About Elgi Equipments Ltd

Elgi Equipments Limited (EEL) was incorporated on 4th March, 1960 as a Private Limited Company, Elgi Equipments was converted into a Public Limited Company in 1975 and came out with a Public Issue of 75,000 shares. It was promoted by L G Balakrishnan, his Bros. and Associates. Presently, the Company is engaged in manufacture, trading of air compressors and providing after sales services. The Company has manufacturing plants in Coimbatore, India. As part of its modernisation plans, the company invested Rs 40 crores in the upgradation and expansion of the manufacturing facilities, especially of compressors. The company was initially manufacturing garage equipment like low-range reciprocating compressors, car-washing machines and hydraulic lifts, with technical know-how from Pumpen Fabrik Urach, Germany. Later, in technical collaboration with Landwehr, Germany, the company started manufacturing lubricating equipment. During 2003-04, the company included three new products namely, Vayu Series Borewell Compressors, 3.5KVA Genset and Electronic Tyre Inflator. In the year 2004-05, the company commissioned its first Four Centrifugal Compressor and Tank Mounted Screw Compressor. The company has obtained the technology for the manufacture of pasteurising plants from Gobel, Germany; screw compressors from Sullair Corporation, the US; bottle-washing machines from Krones, Germany; and automatic vehicle- washing machines from Ceccato, Italy. To strengthen its technologies, the company has tied up with City University, London, and hired consultants to help improve its products and processes. In 1999-2000, a branch office was established in SriLanka to explore the Sri Lankan market. During 2004-05, the company entered the petrol or kerosine engine business through an association with Robinson of Japan via their associates in Sri Lanka. In Aug. 2000, Elgi Equipments has entered into technical collaborations with Hitachi to produce Oil Free Air Compressors in India. It has also tied up with Samsung Techwin Co Ltd, an affiliate of the Samsung group, to bring to India their centrifugal compressor - Turbo Master. To upgrade automotive equipment and also to manufacture Compressors with higher capacities and pressures the company has launched a joint technology upgradation plan with City University UK. During 2002-03 the total capital expenditure incurred were Rs.78.12 million and the captial expenditure were funded by way of internal accruals. In the year 2004, the company has entered into a Collaborative Venture with JP Sauer & Sohn, Germany to envisage the manufacturing of compressor required for Battle ships. The company made an arrangement with Mahindra & Mahindra for supplying the engines for their gensets in 2004-05. During the financial year ended 31 March 2014, Elgi Equipments incurred Capital Expenditure of Rs 917.23 million, of which Rs 584.30 million pertained to plant and machinery through internal accruals. During the year under review, the company's new foundry commenced commercial production. This backward integration was done primarily to improve the quality of the company's products. This has been achieved in significant measure besides the added benefit of having a lower cost source for castings. In spite of uncertain market conditions in the domestic market during the year, the company retained its market share and pushed ahead in some segments. In the international market, the company's new range of products was well received in all markets and able to make a mark in a very short time. This has been particularly observed in the European and American markets. On the other hand, the company faced significant challenges in creating a robust distribution channel in Asian markets. In spite of this, some significant milestones were achieved, the most important being the creation of multiple reference installations for oil free screw compressors. During the year under review, in spite of extreme sluggishness in the automotive sector, Elgi Equipments' subsidiary ATS Elgi Limited sustained its market share throughout the year. During the financial year ended 31 March 2015, Elgi Equipments' manufacturing facility at the new site became fully operational. This has been achieved with little disturbance to regular production and at least cost. Elgi Equipments continued to perform well in the Middle East and African markets, especially with smart growth in industrial compressors. Consequent to Elgi Equipments' decision to restructure its China (Shanghai and Zhejiang) operations by closing down Elgi Compressors Trading (Shanghai) Co Limited and continue to carry on trading operations in Elgi Compressors Zhejiang Limited, the company has written down the value of the investments, advances and receivables relating to Chinese operations to an extent of Rs. 551.76 million, accounting it as an exceptional item to the Statement of Profit and Loss for the financial year ended 31 March 2016.The company's business operations were severely affected in China due to the economic slowdown and hence the company took a decision to restructure the operations in order to minimize losses and approach the market in a focused manner by supplying products that meet the local market requirements. During the year under review, Elgi Equipments acquired Ergo Design Private Limited, an independent industrial design studio. Ergo Design Private Limited caters to the needs of Elgi Equipments to a large extent. The acquisition was done in order that the company has better control over the Intellectual Property rights created by Ergo Design Private Limited using the company's inputs. During the year under review, Elgi Equipments' products continued to be well received by distributors and customers in international markets especially in USA, Europe and the Middle East. The high cost of operations in the company's French operations combined with the country's restrictive labour practices made it clear that profitability of Elgi Equipments' wholly owned subsidiary in France Belair SAS is a challenge. The company took a hard decision to handover Belair SAS to the French judicial system for legal redressal. The company had acquired Belair SAS in February 2010 and since then has invested over Euro 6.8 Million to build the business. During the financial year ended 31 March 2017, consequent to Elgi Equipments' decision to restructure its China operations, Elgi Compressors (Zhejiang) Limited has de-registered its manufacturing license. The company had promoted and invested in Elgi Compressors (Shanghai) Co. Ltd (ECS) as a trading entity, based on local advice at that time that the manufacturing entity, namely Elgi Equipments (Zhejiang) Limited could not carry on trading activities. The company had re-examined the matter in the eve of restructuring China operations on the basis of legal advice, it was confirmed that Elgi Equipments (Zhejiang) Limited could itself engage in trading activities. Therefore, as part of the restructuring process, the Board of Directors thought it prudent to wind down ECS. In pursuance thereof, select employees of ECS numbering six personnel were transferred to Elgi Equipments (Zhejiang) Limited. Other employees of ECS were let go after following legal procedures. Formalities have been completed at the EXIM office and ECS cannot engage in trading activities now. A clearance is pending from the tax bureau but this does not preclude ECS from proceeding with further action for further winding up. ECS will now apply for filing with the Statutory Authority (Minhang BOC) along with necessary particulars as soon as possible to start the winding-up process officially. Belair SAS, France, previously the wholly owned subsidiary of Elgi Equipments was handed over to the French Judicial System for legal redressal on 26 April 2016, considering the cost structure and business operations which was challenging for the company for some time. Attempts on finding solution to the problems were not successful. A situation arose where Belair was unable to even meet the routine financial commitments to run its business operations smoothly. Belair was also unable to service its debts to the company. Therefore, it was decided to seek protective action before appropriate Commercial Court in Annecy, France. The Court appointed an administrator on 28 April 2016. Belair is no longer under the control of Elgi Equipments and is under legal redress as per the French laws. By a judgement and order dated 1 June 2016 and subject to the conditions mentioned therein, the Commercial Court of Annecey ordered assignment of Belair's AIRBEL business to AIRMAX HOLDING and pronounced the judicial liquidation of SAS Belair. During the year under review, Elgi Equipments incorporated a Limited Liability Partnership in the name of Industrial Air Solutions LLP. Elgi Equipments is a partner with Mr. Rajeev Sharma, an ex-employee of the company who holds equal shares along with the company. The LLP will be a model distribution entity to handle Sales and Service of Elgi Compressors for the areas of Coimbatore and Tiruppur by showcasing some of the best business practices to help build a strong brand and improve market share in these areas. During the financial year ended 31 March 2018, Elgi Equipments continued to gain share in North America where its machines are fast gaining reputation for reliability and energy efficiency. For leveraging information technology, various digital and automation initiatives were implemented during the year in collaboration with the business functions. The company was one of the early adopters of ERP (Enterprise Resource Planning) system and during the year the company successfully completed implementation of upgrade to Infor, LN ERP Software. During the year 2019-20, Company acquired Michigan Air Solutions, LLC, an independent compressor distributor in the USA and Company's European expansion plan gained full traction. During the year 2019-20, ELGi Sauer's Engineering Support Team Coimbatore (ESTC) was established to provide exclusive engineering support to the parent Company, Sauer-Germany, and its global subsidiaries. It is fully operational now. ELGi Sauer also commenced construction of a new factory in the outskirts of Coimbatore. In FY 2021, the Company launched ELGi's oil-free AB series screw technology throughout Europe thereby helping their customers in the total cost of ownership, improved reliability, and a reduction of their environmental impact. During the year 2021, the Company acquired F. R. Pulford & Son Pty Ltd, an independent distributor, (Pulford Air & Gas), a Sydney based distribution company for industrial Compressors and air products. During FY 2022, Company invested in Michigan Air Solutions (MAS), distribution business by setting up a new location for Detroit operations. It grew sales at Pattons, distribution business covering North Carolina, South Carolina, Georgia, Virginia, and Alabama. It invested in leadership, sales, and service talent with improving business' structural profitability for expanding sales and market share. During 2022-23, Elgi Compressors Vietnam LLC, a wholly owned subsidiary of the Company was incorporated. CS Industrial Services LLC, USA, a joint venture company was formed by Elgi Compressors USA Inc., a wholly owned subsidiary of the Company. In FY' 23, the Company launched Digital Innovation DOJO - ELGi's digital transformation strategy based on the premise of Experiment, Start Small & Scale Fast'.

Elgi Equipments Ltd Chairman Speech

Elgi Equipments Ltd Company History

Elgi Equipments Limited (EEL) was incorporated on 4th March, 1960 as a Private Limited Company, Elgi Equipments was converted into a Public Limited Company in 1975 and came out with a Public Issue of 75,000 shares. It was promoted by L G Balakrishnan, his Bros. and Associates. Presently, the Company is engaged in manufacture, trading of air compressors and providing after sales services. The Company has manufacturing plants in Coimbatore, India. As part of its modernisation plans, the company invested Rs 40 crores in the upgradation and expansion of the manufacturing facilities, especially of compressors. The company was initially manufacturing garage equipment like low-range reciprocating compressors, car-washing machines and hydraulic lifts, with technical know-how from Pumpen Fabrik Urach, Germany. Later, in technical collaboration with Landwehr, Germany, the company started manufacturing lubricating equipment. During 2003-04, the company included three new products namely, Vayu Series Borewell Compressors, 3.5KVA Genset and Electronic Tyre Inflator. In the year 2004-05, the company commissioned its first Four Centrifugal Compressor and Tank Mounted Screw Compressor. The company has obtained the technology for the manufacture of pasteurising plants from Gobel, Germany; screw compressors from Sullair Corporation, the US; bottle-washing machines from Krones, Germany; and automatic vehicle- washing machines from Ceccato, Italy. To strengthen its technologies, the company has tied up with City University, London, and hired consultants to help improve its products and processes. In 1999-2000, a branch office was established in SriLanka to explore the Sri Lankan market. During 2004-05, the company entered the petrol or kerosine engine business through an association with Robinson of Japan via their associates in Sri Lanka. In Aug. 2000, Elgi Equipments has entered into technical collaborations with Hitachi to produce Oil Free Air Compressors in India. It has also tied up with Samsung Techwin Co Ltd, an affiliate of the Samsung group, to bring to India their centrifugal compressor - Turbo Master. To upgrade automotive equipment and also to manufacture Compressors with higher capacities and pressures the company has launched a joint technology upgradation plan with City University UK. During 2002-03 the total capital expenditure incurred were Rs.78.12 million and the captial expenditure were funded by way of internal accruals. In the year 2004, the company has entered into a Collaborative Venture with JP Sauer & Sohn, Germany to envisage the manufacturing of compressor required for Battle ships. The company made an arrangement with Mahindra & Mahindra for supplying the engines for their gensets in 2004-05. During the financial year ended 31 March 2014, Elgi Equipments incurred Capital Expenditure of Rs 917.23 million, of which Rs 584.30 million pertained to plant and machinery through internal accruals. During the year under review, the company's new foundry commenced commercial production. This backward integration was done primarily to improve the quality of the company's products. This has been achieved in significant measure besides the added benefit of having a lower cost source for castings. In spite of uncertain market conditions in the domestic market during the year, the company retained its market share and pushed ahead in some segments. In the international market, the company's new range of products was well received in all markets and able to make a mark in a very short time. This has been particularly observed in the European and American markets. On the other hand, the company faced significant challenges in creating a robust distribution channel in Asian markets. In spite of this, some significant milestones were achieved, the most important being the creation of multiple reference installations for oil free screw compressors. During the year under review, in spite of extreme sluggishness in the automotive sector, Elgi Equipments' subsidiary ATS Elgi Limited sustained its market share throughout the year. During the financial year ended 31 March 2015, Elgi Equipments' manufacturing facility at the new site became fully operational. This has been achieved with little disturbance to regular production and at least cost. Elgi Equipments continued to perform well in the Middle East and African markets, especially with smart growth in industrial compressors. Consequent to Elgi Equipments' decision to restructure its China (Shanghai and Zhejiang) operations by closing down Elgi Compressors Trading (Shanghai) Co Limited and continue to carry on trading operations in Elgi Compressors Zhejiang Limited, the company has written down the value of the investments, advances and receivables relating to Chinese operations to an extent of Rs. 551.76 million, accounting it as an exceptional item to the Statement of Profit and Loss for the financial year ended 31 March 2016.The company's business operations were severely affected in China due to the economic slowdown and hence the company took a decision to restructure the operations in order to minimize losses and approach the market in a focused manner by supplying products that meet the local market requirements. During the year under review, Elgi Equipments acquired Ergo Design Private Limited, an independent industrial design studio. Ergo Design Private Limited caters to the needs of Elgi Equipments to a large extent. The acquisition was done in order that the company has better control over the Intellectual Property rights created by Ergo Design Private Limited using the company's inputs. During the year under review, Elgi Equipments' products continued to be well received by distributors and customers in international markets especially in USA, Europe and the Middle East. The high cost of operations in the company's French operations combined with the country's restrictive labour practices made it clear that profitability of Elgi Equipments' wholly owned subsidiary in France Belair SAS is a challenge. The company took a hard decision to handover Belair SAS to the French judicial system for legal redressal. The company had acquired Belair SAS in February 2010 and since then has invested over Euro 6.8 Million to build the business. During the financial year ended 31 March 2017, consequent to Elgi Equipments' decision to restructure its China operations, Elgi Compressors (Zhejiang) Limited has de-registered its manufacturing license. The company had promoted and invested in Elgi Compressors (Shanghai) Co. Ltd (ECS) as a trading entity, based on local advice at that time that the manufacturing entity, namely Elgi Equipments (Zhejiang) Limited could not carry on trading activities. The company had re-examined the matter in the eve of restructuring China operations on the basis of legal advice, it was confirmed that Elgi Equipments (Zhejiang) Limited could itself engage in trading activities. Therefore, as part of the restructuring process, the Board of Directors thought it prudent to wind down ECS. In pursuance thereof, select employees of ECS numbering six personnel were transferred to Elgi Equipments (Zhejiang) Limited. Other employees of ECS were let go after following legal procedures. Formalities have been completed at the EXIM office and ECS cannot engage in trading activities now. A clearance is pending from the tax bureau but this does not preclude ECS from proceeding with further action for further winding up. ECS will now apply for filing with the Statutory Authority (Minhang BOC) along with necessary particulars as soon as possible to start the winding-up process officially. Belair SAS, France, previously the wholly owned subsidiary of Elgi Equipments was handed over to the French Judicial System for legal redressal on 26 April 2016, considering the cost structure and business operations which was challenging for the company for some time. Attempts on finding solution to the problems were not successful. A situation arose where Belair was unable to even meet the routine financial commitments to run its business operations smoothly. Belair was also unable to service its debts to the company. Therefore, it was decided to seek protective action before appropriate Commercial Court in Annecy, France. The Court appointed an administrator on 28 April 2016. Belair is no longer under the control of Elgi Equipments and is under legal redress as per the French laws. By a judgement and order dated 1 June 2016 and subject to the conditions mentioned therein, the Commercial Court of Annecey ordered assignment of Belair's AIRBEL business to AIRMAX HOLDING and pronounced the judicial liquidation of SAS Belair. During the year under review, Elgi Equipments incorporated a Limited Liability Partnership in the name of Industrial Air Solutions LLP. Elgi Equipments is a partner with Mr. Rajeev Sharma, an ex-employee of the company who holds equal shares along with the company. The LLP will be a model distribution entity to handle Sales and Service of Elgi Compressors for the areas of Coimbatore and Tiruppur by showcasing some of the best business practices to help build a strong brand and improve market share in these areas. During the financial year ended 31 March 2018, Elgi Equipments continued to gain share in North America where its machines are fast gaining reputation for reliability and energy efficiency. For leveraging information technology, various digital and automation initiatives were implemented during the year in collaboration with the business functions. The company was one of the early adopters of ERP (Enterprise Resource Planning) system and during the year the company successfully completed implementation of upgrade to Infor, LN ERP Software. During the year 2019-20, Company acquired Michigan Air Solutions, LLC, an independent compressor distributor in the USA and Company's European expansion plan gained full traction. During the year 2019-20, ELGi Sauer's Engineering Support Team Coimbatore (ESTC) was established to provide exclusive engineering support to the parent Company, Sauer-Germany, and its global subsidiaries. It is fully operational now. ELGi Sauer also commenced construction of a new factory in the outskirts of Coimbatore. In FY 2021, the Company launched ELGi's oil-free AB series screw technology throughout Europe thereby helping their customers in the total cost of ownership, improved reliability, and a reduction of their environmental impact. During the year 2021, the Company acquired F. R. Pulford & Son Pty Ltd, an independent distributor, (Pulford Air & Gas), a Sydney based distribution company for industrial Compressors and air products. During FY 2022, Company invested in Michigan Air Solutions (MAS), distribution business by setting up a new location for Detroit operations. It grew sales at Pattons, distribution business covering North Carolina, South Carolina, Georgia, Virginia, and Alabama. It invested in leadership, sales, and service talent with improving business' structural profitability for expanding sales and market share. During 2022-23, Elgi Compressors Vietnam LLC, a wholly owned subsidiary of the Company was incorporated. CS Industrial Services LLC, USA, a joint venture company was formed by Elgi Compressors USA Inc., a wholly owned subsidiary of the Company. In FY' 23, the Company launched Digital Innovation DOJO - ELGi's digital transformation strategy based on the premise of Experiment, Start Small & Scale Fast'.

Elgi Equipments Ltd Directors Reports

Dear Shareholders,

Your Directors hereby present the sixty second Annual Report of Elgi Equipments Limited ("Elgi / the Company") along with the audited financial statements for the year ended March 31, 2022.

Financial Results

The highlights of the standalone performance of your Company during the fiscal are given hereunder:

Review of Business Operations

The Company realised an operating revenue of ` 15,825.90 Million as against ` 11,001.70 Million in 2020-21. The details of division wise performance and other operational details are discussed at length in the Management Discussion and Analysis section. There was no change in the nature of business of the Company during the financial year ended March 31, 2022.

Share Capital

During the year under review, there are no changes in the issued and paid-up share capital of the Company. The issued and paid-up share capital of the Company consist of 31,69,09,016 equity shares of face value of ` 1/- each amounting to ` 31,69,09,016/- as on the date of the report.

Transfer to reserves

The Company has not transferred any amount to the General Reserve during the year under review. However, an amount of ` 1,893.51 million of the current profits has been carried forward under the head retained earnings.

Dividend

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations"), the Dividend Distribution Policy of the Company is hosted in the Company’s website at https://www.elgi.com/in/wp-content/uploads/2020/02/ Dividend-Policy.pdf.

For the financial year 2021-22, in line with the Dividend Distribution Policy, the Board of Directors at their meeting held on May 13, 2022, has recommended a dividend of ` 1.15/- per share (115%) on the paid-up share capital of 31,69,09,016 equity shares. Subject to the approval of shareholders, an amount of ` 364.45 million will be paid as dividend after deducting applicable taxes (Previous Year ` 253.28 Million).

Transfer of Unclaimed Dividend/Shares to Investor Education and Protection Fund

In terms of Sections 124 and 125 of the Companies Act, 2013, ("Act") unclaimed or unpaid dividend relating to the financial year 2014-15 is due for remittance to the Investor Education and Protection Fund ("IEPF") established by the Central Government.

Further, pursuant to Section 124(6) of the Act, read with IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, 47,316 equity shares of ` 1/- each on which dividend had remained unclaimed for a period of 7 years have been transferred to the credit of demat account identified by the IEPF Authority during the year under review.

Annual Return

The Annual Return of the Company for the financial year 2021-22 as required under Section 92(3) of the Act is available on the website of the Company and can be accessed on the Company’s website at the link "https://www.elgi.com/in/financials/".

Board Meetings held during the year

During the year, five meetings of the Board of Directors were held. The details of the meetings are furnished in the Corporate Governance Report which is attached to this Report.

Committees

As on March 31, 2022, the Company has Audit Committee, Nomination and Remuneration Committee, Compensation Committee, Stakeholders Relationship Committee, Risk Management Committee and Corporate Social Responsibility Committee. Detailed note on the composition of the Board and its Committees are provided in the Corporate Governance Report attached to this Report.

Statement on compliance with Secretarial Standards

The Directors have devised proper systems to ensure compliance with the provisions of all applicable Secretarial Standards and such systems are adequate and operating effectively.

Directors’ Responsibility Statement

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

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

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

c. The Directors have taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d. The Directors have prepared the annual accounts on a going concern basis;

e. The Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

f. The Directors had devised proper systems to ensure compliance with the provisions of all the applicable laws and such systems were adequate and operating effectively.

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

There were no instances of frauds identified or reported by the Statutory Auditors during the course of their audit pursuant to Section 143(12) of the Act.

Declaration of Independent Directors

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Act and SEBI Listing Regulations.

Remuneration policy of the Company

The Board has, on the recommendation of the Nomination and Remuneration Committee, framed a policy for fixing and revising remuneration of Directors, Key Managerial Personnel, Senior Management Personnel and other employees of the Company. The Remuneration policy is annexed herewith as Annexure A to this report. The Remuneration policy of the Company can be accessed on the Company’s website at the link https://www.elgi.com/in/wp-content/uploads/2019/05/RemunerationPolicy.pdf.

Comments on Auditors’ Report

There are no qualifications, reservations or adverse remarks or disclaimers made by Price Waterhouse Chartered Accountants LLP, Statutory Auditors.

Mr. M. D. Selvaraj, MDS & Associates, Secretarial Auditor in his report has stated that in one instance, the Company has not complied with the provisions of Regulation 29 of SEBI Listing Regulations for which the stock exchanges have imposed a fine. The Company has since paid the fines imposed. The management will ensure that there are no such instances going forward.

Particulars of Loans, Guarantees or Investments made under Section 186 of the Act

Details of loans given, investments made, guarantees given and securities provided pursuant to the provisions of Section 186 of the Act have been given in the notes to the Financial Statements.

Particulars of contracts or arrangements with Related Parties

All transactions entered into with related parties as defined under the Act and Regulation 23 of the SEBI Listing Regulations during the financial year 2021-22 were in the ordinary course of business and on an arm’s length pricing basis.

The particulars of contract or arrangement entered into with related parties referred to in Section 188(1) of the Act which are material in nature are disclosed in the prescribed Form AOC-2 and annexed herewith as Annexure B to this report.

The Audit Committee and the Board of Directors have approved the Related Party Transactions Policy and the same has been hosted on the Company’s website at https://www.elgi.com/in/wp-content/uploads/2019/05/ Related-PartyTransactions-Policy.pdf.

The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and related parties.

Material Changes and commitments affecting the financial position of the Company

There are no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year as on March 31, 2022 and the date of this report.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

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

Risk management

Pursuant to the requirement of Regulation 21 of the SEBI Listing Regulations, the Company has constituted a Risk Management Committee ("RMC"), consisting of Board members and senior executives of the Company. The Company has in place a Risk Management framework to identify, evaluate business risks and challenges across the Company both at corporate level as also separately for each subsidiary.

The top 10 risks for the Company have been mapped by the operating management (with additional support of external guidance) after extensive deliberations on the nature of the risk being a gross or a net risk and thereafter in a prioritized manner presented to the Board for their inputs on risk mitigation/management efforts. Based on this framework, a Risk Management policy has been adopted.

The RMC engages in the Risk Management process and has set out a review process so as to report to the Board the progress on the initiatives for the major risks of each of the businesses that the Company is into. The RMC reviews the top 10 risks. The results of the mitigation measures implemented by the Company are given below:

Corporate Social Responsibility Initiatives

The brief outline of the Corporate Social Responsibility ("CSR") Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out as Annexure D to this report in the format prescribed in the Companies (CSR Policy) Rules, 2014. For other details regarding the CSR Committee, refer to the Corporate Governance Report, which is a part of this report. The policy is available on the website of the Company.

Performance Evaluation of the Board, it Committees and the Directors

Pursuant to the provisions of the Act and SEBI Listing Regulations, the Board of Directors has carried out annual performance evaluation of its own performance, the Directors Individually as well as the evaluation of the working of its Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report attached as an Annexure to this report.

Statement regarding opinion of the Board with regard to integrity, expertise and experience (including the proficiency) of the Independent Directors

The Board of Directors have evaluated the Independent Directors during the year 2021-22 and opined that the integrity, expertise and experience (including proficiency) of the Independent Directors is satisfactory.

Directors and Key Managerial Personnel

Dr. T Balaji Naidu, Director retired from the Company on January 21, 2022. Mr. Anvar Jay Varadaraj was appointed as an Executive Director of the Company with effect from August 2, 2021 subject to the approval of the Central Government. During the year under review, the Company has received the approval of the Central Government for the said appointment. Mr. Sudarsan Varadaraj, Director retires by rotation at the ensuing AGM and being eligible, offers himself for re-appointment. Your Directors recommend his re-appointment.

The resolutions seeking approval of the Members for the re-appointment of Mr. Sudarsan Varadaraj as Director have been incorporated in the Notice to the AGM of the Company along with brief details about him.

Mr. Ragunathan K resigned as the Company Secretary and Compliance Officer of the Company with effect from August 2, 2021. Mr. S Prakash was appointed as the Company Secretary and Compliance Officer of the Company with effect from August 3, 2021.

Pursuant to the provisions of Section 2(51) and 203 of the Act, the Key Managerial Personnel of the Company are Mr. Jairam Varadaraj, Managing Director, Mr. Jayakanthan R, Chief Financial Officer and Mr. S Prakash, Company Secretary.

Subsidiaries, Joint Ventures and Associate Companies

The highlights of performance of subsidiaries, associates and joint venture companies and their contribution to the overall performance of the company during the period review have been disclosed in the Management Discussion and Analysis Report.

The Company has 25 subsidiaries and 8 joint ventures/ associate entities. The statement pursuant to Section 129(3) of the Act, containing the salient features of the financial statements of subsidiary Companies, in Form AOC-1 forms part of this Annual report. Elgi Compressors (M) SDN. BHD, Malaysia a wholly owned subsidiary of the Company was incorporated during the year. During the year under review, Gentex Air Solutions LLC, USA, a joint venture company was formed. Elgi Equipments (Zhejiang) Limited was closed during the year.

Elgi Compressors USA Inc., Elgi Compressors Europe S.R.L, Rotair SPA and Patton’s Inc. are the material subsidiaries of the Company based on the financials for the year ended March 31, 2022. The Board has approved a policy for determining material subsidiaries, which has been uploaded on the Company’s website viz. www.elgi.com. The consolidated financial statements of the Company and its subsidiaries prepared in accordance with the applicable accounting standards have been annexed to the Annual Report. The annual accounts of the subsidiary companies are hosted on the website of the Company viz. www.elgi.com and will also be kept open for inspection by the shareholders at the registered office of the Company. The Company will also provide a copy of the annual accounts of subsidiary companies to the shareholders upon their request.

Deposits

Your Company has not accepted any deposit within the meaning of provisions of Chapter V of the Act, read with the Companies (Acceptance of Deposits) Rules, 2014 for the year ended March 31, 2022.

Details of significant and material orders passed by the Regulators or Courts or Tribunals

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company’s operations in future.

Internal Control Systems and their Adequacy

The Company has adequate internal control systems to monitor business processes, financial reporting and compliance with applicable regulations. The systems are periodically reviewed for identification of control deficiencies and formulation of time bound action plans to improve efficiency at all the levels. 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 Committee reviews the statutory auditors’ report, key issues, significant processes and accounting policies. The Directors confirm that the Internal Financial Controls are adequate with respect to the operations of the Company. A report of Auditors pursuant to Section 143(3) (i) of the Act certifying the adequacy of Internal Financial Controls is annexed with the Auditors Report.

Statutory Auditors

Price Waterhouse Chartered Accountants, LLP (FRN 012754N/N500016) Chartered Accountants, Chennai were appointed as the Statutory Auditors of the Company for a period of five years at the fifty seventh AGM of the Company held on July 28, 2017. The Audit Committee and the Board has approved the re-appointment of Price Waterhouse Chartered Accountants, LLP for the second term of five (5) years i.e., from the conclusion of the sixty second AGM till the conclusion of the sixty seventh AGM. The necessary resolution seeking approval of the Members for their re-appointment has been incorporated in the Notice to the AGM of the Company along with brief details about them.

Secretarial Auditors

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed MDS & Associates, Company Secretaries in Practice, Coimbatore to undertake the secretarial audit of the Company. The report of the secretarial auditor is attached as Annexure E. As per Regulation 24 A of the SEBI Listing Regulations, the Company carried out Secretarial Audit of its material unlisted subsidiary ATS Elgi Limited also through MDS & Associates, Company Secretaries in Practice. The report of the Secretarial Audit of ATS Elgi Limited is annexed.

Cost Auditors

Pursuant to the provisions of Section 148(3) of the Act, the Board of Directors had appointed STR & Associates, Cost Accountants, Trichy (Firm Registration No.: 000029), as Cost Auditors of the Company, for conducting the audit of cost records for the financial year ended March 31, 2022. The audit is in progress and report will be filed with the Ministry of Corporate Affairs within the prescribed period. A proposal for ratification of remuneration of the Cost Auditors for the financial year 2022-23 is placed before the shareholders for ratification/ approval.

The cost records as specified by the Central Government under sub-section (1) of Section 148 of the Act, as required by the Company is maintained by the Company.

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

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

Details of 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 along with the reasons thereof.

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

Human Resources and Industrial Relations

The Company continues to enjoy cordial relationship with its employees at all levels. The total strength of employees as on March 31, 2022 was 2,162 (including subsidiaries).

Particulars of Employees

In terms of the provisions of Section 197(12) of the Act, read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names of the top ten employees in terms of remuneration drawn and names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules forms part of this Report as Annexure F. Disclosures relating to remuneration and other details as required under Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report.

Having regard to the provisions of the second proviso to Section 136(1) of the Act and as advised, the Annual Report excluding the aforesaid information is being sent to the members of the Company. Any member interested in obtaining such information may address their email to investor@elgi.com.

Elgi Equipments Limited Employee Stock Option Plan, 2019

The Company has implemented the Elgi Equipments Limited Employee Stock Option Plan 2019 to enable the Company and its subsidiaries to attract, retain and reward appropriate human talent in its employment and to create a sense of ownership and participation amongst the employees. The Compensation Committee administers and monitors the Employees’ Stock Option Plan of the Company through the Elgi Equipments Limited Employee Stock Option Trust. The Compensation Committee has during the year under review issued 4,74,300 options at a grant price of ` 225/- per option to the eligible employees of the Company. No options were granted to the Directors. The disclosure pursuant to the provisions of Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 is given as Annexure G to this report.

The Company has received a Certificate from the Secretarial Auditors that the above referred Scheme had been implemented in accordance with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 and the resolutions passed by the members in this regard.

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

As per the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules made thereunder, your Company has constituted an Internal Complaints

Committee. During the year under review, there were no cases received/filed pursuant to the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Business Responsibility Report

Pursuant to Regulation 34 of SEBI Listing Regulations, read with SEBI Circular No. CIR/CFD/CMD/10/2015 dated November 4, 2015. The business responsibility report is annexed as Annexure H to this report.

Corporate Governance

A report on corporate governance is annexed to and forms part of this report. The Company has complied with the conditions relating to corporate governance as stipulated in SEBI Listing Regulations.

Vigil Mechanism/Whistle Blower Policy

Pursuant to the provisions of Section 177(9) of the Act, read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulations 4 and 22 of the SEBI Listing Regulations and in accordance with the requirements of SEBI (Prohibition of Insider Trading) Regulations, 2015, the Company has a Whistle Blower policy to deal with unethical or improper practice or violation of Company’s Code of Business Conduct or any complaints regarding accounting, auditing, internal controls or disclosure practices of the Company. This Policy inter-alia provides a direct access to the Chairman of the Audit Committee. Your Company hereby affirms that no Director/employee has been denied access to the Chairman of the Audit Committee. Brief details about the policy are provided in the Corporate Governance Report attached to this Report. The Audit Committee of the Board reviews the Complaints received, redressed, objected, withdrawn and dismissed for, every quarter in their meeting. During the year, there were no complaints under this policy. The Whistle Blower policy is available on the website of the Company at the following address https://www.elgi.com/ in/wp-content/uploads/2019/10/Whistle-Blower-Policy.pdf.

Acknowledgement

Your Directors thank the shareholders, customers, suppliers, bankers and all other stakeholders 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.