Dear Members,

The Board of directors take pleasure in presenting the 44th (Forty-Fourth) Board's Report on the business and operations of the Company For the financial year ended March 31, 2026.

RESULTS OF COMPANY'S OPERATIONS AND COMPANY'S PERFORMANCE

(Amount In Millions)

FINANCIAL POSITION

(Amount In Million)

1. FINANCIAL PERFORMANCE Revenue ? Standalone

On a standalone basis in financial year 2025-26, our Revenue From operations has shown an increase of 12.06 % which resulted increase of Revenue to Rs 3542.03/- million in FY 2025-26 as compared to previous FY 2024-25 which was Rs 3,160.87/- million.

Revenue ? Consolidated

On consolidated basis in financial year 2025-26, our Revenue from operations has shown an increase of 21.28 % which resulted increase of Revenue to Rs 4066.28/- million in FY 2025-26 as compared to FY 2024-25 which was Rs 3,352.76 million.

Profits ? Standalone

On a standalone basis in financial year 2025-26, the profit before tax and exceptional items has shown an increase of 34.04% and stood at Rs 580.81/- million and Profit after exceptional items and tax stood at Rs 446.43/- million. Whereas, in FY 2024-25 the profit before tax and exceptional items stood at Rs 433.27/- million and Profit after exceptional items and tax at Rs 337.53/- million.

Profits ? Consolidated

On consolidated basis in financial year 2025-26, the profit before share of profit of Joint Venture, tax and exceptional items has shown an increase of 29.25 % and stood at Rs 631.43/- million and profit after exceptional items and tax is Rs 504.10/- million. Whereas, in FY 2024-25 the profit before share of profit of Joint Venture, tax and exceptional items stood at Rs 488.55/- million and Profit after exceptional items and tax at Rs 360.41/- million.

EPS- Standalone

On Standalone basis, basic earnings per share increased to Rs 11.98/- per Equity share for financial year 2025-26 as compared to basic earnings per share of Rs 9.02/- per Equity share for last financial year 2024-25 and

Diluted earning per share increased to Rs 11.98/- per Equity share for financial year 2025-26 as compared to diluted earnings per share of Rs 9.02/- per Equity share for last financial year 2024-25.

EPS- Consolidated

On Consolidated basis, basic earnings per share increased to Rs 13.50/- per Equity share for financial year 2025-26 as compared to basic earnings per share of Rs 9.59/- per Equity share for last financial year 2024-25 and

Diluted earnings per share increased to Rs 13.50/- per Equity share for financial year 2025-26 as compared to diluted earnings per share of Rs 9.59/- per Equity share for last financial year 2024-25.

2. DIVIDEND

Your directors have recommended a final dividend of Rs 1.5 per Equity share For financial year 2025-26 subject to approval of Shareholders at the ensuing 44th Annual General Meeting of the Company to be held on September 07, 2026.

3. BUSINESS DESCRIPTION AND STATE OF COMPANY'S AFFAIRS

Diffusion Engineers Limited, incorporated in 1982, operates in the field of engineering solutions, serving customers in both domestic and international markets. With over four decades of industry presence, the Company has established itself as a reliable provider of a diverse portfolio of products and services. These include the manufacture of specialized welding consumables, wear plates, and heavy engineering equipment for core sector industries, along with offering tailored repair, refurbishment, and reconditioning services for heavy machinery and equipment.

The Company's performance and operational progress reflect steady growth and a continued focus on innovation. Through strategic expansion into new markets and the execution of pioneering projects, Diffusion Engineers Limited continues to strengthen its industry position and set new benchmarks. The Company remains firmly committed to delivering superior quality, dependable solutions, and high levels of customer satisfaction. This commitment has enabled Diffusion to maintain long-standing relationships with clients and to remain a trusted partner for organizations seeking efficient and forward-looking engineering solutions in an evolving business environment.

4. SHARE CAPITAL STRUCTURE

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

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

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

Employee Stock Option Scheme

The Company grants share-based benefits to eligible employees with a view of attracting and retaining the best talent, encouraging employees to align individual performances with the Company objectives and promoting their increased participation in the growth of the Company.

The Company had implemented Diffusion Engineers Limited ? Employee Stock Option Scheme 2025 ("ESOP 2025" or "Scheme") during the Financial Year 2025-26.

Diffusion Engineers Limited ? Employee Stock Option Scheme 2025 was approved by the Board at its Meeting held on May 15, 2025 and was further approved by the Shareholders through postal ballot on June 29, 2025. During the reporting year the Company has granted Employee Stock Options under the scheme to the identified employees on December 27, 2025.

The aforementioned scheme is in compliance with the terms of SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("SBEB Regulations"). The Company has obtained certificate from the Secretarial Auditor of the Company stating that the aforementioned scheme has been implemented in accordance with the SBEB Regulations and the resolutions have been passed by the members approving the aforementioned scheme. The certificate is available for inspection by members in electronic mode. The details as required under Part F of Schedule I pursuant to Regulation 14 of the SBEB Regulation, are available at the Company's website at https://diffusionengineers. com/ . Further details of the aforementioned ESOP Scheme during the reporting financial year 2025-26 are as follows:

*Note: As on date of this Board's Report, the 2,00,000 ESOPs granted to the eligible employee (“Grantee”) under the scheme stands cancelled due to resignation by such grantee before vesting.

5. TRANSFER TO RESERVES

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

6. CAPITAL EXPENDITURE ON ASSETS

During financial year 2025-26 the company incurred capital expenditure of Rs 475.39/- million as compared Rs 142.29/- million in the last financial year 2024-25.

7. CHANGE IN THE NATURE OF BUSINESS

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

8. ANNUAL RETURN

Pursuant to Section 92(3) of the Companies Act 2013 and Rule 12 of the Companies (Management and Administration) Rules, 2014, the Annual Return for FY 2025-26 is available on Company's website https://www.diffusionengineers.com/investors- relation

9. PARTICULARS OF LOANS, GUARANTEE AND INVESTMENT

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

10. PARTICULARS OF LOAN TO DIRECTORS OR TO ENTITIES IN WHICH DIRECTORS ARE INTERESTED UNDER SECTION 185 OF THE COMPANIES ACT, 2013

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

11. PUBLIC DEPOSITS

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

12. MAINTENANCE OF COST RECORDS

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

13. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES

All contracts/ arrangements/transactions entered by the Company with the related parties during the financial year 2025-26 were in its ordinary course of business and at arm's length basis.

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

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

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

The disclosure of Related Party Transactions as required under Section 134(3)(h) of the Companies Act, 2013 in Form AOC-2 is appended as Annexure-2 to this Board's Report.

14. MATERIAL CHANGES AND COMMITMENTS, AFFECTING THE FINANCIAL POSITION OF THE COMPANY WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR OF THE COMPANY TO WHICH THE FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT:

There have been no material changes or commitments affecting the financial position of the Company that have occurred between the end of the financial year to which the financial statements relate and the date of this Report.

15. BOARD POLICIES

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

16. RISK MANAGEMENT

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

17. HUMAN CAPITAL MANAGEMENT

At Diffusion Engineers Limited, our employees remain the cornerstone of our success, and we strongly believe in creating meaningful engagement with them. The Company is dedicated to nurturing employee potential through empowerment, ongoing learning opportunities, and the exchange of knowledge and experiences across the organization.

Our policies and management practices are structured to align the aspirations of our employees with the broader goals of the Company. We place significant importance on training and development initiatives, enabling our workforce to adopt and implement industry best practices. In addition, we encourage a culture of self-driven learning, allowing employees to enhance their skills and capabilities at a pace and in a learning environment that suits them best.

The Company is equally committed to building and maintaining a workplace that is fair, inclusive, and diverse. As an Equal Opportunity Employer, we uphold principles of non-discrimination across all employment practices. This commitment strengthens our workforce while providing a distinct advantage in attracting and retaining talented professionals.

We also remain dedicated to upholding and promoting human rights within our operations. Our efforts focus on encouraging responsible practices throughout our wide and diverse supply chain and fostering a corporate culture that actively supports diversity and inclusion.

Through these initiatives, the Company continues to attract and retain highly qualified and skilled professionals who contribute to its sustained growth and progress.

As of March 31, 2026, our workforce numbered 524 employees and 174 workers.

18. MANAGEMENT DISCUSSION AND ANALYSIS

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

19. SUBSIDIARIES INCLUDING MATERIAL SUBSIDIARIES

Your Company as on March 31, 2026 have following Subsidiaries: -

i. Diffusion Super Conditioning Services Private Limited

ii. Nowelco Industries Private Limited

iii. Diffusion Hernon Adhesive and Sealant Private Limited

iv. Diffusion Engineers Singapore Pte. Ltd.

v. Diffusion Wear Solutions Philippines Inc.

vi. Diffusion Eurasia Muhendislik Sanayi Ve Ticaret Anonim Sirketi

vii. Diffusion Wear Solutions Middle East for Welding Wire Rods Electrodes and Similar Products Manufacturing LLC ? S.P.C

Following are Associates of our company: -

i) LSN Diffusion Limited (United Kingdom)

ii) Mecdiff SDN BHD (Malaysia)

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

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

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

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

20. CORPORATE GOVERNANCE

The Company is committed to maintaining high standards of corporate governance and has implemented practices that reflect transparency, accountability, and integrity in its operations. The Board of Directors recognizes that sound corporate governance plays a vital role in achieving sustainable growth and maximizing long-term value for all stakeholders. Accordingly, the Board reiterates its continued dedication to upholding these governance principles.

Corporate governance within the Company is guided by strong ethical values and responsible business practices, which contribute to strengthening the Company's credibility and reputation. The Company strives to ensure that its decisions and actions are conducted with fairness and integrity while addressing the expectations and interests of its stakeholders.

A comprehensive report on Corporate Governance forms an integral part of this Annual Report and is provided in a separate section.

21. AUDIT REPORTS AND AUDITORS

a) Statutory Auditor

The members at the 41st Annual General Meeting held on 25th September, 2023 appointed PGS & Associates, Chartered Accountants (Firm Registration No. ? 122384W) as Statutory Auditors of the Company to hold office for a period of five [5] years commencing from conclusion of 41st Annual General Meeting till the conclusion of Annual General Meeting to be held in the year 2028. PGS & Associates have confirmed their eligibility and that they are not disqualified under the Companies Act, 2013, for their continuance as Statutory Auditors of the Company.

The Auditors' Report for FY 2025-26 provided by PGS & Associates, Chartered Accountants, Statutory Auditors of the Company on Standalone and Consolidated Financial Statements (‘Financial Statements') does not contain any qualification, reservation or adverse remark. The statements made by the Auditors in their report are self ? explanatory and do not call for any further comments. The Auditor's Report is enclosed as separate section with the financial statements in this Annual Report.

Statutory Auditors have also provided their independent report on effectiveness of Internal Financial Controls over Financial Reporting which does not contain any qualification, reservation or adverse remark. The Auditor's Report is enclosed as separate section with the financial statements in this Annual Report.

b) Secretarial Auditors

Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and Regulation 24A of the SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015, the members at the 43rd Annual General Meeting held on July 22, 2025 appointed Mr. Madhav Kawde, Peer Reviewed Practicing Company Secretary (FCS-3251, CP No. 1892), as the Secretarial Auditor of the Company for a term of five consecutive years, to hold office from the conclusion of 43rd Annual General Meeting till the conclusion of 48th Annual General Meeting to be held in the year 2030, covering the period from the financial year ending 31st March 2026 till the financial year ending 31st March 2030. Mr. Madhav Kawde has confirmed his eligibility and that he is not disqualified under the Companies Act, 2013, For his continuance as Secretarial Auditor of the Company.

In terms of provisions of sub-section 1 of section 204 of the Companies Act, 2013, the Company has annexed to this Board's Report as Annexure-4, a Secretarial Audit Report given by the Secretarial Auditor. The Secretarial Auditors' Report for FY 2025-26 does not contain any qualification, reservation, or adverse remark. The statements made by the Secretarial Auditor in his report are selfexplanatory and do not call for any further comments.

The Secretarial Auditor's certificate on the implementation of share-based schemes in accordance- with SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, will be made available on request at the AGM, electronically.

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

c) Internal Auditors

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

As per the provisions of Section 138 of the Companies Act, 2013 and Rules made thereunder, the Company has appointed Chitaley Mehta & Associates, Chartered Accountants, (Firm Registration No- 127021W) as Internal Auditors for the Financial Year 2026 - 2027.

d) Cost Auditors

As per Section 148 of the Companies Act, 2013, the Company is required to have the audit of its cost records conducted by a Cost Accountant in practice. The Board on the recommendation of the Audit Committee has appointed M/s A. B. Verma & Co., Cost Accountants, Nagpur (Firm Registration No. 102527/ Membership No. 31367), as the Cost Auditors of the Company for FY 2026 - 2027 under Section 148 and all other applicable provisions of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014. M/s A. B. Verma & Co., have confirmed that they are Free From disqualification specified under Section 141(3) and Section 148(3) read with Section 141(4) of the Act and that the appointment meets the requirements of Section 141(3)(g) of the Act.

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

The Cost Auditors' Report for FY 2025-26 does not contain any qualification, reservation, or adverse remark.

22. REPORTING OF FRAUD BY AUDITORS

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

23. REVISION OF FINANCIAL STATEMENTS AND BOARD REPORT

There was no revision of financial statements and Boards' Report of the Company during the financial year under review.

24. SEGMENT REPORTING

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

25. BOARD OF DIRECTORS AND ITS MEETING

The Company has a professional Board with right mix of knowledge, skills and expertise with an optimum combination of Executive, Non-Executive and Independent Directors including Woman Director. The Chairman of the Board is an Executive Director. The Board provides strategic guidance and direction to the Company in achieving its business objectives and protecting the interest of the stakeholders. The Board met Five (05) times during the financial year. The maximum interval between any two meetings did not exceed 120 days, as prescribed under Companies Act, 2013. The details pertaining to the composition, terms of reference, etc. of the Board of Directors of the Company and the meetings thereof held during the financial year are given in the Report on Corporate Governance section forming part of this Annual Report.

26. INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

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

27. DIRECTORS' RESPONSIBILITY STATEMENT

The Standalone and Consolidated financial statements For the financial year ended March 31, 2026 are prepared in accordance with Indian Accounting Standards (Ind AS) under the historical cost convention on accrual basis, the provisions of the Companies Act 2013 (to the extent notified) and guidelines issued by SEBI, Ind AS as prescribed under section 133 of Companies Act, 2013, read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or the revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

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

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

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

III. They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

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

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

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

28. INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIAL STATEMENTS

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

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, audit performed by the Internal, Statutory and Secretarial Auditors and the reviews performed by the relevant board committees, including the audit and management committee, the board is of the opinion that the Company's internal financial controls were adequate and effective during the financial year 2025-26. For more details, refer to the ‘Internal control systems and their adequacy' section in the Management's discussion and analysis, which forms part of this Annual Report.

29. DECLARATION OF INDEPENDENCE BY INDEPENDENT DIRECTOR

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

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

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

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

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

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

30. BOARD EVALUATION

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

31. FAMILIARIZATION PROGRAM FOR BOARD MEMBERS

The Directors are provided with relevant documents, reports, internal policies, and reference materials to help them gain a clear understanding of the Company's operations, procedures, and governance practices.

From time to time, the Board is also presented with detailed updates on the Company's business performance, operational developments, strategic initiatives, and associated risks. These presentations assist the Directors in effectively discharging their roles and responsibilities.

In addition, the Directors are regularly informed about significant regulatory developments, amendments in applicable laws, and important judicial pronouncements to ensure that the Board remains well-informed and compliant with the prevailing legal and regulatory framework.

32. POLICY ON DIRECTORS APPOINTMENT, REMUNERATION AND OTHER DETAILS

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

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

33. DIRECTORS AND KEY MANAGERIAL PERSONNEL OF THE COMPANY

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

The Company has eminent individuals from diverse fields as Directors on its Board, who bring in the required skill, integrity, competence, expertise and experience that is required for making effective contribution to the Board. The Board comprise of six (6) Directors with an appropriate mix of Non-Executive Directors, Executive Directors and Independent Directors.

The Board is of the opinion that the Directors of the Company possess requisite qualifications, expertise and experience and they hold highest standards of integrity.

Appointment/Resignation of Directors during the financial year under review:

During the financial year 2025-26, there were no changes in the composition of the Board of Directors. No appointments or resignations of Directors took place during the year.

Retirement by Rotation:

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

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

(ii) Key Managerial Personnel ('KMP')

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

1. Mr Prashant Garg, Managing Director

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

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

Appointment/Resignation of Key Managerial Personnel (KMP) during the financial year under review: During the financial year 2025-26,

Mr. Ramesh Kumar N (PAN: ABOPN4848E) tendered his resignation and ceased to be the Chief Executive Officer (Key Managerial Personnel) of the Company with effect from February 06, 2026.

34. COMMITTEES OF THE BOARD

As on March 31, 2026, the Board has seven committees:

i. Audit Committee

ii. Nomination and Remuneration Committee

iii. Corporate Social Responsibility Committee

iv. Stakeholders Relationship Committee

v. Risk Management Committee

vi. Management Committee

vii. Finance Committee

The details of the powers, functions, composition and meetings of the Committees of the Board held during the financial year 2025-26 are given in the Report on Corporate Governance section forming part of this Annual Report.

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

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

36. CORPORATE SOCIAL RESPONSIBILITY

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

37. SECRETARIAL STANDARDS

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

38. VIGIL MECHANISM (WHISTLE BLOWER POLICY)

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

39. PREVENTION OF INSIDER TRADING

The Board has formulated Code of Conduct and Fair Disclosure for Prevention of Insider Trading Policy in accordance with Regulation 8 & 9 of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 for regulating, monitoring and reporting of Trading of Shares by Insiders. The Code lays down guidelines, procedures to be followed and disclosures to be made while dealing with shares of the Company. The details of the Code of Conduct and Fair Disclosure for Prevention of Insider Trading are given in Annexure-6 of this Board's Report.

40. CODE OF CONDUCT

The Directors, Key Managerial Personnel (KMPs), and Senior Management of the Company have affirmed their compliance with the Code of Conduct applicable to them for the year ended March 31, 2026. Details of the Code of Conduct for Directors, KMPs, and Senior Management are provided in Annexure-6 to this Board's Report.

The Annual Report of the Company also includes a certificate issued by Mr. Prashant Garg, Chairman and Managing Director (DIN: 00049106), confirming compliance based on declarations received from the Members of the Board, KMPs, and Senior Management. This certificate forms part of Annexure-9.

41. LEGAL, GOVERNANCE AND BRAND PROTECTION

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

42. ENHANCING SHAREHOLDERS VALUE

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

43. DISCLOSURE REQUIREMENTS

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

44. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS OF THE COMPANY

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

45. CREDIT RATING OBTAINED

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

46. SEXUAL HARASSMENT OF WOMEN AT WORKPLACE:

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

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

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

47. COMPLIANCE WITH THE MATERNITY BENEFIT ACT, 1961

The Company has complied with the provisions of the Maternity Benefit Act, 1961, including all applicable amendments and rules framed thereunder. The Company is committed to ensuring a safe, inclusive, and supportive workplace for women employees. All eligible women employees are provided with maternity benefits as prescribed under the Maternity Benefit Act, 1961, including paid maternity leave, nursing breaks, and protection from dismissal during maternity leave.

48. GREEN INITIATIVES

Electronic copies of Annual Report for FY 2025-26 and the Notice of 44th Annual General Meeting shall be sent to all the members whose email addresses are registered with the company/ depository participant. Physical copies of Annual Report will be sent only to those members who request the Company for the same once dispatch of Annual Report and Notice of AGM through electronic means is completed.

49. BOARD DIVERSITY

The Board comprises of adequate number of members with diverse experience and skills, such that it best serves the governance and strategic needs of the Company. The Directors are persons of eminence in areas such as business, industry, finance, law, administration, economics etc. and bring with them experience and skills which add value to the performance of the Board. The Directors are selected purely on the basis of merit with no discrimination on race, colour, religion, gender or nationality. A brief profile of the Directors is available on the website of the Company at https://diffusionengineers.com/leadership-team/

50. PROCEEDING PENDING UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016.

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

51. CEO/MD/CFO CERTIFICATION

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

52. THE DETAILS OF DIFFERENCE BETWEEN THE AMOUNT OF THE VALUATION DONE AT THE TIME OF ONE-TIME SETTLEMENT AND THE VALUATION DONE WHILE TAKING LOAN FROM THE BANKS OR FINANCIAL INSTITUTIONS ALONG WITH THE REASONS THEREOF.

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

53. ACKNOWLEDGEMENT

Your Directors place on record their sincere gratitude to the Government of India, the Securities and Exchange Board of India, the Stock Exchanges, and other regulatory authorities for their continued guidance and support extended to the Company.

The Board also acknowledges the valuable support received from the Company's bankers, investors, rating agencies, customers, suppliers, and other business associates for their continued trust and confidence in the Company.

Your Directors further commend the dedication, commitment, and professionalism demonstrated by all employees of the Company. Their collective efforts, teamwork, and unwavering focus have been instrumental in driving the Company's growth and success.

The Board expresses its gratitude to the shareholders for their continued confidence and trust in the Company and its management.