarsh Munot (DIN: 00049903) in the ensuing Annual General Meeting.

Further, based on the recommendations of the Nomination and Remuneration Committee, the Board of Directors of the Company, appointed Mr. Rohit Rathi (DIN: 00018654) as an Additional Director, in the capacity of Non-Executive, Independent Director, with effect from August 6, 2024. As per the provisions of Section 161 of the Act and the Articles of Association of the Company, Mr. Rohit Rathi, shall hold office as Additional Director up to the date of the ensuing 44th Annual General Meeting and is eligible for appointment as an Independent Director. The Company has also received the Notice of candidature of Mr. Rohit Rathi, from a Member, in terms of Section 161 of the Act. Further, Mr. Rohit Rathi has confirmed that he is not aware of any circumstance or situation which exists or may be reasonably anticipated that could impair or impact his ability to discharge his duties with an objective independent judgement and without any external influence in terms of Regulation 25(8) of the Listing Regulations, and has also furnished declaration in terms of Section 149(7) of the Act, that he meets the criteria prescribed for Independence under Section 149(6) of the Act, along with the affirmation pursuant to Rule 6(3) of the Companies (Appointment and Qualification of Directors) Rules, 2014, that his registration on Independent Directors' Databank is in force.

The Board recommends appointment of Mr. Rohit Rathi as the Non-Executive, Independent Director of the Company, with effect from August 6, 2024 to August 5, 2029, to the members for their approval at the forthcoming 44th Annual General Meeting.

The Resolutions for reappointment/ appointment of Mr. Utkarsh Munot and Mr. Rohit Rathi, along with their brief profiles, forms a part of the Notice of 44th Annual General Meeting of the Company.

There was no change in the Key Managerial Personnel during the year.

1. Board Diversity

The Company recognizes and embraces the importance of a diverse Board in its success. The Company believes that a truly diverse Board will leverage differences in thought, perception, knowledge, skill, regional and industry experience, cultural and geographical background, age, ethnicity, race and gender, which will help the Company to retain its competitive advantage.

2. Independent Directors

Pursuant to the provisions of Section 149 of the Act and Regulation 25 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Regulations) Regulations, 2015 (the Listing Regulations), the Independent Directors of the Company have submitted declarations that each of them meets the criteria of independence as provided in Section 149(6) of the Act along with Rules framed there under and Regulation 16(1)(b) of the Listing Regulations. In terms of Regulation 25(8) of the Listing Regulations, the Independent Directors have confirmed that they are not aware of any circumstance or situation which exists or may be reasonably anticipated that could impair or impact their ability to discharge their duties with an objective independent judgment and without any external influence.

Further, declaration on compliance with Rule 6(3) of the Companies (Appointment and Qualification of Directors) Rules, 2014, as amended by Ministry of Corporate Affairs ("MCA") Notification dated October 22, 2019, regarding the requirement relating to enrolment in the Data Bank created by MCA for Independent Directors, has been received from all Independent Directors of the Company. Further, all the Independent Directors have either qualified or are exempted from the self-assessment conducted by the Independent Directors' Databank.

Familiarisation Programmes for Independent Directors

Independent Directors play a pivotal role in upholding Corporate Governance norms and ensuring fairness in decision-making. Being experts in various fields, they also bring independent judgement on matters of strategy, risk management, controls and business performance.

Details of familiarization programme, imparted to the Independent Directors, are available on the website of the Company at www.zfindia.com.

At the time of appointing a new Independent Director, a formal letter of appointment is issued to the Director, inter alia, explaining the role, duties and responsibilities of the Director. The Director is also explained in detail the compliances required from him/ her under the Act, SEBI Regulations and other relevant regulations.

3. Performance Evaluation

The Board of Directors has carried out an annual evaluation of its own performance, Board Committees, and individual Directors pursuant to the provisions of the Act and the Listing Regulations.

Your Board has constituted the Nomination and Remuneration Committee (hereinafter referred to as "the Committee"), in order to oversee, inter-alia, matters relating to:

(i) Identification of persons who are qualified to become directors and persons who can be appointed in senior management in accordance with the criteria laid down, recommend to the Board their appointment and removal;

(ii) Formulate the criteria for determining qualifications, positive attributes and independence of a director;

(iii) Recommend to the Board a policy relating to the remuneration for the directors, key managerial personnel and other employees;

(iv) Carry out evaluation of every director's performance including that of Independent Directors; and

(v) Devise a policy to be followed for identification, appointment, remuneration and evaluation of performance of directors including Company's Board diversity etc., as approved by the Board.

Further, the Company has devised a Policy, for performance evaluation of Independent Directors, Board as a whole, Committees of the Board and other individual Executive/ Non-Executive Directors. The Policy includes criteria for performance evaluation. The criteria are based upon age, experience, quality of participation in Board/ Committee proceedings, attendance at meetings, contribution by strategic inputs and others. The criteria along with additional requirements prescribed by Section 149 of the Act are used for selection of Independent Directors.

The Board evaluated its performance after seeking inputs from all the Directors based on criteria such as the Board composition and structure, effectiveness of board processes, information and functioning, etc. The performance of the Committees was evaluated by the Board after seeking inputs from the Committee members based on criteria such as the composition of committees, effectiveness of committee meetings, etc. The above criteria are broadly based on the Guidance Note on Board Evaluation issued by the Securities and Exchange Board of India.

In a separate meeting of Independent Directors, performance of the Non-Independent Directors and the Board as a whole and the Chairman of the Company was evaluated taking into account the views of Executive Directors and Non-Executive Directors.

The above evaluations were then discussed at the Board meeting that followed the meeting of the Independent Directors and the Nomination and Remuneration Committee, at which the performance of the Board, its Committees, and individual Directors

was also discussed. Performance evaluation of Independent Directors was done by the entire Board, excluding the Independent Director being evaluated.

The Company has carried out the performance evaluation during the year under report. The Board of Directors expressed satisfaction with the evaluation process.

XII) Directors' Responsibility Statement

1. In the preparation of the Annual Financial Statements for the financial year ended on March 31, 2024, the applicable Accounting Standards read with requirements set out under Schedule III to the Companies Act, 2013, have been followed and there are no material departures from the same;

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 as at March 31,2024, and of the profit of the Company for the financial year ended on that date;

3. the Directors have 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;

4. the Directors have prepared the annual financial statement 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, in their opinion, are adequate and are operating effectively; and

6. the Directors have organised/ devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

XIII) Corporate Governance

Pursuant to Regulation 34(3) read with Schedule V of the Listing Regulations, a detailed report on Corporate Governance is given in Annexure - II along with the Auditors' Certificate on its compliance, which forms part of this report.

XIV) Business Responsibility and Sustainability Report

The Business Responsibility and Sustainability Report, for the year ended on March 31, 2024, as stipulated under Regulation 34 of the Listing Regulations, forms part of this Annual Report. The Business Responsibility and Sustainability Report is also available on the Company's website at www.zfindia.com.

XV) Other Aspects

1. Particulars of Loans given, Investments made, Guarantees given and Securities provided

The Particulars of Loans given Investments made, Guarantees given and Securities provided by the Company, are disclosed in the Financial Statements forming part of this Annual Report.

2. Contracts and Arrangements with Related Parties

All contracts/ arrangements/ transactions entered into by the Company during FY 2023-24, with related parties were on an arm's length basis and in the ordinary course of business.

Prior approval of the members of the Audit Committee, who are Independent Directors, was obtained for all the related party transactions in terms of provisions of Regulation 23(2) of the Listing Regulations.

There were no material Related Party Transactions (RPTs) undertaken by the Company during the year that require Shareholders' approval under the provisions of Regulation 23(4) of the Listing Regulations or Section 188 of the Act. Certain transactions which were repetitive in nature were approved through omnibus route. The Audit Committee reviews the details of the Related Party Transactions entered pursuant to the omnibus approval, on a quarterly basis.

All the transactions were in compliance with the applicable provisions of the Act and the Listing Regulations. The details of RPTs during FY 202324, are provided in the Note 36 accompanying the financial statements. Given that the Company does not have any RPTs to report pursuant to provisions of Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014, Form AOC-2, is not required to be attached to the Financial Statements of the Company.

During FY 2023-24, the Non-Executive Directors of the Company had no pecuniary relationship or transactions with the Company other than sitting fees and reimbursement of expenses, as applicable.

Further, the Board recommends the proposed resolution, for approval of the Members, forming part of Notice of 44th AGM, in respect of giving loan/s to or giving guarantee/ security/ undertaking for credit facilities availed/ to be availed by Metacast Auto Private Limited (Metacast), a subsidiary of the Company, of an amount not exceeding Rs. 75 crore, in one or more tranches. The transaction/s being a material related party transaction has been approved and recommended by the Audit Committee and approved by the Board of Directors of the Company, now requires Members' approval.

The Company has formulated a policy on Related Party Transactions (RPTs) in accordance with the Act and the Listing Regulations including any amendments thereto for identifying, reviewing approving and monitoring of RPTs. The said policy is available on the Company's website: http://www.zfindia.com/policies-codes.php.

3. Corporate Social Responsibility (CSR)

Pursuant to provisions of Section 135 of the Act read with the Companies (Corporate Social Responsibility) Rules, 2014, and various amendments and clarifications issued by the Ministry of Corporate Affairs, the Company has its CSR Policy, which is available on the Company's website www.zfindia.com. The Annual Report on CSR activities is annexed herewith marked as Annexure III.

4. Risk Management

The Company follows a specific, well-defined risk management framework which is integrated with its operations.

The Company's Risk Management approach has been developed after taking cognizance of the relevant statutory guidelines, stakeholders' feedback, forecast and expert judgment.

Your Company is not required to constitute a separate Risk-Management Committee.

The Audit Committee of the Board of Directors has been entrusted to identify/ anticipate the possible risk and certify the Risk Mitigation Plan. Further, the Company's Senior Management Team addresses functional, operational, and strategic risks in their corresponding area of responsibility covering overall risks in the area of commercial, technical, information technology and statutory compliance.

The Company's Risk Management Framework inter- alia provides for the following:

i. pro-active processes within the Risk Management Framework for reporting, evaluating and resolving risks;

ii. Identifying and assessing risks associated with various business decisions before they materialize;

iii. Take informed decisions at all levels of the organization in line with the Company's risk appetite;

iv. Ensuring protection of shareholders' stake by establishing an integrated Risk Management Framework for identifying, assessing, mitigating, monitoring, evaluating and reporting all risks;

v. Adoption and implementation of risk mitigation measures at every level in order to achieve longterm goals effectively and sustainably; and

vi. Regularly review Risk Tolerance levels of the Company.

The Company manages, monitors and reports on the major risks and uncertainties, those can impact its ability to achieve its strategic objectives. The Company has introduced several improvements in internal control management to drive a common integrated view of risks, optimal risk mitigation, responses and efficient management of internal control and assurance activities.

5. Auditors and Auditors' Report Statutory Auditors

The Company in its 39th Annual General Meeting held on September 20, 2019 had appointed M/s. Joshi Apte & Company, Chartered Accountants (Firm Registration No. 104370W), as Statutory Auditors of the Company, for a period of five consecutive years from the conclusion of 39th Annual General Meeting until the conclusion of 44th Annual General Meeting.

There are no qualifications, reservations or adverse remarks in the Statutory Auditor's Report for the Financial Year 2023-24. The Statutory Auditors' Report is enclosed with the financial statements in the Annual Report.

Further, pursuant to the recommendations of the Audit Committee and the Board of Directors of the Company, M/s. Joshi Apte & Company, Chartered Accountants (Firm Registration No. 104370W), are proposed to be reappointed in 44th Annual General Meeting, subject to the approval of the members of the Company, for a second term, till the conclusion of 49th Annual General Meeting of the Company.

A resolution seeking their reappointment forms a part of the Notice convening 44th Annual General Meeting for the approval of the Members of the Company. Secretarial Auditors

The Board had appointed M/s. SIUT & Co., LLP, Company Secretaries, to conduct Secretarial Audit for the financial year 2023-24. The Secretarial Audit Report for the same is annexed herewith as Annexure IV.

The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

6. Disclosures Meetings of the Board

Four Meetings of the Board of Directors were held during the financial year 2023-24. Detailed information is given in the Report on Corporate Governance, forming part of this Annual Report.

7. Committees of the Board Audit Committee

The Company has an Audit Committee pursuant to the requirements of the Act read with the rules framed there under and the Listing Regulations. The details

relating to the same are given, in the Corporate Governance Report, forming part of this Report. All the recommendations made by the Audit Committee were accepted by the Board.

The Audit Committee performs its functions as set out under Part C of Schedule II to the Listing Regulations. The detailed terms of reference of the Audit Committee are set out in the Corporate Governance Report. Nomination and Remuneration Committee The Company has Nomination and remuneration Committee (the Committee) pursuant to Section 178 of the Act read with rules made there under and Regulation 19 of the Listing Regulations. The brief details pertaining to the same are given in Corporate Governance Report, forming part of this Report. All the recommendations made by the Committee were accepted by the Board.

The Nomination and Remuneration Committee performs its functions as set out under Part D Para A of Schedule II to the Listing Regulations.

The detailed terms of reference and functions are set out in Corporate Governance Report.

Remuneration Policy

The Board, has on the recommendation of the Nomination & Remuneration Committee, approved a policy for selection, appointment and remuneration of Directors and Senior Management. The detailed Remuneration Policy is placed on the Company's website www.zfindia.com.

Stakeholders' Relationship Committee

The Board has constituted Stakeholders' Relationship Committee in accordance with the provisions of Section 178 of the Act read with rules made thereunder and Regulation 20 of the Listing Regulations.

The Stakeholders' Relationship Committee performs its functions as set out under Part D Para B of Schedule II to the Listing Regulations.

The detailed terms of reference and functions are set out in Corporate Governance Report.

Corporate Social Responsibility Committee

The Company has constituted Corporate Social Responsibility Committee pursuant to the Section 135 of the Act and Rules made thereunder. The detailed functions and constitution thereof of the Corporate Social Responsibility Committee are set out in Corporate Governance Report.

8. Vigil Mechanism/ Whistle Blower Policy

The Company has devised Vigil Mechanism, in terms of Section 177 of the Act and Regulation 22 of the Listing Regulations.

The Audit Committee periodically reviews the functioning of the Vigil Mechanism and ensures that:

a. All the Directors/ Employees are made aware of the Company's Vigil Mechanism;

b. The Vigil Mechanism provides adequate safeguards against victimization of person who use such mechanism and also provides direct access to the Chairman of the Audit Committee in appropriate/ exceptional cases; and

c. The Company had Whistle Blower Policy in terms of Section 177 of the Act and Regulation 22 of the Listing Regulations, which outlined procedures for a person who is willing to use the Vigil Mechanism to address their concerns.

Further, no concerns were raised by any of the employees of the Company during the Financial Year. The Policy on Vigil Mechanism and Whistle Blower may be accessed on the website of the Company at http://www.zfindia.com/annual-return.php.

9. Annual Return

The Annual return is placed on the Company's website www.zfindia.com.

10. Particulars of Employees and related disclosures

Considering the provisions of Section 197 of the Act, read with the relevant rules and having referred to provisions of Section 136(1) of the Act, the Board's Report is being sent to the Members of the Company, excluding details of particulars of employees and related disclosures. The said information/ details is available for inspection at the Registered Office of the Company during working hours, on any working day. Any Member interested in obtaining this information may write to the Company Secretary and this information would be provided on request.

11. Disclosure - Policy on Prevention of Sexual Harassment at Workplace

The Company has in place, a policy on Prevention of Sexual Harassment at Workplace in line with the requirements of 'The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013' and the Rules framed there under. An Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, temporary, trainee etc.) are covered under this Policy. During the year, no complaint with allegation of sexual harassment was received by the Company.

12. General

(i) The Company held no deposits at the beginning of the year, nor accepted any deposits during the year under report.

(ii) All equity shares issued by the Company rank pari-passu in respect of right to receive dividend, voting rights or otherwise.

(iii) During the year under review, no shares were issued as sweat equity to any of the employees or others.

(iv) The Company had three Subsidiaries during the Financial Year 2023-24. However, no remuneration was received by any Whole-time Director/ Employees of the Company, from any of the subsidiaries.

(v) During the year under report, no strictures or material orders were passed by any Regulator or a Court or a Tribunal, which may impact on the going concern status of the Company or its operations in future.

(vi) There has been no instance of fraud reported by the Auditors under Section 143(12) of the Act and Rules framed there under either to the Company or to the Central Government.

(vii) The Central Government, under Section 148(1) of the Act, has not prescribed maintenance of cost records in respect of the activities carried out by the Company.

(viii) During FY 2023-24, the Company has complied with all applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

(ix) There have been no material changes or commitments affecting the financial position of the Company which have occurred between the end of the Financial Year to which the Financial Statements relate and the date of this report.

(x) The Company has not filed any application or no proceeding is pending against the Company under the Insolvency and Bankruptcy Code, 2016, during FY 2023-24.

(xi) The Company has not made any one-time settlement application during the year and thus disclosure for difference between 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, is not applicable to the Company.

XVI) Acknowledgement

The Board of Directors takes this opportunity to thank the Company's members, customers, suppliers, bankers/ business partners, employees, and Central and State Governments for their consistent support and co-operation to the Company.