To The Members,

Kernex Microsystems (India) Limited.

Your Directors take pleasure in presenting the Thirty-Third Annual Report, along with the audited financial statements of your Company for the year ended 31^st March 2025.

1. Financial Results (Standalone)

During the year under review, the Company registered a Profit before tax of Rs. 3,337.43 lakhs for the year ended March 31, 2025, on a standalone basis. A summary of the financial performance of the Company on a standalone and consolidated basis for the financial year ended March 31,2025, is given below:

(Rs. In Lakhs)

The Standalone and Consolidated Financial Statements of the Company for the financial year ended March 31, 2025 have been prepared in accordance with the Indian Accounting Standard (Ind AS) as notified by the Ministry of Corporate Affairs and as amended from time to time.

Standalone

During the year under review, on standalone basis, the total Income from the operations increased by 882%. The same was Rs.18,965.11/- Lakhs for the current FY 2024-25 as compared to Rs.1,929.83/- Lakhs for the previous FY 2023-24. Total Net Profit increased by 348 %, the same was Rs.5,091.71/- Lakhs for the current FY 2024-25 as compared to Rs. (2,040.50)/- Lakhs for the previous FY 2023-24.

Consolidated

During the year under review, on consolidated basis, the total Income from the operations increased by 868.33%. The same was Rs.18,977.39 Lakhs for the current FY 2024-25 as compared to Rs.1,959.80 Lakhs for the previous FY 2023-24. Total Net Profit increased by 294 %, the same was Rs.5,004.88 Lakhs for the current FY 2024-25 as compared to Rs.(2,670.98) Lakhs for the previous FY 2023-24.

2. Amount, if any, which the Board proposes to, carry to any reserves

The Directors of the Company have not proposed to transfer any amount to reserves for the year under review.

3. Dividends

During the period under review, the Directors of the Company have not declared any dividend for the financial year.

4. State of Company's Affairs

Your Company recorded a turnover of Rs. 18,965.11 Lakhs for the financial year 2024-25. The Company has reported a profit before tax of Rs. 3,337.43 Lakhs, compared to a loss of Rs. (2,049.21) Lakhs in the previous financial year.

Domestic

• South Central Railways (SCR)

We are pleased to inform that the inspection by the Principal Chief Signal & Telecommunication Engineer (PCSTE) has been successfully completed. The inspection covered all technical, operational, and safety parameters as per the prescribed norms and has met the satisfaction of the inspecting authority.

Following the inspection, the handing-over process is currently in progress. This involves: Final documentation and submission of inspection reports, Resolution of any minor observations or comments, if any, Transfer of control and responsibility to the designated Railway authorities, Training and familiarization of the operational staff (if required),Signing of necessary hand-over certificates and records

This marks a critical step towards the formal commissioning of the system and commencement of regular operations. The project's nearing completion underscores the collaborative efforts and technical expertise involved, promising to enhance the region's railway network upon its conclusion.

The TCAS System - Generic Application Version 1.1 has been assessed and certified by Italcertifer

S.PA., Italy. As part of the assessment process, Italcertifer conducted a comprehensive evaluation of both the system design and the manufacturing phase, ensuring full compliance with applicable international standards and safety requirements.

This certification marks a significant milestone, reinforcing the reliability and conformity of the TCAS System Version 1.1 for operational use across south central railway zone.

KERNEX-VRRC JV has bagged order for Upgradation of Kavach Version 3.2 to 4.0 in Sadashivpet Road (Excluding) - Bidar - Parli Vaijnath - Parbhani(Excluding) Section of South Central Railway for an amount of Rs. 21.03 crores. Raw material procurement for the project is currently in progress, and purchase orders have already been placed to ensure timely execution of the work. The first batch of units are getting manufactured internally.

• North Central Railways (NCR) - A&B

Kernex Microsystems and KEC International have formed a consortium and successfully secured two significant contracts with a combined value of approximately Rs.536 crores. These orders pertain to the North Central Railway section, covering a total distance of 751.22 RKM. This collaboration marks a substantial achievement for both companies, highlighting their capabilities in the railway infrastructure sector.

Project 1 - NCR A (Section between Chipyana Buzurg (Excl) - Kanpur (Excl) in the North Central Railway)

> The first and second milestones of the project were completed successfully. The installation works for the balance Milestones is complete, testing & other activities are in progress

> Supply of units for the entire project is complete and the supply of spares is planned

> The loco installation is complete for all planned 139 locos

> The required documentation for the phase wise ISA activity is in progress.

Project 2 - NCR B (Section between Kanpur (Incl) - DDU (Excl) in the North Central Railway)

> The first and second milestones of the project were completed successfully. The installation works for the balance Milestones is complete, testing & other activities are in progress.

> Supply of units for the entire project is complete and the supply of spares is planned

> The loco installation is complete for all planned 153 locos

> The required documentation for the phase wise ISA activity is in progress.

Project 3 -ICF (Integral Coach Factory, Chennai)

> A total of 55 TCAS units have been supplied, out of which 25 units have been successfully installed and commissioned at designated locations, in compliance with all functional and technical specifications. The installation of the remaining units is currently in progress and is being carried out as per the planned schedule by ICF.

Project - 4 - SCR Project - Automatic block signaling system in Vemulapadu - Muddanuru section (ABS)

> Kernex Microsystems has formed a Joint Venture under name VRRC-KERNEX-CE-RVR JV, for comprehensive signaling and telecommunication works for provision of automatic block signaling system in Vemulapadu - Muddanuru section of Guntakal division in South Central Railway with a combined value of approximately Rs.109.45 crores covering a total distance of 70.73 RKM kilometers.

The entire project has been strategically divided into four milestones for phased execution and delivery. The current status of each milestone is as follows:

> Milestone 1 & Milestone 2:

Covering a total length of 18.69 Kms, the work under these two milestones has been successfully completed and commissioned.

> Milestone 3:

Spanning 20.11 Kms, the physical work has been fully completed. The milestone is currently awaiting final approval and clearance from the concerned Railway authorities.

> Milestone 4:

Encompassing 31.93 Kms, this milestone is presently under active execution, with installation and related works in progress as per schedule.

Project - 5 - Chittaranjan Locomotive Works (CLW) - Supply and Installation of Loco TCAS

> Your company has bagged order for Supply, Installation, Testing and commissioning and defect liability and long term annual maintenance of On-Board KAVACH equipment along with supply and installation of CAB roof antenna including complete wiring, harnessing, cabling and connection with Loco KAVACH System from Chittaranjan Locomotive Works. Total no. of units to be supplied is for 2,500 with a value of approximately Rs.2041.40 crores. Raw material procurement for the project is currently in progress, and purchase orders have already been placed to ensure timely execution of the work. The first batch of units are getting manufactured internally.

Project - 6 South Eastern Railways (SER) - (GD & GQ Routes)

> Kernex Microsystems (India) Limited, in consortium with MRT Signals Limited, has successfully secured a major contract valued at approximately ?325.33 crores. This prestigious order involves the Supply, Installation, Testing, and Commissioning of Kavach across GO & GO routes covering 688 RKM in the Kharagpur and Chakradharpur Divisions of South Eastern Railway.

> This significant win underscores the technical expertise and execution capabilities of both consortium partners in the field of advanced railway signaling and safety systems. It also marks a key milestone in their contribution to the Indian Railways' modernization and safety enhancement initiatives.

> The survey of stations in the Chakradharpur section is complete and work is in progress at Kharagpur section. The other survey activities like RSSI survey Is in progress for the entire section to meet the Milestone1 requirements. Material procurement is in progress for the units planned for Milestone 2 requirements. Appointment of assessor for the ISA activity is in progress.

Project - 7 - North Central Railways (NCR) - (BHUTESHWAR (INCL) - DHOLPUR (INCL) Section in NCR)

> KERNEX-KEC Consortium has bagged order for provision of KAVACH (Train Collision Avoidance System), along with Tower and 4X48 fibre OFC as a backbone on BHUTESHWAR (INCL) - DHOLPUR (INCL) Section in NCR valued at approximately ?85.14 crores. Raw material procurement for the project is currently in progress, and purchase orders have already been placed to ensure timely execution of the work.

> The survey of stations in the entire section is complete. The other survey activities like RSSI survey Is in progress for the entire section to meet the Milestonel requirements. Material procurement is in progress for the units planned for Milestone 2 requirements. Appointment of assessor for the ISA activity is in progress.

Project - 8 - MAS-GDR, MAS-AJJ, AJJ-RU SR Section of Chennai Division in Southern Railways - (SR)

> KERNEX- VRRC CONSORTIUM has bagged order for Provision Of Kavach (Train Collision Avoidance System), In MAS-GDR, MAS-AJJ, AJJ-RU Sections (271km) Of Chennai Division in SR valued at approximately ?173.11 crores. Raw material procurement for the project is currently in progress, and purchase orders have already been placed to ensure timely execution of the work.

> The survey of stations in the entire section is complete. The other survey activities like RSSI survey Is in progress for the entire section to meet the Milestonel requirements. Material procurement is in progress for the units planned for Milestone 2 requirements. Appointment of assessor for the ISA activity is in progress.

Project - 9 Arakkonam (AJJ Jn)-Jolarpettai(JTJ Jn) Section of Chennai Division in Southern Railways - (SR)

> KERNEX- VRRC CONSORTIUM has bagged order for Provision of KAVACH (Train Collision Avoidance System) along with Tower and 48 Fiber OFC as backbone Network in Arakkonam (AJJ Jn)-Jolarpettai(JTJ Jn) Section of Chennai Division in SR valued at approximately ?135 crores. Raw material procurement for the project is currently in progress, and purchase orders have already been placed to ensure timely execution of the work.

> The survey of stations in the entire section is complete. The other survey activities like RSSI survey Is in progress for the entire section to meet the Milestonel requirements. Material procurement is in progress for the units planned for Milestone 2 requirements. Appointment of assessor for the ISA activity is in progress.

Project - 10 Palanpur - Samakhiyali - Gandhidham Section (300.71 Km) On Ahmedabad Division of

Western Railway

> KERNEX-KEC Consortium has bagged order for Provision of KAVACH Version 4.0 or latest (formerly known as Train Collision Avoidance System-TCAS), including provision of communication back bone based on UHF and OFC on Palanpur - Samakhiyali - Gandhidham Section on Ahmedabad Division of Western Railway valued at approximately ?182.81 crores. Raw material procurement for the project is currently in progress, and purchase orders have already been placed to ensure timely execution of the work.

> The survey of stations is planned in the entire section and the PO's were released. Material procurement is in progress for the units planned for Milestone 2 requirements. Appointment of assessor for the ISA activity is in progress.

International

EGYPTIAN NATIONAL RAILWAYS (ENR), CAIRO

Project Overview:

• Total Gates Supplied: 136

• Total Gates Installed and Commissioned: 124

• Final Handover Status: In Progress Material Supply and Adjustments:

• 100% Material Supply Completed.

• The project was mutually agreed to be shortened from 136 Lx gates to 124 Lx gates.

• 2 Lx gates were repaired and rebuilt.

• Remaining material related to the 10 Lx gates that were not installed is currently being handed over to ENR. So far, 102 wheel sensors have been handed over.

Warranty Maintenance:

• Warranty maintenance for three groups (totaling 102 Lx gates) has been completed.

• Warranty maintenance for the fourth group (22 Lx gates) has also been completed.

Final Handover (FHO):

• FHO of Lx sites is ongoing.

• FHO has been completed for 81 out of 85 Lx sites that are currently operational.

• ENR has dismantled and removed 39 Lx sites out of the 124 Lx gates that were commissioned. Remaining Deliverables:

• 100 Booms were delivered to ENR for use as spares.

5. Change in Nature of business

Your Company primarily operates in the business of manufacturing safety systems for railways. During the period under review, there has been no change in the business activities of the Company.

6. Transfer of unclaimed dividend

There is no unclaimed dividend requiring transfer to the Investor Education and Protection Fund (IEPF) in the FY 2025-26.

7. Annual Return

The Annual Return of the Company as on March 31, 2025, in the Form MGT-7 in accordance with Section 92(3) and 134(3)(9) of the Act as amended from time to time and the Companies (Management and Administration) Rules, 2014 is available on the website of the Company at www.kernex.in.

8. Material changes and commitments, if any, affecting the financial position of the company, having occurred since the end of the Year and till the date of the Report

During the period under review, on 26^th June 2025, the Company has received approval from both the stock exchanges (i.e. BSE Limited and National Stock Exchange of India Limited) for Re-Classification of some of the Promoters/Promoters Group Shareholders to Public Category under Regulation 31A of SEBI (LODR) Regulations, 2015.

Except the mentioned above, there have been no material changes or commitments affecting the financial position of your Company that occurred between the end of the financial year to which the financial statements relate and the date of this Report.

9. Subsidiary and Joint Venture details with consolidated financial statement

Your Company has one 100% wholly owned subsidiary, Avant-Garde Infosystems Inc., in the USA, and Two Joint Ventures (KERNEX TCAS - JV & VRRC-KERNEX-CE-RVR-JV). There were no associate companies as of 31^st March 2025. There has been no change in the business activities of the subsidiary and the Joint Ventures during the year under review.

In accordance with Section 129(3) of the Companies Act, 2013, the Company has prepared consolidated financial statements, including the financials of the Company, the subsidiary, and the Joint Ventures, in the same form and manner as its own, in compliance with the Accounting Standards and the listing regulations of the stock exchanges. These consolidated financial statements are forming part of the Annual Report and will be laid before the Annual General Meeting.

A report containing detailed information about the subsidiary is annexed to this report as Annexure-A.

Companies which have become or ceased to be subsidiaries, associates, and joint ventures.

During the period under review, no company has become or ceased to be a subsidiary, associate, or joint venture of the Company.

10. Directors and Key Managerial Personnel

The following are the Key Managerial Personnel (KMP) of the Company pursuant to the provisions of Section 203 of the Companies Act, 2013, as on 31st March, 2025:-

The following are the Directors of the Company as on 31st March 2025 apart from Key Managerial Personnel mentioned above:

1. Mr. Adabala Seshagiri Rao

2. Mr. Pasupuleti Dinakara Rao

3. Mr. Ayyagari Viswanadha Sarma

4. Mr. Anji Raju Manthena

5. Mr. Janardhana Reddy Vinta

Independent Director Declaration:

All the Independent Directors of your Company, viz., Mr. A Seshagiri Rao, Mr. P Dinakara Rao and Mr. A

V Sarma have registered themselves with the databank maintained by the Indian Institute of Corporate Affairs, in terms of the provisions of amended Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2019 and the Companies (Creation and Maintenance of Databank of Independent Directors) Rules, 2019. Additionally, these Directors have successfully completed/exempted the test conducted by the Indian Institute of Corporate Affairs.

The Company has received the necessary declaration from each Independent Director in accordance with Section 149(7) of the Companies Act, 2013, read with Regulations 16 and 25(8) of the Listing Regulations that they met the criteria of independence as laid out in Section 149(6) of the Companies Act, 2013 and Regulations16(1)(b) and 25(8) of the Listing Regulations(LODR), 2015 and the same have been taken on record by the Board after undertaking due assessment of the veracity of the same.

The criteria for determining qualifications, positive attributes and independence of Directors is provided in the Nomination and Remuneration Policy of the Company is available on the website, viz., www.kernex. in at the web link https://www.kernex.in/company/investor-relations/#1664360427519-a34ca597-61d7

All the Independent Directors of the Company have complied with the Code for Independent Directors prescribed in Schedule IV to the Companies Act, 2013.

Appointments/Re- Appointments:

In accordance with the provisions of Section 152 of the Companies Act, 2013, Mr. Vinta Janardhan Reddy and Mr. M B Narayana Raju, Directors of the Company, retire by rotation at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-appointment.

Members are aware that Mr. Adabala Seshagiri Rao and Mr. Ayyagari Viswanadha Sarma appointed as an Additional Directors under Independent category of the company on 6^th September 2024. The above appointments were approved by the members at the 32^nd Annual General Meeting.

Further also, the nomination and remuneration committee and board of Directors had recommended to the members for the appointment of Mr. Pasupuleti Dinakara Rao as an Independent Director of the Company w.e.f. 30^th September 2024 and the appointment of Mr. Pasupuleti Dinakara Rao was approved by the members at the 32^nd Annual General Meeting.

Further also, based on the recommended of Nomination and Remuneration Committee and remuneration approved by Audit Committee, the Board appointed Ms. Sreelakshmi Manthena as a Managing Director of the Company for a period of three years, effective from 23^rd May 2025. This appointment was subsequently approved by the members through postal ballot conducted on 9^th August 2025 (i.e. Last date of receipt of Postal Ballot).

The brief profiles of the Directors who are to be appointed or re-appointed and necessary resolutions have been included in the notice convening the Annual General Meeting (AGM).

Further, during the year under review, Mr. Sreenivasa Rao R and Mr. Somasekhara Rao K were ceased from the office of the directors on 29th September 2024 as their term of office of 5 years completed.

Further, during the year under review, Mr. Narender Kumar Ceased to be a non-executive director w.e.f. 30th September 2024

Furthermore, during the year under review, Mr. A V S K Mohan ceased from the office of the director on 7th February 2025 as his term of office of 5 years completed.

Familiarization Programs for Independent Director's

The Company undertakes a comprehensive familiarization program for all Independent Directors, ensuring they are well-acquainted with their roles, rights, and responsibilities within the Company. This program includes detailed briefings on various aspects such as the nature of the industry, risk management, board evaluation processes, financial controls, management, board effectiveness, and strategic direction.

Directors are thoroughly informed about the regulatory compliances required under the Companies Act, SEBI (LODR) Regulations, 2015, and other relevant regulations, with their affirmation obtained for the same. To provide a deeper understanding of the Company's operations, Directors are given insights into the functioning of various divisions and departments, the Company's market share, the markets it operates in, as well as governance and internal control processes.

The Whole-Time Directors engage in personal discussions with Independent Directors from time to time, further enhancing their understanding of the Company's business and the regulatory framework in which it operates. These initiatives are designed to equip Independent Directors with the knowledge and context needed to effectively fulfill their roles, contributing to informed decision-making and robust governance within the Company.

11. Compliance with Secretarial Standards

The Company is adhering to the applicable Secretarial Standards as prescribed by the Institute of Company Secretaries of India (ICSI).

12. Meetings

During the year, eight meetings of the Board of Directors were held on 30^th May 2024, 13^th July 2024, 31^st July 2024, 17^th August 2024, 6^th September 2024, 14^th November 2024, 27^th January 2025 and 13^th February 2025 and the details are mentioned in the attached Report on Corporate Governance. The intervening gap between the two consecutive Board Meetings was within the prescribed period of 120 days as specified under the provisions of Section 173 of the Act and the Listing Regulations.

The number and dates of meetings held by the Board and its Committees, the attendance of Directors, and details of remuneration paid to them are provided separately in the Corporate Governance Report, in accordance with Section 134(3)(b) of the Companies Act, 2013.

None of the Directors are disqualified under Section 164(2) of the Companies Act, 2013. A certificate confirming non-disqualification of Directors, as required under Regulation 34 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, is annexed to this Annual Report.

13. Committees of the Board

The Board of Directors has established the following Committees:

a. Audit Committee

b. Nomination and Remuneration Committee

c. Stakeholders' Relationship Committee

d. Risk Management Committee

e. Corporate Social Responsibility Committee

Details of these Committees, including their composition, number of meetings held, and attendance at the meetings, are provided in the Corporate Governance section of this Report.

14. Nomination and Remuneration Policy of Directors, Key Managerial Personnel, and other Employees

In accordance with Section 178(1) of the Companies Act, 2013, the Board, on the recommendation of the Nomination and Remuneration Committee, has approved the criteria and policy for the selection and appointment of Directors, Key Managerial Personnel (KMPs), and their remuneration. The Remuneration Policy is detailed in the Report on Corporate Governance.

15. Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and the Listing Regulations, the Board has conducted an annual performance evaluation of its own members, including the Chairman of the Board, individual Directors, as well as the Audit Committee, Nomination and Remuneration Committee, and other Committees. The evaluation was based on various factors such as attendance, contribution, independence of judgment, and preparedness for meetings.

16. Particulars Relating to Remuneration of Directors/Key Managerial Personnel and Employees.

Disclosures pertaining to remuneration and other details as 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, are provided separately and annexed as Annexure-B to this Report.

In accordance with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company does not have any employees who were employed throughout the financial year and received remuneration of Rs.1.02 Crores or more, nor does it have employees employed for part of the year who received Rs.8.50 Lakhs or more per month.

Furthermore, the Company does not have any employee who, during the financial year under review, received remuneration which, in aggregate or at a rate in excess of that drawn by the Managing Director or Whole-Time Director, and holds, either individually or along with his spouse and dependent children, not less than 2% of the equity shares of the Company.

Remuneration received by Managing/Whole time Director from holding or subsidiary company.

The Whole-Time Directors have not received any remuneration from the subsidiary company. Details regarding this are provided in the Report on Corporate Governance.

17. Directors' Responsibility Statement

The Directors, to the best of their knowledge and belief, hereby state and confirm that:

a. In the preparation of the annual accounts, the applicable accounting standards have been followed, with proper explanations provided for material departures.

b. The Directors have selected appropriate accounting policies and applied them consistently. They have made reasonable and prudent judgments and estimates to provide a true and fair view of the Company's financial position at the end of the financial year and the loss incurred during that period.

c. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act, to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

d. The annual accounts have been prepared on a going concern basis.

e. Internal financial controls have been established and are adequate, and such controls are operating effectively.

f. Proper systems have been devised to ensure compliance with all applicable laws, and these systems are adequate and operating effectively.

18. Share Capital

During the year under review, there was no change in the Authorized, Issued, Subscribed and Paid-up Capital of the Company.

As on 31^st March 2025, the Authorized, Issued, Subscribed and Paid-up Capital of the Company is stands at Rs. 1675.94 Lakhs

Issue of equity shares with differential rights:

During the period under review, the Company did not issue any equity shares with differential rights. Issue of Sweat Equity Shares

During the period under review, the Company did not issue any sweat equity shares.

Details of Employee Stock Options

During the Year, the Company has introduced the "Kernex Microsystems (India) Limited Employees Stock Option Scheme- 2023" ("KMIL ESOS 2023/ or Scheme). The scheme has been approved by the Board of Directors at their meeting held on 14^th November 2023, and the Shareholders of the Company on 23^rd August 2024.

The objective of the Scheme is to motivate the Employees to contribute to the growth and profitability of the Company, retain the Employees and reduce the attrition rate of the Company, achieve sustained growth and the creation of Shareholder value by aligning the interests of the Employees with the longterm interests of the company, create a sense of ownership and participation amongst the Employees to share the value they create for the Company in the years to come and provide additional deferred rewards to Employees.

The Scheme would result in grant of options not exceeding 1,50,000 equity shares of the Company. Each option, when exercised, would be converted into one equity share of Rs. 10/- each (Rupees Ten Only) fully paidup. The quantum of benefits underlying the stock options issued to an eligible employee shall depend upon the number of stock options held by the employee and the market price of the equity shares as on the date of sale.

During the year under review, on 14^th November 2024, the Company had granted 43,000 stock options to its employees under Kernex Microsystems (India) Limited Employee Stock Option Scheme 2023 (KMIL ESOS 2023/ESOS 2023) after taking necessary approvals.

Following are the particulars of ESOP required to be disclosed as per Rule 12(9) of Companies (Share Capital and Debentures) Rules, 2014: -

Further after closure of the Financial Year 2024-25, on 23.05.2025 the Company has granted 1,200 options to the employees.

During the year, a reserve was made towards the outstanding of Employee Stock Options (ESOPs) and Employee Compensation Expenses (Share based payment expenses) for the year ended March 31, 2025, of Rs.1,456.63 lakhs, which includes Employee Benefit expenses detailed in Note No.30 in standalone financial statements and Note No.28 in consolidated financial statements.

Further, information pursuant to Section 62 of the Companies Act, 2013 read with Rules made there under and details of the Scheme as specified in Part F of Schedule - I of SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 are available on Company's website and may be accessed at www.kernex.in

Further, it is confirmed that the Scheme is in compliance with SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, and during the year under review there were no material changes in the Scheme.

Certificate from Mr. D S Rao, Practicing Company Secretary, Secretarial Auditors of your Company confirming that the scheme has been implemented in accordance with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, forms part of the Corporate Governance Report and is also placed on the website of your Company at www.kernex.in

19. Particulars of Loans, Guarantees and Investments.

During the period under review, the company has not provided Loans, Guarantees, and Investments covered under the provisions of Section 186 of the Companies Act, 2013. Further, the details of Loans, Guarantees and Investments are provided in the notes forming part of the financial statements.

20. Related Party Transactions

During the financial year 2024-25, all related party transactions entered by the Company were on an arm's length basis and in the ordinary course of business. There were no materially significant related party transactions involving Promoters, Directors, Key Managerial Personnel, or other designated persons during the year. Details of related party transactions under Section 188 of the Companies Act, 2013 are provided in Form AOC-2, annexed as Annexure-C to this report.

21. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and outgo:

As required under Section 134(3)(m) of the Companies Act, 2013 and Rule 8(3) of the Companies (Accounts) Rules, 2014, the information related to conservation of energy, technology absorption, and foreign exchange earnings and outgo is provided and annexed as Annexure-D to this report.

22. Risk Management

Your Company has established a comprehensive risk management framework to identify, assess, monitor, and mitigate various risks to its key business objectives. The major risks identified by the business and functional units are systematically addressed through ongoing mitigating actions. These risk management activities are discussed regularly at the meetings of the Audit Committee and the Board.

The Company has implemented robust internal control systems and processes to optimize risk mitigation measures. These systems are reviewed by the Audit Committee and approved by the Board.

The executive management receives periodic guidance from the Board to enhance risk mitigation strategies and take timely action as needed.

23. Corporate Social Responsibility (CSR)

During the financial year 2024-25, the provisions of Section 135 of the Companies Act, 2013 were not applicable to the Company. However, the Company has established a Corporate Social Responsibility (CSR) Policy and constituted a CSR Committee in accordance with Section 135 of the Companies Act,

2013. The details of the CSR Policy and Committee are available on the Company's website at www. kernex.in.

As per the provisions of Section 135 of the Companies Act, 2013 and the rules made thereunder, the Company is not required to spend any amount towards CSR for the financial year 2025-26, since the Company has incurred losses in the computation of average net profits of the three immediately preceding financial years

24. Details of Significant Material Orders passed by the Regulators / Courts / Tribunal impacting the going concern status and company's operation in future:

No significant or material orders were passed by regulators, courts, or tribunals that would impact the going concern status of the Company or its future operations. However, during the financial year 202425, the stock exchanges imposed penalties for the non-submission of financial results for the quarters ended 31st December 2023 and 31st March 2024.

Further, on 26^th June 2025, the Company has received approval from both the stock exchanges (i.e. BSE Limited and National Stock Exchange of India Limited) for Re-Classification of some of the Pro- moters/Promoters Group Shareholders to Public Category under Regulation 31A of SEBI (LODR) Regulations, 2015

25. Whistle Blower Policy / Vigil Mechanism

In compliance with Section 177(9) of the Companies Act, 2013, your Company has established a Whistle Blower Policy/Vigil Mechanism to facilitate the reporting of illegal or unethical behavior. Employees are encouraged to report violations of applicable laws, regulations, and the Company's Code of Conduct. The Audit Committee oversees and reviews reports received through this mechanism. Employees have the option to report directly to the Chairman of the Audit Committee. Throughout the year under review, no employee was denied access to the Audit Committee. The Directors and senior management are committed to maintaining the confidentiality of the reporting process and ensuring that whistleblowers are protected from any form of discrimination.

26. Deposits

During the year under review, your Company has not accepted any deposits within the meaning of Section 73 of the Companies Act, 2013, read with the Companies (Acceptance of Deposits) Rules,

2014. As such, no amount on account of principal or interest on deposits from the public was outstanding as of the Balance Sheet date.

Additionally, the Company has availed an amount of Rs. 995.00 lakhs as Inter Corporate Deposits, during the period 2024-25. These amounts were exempted from the definition of deposit. The

outstanding balances exempt from the definition of deposits, including Inter-Corporate Deposits (ICDs) and Secured and Unsecured loans, as on 31^st March 2025, amount to Rs.4,341.10 Lakhs

27. Registrar and Share Transfer agent:

During the year under review, Kfin Technologies Limited is the Registrar and Transfer Agent of the Company.

28. Auditors Statutory Auditors

Members are aware that in terms of Section 139, 141 and 142 of the Companies Act, 2013 ("the Act"), and the Companies (Audit and Auditors) Rules, 2014 made there under, appointed M/s. N S V R & Associates LLP (FRN:008801S/S200060), Chartered Accountants as Statutory Auditors of the Company to fill the casual vacancy caused by the M/s. P R S V & Co LLP (FRN: S200016), Chartered Accountants.

Further members of the Company at their 32^nd Annual General Meeting appointed M/s. N S V R & Associates LLP (FRN:008801S/S200060) , Chartered Accountants as Statutory Auditors of the Company to hold office for a period of 5years from conclusion of the 32^nd Annual General Meeting of the Company.

M/s. N S V R & Associates LLP (FRN:008801S/S200060), Chartered Accountants, Hyderabad, have confirmed that they are eligible to conduct and within the prescribed limits under Section 141 of the Companies Act, 2013.

The financial statements have been audited by M/s. N S V R & Associates LLP, Chartered Accountants, Statutory Auditors of the Company. The following qualifications/comments have been made by the Auditors:-

Comments/Qualifications reported by the Auditor.

a. The Company has a Wholly owned subsidiary namely Avant-Garde Infosystems Inc in USA which is presently supporting the business of the Company by identifying the sources, negotiating for and procuring electronic components from outside India. The subsidiary in the past, was involved in the trading of goods.

b. As per the latest unaudited financials of the subsidiary available as on 31^st March 2025, the accumulated loss of the subsidary company for the period ended 31^st March 2025 is USD 1.894 million (the equivalent Indian Rupees being Rs. 1,617.84 lakhs as per prevailing exchange rate), Which is exceeding the cost of investment made USD 1.822 million (1,275.97 lakhs (at Cost)). As a result, the carrying amount of the investment in the equity of subsidiary in the books of account of the Company amounting to Rs. 1,275.97 lakhs (at Cost) stand's impaired fully. Ind AS 36, requires the company to provide for impairment in respect of diminution in the value of investments by charging the amount of impairment to the Profit & Loss Account.

c. The Company made an investment of Rs. 8.00 lakhs in KERNEX TCAS JV - a controlled entity (subsidiary) formed to execute a railway safety project, in which the Company has 80% share in the profits and losses. In addition, the Company has also provided the long-term advance of Rs. 575.89 lakhs (Including interest amount). As per the latest audited financials of KERNEX TCAS JV as on 31^st March 2025, the JV has total assets of Rs 718.55 lakhs and outside liabilities (other than the advance due to the company) is Rs. 442.94 lakhs. Thus, the net assets available amounting to Rs 275.61 lakhs are not sufficient to recover the advance given to KERNEX TCAS JV which is Rs. 575.89 lakhs (Including interest amount) as on 31^st March 2025. Accordingly in our opinion the same investments and the advance are subject to impairment in standalone financial statements to the extent of Rs 308.28 lakhs.

Since the Company has not impaired the cost of investments in the equity of subsidiary and the advance granted to KERNEX TCAS JV to an extent of Rs. 1,584.25 lakhs (Rs. 1,275.97 lakhs on account of diminution in the value of the investment in equity of the wholly owned subsidiary & Rs. 308.28 lakhs on account of insufficient funds available in KERNEX TCAS JV), the profit and other Comprehensive Income for the year ended are overstated by the said amount. The Other Equity in the balance sheet for the year ended is overstated by Rs.1,584.25 lakhs.

Reply to the Comments made in the Statutory Auditors' Report

The management is of the view that AGI functions as a strategic cost centre contributing to procurement efficiencies and overall operational synergies to the group as a whole, and therefore, its recoverable value cannot be assessed independently and it shall be assessed at group level cash generating unit (CGU). The group's cashflows have been significantly improved during the year 2024-25. Therefore, the management is of the view that the value in use of the CGU at group level exceeds the total net assets of the CGU at group level. Hence no provision in respective of impairment under Ind AS 36 is required to be provided.

Regarding the Kernex TCAS JV, the management believes that the reported losses are temporary and attributable to project execution cycles. The ongoing projects under the JV are expected to generate sufficient future economic benefits and recover the invested amounts. Accordingly, no provision for impairment has been considered necessary at this stage.

Secretarial Auditor

In accordance with Section 204 of the Companies Act, 2013, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. D. S. Rao, Practicing Company Secretary, to conduct the Secretarial Audit for the financial year 2024-25.

The Secretarial Audit Report is annexed as Annexure-E to this report.

Reply to the Comments made in the Secretarial Auditors' Report

1. In accordance with SEBI Circular No. Cir/ISD/3/2011, the entire shareholding of Promoters/Persons Acting in Concert (PACs) has not been dematerialized. Consequently, the stock exchanges have placed the trading of the Company's shares under the trade-to-trade category.

The Company is actively pursuing compliance with SEBI Circular No. Cir/ISD/3/2011 by working towards the dematerialization of the entire shareholding of Promoters/Persons Acting in Concert (PACs). However, despite ongoing efforts, the Company has been unable to fulfill this condition due to a lack of response from the promoters regarding the dematerialization process.

As a result, the stock exchanges have continued to place the trading of the Company's shares under the trade-to-trade category until the required dematerialization is completed.

2. The delay in the submission of financials occurred due to pending account reconciliations with vendors.

Pursuant to the amended provisions of Regulation 24A of the SEBI (LODR) Regulations and Section 204 of the Act read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors have approved and recommended the appointment of Mr. D S Rao, Peer Reviewed Company Secretary in Practice as Secretarial Auditor of the Company for a term of up to 5 (Five) consecutive years to hold office from the conclusion of ensuing AGM till the conclusion of 38^th AGM of the Company to be held in the Year 2030, for approval of the Members at ensuing AGM of the Company. Brief resume and other details of Mr. D S Rao, Practicing Company Secretary, are separately disclosed in the Notice of ensuing AGM.

Mr. D S Rao has given his consent to act as Secretarial Auditor of the Company and confirmed that his aforesaid appointment (if made) would be within the prescribed limits under the Companies Act, 2013 & Rules made there under and SEBI (LODR) Regulations, 2015. He also confirmed that he is not disqualified to be appointed as Secretarial Auditor in terms of provisions of the Companies Act, 2013 & Rules made thereunder and SEBI (LODR) Regulations, 2015.

Internal Auditors:

On the recommendation of the Audit Committee, the Board of Directors appointed M/s. Thirupathi and Associates, Chartered Accountants, Hyderabad, as the Internal Auditors of the Company. The Internal Auditors submit their reports on a quarterly basis to the Audit Committee.

At the beginning of each financial year, an audit plan is rolled out with approval of the Company's Audit Committee. The plan is aimed at evaluation of the efficacy and adequacy of internal control systems and compliance thereof, robustness of internal processes, policies and accounting procedures and compliance with laws and regulations. Based on the reports of internal audit, process owners undertake corrective action in their respective areas. Significant audit observations and corrective actions are periodically presented to the Audit Committee of the Board.

Maintenance of Cost Records

The Company is not required to maintain Cost Records as specified by the Central Government under Section 148 (1) of the Act. Further based on the turnover of the Company for the FY 2024-25, the Company is required to maintain Cost Records and cost audit also applicable to the Company. The Company is adhering to compliance the same from the FY 2025-26.

In accordance with Section 148(3) and other applicable provisions, if any, of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014, the Board of Directors pursuant to the recommendation of the Audit Committee, had appointed M/s. MPR & Associates, Cost Accountants (Firm Registration No. 000413), Hyderabad, as Cost Auditors of the Company, to carry out the audit of the cost records of the products manufactured by the Company for the financial year ending March 31, 2026 at a remuneration of Rs.1,00,000/-.

The remuneration payable to the cost auditor is required to be placed before the Members in the general meeting for their ratification. Accordingly, a resolution seeking Members ratification for the remuneration payable to M/s. MPR & Associates, Cost Accountants, is included in the Notice convening the Annual General Meeting.

A Certificate from M/s. MPR & Associates, Cost Accountants, has been received to the effect that their appointment as Cost Auditor of the Company, if made, would be in accordance with the limits specified under Section 141 of the Companies Act, 2013 and the Rules framed there under.

Reporting of Frauds:

During the year under review, there have been no frauds reported by the Statutory Auditors/Secretarial Auditors and Internal Auditors of the Company under sub-section (12) of Section 143 of the Act.

29. Internal Financial Controls

The Company has established policies and procedures to ensure the orderly and efficient conduct of its business. These measures include adherence to the Company's policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, and timely preparation of reliable financial information. The adequacy of internal controls is reviewed by an independent Audit Committee of the Board.

30. Disclosure under the sexual harassment of women at workplace (prevention, prohibition, and redressal) Act, 2013

Your Company has implemented a Policy for the Prevention of Sexual Harassment of Women at the Workplace, in accordance with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. An Internal Complaints Committee (ICC) has been established to address and resolve any complaints related to sexual harassment. During the period under review, the Company has not received any complaints in this regard.

31. Compliance with the Maternity Benefit Act, 1961

The Company has complied with the provisions of the Maternity Benefit Act, 1961, including all applicable amendments and rules framed there under. The Company is committed to ensuring a safe, inclusive, and supportive workplace for women employees. All eligible women employees are provided with maternity benefits as prescribed under the Maternity Benefit Act, 1961, including paid maternity leave, nursing breaks, and protection from dismissal during maternity leave.

The Company also ensures that no discrimination is made in recruitment or service conditions on the grounds of maternity. Necessary internal systems and HR policies are in place to uphold the spirit and letter of the legislation.

32. Gender-Wise Composition of Employees

In alignment with the principles of diversity, equity, and inclusion (DEI), the Company discloses below the gender composition of its workforce as on the March 31, 2025.

This disclosure reinforces the Company's efforts to promote an inclusive work place culture and equal opportunity for all individuals, regardless of gender.

33. Downstream Investment

During the period under review, the Company neither has any Foreign Direct Investment (FDI) nor invested as any Downstream Investment in any other Company in India.

34. Details of revision of financial statement or the Report

During the period under review, there was no revision of the financial statement or the Report.

35. Corporate Insolvency Resolution process initiated under the Insolvency and Bankruptcy Code, 2016 (IBC)

During the period under review, no Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC) was initiated against the Company.

36. Failure to implement any Corporate Action

There were no instances of Corporate Insolvency Resolution Process (CIRP) initiated against the Company during the period under review.

37. Other General Disclosures

a. Consolidated Financial Statements

The Company is presenting Consolidated Financial Statements in addition to the Standalone Financial Statements for the financial year ended 31st March 2025. This inclusion aligns with the applicable accounting standards and regulatory requirements, providing a comprehensive view of the financial performance of the Company, its subsidiary, and its joint ventures. The consolidated statements offer shareholders a broader perspective on the overall financial health and operational results of the entire group.

b. Timely Holding of the Annual General Meeting

The Company has adhered to the statutory requirements by holding its Annual General Meeting (AGM) for the financial year 2024-25 within the prescribed timeframe. There was no delay in convening the AGM, demonstrating the Company's commitment to compliance with regulatory obligations and its efforts to maintain transparency and timely communication with its shareholders.

c. Cost Records Maintenance

As per the provisions of the Companies Act, 2013, the Company is not required to maintain cost records for the financial year 2024-25.

d. There were no instances where Your Company required the valuation for onetime settlement or while taking the loan from the Banks or Financial institutions

38. Statement of deviation or variation

During the year, the Company has not raised any funds from the public through private placement and preferential issue basis.

39. Management Discussion & Analysis (MDA)

The Management's Discussion and Analysis Report for the year under review, as stipulated under Regulation 34(2)(e) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is presented in a separate section forming part of this Annual Report. This report provides a detailed analysis of the Company's performance, industry trends, opportunities, risks, and outlook for the future. The Management's Discussion and Analysis Report is annexed as Annexure-E to this report for the shareholders' reference.

40. Corporate Governance Report

Your Company is committed to adhering to corporate governance requirements and maintaining the highest standards of integrity and transparency. In line with this commitment, the report on Corporate Governance, as stipulated under Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is provided separately in this Annual Report. The detailed Corporate Governance Report outlines the Company's governance structure, board composition, committee functions, and other governance practices, and is annexed as Annexure-F to this report.

Additionally, the requisite certificate from the Practicing Company Secretary, confirming compliance with the conditions of corporate governance as prescribed under the SEBI (LODR) Regulations, 2015 is attached to this report. This certificate serves as an affirmation of the Company's adherence to the prescribed governance norms

41. Suspension of Trading

The shares of the Company are listed and actively traded on both BSE Limited ("BSE") and the National Stock Exchange of India ("NSE"). During the period under review, there has been no suspension of trading of the Company's securities on either of these stock exchanges.

42. Acknowledgements:

Your Directors would like to express their sincere appreciation for the valuable guidance, assistance, and cooperation received from the Indian Railways, South Central Railways, NCR SER, SR, RDSO, Egyptian Railways, State Bank of India, HDFC Bank, ICICI Bank, CSB Bank Limited, Union Bank of India Government authorities, and our esteemed members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the commendable and dedicated contribution of all employees, whose hard work and commitment have been integral to the Company's success.