DIRECTORS' REPORT

Your Directors (the "Board of Directors”/ "Board”) have pleasure in presenting the 9th Annual Report together with the Audited
Standalone and Consolidated Financial Statements of KRN Heat Exchanger and Refrigeration Limited ("KRN" or "the Company")

for the financial year ended 31st March, 2026 (the "Financial Year").

1. Financial Results

The Company has prepared the Standalone and Consolidated Financial Statements for the Financial Year 2025-26 in
accordance with the Companies (Indian Accounting Standards) Rules, 2015 prescribed under Section 133 of the Companies
Act, 2013 (the "Act”).

The consolidated and standalone financial performance of of the Company for the financial year ended 31st March, 2026 is
summarized below:

(Amount In ' Lakhs except Earnings Per Share Data)

STATE OF COMPANY'S AFFAIRS

KRN Heat Exchanger and Refrigeration Limited, incorporated in 2017 and situated in Neemrana, Rajasthan, is engaged in the
manufacturing of high-quality aluminium and copper fin-and-tube heat exchangers, including water coils, condenser coils, and
evaporator coils. These products are extensively supplied to original equipment manufacturers (OEMs) serving the heating,
ventilation, air conditioning, and refrigeration (HVAC&R) industry.

In addition to its comprehensive portfolio of heat exchangers, the Company manufactures a range of critical components,
including aluminium and copper fins, copper tubes, bar-and-plate assemblies, and other essential parts that support its integrated
manufacturing operations. With a strong emphasis on product quality, engineering excellence, and process efficiency, KRN is
committed to delivering reliable, high-performance thermal solutions that meet the evolving requirements of its customers and
end users.

FINANCIAL HIGHLIGHTS
STANDALONE LEVEL

During the Financial Year 2025-26, your Company clocked total revenue from operations of ' 67623.01Lakh as compared to
' 43118.97Lakh in the Financial Year 2024-25 at Standalone level.

The profit after tax ("PAT”) of the Company for the Financial
Year 2025-26 was ' 7130.53 Lakh as compared to ' 5017.46
Lakh in the Financial Year 2024-25.

CONSOLIDATED LEVEL

During the Financial Year 2025-26, your Company clocked total
revenue from operations of ' 60005.77Lakh, as compared to
' 42984.93Lakh in the Financial Year 2024-25 at Consolidated
level.

The profit after tax ("PAT”) of the Company for the Financial
Year 2025-26 was ' 7646.74 Lakh as compared to ' 5287.54
Lakh in the Financial Year 2024-25.

CHANGE IN THE NATURE OF BUSINESS

The Company continued to operate within its established
business segments, with no change in the nature of business
of your Company during the year under review.

INFORMATION ABOUT SUBSIDIARY, JOINT VENTURE
AND ASSOCIATE COMPANY AND THEIR FINANCIAL
PERFORMANCES

At the end of the financial year on 31st March 2026, the
Company had 2 unlisted subsidiary companies [including 1
material Wholly Owned Subsidiary]

No company became or ceased to be a subsidiary, joint
venture, or associate of the Company during the financial year
under review.

As mandated by Section 129(3) of the Companies Act, 2013
("the Act”), A statement containing the salient features of
the financial statements of the Subsidiaries, Joint Ventures
and Associates of the Company is attached in Form AOC-
1 as Annexure I as required under Rule 5 of the Companies
(Accounts) Rules, 2014.

HIGHLIGHTS OF PERFORMANCE OF SUBSIDIARIES,
ASSOCIATES AND JOINT VENTURES

Your Company has two subsidiaries as on March 31, 2026. The
details are as follows:

a) KRN HVAC Products Private Limited

b) Thermotech Research Laboratory Private Limited

The performance highlights of the material subsidiary
company during the year are given below:

KRN HVAC Products Private Limited ("KRN HVAC")

KRN HVAC is a wholly owned subsidiary Company and is

engaged in the business of Manufacturing of the Heat
Exchnagers and other HVAC Products. KRN HVAC reported
turnover of 218,85.89 Lakhs for the year ended 31st March,
2026 (31st March, 2025: Rs. 1551.05 Lakhs) and reported a net
profit of Rs. 611.17 Lakhs during the Financial Year ended 31st
March, 2026 vis-a-vis net profit of Rs. 278.24 Lakhs during the
previous year ended 31st March, 2025.

During the financial year under review, the Board approved the
conversion of the outstanding unsecured inter-corporate loan
of ' 100 crore, along with applicable interest, if any, granted
by the Company to its wholly owned subsidiary, KRN HVAC
Products Private Limited, into equity shares of the subsidiary,

The Company converted an unsecured loan of ' 100 Crore
extended to KRN HVAC Products Private Limited, its wholly
owned subsidiary, into equity. Pursuant to the conversion, the
Company was allotted 50,00,000 (Fifty Lakh) Equity Shares of
' 10 each issued at a price of ' 200 per share, comprising a
face value of ' 10 and a securities premium of ' 190 per share
pursuant to the approval of the members obtained at the
Extra-Ordinary General Meeting held on December 30, 2025.

After the close of the financial year, KRN HVAC Products Private
Limited, the Company's wholly owned subsidiary, completed a
Rights Issue. Pursuant thereto, the Company subscribed to its
full entitlement and was allotted 78,41,917 (Seventy-Eight Lakh
Forty-One Thousand Nine Hundred Seventeen) Equity Shares
of ' 10 each at an issue price of ' 300 per share, comprising
a face value of ' 10 and a securities premium of ' 290 per
share. Accordingly, the Company continues to hold 100% of
the issued, subscribed and paid-up equity share capital of KRN
HVAC Products Private Limited.

Comprehensive audited financial statements and related
reports for each subsidiary are accessible on our website at
www.krnheatexchanger.com_.

During the financial year, the Company have one material
subsidiary i.e. KRN HVAC Products Private Limited ("KRN
HVAC”).

The policy for determining material subsidiary is available on
the website at https://krnheatexchanger.com/investors/.

ANNUAL RETURN

Pursuant to Section 92(3) read with Section 134(3)(a) of the
Act, the Annual Return for the year ended on 31st March, 2026
in the prescribed Form MGT-7, has been made available on
the Company's website at https://krnheatexchanger.com/
investors/.

DIRECTORS AND KEY MANAGERIAL PERSONNELS (KMPs)

The Company's Board, consisting of highly qualified individuals,
maintains a balanced structure of Executive and Non-Executive
Directors, Women Independent Directors with a majority of
Independent Directors, in compliance with all regulations. This
composition ensures effective leadership and oversight. The
Board currently has 07 Directors (02 Executive Directors, 01
Non- Executive Director and 04 Independent Directors), one
of them is Women Independent Directors. Furthermore, the
Board engages in regular succession planning to maintain
alignment with the Company's future needs.

• Re-appointment of the Directors

Pursuant to the provisions of Section 152(6) of the Act and
other applicable provisions, if any, of the Act, read with
the rules made thereunder and relevant clauses of the
Company's Articles of Association, Mr. Manohar Lal (DIN
10040507), Non-executive, Non Independent Director,
is due to retire by rotation at the ensuing Annual General
Meeting (AGM) and being eligible, has offered himself
for re-appointment. The Board, at their meeting held on
August 12, 2026, has recommended his re-appointment
for approval by the Members at the ensuing AGM of the
Company.

The Notice of the ensuing Annual General Meeting
contains the resolution for the above-mentioned
proposed re-appointment.

Earlier, Mr. Santosh Kumar Yadav (DIN: 07789940),
Chairman and Managing Director of the Company,
retired by rotation at the 08th AGM of the Company,
held on September 16, 2025. The Members of the
Company, subsequently approved his re-appointment,
to continue his service with the Company. His continued
association underscores his significant contribution
to the achievement of the Company's goals and his
commitment to upholding the highest standards of
corporate governance.

• Appointment / Resignation of the Directors and KMPs

During the financial year, The Board appointed Mrs.
Meenakshi Sharma (DIN: 11153602) as an Additional
Director, effective June 18, 2025. Subsequently, her
appointment as a Non-Executive Independent Director
was regularized by the shareholders at the Annual General
Meeting held on September 16, 2025, for a term of three
years commencing from June 18, 2025 to June 17, 2028.

Apart form mentioned above, during the financial year

2025-26, there was no change in the composition of the
Board and no new Director was appointed. The Board
continued to function with its existing Directors, ensuring
continuity, stability and effective oversight. However,
after the closure of the Financial Year, the Board, on the
recommendation and approval of the Audit Committee,
appointed Mr. Pawan Nawal as Chief Financial officer
and Key Managerial Personnel (KMP) of the Company with
effect from 15th May, 2026.

The disclosures required under Regulation 36 of the
Listing Regulations and Secretarial Standards-2 (”SS-
2”) on General Meetings including a brief resume,
details of expertise and other directorships/committee
memberships held by these Directors, form part of the
Notice convening the ensuing AGM.

KEY MANAGERIAL PERSONNEL

Pursuant to the provisions of Sections 2(51) and 203 of the
Act, read in conjunction with the Companies (Appointment
and Remuneration of Managerial Personnel) Rules, 2014 (as
amended), the Key Managerial Personnel ("KMPs”) of the
Company during the financial year were as follows:

Mr. Santosh Kumar Yadav, Managing Director
Mrs. Anju Devi, whole-time Director

*Mr. Jitendra Kumar Sharma, Company Secretary & Compliance
Officer

**Mr. Sonu Gupta, Chief Financial Officer
***Mr. Pawan Nawal, Chief Financial Officer

*Mr. Jitendra Kumar Sharma, has appointed as Company
Secretary & Compliance Officer (CS&CO) of the Company w.e.f.
28th April, 2026

**Mr. Sonu Gupta, has been resigned from the position of
Chief Financial officer of the Company w.e.f. 14th May, 2026
and redesignated as General Manager-Finance and Senior
Management Personnel (SMP) of the Company w.e.f. 15th May,
2026.

***Mr. Pawan Nawal has appointed as Chief Financial officer
(CFO) of the Company w.e.f. 15th May, 2026.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received necessary declarations from
all Independent Directors as required under Section 149(7)
of the Companies Act, 2013 and Regulation 25(8) of the
Listing Regulations, confirming that they meet the criteria
of independence as laid down under Section 149(6) of the

Companies Act, 2013 and Regulation 16(1)(b) of the Listing
Regulations, respectively.

In compliance with Section 150 of the Companies Act, 2013 read
with Rule 6 of the Companies (Appointment and Qualification
of Directors) Rules, 2014, the details of all the Independent
Directors have been registered with the databank maintained
by the Indian Institute of Corporate Affairs (IICA). Further, all
the Independent Directors have passed the online proficiency
self-assessment test conducted by IICA except those who
have been exempted by the Act.

The Independent Directors of the Company strictly adhere to
the Code for Independent Directors, as outlined in Schedule
IV of the Act. Based on these declarations received from
the Independent Directors, the Board has evaluated and
confirmed that all Independent Directors remain independent
of the management and are in full compliance with the relevant
statutory provisions.

SHARE CAPITAL
AUTHORISED SHARE CAPITAL

The Authorised Share Capital of the Company remained
unchanged during the financial year. As of 31st March, 2026
it stand at Rs. 72,00,00,000 consisting of 7,20,00,000 equity
shares of a face value of Rs. 10/- each.

ISSUED, SUBSCRIBED AND PAID UP SHARE CAPITAL

The issued, subscribed, and paid up equity share capital of the
Company remained unchanged during the financial year. As of
31st March, 2026 it stand at Rs. 62,15,66,000 /- (Rupees sixty
Two Crore Fifteen Lakhs Sixty Six Thousand Only) consisting of
6,21,56,600 equity shares of a face value Rs. 10/- each.

After the close of the financial year the Company issued and
allotted 33,01,886 Equity Shares of face value ' 10 each to
eligible qualified institutional buyers at the Issue price of
' 1,060.00 per Equity Share, i.e., at a premium of ' 1,050.00 per
Equity Share (which includes a discount of 4.85% of the floor
price, as determined in terms of the SEBI ICDR Regulations)
against the floor price of Rs. 1,114.05 per Equity Share),
aggregating to ' 34,999.99 lakhs, pursuant to the Issue.

Pursuant to the above allotment of Equity Shares in the Issue,
the paid-up equity share capital of the Company stands
increased from ' 62,15,66,000 consisting of 6,21,56,600
Equity Shares of ' 10 each to ' 65,45,84,860.00 consisting of
6,54,58,486 Equity Shares of ' 10 each.

During the period under review, the Company has not issued
any preference shares.

ANNUAL LISTING FEE

The Annual Listing Fee for the financial year 2025-26 has been
paid to both the Stock Exchanges i.e. BSE Limited and National
Stock Exchange of India Limited.

TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR
EDUCATION AND PROTECTION FUND

During the financial year, the Company has not declared
dividends on the Equity Shares, therefore, provisions for
transfer of unclaimed/unpaid dividend and shares to Investor
Education and Protection Fund under the Companies Act, 2013
were not applicable.

KRN EMPLOYEE STOCK OPTION PLAN 2026 (“ESOP PLAN")

During the year under review, the Board in its meeting held on
12th January, 2026 on the recommendation of the NRC, had
accorded its approval to implement the 'KRN Employee Stock
Option Plan 2026' ('ESOP Plan') and the same was approved by
the Members of the Company at their Extra-Ordinary General
Meeting (EGM) held on 15th April, 2026.

Further, pursuant to the applicable provisions of the Listing
Regulations and SEBI (Share Based Employee Benefits and
Sweat Equity) Regulations, 2021 ('SBEB & SE Regulations'), the
Company has applied for in-principle approval for the proposed
issue of equity shares under the said the ESOP Plan from both
the stock exchanges i.e. BSE Limited (BSE) and National Stock
Exchange of India Limited (NSE) where the equity shares of the
Company are listed.

It is confirmed that the ESOP Plan is in compliance with the
SBEB & SE Regulations and during the year under review no
material changes were made to the ESOP Plan.

The Company's Employee Stock Option Scheme (ESOP) was
approved by the Members on 15 April 2026, subsequent to the
close of the financial year under review. Accordingly, as on
31 March 2026, no stock options had been granted, vested,
exercised, lapsed, or remained outstanding. Therefore, the
disclosures relating to ESOPs for the financial year ended 31
March 2026 are not applicable.

The requisite disclosures as mandated under SBEB & SE
Regulations is available on the website of the Company at
https:krnheatexchanger.com/wp-content/uploads/2026/08/
ESOP-DisclosureKRN.pdf

DIVIDEND

The Board does not propose to pay any dividend for the
financial year ended 31st March, 2026. The Dividend

Distribution Policy of the Company is available at the website of
the Company at https://krnheatexchanger.com/wp-content/
uploads/2025/11/Dividend-Distribution-Policy.pdf.

DIFFERENCE BETWEEN 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 was no instance of one-time settlement with any Bank
or Financial Institution during the financial year 2025-26.

AMOUNT TRANSFER TO RESERVES

Details with regard to amount transferred to reserves are
provided in the Notes to Financial Statements forming part of
this Annual Report.

PUBLIC DEPOSITS

During the year under review, the Company has neither invited
nor accepted any deposits from the public pursuant to the
provisions of Section 73 of the Companies Act, 2013 read with
the Companies (Acceptance of Deposits) Rules, 2014.

Additionally, the Company has not accepted loans/ borrowings
from its Directors and their relatives during this period.

MATERIAL CHANGES AND COMMITMENTS AFFECTING
THE FINANCIAL POSITION OF THE COMPANY WHICH HAVE
OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR AND
THE DATE OF THE REPORT

No material changes and commitments have occurred
between the end of the financial year of the Company and the
date of this report which could affect the financial position of
the Company, Except following:-

1. During the year under review, the Board of Directors, at
its meeting held on 13 March 2026, approved the proposal
to raise funds through issuance of equity shares by way
of Qualified Institutions Placement (QIP). After the close
of the financial year the Company issued and allotted
33,01,886 Equity Shares of face value ' 10 each to eligible
qualified institutional buyers at the Issue price of '
1,060.00 per Equity Share, i.e., at a premium of ' 1,050.00
per Equity Share (which includes a discount of 4.85% of
the floor price, as determined in terms of the SEBI ICDR
Regulations) against the floor price of Rs. 1,114.05 per
Equity Share), aggregating to ' 34,999.99 lakhs.

2. During the year under review, the Board in its meeting
held on 12th January, 2026 on the recommendation of the

NRC, had accorded its approval to implement the 'KRN
Employee Stock Option Plan 2026' ('ESOP Plan') and after
the close of the financial year the Company the same
was approved by the Members of the Company at their
Extra-Ordinary General Meeting (EGM) held on 15th April,
2026. Further, pursuant to the applicable provisions of
the Listing Regulations and SEBI (Share Based Employee
Benefits and Sweat Equity) Regulations, 2021 ('SBEB & SE
Regulations'), the Company has applied for in-principle
approval for the proposed issue of equity shares under
the said the ESOP Plan from both the stock exchanges i.e.
BSE Limited (BSE) and National Stock Exchange of India
Limited (NSE) where the equity shares of the Company
are listed.

RISK MANAGEMENT AND IMPLEMENTATION OF A RISK
MANAGEMENT POLICY

The Company has implemented a dynamic and comprehensive
Risk Management Framework designed to identify, assess, and
mitigate risks across all business operations. This framework
is integrated into our strategic planning and is in full alignment
with regulatory requirements and industry benchmarks.

The Company is exposed to various financial and operational
risks, including market risk, credit risk, liquidity risk, regulatory
risk, human resource risk, and commodity price risk.

During the year under review, the Board has constituted Risk
Management Committee ('RMC'), pursuant to the provisions
of Regulation 21 read with Part D of Schedule II of the Listing
Regulations to frame, implement and monitor the risk
management process and framework of the Company. The
details of the composition of the RMC, its terms of reference,
number of meetings held during the financial year, attendance
at meetings and other requisite details as required under
Listing Regulations are provided in the Corporate Governance
Report which forms part of the Annual Report.

Risk Management has been integrated with major business
processes such as strategic planning, business planning,
operational management and investment decisions to ensure
consistent consideration of risks in all decision- making.
Major risks identified by the businesses and functions are
systematically addressed through mitigating actions on a
continuing basis.

To minimize the adverse consequence of risks on business
objectives the Company has framed this Risk Management
Policy pursuant to Regulation 17(9) of the Listing Regulations.
The main objective of this policy is to ensure sustainable
business growth with stability and to promote a pro-active

approach in reporting, evaluating and resolving risks
associated with the business. In order to achieve the key
objective, the policy establishes a structured and disciplined
approach to Risk Management, in order to guide decisions on
risk related issues.

In today's challenging and competitive environment, strategies
for mitigating inherent risks in accomplishing the growth plans
of the Company are imperative. The common risks inter alia
are: Regulations, competition, Business risk, Technology
obsolescence, Investments, retention of talent and expansion
of facilities.

Business risk, inter-alia includes financial risk, political risk,
fidelity risk and legal risk. As a matter of policy, these risks are
assessed and steps as appropriate are taken to mitigate the
same.

DETAILS WITH RESPECT TO THE ADEQUACY OF INTERNAL
FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL
STATEMENTS

To ensure operational efficiency and financial integrity, the
Board has implemented a comprehensive internal control
framework. This includes robust policies and procedures
designed for the safeguarding of assets, the prevention and
detection of frauds and errors, and the ensuring of accuracy
and completeness of accounting records.

The Audit Committee maintains active oversight, periodically
reviewing the adequacy and effectiveness of these systems
and recommending enhancements to meet evolving business
needs.

Our internal financial control systems are fully compliant with
the Ind AS, the Act, Securities and Exchange Board of India
(SEBI) Regulations and other relevant legislative frameworks.
By ensuring strict adherence to these standards, the Company
reinforces its commitment to upholding the highest standards
of corporate governance and regulatory compliance.

For a comprehensive understanding of the internal financial
controls, including their effectiveness and alignment with the
Company's strategic goals, please refer to the Management
Discussion and Analysis section of this Report.

ANNUAL EVALUATION BY THE BOARD PERFORMANCE AND
PERFORMANCE OF ITS COMMITTEES AND DIRECTORS

The Board, pursuant to the provisions of the Act and Listing
Regulations, has carried out an Annual Evaluation of its own
performance, performance of the Board Committees and of
the individual Directors (including the Independent Directors)
on various parameters.

The criteria for the evaluation of the performance of the Board,
the Committees of the Board and the individual Directors,
including the Chairperson of the Board was approved by
the Nomination and Remuneration Committee ("NRC") of
the Company. The Board decided to circulate the set of
questionnaires for the performance evaluation to the directors
and on the basis of those questionnaires, the evaluation of the
Board Committees and of the individual Directors (including
the Independent Directors) was done for the FY 2025-26.

The performance evaluation of the Non-Independent Directors
and Chairman of the Board was carried out by the Independent
Directors in a separate meeting.

The Directors expressed their satisfaction with the evaluation
process. Further, the evaluation process confirms that the
Board and its Committees continue to operate effectively, and
the performance of the Directors is satisfactory.

PARTICULARS OF EMPLOYEES

The information required pursuant to Section 197(12) of the
Companies Act, 2013 and the particulars of the employees
who are covered under the provisions contained in Rule 5 (1)
of Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014, are attached as Annexure II.

As per the second proviso to Section 136(1) of the Act, the
Directors' Report and Financial Statements are being sent
to the Members of the Company excluding the statement
of particulars of employees under Rule 5(2) and (3) of the
Remuneration Rules. If any Member is interested in obtaining
a copy thereof, the Member may send an email to the Company
Secretary at investors@krnheatexchnager.com, whereupon a
copy would be sent to such Member.

VIGIL MECHANISM/ WHISTLE BLOWER POLICY

The Company has formulated "Whistle Blower Policy” to
provide Vigil Mechanism to the employees including Directors
of the Company to report genuine concerns and to ensure
strict compliance with ethical and legal standards across the
Company. The provisions of this Policy are in line with the
provisions of the Section 177(9) of the Companies Act, 2013
and the rules made thereunder and Regulation 22 of Listing
Regulations. The Company's Whistle Blower Policy is available
on the website of the Company at https://krnheatexchanger.
com/wp-content/uploads/2024/05/Whistle-Blower-and-
Vigil-Mechanism.pdf.

During the period under review, the Company has not received
any complaint under the Whistle Blower Policy of the Company.

MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEE(S)
Number of Meetings of the Board:

The Board met 9 (Nine) times during the financial year 2025¬
26.. The intervening gap between the meetings was within
the time limit prescribed under the provisions of Section 173
of the Act and the Secretarial Standards (SS-1) issued by the
Institute of Company Secretaries of India, and the SEBI Listing
Regulations.

Comprehensive details of these Board meetings, including
attendance, Meeting date composition etc. are set out in the
Corporate Governance Report which forms part of Annual
Report.

Independent Directors' Meeting

In accordance with the provisions of Section 149 (8) of the Act,
read with the Schedule IV of Code for Independent Directors
and rules made thereunder and Regulation 25(3) of the Listing
Regulations, the Independent Directors are required to hold
at least one separate meeting in a financial year. To uphold
the highest standards of corporate governance and effective
Board oversight,

During the Financial Year two (02) separate meetings of the
Independent Directors of the Company were held on 11th
March, 2026 and 30th March, 2026 without the attendance of
Non-Independent Directors and members of the Management,
thereby providing a dedicated forum for independent
deliberations on the Board's performance, governance
framework and overall strategic oversight.

Committees of the Board

The Board has constituted the following Committees with
adequate delegation of powers:

I. Audit Committee

II. Nomination and Remuneration Committee

III. Stakeholders' Relationship Committee

IV. Corporate Social Responsibility Committee

V. Risk Management Committee (Constituted on 12.05.2025)

VI. Banking and Finance Committee (Constituted on
12.05.2025)

VII. Operative Committee (Constituted on 12.05.2025)

VIII. Fund Raising Committee (Constituted on 13.03.2026)

The details of the composition of the Committees, their
terms of reference, attendance of Directors at meetings of
the Committees and other requisite details as required under
Listing Regulations are provided in the Corporate Governance
Report which forms part of the Annual Report.

SECRETARIAL STANDARDS

The Secretarial Standards i.e. SS-1 & SS-2 relating to meetings
of the Board of Directors and General Meetings, respectively
have been duly complied with by the Company.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 134(5) of the Companies
Act, 2013, the Directors of the company, to the best of their
knowledge and belief and based on the information and
interpretations obtained by them, hereby confirms and states
that:

a. in the preparation of annual accounts for the financial
year ended 31st March, 2026, the applicable Accounting
Standards have been followed and there are no material
departures, from the same;

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 as at 31st
March, 2026 and of the profit 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 the Act, 2013 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 are operating effectively; and

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

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT
(BRSR)

Pursuant to the requirements of Regulation 34 (2) (f) of
the Listing Regulations, the Company has prepared a
comprehensive Business Responsibility and Sustainability
Report ("BRSR”) for the financial year 2025-26. This report
forms an integral part of this Annual Report, provides a
transparent, detailed account of the Company's initiatives,
progress, performance and achievements across all the ESG
dimensions.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of Regulation 34 of the Listing Regulations, the
Management Discussion and Analysis Report for the year
under review is annexed separately forming part of the Annual
Report.

CORPORATE GOVERNANCE REPORT

Guided by a culture of transparency, the Company strictly
adheres to the governance norms stipulated under Regulation
34, read with Para C of Schedule V of the Listing Regulations.
A detailed Corporate Governance Report is featured as an
integral part of this Annual Report, providing stakeholders with
a clear view of our ethical framework and internal practices,
which collectively reinforce our commitment to integrity,
accountability and stakeholder trust.

To provide independent assurance of our compliance with
the corporate governance norms as stipulated in the Listing
Regulations, the Company has obtained a certificate from
Practicing Company Secretaries confirming compliance with
the conditions of Corporate Governance as stipulated under
the Listing Regulations. This certificate is incorporated within
the Report on Corporate Governance forming part of this
Annual Report.

This certificate underscores the Company's dedication to
operational excellence and ethical leadership. Together,
the Corporate Governance Report and the accompanying
certificate clearly demonstrate the Company's commitment
to fostering enduring trust and confidence among its valued
stakeholders.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

In alignment with Section 135 of the Act and the Companies
(Corporate Social Responsibility Policy) Rules, 2014, the
Company has a duly constituted CSR Committee. The
Committee is responsible for formulating and monitoring the
CSR Policy and overseeing the implementation of projects
that create sustainable social impact. Details regarding the
composition of the Committee and meetings held during the
year are provided in the Corporate Governance Report.

The Company has in place Corporate Social Responsibility
Policy ("CSR Policy”) which outlines the Company's philosophy
and responsibility and lays down the guidelines and mechanism
for undertaking socially impactful programs towards welfare
and sustainable development of the community around the area
of its operations. The CSR Policy of the Company is available
on the website of the Company and the weblink is: https://
krnheatexchanger.com/wp-content/uploads/2025/08/CSR-
Policy.pdf.

Pursuant to clause (o) of sub section (3) of Section 134 of the Act
and Rule 8 of the Companies (Corporate Social Responsibility)
Rules, 2014, as amended, the Annual Report on Corporate
Social Responsibility activities of the Company undertaken
during the year under review, including salient features of
Company's CSR Policy forms part of this Report as Annexure III.

AUDITORS AND AUDIT REPORTS
STATUTORY AUDITORS

Pursuant to the provisions of Section 139 of the Companies
Act, 2013 read with rules made thereunder, M/s Keyur Shah &
Co., Chartered Accountants (Firm Registration No. 141173W)
has been appointed as the Statutory Auditors of the Company
in the 6th Annual General Meeting of the Company held on 30th
September, 2023 to hold office for a period of four (5) years till
the conclusion of 11th Annual General Meeting.

The Auditors' Report does not contain any qualification,
reservation, adverse remark or disclaimer of opinion. The
Notes to the Financial Statements (including the Consolidated
Financial Statements) referred to in the Auditors' Report are
self-explanatory and do not call for any further comments.

The Reports issued by the Statutory Auditors on the Standalone
and Consolidated Financial Statements of the Company for the
financial year ended March 31, 2026, form part of this Annual
Report.

SECRETARIAL AUDITORS

M/s SMD & Co., Company Secretary in practice (Firm
Registration Number S2023HR924000), was appointed as
Secretarial Auditors of the Company for conducting Secretarial
Audit for a term of five consecutive years, commencing
from financial year 2025-26 till financial year 2029-30 in
the 8th Annual General Meeting of the Company held on 16th
September, 2025.

The Secretarial Audit Report for the financial year ended
March 31, 2026, issued by the Secretarial Auditors in Form MR-
3, is annexed as Annexure IV. to this Report. The observations
and suggestions of the Secretarial Auditors were reviewed,
and necessary corrective/ preventive actions were taken by
the Company.

As of March 31, 2026, the Company have one material unlisted
subsidiary incorporated in India, as defined under Regulation
24A of the Listing Regulations. Consequently, the requirement
to annex Secretarial Audit Reports of such subsidiaries is
applicable for the year under review and forming part of this
Annual Report attached as annexure V.

INTERNAL AUDITORS

Pursuant to the provisions of Section 138 of the Companies
Act, 2013 read with rules made thereunder, the Board of
directors had appointed M/s Sharma Shankar & Co., Chartered
Accountants, as Internal Auditor of the Company to conduct
the Internal Audit of the Company for the financial year 2025¬
26.

Internal Audit Reports are discussed with the management
and are also reviewed by the Audit Committee of the Company.
During the year under review, the Internal Auditors carried out
their functions as per the scope of work assigned and placed
their reports at the meetings of the Audit Committee.

The observations and suggestions of the Internal Auditors
were reviewed, and necessary corrective/ preventive actions
were taken in consultation with the Audit Committee.

COST AUDITORS

Pursuant to the provisions of Section 148 of the Companies Act,
2013Board of Directors of the Company on the recommendation
of the Audit Committee has approved the appointment of
M/s R S Chauhan & Associates, Cost Accountant (Reg. No.
003517) as Cost auditors of the Company for the F.Y 2025-26.
The Company has received a written confirmation from the
firm regarding their eligibility and independence as per the
prescribed standards. The Cost Auditors will submit their Cost
Audit Report within the timelines prescribed under the Act.

In accordance with the provisions of Section 148(1) of the Act,
read with the Companies (Cost Records and Audit) Rules, 2014,
the Company is maintaining the requisite cost records

There has been no qualification, reservation, adverse remark
or disclaimer given by the Cost Auditors in their Report for the
financial year ended March 31, 2026.

As per the provisions of Section 148 of the Act read with the
Companies (Audit and Auditors) Rules, 2014, the remuneration
payable to Cost Auditors is required to be ratified and
confirmed by the members in General Meeting. Accordingly,
resolution seeking members' ratification for the remuneration
payable to M/s R S Chauhan & Associates, Cost Accountant for
the F.Y. 2026-27 is included in the Notice convening the AGM.

DETAILS IN RESPECT OF FRAUD REPORTED BY AUDITOR
UNDER SECTION 143(12) OTHER THAN WHICH ARE
REPORTABLE TO THE CENTRAL GOVERNMENT

There was no fraud reported in the Company during the
Financial Year ended 31st March, 2026. This is also being
supported by the report of the auditors of the Company as no

fraud has been reported in their audit report under Section 143
(12) of the Companies Act, 2013 for the Financial Year ended
31st March, 2026.

PARTICULARS OF LOANS GIVEN, GUARANTEES GIVEN,
SECURITIES PROVIDED AND INVESTMENTS MADE

The detailed particulars of loans given, guarantees given,
security provided and investments made during the year in
accordance with Section 186 of the Act forms part of the notes
to the Audited Financial Statements provided in this Annual
Report.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE
WITH RELATED PARTIES PURSUANT TO THE SECTION 188 (1)
OF THE COMPANIES ACT, 2013

The Company has robust processes and procedures for
identification and monitoring related party(ies) and related
party transactions.

The Company has formulated a policy on related party
transactions which is also available on the website of the
Company at www.krnheatexchanger.com. All related party
transactions are placed before the Audit Committee for review
and approval. Prior omnibus approval is obtained for related
party transactions on a quarterly basis which are of repetitive
nature and/ or entered in the ordinary course of business
and are at an arm's length basis. There were no related party
transactions entered into by the Company with Directors,
KMPs or other related parties which may have a potential
conflict with the interest of the Company.

All related party transactions entered during the financial year
were in the ordinary course of the business and at an arm's
length basis and the Company has not entered into any material
related party transaction as stipulated under Regulation 23 of
the Listing Regulations. Accordingly, the disclosure of related
party transactions as required under Section 134(3)(h) of the
Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 in
Form AOC-2 is not applicable to the Company for FY 2025-26.

The detailed disclosure on related party transactions as per
IND AS-24 containing name of related parties and details of
the transactions entered into with them have been provided
under Note No. 40 of the Standalone Financial Statements of
the Company.

BOARD POLICIES

In compliance with the Act and Listing Regulations, the
Company has made all Board-approved policies available
on its website at https://krnheatexchanger.com/investors/
policies/.

POLICY ON DIRECTOR'S AND KMP APPOINTMENT AND
REMUNERATION

Pursuant to Section 134(3Xe) and Section 178(3) of the Act, the
Nomination & Remuneration Committee (NRC) of your Board
had fixed the criteria for nominating a person on the Board
which inter alia include desired size and composition of the
Board, age limit, qualification / experience, areas of expertise
and independence of individual.

The Board of Directors, on the recommendation of the NRC
of the Company, had framed a Policy for Nomination and
Appointment of Directors. Further, pursuant to provisions of
the Act, the NRC recommended to the Board a Remuneration
Policy for remuneration payable to, to Directors, Key Managerial
Personnels and Senior Management Personnel and other
employees of the Company, which was duly approved by the
Board. The Board on the recommendation of the Committee
appoints the Senior Management Personnel from time to
time. The NRC has also developed the criteria for determining
the qualifications, positive attributes and independence of
Directors and for remuneration to Executive Directors of
the Company. The Remuneration Policy of the Company is
available on Company's website at https://krnheatexchanger.
com/investors/.

We hereby affirm that the remuneration paid to all Directors
during the financial year was in strict accordance with the
terms and conditions stipulated in the Nomination and
Remuneration Policy.

SELECTION AND PROCEDURE FOR NOMINATION AND
APPOINTMENT OF DIRECTORS

The NRC is tasked with identifying and developing the core
competency requirements for the Board, ensuring alignment
with the Company's evolving industry landscape and strategic
goals. Our current Board composition is the result of a
deliberate analysis, ensuring a deep collective understanding
of the Company's operations, financial health, and complex
regulatory environment.

The NRC maintains a rigorous selection process that includes
benchmarking potential candidates against identified
competency gaps, conducting comprehensive due diligence,
and performing background references. Prior to a formal
recommendation to the Board, the NRC engages in detailed
interviews with candidates to brief them on the specific
expectations and expert knowledge required for their
respective roles.

DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT
WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL)
ACT, 2013

The Company has zero tolerance towards Sexual Harassment

of Women at Workplace and values the dignity of individuals
and is committed to provide an environment, which is free of
discrimination, intimidation and abuse.

As per the requirement of The Sexual Harassment of Women
at Workplace (Prevention, Prohibition & Redressal) Act, 2013
('Act') and rules made there under, the Company has adopted
a Sexual Harassment Policy for women to ensure healthy
working environment without fear of prejudice, gender
bias and sexual harassment and Complying with the other
applicable provisions of the Act.

As per the requirement of the POSH Act and Rules made
thereunder, the Company constituted an Internal Complaints
Committee (ICC) to redress the complaints received regarding
sexual harassment. The Committee is led by a senior-level
female employee and includes an external member with
expertise in the field. Beyond complaint resolution, the ICC
focuses on preventive sensitization and policy adherence. The
Board maintains active oversight of the ICC's activities and
policy compliance, ensuring that a culture of accountability,
trust, and transparency remains embedded across the
organization.

Further, to reinforce compliance, real-time tracking, and
central monitoring by the Ministry of Women and Child
Development, the Company has successfully registered its
establishment and active Internal Committee details on the
Government of India's SHe-Box Portal.

We prioritize a proactive approach through regular employee
awareness workshops and specialized training for ICC
members. Pursuant to the requirements of the POSH Act and
the Listing Regulations, the details pertaining to complaints on
matters pertaining to sexual harassment during the Financial
Year 2025-26, are as below:

In line with our commitment to a safe workplace, the Company
strictly enforces its Policy on Prevention of Sexual Harassment,
which applies to all employees regardless of gender or sexual
orientation. This policy is available on the Company's website
at www.krnheatexchanger.com.

COMPLIANCE OF MATERNITY BENEFIT ACT, 1961

The Company has complied with provisions relating to the
Maternity Benefit Act, 1961. as amended by the Maternity
Benefit (Amendment) Act, 2017. All eligible women employees
are entitled to maternity benefits, including paid leaves, as
prescribed under the law.

The Company remains committed to supporting its women
employees by providing a safe, inclusive and enabling
workplace that encourages work-life balance and facilitates a
smooth transition during and after maternity.

No complaints or grievances relating to maternity benefits
were reported during the financial year 2025-26.

DECLARATION REGARDING COMPLIANCE BY BOARD
MEMBERS AND SENIOR MANAGEMENT PERSONNEL WITH
THE COMPANY'S CODE OF CONDUCT

The Board of Directors of the Company has approved a 'Code of
Conduct and Business Ethics' (Code) for all Board members, Key
Managerial Personnel and Senior Management Personnel. All
the members of the Board and Senior Management Personnel
have affirmed the compliance of the same. A copy of the
Code is available on the website of the Company viz. https://
krnheatexchanger.com/wp-content/uploads/2024/05/
Code-of-Conduct-for-Directors-and-Senior-Management-
Personnel-Policy.pdf.

In accordance with the SEBI Listing Regulations, a formal
declaration by the Chairman & Managing Director, affirming
that all Board Members and Senior Management Personnel
have complied with the Code of Conduct for the financial
year ended March 31, 2026, is incorporated into the Corporate
Governance Report forming part of this Annual Report.

CERTIFICATE FROM PRACTICING COMPANY SECRETARIES

Pursuant to the SEBI Listing Regulations, The Company hereby
confirms that none of its directors have been debarred or
disqualified from appointment or continuation as directors by
the Securities and Exchange Board of India (SEBI), the Ministry
of Corporate Affairs (MCA), or any other statutory authority. A
certificate to this effect has been obtained from M/s Deepak
Arora & Associates (Firm Registration No. P2001RJ080000),
Practicing Company Secretaries, and is included as part of this
report.

The Board is comprised of highly experienced individuals of
esteemed repute, exhibiting a diverse and balanced mix of
Executive and Non-Executive Directors, with a majority of
Independent Directors.

FAMILIARIZATION PROGRAMS FOR INDEPENDENT DIRECTORS

In accordance with the provisions of Regulation 25(7) of
the Listing Regulations, the Company has been conducting
familiarisation programmes for Independent Directors. The
familiarisation programme comprises of a combination
of written communication, presentation made in various

meetings and interactions with the management team to
provide the directors an opportunity to familiarize with the
Company, its management, operation, policies and practices.

Further, periodic presentations are made at the Board and
Committee meetings, on business and performance updates
of the Company, global business environment, business
strategy and risks involved. Updates on relevant statutory
changes are provided to the Directors in the Board meetings.
Upon appointment, the Independent Directors are issued
a letter of appointment setting out in detail the terms of
appointment including their roles, functions, responsibilities
and their fiduciary duties as a Director of the Company.

Details regarding familiarization programs imparted to
independent Directors has been disclosed on the given
weblink:https://krnheatexchanger.com/wp-content/
uploads/2024/05/Familarization-Programme.pdf.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)

Innovating for a sustainable future, the Company harnesses
technology to tackle pressing environmental challenges,
including climate change, water scarcity, and waste
management. Equally important is its commitment to social
responsibility, demonstrated by investments in digital skilling,
fostering inclusive workplaces, prioritizing employee well¬
being, and empowering communities. Guided by its core values
and overseen by a dedicated ESG team, the company is setting
new standards for ethical and sustainable business practices.

CONFLICT OF INTERESTS

To ensure absolute transparency and the highest standards of
corporate governance, all Directors provide annual disclosures
regarding their external directorships and committee
memberships, with timely updates provided as changes occur
throughout the year.

This rigorous practice underpins the Company's commitment
to identifying and preventing potential conflicts of interest.
In line with statutory requirements and the Company's Code
of Conduct, any Board Member having a personal interest or
concern in a matter under discussion abstains from both the
deliberation and the voting process for such transactions. This
ensures that all Board decisions are made objectively and in
the best interests of the Company and its stakeholders.

INSIDER TRADING CODE

The Company has instituted a mechanism to avoid Insider
Trading and abusive self-dealing in the securities of the
Company. In accordance with the Securities and Exchange
Board of India (Prohibition of Insider Trading) Regulations, 2015

('SEBI PIT Regulations'), the Company has established systems
and procedures to prohibit insider trading activity and has
framed the Code of Prohibition of Insider Trading (the "Code”).
The Code of the Company prohibits the designated employees
from dealing in the securities of the Company on the basis of
any Unpublished Price Sensitive Information (UPSI), available
to them by virtue of their position in the Company. The
objective of this Code is to prevent the misuse of any UPSI and
prohibit any insider trading activity to protect the interests
of the shareholders at large. The Board of Directors of the
Company has adopted the Code and formulated the Code
of Practices and Procedures for Fair Disclosure in terms of
the requirements of the SEBI PIT Regulations. The Company
Secretary has been appointed as the Compliance Officer for
ensuring implementation of the Code. The Code is available on
the website of the Company at www.krnheatexchanger.com.

DIRECTORS AND OFFICERS LIABILITY INSURANCE (D&O)

The Company provides Directors and Officers Liability
Insurance (D&O Insurance) to indemnify directors, including
Independent Directors and Officers of the Company,
against liabilities arising from negligence, breach of duty,
misstatement in the performance of their duties or other
related acts, in accordance with Regulation 25(10) of Listing
Regulations

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION,
FOREIGN EXCHANGE EARNINGS AND OUTGO

The prescribed particulars on conservation of energy,
technology absorption and foreign exchange earnings and
outgo stipulated under Section 134(3Xm) of the Act, read with
Rule 8 (3) of the Companies (Accounts) Rules, 2014 are detailed
in Annexure VI to this Board's Report.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY
REGULATORS OR COURTS

There is no significant and material order was passed by the
regulators or courts or tribunals impacting the going concern
status and your Company's future operations;

INDUSTRIAL RELATIONS

In pursuit of sustainable, long-term growth and robust order
book visibility, the Company maintains its pre-qualified and
empanelled status with premier government authorities, public
sector undertakings, and major institutional clients, thereby
ensuring its continuous eligibility for high-value infrastructure
tenders. To optimize project execution timelines, manage
resource allocation, and mitigate operational risks associated

with complex engineering projects, the Company strategically
enters into collaborative arrangements, including Joint
Ventures, consortia, and structured sub-contracting
agreements with select industry partners. These synergistic
alliances successfully aggregate complementary technical
expertise, financial capabilities, and operational strengths,
thereby sharpening the Company's competitive advantage
during the bidding stage and ensuring the successful delivery
of large-scale, capital- intensive infrastructure assets.

OTHER INFORMATION

The Board states that no disclosure or reporting is required in
respect of the following items as there were no transactions
on these items during the year under review:

• As per rule 4(4) of the Companies (Share Capital and
Debentures) Rules, 2014, the Company has not issued
equity shares with differential rights as to dividend,
voting or otherwise;

• As per rule 8(13) of the Companies (Share Capital and
Debentures) Rules, 2014, the Company has not issued
shares (including sweat equity shares) to employees of
the Company under any scheme;

• No buyback of shares has been undertaken

• As per rule 12(9) of the Companies (Share Capital and
Debentures) Rules, 2014, the Company has not issued
equity shares under the scheme of employee stock
options;

• Neither the Managing Director nor the Whole-time
Directors have received any remuneration or commission
from any subsidiaries of the Company except sitting fees
as entitled as a Non-Executive Directors in subsidiary
companies;

• The equity shares of the Company have not been
suspended from trading by the SEBI and/ or Stock
Exchanges;

• Since the Company has not formulated any scheme
of provision of money for the purchase of own shares
by employees or by the trustee for the benefit of the
employees in terms of Section 67(3) of the Act, no
disclosures are required to be made

• There was no revision of financial statements and the
Board's Report of the Company during the year under
review;

• No application has been made under the Insolvency and
Bankruptcy Code, hence the requirement to disclose

the details of the 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; and

• The requirement to disclose the details of the difference
between the amount of the valuation done at the time of
one-time settlement and the valuation done while taking
a loan from the Banks or Financial Institutions, along with
the reasons thereof, is not applicable.

ACKNOWLEDGEMENT

The Board of Directors wish to place on record their sincere
appreciation to all the employees for their dedication and
commitment. Their hard work and unstinted efforts enabled
the Company to sustain its performance and consolidate its
sectoral leadership.

The Board of Directors would like to express their sincere
appreciation for assistance and co-operation received from
vendors and stakeholders, including financial institutions,
banks, Central and State Government authorities, customers
and other business associates, who continued to extend
their valuable support during the year under review. It will be
the Company's endeavour to nurture these relationships in
strengthening business sustainability.

By the order of the Board
For KRN HEAT EXCHANGER AND REFRIGERATION LIMITEDSANTOSH KUMAR YADAV

DATE:12-08-2026 Chairman & Managing Director

PLACE: NEEMRANA DIN: 07789940