The Directors are pleased to present the Thirty Second Annual Report of the Company together with the Audited Accounts for the financial year ended March 31, 2018.

FINANCIAL RESULTS

(Rs. in Crores)

* Proposed final dividend on equity shares and tax on dividend have not been recognised as a liability in the current year’s accounts in accordance with the Indian Accounting Standard 10 Events after the reporting period.

OPERATIONS REVIEW

Total income decreased from Rs. 313.76 crores in 2016-17 to 312.24 Crores in 2017-18 with a fall of 0.49%. Profit after Tax for the year 2017-18 is Rs. 21.39 Crores (previous year : Rs. 27.93 Crores), a decrease of 23.40%.

With Fixed Assets of Rs 84.47 Crores (previous year Rs.57.43 crores), our Fixed assets turnover ratio is a healthy 5.29 (previous year 5.32) with Return on Sales of 11.52% (previous year 13.93%).

DIVIDEND

Your Directors are pleased to recommend a final dividend of Re.0.20 per share (20%) with face value of Re.1/- each on Equity Share Capital, for the year ended 31.03.2018, amounting to Rs 304.57 Lakhs, excluding dividend tax. During the year, the Board declared an Interim Dividend of Re.0.20 per share (20%) with face value of Re.1/- each, amounting to Rs.304.57 Lakhs, excluding dividend tax. The aggregate of dividend declared during the year is Re.0.40 per share (40%) with face value of Re.1/- each amounting to Rs.609.14 Lakhs, excluding dividend tax.

TRANSFER TO GENERAL RESERVE

Your directors are pleased to transfer a sum of Rs.10 crore to the General Reserve

FINANCE

Cash and bank balances as at 31^st March 2018 was Rs.664.84 lakhs (previous year Rs.799.12 lakhs). The Company continues to focus on judicious management of its working capital, receivables, inventories and other working capital parameters and which were kept under strict check through continuous monitoring.

WINDMILL

The wind mill of the Company located at Kokkampalayam village, Dharapuram Taluk, Erode District, Tamil Nadu generated 9,98,609 units of electricity in the year 2017-18 against 9,32,626 units generated in 2016-17. The Company had utilised the 6,54,032 units generated as captive consumption during 2017-18 for its Satyamangalam plant and the balance units were sold to TNEB.

BOARD MEETING

The Board of Directors met six times during the financial year. The details of the Board meeting are given in the Corporate Governance report. The intervening gap between the meetings were within the period stipulated under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

AUDIT COMMITTEE MEETING

The Audit Committee of the Company met six times during the current financial year. The details of the Audit Committee meetings are given in the Corporate Governance report. The intervening gap between the meetings were within the period stipulated under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

PARTICULARS OF LOANS, GUARANTEE OR INVESTMENTS

The Company has not given any loans or guarantees covered under the provisions of section 186 of the Companies Act, 2013 and Schedule V of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirement) Regulations, 2015, except the ‘Corporate Guarantee’ given on behalf of its wholly owned subsidiary AVT Tea Services Ltd., London, which is given in the notes No.34 to the financial statements.

The details of investments made by the Company are given in the notes No.5 to the financial statements.

LISTING WITH STOCK EXCHANGES

The Company shares are continued to be listed in both BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE). The Company has paid listing fees up to 31^st March 2019 to the BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE).

DSIR APPROVAL FOR IN-HOUSE R&D FACILITY AT VAZHAKULAM, ALUVA AND BANGALORE

The recognition by the Department of Scientific and Industrial Research (DSIR), New Delhi for the Company’s both R&D facilities situated at Vazhakulam, Aluva, Ernakulam Dt., Kerala and the Manchenahaili Village, Kasabe Hobari, Bangalore are valid upto 31^st March, 2019.

MATERIAL CHANGES AND COMMITMENTS

There are no material changes or events that have occurred since the date of the Balance Sheet which could have any effect on the financial position of the Company

DIRECTORS & KEY MANAGERIAL PERSONNEL

i) Director retiring by rotation

In accordance with the provisions of Companies Act, 2013 and the Articles of Association of the Company, Mr. Habib Hussain, Director retires by rotation at the 32^nd Annual General Meeting and being eligible, offers himself for re-appointment.

ii) Declaration from Independent Directors on Annual Basis The Company has received necessary declaration from all the three Independent Directors of the Company under Section 149(7) of the Companies Act, 2013 that the Independent Directors of the Company meet with the criteria of their Independence laid down in Section 149(6) of the Companies Act, 2013.

iii) Key Managerial Personnel

Mr. M.N. Satheesh Kumar, President and CEO, Mr. A. Ramadas, Sr. Vice President and CFO and Mr. Dileepraj. P, Company Secretary are the Key Managerial Personnel of the Company.

PERFORMANCE OF SUBSIDIARY/JOINT VENTURE /ASSOCIATES

a) AVT Tea Services Ltd., London, UK (AVTTSL)

The present authorized share capital of the Company is Pound Sterling (GBP) 1 million. The paid up capital of the Company as on 31^st March 2018 is Pound Sterling (GBP) 1 million. AVTTSL is the marketing arm of your Company for de-caffeinated tea and instant tea. The AVTTSL recorded sales of Rs.106 Crores (previous year Rs.74 crore) and profit of Rs.1.31 crore (previous year loss of Rs.0.93 crore) for the year 2017-18.

The increase in Instant Tea business of your Company is the result of continued and persistent marketing strategy pursued by them.

Pursuant to Section 129(3) of the Companies Act, 2013, a statement containing the salient features of the financial statements of subsidiary and step-down subsidiary in the prescribed Form AOC-1 is provided in the Page Nos. 92 & 93 of Annual report.

b) Accounts of subsidiaries

Pursuant to Section 136 of the Companies Act, 2013, a copy of the audited financial statements of AVT Tea Services Ltd., London for the period ended 31.03.2018, the overseas subsidiary of your Company shall be provided to any shareholder, free of cost on their request. The Audited financial statements are also available on the website of the Company. The consolidated financial statements audited by the statutory auditors of the Company have been attached to this Report.

c) Joint Venture / Associate Company

The Company does not have any Joint Venture / Associate Company

d) Conservation of energy, technology, absorption, foreign exchange earnings and Outgo

The particulars prescribed by the section 134 (3) (m) of the Companies Act 2013, read with Rule 8 (3) of the Companies (Accounts) Rules, 2014 relating to Conservation of Energy, Technology Absorption, Foreign Exchange earnings and outgo are furnished in the Annexure-I to this Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Pursuant to the provisions of Section 135 of the Companies Act 2013, CSR Committee of the Board of Directors was formed to recommend

a. Ihe policy on Corporate Social Responsibility (CSR) and

b. implementation of the CSR Projects to be undertaken by the Company as per the CSR Policy for consideration and approval by the Board of Directors.

Annual Report on CSR in the prescribed format is enclosed as Annexure - II. The CSR policy of the Company has been already uploaded in the web site: www.avtnatural.com /investor_relations.

CONTENTS OF CSR POLICY

The Company’s commitment to CSR projects and programs will be the focus on holistic development of host communities and create social, environmental and economic value to the society. CSR initiatives of the Company are such that it stimulate well-being in the community and fulfil the role as responsible corporate citizen.

To Company’s commitment to CSR projects and programs will be by investing resources into any of the areas like Development of Skilling among various sections of society, Development of Infrastructure, Empowerment of Women, Promotion of Health Care, Old age homes / day care facilities for Senior Citizens, Promotion of Education, Swatch Bharath and all other activities envisaged in the Schedule VII of the Companies Act 2013.

The Company has won NIPM Kerala Best Corporate Citizen Award 2017, (under Category II) for those companies with CSR Minimum Budget between Rs. 51 Lakhs and Rs. 99 Lakhs during FY 2016-17. The aim of the award was to identify and recognize the efforts of companies in integrating and internalizing Corporate Social Responsibility (CSR) into their core business operations. The award acknowledges efforts of the companies which engage in CSR in a strategic and systematic manner and integrate it with their overall corporate strategy.

STATUTORY AUDITORS

Pursuant to section 139 and 142 of the Companies Act, 2013, the members in their 31^st Annual General Meeting held on 10.8.2017 had appointed M/s PKF Sridhar & Santhanam LLP, Chartered Accountants, KRD Gee Gee Crystal, 7^th Floor, 91-92, Dr. Radhakrishanan Salai, Mylapore, Chennai - 600004, (Firm’s Registration No. 003990S / S200018)), the Statutory Auditors of the Company for a period of 5 years till the conclusion of the 36^th Annual General Meeting. In view of the amendments to the Companies Act 2013, their appointment need not required to be ratified by the Members in the forthcoming AGM.

AUDITORS’ REPORT

There are no qualifications or adverse remarks mentioned in the Auditors’ report. The notes to accounts forming part of financial statements are self-explanatory and needs no further clarification.

SECRETARIAL AUDIT

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 Mr. V. Suresh, Practising Company Secretary (C.P. No.6032), Chennai — 600 018 to undertake the Secretarial Audit of the Company.

The Secretarial Audit Report in form MR-3, submitted by the Secretarial Auditors for the financial year 2017-18, is annexed to this report as Annexure — III and forms an integral part of this Report.

There is no secretarial audit qualification, reservation or adverse remarks in the Secretarial Report for the period under review.

The relevant Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI) relating to the Board and General Meetings have been complied with by the Company.

INTERNAL AUDIT, ITS ADEQUACY AND INTERNAL FINANCIAL CONTROL

The Company has in place adequate Internal Audit and Internal Financial Controls with reference to the financial statements, which is evaluated by the Audit Committee as per Part C of Schedule II of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

In compliance with Section 138 of the Companies Act, 2013, the Company had engaged M/s Varma & Varma, Chartered Accountants, Building No. 53/333, Off. Subash Chandra Bose Road, Vytilla Post, Kochi — 682 019, Kerala as the Internal Auditors of the Company for the financial year 2017-18. Findings and observations of the Internal Auditors are discussed and suitable corrective actions are taken as per the directions of the Audit Committee on an on-going basis to improve efficiency in operations. Thus the internal audit function essentially validates the compliance of the Company.

The Company’s internal control systems are well established and commensurate with the nature of its business and the size and complexities of operations and adequate with reference to the financial statements as envisaged under the Companies Act, 2013.

Your directors endorse that during the year under review, there were no reportable material weaknesses in the present systems or operations of internal controls.

COST AUDIT REPORT

Cost Audit is not applicable to the Company as per the Companies (Cost Records & Audit) Rules, 2014. However, the cost records are maintained by the Company.

REPORTING OF FRAUD

The Auditors of the Company have not reported any fraud as specified under section 143(12) of the Companies Act, 2013.

INSURANCE

The Company continues to carry adequate insurance for all assets against unforeseeable perils.

RELATED PARTY TRANSACTIONS

All transactions entered with related parties for the year under review were at arm’s length basis and in the ordinary course of business and that the provisions of Section 188 of the Companies Act, 2013 are not attracted. There were no transactions exceeding 10% of the annual consolidated turnover as per the last audited financial statements, during the year.

Further, there were no material related party transactions during the year under review with the Promoters, Directors or Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large, except the revision in remuneration of director’s relative exceeding Rs.30 lakhs per annum, which was approved by the shareholder in its meeting held on 10.08.2017. Accordingly, the disclosure of Related Party transactions to be provided under section 134 (3)(h) of the Companies Act 2013, read with Rule 8(2) of the Companies (Accounts) Rules, 2014 in Form AOC -2 is given in the Annexure — IV, forming part of this report.

As per the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, all the related party transactions were placed before the Audit Committee and also the Board of Directors The prior omnibus approval of the Audit Committee was obtained on yearly / quarterly basis for the transactions entered with related parties, except with the wholly owned subsidiary Company, whose accounts are consolidated with the Company. The transactions entered into pursuant to the omnibus approval so granted has been placed before the Audit Committee and the Board of Directors for their approval on a quarterly basis.

The Company is having both the Related Party Transaction policy and the Policy for determining Material Subsidiary, which are hosted in the website of the Company under the link www.avtnatural.com/investor_relations.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS AND COURTS

There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in Form MGT - 9 is enclosed herewith as Annexure - V.

STATUTORY INFORMATION

The information under section 197 of Companies Act 2013 and pursuant to rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are not required, as none of the employees falls under this category.

The information required under section 197 (12) of the Companies Act 2013 read with rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of the Company have been given in the Annexure - VI.

The statement containing remuneration paid to employees and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in a separate annexure forming part of this report. Further, the report and the accounts are being sent to the members excluding the aforesaid annexure. In terms of Section 136 of the Act, the said annexure is open for inspection at the Registered Office of the Company during business hours on working days of the Company upto the date of the forthcoming Annual General Meeting. Any member interested in obtaining a copy of the same may write to the Company Secretary and the same will be provided free of cost to the member.

INDUSTRIAL RELATIONS

Your Company during the year under review, enjoyed a cordial relationship with technicians/workers and employees at all levels.

NOMINATION AND REMUNERATION POLICY

The Board on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management Personnel, Key Managerial Personnel and their remuneration etc. A copy of the policy is uploaded in the web site of the Company and the website link is www.avtnatural.com/ investor_relations.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has a Vigil Mechanism / Whistle Blower Policy in place pursuant to Section 177 (9) of the Companies Act 2013 and as per the Regulation 22 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. The said policy is available in the website of the Company which can be accessed from the link -www.avtnatural.com/investor_relations. During the year no instances of unethical behavior were reported.

RISK MANAGEMENT

Pursuant to Section 134 (3) (n) of the Companies Act, 2013 and the Regulation 21 (5) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, the Company had laid down the procedures to inform Board members about the risk assessment and mitigation procedures.

The Company is having in place a ‘Risk policy and risk management Procedures’. Mr. A. Ramadas, Sr. Vice President and CFO has been assigned the task of informing the Board about the various risks and its mitigation by the Company from time to time. At present the Company has not identified any element of risk which may threaten the existence of the Company.

ENVIRONMENT AND SAFETY

The Company is conscious of the importance of environmentally clean and safe operations. The Company’s policy requires conduct of operations in such a manner, so as to ensure safety of all concerned, compliances environmental regulations and preservation of natural resources.

BOARD EVALUATION

The Board of Directors has made a formal annual evaluation of its own performance and that of its committees, individual Directors & CEO, pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015. The evaluation was done based on the evaluation criteria formulated by Nomination and Remuneration Committee which includes criteria such as fulfilment of specific functions prescribed by the regulatory framework, adequacy of board meetings, attendance and effectiveness of the deliberations etc.

Each Board member completed a questionnaire providing feedback on the functioning and overall level of engagement of the Board and its Committees on the parameters such as the composition, execution of specific duties, contribution of new ideas/insights, quality, quantity and timeliness of flow of information, deliberations at the meeting, independence/non-partisan approach in decision making etc.,

Independent Directors met on 5^th February 2018 to review performance evaluation of Non-Independent Directors and the entire Board of Directors including the Chairman, Non-Executive Directors etc., The Independent Directors were satisfied with the overall functioning of the Board, flow of information to the Board, its various Committees and also of the performance of other Non-executive Directors and the Chairman of Board.

DISCLOSURE OF ACCOUNTING TREATMENT

The Company has adopted the Indian Accounting Standards (Ind AS) with effect from 1^st April 2017 and all its financial statements are made according to the said standard. Further, in the preparation of the financial statements, the Company has followed the Accounting Standards referred to in Section 133 of the Companies Act, 2013. The significant accounting policies which are applied are set out in the Notes to the Financial Statements.

CORPORATE GOVERNANCE

Your Company has taken adequate steps to adhere to all the stipulations laid down in Regulation 27 read with Part E of Schedule II and Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 on Corporate Governance. The Management Discussion & Analysis Report, Report on Corporate Governance with Auditors’ Certificate on compliance with conditions of Corporate Governance have been Annexed VII & VIII to this Report.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Act and that an Internal Complaints Committee has been set up for redressal of complaints and that all employees (permanent, contractual, temporary, trainees) are covered under this policy.

During the year the Company has not received any complaint under Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013.

GST IMPLEMENTATION

Goods and Service Tax (GST) is an indirect tax or consumption tax) levied by the Government on the sale of goods and services. GST is levied at every step in the production process, but is refunded to all parties in the chain of production other than the final consumer. The tax replaced existing multiple cascading taxes levied by the Central and State Governments. Your Company has implemented the same with effect from 1^st July 2017, in accordance with the implementation of the new taxation regime.

EXPANSION OF ACTIVITY IN TIPTUR

As decided by the Board in its meeting held on 10^th August 2017, the operations of the Company is getting expanded at Tiptur in Karnataka.

CAUTIONARY STATEMENT

Statements in this Directors’ Report & Management Discussion and Analysis Report describing the Company’s objectives, projections, estimates, expectations or predictions may be ‘forward looking statements’ within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make difference to the Company’s operations include raw material availability and its prices, cyclical demand and pricing in the Company’s principle markets, changes in Government regulations, Tax regimes, economic developments within India and the countries in which the Company conducts business and other ancillary factors.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134 (3) (c) of the Companies Act, 2013, with respect to Directors’ Responsibility Statement, it is hereby confirmed that:

1. In the preparation of the accounts for the financial year ended 31^st March 2018, the applicable accounting standards had been followed along with proper explanation relating to material departures;

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

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

4. The Directors have prepared the accounts for the financial year ended 31^st March 2018 on a ‘going concern’ basis.

5. The directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively.

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

ACKNOWLEDGEMENT

Your Directors sincerely acknowledge the support & Co-operation extended by the customers, farmers, suppliers, bankers viz., State Bank of India, Bank of Baroda, Citibank N.A., The South Indian Bank Limited and the Hongkong and Shanghai Banking Corporation Limited, Central and State Governments, Local Authorities and other Stakeholders .

We are also grateful to our shareholders who are pillars of the Company, who reposed their faith in the Company and its management.

Your Directors also pleased to place on record the gratitude & appreciation for the commitment, dedication and hard work of all the employees of the Company.

For and On behalf of the Board

Place : Chennai Ajit Thomas

Date : 29^th May 2018 Chairman