Your Directors are pleased to present the 38^th Annual Report on the business and operations of Varroc Engineering Ltd.
(“the Company”) together with audited financial statements for the financial year ended March 31,2026.

FINANCIAL RESULTS

The summary of the Company's financial performance, both on a consolidated and standalone basis, for the Financial
Year 2025-26 as compared to the previous Financial Year is given below:

REVIEW OF OPERATIONS

Continuing the resilient revenue growth, on a consolidated basis, the revenue from operations for the financial year 2025-26
(FY26) was H 88,904.93 million with an increase of 9.03% in rupee terms. EBITDA margin stood at 9.4% for FY 26 while PBT
before JV profit margin and exceptional items improved by 50 bps and stood at 4.3%. The detailed State of Company's
Affairs have been outlined in Management Discussion and Analysis Report, which forms part of this Annual Report.

VOLUNTARY SEPARATION SCHEME (“VSS”)

During the year under review, the Group had implemented a Voluntary Separation Scheme (“VSS”) for permanent
workmen across various manufacturing facilities of the Group to streamline its workforce and optimize operating costs.
The Scheme was structured in a manner that was beneficial to both the Group and the participating workmen. Pursuant
to the Scheme, the Group had received a total of 432 applications from eligible workmen, of which 411 applications
were accepted. The total outflow on account of implementation of above Scheme was H 799.49 million. The scheme was
concluded on January 16, 2026.

CREDIT RATING

The Credit rating of the Company is managed by India Ratings and Research Limited [‘Ind-Ra']. During the year under
review, Your Company's rating has been upgraded i.e. long-term loans rating at IND AA /Stable. The rating on the
Company's short-term bank facilities and commercial paper programme has been affirmed at ‘IND A1 '. This indicates
the Company's good financial health and its ability to meet financial obligations.

CHANGE IN THE NATURE OF BUSINESS

There was no change in the nature of business of the Company during the financial year ended March 31,2026.

SHIFTING OF REGISTERED OFFICE

During the year under review, there has been no change in the Registered Office of the Company.

ALTERATION OF OBJECT CLAUSE OF MEMORANDUM OF ASSOCIATION OF THE COMPANY

During the year under review, after obtaining requisite approval of the members, the Object clause of Memorandum of
Association of the Company has been altered.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management Discussion and Analysis, as stipulated under Regulation 34 of SEBI Listing Regulations forming part of this
report has been given under separate section.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY,
BETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE OF THIS REPORT

There have been no material changes and commitments affecting the financial position of the Company which have
occurred between the end of the financial year to which the financial statements relate and the date of this Report.

DIVIDEND AND RESERVES
DIVIDEND

The Board has recommended a final dividend of H1.50/- per equity share (face value of Re.1/- each) @150% subject to
approval of the Members at the ensuing Annual General Meeting (“AGM”). The dividend recommended is in accordance
with the Dividend Distribution Policy.

In terms of Ind AS 10, events after the reporting period as notified by the Ministry of Corporate Affairs (“MCA”), the proposed
dividend of H 229.18 million is not recognised as liability as on March 31,2026.

The dividend, if approved at the ensuing AGM, would be paid to those Members whose names appear in the Register of
Members maintained by the Registrar and Share Transfer Agents/ Beneficial Owners maintained by the depositories as
stated in Notice of the ensuing AGM.

DIVIDEND DISTRIBUTION POLICY

The Dividend Distribution Policy of the Company approved by the Board of Directors ("Board") is in line with the
Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI
Listing Regulations"). The policy is available on the Company's websitehttps://www.varroc.com/upload/financial
resultsZ1706864856652337785.pdf

UNCLAIMED DIVIDENDS

In accordance with the provisions of Section 125 of the Act read with the Investor Education and Protection Fund Authority
(Accounting, Audit, Transfer and Refund) Rules, 2016 (‘IEPF Rules'), following dividends declared by the Company and
remaining unclaimed for seven consecutive years will be transferred to the Investor Education and Protection Fund (IEPF)
during the Financial Year 2026-27:

Further, shares in the folios/demat accounts in which dividend(s) have remained unclaimed for seven consecutive years
are also liable to be transferred to IEPF.

TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND

a) TRANSFER OF UNCLAIMED DIVIDEND / DEBENTURE REDEMPTION / DEBENTURE INTEREST TO IEPF:

As required under Section 124 of the Companies Act, 2013 (“the Act”) no amounts have been transferred to the
Investor Education and Protection Fund established by the Central Government during the Financial Year 2025-26.

b) TRANSFER OF SHARES TO IEPF

As required under Section 124 of the Act, no equity shares have been transferred by the Company to the Investor
Education and Protection Fund Authority (IEPF) during the Financial Year 2025-26.

TRANSFER TO RESERVES

Since the requirement to do transfer from Current Year Profits to Reserves have been dispensed off by the MCA no amount
was transferred to any reserve during the financial year.

SHARES AND SHARE CAPITAL

RE-CLASSIFICATION OF AUTHORISED SHARE CAPITAL

During the year under review, the Authorised Share Capital of H 5,49,00,000/- divided into 54,90,000 equity shares having
face value of H 10/- each has been re-classified into 5,49,00,000 equity shares having face value of Re. 1/- each.
Accordingly, clause V of the Memorandum of Association of the Company has been altered to this effect after obtaining
approval from the shareholders of the Company.

During the year under review, there was no change in the paid-up share capital of the Company. The paid-up & subscribed
equity share capital of your Company is H 152.79 million. The equity shares of the Company are listed on BSE Limited and
National Stock Exchange of India Limited.

During the year under review, the Company has not raised funds by way of public issue, rights issue or preferential issue
and hence, the disclosure under Regulation 32(4) of SEBI Listing Regulations is not applicable.

Presently, the Company does not have any scheme for the issue of shares, including sweat equity to the Employees or
Directors of the Company.

NON-CONVERTIBLE DEBENTURES

During the Financial Year 2023-24, the Company had issued 25,000 Rated, Listed, Senior, Secured, Redeemable, Taxable,
Transferable, Non-Convertible Debentures (“NCDs”) of H 1 Lakh each aggregating to H 2,500 million bearing coupon rate
of 8.60% on September 7, 2023 (Date of Allotment), which were due for redemption on September 7, 2028, with the tenure
of 5 years from the date of Allotment with equal quarterly amortization starting from end of 15 months from the date of
Allotment and coupon payments to be made on quarterly basis.

During the year under review, the Company had exercised call option for early redemption of above NCDs issued by
the Company as per terms and conditions stated in the issue documents including Debenture Trust Deed executed
between the Company and its Debenture Trustee ("DTD"), Information Memorandum/General Information Document
dated September 4, 2023 ("GID"). Accordingly, on March 06, 2026, these NCDs were fully redeemed. The Company has
also delisted the above NCDs by completing relevant formalities with BSE Ltd. effective from March 23, 2026.

During the year under review, the Company has not issued any Debentures.

DEPOSITS

The Company has not accepted any deposits from the public during the year under review within the meaning of
Sections 73 and 74 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014. Further,
no amount of principal or interest on deposits was outstanding as on the date of the balance sheet.

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

As on March 31,2026, the Company had 14 subsidiaries as against 16 in the previous year.

Pursuant to an internal reorganization exercise, following were the changes in step-down subsidiaries during the year:
Deregistration

The following step-down subsidiaries were deregistered during the year:

i. Varroc Czech Republic s.r.o. has been de-registered w.e.f. June 16, 2025

ii. Varroc Lighting Systems Bulgaria EOOD has been de-registered w.e.f. October 2, 2025

As reported last year, regarding successful resolution of Joint Venture dispute, the following JV Companies were ceased
effective from May 07, 2025:

i. Varroc TYC British Virgin Islands

ii. Varroc TYC Auto Lamps Co. Ltd. Changzhou

iii. Varroc TYC Auto Lamps Co. Ltd. Chongqing

A list of subsidiaries/joint ventures of your Company is provided as part of the notes to the consolidated financial statements.

In accordance with the provisions of Companies Act, 2013, the consolidated financial statements of the Company and its
subsidiaries are prepared and form part of this Annual Report. Further, a statement containing the salient features of the
financial statements of the Company's subsidiaries, associates and joint ventures in Form AOC-1, as required under Section
129(3) of the Companies Act, 2013, forms part of the Annual Report. The statement provides details of the performance
and financial position of each of the Subsidiaries, Associates and Joint Ventures.

In line with the requirements of Regulation 16(1) (c) of the SEBI Listing Regulations, the Company has a policy on
identification of material subsidiaries, which is available on the Company's websitehttps://www.varroc.com/upload/
financial results/1767938195158573509.pdf.

Pursuant to Section 134 of the Act read with rules made thereunder, the details of developments at the level of subsidiaries
and joint ventures of your Company are covered in the Management Discussion and Analysis Report, which forms part of
this Annual Report.

Pursuant to the provisions of Section 136 of the Companies Act, 2013, the audited standalone and consolidated financial
statements of the Company, together with the audited financial statements of each of its subsidiaries, are available on
the Company's website athttps://www.varroc.com/investors/financial-results. These documents will also be available for
inspection by the Members during business hours at the Registered Office of the Company up to the date of the Annual
General Meeting.

CONSOLIDATED FINANCIAL STATEMENT

Audited annual consolidated financial statements forming part of the annual report have been prepared in accordance
with Companies Act, 2013, Indian Accounting Standards (Ind AS) 110- ‘Consolidated Financial Statements' and Indian
Accounting Standards (Ind AS) 28 - Investments in Associates and Joint Ventures', notified under Section 133 of Companies
Act, 2013 read with Companies (Indian Accounting Standards) Rules, 2015 and as amended from time to time.

AUDITORS & THEIR REPORT
STATUTORY AUDITORS

The Members of the Company had appointed SRBC & Co. LLP, Chartered Accountants (ICAI Firm Registration No.
324982E/E300003), as Statutory Auditors of the Company for a term of 5 (five) consecutive years to conduct the audit
from FY 2022-23 to FY 2027-28. The SRBC & Co. LLP, Chartered Accountants have confirmed that they are not disqualified
from continuing as Auditors of the Company.

SECRETARIAL AUDITORS

As per the provisions of Regulation 24A of SEBI Listing Regulations, the members in their 37^th Annual General Meeting
held on August 21, 2025 had appointed M/s. Uma Lodha & Co. Company Secretaries, Mumbai (Mem No. FCS 5363
C.P. No.2593 & Peer review Certificate No. 6629/2025) as Secretarial Auditors, to conduct Secretarial Audit of the Company
for 5 consecutive financial year effective from the financial year 2025-26. The Secretarial Auditor has confirmed that they
have subjected themselves to Peer Review process by the Institute of Company Secretaries of India ("ICSI") and hold valid
certificate issued by the Peer Review Board of ICSI.

EXPLANATIONS OR COMMENTS BY THE BOARD ON EVERY QUALIFICATION, RESERVATION OR ADVERSE
REMARK OR DISCLAIMER MADE BY THE AUDITORS

(i) Auditors' Report:

The Auditor's report for FY 2025-26 on the consolidated financial statements of the Company contains the
following qualifications:

• As disclosed in note 50A(a) to the consolidated financial statements and other financial information for the
year ended March 31,2026, the Group received a settlement offer from Beste Motor Co. Ltd. and TYC Brother
Industrial Co. Ltd. ("TYC Parties") alleging breach of Transition Management Agreement ('TMA' or 'agreement')
in respect of certain income amounting to H 209.89 million recognized during the year ended March 31, 2026
and H 231.82 million recognized during the previous year ended March 31,2025 by the Group under 'Revenue
from operations', as received from Chongqing Varroc TYC Auto Lamps Co., Ltd. (erstwhile joint venture).
Subsequently, the Group also received a 'Statement of Claim' under the arbitration proceedings with TYC Parties
on the aforesaid matter and on certain additional claims/ breaches under the aforesaid TMA against which
the Company has filed Statement of defence in March 2026. Pending disposal of the arbitration proceedings
and in the absence of sufficient appropriate audit evidence, we are unable to comment on the said income
recognized in the books and consequential impact, including of the additional claims/breaches, if any, on the
profit before tax, tax expense, profit after tax, total comprehensive income and earnings per share for the year
ended March 31,2026 and retained earnings as at March 31,2026.

Management Response:

• The Group has strong belief that the income recognized in the books have been received based on valid
agreement(s) entered into between the parties and necessary services have been availed by overseas entities.

The Group believes that it has a strong case and will take appropriate actions, including filing of counter claims, as
necessary to protect its interests. Pending disposal of the arbitration proceedings, the Group is unable to determine
the possible impact of this matter.

The Auditor's report for FY 2025-26 on the standalone financial statements of the Company contains the following
qualifications:

• As disclosed in note 55(a) to the standalone financial statements and other financial information for the year
ended March 31, 2026, the Company received a settlement offer from Beste Motor Co. Ltd. and TYC Brother
Industrial Co. Ltd. ("TYC Parties") alleging breach of Transition Management Agreement ('TMA' or 'agreement')
in respect of certain income amounting to H 209.89 million recognized by the Company under 'Revenue from
operations' during the year ended March 31,2026, as received from Chongqing Varroc TYC Auto Lamps Co., Ltd.
(erstwhile joint venture). Subsequently, the Company also received a 'Statement of Claim' under the arbitration
proceedings with TYC Parties on the aforesaid matter and on certain additional claims/breaches under the
aforesaid TMA against which the Company has filed Statement of defence in March 2026.

Management Response:

• The Company has strong belief that the income recognized in the books have been received based on valid
agreement(s) entered into between the parties and necessary services have been availed by overseas entities.

The Company believes that it has a strong case and will take appropriate actions, including filing of counter
claims, as necessary to protect its interests. Pending disposal of the arbitration proceedings, the Company is
unable to determine the possible impact of this matter.

Apart from the above, there are no further qualifications, reservations, or adverse remarks on the financial statements
for the year ended March 31, 2026. The notes on the financial statement referred to in the Auditors' Report are self¬
explanatory and do not call for any further comments. The Auditor's Report is enclosed with the financial statements.

The total fees for all the services paid by the Company and its subsidiaries, on a consolidated basis, to the statutory
auditor, and all entities in the network firm/network entity of which the statutory auditor is a part, have been provided
in Corporate Governance Report forms part of this annual report.

(ii) Secretarial Audit Report:

The Secretarial Audit Report for the year under review confirming compliance by the Company with the Act
(including circulars issued thereunder) and applicable regulations and circulars/ guidelines/directions issued by
SEBI is appended to the Board's Report. There is no adverse remark, qualification, reservation or disclaimer in the
Secretarial Audit Report.

(iii) Reporting of frauds by auditors

There were no frauds reported by the Auditors of the Company under Section 143(12) of the Act to the Audit
Committee (“AC”).

COST RECORDS

The Cost records as specified by the Central Government under sub-section (1) of section 148 of the Companies Act,

2013, are prepared, maintained and the same are audited by the Cost Auditor.

COST AUDIT

Pursuant to Section 148 of the Companies Act, 2013 read with rules made thereunder, the Board of Directors at their
meeting held on May 27, 2026, has re-appointed M/s S. R. Bhargave & Co., Cost Accountants, Pune (Firm Registration
No. M - 000218), to audit the Cost Accounts of the Company for the year ending March 31, 2027. Their remuneration is
proposed to be ratified by Members at the ensuing Annual General Meeting. The Cost Audit Report and other documents
for the year ended March 31,2025 were submitted with the Central Government by filing Form CRA-4 vide SRN AB6478031
dated September 03, 2025.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under section 134 of the Companies Act, 2013 with respect to Directors' Responsibility
Statement, it is hereby confirmed by the Board of Directors:

a. that in the preparation of the annual accounts for the financial year ended March 31,2026, the Indian Accounting
Standards (Ind AS) have been followed along with proper explanation relating to material departures;

b. that they had selected such accounting policies and applied them consistently and made judgments and estimates
that were 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 the year ended on that period.

c. that they had taken proper and sufficient care for the 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. that they had prepared the accounts for the financial year ended March 31,2026 on a ‘going concern' basis.

e. that they had laid down internal financial controls to be followed by the Company and that such internal financial
controls are adequate and are operating effectively; and

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

DIRECTORS AND KEY MANAGERIAL PERSONNEL

The Board of Directors of the Company comprises an appropriate mix of Executive and Independent Directors, including
Women Director, possessing rich experience and expertise across diverse fields such as corporate finance, strategic
management, legal, social initiatives, general management and strategy. Except for the Independent Directors, all other
Directors are liable to retire by rotation in accordance with the provisions of the Act.

As on March 31, 2026, the composition of the Board is in accordance with the provisions of Section 149 of the Act
and Regulation 17 of the SEBI Listing Regulations, with an appropriate combination of Executive Directors and
Independent Directors.

The list of Directors of the Company has been disclosed as part of the Corporate Governance Report.

Changes during the year:

- The appointment of Mrs. Liselott Kilaas (DIN: 10953529) was approved as an Independent Director, by the Members
through special resolution passed by way of postal ballot on April 26, 2025, for a period of 5 (Five) years commencing
from March 27, 2025 to March 26, 2030.

- Mr. Akshaykumar Chudasama (DIN 00010630) was appointed as an Independent Director on the Board of the
Company for a first term of up to five years with effect from May 29, 2025 till May 28, 2030, by the Board based
on recommendation of the Nomination and Remuneration Committee ("NRC") of the Company. Further, the
said appointment was approved by the Members by way of a special resolution passed at the AGM held on
August 21,2025.

- Mr. Tarang Jain (DIN 00027505) was re-appointed as Chairman & Managing Director on the Board of the Company
with effect from June 01, 2025, by the Board based on recommendation of NRC of the Company. Further, the
said re-appointment was approved by the Members by way of a special resolution passed at the AGM held on
August 21,2025.

- Mr. Dhruv Jain (DIN 09710448) was appointed as Whole Time Director on the Board of the Company with effect from
June 01,2025, by the Board based on recommendation of NRC of the Company. Further, the said appointment was
approved by the Members by way of a special resolution passed at the AGM held on August 21,2025.

- Mr. Vidyadhar Limaye (DIN: 06720053) Whole Time Director & Occupier of the plants of the Company resigned from
the directorship of the Company w.e.f. 30^th June, 2025. The Board had expressed its sincere gratitude and placed on
record its appreciation of their significant contribution during his tenure as Director of the Company.

- Mr. Padmanabh Sinha (DIN: 00101379) was appointed as an Independent Director on the Board of the Company for
a first term of up to five years with effect from July 18, 2025 till July 17, 2030, by the Board based on recommendation
of the NRC of the Company. Further, the said appointment was approved by the Members by way of a special
resolution passed at the AGM held on August 21,2025.

- Mr. Gautam Khandelwal (DIN: 00270717), Mrs. Vijaya Sampath (DIN: 00641110) and Mr. Marc Szulewicz (DIN: 01911768)
Independent Directors of the Company, who were appointed for second term of five years, from July 20, 2020 to July
19, 2025, have ceased to be the Independent Directors of the Company from July 19, 2025 pursuant to completion
of their second term. The Board records its deepest appreciation for contribution by the said Independent Directors
in guiding and supporting the management during their tenure as Independent Directors of the Company over the
last so many years.

- Mr. Ajay Sharma (ACS:9127) resigned as Group General Counsel & Company Secretary of the Company from the close
of business hours on July 31,2025. The Board had expressed its sincere gratitude and placed on record its appreciation
of his significant contribution during his tenure as Company Secretary & Compliance Officer of the Company.

- Mr. Anil Ghatiya (ACS: 16620) appointed as Company Secretary & Compliance Officer of the Company from
July 31,2025, by the Board based on recommendation of the NRC of the Company.

- Mr. Arjun Jain (DIN 07228175) was re-appointed as Whole time Director on the Board of the Company with effect from
August 07, 2025, by the Board based on recommendation of NRC of the Company. Further, the said re-appointment
was approved by the Members by way of a special resolution passed at the AGM held on August 21,2025.

- Mr. Avinash Chintawar (DIN: 07817177) was appointed as Whole Time Director & Occupier of the plants of the Company
by the Board based on recommendation of the NRC of the Company with effect from November 12, 2025. Further, the
shareholders through special resolution passed by way of postal ballot appointed him as Whole time Director, liable to
retire by rotation, for a period of 3 (Three) years commencing from November 12, 2025 to November 11,2028.

Appointment of Director retire by rotation

In accordance with the provisions of Section 152 of the Act, read with rules made thereunder and Articles of Association of

your Company, Mr. Arjun Jain (DIN 07228175) and Mr. Dhruv Jain (DIN: 09710448) liable to retire by rotation at the ensuing

AGM and being eligible, offers themselves for reappointment. The Board recommends the re-appointment of Mr. Arjun

Jain and Mr. Dhruv Jain as Director for your approval. Brief details as required under Secretarial Standard-2 and Regulation

36 of SEBI Listing Regulations, are provided in the Notice of AGM.

KEY MANAGERIAL PERSONNEL

In terms of the provisions of Section 203 of the Act, as on March 31, 2026, the Company has the following Key

Managerial Personnel:

(a) Mr. Tarang Jain, Chairman & Managing Director

(b) Mr. Arjun Jain, Whole Time Director

(c) Mr. Dhruv Jain, Whole Time Director

(d) Mr. Avinash Chintawar, Whole Time Director

(e) Mr. K. Mahendra Kumar, Group Chief Financial Officer

(f) Mr. Anil Ghatiya, Company Secretary & Compliance Officer

DECLARATION FROM INDEPENDENT DIRECTORS

The Company has received declaration of independence from all the Independent Directors as stipulated under
Section 149(7) of the Act and Regulation 25(8) of the SEBI Listing Regulations, confirming that they meet the criteria of
independence, which has been duly assessed by the Board as part of their annual performance evaluation exercise.

Further, in terms of Regulation 25(8) of the SEBI Listing Regulations, the Independent Directors have also confirmed that
they are not aware of any circumstances or situations, which exist or may be reasonably anticipated, that could impair or
impact their ability to discharge their duties with an objective independent judgement and without any external influence.

The Independent Directors have confirmed that they have complied with the Code for Independent Directors prescribed
in Schedule IV to the Act.

In the opinion of the Board, all Independent Directors possess requisite qualifications, experience, expertise and hold
high standards of integrity required to discharge their duties with an objective independent judgment and without any
external influence. List of key skills, expertise and core competencies of the Board, including the Independent Directors,
forms a part of the Corporate Governance Report of this Annual Report.

STATEMENT REGARDING INTEGRITY, EXPERTISE AND EXPERIENCE OF INDEPENDENT DIRECTORS

In the opinion of the Board, the Independent Directors possess a clear sense of values and integrity and have the requisite
expertise, experience and proficiency in their respective fields. All the Independent Directors of the Company are
registered with the Data Bank maintained by the Indian Institute of Corporate Affairs. In terms of the provisions of Section
150 of the Companies Act, 2013 read with Rule 6 of the Companies (Appointment and Qualification of Directors) Rules,
2014, the Independent Directors of the Company are exempt from undertaking the online proficiency self-assessment test
conducted by the Indian Institute of Corporate Affairs, except those who were required to undertake such test and have
successfully passed the online proficiency self- assessment test within the prescribed time.

FORMAL ANNUAL EVALUATION OF THE PERFORMANCE OF THE BOARD, ITS COMMITTES AND DIRECTORS

Pursuant to the provisions of the Act and SEBI Listing Regulations, the Board has carried out an annual evaluation of its
own performance, the performance of its Committees and that of Individual Directors. The performance evaluation of
the Independent Directors was carried out by the entire Board, excluding the Director being evaluated. The evaluation
process considered various aspects including the composition of the Board, experience and competencies of Directors,
governance practices and the contribution of Directors towards the strategic direction and effective functioning
of the Company.

In accordance with the provisions of Section 178(1) of the Companies Act, 2013 and the SEBI Listing Regulations, the
Company has adopted a Policy for Performance Evaluation of Independent Directors, the Board, its Committees and
other Directors, which also lays down the criteria for evaluation of Executive and Non-Executive Directors. Based on the
said Policy, the Board carried out the evaluation of its performance, the performance of its Committees and individual
Directors. The details of the evaluation process have been provided in the Report on Corporate Governance, forming
part of this Annual Report.

The Policy is available on the Company's website and may be accessed at:https://www.varroc.com/upload/financial
results/17068646041473196366.pdf.

BOARD FAMILIARISATION

The Company has put in place a Familiarisation Programme for Independent Directors to familiarise them with their roles,
rights and responsibilities in the Company, the nature of the industry in which the Company operates, the business model
of the Company and related matters. The details of such familiarisation programmes are available on the Company's
website at:https://www.varroc.com/investors/corporategovernance-programs.

POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION

The Nomination and Remuneration Committee selects the candidates to be appointed as the Director on the basis of
the requirement and enhancing the competencies of the Board. The current policy is to have a balance of Executive
and Independent Directors to maintain the independence of the Board and to separate the functions of governance
and management. The composition of Board of Directors during the year ended March 31, 2026 is in conformity with
Regulation 17 of the SEBI Listing Regulations, 2015 read with Section 149 of the Companies Act, 2013. The Company has
policy, namely policy on Directors' appointment and remuneration and other matters (“Remuneration Policy”) to govern
directors' appointment, including criteria for determining qualifications, positive attributes, independence of a director,
remuneration to the directors and other matters, as required under sub-section (3) of Section 178 of the Companies Act,
2013. The said policy is available on the website of the Company and link for the same ishttps://www.varroc.com/upload/
financial results/17068646041473196366.pdf.

COMMITTEES OF BOARD

Your Company has duly constituted the Committees required under the Companies Act, 2013 read with applicable Rules
made thereunder and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Details of all the committees such as terms of reference, composition, and meetings held during the year under review
are disclosed in the Corporate Governance Report, which forms part of this Annual Report.

The details of the said committees are available on the website of the Company and link for the same ishttps://www.
varroc.com/investors/board-of-directors-committees.

MEETINGS OF THE BOARD

During the year under review, the Board of Director met 6 (Six) times. The gap between two Board meetings was within the
time prescribed under the Act and SEBI Listing Regulations. The composition of Board of Directors during the year ended
March 31,2026 is in conformity with Regulation 17 of the SEBI Listing Regulations read with Section 149 of the Companies
Act, 2013. For further details, please refer Report on Corporate Governance attached to this Annual Report.

INDEPENDENT DIRECTORS

During FY26, Independent Directors held their separate meetings on May 29, 2025 and March 26, 2026, respectively,
in accordance with the requirements of Schedule IV of the Act, Secretarial Standard-1 on Board Meetings issued by
the Institute of Company Secretaries of India and the SEBI Listing Regulations. A separate meeting of the Independent
Directors was also convened on May 27, 2026.

AUDIT COMMITTEE

As on March 31,2026 the Audit Committee comprised of 3 Independent Directors as its Members. The Chairperson of the
Committee is an Independent Director. The Members possess adequate knowledge of accounts, audit, finance, etc.
The composition of the Audit Committee is in conformity with requirements as per the Section 177 of the Companies Act,
2013 and Regulation 18 of the SEBI Listing Regulations. For further details, please refer Report on Corporate Governance
attached to this Annual Report.

INTERNAL AUDITOR

The Internal Auditor of the Company is a permanent invitee to the Audit Committee Meeting and regularly attends the
Meetings for reporting their findings of the internal audit to the Audit Committee Members.

CORPORATE GOVERNANCE

The Company is committed to maintain the standards of corporate governance and adherence to the corporate
governance requirement set out by SEBI Listing Regulations. The report on Corporate Governance as stipulated under
the SEBI Listing Regulations forms an integral part of this Report. The requisite certificate from the Secretarial Auditors
of the Company confirming compliance with the conditions of corporate governance is attached with the report on
Corporate Governance.

PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN OR SECURITY PROVIDED

Details of investments made and/or loans or guarantees given and/or security provided, if any, are given in the notes to
the Standalone and Consolidated financial statements which form part of this Annual Report.

BUSINESS RESPONSIBILITY SUSTAINABILITY REPORT

As per Regulation 34(2)(f) of SEBI Listing Regulations, the Annual Report shall contain business responsibility and sustainability
report (BRSR) describing the initiatives taken by the Company from environmental, social and governance perspective.
Having regard to the green initiative, the BRSR is made available on the Company's website athttps://www.varroc.com/
upload/financial resultsZ17815315122112124593.pdf.

CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

During the year under review, all related party transactions were in the ordinary course of business and on arm's length
terms. The Audit Committee, on a quarterly basis during the Financial Year 2025-26, reviewed the related party transactions
vis-a-vis the omnibus approval(s) accorded by it. Prior approval of the Audit Committee was obtained for all the related
party transactions to be entered into by it for the Financial Year 2025-26 with adequate disclosures being placed for
review of the Audit Committee as per the prevailing regulations.

During the year under review, the Company has not entered into material related party transactions. Furthermore, there
was no contract/arrangement with related parties referred to in sub-section (1) of Section 188 of the Act, which required
Board's approval.

All Related Party Transactions entered during FY26 were in compliance with the Act and the SEBI Listing Regulations, details
whereof are disclosed in the section ‘Notes to the financial statements' forming an integral part of this Annual Report.

For the current financial year, the Audit Committee, before the commencement of the financial year, has accorded
its prior approval for the related party transactions proposed in FY27 and has also reviewed the information required for
entering into related party transaction(s).

The related party transaction policy of the company can be accessed on the Company's website at the link:https://
www.varroc.com/upload/financial results/17702856591505710973.pdf.

The details of transactions with related parties as required under Indian Accounting Standard (Ind AS) 24 are provided in
the Notes to the Financial Statements forming part of this Annual Report.

As all Related Party Transactions entered into during the financial year were in the ordinary course of business and on an
arm's length basis, the disclosure of Related Party Transactions in Form AOC-2 in terms of Section 188 of the Companies
Act, 2013 read with the Companies (Accounts) Rules, 2014 is not applicable.

RISK MANAGEMENT FRAMEWORK

The Company has constituted a Risk Management Committee ("RMC") in terms of the requirements of Regulation 21 of
the SEBI Listing Regulations and has also adopted an Enterprise Risk Management Policy. The details are covered as part
of the Corporate Governance Report.

The Company has a risk management framework, and Board members are informed about risk assessment and
minimization procedures and periodical review to ensure management controls risk by means of a properly designed
framework. The AC and the Board are kept apprised of the proceedings of the meetings of the RMC.

The Company, as it advances towards its business objectives and goals, is often subjected to various risks. Credit risk,
market risk, liquidity risk, transition risk, strategic risk and operational risk are some of the risks that your Company is exposed
to and details of the same are covered in the Management Discussion and Analysis and Corporate Governance
section of the Report.

The Risk Management Policy is available on your Company's website and link for the same ishttps://www.varroc.com/
upload/financial results/1706864725414838139.pdf

INTERNAL CONTROL SYSTEMS AND ADEQUACY OF INTERNAL FINANCIAL CONTROLS

The Company has an internal control system, commensurate with the size, scale and complexity of its operations. The
Internal Audit (IA) function of the Company monitors and evaluates the efficacy and adequacy of the internal control
system in the Company to ensure that financial reports are reliable, operations are effective and efficient and activities
comply with applicable laws and regulations. Based on the report of the IA function, process owners undertake preventive
and corrective action, if any, in their respective areas and thereby strengthen the controls. Significant audit observations
and preventive and corrective actions thereon are presented to the AC of the Company from time to time.

The details with respect to internal control systems and adequacy of internal financial controls are included in the
Management Discussion and Analysis Report, which forms part of this Integrated Annual Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The objective of the Company's Corporate Social Responsibility (CSR) initiatives is to improve the quality of life of
communities through long-term value creation for all stakeholders. The Company has formulated a CSR Policy which
provides guidelines for undertaking CSR activities.

The details of the CSR Committee are provided in the Corporate Governance Report, which forms part of this Annual
Report. The CSR policy is available on the website of your Company and the link for the same ishttps://www.varroc.com/
upload/financial results/17068631711 735884362.pdf.

During the year under review the Company was required to spend an amount of H 48.43 million towards CSR activities
against which, the Company has spent H 51.11 million and availed surplus of H 4.42 million from previous year.

The Annual Report on CSR activities as required to be given under Section 135 of the Companies Act, 2013 and Rule 8 of
the Companies (Corporate Social Responsibility Policy) Rules, 2014 has been provided in an Annexure - I to this Report.

PARTICULARS REGARDING CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE
& OUTGO

Information pursuant to the provision of Section 134 of Companies Act, 2013 read with the rule 8 of Companies (Accounts)
Rules, 2014 regarding conservation of energy, technology absorption and foreign exchange earnings and outgo are
given is annexed hereto as Annexure - II.

ANNUAL RETURN

As per the provisions of section 134 (3) (a) the Annual Return of the Company for the Financial Year 2025-26 may be
accessed under investor relation tab on the Company's website at the linkhttps://www.varroc.com/upload/financial
results/17815320971003804398.pdf.

BOARD POLICIES

The details of various policies approved and adopted by the Board as required under the Act and SEBI Listing Regulations
are available on the Company's website on the linkhttps://www.varroc.com/investors/corporate-governance.

PARTICULARS OF EMPLOYEES

The information required pursuant to the provisions of Section 197 of the Act read with Rule 5(1) of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company has
been appended as Annexure - III to the Board's Report.

In terms of second proviso to Section 136 of the Act, the Report and accounts are being sent to the Members and others
entitled thereto, excluding the information on employees' particulars as required pursuant to provisions of Rule 5(2) and
5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The said information is
available for inspection by the Members.

The Board of Directors affirms that the remuneration paid to the employees of the Company is as per the policy on
Directors' appointment and remuneration/compensation for Directors, Senior Management Personnel, Key Managerial
Personnel and other employees and is in accordance with the requirements of the Act and SEBI Listing Regulations and
none of the employees listed in the said Annexure are related to any Directors of the Company.

POLICY FOR PREVENTION, PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT AT WORKPLACE

The Company has in place a policy for prevention, prohibition and redressal of sexual harassment at workplace. Further,
the Company has constituted an Internal Committee under the Sexual Harassment of Women at Workplace (Prevention,
Prohibition and Redressal) Act, 2013, where complaints in the nature of sexual harassment can be registered. Appropriate
reporting mechanisms are in place for ensuring protection against sexual harassment and the right to work with dignity.

During the year under review, the Company received Nine (9) complaints in this regard. All nine (9) complaints were
disposed of during the year. All new employees go through a detailed orientation on anti-sexual harassment policy
adopted by your Company.

VIGIL MECHANISM

Pursuant to Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 read with Section 177(9) of the Act
and Regulation 22 of the SEBI Listing Regulations, the Company has adopted a whistle blower policy and has established
the necessary vigil mechanism for directors and its employees of the Company. The objective is to establish a redressal
forum, which addresses all concerns raised on questionable practices and through which all the stakeholders such as
Employees, Directors and service providers (agency, vendor, contractor or any outsourced partner) can raise actual or
suspected violations.

The Vigil Mechanism provides for adequate safeguards against victimization of the persons who use such mechanism and
make provisions for direct access to chairman of the Audit Committee ("AC"). The effectiveness of the vigil mechanism is
regularly reviewed by the AC, which ensures that all grievances are handled promptly and judiciously. The AC's oversight
ensures that the framework is accessible to all stakeholders and that it aligns with best practices. Necessary details
pertaining to the vigil mechanism are disclosed in the Corporate Governance Report.

The said policy is uploaded on the website of your Company and the link for the same ishttps://www.varroc.com/upload/
financial results/170686363170852865.pdf

DISCLOSURE UNDER MATERNITY BENEFIT ACT, 1961

The Company is committed to providing a safe, inclusive and supportive work environment for all employees, including
women employees. The Company complies with the provisions of the Maternity Benefit Act, 1961 and the rules framed
thereunder, as amended from time to time.

Further, in accordance with the provisions of the said Act, the Company provides maternity leave and other related
benefits to its eligible women employees. The Company also ensures that the rights and benefits of women employees
during maternity are protected, and that appropriate facilities and support are provided in compliance with the
applicable statutory requirements.

CYBER SECURITY

In view of the evolving cyber threat landscape, the Company's cybersecurity framework is reviewed periodically, and
the requisite processes and technology controls are continuously enhanced in alignment with emerging threat scenarios.
The Company's technology environment is enabled with real-time security monitoring, with robust controls implemented
across multiple layers encompassing end-user devices, network infrastructure, servers, applications, and data. These
measures are designed to ensure confidentiality, integrity, and availability of information assets, and to safeguard the
interests of all stakeholders.

OTHER DISCLOSURES

Your directors state that no disclosure or reporting is required in respect of the following items, as there were no transactions/
events of these nature during the year under review:

1. No Whole-time Director received remuneration from any of the subsidiary(ies) of the Company.

2. No corporate insolvency resolution process was initiated under the Insolvency and Bankruptcy Code, 2016, either by
or against the Company, before NCLT or other court(s).

3. Issue of equity shares with differential rights as to dividend, voting or otherwise.

4. Issue of Shares (Including Sweat Equity Shares) to employees of your Company under any scheme.

5. No Significant or material orders passed by the Regulators or Courts or Tribunals which impact the going concern
status and your Company's operation in future.

6. Voting rights which are not directly exercised by the employees in respect of shares for the subscription/purchase of
which loan was given by your Company (as there is no scheme pursuant to which such persons can beneficially hold
shares as envisaged under Section 67(3)(c) of the Act).

7. The Company has complied with the Secretarial Standards issued by the Institute of Company Secretaries of India on
Board Meetings and Annual General Meetings.

8. The details of the difference between the amount of the valuation done at the time of one-time settlement and the
valuation done while taking a loan from the Banks or Financial Institutions along with the reasons thereof: Nil

9. There were no instance of revision of financial statements and Board's Report of your Company.

10. The Certificate duly signed by the Chairman & Managing Director and Chief Financial Officer on the Financial
Statements of the Company for the year ended March 31,2026, as submitted to the Board of Directors at its meeting
held on May 27, 2026, is annexed to this report.

11. The declaration by the Chairman & Managing Director regarding compliance by the Board members and senior
management personnel with the Company's Code of Conduct is annexed to this report.

12. The Government of India notified on November 21, 2025, the four Labour Codes - the Code on Wages, 2019, the
Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health and Working
Conditions Code, 2020 - consolidating 29 existing labour laws. The Ministry of Labour and Employment, Government
of India has notified Social Security (Central) Rules, 2026 on May 08, 2026. The Government of India is in the process of
notifying other related rules to the New Labour Codes and the impact of these will be evaluated and appropriately
accounted as and when notified.

13. The Company uses SAP accounting software for maintaining its Books of Accounts which has a feature of recording
audit trail (edit log) in respect of the application and the same has been operated throughout the year for all
relevant transactions. Further, there were no instances of the audit trail feature being tampered with in respect
of the accounting software during the year. Additionally, the audit trail of prior year has been preserved by the
Company as per the statutory requirements for record retention to the extent it was enabled and recorded in the
respective year.

14. The Company uses a software for payroll processing which is operated by third party software service provider which
has a feature of recording audit trail (edit log) in respect of the application layer and the same has been operated
throughout the year for all relevant transactions except that audit trail feature is not enabled for direct changes
to the data when using certain access rights. Additionally, the audit trail of prior year has been preserved by the
Company as per the statutory requirements for record retention to the extent it was enabled and recorded in the
respective year.

ACKNOWLEDGEMENTS

The Directors express their sincere gratitude and appreciation towards all those who have contributed to the success of
the Company during the past year. It is through the collective effort and dedication of many stakeholders that we have
achieved our goals and milestones.

We express our sincere gratitude to SEBI, BSE Limited, National Stock Exchange of India Limited,

Ministry of Finance, Ministry of Corporate Affairs, Registrar of Companies and other government and regulatory authorities,
lenders, financial institutions and the Company's bankers for the ongoing support extended by them.

We would also like to thank our esteemed customers and shareholders. As we reflect on the accomplishments of the
past year, we are deeply grateful for your unwavering support and partnership. Your loyalty and trust have been the
cornerstone of our success, empowering us to overcome challenges and pursue new opportunities with confidence. We
recognize the importance of your continued commitment, and we remain steadfast in our dedication to delivering value
and excellence in all that we do.

Lastly, we extend our deepest appreciation to our employees, whose hard work, commitment, and innovative ideas have
been instrumental in driving our growth and success. Their unwavering dedication and professionalism have played a
significant role in overcoming challenges and seizing opportunities.

For and on behalf of the Board of Directors
Varroc Engineering Limited

Tarang Jain

Date: May 27, 2026 Chairman and Managing Director

Place: Pune (DIN 00027505)