Directors Report of Diffusion Engineers Ltd.

Mar 31, 2025

The Board of directors take pleasure in presenting the 43^rd (Forty-Third) Board''s Report on the business and operations
of the Company for the financial year ended March 31, 2025. This being the first report after the Initial Public Offer ("IPO")
and listing of the equity shares on BSE Limited ("BSE") and National Stock Exchange of India Limited ("NSE") (BSE and NSE
hereinafter collectively referred as "Stock Exchanges"), the Board welcomes all the public shareholders and look forward to
your continued faith and support.

Results of Company''s operations and Company''s Performance

(Amount In Millions)

Sr* Particulars no.	Standalone		Consolidated
	For the year ended March 31		For the year ended March 31
	2025	2024	2025 2024
i. Revenue from Operations	3,160.07	2,571.26	3,351.96	2,781.45
ii. Other Income	90.79	71.94	93.27	74.17
iii. Total income (I II)	3,250.86	2,643.19	3,445.23	2,855.62
iv. Expenses
Operating Expenses	2,151.90	1,775.93	2,228.56	1,856.51
Employee Benefits Expenses	399.15	345.51	419.02	360.56
Finance Costs	21.95	16.94	22.74	17.55
Depreciation and Amortisation Expenses	44.39	38.55	52.75	45.49
Admin & Other Expenses	200.20	147.11	233.61	175.70
Total Expenses	2,817.59	2,324.05	2,956.68	2,455.81
v. Profit/(Loss) Before Share of Profit of Joint	433.27	319.14	488.55	399.81
Venture, Exceptional Items and Tax (III-IV)
vi. Share of Profit of Joint Venture	-	-	(19.51)	13.60
vii. Profit Before Exceptional Items and	433.27	319.14	469.04	413.41
Tax(V VI)
viii. Exceptional item	-	(2.57)	-	(2.57)
ix. Profit/(Loss) before tax (VM VIM)	433.27	316.58	469.04	410.84
x. Tax expenses	95.74	82.63	108.63	102.80
xi. Profit/(Loss) for the period/year after tax	337.53	233.95	360.41	308.04
(IX -X)
xii. Total Other Comprehensive Income	(1.39)	(1.54)	0.51	(3.67)
xiii. Total Comprehensive Income for the year	336.14	232.42	360.92	304.38
(XI XII)
xiv. Paid-up Equity Share Capital (Face value of	374.26	280.21	374.26	280.21
'' 10/-each)
xv. Earnings Per Equity Share of '' 10/- each:
- Basic	9.02	8.35	9.59	10.94
- Diluted	9.02	6.25	9.59	8.19

Financial Position

	Standalone		Consolidated
Particulars	For the year ended March 31		For the year ended March 31
	2025	2024	2025 2024
Equity
Equity Share Capital	374.26	280.21	374.26	280.21
Other Equity	3,176.15	1,502.98	3,314.51	1,626.84
Non-controlling Interest	-	-	4.46	3.14
Total Equity	3,550.42	1,783.20	3,693.24	1,910.19
Non-Current Liabilities	61.62	58.06	66.22	62.43
Current Liabilities	678.99	755.70	684.96	782.63
Total Liabilities	740.61	813.76	751.18	845.05
Equity Liabilities	4,291.02	2,596.96	4,444.42	2,755.24
Property, Plant and Equipment	950.70	877.93	974.00	905.71
Capital work-in-progress	31.44	11.05	31.44	11.05
Intangible Assets	4.83	4.25	4.83	4.25
Other Non-Current Assets	450.51	347.14	436.47	354.04
Current Assets	2,853.44	1,356.57	2,997.69	1,480.19
Total Assets	4,291.02	2,596.96	4,444.42	2,755.24

1. Financial Performance
Revenue - Standalone

On a standalone basis in financial year 2024-25, our
Revenue from operations has shown an increase
of 22.90% which resulted increase of Revenue to
'' 3,160.07/- million in FY 2024-25 as compared to
previous FY 2023-24 which was '' 2,571.26/- million.

Revenue - Consolidated

On consolidated basis in financial year 2024-25, our
Revenue from operations has shown an increase
of 20.51% which resulted increase of Revenue to
'' 3,351.96/- million in FY 2024-25 as compared to
financial year 2023-24 which was '' 2,781.45 million.

Profits - Standalone

On a standalone basis in financial year 2024-25, the
profit before tax and exceptional items has shown an
increase of 35.76% and stood at '' 433.27/- million and
Profit after exceptional items and tax stood at '' 337.53/-
million. Whereas, in FY 2023-24 the profit before tax and
exceptional items stood at '' 319.14/- million and Profit
after exceptional items and tax at '' 233.95/- million.

Profits - Consolidated

On consolidated basis in financial year 2024-25, the
profit before tax and exceptional items has shown
an increase of 13.46% and stood at '' 469.04/- million
and profit after exceptional items and tax is '' 360.41/-
million. Whereas, in FY 2023-24 the profit before tax and
exceptional items stood at '' 413.4/- million and Profit
after exceptional items and tax at '' 308.04/- million.

EPS- Standalone

On Standalone basis, basic earnings per share increased
to '' 9.02/- per Equity share for financial year 2024-25 as
compared to basic earnings per share of '' 8.35/- per
Equity share for last financial year 2023-24 and

Diluted earning per share increased to '' 9.02/- per
Equity share for financial year 2024-25 as compared to
diluted earnings per share of '' 6.25/- per Equity share
for last financial year 2023-24.

EPS- Consolidated

On Consolidated basis, basic earnings per share
decreased to '' 9.59/- per Equity share for financial
year 2024-25 as compared to basic earnings per
share of '' 10.94/- per Equity share for last financial
year 2023-24 and

Diluted earnings per share increased to '' 9.59/- per
Equity share for financial year 2024-25 as compared to
diluted earnings per share of '' 8.19/- per Equity share
for last financial year 2023-24.

2. Dividend

Your directors have recommended a final dividend of
'' 1.50/- (One Rupees Fifty Paisa Only) per Equity share
for financial 2024-25 aggregating to '' 56.14/- million
subject to approval of Shareholders at the ensuing 43^rd
Annual General Meeting of the Company to be held on
Tuesday, July 22, 2025.

3. Business Description and State of Company''s Affairs

Diffusion Engineers Limited was incorporated in the
year 1982. The Company is engaged in the business of

providing engineering solutions to customers both in
domestic and international market. The Company has
been in existence for over four decades and provides
a wide range of products and services including
manufacture of special welding consumables, wear
plates and heavy engineering equipment for core
industries and provide special and customized
repairs and reconditioning services of heavy
machinery and equipment.

The company''s state of affairs reflects robust growth
and a commitment to innovation, evidenced by its
strategic expansions into new markets and pioneering
projects that set industry benchmarks. Diffusion''s
steadfast dedication to quality, reliability, and customer
satisfaction underpins its success, making it a trusted
partner for organizations seeking transformative
solutions in today''s dynamic business landscape.

4. Share Capital Structure

The Equity Shares of the Company were listed on
Stock Exchanges with effect from October 04, 2024
and the Company''s shares are compulsorily tradable in
electronic form.

The Authorized Share Capital of the Company is
'' 40,00,00,000/- [Rupees Forty Crores Only] consisting
of 4,00,00,000 [Four Crores] Equity Shares having face
value of '' 10/- [Rupees Ten Only] each. During the year
there has been no change in the Authorised Share
Capital of the Company.

The paid-up share capital of the Company is
'' 37,42,62,590 [Rupees Thirty-Seven Crore forty-two
lakh sixty-two thousand five hundred and ninety
only] consisting of 3,74,26,259 [ Three Crore seventy-
four lakh twenty-six thousand two hundred and fifty-
nine] Equity Shares having face value of '' 10/- [Rupees
Ten Only] each.

During the year, your Company has issued and allotted:
94,05,000 [Ninety-Four Lakhs Five Thousand] Equity
shares having face value of '' 10/- [Rupees Ten Only]
each through Initial Public Offer [IPO]

5. Transfer to Reserves

The Company has not transferred any amount to the
general reserve account during the reporting period.

6. Capital Expenditure on Assets

During financial year 2024-25 the company incurred
capital expenditure of '' 142.29/- million as compared
'' 324.57/- million in the last financial year 2023-24.

7. Change in the nature of business

During the year, the company has not changed its
business and the activity of the company continues
to be the same .

8. Annual Return

Pursuant to Section 92(3) of the Companies Act 2013
and Rule 12 of the Companies (Management and
Administration) Rules, 2014, the Annual Return for FY
2024-25 is available on Company''s website https://
www.diffusionengineers.com/investors-relation

9. Particulars of Loans, Guarantee and Investment

Loans, guarantees and investments covered under
Section 186 of the Companies Act, 2013 forms part
of the Notes to the Financial Statements provided in
this Annual Report.

10. Particulars of Loan to Directors or to Entities in
which Directors are interested under Section 185 of
the Companies Act, 2013

During the period under review, your Company has
not given any loan to any Director or to entities in
which Directors are interested under section 185 of
Companies Act, 2013

11. Public Deposits

The Company has not accepted deposits within the
meaning of the provision of Chapter V of the Companies
Act, 2013 read with the relevant Rules.

12. Maintenance of Cost Records

Company has maintained cost records as per section
148 (1) of Companies Act, 2013.

13. Particulars of Contracts or Arrangements made
with Related Parties

All contracts/ arrangements/transactions entered
by the Company with the related parties during the
financial year 2024-25 were in its ordinary course of
business and at arm''s length basis.

Suitable disclosure as required by the Indian
Accounting Standards (IND AS 24) has been made in
the notes to the Financial Statements which forms part
of the Annual Report.

As per the provisions of Regulation 23 of SEBI
(Listing Obligations and Disclosure Requirements)
Regulations, 2015, (''Listing Regulations'') the Company
has formulated and adopted Policy on Related Party
Transactions; details of the same are provided in
Annexure-6 to the Board''s Report.

Further, the Company during the reporting year, has
not entered into a contract/ arrangement/ transaction
which is considered material in accordance with the
definition of materiality as included in the Company''s
Related Party Transaction Policy read with Regulation
23 of Listing Regulations as amended from time to time.

The disclosure of Related Party Transactions as required
under Section 134(3)(h) of the Companies Act, 2013

in Form AOC-2 is appended as Annexure-2 to this
Board''s Report.

14. Material Changes and commitments, affecting
the financial position of the Company which have
occurred between the end of the Financial Year of
the Company to which the Financial Statements
relate and the date of the Report:

The Shareholders of the Company on April 03, 2025
by way of postal ballot through remote e-voting
process approved Re-Appointment of Mr. Prashant
Garg (DIN: 00049106) as the Chairman and
Managing Director of the Company for a period of
Five (5) years with effect from 16^th March, 2025 till
15^th March, 2030.

The Board of Directors at its meeting held on May
15, 2025 approved,

i) The proposal for sale of 2.06% stake of its associate
company, LSN Diffusion Limited.

ii) ''Diffusion Engineers Limited - Employee Stock
Option Scheme 2025'' and implementation through
an irrevocable employee welfare trust namely
''Diffusion ESOP Trust'' to be set-up by the Company,
pursuant to the provisions of Section 62(1)(b), of
the Companies Act, 2013 read with rules framed
thereunder, and the relevant provisions of the
Securities and Exchange Board of India (Share Based
Employee Benefits & Sweat Equity) Regulations,
2021, subject to the approval of shareholders of the
Company by way of special resolution.

15. Board Policies

The details of the policies approved and adopted by
the board as required under Companies Act, 2013 and
Listing Regulations are provided in Annexure-6 to the
Board''s Report.

16. Risk Management

The Board had constituted the Risk Management
Committee. The composition of Risk Management
Committee is given in the Corporate Governance
Report, forming part of the Annual Report. Further,
pursuant to Section 134(3)(n) of the Companies Act,
2013 and Regulation 17(9) of SEBI Listing Regulations,
the Company has formulated and adopted the Risk
Management Policy inter-alia including the details/
process about identification of elements of risks if
any, which in the opinion of the Board may threaten
the existence of the Company. The aforesaid Risk
Management Policy establishes the philosophy of
the Company towards risk identification, analysis and
prioritization of risks, development of risk mitigation
plans and reporting on the risk environment of the
Company. This Risk Management Policy is applicable
to all the functions, departments and geographical
locations of the Company. The purpose of this policy
is to define, design and implement a risk management
framework across the Company to identify, assess,

manage and monitor risks. Aligned to this, purpose
is also to identify potential events that may affect
the Company and manage the risk within the risk
appetite and provide reasonable assurance regarding
the achievement of the Company''s objectives and
business continuity.

17. Human Capital Management

At Diffusion Engineers Limited, we deeply value our
people and the opportunity to engage with them. We
are committed to enhancing their potential through
consistent empowerment, continuous learning, and
the sharing of knowledge and experiences.

Our policies and processes are designed to align
employees with their individual goals and the
organization''s objectives. We place strong emphasis
on training and development, which has led to the
adoption of industry best practices. Additionally, our
self-directed learning culture encourages employees
to develop at their own pace in environments that best
suit their learning preferences.

The Company is also committed to fostering an
equal, inclusive, and diverse workforce. As an Equal
Opportunity Employer, we ensure non-discrimination
in all aspects of employment. This approach not only
strengthens our team but also gives us a competitive
advantage in staffing and talent retention.

Furthermore, we are dedicated to the protection
and advancement of human rights. Our key focus
areas include promoting responsible practices
across our extensive and diverse supply chain and
supporting a corporate culture that champions
diversity and inclusion.

We attract highly skilled and educated professionals.
As of March 31, 2025, our workforce numbered 486
employees and 179 workers.

18. Management Discussion and Analysis

In terms of the provisions of Regulation 34 read with
Schedule V of SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 the Management''s
Discussion and Analysis Report is presented in a
separate section forming part of this Annual Report.

19. Subsidiaries including Material Subsidiaries

Your Company as on March 31, 2025 have following
Subsidiaries: -

i. Diffusion Super Conditioning Services Private
Limited

ii. Nowelco Industries Private Limited

iii. Diffusion Hernon Adhesive and Sealant Private
Limited

iv. Diffusion Engineers Singapore Pte. Ltd.

v. Diffusion Wear Solutions Philippines Inc.

vi. Diffusion Eurasia Muhendislik Sanayi Ve
Ticaret Anonim Sirketi

Following are Associates /Joint Venture of our company: -

i) LSN Diffusion Limited (United Kingdom)

ii) Mecdiff SDN BHD (Malaysia)

None of the company ceased to be the subsidiary, joint
venture or associate company of Diffusion Engineers
Limited during the reporting year.

The Board of Directors in its meeting held on February
07, 2025 approved Incorporation of a Wholly-owned
Subsidiary of the Company with the name having pre¬
fix "Diffusion Engineers Middle East" or such other name
as may be approved by regulatory authorities of United
Arab Emirates (UAE) for the purpose of the business
related to service of welding and light fabrication shop
to cater to Middle Eastern markets. The Company is in
process of incorporation.

The company does not have any material subsidiary in
terms of Regulation 16(1)(c) of SEBI (Listing Obligations
and Disclosure Requirements) Regulations, 2015

Pursuant to provisions of Section 129(3) of the
Companies Act, 2013, the Company has prepared
Consolidated financial statements of the Company and
its subsidiary, which form part of the Annual Report.
Further, a statement containing the salient features of
the financial statement of the Company''s subsidiaries
in the prescribed format AOC-1 is appended as an
Annexure-1 to the Board''s Report.

In accordance with the third proviso of Section 136(1)
of the Companies Act, 2013, the Annual Report of
the Company, containing therein its Standalone and
Consolidated financial statements have been placed
on the website of the Company at https://www.
diffusionengineers.com/investors-relation

20. Corporate Governance

The Company has adopted and consistently adheres
to best practices in corporate governance. It firmly
believes that strong governance is fundamental to
sustainable business growth and the enhancement
of stakeholder value. The Board of Directors reaffirms
its unwavering commitment to maintaining high
standards of corporate governance.

Corporate governance at the Company is an ethically
driven process rooted in core values that aim to
strengthen the organization''s brand and reputation.
This commitment is reflected in ethical decision¬
making and responsible business conduct aligned with
stakeholders'' expectations.

A detailed report on Corporate Governance is an
integral part of this Annual Report and is presented as a
separate section herein.

21. Audit reports and Auditors

a) Statutory Auditor

The members at the 41^st Annual General Meeting
held on 25^th September, 2023 appointed PGS

& Associates, Chartered Accountants (Firm
Registration No. - 122384W) as Statutory
Auditors of the Company to hold office for
a period of five [5] years commencing from
conclusion of 41^st Annual General Meeting till
the conclusion of Annual General Meeting to
be held in the year 2028. PGS & Associates have
confirmed their eligibility and that they are not
disqualified under the Companies Act, 2013,
for their continuance as Statutory Auditors
of the Company.

The Auditors'' Report for FY 2024-25 provided
by PGS & Associates, Chartered Accountants,
Statutory Auditors of the Company on Standalone
and Consolidated Financial Statements (''Financial
Statements'') does not contain any qualification,
reservation or adverse remark. The statements
made by the Auditors in their report are self
- explanatory and do not call for any further
comments. The Auditor''s Report is enclosed as
separate section with the financial statements in
this Annual Report.

b) Secretarial Auditors

Pursuant to provision of section 204 of Companies
Act, 2013 read with rule 9 of the Companies
(Appointment and Remuneration of Managerial
Personnel) Rules 2014, the Board of directors on
the recommendation of the Audit Committee,
in its meeting held on July 31, 2024, appointed
Mr. Madhav Kawde, Practicing Company Secretary
(CP No. 1892) as Secretarial Auditor to conduct the
secretarial audit of the company for the financial
year 2024 - 2025.

In terms of provisions of sub-section 1 of section
204 of the Companies Act, 2013, the Company has
annexed to this Board''s Report as Annexure-4, a
Secretarial Audit Report given by the Secretarial
Auditor. The Secretarial Auditors'' Report for
FY 2024-25 does not contain any qualification,
reservation, or adverse remark. The statements
made by the Secretarial Auditor in his report
are self - explanatory and do not call for any
further comments.

As required under Listing Regulations the
Practicing Company Secretary''s Certificate on
Corporate Governance and non-disqualification of
directors including KYC requirement is appended
as Annexure-8. The appended certificate does
not contain any qualification, reservation or
adverse remarks.

Internal Auditors

The Company''s Internal Audit is being conducted
by Independent Auditors on quarterly basis
and they furnish their quarterly report on their
observations to Audit Committee for review.

As per the provisions of Section 138 of the
Companies Act, 2013 and Rules made thereunder,
the Company has appointed Chitaley Mehta
& Associates, Chartered Accountants, (Firm
Registration No- 127021W) as Internal Auditors for
the Financial Year 2025 - 2026.

c) Cost Auditors

As per Section 148 of the Companies Act, 2013,
the Company is required to have the audit of its
cost records conducted by a Cost Accountant in
practice. The Board on the recommendation of the
Audit Committee has appointed M/s A. B. Verma &
Co., Cost Accountants, Nagpur (Firm Registration
No. 102527/ Membership No. 31367), as the Cost
Auditors of the Company for FY 2025 - 2026 under
Section 148 and all other applicable provisions of
the Companies Act, 2013 read with the Companies
(Cost Records and Audit) Amendment Rules, 2014.

M/s A. B. Verma & Co., have confirmed that they are
free from disqualification specified under Section
141(3) and Section 148(3) read with Section 141(4)
of the Act and that the appointment meets the
requirements of Section 141 (3)(g) of the Act.

The remuneration payable to the Cost Auditors
is required to be placed before the members in a
general meeting for their ratification. Accordingly,
a Resolution for seeking members'' ratification for
the remuneration payable to M/s A. B. Verma & Co.
is included in the Notice convening the Annual
General Meeting.

The Cost Auditors'' Report for FY 2023-24 does
not contain any qualification, reservation, or
adverse remark.

22. Reporting of Fraud by Auditors

During the year under review, none of the Auditors
have reported to the audit committee, under Section
143 (12) of the Companies Act, 2013, any instances of
fraud committed against the Company by its officers
or employees, the details of which would need to be
mentioned in the Board''s report.

23. Revision of Financial Statements and Board Report

There was no revision of financial statements and
Boards'' Report of the Company during the financial
year under review. However, for the purpose of IPO,
the Company has re-stated the financial statements
of preceding three financial years pursuant to the
provisions of Securities and Exchange Board of
India (Issue of Capital and Disclosure Requirements)
Regulations, 2018 ("SEBI ICDR Regulations").

24. Segment Reporting

The company has only one operating segment i.e
"Welding Fabrication Technology and Engineering"
as per Ind AS 108 which includes Manufacturing,
Trading and Job Work.

25. Board of Directors and its Meeting

The Company has a professional Board with right mix
of knowledge, skills and expertise with an optimum
combination of Executive, Non- Executive and
Independent Directors including Woman Director.
The Chairman of the Board is a Executive Director. The
Board provides strategic guidance and direction to
the Company in achieving its business objectives and
protecting the interest of the stakeholders. The Board
met Eleven (11) times during the financial year. The
maximum interval between any two meetings did not
exceed 120 days, as prescribed under Companies Act,
2013. The details pertaining to the composition of the
Board of Directors of the Company and the meetings
thereof held during the financial year are given in the
Report on Corporate Governance section forming part
of this Annual Report.

26. Investor Education and Protection Fund (IEPF)

During the year, the Company was not required to
transfer any amount to Investor Education and Protection
Fund (IEPF) as per the requirements of the IEPF Rules.

27. Directors'' Responsibility Statement

The Standalone and Consolidated financial statements
for the financial year ended March 31,2025 are prepared
in accordance with Indian Accounting Standards (Ind
AS) under the historical cost convention on accrual
basis, the provisions of the Companies Act 2013 (to
the extent notified) and guidelines issued by SEBI,
Ind AS as prescribed under section 133 of Companies
Act, 2013, read with Rule 3 of the Companies (Indian
Accounting Standards) Rules, 2015 and Companies
(Indian Accounting Standards) Amendment Rules,
2016. Accounting policies have been consistently
applied except where a newly issued accounting
standard is initially adopted or the revision to an
existing accounting standard requires a change in the
accounting policy hitherto in use.

Pursuant to Section 134(5) of the Companies Act, 2013,
the Board of Directors, to the best of their knowledge
and ability, confirm that:

I. In the preparation of the annual accounts, the
applicable accounting standards have been
followed and there are no material departures;

II. 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 of the Company for that period;

III. They have 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;

IV. They have prepared the annual accounts on a
going concern basis;

V. They have laid down internal financial controls
to be followed by the Company and such
internal financial controls are adequate and
operating effectively;

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

28. Internal Financial Controls with Reference to
Financial Statements

The Company has internal financial control systems to
commensurate with the nature of its business, size and
complexity of its operations. Internal financial control
systems include policies and procedures which are
designed to ensure reliability of financial reporting,
compliance with policies, procedure, applicable laws
and regulations and that all assets and resources
are acquired economically, used efficiently and
adequately protected.

Based on the framework of internal financial controls
and compliance systems established and maintained
by the Company, audit performed by the Internal,
Statutory and Secretarial Auditors and the reviews
performed by the relevant board committees,
including the audit and management committee, the
board is of the opinion that the Company''s internal
financial controls were adequate and effective during
the financial year 2024-25. For more details, refer to the
''Internal control systems and their adequacy'' section in
the Management''s discussion and analysis, which forms
part of this Annual Report.

29. Declaration of Independence by Independent
Director

Independent Directors of the Company has provided
declarations under Section 149 (7) of the Companies
Act, 2013 and Regulation 25 (8) of Securities and
Exchange Board of India (Listing Obligations and
Disclosure Requirements) Regulations, 2015, that
he/she meets with the criteria of independence, as
prescribed under Section 149 (6) of the Companies Act,
2013 and Regulation 25 of Securities and Exchange
Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015.

Your Company has received declarations from all
Independent Directors confirming that:

(i) They meet the criteria of independence as
prescribed under Section 149(6) of the Companies
Act, 2013 and Regulation 16(1)(b) of the SEBI
(LODR) Regulations, 2015.

(ii) They have complied with the code for independent
directors prescribed under Schedule IV to the Act;

(iii) They have registered themselves with the
independent director''s database maintained
by the Indian Institute of Corporate Affairs
in compliance with Rules 6(1) and 6(2) of the
Companies (Appointment and Qualification of
Directors) Rules, 2014;

(iv) They are not aware of any circumstance or
situation, which exists or may be reasonably
anticipated, that could impair or impact their
ability to discharge their duties.

30. Board Evaluation

The Board of Directors carried out an annual evaluation
of its own performance, Board Committees and
individual Directors pursuant to the provisions the
Companies Act, 2013 and SEBI Listing Regulations.
The evaluation parameters and the process have been
explained in Corporate Governance Report.

31. Familiarization Program for Board Members

The Board members are provided with necessary
documents / brochures, reports and internal policies
to enable them to familiarise with the Company''s
procedures and practices. Periodic presentations
are made on business and performance updates of
the Company, business strategy and risks involved.
The Directors are also updated with various
regulations prevailing at the time and the new judicial
pronouncements, if any.

32. Policy on Directors Appointment, Remuneration
and other details

The Nomination and Remuneration Committee
(''NRC'') has adopted the policy and procedures with
regard to identification and nomination of persons
who are qualified to become directors and who may
be appointed in senior management and the same
is available on the website of the company at https://
www.diffusionengineers.com/investors-relation This
policy is framed in compliance with the applicable
provisions of Regulation 19 read with Part D of the
Schedule II of the SEBI (Listing Obligations and
Disclosures Requirements) Regulations, 2015 (''the
Regulations'') and Section 178 and other applicable
provisions of the Companies Act, 2013.

The details as required under Section 197 (12) of the Act
read with Rule 5 of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014, are
provided in the Annexure-3 of the Boards'' Report.

33. Directors and Key Managerial Personnel of the
Company

(i) The present composition of the Board of the
Company is as under:

The Company has eminent individuals from
diverse fields as Directors on its Board, who
bring in the required skill, integrity, competence,
expertise and experience that is required for

making effective contribution to the Board. The Board comprise of six (6) Directors with an appropriate mix of Non¬
Executive Directors, Executive Directors and Independent Directors.

Sr No	Name of Directors	DIN	Designation	Executive/ Non - Executive
1	Mr. Prashant Garg	00049106	Managing Director	Executive
2	Mr. Nitin Garg	08558736	Director	Non - Executive
3	Ms. Chitra Narendra Garg	01784644	Director	Non - Executive
4	Mr. Anil Kumar Trigunayat	07900294	Independent Director	Non - Executive
5	Mr. Sherry Samuel Oommen	07059616	Independent Director	Non - Executive
6	Ms. Deepali Bendre	10753545	Independent Director	Non - Executive

Appointment/Resignation of Directors

During the financial year under review:

a) Dr. Renuka Garg (DIN: 02815373) tendered
her resignation from the post of Non¬
Executive Director of the Company with
effect from July 23, 2024.

b) The Board on the recommendation of

Nomination and Remuneration Committee at
its meeting held on July 23, 2024 appointed
Dr Nitin Garg (DIN: 08558736) as an Additional
Director under the category of Non-Executive
Director of the Company with effect from July
23, 2024. The appointment was regularised by
the shareholders at the Annual General Meeting
of the Company held on August 31, 2024.

c) The Board on the recommendation of

Nomination and Remuneration Committee
at its meeting held on August 26, 2024
appointed Mr. Sherry Samuel Oommen (DIN:
07059616) and Ms. Deepali Bendre (DIN:
10753545) as an Additional Director under
the category of Non-Executive Independent
Director of the Company with effect from
August 26, 2024. Their appointments as
Independent Directors for a term of five
(5) years with effect from August 26, 2024
was regularised by the shareholders of the
Company in their Extra Ordinary General
meeting held on August 26, 2024

d) Mr Ajay Jain (DIN: 02815416) and Ms Anita
Vijayakar (DIN: 01190200) ceased to be
Independent Directors of the company upon
completion of their second term of 5 (Five)
consecutive years on September 13, 2024

(ii) Key Managerial Personnel (''KMP'')

In terms of the provisions of Section 2(51) and

Section 203 of the Companies Act, 2013 the

following are the KMPs of the Company:

1. Mr Prashant Garg [Managing Director]

2. Mr Ramesh Kumar Narasinghbhan
[appointed as Chief Executive Officer (CEO) of
Company with effect from February 13, 2025]

3. Mr Abhishek Mehta [appointed as
Chief Financial Officer, with effect from
29^th June 2023]

4. Ms Chanchal Jaiswal [appointed as Company
Secretary and Compliance Officer, with
effect from 29^th June 2023]

Appointment/Resignation of Key Managerial
Personnel (KMP)

During the financial year under review:

i. Mr Ramesh Kumar Narasinghbhan (PAN:
ABOPN4848E) was appointed as Chief
Executive Officer (CEO) of Company with
effect from February 13, 2025 for the period
of 4 (Four) years in the board meeting held
on February 07, 2025.

ii. Mr. Prashant Garg (DIN: 00049106) was re¬
appointed as the Chairman and Managing
Director for a period of five years with
effect from March 16, 2025, pursuant to a
resolution passed by our Board of Directors
at their meeting held on February 07, 2025
and a resolution passed by Shareholders
through postal ballot on April 03, 2025.

Retirement by Rotation:

In terms of the provisions of Section 152 and other
applicable provisions, if any, of the Companies
Act, 2013, Dr Nitin Garg (DIN: 08558736), Director
retires by rotation at the ensuing Annual General
Meeting, and being eligible, offers himself for
re - appointment.

Accordingly, a Resolution for seeking members''
approval for appointment of Director is
included in the Notice convening the Annual
General Meeting.

34. Committees of the Board

As on March 31, 2025, the Board has six committees:

i. Audit Committee

ii. Nomination and Remuneration Committee

iii. Corporate Social Responsibility Committee

iv. Stakeholders Relationship Committee

v. Risk Management Committee

vi. Management Committee

The details of the powers, functions, composition and
meetings of the Committees of the Board held during
the financial year 2024-25 are given in the Report
on Corporate Governance section forming part of
this Annual Report.

35. Conservation of Energy, Technology Absorption,
Foreign exchange earnings and outgo

The particulars as prescribed under Sub-section (3) (m)
of Section 134 of the Companies Act, 2013, read with the
Companies (Accounts) Rules, 2014, are given separately
as Annexure-7 to the Board''s Report.

36. Corporate Social Responsibility

The Company is committed to conduct its business
in a socially responsible, ethical and environmental
friendly manner and to continuously work towards
improving quality of life of the communities in its
operational areas. The Board of Directors at its meeting
held on August 26, 2024 had re-constituted Corporate
Social Responsibility (CSR) Committee in accordance
with Section 135 of Companies Act, 2013 read with
rules formulated therein. The CSR agenda is planned
in consultation with the CSR committee members
through a systematic independent need assessment.
Your Company believes in positive relationships
that are built with constructive engagement which
enhances the economic, social and cultural well-being
of individuals and regions connected to the Company''s
activities. Your Company has adopted a detailed policy
on Corporate Social Responsibility. The brief outline
of the Corporate Social Responsibility (CSR) Policy
of the Company including the annual report on the
Company''s CSR activities are set out in Annexure-5 of
this report in the format prescribed in the Companies
(Corporate Social Responsibility Policy) Rules, 2014.

37. Secretarial Standards

The Company duly complies with all applicable
secretarial standards issued by the Institute of Company
Secretaries of India.

38. Vigil Mechanism (Whistle Blower Policy)

In terms of the section 177(9) of companies act, 2013
and rules framed thereunder read with Regulation 22
of Listing Regulations, your Company has established
a ''Vigil Mechanism Policy'' and it provides a channel tc
the employees to report to the appropriate authorities
concerns about unethical behaviour, actual or
suspected fraud or violation of the Company''s code
of conduct policy and provides safeguards against
victimization of employees who avail the mechanism
and also provide a direct access to the Chairman of
the Audit Committee in exceptional cases. Protected
disclosures can be made by a whistle blower through
an e-mail, or dedicated telephone line or a letter to
the concerned authorities. The details of the vigil
mechanism (whistle blower policy) are given in
Annexure-6 of this Board Report.

39. Prevention of Insider Trading

The Securities and Exchange Board of India (SEBI) vide
notification dated January 15, 2015 had put in place
a new framework for prohibition of Insider Trading
in securities and to strengthen the legal framework
thereof. These regulations of the SEBI under the above
notification had become effective from May 15, 2015.
Whereas on December 31, 2018, the regulations were
amended with Securities and Exchange Board of
India (Prohibition of Insider Trading) (Amendment)
Regulations, 2018 effective from April 1, 2019.
Accordingly, the Board has formulated Code of Conduct
and Fair Disclosure for Prevention of Insider Trading
Policy in accordance with Regulation 8 & 9 of Securities
and Exchange Board of India (Prohibition of Insider
Trading) Regulations, 2015 for regulating, monitoring
and reporting of Trading of Shares by Insiders. The
Code lays down guidelines, procedures to be followed
and disclosures to be made while dealing with shares
of the Company. The details of the Code of Conduct
and Fair Disclosure for Prevention of Insider Trading are
given in Annexure-6 of this Board''s Report.

37. Code of Conduct

The Directors, KMP''s and Senior Management of the
Company have affirmed compliance with Code of
Conduct applicable to them during the year ended
March 31, 2025. The details of the Code of Conduct for
Directors, KMP''s and Senior Management are given in
Annexure-6 of this Board''s Report. The Annual Report
of the Company contains a certificate by Ramesh
Kumar Narasinghbhan, Chief Executive Officer of the
Company, on compliance declaration received from the
Members of the Board, KMP''s and Senior Management
as an Annexure-9.

38. Legal, Governance and Brand Protection

The Company continues to focus on the key areas and
projects within the Legal, Compliance and Corporate
Affairs functions.

39. Enhancing Shareholders Value

Your Company believes that its members are its
most important stakeholders. Accordingly, your
Company''s operations are committed to the pursuit
of achieving high levels of operating performance and
cost competitiveness, consolidating and building for
growth, enhancing the productive asset and resource
base and nurturing overall corporate reputation.

40. Disclosure Requirements

As per Listing regulations, Corporate Governance
Report with the Auditors Certificate thereon and
the Management Discussion and Analysis Report
are attached herewith and forms part of this Report.
The Company has devised a proper system to ensure
compliance with the provisions of all Secretarial
Standards issued by the Institute of Company

Secretaries of India and that such systems are adequate
and operating effectively.

41. Significant and Material Orders Passed by the
Regulators or Courts or Tribunals Impacting the
Going Concern Status of the Company

There are no orders passed by the Regulators or Courts
or Tribunals which would impact the going concern
status and the Company''s future operations.

42. Credit Rating Obtained

During the year under review the Company had
obtained the Credit rating from CRISIL Ratings Limited
and Acuite Ratings & Research Limited for the loans
and credit facilities from Banks. The details of Ratings
are provided in Corporate Governance Report forming
part of this Annual Report.

43. Sexual Harassment of Women at Workplace:

The Company has zero tolerance towards sexual
harassment at the workplace and has adopted a Policy
on Prevention of Sexual Harassment of Women at
Workplace (Prevention, Prohibition and Redressal) in
line with the provisions of the Sexual Harassment of
Women at Workplace (Prevention, Prohibition and
Redressal) Act, 2013 and the Rules thereunder.

The details of the policy are given in Annexure-6
of this Board''s Report. The Company has complied
with provisions relating to the constitution of Internal
Complaints Committee under the Sexual Harassment
of Women at Workplace (Prevention, Prohibition
and Redressal) Act, 2013. The details of complaints
filed, disposed of and pending during the financial
year pertaining to sexual harassment is provided in
Corporate Governance Report of this Annual Report.

Your company has been certified as "Great place to
work" for the third time in a row. The Great Place to
Work Assessment is considered a ''Gold Standard'' in
workplace Culture assessment.

44. Maternity Benefit

The company is in compliance with the provisions
relating to the Maternity Benefit Act, 1961.

45. Green Initiatives

Electronic copies of Annual Report 2024-25 and the
Notice of 43^rd Annual General Meeting shall be sent to
all the members whose email addresses are registered
with the company/ depository participant. Physical
copies of Annual Report will be sent to only to those
members who request the Company for the same once
dispatch of Annual Report and Notice of AGM through
electronic means is completed.

46. Board Diversity

The Board comprises of adequate number of members
with diverse experience and skills, such that it best serves
the governance and strategic needs of the Company.
The Directors are persons of eminence in areas such

as business, industry, finance, law, administration,
economics etc. and bring with them experience
and skills which add value to the performance of the
Board. The Directors are selected purely on the basis of
merit with no discrimination on race, colour, religion,
gender or nationality. A brief profile of the Directors
are available on the website of the Company at https://
www.diffusionengineers.com/about-us

47. Proceeding pending under the Insolvency and
Bankruptcy Code, 2016.

No application has been made under the Insolvency and
Bankruptcy Code; hence the requirement to disclose
the details of application made or any proceeding
pending under the Insolvency and Bankruptcy Code,
2016 (31 of 2016) during the year along with their status
as at the end of the financial year is not applicable.

48. CEO/CFO Certification

As required Regulation 17(8) read with Schedule II of the
SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015, the CEO/CFO certification is attached
with this Annual Report as an Annexure-10.

49. The details of difference between the amount of the
valuation done at the time of one-time settlement
and the valuation done while taking loan from
the banks or financial institutions along with the
reasons thereof.

There has been no settlement made with any Bank
or Financial institution by the Company during the
Financial Year, thus the requirement to provide details
not applicable to the Company.

50. Material events during FY 2024-25

Initial Public Offer & consequent listing of Shares on
National Stock Exchange of India Limited ("NSE")
and BSE Limited ("BSE")

The equity shares of the Company got listed on
Stock Exchanges with effect from October 04, 2024,
pursuant to the IPO of the Company by way of fresh
issue of 94,05,000 Equity Shares aggregating to INR
1,579.64 million.

The issue comprising of a fresh issue, was open for
subscription from September 26, 2024 and ended on
September 30, 2024. The issue includes a reservation
of up to 50,000 shares for employees offered at a
discount of INR 8/- to the issue price. The allotment
for Diffusion Engineers IPO was finalized on Tuesday,
October 1, 2024. The shares got listed on BSE, NSE on
October 4, 2024.

Company completed its IPO successfully with
participation of several leading domestic and global
institutional investors as well as NRIs, HNIs and retail
investors. The Board is deeply grateful and honoured
by the trust and confidence shown in the Company by
its members. The Board would also like to express its
sincere appreciation for the invaluable support from

various Authorities, Book Running Lead Managers
(BRLMs), Stock Exchanges, Depositories, Legal Counsels,
Consultants, Auditors, and the Company''s Employees,
all of whom contributed significantly to the remarkable
success of the Company''s maiden IPO.

51. Acknowledgement

Your directors place on record their appreciation to
the Government, the Securities and Exchange Board
of India, the Stock Exchanges and other regulatory
authorities for their valuable guidance and support
and wish to express our sincere appreciation for their
continued co-operation and assistance. We look
forward to their continued support in future as well. We
wish to thank our bankers, investors, rating agencies,
customers and all other business associates for their
support and trust reposed in us.

Your directors express their deep sense of appreciation
for all the members of the Diffusion family whose
commitment, co-operation, active participation,
dedicated efforts, consistent contribution and
professionalism at all levels has made the organization''s
growth possible. Your Board is thankful to you for the
support and trust reposed in them and the Company.

For and on behalf of Board of Directors

Sd/-

Prashant Garg

Chairman and Managing Director
(DIN: 00049106)

Place: Nagpur
Date: 15^th May 2025

---

Mar 31, 2024

Your Directors have immense pleasure in presenting the Forty-Second Annual Report on the business and operation of the Company together with Audited Statement of Accounts for the financial year ended 31^st March, 2024.

1. Financial Highlights

During the year under review, performance of your company is as under:

(Rs. in Millions)
Particulars	Year ended 31st March, 2024	Year ended 31st March, 2023
Turnover	2,571.26	2440.74
Profit/(Loss) before taxation	316.58	225.48
Less: Tax Expense	82.63	57.32
Profit/(Loss) after tax	233.95	168.16
Add: Balance B/F from the previous year	1,155.70	998.60
Balance Profit / (Loss) C/F to the next year	1,363.51	1155.70
The consolidated performance of the group as per consolidated financial statements is as under: (Rs. in Millions)
Particulars	Year ended 31st March, 2024	Year ended 31st March, 2023
Turnover	2,781.45	2548.76
Profit/(Loss) before taxation	410.84	286.60
Less: Tax Expense	102.80	65.15
Profit/(Loss) after tax	308.04	221.46
Add: Balance B/F from the previous year	1,211.89	1001.32
Balance Profit / (Loss) C/F to the next year	1,492.34	1211.89

**Annexure-I & II for details

2. Dividend

During the Year, the board had declared and distributed an interim dividend of 2.5% & proposed final dividend of 2.5%, total dividend for 2023 - 2024 is 5%.

3. Amounts transferred to Reserves

The Board of the company has not transferred any amount to its reserves.

4. State of Company’s Affairs & Future Outlook

Your company completes more than 4 decades of its existence, a long and successful journey begun by our Visionary Founder late Shri. N. K. Garg whose disciplined work culture & professional approach towards governance, principles of independence, transparency, accountability, responsibility, compliance, ethics and trust has been successfully adopted by the present management. We continue to uphold the value systems which have been the traditional hallmark of Diffusion Engineers Limited for over four decades.

Prashant Garg, our Promoter and Managing Director, has been instrumental in steering our Company towards forward integration from manufacturing welding consumables to heavy engineering equipment and adding new product lines to our business. He has paved the way for the concept of total wear solutions.

During the financial year 2023-24, the company''s turnover amounted to Rs. 2,571.26 million against Rs. 2440.74 million during the preceding year. The company''s net profit after interest/depreciation and tax amounted to Rs. 233.95 million against profit of Rs. 168.16 million during the preceding year. Your directors are hopeful that there will be considerable increase in turnover/profits in next financial year and there will be healthy growth. The subsidiary and associate companies have also improved their performance during the year.

Your directors are pleased to inform that, the Company is in process of issuing Equity Shares through Initial Public Offering. The Members of the Company at the Extra Ordinary General Meeting held on 20th December, 2023 approved the issue of Equity Shares through Initial Public Offering [IPO]. In this regard, Board of directors of the Company approved the Draft Red Herring Prospectus ("DRHP") on 26th April 2024 and filed the same with Securities Exchange Board of India (SEBI) and Relevant Stock Exchanges. On 26th July 2024, your company has received in principal approval of National Stock Exchange of India Limited (NSE) and BSE Limited (BSE) for listing its equity shares under proposed public issue and also on July 30, 2024 we have received final observation cum approval letter from the Securities Exchange Board of India on the DRHP.

Disclaimer clause: However, it is to be distinctly understood that permission given by NSE and BSE should not in any way be deemed or construed that offer document has been cleared or approved by the exchanges nor does it certify the correctness or completeness of any of the content of the offer document.

5. Capital Structure

i) Authorised Share Capital

As on the date of this Report, the Authorised Share Capital of the Company is Rs.40,00,00,000/- consisting of 4,00,00,000 Equity Shares having face value of Rs.10/- each.

• On 25th September, 2023, Authorised Share Capital of the company increased from Rs.5,00,00,000/- consisting of 50,00,000 Equity Shares having face value of Rs.10/- each to Rs.15,00,00,000/- consisting of 1,50,00,000 Equity Shares having face value of Rs.10/- each.

• On 18th November, 2023, Authorised Share Capital of the company further increased from Rs.15,00,00,000/- consisting of 1,50,00,000 Equity Shares having face value of Rs.10/- each to Rs.40,00,00,000/- consisting of 4,00,00,000 Equity Shares having face value of Rs.10/- each.

ii) Paid up Share Capital

During the period under review, the paid-up equity share capital of the Company was increased consequent upon allotment of following equity shares of the Company:

• On 11th October, 2023, Company has allotted 2,65,570 Equity Shares of the face value of Rs.10/- each on preferential basis via private placement.

• On 29th November, 2023, Company has allotted 2,40,18,222 Equity Shares of the face value of Rs.10/- each as fully paid-up Bonus Shares.

6. Directors and Key Managerial Personnel

As of March 31, 2024, your Company has 6 Directors, which includes 3 Independent Directors, 2 Non-Executive Non-Independent Director and 1 Managing Director.

¦ Change in Directors and KMP during the financial year

Appointment of Mr. Anil Kumar Trigunayat [DIN - 07900294] as Independent Director

Pursuant to provisions of Section 149, 150, 152, 161[1] of the Companies Act, 2013 and on recommendation of Nomination and Remuneration Committee (‘NRC''), the Board has appointed Mr. Anil Kumar Trigunayat as an Independent director of the Company for a period of five consecutive years effective from 30^th November, 2023. The same has been approved by the members vide their Ordinary resolution dated 07^th December, 2023. The Board is of the opinion that Mr Anil Kumar Trigunayat is a person of integrity, expertise, with competent experience and proficiency to serve the Company as an independent director that can strengthen the overall composition of the Board.

Appointment of Ms. Chitra Narendra Garg [DIN - 01784644] as NonExecutive Director

Pursuant to provisions of Section 161 of the Companies Act, 2013 and on recommendation of Nomination and Remuneration Committee (‘NRC''), the Board has appointed Ms. Chitra Narendra Garg as Non-Executive NonIndependent Director of the Company with effect from 05^th December, 2023. The same has been approved by the members vide their Ordinary resolution dated 07^th December, 2023.

¦ Change in Directors after the end of financial year 2023-24 but upto the date of this report.

Dr Renuka Garg (DIN: 02815373), Non-Executive Director of the Company has tendered resignation from post of directorship on the Board of the Company with effect from 23^rd July 2024. Further the Board of Directors have appointed Dr Nitin Garg (DIN: 08558736) as an Additional Director (Non-Executive) on the Board of the Company with effect from 23^rd July 2024 to hold office upto the date of ensuing General Meeting. Accordingly, a resolution for seeking members approval for appointment of Dr Nitin Garg as a Director (Non-Executive) on the Board of the Company is included in the Notice convening the Annual General Meeting.

¦ Retire by Rotation:

In terms of the provisions of Section 152 and other applicable provisions, if any, of the Companies Act, 2013, Ms. Chitra Garg [DIN - 01784644] Director retires by rotation at the ensuing Annual General Meeting, and being eligible, offers herself for re - appointment.

¦ Key Managerial Personnel (‘KMP'')

In terms of the provisions of Section 2(51) and Section 203 of the Companies Act, 2013 the following are the KMPs of the Company:

1. Mr Prashant Garg [Managing Director]

2. Mr Abhishek Mehta [appointed as Chief Financial Officer, w.e.f 29^th June 2023]

3. Ms Chanchal Jaiswal [appointed as Company Secretary and Compliance Officer, w.e.f 29^th June 2023]

There are no other changes in the KMPs during Financial Year 2023 - 2024

7. Number of Board Meetings & Attendance

Eleven meetings were held during the Financial Year 2023 - 2024. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. Dates and attendance details of meetings as follows:-

Sr. No.	Date of meeting	Total No. of Directors on the Date of Meeting	No. of Directors attended	% of Attendance
1	29.06.2023	4	4	100%
2	19.07.2023	4	4	100%
3	17.08.2023	4	4	100%

4	08.09.2023	4	4	100%
5	11.10.2023	4	4	100%
6	29.11.2023	4	3	75%
7	30.11.2023	4	4	100%
8	05.12.2023	5	4	80%
9	13.12.2023	6	6	100%
10	26.12.2023	6	6	100%
11	30.03.2024	6	6	100%

8. Audit Committee

The Audit Committee''s role is to assist the Board in overseeing the governance function and responsibilities in relation to the Company''s financial reporting process carried out by the Management, internal control system, risk management system and internal and external audit functions. The Audit Committee functions according to its charter/terms of reference that defines its composition, authority, responsibilities and reporting functions.

The Audit Committee consists of the following members -

1. Mr. Ajay Jain [Independent Director & Chairperson of the Committee]

2. Ms. Anita Vijayakar [Independent Director and member of Committee]

3. Mr. Prashant Garg [Managing Director and member of Committee]

During the year under review, six (6) Meetings of the Audit Committee were held on the following dates -

• 29^th June, 2023

• 19^th July, 2023

• 17^th August,2023

• 30^th November, 2023

• 27^th March, 2024

• 30^th March, 2024

9. Corporate Social Responsibility Committee

The Corporate Social Responsibility (‘CSR'') Committee of the Board is constituted in accordance with the provisions of Section 135 of the Act. The CSR Committee has been entrusted with the specific responsibility of devising and implementing corporate social responsibility programs. The CSR Committee was reconstituted by our Board at its meeting held on 13^th December 2023.

As on 31^st March 2024, CSR Committee comprises of following members-

1. Ms Anita Vijayakar [Independent Director & Chairperson of Committee]

2. Dr. Renuka Garg [Non-Executive Non-Independent Director and member of Committee]

3. Mrs. Chitra Garg [Non-Executive Non-Independent Director and member of Committee]

During the year under review, meeting of the CSR Committee was held on 17^th August, 2023

10. Nomination & Remuneration Committee

The role of Nomination & Remuneration committee (NRC) is to formulate Policy on director''s appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters as specified u/s 178 (3) of the Companies Act, 2013. Nomination & Remuneration Policy of Diffusion Engineers Limited is available on the Company''s website at www.diffusionengineers.com

The Nomination & Remuneration Committee was reconstituted by our Board at its meeting held on 30^th March 2024. NRC Committee currently comprises of following members-

1. Ms. Anita Vijayakar [Independent Director & Chairperson of the Committee]

2. Mr. Ajay Jain [Independent Director and member of Committee]

3. Ms. Chitra Garg [Non-Executive Non-Independent Director and member of Committee]

During the year under review, three (3) Meetings of the Nomination & Remuneration Committee were held on the following dates -

• 29^th June, 2023

• 30^th November, 2023

• 05^th December, 2023

11. Stakeholders’ Relationship Committee

Stakeholders Relationship Committee (SRC) is a committee within an organization that helps the board of directors oversee the interests of stakeholders, such as investors, debenture holders, and other security holders. The SRC''s primary role is to resolve concerns and complaints from stakeholders.

As on 31^st March 2024 Stakeholders'' Relationship Committee consists of following directors as members -

1. Mr. Ajay Jain [Independent Director & Chairperson of the Committee]

2. Mr. Prashant Garg [Managing Director and member of Committee]

3. Dr. Renuka Garg [Non-Executive Non-Independent Director and member of Committee]

During the year under review, Meeting of the Stakeholders'' Relationship Committee was held on 30^th March, 2024

12. Risk Management Committee

The Risk Management Committee was constituted by our Board at its meeting held on 13^th December 2023. Risk Management Committee assist the Board of Directors in fulfilling its oversight responsibilities with regard to the risk appetite of the

Corporation, the Corporation''s risk management, identification & mitigation of associated risk.

The Risk Management Committee consists of following members -

1. Mr. Prashant Garg [Managing Director & Chairperson of the Committee]

2. Mr. Ajay Jain [Independent Director and member of Committee]

3. Mr. Anil Kumar Trigunayat [Independent Director and member of Committee]

4. Mr. Abhishek Mehta [Chief Financial Officer and member of Committee]

During the year under review, Meeting of the Risk Management Committee was held on 30^th March, 2024

13. Independent Directors’ Meeting

Pursuant to the Companies Act, 2013, the Independent directors must hold at least one meeting in a financial year without attendance of non-independent director and members of the Management. Accordingly, independent directors of the Company met on 30^th March, 2024 and:

¦ Reviewed the performance of non-independent directors and the Board as a whole;

¦ Reviewed the performance of the Chairman of the Company.

¦ Assessed the quality, quantity and timeliness of flow of information between the Company''s Management and the Board that is necessary for the Board to effectively and reasonably perform their duties.

14. Corporate Governance

The company has been following best of the Corporate Governance practices. The management strives to protect the interest of all stakeholders in most transparent and fair manner. The Board is balanced as regards the representation of suitable number of non - executive and independent directors who are taking care of the interests and well - being of all the stakeholders. Its decision-making is objective. The Board has an effective mechanism to understand the concerns of stakeholder & it effectively and regularly monitors the functioning of the management team. The Board remains in effective control of the affairs of the company at all times.

15. Secretarial Standards:

The directors state that applicable Secretarial standards have been duly followed by the company.

16. Subsidiaries

Following is the list of Subsidiaries of our company: -

i. Diffusion Super Conditioning Services Private Limited

ii. Nowelco Industries Private Limited

iii. Diffusion Hernon Adhesive and Sealant Private Limited

iv. Diffusion Engineers Singapore Pte. Ltd.

v. Diffusion Wear Solutions Philippines Inc.

vi. Diffusion Eurasia Muhendislik Sanayi Ve Ticaret Anonim Sirketi*

Following are Associates / Joint Venture of our company: -

i) LSN Diffusion Limited (United Kingdom)

ii) Mecdiff Sdn Bhd (Malaysia)

*Diffusion Eurasia Muhendislik Sanayi Ve Ticaret Anonim Sirketi (DEMSTAS) is a Company incorporated in Turkey on February 16, 2024 and is registered with the IZMIR Trade Registry Office under Trade Registry number 253826. Holding in the said company was agreed as follows: Diffusion Engineers Limited - 70% and Gurkhan Gokhan - 30%. Total Share capital proposed was 2,50,000 Turkish Lira and 25% of the same i.e. 62,500 Turkish Lira was paid by Gokhan Gurcan. Contribution of Diffusion Engineers Limited was to be done within 24 months from the date of registration. As on 31st March 2024 your company had not invested any amount in the said company. On 21st May 2024, Diffusion Engineers Limited transferred 1,75,000 Turkish Lira in the said company as their 70% capital contribution. Thus, consolidation was not required for FY 2023-24

17. Particulars of Loan, Guarantees and Investments under Section 186

Pursuant to Section 186 of the Companies Act, 2013, the details of the Loans given, guarantees on securities provided and investments made are provided in the notes to the financial statement and Annexure 3 of this report.

18. Particulars of Contracts or Arrangements with Related Parties

All the related party transactions entered into during the financial year were on arm''s length basis, in the ordinary course of business and were in compliance with the applicable provisions of the Act. Particulars of contracts or arrangements with related parties referred to in Section 188 (1) of the Companies Act,2013 in the prescribed Form AOC-2 is appended which forms part of this Report.

Your directors draw attention of the members to Notes of financial statement which sets out Related Party disclosures.

19. Deposits

The Company has not accepted/renewed any deposit from the public within the ambit of Section 73 of Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014.

20. Statutory Auditors

The members at the 41^st Annual General Meeting held on 25^th September, 2023 appointed PGS & Associates, Chartered Accountants (Firm Registration No. -122384W) as Statutory Auditors of the Company to hold office for a period of five [5] years commencing from conclusion of 41^st Annual General Meeting till the conclusion of Annual General Meeting to be held in the year 2028.

Further, the report of Statutory Auditors along with notes to Financial Statement is enclosed to this report. The observations made in the Auditors'' Report are selfexplanatory and therefore, in the opinion of the Directors, do not call for further comments. The Auditor''s Report does not contain any qualification, reservation, adverse remark or disclaimer.

21. Details in respect of frauds reported by auditors under section 143 (12) other that those which are reportable to central governments:

As per Auditors Report, no fraud reported by auditor of the Company.

22. Secretarial Audit

Pursuant to provision of section 204 of Companies Act, 2013 read with rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Board of directors in its meeting held on 17th August 2023, appointed Mr. Madhav Kawde, Practicing Company Secretary (CP No. 1892) as Secretarial Auditor to conduct the secretarial audit of the company for the financial year 2023 - 2024. The secretarial audit report in Form MR - 3 is annexed to this report. The observations made in the Secretarial Audit Report are self-explanatory and therefore, in the opinion of the Directors, do not call for further comments. The Secretarial Audit Report does not contain any qualification, reservation, adverse remark or disclaimer.

23. Cost Audit Records

Company has maintained cost records as per section 148 (1) of Companies Act, 2013.

24. Cost Auditors

As per Section 148 of the Act, the Company is required to have the audit of its cost records conducted by a Cost Accountant in practice. The Board on the recommendation of the Audit Committee has appointed M/s A. B. Verma & Co., Cost Accountants, Nagpur (Firm Registration No. 102527/ Membership No. 31367), as the Cost Auditors of the Company for FY 2024 - 2025 under Section 148 and all other applicable provisions of the Act read with the Companies (Cost Records and Audit) Amendment Rules, 2014.

M/s A. B. Verma & Co., have confirmed that they are free from disqualification specified under Section 141(3) and provision to Section 148(3) read with Section 141(4) of the Act and that the appointment meets the requirements of Section 141(3)(g) of the Act.

The remuneration payable to the Cost Auditors is required to be placed before the members in a general meeting for their ratification. Accordingly, a Resolution for seeking members'' ratification for the remuneration payable to M/s A. B. Verma & Co. is included in the Notice convening the Annual General Meeting.

25. Risk. Management Policy

The Company has developed and implemented a risk management policy which identifies major risks which may threaten the existence of the Company. The same has also been adopted by your Board and is also subject to review from time to time. Risk mitigation process and measures have also been formulated and clearly spelled out in the said policy. The company has been constantly assessing various risk factors and it has adequate risk review system with respect to following areas:

Plant Operations: - Various Plants of the company are running at its optimal capacity. It is paying special attention to Industrial safety and training; company has insured all its plants adequately.

Financial Risk: - The Company has been managing its financial and other resources very effectively; Credit period offered to customers is effectively monitored, with optimal utilization of internal accruals the financial cost is very minimum in comparison with other companies operating in the same field. It also pays more attention to Foreign Exchange Earning and Expenses.

Protection of IPR & Legal diligence: -Constant evaluation of Intellectual Property Rights related issues and Contractual obligations with Jurisdictional issue are diligently observed.

The Risk Assessment and Management Policy is available on the Company''s website at www.diffusionengineers.com

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

There are no cases reported during the year under review. Ms. Anita Vijayakar (DIN - 01190200) an Independent Director is a Chairperson of the Internal Complaints committee along with various women staff members both from plants and office. Your company has been certified as “Great place to work” for the second time in a row. The Great Place to Work Assessment is considered a ‘Gold Standard'' in workplace Culture assessment.

27. Conservation of Energy. Technology Absorption. Foreign Exchange Earnings and Outgo

Details is as per Annexure-IV

28. Corporate Social Responsibility (CSR)

Composition of CSR committee, the details about implementation of various programmes are provided in Annexure-V as per the prescribed format under Companies (Corporate Social Responsibility Policy) Rules, 2014.

29. Extract of Annual Return

Pursuant to Section 92(3) read with Section 134 (3) (a) of the Act and Rule 12 of the Companies (Management and Administration), Rules 2014 the Annual Return in Form MGT - 7 as on March 31, 2024 is available on the Company''s website at www.diffusionengineers.com

30. Formal Annual Evaluation of the performance of the Board, its committees & of Individual Directors:

The Board evaluated its performance as a whole and was satisfied with its performance and composition of Independent and Non-Independent Directors. The Board have adequate expertise drawn from diverse industries and business and bring specific competencies relevant to the Company''s business and operations. Performance of all the Directors was quite satisfactory.

The term of reference and composition of the Committees is clearly defined. The Committee performed their duties diligently and contributed effectively to the decisions of the Board.

31. Material Changes and Commitments:

There have been no material changes and commitments, which affect the financial position of the company which have occurred between the end of the financial year to which the financial statements relate and the date of this Report.

32. Details of Significant and Material Orders Passed by the Regulators, Courts and Tribunals:

No significant and material order has been passed by the regulators, courts, tribunals impacting the going concern status and Company''s operations in future.

33. Internal Financial Control:

The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation was observed.

34. Statement on Declaration from Independent Directors:

The Company has received necessary declarations from all Independent Directors of the Company in accordance with the provisions of Section 149(7) of the Companies Act, 2013 confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013.

35. Proceedings pending under the Insolvency and Bankruptcy Code,2016:

No application has been made or any proceeding is pending under the IBC, 2016.

36. Difference in Valuation:

The company has never made any one-time settlement against the loans obtained from Banks and Financial Institution and hence this clause is not applicable.

37. Directors Responsibility Statement

In accordance with the provisions of Section 134 (5) of the Companies Act 2013, your directors confirm that:

a) in the preparation of the annual accounts for the financial year ended 31^st March, 2024, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b) 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 as at 31^st March, 2024 and of the profit /loss of the Company for that period;

c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

d) the directors had 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) 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.

38. Acknowledgment

Your Directors place on record their gratitude to government authorities, Bankers and all stakeholders for the assistance, co - operation and encouragement they extended to the Company. Your directors also wish to place on records their sincere thanks and appreciation to Employees at all levels for continuing support and unstinting efforts in ensuring an excellent all-around operational performance.