Policy on Related Party Transactions

RELATED PARTY TRANSACTION POLICY

1. Preamble

The Board of Directors (“the Board”) of Samrat Forgings Limited (the “Company” or “SFL”), has adopted the following policy and procedures with regard to Related Party Transactions as defined below. The Audit Committee will review and may amend this policy from time to time.

This policy will be applicable to the Company and is to regulate transactions between the Company and its Related Parties based on the applicable laws and regulations applicable on the Company.

2. Purpose

The policy is framed as per requirement of Clause 49 of the Listing Agreement entered by the Company with the Stock Exchanges and intended to ensure the proper approval and reporting of transactions between the Company and its Related Parties. Such transactions are appropriate only if they are in the best interest of the Company and its shareholders. The Company is required to disclose each year in the Financial Statements certain transactions between the Company and Related Parties as well as policies concerning transactions with Related Parties. 3. Definitions

“Audit Committee or Committee” means Committee of Board of Directors of the Company constituted under provisions of Listing Agreement and Companies Act, 2013.

“Board” means Board of Directors of the Company. “Control” shall have the same meaning as defined in SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

“Key Managerial Personnel” mean key managerial personnel as defined under the Companies Act, 2013.

“Material Related Party Transaction” means a transaction with a related party if the transaction / transactions to be entered into individually or taken together with previous transactions during a financial year, exceed ten percent (10%) of the annual revenues or total assets or total liabilities and/or twenty percent (20 %) of the consolidated revenue/net worth of the listed holding company as per the last audited financial statements of the Company, whichever is higher.

“Policy” means Related Party Transaction Policy.

“Related” means an entity shall be considered as related to the Company if:

  1. Such entity is a related party under section 2(76) of the Companies Act, 2013; or
  2. Such entity is a related party under applicable accounting standards.

“Related Party Transaction” means any transaction directly or indirectly involving any Related Party which is a transfer of resources, services or obligations between a company and a related party, regardless of whether a price is charged.

“Relative” means relative as defined under the Companies Act, 2013 and includes anyone who is related to another, if –

i. They are members of a Hindu undivided family.
ii. They are husband and wife: or
iii. Father (including step-father)
iv. Mother (including step-mother)
v. Son (including step-son)
vi. Son’s wife
vii. Daughter
viii. Daughter’s husband
ix. Brother (including step-brother)
x. Sister (including step-sister)

4. Policy

All Related Party Transactions shall be reported to the Audit Committee and referred for approval by the Committee in accordance with this Policy. 4.1 Procedures for review and approval of Related Party Transactions

(a) All Related Party Transactions or changes therein must be reported to the Chief Financial Officer, Head of Accounts Department, and to the Compliance Officer and referred for prior approval by the Audit Committee in accordance with this policy.

(b) The Audit Committee will undertake an evaluation of the Related Party Transaction. If that evaluation indicates that the Related Party Transaction would require the approval of the Board, or if the Board in any case elects to review any such matter, the Audit Committee will report the Related Party Transactions, together with a summary of material facts, to the Board for its approval.

(c) If the Board is of the view that the Related Party Transaction needs to be approved at a general meeting of the shareholders by way of a special resolution pursuant to Companies Act, 2013 and any other applicable law, the same shall be put up for approval by the shareholders of the Company.

(d) If prior approval of the Audit Committee/Board/general meeting for entering into a Related Party Transaction is not feasible, then the Related Party Transaction shall be ratified by the Audit Committee and the Board/general meeting, if required, within 3 months of entering in the Related party Transaction.

(e) In any case where either the Audit Committee/Board/a general meeting determines not to ratify a Related Party Transaction that has been commenced without approval, the Committee or Board or the general meeting, as appropriate, may direct additional actions including, but not limited to, immediate discontinuation of the transactions, or modification of the transaction to make it acceptable for ratification. In accordance with any review of a Related Party Transaction, the Audit Committee/Board has authority to modify or waive any procedural requirements of this Policy.

(f) In determining whether to approve or ratify a Related Party Transaction, the Audit Committee/Board will take into account, among other factors it deems appropriate, whether the Related Party Transaction is on term no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the Related Person’s interest in the transaction.

(g) No director or Key Managerial Personnel shall participate in any discussion or approval of a Related Party Transaction for which he or she is a Related Party, except that the director/Key Managerial Personnel shall provide all material information concerning the Related Party Transaction to the Audit Committee/Board.

(h) If a Related Party Transaction will be ongoing, the Audit Committee may establish guidelines for granting the omnibus approval in line with the policy on Related Party Transactions of the Company and such approval shall be in respect of transactions which are repetitive in nature.

(i) The Audit Committee shall satisfy itself the need for such omnibus approval and that such approval is in the interest of the Company;

(j) The omnibus approval shall specify (i) the name/s of the related party, nature of transaction, period of transaction, maximum amount of transaction that can be entered into, (ii) the indicative case price/current contracted price and the formula for variation in the price if any and (iii) such other conditions as the Audit Committee may deem fit.

Provided that where the need for Related Party Transaction cannot be foreseen and aforesaid details are not available, Audit committee may grant omnibus approval for such transactions subject to their value not exceeding Rs. 1 crore per transaction.

(k) Thereafter, the Audit Committee, shall review atleast on a quarterly basis, the details of RPTs entered into by the Company pursuant to each of the omnibus approval given.

(l) The omnibus approval shall be valid for a period not exceeding one year and shall require fresh approval after expiry of one year.

(m) In addition, the Audit Committee/ the Board may review any Related Party Transactions involving independent directors as part of the annual determination of their independence.

(n) Noting in this Policy shall override any provisions of law made in respect of any matter stated in this Policy.

4.2 Standards for Review

A Related Party Transaction reviewed under this Policy will be considered approved or ratified if it is authorised by the Audit Committee/Board, as applicable, in accordance with the standards set forth in this Policy after full disclosure of the Related Party’s interests in the transaction. As appropriate for the circumstances, the Audit Committee or Board, as applicable, shall review and consider:

(a) The Related Party’s interest in the Related Party Transaction;

(b) The approximate amount involved in the Related Party Transaction;

(c) The appropriate amount of the Relate Party’s interest in the transaction without regard to the amount of any profit or loss;

(d) Whether the Related Party Transaction was undertaken in the ordinary course of business of the Company;

(e) Whether the transaction with the Related Party is proposed to be , or was, entered on an arm’s length basis;

(f) The purpose of, and the potential benefits to the Company from the Related Party Transaction;

(g) Whether there are any compelling business reasons for the Company to enter into the Related Party Transaction and the nature of alternative transaction, if any:

(h) Whether the Related Party Transaction includes any potential reputational risk issues that may arise as a result of or in connection with the Related Party Transaction.

(i) Whether the Related Party Transaction would impair the independence of an otherwise independent director or nominee director;

(j) Whether the Company was notified about the Related Party Transaction before its commencement and if not, why pre-approval was not sought and whether subsequent ratification would be detrimental to the Company;

(k) Whether the Related Party Transaction would present an improper conflict of interest, as per provisions of law, for any director or Key Managerial Personnel, taking into account the size of the transaction, the overall financial position of the Related Party, the director or indirect nature of the Related Party’s interest in the transaction and the ongoing nature of any proposed relationship and any other factors the Audit Committee/Board deems relevant.

(l) Required public disclosure, if any; and

(m) Any other information regarding the Related Party Transaction or the Relate Party in the context of the proposed transaction that would be material to the Audit Committee/Board/shareholders, as applicable in light of the circumstances of the particular transaction.

The Audit Committee/Board will review all relevant information available to it about the Related Party Transaction. The Audit Committee/Board, as applicable, may approve/ratify/recommend to the shareholders, the Related Party Transaction only if the Audit Committee/Board, as applicable, determines in good faith that, under all of the circumstances, the transaction is fair as to the Company. The Audit Committee/Board, in its sole discretion, may impose such conditions as it deems appropriate on the Company or the Related Party in connection with approval of the Related Party Transaction.

4.3 Determination of Ordinary Course of Business

“In the Ordinary Course of Business” means all such acts and transactions undertaken by the Company, including, but not limited to sale or purchase of goods, property or services, leases, transfers, providing of guarantees or collaterals, in the normal routine in managing trade or business and is not a standalone transaction. The Company should take into account the frequency of the activity and its continuity carried out in a normal routine in managing trade or business and is not a standalone transaction. The Company should take into account the frequency of the activity and its continuity carried out in a normal organized manner for determination what is in the ordinary course of business.

4.4 Determination of Arms’ length nature of the Related Party Transaction

(a) Price Determination

At the time of determination of the arms’ length nature of price charged for the Related Party Transaction, the Audit Committee shall take into consideration the following:

(i) Permissible methods of arms’ length pricing as per applicable law including such prices where the benefits of safe harbor is available under applicable law.

(ii) For the said purpose the Audit Committee shall be entitled to rely on professional opinion in this regard.

(b) Underwriting and Screening of arms’ length Related Party Transaction

(i) A Related Party with whom the Related Party Transaction is undertaken must have been selected using the same screening/selection criteria/underwriting standards and procedures as may be applicable in case of an unaffiliated party.

(ii) The Chief Financial Officer shall produce evidence to the satisfaction of the Audit Committee for having applied the said procedure.

(c) Related Party Transaction limits:

1. The Related Party Transaction must be within the lower of the following transaction limits with respect to any Related Party:

I. Limits of Material Related Party Transactions; and

II. Expected transaction volumes based on past transactions with Related Parties using linear rate of growth as evidence by past data.

2. Credit limits extended to the Related Party must be usual as for unaffiliated parties.

If the Audit Committee is of the opinion that the Related Party Transaction meets the aforesaid criteria of Ordinary Course of Business and the Arms’ Length nature, the Related Party Transaction will not be treated as a Related Party Transaction for the purpose of this Policy.

4.5 Identification of Potential Related Party Transactions

(a) Each director/Key Managerial Personnel is responsible for providing written notice to the Compliance Officer of any potential Related Party Transaction involving him or her or his or her relatives, including any additional information about the transaction that the Compliance Officer may reasonably request. The Compliance Officer in consultation with other members of the management and with the Audit Committee, as appropriate, will determine whether the transaction does, in fact, constitute a Related Party Transaction requiring compliance with this Policy.

(b) Every director/Key Managerial Personnel of the Company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement or proposed contract or arrangement entered into or to be entered into shall disclose the nature of his concern or interest at the meeting of the Board in which the contract or arrangement is discussed and shall not participate in or exercise influence over any such meeting.

(c) Where any director/Key Managerial Personnel, who is not so concerned or interested at the time of entering into such contract or arrangement, he shall, if he becomes concerned or interested after the contract or arrangement is entered into, disclose his concern or interest forthwith when he becomes concerned or interested or at the first meeting of Board held after he becomes so concerned or interested.

(d) A contract or arrangement entered into by the Company without disclosure or with participation by a Director/Key Managerial Personnel who is concerned or interested in any way, directly or indirectly, in the contract or arrangement, shall be voidable at the option of the Company.

(e) The Company strongly prefers to receive such notice of any potential Related Party Transaction well in advance so that the Compliance Officer has adequate time to obtain and review information about the proposed transaction and other matter incidental thereto and to refer it to the appropriate approval authority. Ratification of a Related Party Transaction after its commencement or even its completion may be appropriate in some circumstances.

4.6 Disclosures

(a) The Company is required to disclose Related Party Transactions in the Company’s Board’s Report to shareholders of the Company at the Annual General Meeting.

(b) Details of all material Related Party Transactions shall be disclosed quarterly along with Company’s Compliance Report on Corporate Governance, in accordance with the Listing Agreement.

(c) The Company is also required to disclose this Policy on its website and also in the Annual Report of the Company.

(d) The Company shall keep one or more registers giving separately the particulars of all contracts or arrangements with any related party. This Policy will be communicated to all operational employees and other concerned persons of the Company.

.