Your Directors present this Fortieth Annual Report of your Company ("the Company" or "Aarti Industries Limited") together with the Audited Financial Statements of the Company for the Financial Year ended March 31, 2023.

Your Company reported Gross Total Income at Rs. 7,226 Crores for FY 2022-23 as against Rs. 6,820 Crores for FY 2021-22. Similarly, the exports for the year were at Rs. 3,517 Crores for FY 2022-23 as against Rs. 2,950 Crores for FY 2021-22.

Likewise, the Consolidated Total income from operations for FY 2022-23 was at Rs. 7,283 Crores as compared to Rs. 6,871 Crores for FY 2021- 22 and exports for FY 2022-23 was Rs. 3,573 Crores v/s '3,007 Crores for FY 2021-22.

In accordance with the provisions of Companies Act, 2013, Regulation 33 of the Listing Regulations, and applicable Accounting Standards, the Audited Consolidated Financial Statements of the Company for the FY 2022-23, together with the Auditors' Report, form part of this Annual Report.

Your Company has transferred '55 Crores to the General Reserve (Previous Year: Rs.129 Crores).

As on March 31, 2023, the Company has 6 (Six) direct subsidiaries, namely, Aarti Corporate Services Limited, Innovative Envirocare Jhagadia Limited, Aarti Polychem Private Limited, Aarti Bharuch Limited, Aarti Spechem Limited and Alchemie (Europe) Limited, and 2 (Two) indirect subsidiaries namely Shanti Intermediates Private

Limited and Nascent Chemical Industries Limited both hold through Aarti Corporate Services Limited.

During the year, the Hon'ble National Company Law Tribunal (NCLT), Ahmedabad Bench vide its order dated September21,2022approved the Scheme of Arrangement ("Scheme") between Aarti Industries Limited and Aarti Pharmalabs Limited and their respective shareholders under the provisions of Section 230-232 of Companies Act, 2013. Pursuant to the Scheme, Aarti Pharmachem Limited and Aarti USA Inc. ceased to be subsidiaries of your Company.

Further, the Ministry of Corporate Affairs has approved incorporation of Wholly Owned Subsidiary (WOS) of your Company, Augene Chemical Private Limited, bearing CIN:U20299GJ2023PTC141303 on May 18, 2023. The Registered Office of the Company is situated at Gujarat.

The Company does not have any material subsidiary whose net worth exceeds 10% of the consolidated net worth of the Company in the immediately preceding accounting year or has generated 10% of the consolidated income of the Company during the previous Financial Year. A policy on material subsidiaries had been formulated and is available on the website of the Company and the web link thereto is: https://www.aarti-industries.com/investors/ GetReport Rs.strcont id=A8DuSuG1AT8OIQL33MM

During the year, the Board of Directors reviewed the affairs of the subsidiaries. In accordance with Section 129(3) of the Companies Act, 2013, we have prepared consolidated financial statements of the Company and all its subsidiaries, which form part of the Annual Report.

Further a statement containing salient features of the financial statement of our Subsidiaries/Jointly controlled entity in the prescribed format AOC-1 is included in the Report as Annexure-A and forms an integral part of this Report.

Your Company's Equity Share Capital as on March 31, 2023 was as follows:

During the year 2022-23, there was no change in the authorized and paid up share capital of the Company.

The State of your Company's affairs is given in the Management Discussion and Analysis, which forms part of this Annual Report.

I n accordance with the prevailing provisions of the Section 149 of the Companies Act, 2013 read with Regulation 17 of the Listing Regulations, as amended from time to time, as on March 31, 2023, the Board of Directors, comprises Sixteen Directors (with Six Executive Directors, Two Non-Executive NonIndependent and Eight Independent Directors).

At the 39th AGM held on September 26, 2022, Shri Rajendra V. Gogri (DIN: 00061003) was re-appointed

as the Managing Director of the Company for a period of five years w.e.f. July 1, 2023.

During the year, Smt. Hetal Gogri Gala (DIN: 00005499) had conveyed her intention to step down as an Executive Director since she had taken up executive role as 'Vice Chairperson and Managing Director of 'Aarti Pharmalabs Limited' effective from October 17, 2022, however, she continues to be a 'Non-Executive Director' of the Company.

Shri Narendra Jagannath Salvi (DIN: 00299202) had conveyed his intention to step down as an Executive Director since he had taken up executive role as the 'Managing Director' of 'Aarti Pharmalabs Limited' effective from October 17, 2022, however, he continues to be a 'Non-Executive Director' of the Company.

In accordance with the regulatory requirements Shri Narendra J. Salvi retires by rotation in ensuing 40th Annual General Meeting. However, vide his letter dated June 21, 2023, he conveyed his intention to retire and requested the Board not to consider his re-appointment stating the reason 'Preoccupation'. The Board of Directors in its meeting held on June 28, 2023, took it on record and considered as 'not to fill up' the vacancy thereby caused.

In accordance with the regulatory requirements Shri Kirit R. Mehta (DIN: 00051703) also retires by rotation in the ensuing 40th Annual General Meeting. However vide letter dated June 21,2023 he conveyed his intention to retire due to health related reasons and requested the Board not to consider his re-appointment. The Board of Directors in its meeting held on June 28, 2023, took it on record and considered to 'fill up' the vacancy thereby caused.

Pursuant to Regulation 36 of the Listing Regulations read with Secretarial Standard-2 on General Meetings, a brief profile of the Directors proposed to be appointed /re-appointed is made available, as an Annexure to the Notice of the Annual General Meeting.

Further, based on recommendation of Nomination and Remuneration Committee, the Board of Directors in its meeting held on June 28, 2023, appointed Prof. Aniruddha B. Pandit (DIN: 02471158) and Shri Shekhar S. Khanolkar (DIN: 02202839) as Additional Directors in the category of Independent Directors and Shri Ajay Kumar Gupta (DIN: 08619902) as Additional Director in the category of Executive Director, all with effect from June 29, 2023. Their appointments are subject to approval of the Members at the ensuing AGM of the Company. The brief resume regarding their appointment is given in the Notice.

Pursuant to the provisions of Regulation 34(3) read with Schedule V to the Listing Regulations, the Company has obtained a Certificate from CS Sunil M. Dedhia (COP No. 2031), of Sunil M. Dedhia & Co. Company Secretary in Practice and the Secretarial Auditor of the Company, certifying that none of the Directors of the Company have been debarred or disqualified from being appointed or continuing as Directors of companies by the Securities and Exchange Board of India or by the Ministry of Corporate Affairs or by any such statutory authority. The said Certificate is annexed to the Corporate Governance Report of the Company for the Financial Year 2022-23.

During the year under review, there was no change in the Key Managerial Personnel of the Company.

In accordance with Section 149(7) of the Companies Act, 2013, all Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 16 of the Listing Regulations.

In the opinion of the Board of Directors, the Independent Directors fulfil the conditions specified in the Companies Act, 2013 read with the rules made thereunder as well as Listing Regulations and are independent from Management, hold the highest degree of integrity and possess expertise in their respective fields with enormous experience.

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

All the Independent Directors of the Company have enrolled their names in the 'Independent Directors Data Bank' maintained by Indian Institute of Corporate Affairs ("IICA").

The Company has a Familiarisation programme for its Independent Director which is imparted at the time of appointment of an Independent Director on Board as well as annually. During the year, the Independent Directors of the Company were familiarised and the details of familiarisation programmes imparted to them are placed on the website of the Company and the web link thereto is: https://www.aarti-industries. com/Upload/PDF/Familiarisation-Programme- FY-2022-23.pdf

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013:

a. That in the preparation of the annual financial statements for the year ended March 31, 2023, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b. That the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the Financial Year and of the profit and loss of the company for that period;

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

d. That Directors have prepared the annual accounts on a going concern basis;

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

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

The Board of Directors met eight (8) times during the Financial Year under review. The details of the number of meetings of the Board and its Committees held during the Financial Year 2022-23 and the attendance of each Director/Member at these meetings are provided in the Corporate Governance Report forming part of the Annual Report. The intervening gap between the Board meetings was within the period prescribed under the Companies Act, 2013 and the Listing Regulations.

During the year, the Company has declared an Interim Dividend of '1/- (@ 20%) each per share.

Your Board of Directors recommend a Final Dividend of '1.50 (@ 30%) per share subject to approval of the Shareholders at the ensuing 40th AGM, aggregating to a total Dividend of Rs.2.50 (@ 50%) per share (of Rs.5 each) for the financial year 2022-23, resulting in a total payout Rs.90.63 Crores (Previous Year: Rs.126.88 Crores).

The Dividend payout is in accordance with the Dividend Distribution Policy which is available on the website of the Company.

As per Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"), the top 1000 listed companies shall formulate a Dividend Distribution Policy. Accordingly, the policy was adopted to set out the parameters and circumstances that will be taken into account by the Board in determining the distribution of dividend to its shareholders and/or retaining profits earned by the company. A policy is available on the website of the Company and the web link thereto is: https://www.aarti-industries.com/investors/ GetReport Rs.strcont id=b22bcY6v1CAOIQL33MM

Your Company through, Aarti Foundation and Dhanvallabh Charitable Trust - Our CSR arms undertake community interventions to enhance the lives of the communities. Besides our direct involvement, we partner with numerous implementing agencies to carry out need assessment and make impactful interventions. Our Focus areas during the year has been;

• Education & Skill Development

• Childcare & Healthcare Facilities

• Women Empowerment & Livelihood Opportunities

• Cluster & Rural Development

• Disaster Relief & Rehabilitation

• Eradication of Hunger & Poverty

• Water Conservation & Environment

• Research & Development work for upliftment of Society

The detailed policy on Corporate Social Responsibility is available on the website of the Company on the web link thereto is:

https://www.aarti-industries.com/investors/ GetReport Rs.strcont id=rOxVNykXxlkOIOL33MM

A brief note on various CSR initiatives undertaken during the year including the composition of the CSR Committee is presented in this Annual report. The CSR annual report is annexed as Annexure-B and forms an integral part of the Report.

The details of the composition of the Audit Committee, terms of reference, meetings held, etc. are provided in the Corporate Governance Report, which forms part of this Report. During the year there were no cases where the Board had not accepted any recommendation of the Audit Committee.

The Company has established a Vigil Mechanism and Whistle Blower Policy for its Directors and Employees to report concerns about unethical behaviour, actual or suspected fraud, actual or suspected leak of UPSI or violation of Company's Code of Conduct. It also provides for adequate safeguards against the victimisation of employees and allows direct access to the chairperson of the audit committee in exceptional cases The said policy has been posted on the website of the Company and the web link thereto is:

https://www.aarti-industries.com/investors/ GetReport Rs.strcont id=ZMPluse33MMnrACtosYOIOL33MM

The Company affirms that no person has been denied access to the Audit Committee Chairman.

The Company has a Policy on Materiality of Related Party Transaction and dealing with Related Party Transaction which is uploaded on the Company's website at the web- link given below:

https://www.aarti-industries.com/investors/ GetReport Rs.strcont id=TNJu6Gnbr7sOIQL33MM

All related party transactions that were entered into during the FY 2022-23 were on arm's length basis and were carried out in the ordinary course of the business.

There are no materially significant related party transactions made by the Company with Promoters, Key Managerial Personnel or other Designated Persons which may have potential conflict with interest of the Company at large.

The related party transactions are approved by the Audit Committee. Omnibus approval is obtained for the transactions which are foreseen and repetitive in nature. A statement of related party transactions is presented before the Audit Committee on a quarterly basis, specifying the nature, value and terms and conditions of transactions. A report of factual findings arising out of the accepted procedures carried out in regard to transactions with Related Parties is given by the Statutory Auditors on quarterly basis and the same is placed before the Audit Committee.

The details of related party transactions are provided in the accompanying financial statements.

Since all related party transactions entered into by the Company were in ordinary course of business and were on an arm's length's basis, Form AOC-2 is not applicable to Company.

Your Company continues to manage its treasury operations efficiently and has been able to borrow funds for its operations at competitive rates. During the Financial Year, your Company had dual rating for its Commercial Papers (CPs) Programme of Rs.400 Crores, which are revalidated from time to time:

During the Financial Year, the Company has issued CPs amounting to '875 Crores in various tranches, out of which CPs amounting to '475 Crores were listed on BSE Limited. Further, CPs amounting to '800 Crores were redeemed during the Financial Year and the Company has not defaulted on payment of any dues to the Investors.

Your Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013 [(i.e., deposits within the meaning of Rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014)], during the Financial Year 2022-23.

Particulars of loans given, investments made, guarantees given and securities provided during the year under review and as covered under the provisions of Section 186 of the Companies Act, 2013 have been disclosed in the notes to the standalone financial statements forming part of the Annual Report.

The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in an Annexure and forms part of this report.

I n terms of Section 136(1) of the Companies Act, 2013, the Report and the Accounts are being sent to the Members excluding the aforesaid Annexure. Any Member interested in obtaining a copy of the Annexure may write to the Company Secretary at the Registered Office of the Company for a copy of it.

Employees being our key stakeholders, the HR initiatives and policies revolve around garnering the opportunities to serve our employees better. In an attempt to devise a seamless succession planning process through VTS (Vertical Talent Strategy), we developed VTS for 23 Verticals, identifying high-potential employees and successors for critical roles. Our Talent Management team worked along with the verticals to create action plans for building a talent growth pipeline. Moving ahead in our journey of being a 'Preferred employer of Choice', we received 100% participation in Voice 3.0-our employee engagement survey.

Following the excellent execution of Vertical Action Plans, Voice 3.0 also saw positive scores in many areas of employee engagement. The phenomenal scores in Voice 3.0 are also accredited to Metamorphosis sessions. These sessions have empowered employees by fostering a belief in long-term goals, belongingness, and leadership among executives and thus driving engagement.

In FY 23 we onboarded 1921 bright minds. Towards our strategy to groom internal talent and ensure career growth opportunities for them, we drove internal growth from 23% to 44% in FY 22-23 through Navodaya and Talent Spotting and we target 70% growth in FY 23-24. A state-of-the-art infrastructure has been developed in Mumbai and Vadodara to ensure employee comfort.

To further upskill and train employees in different areas of effectiveness, a robust training calendar and upskilling programs have been implemented (Eklavya, Kshitij, Utkarsh, Nipun, New FTM, GTD, NICMAR, ME, SKV, etc.). We have also developed a long-term incentive plan (PSOP) for employees

Aarti Industries Limited Performance Stock Option Plan 2022 ("PSOP 2022") was approved by the shareholders through Postal Ballot on October 29, 2022, under which stock options would be granted to the eligible employees, in compliance with the provisions of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

Further, pursuant to the PSOP 2022, the Company has granted 80,142 options to eligible employees as per the recommendation of the Nomination and Remuneration Committee, at its meeting held on May 6, 2023.

Your Company has received a certificate from CS Sunil M. Dedhia (COP No. 2031), of Sunil M. Dedhia & Co. Company Secretary in Practice and the Secretarial Auditor of the Company that PSOP 2022 has been implemented in accordance with the provisions of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 and the resolution passed by the shareholders. Any request for inspection of the said Certificate may please be sent to investorrelations@ aarti-industries.com

There are no other material changes and commitments affecting the financial position of the Company occurred between the end of the Financial Year to which these financial statements relate and the date of the report.

Pursuant to the applicable provisions of the Companies Act, 2013 read with IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 ('the Rules') all unpaid or unclaimed dividends are required to be transferred by the Company to the IEPF established by the Government of India, after the completion of seven years. Further, according to the rules, the shares on which Dividend has not been paid and claimed by the Shareholders for seven consecutive years or more shall be transferred to the Demat account of the IEPF Authority. Accordingly, the Company has transferred the unclaimed and unpaid dividends of '46,80,672/-. Further, 48,654 corresponding shares were transferred as per the requirement of the IEPF Rules.

Pursuant to Section 92(3) read with Section 134(3)(a) of the Companies Act, 2013, the Annual Return as on March 31,2023 is available in prescribed format on the Company's website on www.aarti-industries.com

Corporate Governance essentially involves balancing the interests of a Company's stakeholders. The Company continues to nurture a culture of good governance practices across functions, offices and manufacturing facilities.

Your Company has complied with the mandatory Corporate Governance requirements stipulated under the Listing Regulations. The separate Report on Corporate Governance is annexed hereto forming part of this report. The requisite certificate from Gokhale & Sathe, Chartered Accountants is attached to the Report on Corporate Governance.

Pursuant to Regulation 34 read with Schedule V to the Listing Regulations, Management's Discussion and Analysis for the year under review is presented in a separate section forming part of the Annual Report.

The Listing Regulations mandate the inclusion of the Business Responsibility & Sustainability Reporting as part of the Annual Report for top 1000 listed entities based on market capitalisation. BRSR for the year under review, as stipulated under Regulation 34 (f) of Listing Regulations read with SEBI Circular No. SEBI/HO/CFD/ CMD-2/P/CIR/2021/562 dated May 10, 2021 is in a separate section forming part of the Annual Report. The non-financial sustainability disclosures have been independently assured by TUV Nord.

Pursuant to the provisions of Companies Act, 2013 and the Listing Regulations, a structured questionnaire was prepared after taking into consideration various aspects of the Board's functioning, composition of the Board and its Committees, culture, execution and performance of specific duties, obligations and governance.

The performance of the Committees and Independent Directors were evaluated by the entire Board of Directors except for the Director being evaluated. The performance evaluation of the Chairman, NonIndependent Directors and Board as a whole was carried out by the Independent Directors. The Board of Directors expressed their satisfaction with the outcome of evaluation and the process followed thereof.

Pursuant to Section 178 of the Companies Act, 2013 and Regulation 19 of the Listing Regulations, your Company has in place a Nomination and Remuneration Policy which lays down a framework in relation to remuneration of Directors, Key Managerial Personnel and Senior Management of the Company. The policy also lays down criteria for selection and appointment of Board Members. The said policy has been posted on the website of the Company and the web link thereto is: https://www.aarti-industries.com/investors/ GetReport Rs.strcont id=pTvbr0JryL0OIQL33MM

The details of this policy are given in the Corporate Governance Report.

Your Company recognises that risk is an integral and unavoidable component of business and is committed to managing the risk in a proactive and effective manner. The Company aims to use risk management to take better informed decisions and improve the probability of achieving its strategic and operational objectives.

In compliance with Regulation 21 of Listing Regulations, your Company has a Risk Management Committee consisting of Shri Rajendra Gogri (Chairman), Shri Rashesh Gogri, Shri Bhavesh R. Vora, Smt. Hetal Gogri Gala, Shri Renil Gogri, Shri Narendra J. Salvi, Shri Chetan Gandhi and Shri Ajaykumar Gupta. The Committee through its risk management framework continuously identifies, evaluates and takes appropriate measures to mitigate/ minimise various elements of risks. The Risk Management Committee meets periodically to ensure that appropriate methodologies, processes and systems are in place to monitor and evaluate risks associated with the business of the Company and also to monitor and oversee the implementation of the Risk Management Policy.

The said policy has been posted on the website of the Company and the web link thereto is: https://www.aarti-industries.com/investors/ GetReport Rs.strcont id=dCIEPn8aX6wOIQL33MM

The Company with its sheer focus committed to achieve 100% compliance. We have adopted a third-party managed IT-based Compliance Management System. It has a repository of all applicable regulations and requisite compliances. It has an in-built alert system that sends alerts to the users and intimates concerned personnel about upcoming compliances. Last year, we added a module on 'License Management' into our compliance management system. Newly added licence management system helps us in tracking the validity and renewal process of all applicable licences. We initiate the licence renewal process well in advance to avoid any delays.

Sustainability & Safety is very important for Chemical Industry in general and very critical for Aarti Industries in particular, that is the reason our strategic statement is 'Sustainability for Sustainable Growth'. We at Aarti Industries Limited (AIL), are committed to maintain the world-class standards of health, safety, environment protection, security, human rights, product safety & quality and processes while conducting all our business operations, services, and expansion activities.

We believe that Safety is not one person's job but it is for all the employees of the company from operators to Directors. In the Chemical Industry the most important thing for safety is the 'Operational Discipline'.

To enable the Best Safety culture, ALL has created an unique concept of Aarti Engaging Leaders, committed to live by Aarti Values of Care, Integrity and Excellence and enabling everyone to listen and speak powerfully.

Health and Safety at ALL has been enhanced through following interventions:

• Several Process Initiative Common (PICs) with specific objectives to enhance safety and sustainability across the organisation

• Robust Management governance through Apex sustainability council and sub councils for ensuring progress in various domains of sustainability

• Safety audit framework