Director's Report


Timken India Ltd
BSE Code 522113 ISIN Demat INE325A01013 Book Value (₹) 293.50 NSE Symbol TIMKEN Div & Yield % 0.05 Market Cap ( Cr.) 21,211.68 P/E * 59.71 EPS * 47.23 Face Value (₹) 10
* Profit to Earning Ratio
* Earning Per Share

To the Members,

th

The Board of Directors has pleasure in presenting 36 Annual Report of the Company for the year ended 31 March, 2023.

Financial Summary

(Rs in million)

Particulars Financial Year ended 31 March, 2023 Financial Year ended 31 March, 2022
Revenue from Operations 28,066.10 22,032.44
Add: Other Income 531.75 142.89
Total Income 28,597.85 22,175.33
Less: Total Expenses 23,362.64 17,793.49
Profit before tax (PBT) 5,235.21 4,381.84
Less: Tax expenses 1327.76 1110.79
Net Profit after tax (PAT) 3,907.45 3,271.05
Add: Other Comprehensive Income 7.68 (23.92)
Total Comprehensive Income 3,915.13 3,247.13

During FY 2022-23, the Company recorded a strong revenue growth of 27% YOY. This increase is driven by growth across most of the end market sectors. Total expenses increased by 31% during the same period on account of inflationary impact on metals and other expenses. The PBT is Rs 5,235.21 million in FY 2022-23 as compared to Rs 4,381.84 million in FY 2021-22. Increase in PBT can be attributed to increase in sales due to increased business volume. The Financial Statements for FY 2022-23 have been prepared in accordance with Indian Accounting Standards (“Ind-AS”).

Financial Position

The Company continues to remain debt free and generated adequate cash flow to meet its working capital needs and long-term growth projects. Cash and cash equivalents and investments in mutual funds as at 31 March, 2023 were Rs 3,942.94 million as compared to Rs 1,137.46 million as at 31 March, 2022. The year also saw better working capital management in the areas of receivables, payables and inventory which is also reflected under cash flow and financial ratios section. For more details on financial position, please refer Management Discussion and Analysis.

The business of the Company has not undergone any change in the financial year under review.

Post Balance sheet event

There is no reportable event comprising material changes and commitments between the date of financial year end and the date of this

report affecting the financial position of the Company.

Reserves

The Board of Directors of the Company did not propose to transfer any amount to reserves during the financial year under review.

Dividend

The Board of Directors, subject to approval of Members at ensuing Annual General Meeting ('AGM'), has recommended dividend of Rs. 1.5 per equity share of Rs. 10/- each fully paid up (15%) for the year ended 31 March, 2023. Dividend Distribution Policy is available on the website of the Company and can be accessed at www.timken.com/en-in/investors/policies/.

New Manufacturing Facility

New manufacturing facility is being set up at Bharuch, Gujarat to manufacture Spherical Roller Bearings (‘SRB') and Cylindrical Roller Bearings (‘CRB') and components thereof. The Company already has manufacturing plant at Bharuch, Gujarat wherein primarily Tapered Roller Bearings (‘TRB') and its components are manufactured. At the same premises wherein existing plant is situated, new facility will be set up to manufacture SRB and CRB and components thereof which will enhance manufacturing capacity of the Company. Commercial production from new facility is expected to start in the month of January, 2025. The Company will be investing approx. Rs 600 crore for setting up this facility.

Directors and Key Managerial Personnel

As on 31 March, 2023, the Board comprised 8 Directors out of which 4 were Independent, 2 were Executive and 2 were Non-Executive Directors. During the year under review:

• Re-appointment of Mr. Sanjay Koul (DIN: 05159352) as Managing Director was approved by the members at 35 AGM of the Company.

• Appointment of Mr. George J Ollapally (DIN: 09607523) as an Independent Director was approved by members at 35 AGM of the Company.

• Appointment of Mr. Veerappan V (DIN: 01593254) as an Independent Director was approved by members at 35 AGM of the Company.

• Appointment of Mr. Hansal Patel (DIN: 09607506) as a Director was approved by members at 35 AGM of the Company.

Mr. Bushen Lal Raina (DIN: 00182160) ceased to be a part of the Board of Directors of the Company due to his sad demise on 2 August, 2022.

Mr. Douglas Smith (DIN: 02454618), Director will retire by rotation at 36 AGM and being eligible, offers himself for re-appointment.

Based on recommendation of the Nomination and Remuneration Committee, the Board of Directors of the Company has approved:

Appointment of Mr. Ajay Sood (DIN: 03517303) as an Independent Director of the Company w.e.f. 1 October, 2023 for a period of 2 years subject to approval of the members of the Company.

• Appointment of Dr. Lakshmi Lingam (DIN: 10181197) as an Independent Director of the Company w.e.f. 1 October, 2023 for a period of 2 years subject to approval of the members of the Company.

In the opinion of the Board, aforesaid persons possess requisite expertise, skills, integrity and experience and their association and leadership will be beneficial to the Company. Hence, the Board has recommended their appointment at 36 AGM.

The Company is in receipt of Notices under Section 160 of the Companies Act, 2013 (the ‘Act') in respect of proposed appointment of Mr. Ajay Sood and Dr. Lakshmi Lingam as mentioned above at ensuing AGM.

Pursuant to Section 203 of the Act, Mr. Sanjay Koul as Managing Director, Mr. Avishrant Keshava as Chief Financial Officer and Mr. Mandar Vasmatkar as Company Secretary serve as whole-time Key Managerial Personnel (‘KMP'). During the year under review, there has been no change in KMP.

The Company has received necessary declarations from all Independent Directors of the Company confirming that each of them has met with the criteria of independence laid down in Section 149 of the Act and Regulation 16 of Listing Regulations. Independent Directors' details have been included in the databank of Independent Directors maintained by Indian Institute of Corporate Affairs (‘IICA').

Corporate Governance

Pursuant to Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations'), Corporate Governance Report along with Compliance Certificate from Practicing Company Secretary is attached as Annexure - I. Details relating to composition of the Board and its Committees along with its meetings held during FY 2022-23 are given in Corporate Governance Report which is attached as Annexure - I. One meeting of the Independent Directors was held on 20 February, 2023 which was attended by all the Independent Directors without participation of Non-Independent Directors and members of management.

Directors' Responsibility Statement

In pursuance of Section 134 (5) of the Act, the Directors hereby confirm that:

a) in the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made;

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

c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) they have prepared the annual accounts on a going concern basis;

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

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

Nomination and Remuneration Policy

Based on recommendation of the Nomination and Remuneration Committee, the Board has laid down a Policy for remuneration of Directors, KMPs and other employees. The salient features of the Policy are as follows:

• It covers role of the Nomination and Remuneration Committee in line with Section 178 of the Act and Listing Regulations.

• It lays down factors and personal specifications that need to be considered for appointment of a Director.

• It specifies terms and conditions that need to be considered for appointment of Directors, KMPs and Senior Managerial Personnel including tenure of appointment, removal and retirement.

• It also lays down parameters for payment of remuneration to Executive Directors, Non- Executive/ Independent Directors, KMPs and Senior Managerial Personnel.

During the year under review, no change was made in the Nomination and Remuneration Policy. This Policy is disclosed on the Company's website at https://www.timken.com/en-in/investors/policies/.

Ratio of Remuneration

Pursuant to Section 197 of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel)

Rules, 2014, as amended from time to time, applicable details are given in specified format which is attached as Annexure II.

Information required under Section 197(12) of the Act read with Rules 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended from time to time, is annexed to this report. However, this Report and the Financial Statements are being sent to the shareholders of the Company excluding aforesaid information. Any shareholder interested in obtaining such information may write to the Company Secretary & Chief - Compliance at the Registered Office of the Company. The said information is also available for inspection at the Registered Office during working hours up to the date of AGM.

Formal Annual Evaluation of the Board of Directors, its Committees and individual Directors

The Board has carried out performance evaluation of the Board of Directors as a whole, various Committees of the Board and individual Directors based on performance evaluation criteria. Each Director has provided feedback in writing to Chairman about the Board as a whole, various Committees and individual Directors. Further, Independent Directors in their separate meeting held on 20 February, 2023 have evaluated performance of Non- Independent Directors, Chairman and the Board as a whole.

Risk Management

The Board of Directors of the Company has constituted Risk Management Committee which inter-alia is responsible for assessment of risks, establishment of framework for monitoring risks and developing strategy for mitigation of various risks. During the year under review, new Risk Management Policy was approved mainly to capture the new Enterprise Risk Management processes that were adopted by the Company as per ISO 31000: 2018 to continually improve risk and opportunity management at enterprise level. Updated Policy is disclosed on the Company's website at https://www.timken.com/en-in/investors/policies/.

Vigil Mechanism/Whistle Blower Policy

For details, please refer Corporate Governance Report attached as Annexure I.

Corporate Social Responsibility

The Corporate Social Responsibility (‘CSR') Committee of the Board is responsible for evaluation and implementation of CSR Projects. The Company has spent Rs. 3,42,56,535/- on various CSR Activities during FY 2022-23 including administrative overheads. Further, the Company has transferred Rs. 2,46,63,101/- on account of ongoing project to Unspent CSR Account. For more details on CSR expenditure during the year under review, please refer Annual Report on CSR Activities attached as Annexure III. Salient features of the CSR Policy are as follows:

l It lays down CSR Philosophy, Vision and Commitment of the Company. l It specifies guidelines for implementation of CSR Projects through CSR Partners including eligibility criteria for CSR Partners. l It also lays down roles and responsibilities of the CSR Committee.

During the year under review, no change was made in the CSR Policy. This Policy is disclosed on the Company's website at

https://www.timken.com/en-in/investors/policies/.

Statutory Audit

Pursuant to Section 139 of the Act, M/s Deloitte Haskins & Sells LLP, Chartered Accountants (Registration No. 117366W/W100018) have been re-appointed as Statutory Auditors of the Company for a period of 5 years from conclusion of 35 (‘AGM') till 40 AGM. During the year under review, there was no fraud reported by the auditors to the Audit Committee/Board under section 143(12) of the Act. The Report given by the Statutory Auditors on the financial statements of the Company forms a part of this Annual Report. Statutory Auditors have given unmodified opinion. However, they have pointed out that proper books of accounts as required by law were kept except back up on daily basis of such books of accounts in electronic mode in server physically located in India. The Company is exploring options available for maintaining backup on daily basis and this is work-in-progress and it will be implemented soon.

Cost Audit

In terms of Section 148 of the Act, the Company is required to maintain cost records and have its records audited by Cost Accountant. The Company has maintained the cost records for FY 2022-23 as required under Section 148 of the Act.

The Board of Directors, on recommendation of the Audit Committee, has re-appointed M/s Shome and Banerjee (Firm Registration No. 000001) as Cost Auditors for FY 2023-24. In terms of Section 148 of the Act read with Rules made thereunder, remuneration payable to

Cost Auditors is required to be ratified by members of the Company. Accordingly, appropriate resolution for ratification of remuneration payable to Cost Auditors for FY 2023-24 has been inserted in the Notice convening 36 AGM. The Board requests members to approve/ratify remuneration of Rs. 6,30,000/- (Rupees Six Lakhs and Thirty Thousand Only) plus applicable taxes and out of pocket expenses payable to Cost Auditors for FY 2023-24. The Cost Audit Report of the Company for FY 2021-22 was filed on 14 October, 2022 (within the stipulated due date).

Secretarial Audit

Pursuant to Section 204 of the Act, M/s. V Sreedharan & Associates, Practicing Company Secretaries, has submitted the Secretarial Audit Report which is attached as Annexure IV. There are no qualifications or adverse remark made by the Secretarial Auditor. The Company has complied with norms of applicable Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI).

Internal Audit

KPMG Assurance and Consulting Services LLP acted as Internal Auditors for FY 2022-23. They conducted periodical audits and submitted their reports to the Audit Committee. Their reports have been reviewed by the Audit Committee.

Internal Financial Controls

The Company has a system of internal controls commensurate with the nature of its business and the size and complexity of its operations. The Company has adequately documented policies, procedures and authorization matrix aligned with the level of responsibility which is designed to provide reasonable assurance on recording of transactions, effectiveness, and efficiency of operations, providing reliable financial information and safeguarding of assets. The Company has developed and implemented a framework for ensuring internal controls over financial reporting. The Company has carried out evaluation of design and effectiveness of these controls and noted no significant material weaknesses or deficiencies which can impact financial reporting.

Related Party Transactions

The Company has adopted Related Party Transactions Policy and all its transactions in ordinary course of business are entered in accordance with the said Policy. The Audit Committee reviews this Policy from time to time and also reviews and approves all related party transactions, to ensure that the same are in line with the provisions of applicable laws and the said Policy. Related Party Transactions Policy is available on the website of the Company at https://www.timken.com/en-in/investors/policies/. All related party transactions entered into by the Company during FY 2022-23 are disclosed in the Financial Statements for the year ended 31 March, 2023.

In terms of Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014, material related party transactions entered during FY 2022-23 in the ordinary course of business and on arm's length basis are given in Form AOC-2, attached to this Report marked as Annexure V. For FY 2023-24, the Company anticipates that material related party transactions would be entered with four parties, for which approval is being sought in 36 AGM.

Listing with Stock Exchanges

The Company confirms that it has paid Annual Listing Fees for FY 2023-24 to National Stock Exchange of India Limited and BSE Limited, where the Company's shares are listed.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

Particulars relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo are attached to this

Report marked as Annexure VI.

Investor Education and Protection Fund

Pursuant to Section 124 of the Act and Rules made thereunder:

(i) the Company has transferred following unclaimed dividend amounts to Investor Education and Protection Fund (‘IEPF') during FY 2022-23:

Particulars Amount (in Rs)
Dividend paid by erstwhile ABC Bearings Limited (amalgamated with the Company) for FY 2014-15 3,43,620/-
Dividend paid by the Company for FY 2021-22 against shares already transferred to IEPF 13,91,739/-

(ii) Unpaid dividend for FY 2015-16 relating to the Company and ABC Bearings Limited (amalgamated) is due for transfer to IEPF in the month of September, 2023.

Annual Return

A copy of Annual Return filed during FY 2022-23 is placed on the Company's website at https://www.timken.com/en-in/investors/statutory-compliances/. Draft Annual Return as on 31 March, 2023 is available on the website of the Company at https://www.timken.com/en-in/investors/statutory-compliances/.

Financial Performance of any Subsidiary / Associate/ Joint Venture Company

The Company does not have any Subsidiary, Associate or Joint Venture Company.

Particulars of Loans, Guarantees or Investments

Particulars about investments made by the Company during the year are disclosed in the Financial Statements. During the year under review, the Company did not give any loans except to its employees as part of the conditions of service. Also, the Company did not give any guarantee or extended any securities in connection with any loan.

Deposits

The Company has not accepted Deposits covered under Chapter V of the Act and Rules framed thereunder.

Significant and/or material orders passed by the Regulators

No significant and/or material order was passed by any Regulator, any Court in India or any Tribunal, impacting going concern status and the Company's operations in future.

Other Reports/Annexures

Pursuant to the Act and Listing Regulations, following reports form part of this report:

1) Management Discussion and Analysis Annexure VII.

2) Declaration regarding compliance with Code of Conduct Annexure VIII

3) Business Responsibility and Sustainability Report Annexure IX

Disclosures under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Company does not tolerate discrimination, sexual harassment or any other harassment whether engaged in by management or associates or other individual with whom associates come into contact during work. The Company believes in providing and ensuring a workplace free from discrimination and harassment based on gender. The Company has adopted Anti-Sexual Harassment Policy in line with Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company has constituted ‘Internal Committee' to redress complaints received regarding sexual harassment as required by aforesaid Act. During the year under review, the Company has not received any sexual harassment complaint.

Other Disclosures

Sweat Equity Shares The Company has not issued any Sweat Equity Share and therefore, disclosure norms are not applicable to the Company.
Shares with differential Rights The Company has not issued any Share with differential rights and therefore, disclosure norms are not applicable to the Company.
Shares under Employees Stock Option Scheme The Company does not have any stock option scheme and therefore, disclosure norms are not applicable to the Company.
Purchase by Company or giving of loans by it for purchase of its shares The Company has not purchased or given any loan to purchase its Equity Share and therefore, disclosure norms are not applicable to the Company.
Buy Back of Shares The Company has not bought back any Equity Share and therefore, disclosure norms are not applicable to the Company.
Demat Suspense /Unclaimed Suspense Account In terms of applicable SEBI Circulars, the Company has opened a Suspense Escrow Demat Account to credit shares in physical folios to aforesaid account in case of non-receipt of demat request from the securities holder/claimant within 120 days of the date of issuance of Letter of Confirmation. For more details, please refer Corporate Governance Report attached as Annexure - I.
Settlement with Banks/Financial Institutions Not applicable.
Proceedings pending under Insolvency and Bankruptcy Code, 2016 Not applicable.

Acknowledgment

We thank all our stakeholders, employees, suppliers and investors for continuous support due to which we could achieve great results. The Company has innovative applications, strong leadership and therefore, better positioned to capitalize new opportunities and achieve stronger performance.

For and on behalf of the Board of Directors
Sd/-
Sanjay Koul
Date : 30 June, 2023 Chairman & Managing Director
Place : Bengaluru DIN: 05159352