Director Report

The Members,

The Directors present the 49^th Annual Report of RITES Ltd. (the Company or RITES) along with the audited financial statements for the financial year ended March 31, 2023, and Auditors' Report thereon.

FINANCIAL HIGHLIGHTS

The financial performance during the year under review (FY 2022-23) as compared to the previous year is summarized below:

(Rs in crore)

With a well-diversified and resilient business model, RITES has followed a trajectory uniquely rooted in India's growth story. A future-ready and multidisciplinary consultancy organization, RITES is providing customized, diversified, comprehensive, and concept to commissioning services and integrated solutions in the transport infrastructure sector in India and abroad.

The company is uniquely placed in terms of geographical reach and consultancy services in sectors such as railways, highways, airports, ports, ropeways, metros, bridges & tunnels, urban engineering and sustainability, inland waterways, and renewable energy. Equipped with sophisticated software (including for designs) and modern equipment, RITES is also a unique inspection organization with in-house material-testing laboratories with national/international accreditation/certification.

Delivering smart and sustainable solutions with a talent pool of over 2,000 professionals, and the ability to adapt to diverse market needs and foster collaborative relationships, RITES has served clients in more than 55 countries across Asia, Africa, Latin America, South America, and Middle East region.

During the financial year 2022-23, the company recorded consolidated revenue of Rs 2730 crore and achieved highest-ever consultancy revenue. Additionally, our Profit After Tax of Rs 571 crore underscores our ability to navigate market challenges and capitalize on emerging opportunities.

The increased thrust on the expansion & upgrade of transport infrastructure and last-mile connectivity, domestically as well as globally, provides opportunities for technical consultancy and export of rolling stock (indigenously developed and customised offerings), adding credence to the idea of Atmanirbhar Bharat that calls for 'Make in India, Make for the World'. By aligning our growth plans with the Nation's vision, we aim to further strengthen our position, embracing innovation, and fostering sustainable practices.

STATE OF COMPANY'S AFFAIRS & OUTLOOK

Infrastructure plays a key role in facilitating and stimulating economic growth by providing better connectivity, enabling within and trans-border movement of people and goods and enhancing productivity and efficiency. The sector is responsible for propelling India's overall development and draws focus from the Government, which has unveiled various initiatives that would ensure time- bound creation of world-class infrastructure.

The company continued to be a leading consultancy organisation providing consultancy, design, engineering and turnkey solutions to its various clients in India and abroad. Under its strategic initiative 'RITES Videsh', the company is tapping on the emerging opportunities (export and consultancy) in Southeast Asia and Africa. In the current year, the company achieved highest-ever revenue in international consultancy as well as highest-ever consultancy revenue, leading to higher standalone profit.

'Transforming to Green, RITES has charted a roadmap to emphasize the integration of infrastructure and green solutions, hasten green growth, and provide smart solutions for shaping tomorrow's mobility. Under a dedicated 'Sustainability Unit', RITES undertakes projects involving advanced sustainable solutions. Also, the company has been embracing and advocating sustainable & cutting-edge solutions that aid in the transition to a circular economy.

RITES' subsidiary REMC Ltd is involved in power management and generation and has a mandate to manage the entire power procurement under open access for Indian Railways, besides handling renewable energy and energy-efficiency projects. During FY 2022-23, REMC Ltd. achieved highest-ever turnover of Rs 117.06 crore and profit before tax of Rs 83.80 crore. It became debt- free during FY 2022-23. During the year, REMC Ltd paid an interim dividend of Rs 26.25 crore ( Rs 2.5 per share) and declared final dividend of Rs 31.50 crore ( Rs 3 per share), which is highest-ever in a financial year, subject to the approval of shareholders.

SAIL-RITES Bengal Wagon Industry Pvt. Ltd., a joint venture of RITES and SAIL on 50:50 basis, has manufactured 320 BCNAHSM1 wagons and 364 BOXNHL wagons during FY 2022-23. An order has also been received from GATX for supplying 186 BOXNHL wagons and 03 Brake Vans. It had revenue of Rs 222.79 crore with profit after tax of Rs 0.33 crore during FY 2022-23.

RITES' foreign subsidiary RITES (Afrika) (Proprietary) Limited, Botswana, has a proven track record of executing projects in Botswana and has executed projects from concept to commissioning for value ranging up to BWP 520.00 million. RITES (Afrika) (Proprietary) Limited achieved the turnover of BWP 12.62 million ( Rs 7.87 crore) and earned a net profit after tax of BWP 1.25 million ('0.78 crore) during FY 2022-23.

CHANGE IN THE NATURE OF BUSINESS

There was no material change in the nature of business of the company during FY 2022-23.

RESERVES

The company has not transferred any amount to the reserves during FY 2022-23.

DIVIDEND

Your company has a consistent track record of dividend payment. For FY 2022-23 also, based on company's performance, the Directors have declared three interim dividends aggregating to Rs 14.5 per equity share. The Directors have also recommended a final dividend of Rs 6.00 per equity share. The total dividend for the financial year 2022-23 is Rs 492.62 crore (i.e. Rs 20.50 per share) which is 205% of paid-up share capital of the company.

The total dividend payout during the year works out to be Rs 432.55 crore which includes Rs 84.11 crore final dividend for financial year 2021-22 and Rs 348.44 crore interim dividend for the financial year 2022-23.

DIVIDEND DISTRIBUTION POLICY

The Dividend Distribution Policy, in terms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations

and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations") is annexed to this report as Annexure -D and is also available on the Company's website at

https://www.rites.com/Upload/upload/misc/Balancesheet/

Dividend-Distribution-Policy070619.pdf

PRESIDENTIAL DIRECTIVE

During the year, a presidential directive has been issued vide Railway Board letter no. 20-21/PL/57/2 dated 16^th Sept 2022 allowing all PSUs to undertake all kind of businesses as deemed suitable/ appropriate by them with a view to maximize their revenue and profit.

DEPOSITS

The company has not accepted any deposits from public during the financial year 2022-23.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION

No material changes or commitments affecting the financial position of the company has occurred during the financial year 2022-23 and after the close of the financial year up to the date of the report.

CAPITAL STRUCTURE

During the FY 2022-23, the paid-up share capital of the company was Rs 240.30 crore as against the Authorized Share Capital of Rs 300 crore. There was no change in paid up and authorized capital of the company during the financial year 2022-23.

CREDIT RATING

During the financial year 2022-23, the company has received a credit rating of IVR AAA/ Stable (IVR Triple A with stable outlook) for Long Term Bank facilities up to an amount of Rs 1265 crore from Infomerics Valuation and Ratings Private Limited.

INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

The company has complied with the provisions relating to the Investor Education and Protection Fund (IEPF) under the Companies Act, 2013 and the rules made thereunder. Company Secretary is the nodal officer to deal with the IEPF Authorities and compliances related thereto. No amount is due for transfer

to IEPF and details of unclaimed dividend as on March 31, 2023 are available on the company website and has also been disclosed in the Corporate Governance report. Further, the company does not have shares in Demat Suspense Account/ Unclaimed Suspense Account/ Unclaimed dividend and the same has been disclosed in the Corporate Governance report.

MEMORANDUM OF UNDERSTANDING (MoU)

Evaluation of MoU performance for the Year 2021-22 as per DPE parameters is finalized and the company secured a rating of "Very Good" for the year 2021-22.

The company signed Memorandum of Understanding (MoU) with the Ministry of Railways for 2022-23 and its evaluation is under process with DPE.

During FY 2022-23, MoU includes some of the compliance parameters and their compliance status are as follows:

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013

Particulars of loans, guarantees given or investments made along with the purpose for which the loan is proposed to be utilized by the recipients are provided in the standalone financial statement (Please refer to Note 7.1, 8, 16, 17 &.43 (f) (ii) of the standalone financial statement).

board of directors & KEY MANAGERIAL PERSONNEL (kmp) and number of meetings of the board

As on 31^st March, 2023, the Company had 10 Directors comprising four Functional Directors and two Government Nominee Directors and four Independent Directors. During the year, 8 meetings of Board of Directors were held as mentioned below:

The following Directors held office during the year:

Whole-time Directors:

Government Nominee Directors:

Independent Directors:

KEY MANAGERIAL PERSONNEL (KMP) (SECTION 203 OF THE COMPANIES ACT, 2013)

DIRECTORS & KEY MANAGERIAL PERSONNEL Inductions, Retirements and Resignations

The company has inducted three Functional Directors and two Directors superannuated during the Financial Year 2022-23. Appointment of Directors is done by the Government of India from a pool of professionals in varied fields, with due verification of expertise, integrity and experience.

During the Financial Year 2022-23, Shri Gopi Sureshkumar Varadarajan (DIN: 08241385) ceased to be Director Projects of the company w.e.f. closing of working hours on 31.07.2022 on attaining the age of superannuation. The Ministry of Railways vide its order no. 2021/E(O)II/40/8 dated 23.09.2022 had appointed Shri Arun Kumar Singh as Director Projects of the Company w.e.f. date of his assumption of charge. Shri Arun Kumar Singh assumed the charge of Director (Projects) w.e.f. 26.09.2022.

Shri Anil Vij (DIN: 07145875) has superannuated from the post of Director (Technical) w.e.f. closing of working hours on 28.02.2023. The Ministry of Railways vide its order no. 2018/E(O)II/40/22 dated 16.03.2023 has entrusted additional charge of the post of Director (Technical), RITES to Shri A.K. Chandra, IRSME, PED/ W&D, Railway Board till the appointment of a regular incumbent to the post or until further orders, whichever is earlier.

Ministry of Railways vide its letter no 2021/E(O)Il/40/30 dated March 21, 2023 has appointed Dr. Deepak Tripathi (DIN: 10090267) as Director (Technical) of the Company w.e.f. the date of assumption of charge i.e., 27.03.2023 till the date of his superannuation or until further orders, whichever is earlier. Shri A.K. Chandra (DIN: 10076614) holding additional charge to the post of Director (Technical) of RITES Limited ceases to be Director (Technical) of RITES Limited w.e.f. the date of appointment of Dr. Deepak Tripathi as Director (Technical) of RITES Limited, due to appointment of regular incumbent to the post.

DECLARATION BY INDEPENDENT DIRECTORS

As on 31^st March, 2023, two positions of Independent Directors were vacant. During the financial year 2022-23, all independent directors have met the requirements specified u/s 149(6). The declaration as required under section 149(7) of the Companies Act, 2013 has been received from independent directors.

COMMITTEES OF THE BOARD

The Company has Audit Committee, Nomination and Remuneration Committee, Risk Management Committee, Project Investment Committee, CSR Committee and Stakeholders' Relationship Committee of the Board in place. The separate meeting of independent directors was held on May 23, 2022 as per the provisions specified in regulation 25 of SEBI (Listing Obligations and Disclosure Requirements), 2015.

The composition, number and date of meetings of such committees held during the year and scope of the committees are provided in the report of Corporate Governance at Annexure- A.

COMPANY'S POLICY ON DIRECTOR'S APPOINTMENT AND REMUNERATION

As per the provisions of section 197(12) of the Companies Act, 2013 read with rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, every listed company is required to disclose the ratio of the remuneration of each Director to the median employee's remuneration and details of employees receiving remuneration exceeding limit as prescribed from time to time in the Director's Report.

However, as per notification dated June 5^th, 2015 issued by MCA, Government Companies are exempted from complying with the provisions of Section 197 of Companies Act, 2013. Therefore, such particulars have not been included as a part of Director's Report.

FORMAL ANNUAL EVALUATION OF DIRECTORS UNDER SECTION 134 (3) (P) OF THE COMPANIES ACT, 2013

Formal Annual evaluation of Chairman & Managing Director and Directors, being a Government Company, is done by the Administrative Ministry. Further, as per Notification issued by Ministry of Corporate Affairs dated 5^th June, 2015, the provisions of the said section shall not apply to Government Company, in case the Directors are evaluated by the Ministry or Department of the Central Government etc.

RETIREMENT OF DIRECTORS BY ROTATION

As per the Companies Act, 2013 the provisions in respect of retirement of Directors by rotation is applicable. In view of this, all the directors, except Independent Directors and Chairman & Managing Director [As per Article 56(h) of the Articles of Association], will be liable to retire by rotation. Accordingly, one- third among all other directors will retire by rotation. Accordingly, Shri Sandeep Jain (DIN:09435375) and Shri Raj Kumar Mangla (DIN:09533985) will retire by rotation and being eligible, offer themselves for reappointment.

directors' responsibility statement under the companies act, 2013

In pursuance of Section 134 (5) of the Companies Act, 2013, The Directors hereby confirm that:

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

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

(c) The Directors 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;

(d) The Directors have prepared the annual accounts on a going concern basis;

(e) The directors 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) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES UNDER SECTION 188 (1) OF THE COMPANIES ACT, 2013

All contracts / arrangements / transactions entered by the Company during the financial year 2022-23 with related parties were in the ordinary course of business and on an arm's length basis.

Your Directors draw attention of the members to Note No.43 to the financial statement which sets our related party disclosures. (The details of contracts entered into with related parties in prescribed format AOC-2 is placed at Annexure -I).

SUBSIDIARIES AND JVs SUBSIDIARIES

REMC Limited incorporated on 16^th August, 2013 in Joint Venture with Ministry of Railways for taking up various assignments/ tasks to develop potential business avenues in the field of power sector including Green Energy, power trading etc.

The company has also one overseas wholly owned subsidiary company namely RITES (Afrika) (Pty) Limited, Botswana, incorporated on 16^th January 1991 and is primarily engaged in design and projects consultancy services in Botswana.

JOINT VENTURES

The company also has two joint ventures namely SAIL RITES Bengal Wagon Industry Private Limited (50% stake in JV) and Indian Railway Stations Development Corporation Limited (24% stake in JV) which is under winding up.

A report on the performance and financial position of each subsidiaries, associates and Joint Ventures companies as per the provisions of Section 129 (3) of the Companies Act, 2013 in prescribed format AOC- 1 is provided as Annexure to the consolidated financial statements and hence not repeated here for sake of brevity.

AUDITORS

The Comptroller & Auditor General of India appointed the following Statutory Auditor for the FY-2022-23:

M/s Pawan Puri & Associates, Statutory Auditors Chartered Accountants

The Auditors' Report for the financial year 2022-23 does not contain any qualification, reservation or adverse remark. The Report is enclosed with the financial statements in this Annual Report.

The Board would like to place on record its sincere thanks for the valuable services rendered by Statutory Auditors and the Branch Auditors.

SECRETARIAL AUDIT REPORT

The Board has appointed Akhil Rohatgi & Co., Practicing Company Secretary to conduct Secretarial Audit for the financial year 202223. The Secretarial Audit Report for the financial year ended March 31, 2023 has been placed at Annexure - III.

The Secretarial Audit Report does not contain any qualification, reservation or adverse remark except commenting on present strength of Independent Directors as the number of Independent Directors on the Board was less than half of the total strength of Board, as required under SEBI (LODR) Regulations and DPE Guidelines.

In this regard Company has received notices from Stock Exchanges levying fine on the company. The company has replied to Stock Exchanges stating that the power to appoint the Directors including Independent Directors vests with the Government of India and the company has requested the administrative Ministry in this regard for making necessary appointments.

COST RECORDS & COST AUDIT

Maintenance of cost records and requirement of cost audit as prescribed under the provisions of section 148(1) of the Companies Act, 2013 are not applicable for the business carried out by the company.

FRAUDS REPORTED BY THE AUDITOR

No frauds are reported by the Auditors which fall under the purview of sub section (12) of Section 143 of the Companies Act, 2013

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

RITES has adequate internal control and audit systems for enhancement of efficiency in operations and to ensure compliance with applicable laws, rules and regulations. Company has structured policies and guidelines for optimal delegation of authority for facilitation of business. RITES's internal audit is conducted by experienced professionals and external audit firms. The internal control and audit systems are also reviewed periodically. Corrective and preventive measures, whenever necessary, are taken up from time to time for continuous improvement.

The internal control system has been further strengthened through the following: -

Internal Financial Controls

The Internal Financial Control of the company is analyzed and audited for the compliance of the internal financial control and accordingly the report on the Internal Financial controls under clause (i) of sub-section 3 of Section 143 of the Companies Act, 2013 is prepared and annexed to the Independent Auditor's Report. Based on criteria established by the Company, considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India, an adequate internal financial controls with reference to the Standalone Financial Statements, were established and operating effectively as on March 31,2023.

CORPORATE SOCIAL RESPONSIBILITY & SUSTAINABILITY:

India, being a pioneer in the global arena, took a significant stride by mandating Corporate Social Responsibility (CSR) through an amendment to the Companies Act in April 2014. It is a continuing commitment by businesses to integrate social and environmental concerns in their business operations. CSR is a concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders.

Corporate Social Responsibility (CSR), is a tool by which an organisation integrates social, environmental, and economic concerns into their values, culture, decision making, strategy and operations in a transparent and accountable manner, thereby establishing better practices to enhance and improve society sustainably for the welfare of all. The CSR activities of the Company should take into account the expectations of stakeholders and should comply with applicable law and be consistent with good business norms and practices. It should act in a way that enhances society and its inhabitants and be held accountable for any action that affects the people, their communities and the environment.

At RITES social responsibility and sustainable development are seamlessly integrated throughout the organisation. RITES recognizes its responsibility toward society and strives to work consistently for its betterment by taking actions to address societal challenges. It applies to a wide variety of company activities, which operate in different social and environmental settings. RITES not only delivers one of the best technological supports in the field of transport & transport infrastructure, but it does it in a transparent sustainable & ethical manner to create a meaningful impact on the beneficiaries.

The Companies Act, which has brought the idea of CSR to the forefront and through its disclose-or-explain mandate, is promoting greater transparency and disclosure. RITES is a staunch advocator of Sustainable Development and is committed to operate in an economically, socially and environmentally sustainable manner that is transparent and ethical. It applies to a wide variety of company

activities, which operate in very different social and environmental settings. In line with these principles, a total amount of Rs 14.10 crore was spent during FY 2022-23 on various CSR initiatives.

RITES has a strong corporate governance process in place to address new industry standards and regulations as they emerge. In line with the Guidelines on CSR issued by DPE and provisions of Section 135 of the Companies Act, 2013, a Board-level committee has been constituted to oversee the implementation of CSR and to assist the Board of Directors to formulate suitable policies & strategies in this regard. As on March 31, 2023, the CSR Committee is headed by Shri Raj Kumar Mangla, Chairperson and comprises Shri Bibhu Prasad Nayak Director Finance and Shri Laxman T. Tapashi, Independent Director, as Members of this Committee.

A report on CSR activities as prescribed under Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 is attached as Annexure II.