To the Members,

Your Directors are pleased to present the 16^th Annual Report of Avana Electrosystems Limited (“the Company”) along with the audited financial statements for the financial year ended March 31, 2026.

The Financial Year 2025-26 marks a historic milestone in the Company's journey with the successful completion of its Initial Public Offering (“IPO”) and the listing of its Equity Shares on the NSE EMERGE Platform on the National Stock Exchange of India Limited on 20^th January 2026. The successful listing has strengthened the Company's capital base, enhanced its market visibility and reinforced the confidence of investors in the Company's business model, governance standards and long-term growth strategy.

FINANCIAL RESULTS

The financial results of the Company for the year ended 31^st March, 2026 are summarized below:

( . in Lakh)

PERFORMANCE OF THE COMPANY

During the year under review, your Company clocked a total income of 8,483.09 Lakhs as against 6,293.39 Lakhs representing an increase of 34.79 % over that of the previous year. The PBDIT has increased from 1,396.77 Lakhs (FY 2024-2025) to 1,729.94 Lakhs (FY 2025-2026) representing an increase of 23.85 %. The Net Profit during the year was 1,172.28 Lakhs in comparison with previous year which stood at 847.08 Lakhs resulting in an increase of 38.39 %.

CHANGE IN THE NATURE OF BUSINESS

During the year under review, there was no change in the nature of business of the Company.

DIVIDEND

For the Financial Year 2025-2026, your Company did not declare any dividend.

No Dividend remained unclaimed for a period of 7 consecutive years which is required to be transferred to Investor Education & Protection Fund (IE&PF).

SHARE CAPITAL AND CHANGES IN SHARE CAPITAL: -

During the year, there was a change in the share capital of the Company. The Authorised Share Capital of the Company increased from INR 90,00,000/-(Rupees Ninety Lakhs Only) divided into 9,00,000 Equity Shares of INR 10/- (Rupees Ten) each to INR 25,00,00,000/-(Rupees Twenty Five Crores Only) divided into 2,50,00,000 Equity Shares of INR 10/- (Rupees Ten) each.

The Issued, Subscribed and Paid up Equity Share Capital of the Company was increased from INR 79,40,640/- (Rupees Seventy Nine Lakhs Forty Thousand Six Hundred and Forty Only) divided into 7,94,064 Equity Shares of INR 10/- each to INR 22,64,54,080/- (Rupees Twenty Two Crores Sixty Four Lakhs Fifty Four Thousand and Eighty Only) divided into 2,26,45,408 Equity Shares of INR 10/- each.

SHARES IN SUSPENSE ACCOUNT

There are No shares lying in Suspense Account.

INITIAL PUBLIC OFFER (IPO) AND LISTING

Pursuant to Section 23 (1) of the Companies Act, 2013 and other provisions under the said Act and Rules made thereunder read with chapter IX of the securities and exchange board of India (issue of capital and disclosure requirements) regulations, 2018 (“SEBI (ICDR) regulations”), as amended in terms of Rule 19(2)(b) of the securities contracts (regulation) Rules, 1957, your Company had made an Initial Public Offer aggregating to INR 3,522.30 Lakhs (“Issue Size”) and has issued and allotted 51,76,000 equity shares to the general public and 7,94,000 equity shares were offered under OFS (Offer for Sale) at a price of INR 59/- per share (including Face Value of Rs.10/- and a Premium of Rs. 49/- per share) through an Initial Public Offer. Furthermore, the Equity Shares of your Company were listed on The National Stock Exchange of India Limited on Small, Medium Enterprise (“SME”) platform on Tuesday, January 20, 2026.

SUBSIDIARY COMPANY, ASSOCIATE AND JOINT VENTURE

During the year under review, the Company did not have any Subsidiary, Associate or Joint Venture Company.

TRANSFER TO RESERVES

The Company retained the entire surplus in the Profit and Loss Account and hence no transfer to General Reserve was made during the Year.

FINANCE

The total borrowings reduced from 568.51 Lakhs to 76.14 Lakhs mainly due to internal accruals from Operations/ improvement in the business of the Company. Your Company follows judicious management of its Short Term and Long-Term Borrowings with strong relationship with reputed Banks from whom your Company has availed Credit facilities at very competitive rates.

DEPOSITS

Your Company neither accepted nor renewed any Deposits during the year to which the provisions of the Companies (Acceptance of Deposits) Rules, 2014 applies.

INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Pursuant to the applicable provisions of the Companies Act, 2013, read with the IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (“the IEPF Rules”), all the Unpaid or Unclaimed dividends are required to be transferred by the Company to the IEPF Authority after the completion of seven years. Further, according to the Rules, the Shares on which dividend has not been paid or claimed by the shareholders for seven consecutive years or more shall also be transferred to the demat account of the IEPF Authority. During the year 2025-26, No Unpaid or Unclaimed Dividend was required to be transferred to the IEPF Authority since the Company did not declare any dividend in the past.

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

During the year under review, the Company has adhered to the provisions of Section 186 of the Companies Act, 2013. There were no loans / guarantees given and no investments made by the Company during the financial year ended 31^st March, 2026.

DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

Appointments, Resignations and Changes

Mrs. Sheela Arvind (DIN: 01020390) was appointed as a Non- Executive Independent Woman Director with effect from 4^th August 2025 to hold office of the Company for a period of 5 (five) consecutive years w.e.f., 4^th August 2025 to 4^th August 2030.

Mrs. Shital Darak Mandhana (DIN: 07043909) was appointed as a Non- Executive Independent Woman Director with effect from 4^th August 2025 to hold office of the Company for a period of 5 (five) consecutive years w.e.f., 4^th August 2025 to 4^th August 2030.

Mr. Kishore N S (DIN: 11222235) was appointed as a Non- Executive Independent Director with effect from 4^th August 2025 to hold office of the Company for a period of 5 (five) consecutive years w.e.f., 4^th August 2025 to 4^th August 2030.

Mr. Ravi Kumar S (Membership No: 239041) was appointed as the Chief Financial Officer (CFO) of the Company with effect from 1^st September 2025.

Mrs. Amrutha Naveen (Membership No: A65237) Company Secretary and Compliance Officer of the Company resigned from the position for professional growth through Practice with effect from the close of business hours on 31^st March 2026. The Board placed on record its appreciation for the services rendered by Mrs. Amrutha Naveen during her tenure as the Company Secretary.

Ms. C R Nerajaa (Membership No: A66661) was appointed as the Company Secretary and Compliance Officer of the Company with effect from 10^th April 2026.

Mr. Panish Anantharamaiah, Managing Director, Mr. Gururaj Dambal, Whole-Time Director, Mr. Vinod Kumar S Whole Time Director, Mr. K N Sreenath Whole Time Director ( Designated as an Executive Director), Mr. S Ravi

Kumar, Chief Financial Officer and Ms. C R Nerajaa, Company Secretary are the Key Managerial Personnel (KMPs) of the Company as per Section 203 of the Companies Act, 2013.

Brief Profile of Directors appointed during the Financial Year 2025-26:

Mrs. Sheela Arvind, aged 56 years is a Fellow Member of the Institute of Company Secretaries of India and holds a Bachelor's Degree in Commerce from the University of Mysore, a Bachelor's Degree in Law from the Karnataka State Law University, Hubballi and a Diploma in Business Administration from the Department of Technical Education, Government of Karnataka. She is a Practicing Company Secretary with 22 years of expertise in Corporate Governance, Secretarial Compliance, CSR, ESG, Social Audit, Drafting, Taxation and compliance laws.

In the Opinion of the Board, the Independent Woman Director Mrs. Sheela Arvind appointed during the financial year ended 31^st March, 2026 has the requisite Independence, Integrity, Expertise and Experience.

Mrs. Shital Darak Mandhana, aged 40 years is a Fellow Member of the Institute of Company Secretaries of India. She holds a Bachelor's Degree in Commerce from the University of Mumbai, a Bachelor's Degree in Law from the Mumbai University, and a Master of Arts in Business Law from NUJS (National University of Juridical Science). She is also a Registered Valuer registered with the Insolvency and Bankruptcy Board of India. She has worked with Avesthagen Limited as Executive Company Secretary from June 2009 to January 2010 and with Kurlon Limited as a Company Secretary from February 2010 to July 2013 and with Integrated Risk Control Applications Private Limited as a Secretarial and Legal Advisor from January 2014 to December 2014. Since 2015, she is a Practicing Company Secretary and has founded ProCS Legal, a firm providing legal, secretarial, and business consultancy services. She has experience in the field of valuation, financial analysis and research, compliance management, ITR Management and Team Management skills.

In the Opinion of the Board, the Independent Woman Director Mrs. Shital Darak Mandhana appointed during the financial year ended 31^st March, 2026 has the requisite Independence, Integrity, Expertise and Experience.

Mr. Kishore N S, aged 44 years, is a member of the Institute of Chartered Accountants of India and holds a Bachelor's Degree in Business Management from the Bangalore University and is a Practicing Chartered Accountant. He has over 14 years of experience in financial, regulatory, and strategic advisory services. He also specializes in Audit & Assurance, Taxation (both Direct and Indirect), Corporate Law & Secretarial Services, Financial Advisory, Business Valuation & Transaction Support, Internal Controls & SOP Implementation.

In the Opinion of the Board, the Independent Director Mr. Kishore N S, appointed during the financial year ended 31^st March, 2026 has the requisite Independence, Integrity, Expertise and Experience.

Re-appointments

As per provisions of the Companies Act, 2013, Mr. Gururaj Dambal, (DIN: 03099402) Whole-Time Director is liable to retire by rotation at the ensuing Annual General Meeting and being eligible, offer himself for re-appointment. The Board of Directors recommends his re-appointment.

Brief Profile of Director proposed to be Re-appointed:

Mr. Gururaj Dambal, aged 48 years, is one of the Promoters and a Whole Time Director of your Company. He holds a Diploma in Electronics and Communication Engineering from the Department of Technical Education, Government of Karnataka and has 24 years of experience in the Electrical Industry. Previously, he was associated with JVS Electronics Private Limited as a Technical Assistant from July 2001 to September 2009 and with Vignani Technologies Private Limited from October 2009 to July 2010 as Member Technical Staff. He is associated with your Company since year 2010. Currently he looks after the product development, automation, purchase, assembly, testing and delivery in relay unit.

Your Board recommends the reappointment of Mr. Gururaj Dambal, Whole-Time Director who is retiring by rotation in the ensuing Annual General Meeting.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received declarations from all its Independent Directors that they meet the criteria of Independence as laid down under section 149(6) of the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 in respect of the financial year ended March 31, 2026. Independent Directors have complied with the Code for Independent Directors prescribed in Schedule IV of the Companies Act, 2013.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT (BRSR)

The Business Responsibility Reporting as required under Regulation 34(2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 does not apply to your Company for the financial year 2025-26.

DISCLOSURE IN RESPECT OF SCHEME FORMULATED UNDER SECTION 67(3) OF THE COMPANIES ACT, 2013

Since the Company has not formulated any scheme in terms of Section 67(3) of the Companies Act, 2013, no disclosures are required to be made.

BOARD MEETINGS HELD DURING THE FINANCIAL YEAR

During the year under review, 23 Board Meetings were convened and held. The intervening gap between the Meetings was within the time period prescribed under the Companies Act, 2013. The details of such meetings are as under:

BOARD COMMITTEES

The primary committees of the Board are Audit Committee, Nomination and Remuneration Committee, Stakeholders' Relationship Committee and Corporate Social Responsibility Committee. The composition of the Primary Committees as of 31^st March 2026 (including the changes effected up to the date of this report) and their meeting dates are given below:

Details of recommendations of Audit Committee which were not accepted by the board along with reasons

The Audit Committee generally makes certain recommendations to the Board of Directors of the Company during its meetings held to consider financial results (Unaudited and Audited) and such other matters placed before the Audit Committee as per the Companies Act 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 from time to time. During the year, the Board of Directors considered all the recommendations made by the Audit Committee, accepted and carried out the same to its satisfaction. Hence there are no recommendation of Audit Committee unaccepted by the Board of Directors of the Company during the year under review.

BOARD EVALUATION

The Board of Directors has carried out an annual evaluation of its own performance, Board Committees and individual directors pursuant to the provisions of the Companies Act, 2013and the Listing Regulations. The performance of Managing Director of the Board was reviewed by the Independent Directors taking into consideration the views of the other executive directors. Similarly, the performance of other Executive Directors was reviewed by the Independent Directors taking in to consideration the other Executive Directors and Managing Director (other than the Director being evaluated). The parameters considered were leadership ability, adherence to corporate governance practices, Integrity, Attendance and Availability to Meetings, knowledge of Company's business, Active Participation in deliberations in Meetings, use of Core Competencies, Professional Skills and expertise for the benefit of the Company, maintaining confidentiality, adhering to code of conduct, disclosing conflict of interest etc. The Board evaluated its performance after seeking inputs from all the Directors on the basis of such criteria such as Board composition and structure, Strategic guidance, Board Dynamics, effectiveness of board processes, information and functioning etc. The performance of the committees was evaluated by the Board after seeking inputs from the committee members on the basis of criteria such as the composition of committees, effectiveness of committee meetings etc. The above criteria are as provided by the Guidance note on Board evaluation issued by the Securities and Exchange Board of India. As per the SEBI Circular SEBI/HO/CFD/CMD/CIR/P/2018/79 dated 10^th May 2018, the followings details are being provided on Board evaluation.

NON-APPLICABILITY OF INDIAN ACCOUNTING STANDARDS

As per the provisions of Rule 4(1) of the Companies (Indian Accounting Standards) Rules, 2015, Companies whose shares are listed on SME exchange as referred to in Chapter XB of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, are exempted from the compulsory requirements of adoption of IND-AS w.e.f. 1^st April, 2017. As your Company is listed on NSE Emerge platform, it is covered under the exempted category and is not required to comply with IND-AS for preparation of Financial Statements.

CODE FOR PROHIBITION OF INSIDER TRADING

Your Company has adopted the Internal Code of conduct for Regulating, monitoring and reporting of trades by Designated persons under the Securities Exchange Board of India (Prohibition of Insider Trading) Regulation, 2015 (“Code”) for prohibition of insider trading in the securities of the Company to curb the practice for dealing in the securities while having Unpublished Price Sensitive Information (“UPSI”) by the Insiders of the Company. The Code, inter alia, prohibits dealing in securities by insiders while in possession of unpublished price sensitive information. The said Code has been amended, from time to time, to give effect to the various notifications/circulars of Securities and Exchange Board of India (“SEBI”) with respect to the SEBI (Prohibition of Insider Trading) Regulations, 2015. Your Company has also formulated and adopted the Policy and Procedures for inquiry in case of leak or suspected leak of Unpublished Price Sensitive Information [Under Regulation 9A (5) of Securities and Exchange Board of India (Prevention of Insider Trading) Regulations, 2015].

DETAILS OF POLICIES DEVELOPED BY THE COMPANY

(i) Nomination and Remuneration Policy

The Company has formulated the Nomination and Remuneration Policy in compliance with Section 178 of the Companies Act, 2013. The objective of this policy is to ensure

The level and composition of remuneration is reasonable and sufficient to attract, retain and motivate directors of the quality required to run the Company successfully;

Relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and

Remuneration to Directors, Key Managerial Personnel and Senior Management involves a balance with short and long-term performance objectives appropriate to the working of the Company and its goals;

This policy is being governed by the Nomination and Remuneration Committee comprising of members of the Board, as stated above, comprising of three Independent Directors. The policy lays down the standards to be followed by the Nomination and Remuneration Committee with respect to the appointment, remuneration and evaluation of Directors and Key Management Personnel. The detailed policy is hosted on the website of the Company and the web link for same is https://avanaelectrosystems.com/wp-content/uploads/2025/12/6.-Nomination-and-Remuneration-Policy.pdf

Affirmation that the remuneration is as per the remuneration policy of the Company

The Company has formulated the Nomination and Remuneration Policy in compliance with Section 178 of the Companies Act, 2013. This policy governs the criteria for deciding the remuneration for Directors, Key Managerial Personnel and Senior Management Personnel. It is affirmed that the remuneration to Directors, Key Managerial Personnel and Senior Management Personnel is being fixed based on the criteria and parameters mentioned in the above-mentioned policy of the Company.

(ii) Corporate Social Responsibility Policy (CSR)

Your Company recognizes that its business activities have wide impact on the societies in which it operates, and therefore an effective practice is required giving due consideration to the interests of its stakeholders including shareholders, customers, employees, suppliers, business partners, local communities and other organizations.

Your Company endeavors to make CSR an important agenda and is committed to its Stakeholders to conduct its business in an accountable manner that creates a sustained positive impact on society. Your Company satisfying the threshold as stipulated under Section 135 of the Companies Act, 2013 has established the CSR Committee comprising of members of the Board, as stated above, and the Chairman of the Committee is Non-Executive and Independent Director. The said Committee has formulated and approved the CSR policy as per the approach and direction given by the Board pursuant to the recommendations made by the Committee including guiding principles for Selection, implementation and monitoring of activities as well as formulation of Annual Action Plan for the Company with its major focus on:-

Devising meaningful and effective strategies for carrying out CSR activities and engaging with all stakeholders towards implementation and monitoring. Make sustainable contributions to communities. Identify socio-economic opportunities to perform CSR activities. Focus on social welfare activities and programmes as envisaged in Schedule VII of The Companies Act, 2013. Modalities of utilizing the funds and implementation of schedules for the Projects or Programmes. Monitoring and Reporting mechanism for the Projects or Programmes; and Details of need and impact assessment study, if any, for the Projects undertaken by the Company.

The CSR Committee is meant to recommend to the Board of Directors to implement the CSR activities covering any of the areas as detailed under Schedule VII of the Companies Act, 2013 as per CSR Policy of the Company. Annual Report on CSR activities as required under the provisions of Companies Act, 2013 is annexed herewith marked as Annexure “A” and forms part of this report.

(iii) Risk Management and Measures

The Company recognizes that risk management is an integral part of good corporate governance. In line with the requirements under Section 134(3)(n) of the Companies Act, 2013, the Board of Directors has developed and implemented a comprehensive Risk Management Measures. The objective is to create a robust framework for identifying, evaluating, monitoring, and mitigating operational, financial, and strategic risks across the organization. The risk management framework is overseen directly by the Board of Directors and reviewed periodically in consultation with the Audit Committee to align with the evolving business environment.

1. Identification of Key Risk Elements the Board has identified the following principal elements of risk that may impact the ongoing operations and future performance of the Company Market and Industry Risk: Vulnerability to fluctuations in customer demand, intense competition within the SME sector, and price volatility of raw materials or inputs. Financial and Liquidity Risk: Exposure to interest rate shifts, foreign exchange fluctuations (if applicable), and timely realization of trade receivables. Operational Risk: Dependencies on key personnel, technology disruptions, supply chain bottlenecks, and maintenance of quality control standards. Regulatory and

Compliance Risk: Adherence to continuous disclosure norms under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, statutory labor laws, environmental guidelines, and tax regulations.

2. Mitigation Measures and Internal Controls To counter the identified risks, the Company has put in place the following proactive control measures: Internal Financial Controls: The Company maintains an adequate system of internal financial controls commensurate with its size and scale of operations, ensuring accuracy in financial reporting and safeguarding of assets. Diversification and Monitoring: Regular review of operational pipelines, expansion of the customer/supplier base to avoid concentration risk, and stringent credit control policies for trade debtors. Compliance Tracking: Periodic internal reviews and updates from the designated Compliance Officer to ensure strict adherence to stock exchange guidelines and statutory filings. Going Concern Assessment: In the opinion of the Board, there are currently no elements of risk that threaten the immediate existence or going concern status of the Company.

(iv) Whistle-Blower Policy Vigil Mechanism

The Company is committed to adhere to the highest standards of ethical, moral and legal conduct of business operations. To maintain these standards, the Company encourages its employees who have concerns about suspected misconduct to come forward and express these concerns without fear of punishment or unfair treatment. A Vigil (Whistle Blower) mechanism provides a channel to the Employees and Directors to report to the management concerns about unethical behavior, actual or suspected fraud or violation of the Code of Conduct or Policy. The mechanism provides for adequate safeguards against victimization of employees and directors to avail of the mechanism and also provide for direct access to the Chairman of the Board/Chairman of the Audit Committee in exceptional cases.

In line with the statutory requirements, the Company has formulated a Whistle Blower Policy/Vigil Mechanism, which covers malpractices and events which have taken place / suspected to have taken place, misuse or abuse of authority, fraud or suspected fraud, violation of Company Rules, manipulations, negligence causing danger to public health and safety, misappropriation of monies, and other matters or activity on account of which the interest of the Company is or is likely to be affected and formally reported by whistle blowers concerning its employees.

The Managing Director is responsible for the administration, interpretation, application and review of this policy. The Managing Director is also empowered to bring about necessary changes to this Policy, if required at any stage with the concurrence of the Audit Committee. The mechanism also provides for access to the Chairman of the Audit Committee in required circumstances.

TRAINING AND FAMILIARIZATION PROGRAM FOR INDEPENDENT DIRECTORS

Every Independent Director on being inducted into the Board attends an orientation program. To familiarize the new directors with the strategy, operations and functions of our Company, the Executive Directors/ Senior Managerial Personnel make presentations to the inductees about the Company's strategy, operations, product offerings, Organization structure, human resources, technologies, facilities and risk management.

Further, at the time of appointment of Independent Directors, the Company issues a formal letter of appointment outlining his/her role, functions, duties and responsibilities as a director. The detailed familiarization program for Independent Directors is hosted on the website of the Company and the weblink for same is https://avanaelectrosystems.com/wp-content/uploads/2025/12/Familiarisation-Programme-for-Independent-Directors.pdf

COMPLIANCE WITH THE PROVISIONS OF SECRETARIAL STANDARDS

The Directors state that applicable Secretarial Standards, i.e. SS-1 and SS-2, issued by the Institute of Company Secretaries of India, relating to ‘Meetings of the Board of Directors' and ‘General Meetings', respectively, have been duly followed / complied with by your Company.

NAMES OF COMPANIES WHICH HAVE BECOME OR CEASED TO BE ITS SUBSIDIARIES, JOINT VENTURES OR ASSOCIATE COMPANIES DURING THE YEAR.

Your Company has NO Subsidiary, Joint venture or Associate Companies. Thus, a statement on performance of Subsidiary Company as per form AOC-1 is not applicable to the Company.

AUDITORS

Statutory Auditors

At the Annual General Meeting held on 30^th September 2024, M/s. Vasanth & Co, Chartered Accountants, (Firm Registration number 008204S) were appointed as Statutory Auditors of the Company to hold office for a consecutive term of 5 years from the conclusion of Fifteenth (15^th) Annual General Meeting of the Company until the conclusion of Nineteenth (19^th) Annual General Meeting of the Company to be held in the calendar year 2029.

The Company has received a Certificate from the Statutory Auditors to the effect they are not disqualified to continue as Auditors of the Company has also been received.

The Notes on financial statement referred to in the Auditors' Report are self-explanatory and do not call for any further comments. The Auditors' Report does not contain any qualification, reservation, adverse remark or disclaimer.

Total Fees for all the Services paid by the Company, on a consolidated basis, to the Statutory Auditors

Total Fees for all the Services paid by the Company, on a consolidated basis to M/s. Vasanth & Co, Chartered Accountants, Statutory Auditors for the financial year 2025-26 was Rs.10,00,000/- (Rupees Ten Lakhs Only) in 2025-26 (excluding tax).

The Board, in consultation with the Statutory Auditors and as per the recommendation of Audit Committee, will decide the payment of Audit Fee payable to the Statutory Auditors for all their services including audit of accounts, tax audit etc., for the financial year 2026-27 excluding out of pocket expenses.

Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. Malali Anantharam Adarsha, [Membership No: A61879, CP No:23994], a Practicing Company Secretary to undertake the Secretarial Audit of the Company. The Secretarial Audit Report for the financial year 2025-2026 is annexed herewith marked as Annexure “B” and forms part of this report. The Secretarial Audit Report does not contain any qualification, reservation, adverse remark or disclaimer.

Pursuant to recent SEBI-LODR Amendments, the Company is required to appoint Secretarial Auditors for a term of five consecutive financial years. In view this, the Directors recommend the resolution at Item No. 3 of the Notice of Annual General Meeting to be passed as an Ordinary Resolution for appointment of Mr. Malali Anantharam Adarsha (Peer Review No. 3224/2023) Company Secretary in Practice to undertake Secretarial Audit of the Company for a term of five consecutive financial years i.e. from the financial year 2026-27 to financial year 2030-31.

The Board, in consultation with the Secretarial Auditor and as per the recommendation of Audit Committee has decided to pay a sum of Rs.1,00,000/- (Rupees One Lakh Only) as Secretarial Audit fee for a financial year 2025-26 which will be paid during this financial year. Similarly, the above said fee will be paid to the Secretarial Auditor for every financial year until their appointment is valid. The above said fee is exclusive of out-of-pocket expenses.

Internal Auditors

The Board of Directors have appointed M/s. Venkatesh Golakaram & Associates, Chartered Accountants (FRN: 029733S) as Internal Auditors of the Company for the financial year 2026-27. The Internal Auditors are reporting to the Audit Committee with regard to their audit process and key audit findings during the year.

The Board, in consultation with the Internal Auditor/s and as per the recommendation of Audit Committee has decided to pay a sum of Rs.3,00,000/- (Rupees Three Lakh Only) as Internal Audit fee for the financial year 2025-26 which will be paid during this financial year. Similarly, the above said fee will be paid to the Internal Auditor for every financial year until their appointment is valid. The above said fee is exclusive of out-of-pocket expenses.

MAINTENANCE OF COST RECORDS

In terms of Section 148 of the Companies Act, 2013 read with Companies (Cost records and audits) Rules, 2014, the Company is not required to maintain the cost records and accordingly the Company has not maintained the Cost record.

STATEMENT OF DEVIATION OR VARIATION

Pursuant to Regulation 32(1) of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, there is no deviation or variation in the use of IPO proceeds.

PARTICULARS OF EMPLOYEES AND REMUNERATION

Details as required under Section 197 of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014:

Details of Top ten Employees in terms of Remuneration drawn:

(i) Details of the employees employed throughout the year and drawing remuneration which in the aggregate is not less than Rupees One Crore and Two Lakhs per annum, during the financial year. - NIL

(ii) Employees employed for a part of the financial year, was in receipt of remuneration for any part of that year, which, in the aggregate exceeds Rupees Eight Lakhs and Fifty Thousand per month, during the financial year. - NIL.

(iii) None of the employees except the Executive Directors employed throughout the financial year or part thereof, hold by himself / herself or along with his/her spouse and dependent children, more than two per cent of the equity shares of the Company.

Details required as per Section 197 and Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

Note: Retirement benefits like Gratuity not included since the same is not comparable.

*Mr. Ravi Kumar S was appointed as Chief Financial Officer of the Company with effect from September 1, 2025. ** Mrs. Amrutha Naveen was appointed as Company secretary & Compliance Officer on August 29,2025 and resigned from the position of Company Secretary & Compliance Officer with effect from March 31, 2026.

Percentage increase in the median remuneration of employees in the financial year

The median remuneration of Employees for the Financial Year 31^st March, 2026 was arrived at Rs 3,80,633/- per annum and the median remuneration of Employees for the previous financial year 31^st March, 2025 was arrived at Rs 3,37,459/- per annum and accordingly, there was an increase of 12.79% in the median remuneration of employees in the financial year.

Number of permanent employees on the rolls of the Company as on 31^st March 2026

The Number of permanent employees on the rolls of the Company as of 31^st March, 2026 stood at 154.

Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration;

The average percentile increase was about 15.23% for all the employees who went through the compensation review cycle in the year. For the managerial personnel, the compensation has increased marginally for Executive Directors, Managing Director, CFO and the Company Secretary, due to annual increment based on their performance. The remuneration for the Managing Director and Executive Directors is determined by the Shareholders for a defined term as stipulated under the Companies Act, 2013.

The compensation decisions are taken after considering at various levels of the benchmark data and the compensation budget approved for the financial year. The Nomination and Remuneration Committee recommends to the Board of Directors any compensation revision of the managerial personnel. In respect of Whole-time Directors, the remuneration fixed for them is finally approved by the Shareholders.

Details of pecuniary relationship or transactions of the non-executive directors vis-a-vis the Company

All the Non-Executive Directors were entitled to only the Sitting fees of Rs. 30,000/- (Rupees Thirty Thousand Only) for every board meeting they attend as Members pursuant to the payment of sitting fees approved by the Board at its meeting held on 29^th August 2025.

Mr. Panish Anantharamaiah, Managing Director held 42,39,705 Equity shares as of 31^st March 2026. Mr. K N Sreenath, Executive Director held 42,39,705 Equity shares as of 31^st March 2026. Mr. Gururaj Dambal, Whole-Time Director held 42,39,705 Equity shares as of 31^st March 2026. Mr. Vinod Kumar S, Whole-Time Director held 39,56,205 Equity shares as of 31^st March 2026.

ADEQUACY OF INTERNAL FINANCIAL CONTROLS

The term Internal Financial Controls has been defined as the policies and procedures adopted by the Company to ensure orderly and efficient conduct of its business, including adherence to Company's policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, and the timely preparation of reliable financial information.

Your Company has adequate and robust Internal Control System, commensurate with the size, scale and complexity of its operations. The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls.

The Internal Auditor of the Company carry out review of the internal control systems and procedures. The internal audit reports are reviewed by Audit Committee and Board.

Your Company has also put in place adequate internal financial controls with reference to the financial statements commensurate with the size and nature of operations of the Company. During the year, such controls were tested and no material discrepancy or weakness in the Company's internal controls over financial reporting was observed.

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

The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All the employees (permanent, contractual, temporary, trainees) are covered under this policy.

The Company has not received any complaint on sexual harassment during the financial year ended 31^st March, 2026.

MATERNITY BENEFIT PROVIDED BY THE COMPANY UNDER MATERNITY BENEFIT ACT 1961

The Company declares that it has duly complied with the provisions of the Maternity Benefit Act, 1961. All eligible women employees have been extended the statutory benefits prescribed under the Act, including paid maternity leave, continuity of salary and service during the leave period, and post-maternity support such as nursing breaks and flexible return-to-work options, as applicable. The Company remains committed to fostering an inclusive and supportive work environment that upholds the rights and welfare of its women employees in accordance with applicable laws.

LISTING WITH STOCK EXCHANGE

The Equity Shares of the Company were listed on National Stock Exchange of India Limited on Small, Medium Enterprise (“SME”) platform on 20^th January, 2026.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE

During the year there were no significant and/or material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and the Company's operations in future.

MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY WHICH HAS OCCURRED SINCE 31^ST MARCH 2026 TILL THE DATE OF THIS REPORT

There have been no material changes and commitments which affect the financial position of the Company which have occurred between the end of the financial year i.e., from 31^st March 2026 to which the financial statements relate until the date of this report.

EQUITY SHARES WITH DIFFERENTIAL VOTING RIGHTS

The Company has not issued any shares with differential voting rights and accordingly the provisions of section 43 read with Rule 4 (4) of the Companies (share capital and debentures) Rules 2014 of the Companies act 2013 and Rules framed there under are not applicable to the Company for the financial year under review.

DETAILS OF SWEAT EQUITY SHARES

The Company has not issued any sweat equity shares and accordingly the provisions of Section 54 read with Rule 8 (13) of the Companies (Shares Capital and Debentures) Rules, 2014 of the Companies Act, 2013 and Rules framed there under are not applicable to the Company for the financial year under review.

DETAILS OF EMPLOYEES STOCK OPTION SCHEME

The Company has not granted stock option and accordingly the provisions of Section 62(1)(b) read with Rule 12 (9) of the of the Companies (Shares Capital and Debentures) Rules, 2014 of the Companies Act, 2013 and Rules framed there under are not applicable to the Company for the financial year under review.

DEMAT STATUS

All the shares are presently held in Dematerialized / electronic mode.

CREATION OF CHARGE

During the year the Company has created / modified charge on its assets for the purpose of availing Loans from Banks / Financial Institutions.

CORPORATE GOVERNANCE REPORT

The Company is claiming exemption under Regulation 15 (2) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Compliance with the Corporate Governance Provisions as specified in regulation 17 to 27 and clauses (b) to (i) and (t) of sub-regulation (2) of 46 and paras C, D and E of Schedule V of SEBI (Listing Obligations and Disclosure Requirements) 2015 shall not apply except those specifically made applicable to SME Listed Companies.

DETAILS OF DIFFERENCE BETWEEN VALUATION AMOUNT ON ONE TIME SETTLEMENT AND VALUATION WHILE AVAILING LOAN FROM BANKS AND FINANCIAL INSTITUTION: -NIL

ANNUAL RETURN

The Annual Return as on 31^st March 2026 as provided under Section 92(3) of the Companies Act, 2013 and as prescribed in Form No. MGT-7 of the Companies (Management and Administration) Rules, 2014, is available on the website of the Company and can be accessed at https://avanaelectrosystems.com/

RELATED PARTY TRANSACTIONS

As required under Regulation 23 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended, the Company has developed a policy on dealing with Related Party Transactions and such policy is disclosed on the Company's website. The weblink for the same is https://avanaelectrosystems.com/wp-content/uploads/2026/09/AEL-Related-Party-Transactions-Policy-Final.pdf

There were no related party transactions entered into during the financial year by the Company with the Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with the interest of the Company at large other than the remuneration paid to the Executive Director/s and the payments made to some of the Related Parties as disclosed in the financials and Stock Exchange as per the approval obtained from the Audit Committee.

The details of Related Party Transactions are provided in the Notes to the Accounts and AOC-2 forming part of the Director's Report Marked as Annexure “C”

MANAGEMENT DISCUSSION AND ANALYSIS REPORT: -

The Management Discussion and Analysis as required in terms of the Listing Regulations is annexed to the report as Annexure “D” which forms an integral part of this report.

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

The details on Conservation of energy, technology absorption, foreign exchange earnings and outgo are annexed herewith as marked as Annexure “E” and forms part of this report.

DIRECTORS' RESPONSIBILITY STATEMENT

In terms of Section 134(5) of the Companies Act, 2013, the Directors would like to state that:

1. In the preparation of the annual accounts, the applicable accounting standards have been followed.

2. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were 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 or loss of the Company for the year under review.

3. The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

4. The Directors have prepared the annual accounts on a going concern basis.

5. The Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

6. The Directors had devised proper system to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

DEPOSITORY

Your Company has arrangements with National Securities Depository Limited (‘NSDL') and Central Depository Services (India) Limited (‘CDSL'), the Depositories, for facilitating the members to trade in the fully paid-up equity shares of the Company in Dematerialized form. The Annual Custody fees for the FY 2026-27 has been paid to both the Depositories.

INDUSTRIAL RELATIONS

Industrial relations in all the units and branches of your Company remained cordial and peaceful throughout the year.

DETAILS OF APPLICATION MADE / PROCEEDINGS PENDING UNDER IBC CODE, 2016 DURING THE YEAR AND THEIR STATUS AS AT THE END OF FY: NIL

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: N.A.

DETAILS OF ONE TIME SETTLEMENT, IF ANY; NIL

ENVIRONMENT, HEALTH AND SAFETY

The Company is conscious of the importance of environmentally clean and safe operations. The Company gives importance to the conduct of operations in such a manner to ensure safety of all the Stakeholders concerned, compliance with all the environmental regulations and preservation of natural resources.

CAUTIONARY STATEMENT

Statements in this Directors' Report and Management Discussion and Analysis Report describing the Company's objectives, projections, estimates, expectations or predictions may be “forward-looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make difference to the Company's operations include raw material availability and its prices, cyclical demand and pricing in the Company's principal markets, changes in Government regulations, Tax regimes, economic developments within India and the countries in which the Company conducts business and other ancillary factors.

ACKNOWLEDGEMENTS

Your Directors wish to place on record their appreciation and sincere thanks to the Customers, Business Associates, Vendors, Bankers, Government and all the statutory authorities for their unwavering support and co-operation. Your directors, also acknowledge the hard work, dedication, and commitment of the employees and place on record the appreciation for the dedication and hard work contributed by employees, individually and collectively, in the overall progress of the Company during the last year.