Nature and purpose of reserves:

A: Capital Reserves/Merger Reserve: The Company has recognised Capital Reserves/Merger Reserve for difference between consideration paid and net assets acquired under common control business combination transaction (Arising pursuant to the Scheme of Amalgamation). This can be utilised in accordance with the provisions of the Companies Act, 2013.

B: Security Premium: The amount received in excess of face value of the equity shares is recognised in Securities premium.

It is utilised in accordance with the provisions of the Companies Act, 2013.

C: General Reserve: The General Reserve is used from time to time to transfer profits from retained earnings for appropriation

purposes. General Reserve is created by the transfer from one component of equity to another and is not an item of other comprehensive income. This can be utilised in accordance with the provisions of the Companies Act, 2013.

D: Retained Earnings: Retained earnings represents accumulated profit of the Company as on reporting date. The reserve can be utilised in accordance with the provision of the Companies Act, 2013.

E: Other Comprehensive Income -Cashflow Hedge Reserve: This represents the cumulative effective portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the designated portion of the hedging instruments that are recognised and accumulated under the heading of effective portion of cash flow hedges will be reclassified to statement of profit and loss only when the hedged items affect the profit and loss or upon discontinuation of hedge relationship.

(1) State Bank of India:

Engineering Segment -HEIL - Secured by hypothecation of entire current assets of the Engineering Division on first ranking pari passu basis with Citi Bank N.A., RBL Bank Ltd., HSBC Ltd and HDFC Bank Ltd.

(2) Citi Bank N.A.:

Engineering Segment -HEIL 1) Working capital Secured by hypothecation of entire current assets of the Engineering Division on first ranking pari passu basis with State Bank of India, RBL Bank Limited, HSBC Ltd and HDFC Bank Limited, and secured by demand promissory note and letter of continuity for the facility amount 2) SBLC extended to Citibank, China for working capital facility to Harsha Precision Bearing Components (China) Co. Ltd. secured by demand promissory note and letter of continuity for the facility amount 3) SBLC extended to Citibank, Romania for working capital facility Harsha Engineers Europe SRL, further Citibank, Romania secured by first charge on inventory and receivables of Harsha Engineers Europe SRL, Romania in favour of Citibank, Romania and first charge on plant and machinery Harsha Engineers Europe SRL, Romania in favour of Citibank, Romania and secured by demand promissory note and letter of continuity for the facility amount.

(3) YES Bank Ltd:

Solar Segment Demand loans from banks are secured by first pari passu charge with RBL Bank Ltd. by hypothecation of the Solar Division's assets including stock of Raw Materials, Semi-Finished, Finished Goods, Consumable Stores and spares and other such movables, book debts, bill whether documentary or clean, outstanding monies, receivables, plant and machineries and all other current assets both present and future excluding project specific charge.

(4) RBL Bank Ltd:

Engineering Segment -HEIL - Secured by hypothecation of entire current assets of the Engineering Division first ranking pari passu with State Bank of India, Citi Bank N.A., HSBC Ltd and HDFC Bank Limited

Solar Segment Demand loans from banks are secured by first pari passu charge with YES Bank Ltd by hypothecation of the Solar Division's assets including stock of Raw Materials, Semi-Finished, Finished Goods, Consumable Stores and spares and other such movables, book debts, bill whether documentary or clean, outstanding monies, receivables, plant and machineries and all other current assets both present and future.

(5) HDFC Bank Ltd:

Engineering Segment -HEIL - Secured by hypothecation of entire current assets of the Engineering Division first ranking pari passu with State Bank of India, Citi Bank N.A., HSBC Ltd and RBL Bank Limited.

(6) HSBC Ltd:

Engineering Segment -HEIL 1) Working capital Secured by hypothecation of entire current assets of the Engineering Division on first ranking pari passu basis with Citi Bank N.A., State Bank of India, RBL Bank Limited and HDFC Bank Limited 2) SBLC extended to HSBC Bank (China) Co. Ltd. for working capital facility to Harsha Precision Bearing Components (China) Co. Ltd.

The Company has obtained various borrowings from banks on the basis of security of current assets wherein the quarterly returns/statements of current assets as filed with banks are in agreement with the books of accounts.

A. Actuarial Risk: Risk in cost more than expected due to adverse salary growth experience, variability morality rates, and variability in withdrawal rate.

B. Investment Risk: For funded plans that rely on insures for managing the assets, the value of the assets certified by the insurer may not be the fair value of instruments backing the liability. In such cases the present value of the assets is independent of the future discount rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.

C. Liquidity Risk: Employees with high salaries and long duration or those higher in hierarchy, accumulate significant level of benefits. If some of such employees resign/retire from the Company, there can be strain of the cashflows.

D. Market Risk: Market risk is collective term for risk that are related to changes and fluctuations of the financial markets. One actuarial assumption that has a market effect in the discount rate. The discount rate reflects the time value of money. An increase in discount rate leads to a decrease in Defined Benefit Obligation of the plan benefits & vice versa. This assumption depends on the yields on the corporate/government bonds and hence the valuation of liability is exposed to fluctuations in the yields as at the valuation date.

E. Legislative Risk: Legislative risk is the risk of increase in plan liabilities or reduction in the plan assets due to change in the legislative/regulation. The government may amend the Social Security Code, 2020 thus requiring the companies to pay higher benefits to the employees. This will directly affect the present value of the Defined Benefit Obligation and the same will have to be recognized immediately in the year when any such amendment is effective.

New Labour Code:

Effective November 21,2025, the Government of India has consolidated 29 existing labour legislations into a unified framework comprising four Labour Codes collectively referred to as the "New Labour Codes". On the basis of the information available, the Company has assessed the financial implications of these changes, which has resulted in one time increase in gratuity and leave encashment liability mainly on account of past service cost by ' 579 lakhs. Such increase is primarily arising due to change in the definition of "wages" for employees and contract labours. Certain supporting rules under the New Labour Codes are yet to be notified, and the Company continues to monitor the enactment of the Central and State rules and related clarifications, appropriate accounting effect of such developments will be provided.

#It includes ' 1500 lakhs of the City Civil Court, Bengaluru case filed by Orchestrate Systems Pvt Ltd. (OSPL) against the Company. This matter was filed by OSPL after the winding up petition was filed by the Company against OSPL at Karnataka High Court. later the Company had withdrawn the winding up petition at Karnataka High court against OSPL, with permission of court to pursue the matter under MSMED Act. Thereafter, the Company had filed MSME case against OSPL for recovery of ' 686 lakhs and on conciliation fail at MSMEFC the matter was refer to Arbitration. After completion of arbitration, arbitrator has passed necessary order in favour of the Company for recovery of ' 686 lakhs plus interest as per the said order dated May 4, 2019. The Company has filed execution petition at commercial court Raipur for above arbitration order as assets of OSPL are located in Chhattisgarh. The same matter is pending with commercial court, Raipur. OSPL has challenged this arbitration at Gujarat High court and the same matter is also pending with Gujarat High court. Against, civil court case at Bengaluru by OSPL, Counter Claim Revival Application has been submitted by the Company, Hearing on revival application is pending.

Note: All of the issue of litigation pertaining to Income tax are based on interpretation of the income tax law & rules, Management has been opined by its counsel that many of the issues raised by revenues will not be sustainable in law as they are covered by judgements of respective judicial authorities which supports its contention. As such no material impact on the financial of the Company is envisaged. Out of above net contingent liabilities ' 252 lakhs refund & interest received from department before approval of financials by Board.

33.2. Corporate Social Responsibility (CSR) Expenses

Based on the guidance note on Accounting for Expenditure on Corporate Social Responsibility Activities (CSR) issued by the Institute of Chartered Accountants of India and Section 135 of the Companies Act, 2013, read with rules made thereunder, the Company has incurred the following expenditure on CSR activities.

33.3. Segment Reporting:

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker [CODM] of the Company.

Ind AS 108 "Operating Segment" establishes standards for the way that public business enterprises report information about operating segments and related disclosures about products and services, geographic areas. Accordingly, information has been presented both along business segments and geographic segments.

A: BUSINESS SEGMENTS INFORMATION

The Chief Operating Decision Maker [CODM] reviews the Company as (i) "Engineering & Others" and (ii) "Solar-EPC and O&M" segment.

The CODM reviews revenue, results, total assets and total liabilities as the performance indicator of an operating segment.

The "Engineering & Others" segment includes all activities related with Bearing Cages & Stamp components including but not limited to sales, services, design, tooling, development, procurement and manufacturing.

The "Solar-EPC and O&M" segment includes all activities related with Solar Power Projects including but not limited to engineering, design, development, procurement, construction, erection, installation, commissioning, operation & maintenance.

The above business segments have been identified considering, (1) the different risk and returns and (2) the Customers.

The accounting policies adopted for segment reporting are in line with the accounting policy of the Company with following additional information for segment reporting.

33.5. Additional Regulatory Information:

1) The Company does not have any investment property. Hence, comment related to revaluation is not made.

2) The Company has not granted any Loans or Advances in the nature of loans to promoters, directors, KMPs and the related parties (as defined under the Companies Act, 2013), either severally or jointly with any other person, that are: (a) repayable on demand; or (b)without specifying any terms or period of repayment.

3) No proceedings have been initiated during the year or are pending against the Company as at reporting date for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (as amended in 2016) and rules made thereunder.

4) The Company has not been declared as wilful defaulter (by virtue of Section 477 & 488 of the Companies Act, 2013) by any bank or financial institution or government or any government authority.

5) The Company did not have any material transaction with companies struck off under Section 248 of the Companies Act, 2013 or Section 560 of Companies Act, 1956 during the current and previous financial year.

6) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.

7) The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with the Companies (Restriction on number of Layers) Rules, 2017

8) (A) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign

entities (Intermediaries) with the understanding that the Intermediary shall:

(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or

(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

(B) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:

(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

9) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.

10) The Company does not have any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).

33.6. Dividends Proposed to be Distributed

The Board of Directors, at its meeting held on May 7, 2026, recommended the final dividend of ' 1.50 per equity share of ' 10/- each for the year 2025-26, which will result in a total outflow of ' 1,365.66 lakhs. The recommended dividend is subject to the approval of the shareholders at the Annual General Meeting and hence not recognized as a liability as at March 31,2026.

33.7. Maintenance of Books of Accounts with Audit Trail

The Company has used accounting software for maintaining its books of accounts which has a feature of recording audit trail [edit log] facility and the same has been operational throughout the year for all relevant transactions recorded in the software except that no audit trail has been enabled at the database level for accounting software to log any direct data changes.

Audit trail has been preserved by the Company as per the statutory requirements for record retention.

33.8 Previous year's figures have been regrouped/reclassified to make them comparable with those of the current reporting year, wherever necessary.

Reason for change more than 25%:

*Debt-Equity Ratio (Times): Increase due to Increase in Current Borrowings

**Debt Service Coverage Ratio (Times): Improved due to decrease in Finance Cost & in last comparative year PAT was lower (with reference to ' 9,501 lakhs Impairment in carrying value of Investment of wholly owned subsidiary, Harsha Engineers Europe SRL-Romania & ' 2,060 lakhs Bad Debts Write Off/Net Sundry Balances write off pertains to Solar-EPC and O&M Segment.)

#Return on Equity Ratio (%): Improved due to last comparative year PAT was lower (with reference to ' 9,501 lakhs Impairment in carrying value of Investment of wholly owned subsidiary, Harsha Engineers Europe SRL-Romania & ' 2,060 lakhs Bad Debts Write Off/Net Sundry Balances write off pertains to Solar-EPC and O&M Segment.)

##Net profit ratio (%): Improved due to last comparative year PAT was lower (with reference to ' 9,501 lakhs Impairment in carrying value of Investment of wholly owned subsidiary, Harsha Engineers Europe SRL-Romania & ' 2,060 lakhs Bad Debts Write Off/Net Sundry Balances write off pertains to Solar-EPC and O&M Segment.)

###Return on Capital Employed (%): Improved due to last comparative year PBIT was lower (with reference to ' 9,501 lakhs Impairment in carrying value of Investment of wholly owned subsidiary, Harsha Engineers Europe SRL-Romania & ' 2,060 lakhs Bad Debts Write Off/Net Sundry Balances write off pertains to Solar-EPC and O&M Segment.)

The Company provides for allowance for impairment that represents its estimate of expected losses in respect of trade and other receivables.

The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix, Consequently, the Company has taken Life time expected credit losses approach (simplified approach) and loss allowance was determined based on loss rate at 0% for not due & ageing less than 6 months, 2.5% for ageing between 6 to 12 months, 5% for ageing between 1-2 years, 10% for ageing between 2-3 years, 25% for ageing more than 3 years.

Fair value of instruments measured at amortised cost:

The carrying amounts of Financial assets and liabilities are considered to be the approximately equal to the fair values and not materially different from the carrying amount. Accordingly, the fair value has not been disclosed separately.

Types of inputs are as under:

Input Level 1 (Directly Observable) which includes quoted prices in active markets for identical assets such as quoted price for an equity security on Security Exchanges.

Input Level 2 (Indirectly Observable) which includes prices in active markets for similar assets such as quoted price for similar assets in active markets, valuation multiple derived from prices in observed transactions involving similar businesses etc.

Input Level 3 (Unobservable) which includes management's own assumptions for arriving at a fair value such as projected cash flows used to value a business etc.

B. Financial Risk Management

The Company's principal financial liabilities comprises of loans & borrowings and trade & other payables. The main purpose of these financial liabilities is to finance the Company operations and to provide guarantees to support its operations. The Company's principal financial assets include trade & other receivables, cash & cash equivalents and investments that are derived directly from its operations. The Company has exposure to the following risks arising from financial instruments:

i. Credit risk

ii. Liquidity risk

iii. Market risk

(i) Credit risk

Credit risk is the risk that a customer or counterparty to a financial instrument will fail to perform or fail to pay amounts due causing financial loss to the Company. The potential activities where credit risks may arise include from cash and cash equivalents, derivative financial instruments and security deposits or other deposits and principally from credit exposures to customers relating to outstanding receivables. The maximum credit exposure associated with financial assets is equal to the carrying amount. Details of the credit risk specific to the Company along with relevant mitigation procedures adopted have been enumerated below:

Trade receivables

The Company's exposure to credit risk is the exposure that Company has on account of goods & services rendered to a contractual counterparty or counterparties, whether with collateral or otherwise for which the contracted consideration is yet to be received. The Company's customer base are Industrial and Commercial.

Other financial assets

Other financial assets comprise of cash and cash equivalents, Bank fixed deposits, loans provided to employees and

investments in equity shares of companies other than subsidiaries, associates and joint ventures as well as derivative

instruments.

- Cash and cash equivalents and Bank deposits are placed with banks having good reputation and past track record with adequate credit rating. The Company reviews their credit-worthiness at regular intervals.

- Investments are made in credit worthy Asset Management Companies or Instruments.

- Derivative instrument comprises cross currency interest rate swaps, forward contracts, options etc. where the counter parties are banks with good reputation, and past track record with adequate credit rating. Accordingly no default risk is perceived.

(ii) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are proposed to be settled by delivering cash or other financial asset. The Company's financial planning has ensured, as far as possible, that there is sufficient liquidity to meet the liabilities whenever due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.

(iii) Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices -will affect the Company's income or the value of its holdings of financial instruments.

Interest rate risk:

Interest rate risk is the risk that the fair value of future cashflows of the financial instruments will fluctuate because of changes in market interest rates. In order to optimise the Company's position with regards to interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest rate risk management by time to time evaluating and utilising the favourable financial instrument. There are certain fixed interest rate barring investment instruments, which are excluded to derive interest rate risk. As at the year end, the Company is exposed to changes in market interest rates through investment and bank borrowings at variable interest rates, to derive sensitivity it has been net out.

Currency risk

The functional currency of the Company is Indian Rupees and its revenue is generated from operations in India. It is exposed to foreign currency risk arising out of the EURO, US Dollar, CNY, JPY etc. Accordingly, the foreign currency exposure has been hedged time to time as per the Company's Risk management policy after evaluating the risk associated with. This aside, the Company does not have any derivative instruments used for trading or speculative purposes.

C. Capital Management

The Company's objectives when managing capital are to:

- safeguard their ability to continue as a going concern so that they can continue to provide return for shareholders and benefits for other stakeholders.

- maintain an optimal capital structure to reduce the cost of capital.

The Company monitors capital on the basis of the following debt equity ratio:

Company believes in conservative leverage policy. Company's capital expenditure plan over the medium term shall be largely funded through internal accruals.