Your Directors hereby present the 39th Annual Report and the Audited Financial Statements, for the year ended 31st March, 2024.

Financial Highlights

The highlights of financial results of the Company for the year under review are given below:

Dividend

Considering losses during the year, your Directors do not recommend dividend for the year ended March 31, 2024.

Industry Outlook

Indian air conditioning industry has been on a path of steady growth. Several macro tailwinds such as rising disposable incomes, low penetration, improved quality and reliability of electricity supply continue to drive demand for room air conditioners. Further, improved consumer awareness of energy efficient cooling technologies and increased affordability through easy financing options, have made newer technologies more accessible to consumers. The buying pattern of consumers is also undergoing a shift as consumers become more comfortable ordering large appliances, such as air conditioners, online. The growth in e-commerce is therefore also expected to give additional boost to the industry.

India continues to be prone to changing weather patterns which often result in severe summers and unseasonal rains. Air conditioning industry continues its efforts to combat climate change by introducing higher efficiency air conditioning solutions with several smart features that provide better customization and control. These factors are expected to drive healthy growth of air conditioning industry in India.

The industry's dependence on imported components and raw material has traditionally been very high, which puts it at risk of any global supply chain disruptions. Government of India's push for Make in India supported by Production Linked Incentive (PLI) scheme has started to enhance the air conditioning component ecosystem in our country. Government of India has also implemented Quality Control Order (QCO) starting Oct 1st, 2023, which aims to ensure availability of quality products to consumers.

Overall, air conditioning industry is poised for a steady growth of 11 - 12% year on year, making it one of the most attractive industries in the consumer durables market.

Business Overview

During the financial year 2023-24, the company's revenue declined from ? 23,844 million to ? 19,187 million, representing a 19.5% decline. The company incurred a loss of ? 722 million against a loss of ? 896 million last year.

Delayed onset of summer and unseasonal rains in North India where the company has much higher presence have adversely affected the sale of room air conditioners in Q1 and Q2. The commercial air conditioning business has experienced challenges in importing certain components due to the implementation of QCO norms. Beginning Q3, the company has initiated a turnaround strategy by first putting in place focused organization through careful restructuring. The turnaround strategy focused on three key pillars

of execution: go-to-market, product quality and cost excellence. Go-to-market strategy focused on ground-up channel planning, product positioning and price laddering for the retail channel. The strategy focused on disciplined sales management and targeted spends and it significantly improve channel advocacy, price stability and overall customer satisfaction.

The stellar financial results of last quarter of Financial year 2023-24 are a testament to the effectiveness of this turnaround strategy. Q4 revenue have grown by 41% from ? 5499 million last year to ? 7748 million this year. Profit before tax has grown from ? 21.6 million in Q4 last year to ? 650.6 million this year, indicating a very healthy revival of the company's business. In addition, robust inventory and cash management during the year 2023-24 has helped company repay entire borrowings (working capital loans) of ? 1,430.3 Million as at 31st March, 2023 and ending the year with a healthy cash balance of ? 718.2 Million including fixed deposits of ? 160.0 Million as at 31st March, 2024.

Room Air Conditioners

Indian Room Air Conditioning industry attracts significant interest due to several macro factors to its favor and continues to see intense competition. The company focuses on building strong customer base through a pipeline of innovative product offerings to cater to customer preferences.

The Company also focused on improving its reach through appointment of new distributors while strengthening its presence in the modern retail. Despite these efforts, the room air conditioning business contracted during the first two quarters of the year owing to delayed onset of summer and unseasonal rains in North India.

The steps taken as part of the turnaround strategy have started to revive the company's room air conditioning business and put it on right footing for strong growth.

Light Commercial Air Conditioners

Light Commercial air conditioning market in India was driven by investments into infrastructure development. Increasing Government spending into metro and railway networks, and private investments into hospitals, educational institutes, commercial and residential real estate, hospitality and data centers have been the major drivers of demand. In addition, the growth in premium housing and condominiums has started to drive the demand for VRF in high-end residential segment.

The company has an established channel network in all major cities to cater this demand and has taken several initiatives to strengthen the ease of doing business for the channel partners. The Company's commercial business in the year was however impacted by challenges in importing certain components due to the introduction of QCO norms. With the foundations intact, the company is poised to take advantage the high growth potential of the light commercial segment.

International Sales

In the past year, International Air Conditioning Sales business for Hitachi has strengthen its footprint in the South Asia market.

Focused countries were Bangladesh, Maldives, Sri Lanka, Nepal, and Bhutan. Company has demonstrated promising growth potential. Through strategic initiatives, Company has successfully

added new customers and established strong partnerships with key channel partners in each of these markets. Company has added over 50 new customers across various sectors, including commercial, healthcare, hospitality, manufacturing, residential, and government segments.

Company has partnered with 6 new channel partners, enhancing sales network and ensuring better market penetration. These new partners have contributed to Company's exports revenue. During the year 2023-24, the Company has focused on targeted marketing campaigns and localized solutions.

Risks, Concerns and Challenges

Raw Material price fluctuations

Fluctuations in raw material costs can lead to significant changes in component prices and can disrupt the supply chain, potentially straining the company's profitability. To mitigate this risk, the company has proactively developed a network of local vendors and implemented dual sourcing for key components.

Seasonality Risk

As an air conditioning product company, our business is inherently seasonal. Unfavorable and unforeseen events such as intermittent rains, wide-ranging temperature fluctuations, and supply chain disruptions can impact our operations. To mitigate the risk of lost opportunities or excess inventory, we have strengthened our demand and supply planning process that enables us to remain agile and responsive to seasonal variations.

Technology Changes

Globalization and post-pandemic experiences have significantly shifted consumer preferences, with an increasing demand for new products to incorporate smart and futuristic technologies. As a consumer-focused company, we continuously monitor technological advancements and regularly update our offerings. To avoid falling behind, we have a robust product development process that includes a 3-year roadmap for new products and upgrades, integrating customer insights, smart technologies, and regulatory requirements.

Government Policies

The company's core product business is highly dependent on government policies related to energy efficiency standards, environmental regulations, manufacturing standards, non-tariff barriers, incentives, anti-dumping duties, and taxes. These policies can directly or indirectly affect product pricing and the company's operations. To mitigate this risk, the company stays vigilant and updated on all relevant policies, taking necessary actions as needed. At the same time, the company is participating in various industry associations for progressive discussions with government authorities on policy framework impacting our business and industry at large while achieving government objectives on sustainability etc.

Human Resources

At the heart of our commitment are our people - our employees, who are our brand ambassadors. They bring vitality, dynamism, energy and innovative ideas to work every day. They are the driving force behind our success, helping us realise our aspirations in this new era. To achieve our goals, we prioritise the well-being and development of our employees. We provide them with a sense of purpose, provide opportunities, and prioritise their health and safety.

Human Capital

As on March 31, 2024, the total strength of employees (Staff and Operators) of the Company was 1169. We enable and sustain an empowering work culture where our employees learn and lead. Our people are key to retaining our competitive edge. We are continuously working to create an environment of empowerment through well-defined policies that reflect empathy, celebrate meritocracy and provide ample professional development opportunities.

Talent Attraction and Retention

We consider our employees critical to our success. Our human resource strategy is outlined to build better organisational capabilities, hire and retain the best talent and create a culture that delivers long-term value and sustain competitiveness in the global marketplace. To have skilled workforce on board for a sustainable future is pivotal for the Company.

Talent Management

Our talent management process focuses on building succession strength, creating development journeys and learning interventions to attract, retain and develop top talent across the Company. This is anchored through "Organisation Talent Review" (OTR) process to provide an overview of talent across the company and enable talent movements across teams based on individual strengths and aspirations.

Diversity and Inclusion

The Company promotes Diversity, Equity and Inclusion at all locations, for all departments and stakeholders. On a time-to-time basis Company reviews the existing policies and practices to make the workplace inclusive.

We prioritise Diversity, Equity and Inclusion (DE&I)in our workplace and strive to provide equal opportunities to all individuals. Our policies ensure that no discrimination occurs based on gender or disability regarding employment, promotion, termination or other related issues.

Our Prevention of Sexual Harassment at Workplace (POSH) Policy is in line with our commitment towards gender inclusion and diversity and helps create a safe and secure workplace for all. All women employees (permanent, temporary, contractual and trainees), woman service providers, as well as any woman visiting our Company are covered under this policy. Any breach of this policy is subject to strong disciplinary actions.

Organisational Transformation

Initiative of Re-organisation of the service team was carried out with a view to align the Service team with the Sales Function and strengthen our Aftermarket function. As a part of the strategy the Field Operations & After Market business excellence teams were created to drive operational excellence.

Industrial Relations

The industrial relations scenario continued to be positive at our Kadi Plant. Long-term Settlement with our labor unions was completed amicably. The relationship between the Management

and the Unions has evolved significantly at JCH-India. Both the parties have recognised the benefits of collaboration and working together towards the organisation's larger interests. We also launched and completed two rounds of Voluntary Retirement Scheme (VRS) wherein about 91 operators participated and took benefit of the same.

This year we introduced a program, where two batches of 15 Operators each visited Japan for 3 months. Through this program our operators not only enhanced their technical skills but also contributed to the regular operations on the manufacturing lines. The skill and workmanship of operators of the Company were noted to be at par with Japanese Standards and was appreciated by Tochigi Team. This collaborative program provided valuable opportunity to our operators to gain technical skills, work experience, and exposure to Japanese culture and tradition, while also contributing to the increase in production level of air conditioning units at Tochigi, Japan.

Employee Wellness and Engagement

As part of our Culture Transformation journey, we have introduced YOUR VOICE program wherein employees participate in the survey. We gauge their engagement and their response to the movements made on the desired culture.

We have introduced the Long-Service Reward & Recognition program for our employees. Health and wellbeing are at our core. We organized series of Health Check up, Eye Check-up camps and blood donation for our employees and operators at Kadi. 100% of our employees and operators are covered by organisational insurance and benefits. Our aim is to provide safe workspaces designed around our values of diversity, equity, inclusion and fair play, and giving them a healthy and safe place to flourish.

Internal Control and Systems

The Company has a well-defined and adequate internal control system commensurate to the size of its business and the nature of industry it operates in. The Internal Control system ensures safeguarding and protecting the assets of the Company. Internal Audit was conducted by external Auditors at plant as well as at all the branches of the Company within the detailed scope defined and approved by the Audit Committee. The Internal Audit is planned to substantiate and review the adequacy of internal controls and laid down procedures & systems. Observations of Internal Auditors and the detailed plan of action are reviewed and discussed at the meetings of the Audit Committee on a periodic basis.

Auditors

Pursuant to the provisions of Section 139 of the Companies Act, 2013, Members of the Company, at the Annual General Meeting held on 15th September 2021, appointed M/s. Price Waterhouse & Co Chartered Accountants LLP (Firm Registration No. 304026E / E300009) as Auditors of the Company to hold office from the conclusion of Annual General Meeting held on 15th September, 2021 till the conclusion of the sixth consecutive Annual General Meeting.

Directors' Responsibility Statement

Your Directors confirm that:

a) I n the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures;

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

c) Proper and sufficient care has been taken 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;

d) Annual accounts have been prepared on a going concern basis;

e) I nternal financial controls which are to be followed by the Company have been laid down and that such internal financial controls are adequate and were operating effectively; and

f) Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Change in Board of Directors

During the year under review, there were following changes in the

Board of Directors of the Company:

1. Cessation of Mr. Gurmeet Singh as Managing Director as well as Director of the Company with effect from closing hours as on 30th June, 2023.

2. Appointment of Mr. Sanjay Sudhakaran as Director as well as Managing Director of the Company with effect from 1st July,

3. Cessation of Mr. Tatsuya Sugawara as a Director of the Company with effect from 30th June, 2023.

4. Appointment of Mr. Nobuyuki Tao as a Director of the Company with effect from 30th June, 2023.

5. Appointment of Mr. Arpit Patel as an Independent Director of the Company with effect from 1st October, 2023.

Performance Evaluation

The Board has carried out an annual evaluation of the performance of the Board, Audit Committee, Risk Management Committee, Stakeholder Relationship Committee, Nomination and Remuneration Committee, Executive Committee, ESG Committee, Vigil Mechanism Committee and CSR Committee.

The Board has also carried out annual evaluation of the performance of individual Directors, who were evaluated considering levels of their engagement and contribution, safeguarding the interests of the Company and its minority shareholders, etc. The performance evaluation of the Chairman and the Non-Independent Directors were carried out by the Independent Directors at their separate meeting.

Details of Establishment of Vigil Mechanism

The Company has established a Vigil Mechanism process as an extension of the Company's Code of Conduct whereby an employee, director, customer, vendor or associate of the Company can disclose his genuine doubt in good faith to any member of Vigil Mechanism Committee about unethical behavior, actual or suspected fraud or violation of the Company's Code of Conduct or ethics policy, so that appropriate action can be taken to safeguard the interest of the Company. In exceptional cases, a complaint can be reported by a complainant to a Chairperson of Audit Committee. This mechanism is overseen by the Audit Committee.

Risk Management System

Company has implemented Enterprise Risk Management (ERM) system to identify, assess, monitor and mitigate the various risks associated with the Company.

Risks are identified and then classified into different categories such as Strategic, Operational, and Business risk. Then score based on level and significance of risk is given and subsequently risk mitigation steps are taken. ERM cover various functional risks including Cyber securities related risks.

24 As required under SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015, Board has formed a Risk Management Committee to discuss the critical and vital risks.

Internal Financial Control

Internal Financial Control plan adopted by the Company is adequate with reference to the Financial Statement.

1. Conduct of its business by adherence to Company's policies.

2. Safeguarding of assets.

3. The accuracy and completeness of the accounting records, Prevention and detection of frauds and errors and timely preparation of reliable financial information.

Other Disclosures

1. Number of meetings of the Board: Six meetings of the Board of Directors of the Company were held during the year under review on 23rd May, 2023, 30th June, 2023, 26th July, 2023, 27th October, 2023, 30th January, 2024 and 18th March, 2024.

2. Members of the Audit Committee as on 31st March, 2024 are as under:

Mr. Mukesh Patel - Chairman

Mr. Ashok Balwani - Member

Ms. Shalini Kamath - Member

Mr. Arpit Patel - Member

Mr. Nobuyuki Tao - Member

3. The Company has received necessary declaration from each Independent Director under Section 149(7) of the Companies

Act, 2013, that he/she meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013.

4. Details of the CSR amount spent for the year 2023-24 is attached as Annexure A. Details about the Policy on Corporate Social Responsibility (CSR) as required under Section 134(3)(o), 135(2) read with Companies (Corporate Social Responsibility Policy) Rules, 2014 has been placed on the website of the Company and Weblink is as under:

https://buy.hitachiaircon.in/cms/materials/d86a33aa94.pdf

The projects to be implemented by the Company for the year 2024-25 have been placed on the website of the Company and Weblink is as under:

https://buv.hitachiaircon.in/cms/materials/f01d9f346b.pdf

5. Formal Appointment and Evaluation Policy of the Board of Directors and Senior Management of the Company which has been formulated and recommended by Nomination and Remuneration Committee and adopted by Board of Directors covering appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under Section 178(3) has been placed on the website of the Company and Weblink is as under:

https://buy.hitachiaircon.in/cms/materials/858c85c293.pdf

6. No commission was paid to Directors of the Company, so no disclosure is required to be made under Section 197(14).

7. The Draft Annual Return in form MGT-7 as provided under sub-Section (3) of section 92 has been placed on the website of the Company and Weblink is as under:

https://buy.hitachiaircon.in/cms/materials/baab76c33b.pdf

8. No loan was granted by the Company to any person to purchase or subscribe to fully paid-up shares of the Company.

9. Details of the significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, including:

10. Secretarial Audit Report: Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Report of the Secretarial Auditors is annexed as Annexure B.

11. There is no material fraud reported by Auditors under Section 143(12) of the Companies Act, 2013 during the year under review.

12. Particulars of loans, investments or guarantees under section 186: Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered under Section 186. Company has not made any investment in securities of other Body Corporate. Company has given guarantee of Rs. 75 Million against the credit facilities availed by dealers.

13. There is no subsidiary and/or joint venture of the Company. Further, there is no associate Company in which Company has a significant influence. Therefore, no disclosure in this regard is required in Form AOC 1.

14. There is no Company which has become or ceased to be its subsidiary, joint venture or associate Company during the year.

15. During the year, Company has not accepted deposits covered under Chapter V.

16. There is no qualification, reservation or adverse remark or disclaimer made by the Auditors in their report.

17. There is no qualification, reservation or adverse remark or disclaimer made by the Company Secretaries in practice in their Secretarial Audit Report.

18. There is no significant and material order passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future.

19. Details of complaints relating to sexual harassment during the year under review:

Number of complaints pending as on 31st March, 2023 : Nil Number of complaints received during the year : 2 Number of complaints disposed of during the financial year : 2 Number of complaints pending as on 31st March, 2024 : Nil

20. The information as per Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 ('Rules'), forms part of this Report. However, as per second proviso to Section 136(1) of the Act and second proviso of Rule 5(3) of the Rules, the Report and Financial Statements are being sent to the Members of the Company excluding the statement of particulars of employees under Rule 5(2) of the Rules. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.

21. Related party transactions under Section 188(1): All transactions entered by the Company with related parties during the year under review were in ordinary course of business and on an arm's length basis. There were no material Related Party Transactions (RPTs) undertaken by the Company during the year that require shareholders' approval under Section 188 of the Act. Therefore, the disclosure in Form AOC-2 under Section 134(3)(h) of the Companies Act, 2013 is not applicable.

Policy on dealing with Related Party Transactions has been disclosed on Company's website and a weblink is as under: https://buy.hitachiaircon.in/cms/materials/3f846d49e9.pdf

22. Revision in Accounts or Board's Report: No revisions have been made in the Accounts or Board's Report.

23. Issue of Equity Shares with differential rights: No Equity Share were issued with differential voting rights during the year under review.

24. Issue of Sweat Equity Shares: No issue of Sweat Equity Share were made during the year under review.

25. Employee Stock Option and Employee Stock Purchase Schemes: No Employee Stock Option and Employee Stock Purchase Schemes were launched by the Company during the year under review.

26. Disclosure under Regulation 34(3) read with Schedule V of the SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015:

a. The Equity Shares of the Company are not delisted or suspended during the year under review.

b. Equity Shares of the Company were listed on the BSE Limited and the National Stock Exchange of India Limited.

c. Annual listing fees have been paid to both the stock exchanges mentioned above.

27. Dividend Distribution Policy has been disclosed on Company's website and a weblink is as under: https://buy.hitachiaircon.in/cms/materials/9de980b488.pdf

28. Company has complied with Secretarial Standards applicable to Company.

29. Information pursuant to 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 and Foreign exchange earnings and outgo are attached in Annexure C.

ACKNOWLEDGEMENT

Your Directors thank all Customers, Suppliers, Investors, Bankers and other stakeholders of the Company for their co-operation and continued support during the year. We look forward to their continued support in the future also.

We wish to place on record our sincere appreciation for the excellent work put in by the employees of the Company at all levels.