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Sona BLW Precision Forgings Ltd.

BSE: 543300 | NSE: SONACOMS |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE073K01018 | SECTOR: Auto Ancillaries - Castings/Forgings

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Annual Report

For Year :
2021

Director’s Report

The Board of Directors have pleasure in presenting their Twenty Fifth (25th) Annual Report along with the audited financial statements (Standalone and Consolidated) of the Company for the Financial Year ended 31st March 2021.

1. FINANCIAL HIGHLIGHTS & PERFORMANCE

The financial performance of the Company (Standalone and Consolidated) for the Financial Year ended 31st March 2021 is as under:

('' in million)

Particulars

Standalone

Consolidated

31st March 2021

31st

March 2020 |

31st March 2021

31

* March 2020

Total Income

8,438.93

5,396.74

15,686.41

10,437.65

Total Expenses

6,030.68

4,460.27

12,547.39

8,887.93

Profit before exceptional items and tax

2,408.25

936.46

3,139.02

1,549.72

Less: Exceptional Items

(139.06)

-

(139.06)

2,368.22

Profit before Tax

2269.19

936.47

2999.96

3,917.94

Less: Provision for Tax (Incl. tax related to previous year)

368.03

124.05

666.02

365.05

Increase / (Decrease) in Deferred Tax Liability

20.75

(28.37)

182.29

(99.98)

Profit After Tax

1,880.41

840.79

2,151.65

3,652.86

Non-Controlling interest

-

-

-

(2.09)

Add: Profit Brought Forward

3,119.09

3,483.33

3,569.95

1,115.12

Add: Re-measurement of defined benefit asset, net of tax

(0.38)

1.71

3.64

8.71

Profit available for appropriations

-

4,325.83

5,725.24

4,776.69

Ind AS 116 transition adjustments

-

(13.73)

-

(13.73)

Transfer to Capital Redemption Reserve

-

(25.93)

-

(25.93)

Dividend Paid

(904.02)

(968.09)

(904.01)

(968.09)

Dividend Tax Payable / Paid

-

(198.99)

-

(198.99)

Balance Carried to Balance Sheet

4,095.21

3119.09

4,821.23

3,569.95

Standalone

The standalone revenue from operations increased by 42% to '' 7,671.73 million for Fiscal 2021 from '' 5,386.91 million for Fiscal 2020, due to ramp-up of sales volume for some of the new contracts especially in the EV segment and growth in sales in the Indian tractor market. Profit before exceptional items and tax in Fiscal 2021 was '' 2,408.25 million as compared to '' 936.46 million in Fiscal 2020, reflecting an increase of 157% from the previous year. Profit after tax (PAT) in Fiscal Year 2021 was '' 1,880.41 million as compared to '' 840.79 million in Fiscal 2020, reflecting an increase of 124% from the previous year due to certain one-time tax adjustments in Fiscal 2020 and Exceptional Expense on account of IPO expenses and dividend of ''759.97 million received from Subsidary in Fiscal 2021.

Consolidated

The consolidated revenue from operations increased by 51% to '' 15,663.00 million for Fiscal 2021 from '' 10,379.82 million for Fiscal 2020, primarily due to the full year impact of the acquisition of the Comstar Entities during Fiscal 2021 as compared to the impact of about nine months for Fiscal 2020 commencing from 5th July 2019 and due to the ramp-up of sales volume for some of the new contracts

especially in EV segment and growth in sales in the Indian tractor market. Profit before exceptional items and tax in Fiscal 2021 was '' 3,139.02 million as compared to '' 1,549.72 million in Fiscal 2020, reflecting an increase of 103% from the previous year. Profit after tax (PAT) in Fiscal Year 2021 was '' 2,151.65 million as compared to '' 3,652.86 million in Fiscal 2020, reflecting a decrease by 41% from the previous year primarily due to exceptional income of '' 2,368.22 million and certain one-time tax adjustments in Fiscal 2020 and exceptional expense of '' 139.06 million on account of IPO expenses in Fiscal 2021.

2. PERFORMANCE OF THE COMPANY AND INDUSTRY OVERVIEW

Fiscal 2021 ended as the best year in the history of the company both in the terms of Revenue as well as Profits (before tax and exceptional items). Its consolidated revenue, EBITDA and Profit Before tax and exceptional item stood at '' 15,663.00 million, '' 4,410.16 million and '' 3,139.02 million respectively. It was the year in which we saw unfolding of potential of EV business as a meaningful part of our revenue and profitability. Consolidated financials also reflect the impact of Comstar acquisition for the full financial year for the first time. However,

the year didn''t start on a positive note to mention the least, with the entire country going through a complete lockdown since 24th March 2020 due to outbreak of COVID-19.

Lockdown restrictions imposed in India and many countries across the world resulted in cessation of economic activities for part of the Fiscal 2021 adversely affecting demand for automobiles of all types adversely. This was followed by partial and gradual easing of lockdown restrictions which resulted in economic activity picking up gradually first and then at a faster pace in the second half of the year.

Lockdowns impacted our manufacturing activities by way of disruption in supply chain, disruption in timely availability and transportation of raw materials, unavailability of personnel, delays in obtaining local approvals and clearances and cash flow challenges of suppliers and contractors. However, we did not experience any interruption in our ability to supply our systems and components to our customers and ensured that our customers did not experience disruption of their product lines due to us. We also managed to continue to drive business development and won new development programmes during the period after April 2020. We have 58 new programmes as on 31st March 2021 of which production has started for 24 in Fiscal 2021 and for the balance it will start in FY22 or later years depending upon customer production schedules.

In order to mitigate the impact of the COVID-19 pandemic on our operations, we proactively took steps such as reducing some of our administrative and other fixed expenses and arranging for additional liquidity through working capital loans to manage our expenses and liquidity. Despite the impact of the COVID-19 pandemic, our EBITDA margins improved from 23.3% in Fiscal 2020 to 28.2% in Fiscal 2021.

We have also taken active measures to promote health and safety and social distancing efforts, including providing PPEs, masks, hand sanitizers, and gloves to employees in our manufacturing facilities and in affected areas, staggered working shifts at our manufacturing and assembly plants and working closely with health authorities for obtaining approvals to commence operations at our plants and to lay down and enforce covid safety guidelines and protocols. In addition, as part of our risk management policy, we developed a mobile phone based application for our employees

to report their health status on a daily basis and also implemented a safety SOP applicable for our employees travelling between workplace and home, inside shop safety management practices including vendor safety management and measures to check vehicles entering and leaving our premises and employees returning to the workplace after easing of lockdown.

As per Ricardo report Global Light Vehicle (Passenger Vehicles GVW <=3.5T) production declined by approximately 18% in calendar year 2020 due to COVID-19. It expects Calendar year 2021 growth to be primarily driven by the Chinese market. In calendar year 2020, global production of BEVs (Battery Electric Vehicle) stood at approximately 2.3 million units. Among the available propulsion technologies BEV has been the fastest growing at CAGR of approximately 46% between calendar years 2015 to 2020. According to Ricardo, BEVs are also expected to see an increased penetration growing at approximately 36% CAGR between calendar years 2020 to 2025.

According to CRISIL, Indian PV, CV and Tractor production declined at a CAGR of 12%, 27% and 2% respectively between FY19 to FY21. It expects Indian PV, CV and Tractor production to grow at 8-10%, 12-14% and 1-3% between years FY21 to FY26.

The Government of India has been pushing for electrification of vehicles aggressively and announced Faster Adoption and Manufacturing of Electric Vehicles in India Phase-II (FAME-II) policy with significant allocation of resources in March 2019 to push for electrification of vehicles including establishing charging stations and providing subsidy on acquisition of EVs. So far the rate of adoption in India has been very low. According to CRISIL, E2W (electric 2 wheeler) adoption is likely to go up as cost of acquisition after factoring in the subsidy narrows down further and the total cost of ownership of E2W becomes favorable over the coming years. It expects the E2W sales to cross 2 million per annum by FY26 growing at a CAGR of 70-74% between FY21 to FY26. Growth projections for adoption of EVs indicate that we are at the cusp of a large transformation in the automotive industry. Revenue from EVs already constitutes 13.8% of our Revenue from Sale of Goods against it being only 3% of Global light vehicle production. We feel that the company is well positioned to gain from this large emerging trend.

3. CORPORATE DEVELOPMENTS

a. INITIAL PUBLIC OFFER

Subsequent to the year under review, the Company has successfully completed the initial public offering of its equity shares (IPO”) which includes fresh issue of 10,309,278 equity shares aggregating to '' 3,000 million by the Company (Fresh Issue”) and an offer for sale of 180,412,371 equity shares aggregating to '' 52,500 million by Singapore VII Topco III Pte. Ltd. (“Selling Shareholder”) for cash at a price of '' 291 per equity share through book building process.

The equity shares of your Company have been listed on the BSE Limited and the National Stock Exchange of India Limited on Thursday, 24th June 2021.

The net proceeds from the Fresh Issue are to be utilized fully for repayment and prepayment of identified borrowings in full availed by the Company and for general corporate purposes.

b. SCHEME OF AMALGAMATION OF COMSTAR AUTOMOTIVE TECHNOLOGIES PRIVATE LIMTIED WITH THE COMPANY

Your Company has filed a Scheme of Amalgamation of Comstar Automotive Technologies Private Limited, a wholly owned subsidiary (“Transferor Company”) with itself before National Company Law Tribunal, Chandigarh on 10th January 2020. Post issue of sanction of amalgamation by NCLT and the Scheme of Amalgamation becoming effective, once sanctioned, no new shares of the Company shall be issued and the entire share capital of the Transferor Company shall stand cancelled. The Scheme of Amalgamation shall, upon being sanctioned by the Hon''ble National Company Law Tribunal, Chandigarh, be effective from 5th July 2019.

4. DIVIDEND

During the year under review, the Board of Directors had declared two interim dividends; first on 14th August 2020 @ '' 9.63 per Equity Share and another on 27th January 2021 @ '' 9.30 per Equity Share.

The Board has adopted the Dividend Distribution Policy in its meeting held on 27th January 2021 in accordance with the provisions of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended from time to time. The Policy can be accessed on the Company''s website at: https://sonacomstar.com/

5. TRANSFER TO RESERVES

The Board of Directors of the Company do not propose to transfer any amount to reserves other than transfer of undistributed profit to surplus in statement of Profit & Loss.

6. MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis Report for the Financial Year 2020-21, pursuant to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is presented as a separate statement forming part of this Annual Report.

7. CHANGE IN SHARE CAPITAL OF THE COMPANY

Increase in Authorised Share Capital

The authorised share capital of the Company has been increased from '' 520,000,000/- (Rupees five hundred and twenty million only), divided into 50,500,000 (Fifty million and five hundred thousand) Equity Shares of '' 10/- (Rupees Ten) each and 1,500,000 (One million and five hundred thousand) Preference Shares of '' 10/- (Rupees ten only) each to '' 10,000,000,000 (Ten thousand million) divided into 998,500,000 (Nine hundred and ninety eight million five hundred thousand) equity shares of '' 10/- (Rupees ten only) each and 1,500,000 (One million and five hundred thousand) Preference Shares of '' 10/- (Rupees ten only) vide shareholders resolution passed on 22nd January 2021.

a. CONVERSION OF PREFERENCE SHARES INTO EQUITY SHARES

During the year under review, 594,436 (Five hundred ninety four thousand four hundred and thirty six) compulsory convertible preference shares (CCPS) issued to Singapore VII Topco III Pte. Ltd. on 5th July 2019, were converted into Equity Shares of '' 10/- (Ten) each as per the terms of Share Subscription and Share Purchase Agreement dated 16th October 2018.

b. ISSUE OF BONUS SHARES

During the year under review, the Company has issued and allotted 525,232,180 (Five hundred twenty five million two hundred thirty two thousand one hundred and eighty) bonus shares of '' 10/-(Ten) each to the equity shareholders in the ratio of 11:1 (i.e. eleven fully paid equity share for one fully paid equity share held) on 10th February 2021.

The Company has not issued any sweat equity shares during the year under review.

8. CHANGE IN NATURE OF BUSINESS

During FY 2020-21, there was no change in the nature of Company''s business.

9. SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES

As at 31st March 2021, the Company has 3 (three) directly held subsidiaries and 7 (seven) step down subsidiaries, the details of which is available in Annual Return (MGT-7) of the Company available on the website at https://sonacomstar.com/investor/ annual-reports-and-returns

Pursuant to Section 129(3) of the Companies Act, 2013, the Company has prepared the Consolidated Financial Statements, which forms part of this Annual Report. Further, a statement containing salient features of Standalone Financial Statements of subsidiaries in Form AOC-1 is attached to the Consolidated Financial Statements of the Company and therefore not repeated in this report for the sake of brevity.

During the year under review, on 12th November 2020, the Company had incorporated a wholly owned subsidiary in the name of ''Sona Comstar eDrive Private Limited'' to engage into the business to design, develop, manufacture, assemble, supply, sell, trade and otherwise deal in motors, controllers and other components for electric vehicles.

Apart from Sona Comstar eDrive Private Limited, no other company has become or ceased to be subsidiary, joint venture or associate of the Company during the year under review.

In accordance with Section 136 of the Companies Act, 2013, the audited Financial Statements, including the Consolidated Financial Statements and related information of the Company and audited Financial Statements of each of its subsidiaries, are available on the website of the Company at https:// sonacomstar.com/investor/subsidiary-companies-financial-statements

Material Subsidiaries

Your Company has two material unlisted subsidiaries viz. Comstar Automotive Technologies Private Limited (''Comstar Automotive'') and Comstar Automotive USA LLC (''Comstar USA'') as on 31st March 2021.

During the year under review, pursuant to Regulation 24(1) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015,

Mr. BVR Subbu, Independent Director of the Company is designated as Director on the Board of Directors of Comstar Automotive. Further, Mr. Jeffrey Mark Overly, Independent Director of the Company was appointed as Director on the Board of Comstar USA.

The policy for determining material subsidiaries, as approved by the Board has been uploaded on the Company''s website and can be accessed at: https://sonacomstar.com/policies-and-codes

10. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Our Board comprises eight directors, including four Independent Directors (including one-woman Independent Director), one Executive Director, and three Non-Executive Directors.

During the year, Mrs. Pallavi Joshi Bakhru (DIN: 01526618) ceased to be an Independent. Director of the Company with effect from 2nd May 2020, due to conflict with new assignment undertaken by her. The Board places on record its appreciation for the guidance and support provided by Mrs. Bakhru during her tenure with the Company.

During the year, Mr. Amit Jain (DIN: 06917608) ceased to be the Non-Executive Nominee Director of the Company with effect from 1st January 2021, due to his resignation. The Board places on record its appreciation for the guidance and support provided by Mr. Jain during his tenure with the Company.

During the year, Mr. Neeraj Mohan (DIN:05117389) ceased to be the Non-Executive Nominee Director of the Company with effect from 12th February 2021, due to his resignation. The Board places on record its appreciation for the guidance and support provided by Mr. Mohan during his tenure with the Company.

During the year under review, the Board of Directors of the Company, on the recommendation of Nomination and Remuneration Committee, has appointed Mrs. Shradha Suri (DIN: 00176902), as an Additional Director of the Company in the category of Non-Executive And Independent Director of the Company with effect from 5th August 2020 in its meeting held on 5th August 2020. The shareholders of the Company approved her appointment as Non-Executive and Independent Director in the 24th Annual General Meeting held on 31st December 2020 for a term of 5 (Five) years.

During the year under review, Mr. Prasan Abhaykumar Firodia (DIN: 00029664), tendered his resignation as a Non-Executive Nominee Director of the Company effective from 27th January 2021. Thereafter, the Board of Directors of the Company, on the recommendation of Nomination and Remuneration Committee, appointed Mr. Firodia (DIN: 00029664), as an Additional Director of the Company in the category of Non-Executive and Independent Director of the Company with effect from 27th January 2021 in the same meeting held on 27th January 2021. The Shareholders of the Company approved his appointment as NonExecutive and Independent Director in the Extra Ordinary General Meeting held on 30th January 2021 for a term of 5 (Five) years.

During the year under review, the Board of Directors of the Company, on the recommendation of Nomination and Remuneration Committee, appointed Mr. Jeffrey Mark Overly (DIN: 09041143) as an Additional Director of the Company in the category of Non-Executive and Independent Director with effect from 12th February 2021 in its meetings held on 12th February 2021. The shareholders of the Company approved his appointment as Non-Executive and Independent Director in the Extra Ordinary General Meeting held on 22nd February 2021 for a term of 5 (Five) years.

In terms of applicable provisions of the Act and the Articles of Association of the Company, Mr. Vivek Vikram Singh (DIN: 07698495), Managing Director & Group CEO of the Company retires by rotation at the ensuing Annual General Meeting and being eligible, has offered himself for re-appointment. The Board of Directors, on the recommendation of Nomination and Remuneration Committee, has recommended his re-appointment. Brief resume and other details of Mr. Vivek Vikram Singh (DIN: 07698495), who is proposed to be re-appointed as a Director of your Company, have been furnished in the Explanatory Statement to the Notice of the ensuing Annual General Meeting of the Company.

11. DECLARATION OF INDEPENDENT DIRECTORS

The Independent Directors on the Board of the Company have submitted requisite declarations to the Board that they fulfil all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements)

All Independent Directors of the Company have affirmed compliance with the Schedule IV of the Act and Company''s Code of Conduct for Directors and Senior Management.

All the Independent Directors of the Company have complied with the requirement of inclusion of their names in the data bank of Independent Directors maintained by Indian Institute of Corporate Affairs and they meet the requirements of proficiency selfassessment test.

In the opinion of Board of Directors of the Company, Independent Directors on the Board of Company hold highest standards of integrity and are highly qualified, recognized and respected individuals in their respective fields. Composition of Independent Directors are optimum mix of expertise (including financial expertise), leadership and professionalism.

12. CORPORATE GOVERNANCE

The Company is committed to pursue and adhere to the highest standard of Corporate Governance as set out by the Securities and Exchange Board of India (SEBI) and the Companies Act, 2013. The report on the Corporate Governance as stipulated in Regulation 34 read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is enclosed as Annexure-A and form part to this Report.

Certificate from PI & Associates, Practicing Company Secretaries, confirmed that the Company has complied with the conditions of Corporate Governance as stipulated in the SEBI Listing Regulations and the same is attached as Annexure-B to this Report.

13. ANNUAL PERFORMANCE EVALUATION

The Board has approved the policy for evaluating the performance of Board, its committees and individual Directors in compliances with the provision of Section 178 read with Schedule IV of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

In accordance with the evaluation criteria specified in the policy, the Nomination and Remuneration Committee and the Board have carried out the annual performance evaluation of the Board as a whole, its committees and individual Directors. The Independent Directors carried out the annual performance evaluation of the Chairperson, Non-Independent Directors and the Board as a whole.

A structured questionnaire covering various aspects of the Board''s functioning was circulated to the Directors. The criteria for evaluation of Independent Directors included attendance at the meetings, interpersonal skills, independent judgement, knowledge, contribution to strategy, risk management, compliance framework, etc. The feedback and results of the questionnaire were collated and consolidated report was shared with the Board for improvements of its effectiveness. The Directors expressed their satisfaction with the evaluation process.

14. FAMILIARISATION PROGRAMME FOR BOARD MEMBERS

As per Regulation 25(7) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Independent Director of the Company need to be imparted with familiarisation programme. However, since the equity shares Company has been listed on National Stock Exchange of India Limited and BSE Limited on 24th June 2021, the Company has initiated the familiarisation programme for the Independent Directors of the Company, the details of which will be available on the website of the Company i.e. https://sonacomstar.com/policies-and-codes

The familiarisation programme aims at making the Independent Directors of the Company familiar with the business and operations of the Company through various structured familiarisation programmes.

The Company issues a formal letter of appointment to Independent Director, which outlines his / her role, function, duties and responsibilities. The format of the letter of appointment is available on the website of the Company at https://sonacomstar. com/investor/appointment-re-appointment-of-independent-directors

15. DIRECTORS RESPONSIBILITY STATEMENT

The Board of Directors in terms of Section 134 of the Act, confirm that:

1. i n the preparation of the annual accounts for the financial year ended 31st March 2021, the applicable accounting standards were followed, along with proper explanation relating to material departures;

2. they have such accounting policies and applied 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 31st March 2021 and of the profit for that period;

3. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

4. the annual accounts for the financial year ended 31st March 2021 have been prepared on a going concern basis;

5. they 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

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

16. DISCLOSURE ON COMPANY’S POLICY ON DIRECTORS’ APPOINTMENT AND REMUNERATION AS PER SECTION 178 OF THE COMPANIES ACT, 2013

The Company has, on the recommendation of the Nomination & Remuneration Committee, amended the Nomination and Remuneration Policy along with a charter of the Nomination and Remuneration Committee in terms of the Section 178 of the Act with effect from 14th August, 2020.

While formulating policy with respect to remuneration payable to the Directors, Key Managerial Personnel and other employee, the Board has ensured that —

a) t he level and composition of remuneration is reasonable and sufficient to attract, retain and motivate directors of the quality required to run the company successfully;

b) relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and

c) remuneration of the Directors, Key Managerial Personnel and Senior Management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals.

The salient features of the Nomination and Remuneration Policy of the Company prepared in accordance with the provisions of Section 178 of the Companies Act, 2013 read with Part D of Schedule II of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 have been provided in the Corporate Governance Report.

This Policy is available on the website of the Company at: https://sonacomstar.com/policies-and-codes

17. EMPLOYEE STOCK OPTION SCHEME

On 30th September 2020, pursuant to the approval by the shareholders in the extra-ordinary general meeting, the Board/Nomination and Remuneration Committee of Board, was authorized to grant options under the “Sona BLW Precision Forgings Limited Employee Stock Option Plan 2020” (ESOP Scheme-2020/Plan) to the eligible employees of the Company and its subsidiaries under the ESOP Scheme-2020.The maximum number of Options to be granted, orginally under the ESOP Scheme-2020, originally were 278,556 (Two Hundred Seventy Eight Thousand Five Hundred Fifty Six) Shares (or such other adjusted figure for any re-organisation of capital structure undertaken in accordance with this Plan).

Further, pursuant to issue of bonus shares made by the Company, the Board of Directors and the Shareholders in their respective meetings had approved adjustments to the entitlements under the said Employee Stock Option Scheme 2020, by increasing the ESOP pool of the Company from 278,556 (Two hundred seventy-eight thousand five hundred and fifty six) to 3,342,672 (Three million three hundred forty-two thousand six hundred seventy-two). Consequent to such adjustments, additional options were granted to the above-said employees during the year under review.

The Nomination and Remuneration Committee has also been designated as Compensation Committee.

Applicable disclosures as stipulated under the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (SEBI SBEB Regulations) with regard to the Employee Stock Option Scheme are available on the Company''s website at https://sonacomstar. com/investor/annual-reports-and-returns

The Company has received a certificate from M/s. Walker Chandiok & Co. LLP, Statutory Auditors (Firm Registration No. 001076N/N500013) that the Employee Stock Option Scheme-2020 for grant of stock options has been implemented in accordance with the SEBI SBEB Regulations and the resolution passed by the members in their general meeting held on 30th September, 2020. The certificate is available for inspection in the electronic mode for the members.

18. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

Since there was no unclaimed dividend, the provisions of Section 125 of the Companies Act, 2013 do not apply.

19. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013

Pursuant to Section 186 of Companies Act, 2013, disclosure on particulars relating to loans, advances, guarantees and investments form part of the Financial Statements in this Annual Report.

20. DEPOSITS

The Company has neither accepted nor renewed any deposits during the year under review in terms of Chapter V of the Act.

21. MATERIAL CHANGES AND COMMITMENT AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT

No material changes and commitments affecting the financial position of the Company which have occurred between end of the financial year to which the Financial Statements relate and the date of this report, except the slowdown in economic activities due to outbreak of COVID-19 pandemic globally.

22. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

All contracts or arrangements entered by the Company during the period under review with the related parties were on arms'' length basis and in the ordinary course of business, except for the relinquishment of put option right in relation to shares of Sona Holding B.V for a value of '' 19 million as set forth in note 52 of the Consolidated Financial Statements.

The particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Companies Act, 2013, in the prescribed Form AOC-2, is appended as Annexure C forming part of this report.

The Board has approved a Policy on Related Party Transactions which has been uploaded on the Company''s website. The web-link to the policy on Related Party Transactions as required under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is as under: https://sonacomstar.com/policies-and-codes

23. MEETINGS OF THE BOARD

Ten (10) meetings of the Board were held during the year under review. For details of these Board meetings, please refer to the section on Corporate Governance forming part of this Report.

The Board met quarterly and the gap intervening between two meetings was within the time prescribed under the Companies Act, 2013 and Listing Regulations.

The details and attendance of meetings of the board, its committees, the Annual General Meeting and Extra Ordinary General Meeting are included in the “Report on Corporate Governance”, which forms part of this Report.

24. COMMITTEES OF THE BOARD

The Board of Directors of the Company have constituted/ re-constituted following committees, during the year under review:

• Audit Committee

• Nomination and Remuneration Committee

• Corporate Social Responsibility Committee

• Stakeholders Relationship Committee

• Risk Management Committee

The details with respect to the composition, powers, roles, terms of reference, etc. of the aforesaid committees are given in details in the “Report on Corporate Governance” of the Company which forms part of this Report.

During the year under review, all recommendations made by the committees were accepted by the Board.

25. DOWNSTREAM INVESTMENT

On 12th November 2020, the Company has incorporated a wholly owned subsidiary in the name of “Sona Comstar eDrive Private Limited”. During the year under review, Walker Chandiok & Co LLP, Chartered Accountants, Statutory Auditors of the Company have certified the compliance as regards the Downstream Investment under the extant Foreign Exchange Management (Non-debt Instruments) Rules, 2019, which can be access at https://sonacomstar.com/investor/annual-reports-and-returns

26. SECRETARIAL AUDITORS AND SECRETARIAL AUDIT REPORT AND EXPLANATIONS BY THE BOARD ON THE QUALIFICATION OF SECRETARIAL AUDITOR’S REPORT, IF ANY

Pursuant to the provisions of Section 204 of the Companies Act 2013, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s Vinod Kothari & Co., Company Secretaries, New Delhi, as its Secretarial Auditor to undertake the Secretarial Audit for Financial Year 2020-21.

The Secretarial Auditors'' Report for the financial year 2020-2021 does not contain any qualification, reservation or adverse remark.

The Secretarial Auditors'' Report is enclosed as Annexure-D to the Board''s report.

Further as per the requirement of Regulation 24A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the Secretarial Audit Report of the material subsidiaries namely Comstar Automotive Technologies Private Limited is also attached with the main Secretarial Audit Report.

The Board of Directors in its meeting held on 6 August 2021 appointed M/s PI & Associates, Company Secretaries as Secretarial Auditors for the Financial Year 2021-22.

27. STATUTORY AUDITORS AND AUDITORS’ REPORT AND EXPLANATIONS BY THE BOARD ON THE QUALIFICATION OF STATUTORY AUDITOR’S, IF ANY

M/s. Walker Chandiok & Co., Chartered Accountants (FRN No. 001076N) was appointed as statutory auditors for a period of 5 (Five) consecutive financial years in the 21st Annual General Meeting held on 28th September, 2017.

The Audit Report on Standalone Financial Statements does not contain any qualification, reservation or adverse remarks except as mentioned below:

However, the Statutory Auditors have Qualified Opinion” in the Auditors Report of Consolidated Financial Statements. The qualification and the management comments thereon are as follows:

The Statutory Auditors have included an audit qualification in relation to the Consolidated Financial Statements for Fiscal Year 2020 for the matter stated below, while mentioning that it does not have any effect on the consolidated profit and equity attributable to the owners for Fiscal 2021. The qualification states that the majority shareholding in Sona Holding B.V (Sona B.V”), the erstwhile subsidiary company, which was classified as a ''discontinued operation'' in the consolidated financial statements for the previous year ended 31st March 2019, was sold to Sona Autocomp Holding Pvt Ltd on 4th July 2019, and consequently, the Company ceased to exercise control over the erstwhile subsidiary company with effect from 5th July 2019 onwards. Due to the unavailability of the consolidated financial statements of Sona B.V and its subsidiaries (Sona B.V Group”) for the period from 1st April 2019 to 4th July 2019, the consolidated financial Statements of the Sona B.V Group for the period from 1st April 2019 to 4th July 2019 has not been included in the consolidated financial statements for Fiscal Year 2020, and the assets and liabilities of Sona B.V Group have been derecognized at their respective carrying values as at 31st March 2019 instead of 4th July 2019. The Statutory Auditors have stated in their audit opinion that this accounting treatment is not in compliance with the requirements of Ind AS 110 - Consolidated Financial Statements and had the consolidated financial statements of the Company been prepared after considering the consolidated financial statements of Sona B.V Group for the period from 1st April 2019 to 4th July 2019, the Profit or Loss from discontinued operations” would have been higher and Exceptional Item” would have been lower by the same amount with no effect on the consolidated profit of the Group for Fiscal 2020 and its equity attributable to the owners on that date. Further, Note 49 of the Consolidated Financial Statement states that owing to the insolvency proceedings and acquisition of the businesses by a third party, despite the best efforts of management, substantiated by multiple communications over electronic mail, the Company was unable to obtain the audited consolidated financial statements of Sona B.V for the period from 1st April 2019 to 4th July 2019. The Company has not been able to arrange the consolidated financial statements of Sona B.V for the above mentioned period until the date of the auditor''s report of the Consolidated Financial Statements.

Accordingly, the modification in the auditor''s report dated 27th April 2021, could not be adjusted in the Consolidated Financial Statements for Fiscal 2020. Consequently, the auditors were unable to quantify its impact on the said items in the accompanying Consolidated Financial Statements and thus the Consolidated Financial Statements for Fiscal 2020 may not be comparable to Fiscal 2021 with respect to this matter.

28. COST AUDITORS AND COST RECORDS

The Company is in compliance of maintenance of cost records as specified by the Central Government under Section 148 (1) of the Companies Act, 2013. The Company is not required to get its cost records audited by a Cost Accountant.

29. INTERNAL CONTROL SYSTEM

The Company has in place internal control system, which is commensurate with its size, scale and complexities of its operations. The Board of Directors have in their meeting held on 27th July 2021, re-appointed Mr. J. V. Prabhu, as Internal Auditor of the Company for the Financial Year 2021-22.

The Board has, in their meeting held on 27th July 2021, re-appointed M/s Deloitte Haskins & Sells LLP, to review the processes gap and recommendations and submit their periodical reports to the Audit Committee on the gap analysis for the Financial Year 2021-22.

The main thrust of internal audit is to test and review controls, appraisal of risks and business processes, besides benchmarking controls with best practices in the industry.

The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same.

The Audit Committee of the Board of Directors are periodically apprised of the internal audit findings

and corrective actions are taken accordingly. Significant audit observations and corrective actions taken by the management are presented to the Audit Committee of the Board.

For more details, refer to the ''internal control systems and its adequacy'' section in Management''s Discussion and Analysis Report, which forms part of this Annual Report.

30. BUSINESS RESPONSIBILITY REPORT

A detailed Business Responsibility Report in terms of the provisions of Regulation 34 of the Listing Regulations is attached as Annexure-E to this Report.

31. REPORTING OF FRAUD

During the year under review, neither the statutory auditors nor the secretarial auditor has reported to the Audit Committee, under Section 143 (12) of the Companies Act, 2013, any instances of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned in the Board''s report.

32. CORPORATE SOCIAL RESPONSIBILITY (CSR)

The CSR Committee has been entrusted with the prime responsibility of recommending to the Board, the CSR activities to be undertaken by the Company in terms of CSR Policy, the amount of expenditure to be incurred and monitoring the implementation of the framework of the CSR Policy.

During the Financial Year 2020-21, the Company''s CSR efforts included COVID-19 relief in various ares, including providing dry rations, meals and essentials to COVID affected communities, supporting the health care system to fight COVID-19 in collaboration with credible organizations across various states.

Annual Report, on CSR activities, as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 has been annexed as Annexure-F to this Report.

The Board of Directors of the Company amended the CSR Policy of the Company pursuant to amendments in the Companies (Corporate Social Responsibility Policy) Rules, 2014 and Section 135 of the Companies Act, 2013. The CSR Policy of the Company is available on the website of the Company at https://sonacomstar.com/investor/ corporate-social-responsibilities

33. RISK MANAGEMENT

Pursuant to Section 134(3)(n) of the Companies Act, 2013 and Regulation 17(9) of SEBI (LODR) Regulations, 2015, the Company has formulated and adopted a Risk Management policy. The primary objectives of the policy include identification and categorization of potential risks, their assessment and mitigation and to monitor these risks.

The Board has entrusted the Risk Management Committee (RMC) with overseeing the processes of identification, evaluation and mitigation of risks. The RMC inter alia shall periodically review the organisational risks that are spread across operational, financial, technological and environmental spheres and shall provide guidance to the management team.

Your Company is committed to protect the interests of its customers, stakeholders, investors, shareholders, employees and each person or entity with whom it is associated. Towards this goal, your Company will further strengthen the internal processes and evaluate even more innovative ways to blunt the risk impact.

The details of the RMC along with its charter are set out in the Corporate Governance Report, forming part of this Report.

34. VIGIL MECHANISM

Pursuant to the provisions of Section 177(9) & (10) of the Companies Act, 2013 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014, and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors had approved the Policy on vigil mechanism/whistle blower which provides mechanism to its directors, employees and other stakeholders to raise concerns about any wrongdoing in the Company and provide for adequate safeguards against victimization of the persons who avail this mechanism.

The mechanism under the policy has been appropriately communicated within the organisation.

During the year under review, the Company has not received any complaints under the said mechanism. The whistle blower policy of the Company has been displayed on the Company''s website at: https:// sonacomstar.com/policies-and-codes

35. ANNUAL RETURN

In accordance with the provisions of Companies Act, 2013, the Annual Return of the Company in the prescribed format is available at: https:// sonacomstar.com/investor/annual-reports-and-returns

36. COMPLIANCE WITH SECRETARIAL STANDARDS

The Company is in compliance with all applicable secretarial standards issued by the Institute of Company Secretaries of India.

37. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY’S OPERATIONS

No significant and material order has been passed by any regulator or court or tribunal, which might impact the going concern status and Company''s operations in future.

38. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information pertaining to conservation of energy, technology absorption, Foreign exchange Earnings and outgo as required under Section 134 (3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is attached as Annexure-G of this Report.

39. DISCLOSURE ON MANAGING DIRECTOR AND KEY MANAGERIAL PERSONNEL RECEIVING REMUNERATION AND COMMISSION FROM HOLDING COMPANY OR SUBSIDIARY COMPANY

The Managing Director of the Company is not in receipt of remuneration and commission from holding company or subsidiary company except as mentioned hereinafter.

The erstwhile holding company (and now a majority shareholder) of the Company namely Singapore VII Topco III Pte. Ltd. (Singapore VII) has adopted an exit return incentive plan (ERI Plan) pursuant to which Singapore VII will reward certain identified employees of the Company and/or its subsidiaries(including each of Key

Managerial Personnel and Executive Director(s) who are not promoters of the Company) with cash rewards based on certain disposition event(s) in relation to its interest in the Company. These cash awards will be paid to such employees entirely by Singapore VII (without any recourse or liability to the Company). None of the promoters, nominee director or shareholder of the Company, having significant influence, is beneficiary of the ERI Plan.

The Board of Directors of the Company have approved the ERI Plan, in its meeting held on 6th August 2021 in compliance with Regulation 26(6) of the Listing Regulations.

The Company is also seeking the approval of the shareholders (at the ensuing Annual General Meeting of the Company) in compliance with Regulation 26(6) of the Listing Regulations.

40. DISCLOSURE UNDER RULE 5(2) AND 5(3) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

Disclosure pertaining 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 is attached as Annexure-Hl forming part of this Report.

The statement containing names of top ten employees in terms of remuneration drawn and the particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is attached as Annexure-H2 forming part of this Report.

41. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WORKMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSEL) ACT, 2013

The Company has formulated a comprehensive policy on prevention, prohibition and redressal against sexual harassment of women at workplace which is also in accordance with the provisions of the Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013 (POSH).

The employees are sensitised from time to time in respect of matters connected with prevention of sexual harassment. Awareness programmes are conducted at all unit levels to sensitise the employees to uphold the dignity of their female colleagues at workplace.

During the year under review, no complaints have been received by the Company under the POSH.

42. ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) COMMITTEE

The Board of Directors of the Company in its meeting held on 6th August 2021 constituted an ESG Committee of the Board to oversee the implementation of the ESG frameworks across all its operations in India.

43. CAUTIONARY STATEMENT

The Annual Report including those which relate to the Directors'' Report, Management Discussion and Analysis Report may contain certain statements on the Company''s intent expectations or forecasts that appear to be forward-looking within the meaning of applicable securities laws and regulations while actual outcomes may differ materially from what is expressed herein. The Company bears no obligations to update any such forward looking statement. Some of the factors that could affect the Company''s performance could be the demand and supply for Company''s product and services, changes in Government regulations, tax laws, forex volatility etc.

44. ACKNOWLEDGEMENT

The Board of Directors would like to acknowledge and place on record their sincere appreciation

to all stakeholders, customers, vendors, banks, Central and State Governments, the Company''s valued investors and all other business partners, for their continued co-operation and for the excellent support received from them.

The Board also wishes to place on record its appreciation to the Book Running Lead Managers (BRLM''s), Legal Counsels, Securities Exchange Board of India (SEBI), Registrar of Companies (ROC), National Stock Exchange of India Limited (NSE), BSE Ltd., Registrar and Transfer Agent (RTA), auditors and all intermediaries for their co-operation and immense support extended to the Company in its process of the Initial Public Offer (IPO).

The Board also wishes to place on record its appreciation to the new investors consequent to the IPO, for showing their confidence and faith in the management of the Company.

Your Directors recognize and appreciate the efforts and hard work of all the employees of the Company and their continued contribution to promote its development.

By order of Board of Directors For Sona BLW Precision Forgings Limited

Sunjay Kapur

(Chairman and

Place: Gurgaon Non Executive Director)

Date: 6th August 2021 DIN:00145529

Director’s Report