DIVIDEND

The Directors are pleased to recommend a dividend
of C 12/- per equity share of C 10/- each on the paid
up equity share capital of the Company for the year
ended 31^st March 2026, for consideration and approval
of Members at the ensuing Annual General Meeting
(AGM). Pursuant to Regulation 43A of the SEBI (Listing
Obligations and Disclosure Requirements) Regulations,
2015 ('SEBI Listing Regulations'), the Company has
adopted a Dividend Distribution Policy. This policy can
be accessed on the Company's website athttps://
www.vsthyd.com/mainsite/documents/Dividend-
Distribution-Policy.pdf

The dividend would be payable to all Shareholders
whose names appear in the Register of Members as
on 10^th July 2026, subject to deduction of tax at source.

TRANSFER TO RESERVES

It is proposed to carry forward an amount of C 3000
Lakhs to General Reserve.

MATERIAL CHANGES AND COMMITMENTS

Except as disclosed elsewhere in the Report, there have
been no material changes and commitments which
affect 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. There has been no change in the nature of
business of the Company during the year.

SHARE CAPITAL

The paid up Equity Share Capital as on 31^st March 2026
was C 16,986.11 Lakhs. The Company has neither issued
shares with differential rights as to dividend, voting or
sweat equity shares.

EMPLOYEE STOCK OPTION PLAN

During the year under review, there has been no
change in the VST Employee Stock Option Plan-

2020 (VST-ESOP 2020) of the Company and further
the said VST-ESOP 2020 are in compliance with SEBI
(Share Based Employee Benefits and Sweat Equity)
Regulations, 2021. The necessary disclosures in
compliance with Regulation 14 of the SEBI (Share Based
Employee Benefits and Sweat Equity) Regulations,

2021 are available on the website of the Company at
https://www.vsthyd.com/mainsite/other-information.
html#esop-disclosure-area

Pursuant to the VST Employee Phantom Stock Option
Plan (VST EPSOP-2023) approved by the Nomination

and Remuneration Committee and the Board during
FY 2023-24, phantom options were granted to eligible
employees during the year under review. The valuation
methodology and impact on the profit and loss account
if any as per the applicable accounting standards are
disclosed in the notes to financial statements.

MANAGEMENT DISCUSSION & ANALYSIS REPORT
(MD&A)

Based on feedback from Members on the Annual
Report and Accounts, this report includes MD&A as
appropriate so that duplication and overlap between
the Directors' Report and a separate MD&A is avoided
and the entire material with Company's state of
affairs is provided in a composite and comprehensive
document.

INDUSTRY PERFORMANCE

The industry witnessed ~7% volume growth in
FY 2025-26, driven by a stable regulatory and
taxation regime for most of the year. The vibrant
mid-premium price segment further strengthened
its position across markets driven by legacy brands
and convenient pricing. While the premium and value
segments remained stable, the low-price segment's
performance was lower than industry performance.

COMPANY PERFORMANCE

Your Company's volume growth in FY 2025-26 was
higher than industry trend after four consecutive
years of volume decline and lower performance.
Your Company registered a strong growth of ~9%
with impressive gains across segments and across
geographies.

TOTAL, your Company's first national trademark,
strengthened its appeal among young adult
consumers and grew volumes in all its major operating
markets. Your Company remains focused on further
enhancing TOTAL's consumer appeal through periodic
upgradations and introduction of new variants to grow
its franchise.

EDITIONS transitioned from a regional brand and
strongly emerged as your Company's second national
trademark with gains in core geographies and weak
markets. EDITIONS made impressive inroads in the
mid premium segment where your Company had no

presence till two years ago. Your Company remains
committed to expand EDITIONS' appeal by launching
innovative offers.

Simultaneously, vastly improved in-market execution
has driven strong performance in heritage trademarks
such as CHARMS, SPECIAL, and MOMENTS. Your Company
is also focused on strengthening and increasing the
relevance of heritage trademarks through affordable
innovation.

Your Company's distribution capabilities have
significantly strengthened over the past few years.
This has been achieved by data-driven decision¬
making and targeted market activities driven by a
comprehensive digital infrastructure ecosystem. This
has also helped in portfolio expansion, both width and
depth, in core, emerging and weak markets.

LEAF TOBACCO

During FY 2025-26, the global tobacco industry
operated in a relatively soft market environment,
largely due to higher crop production across major
origins, including Brazil, Zimbabwe, Malawi and India.
Favourable climatic conditions resulted in increased
global leaf availability, leading to downward pressure
on international tobacco prices.

Global importers adopted cautious procurement
strategies, focusing on inventory optimisation and
staggered buying cycles. This led to slower procurement
activity and extended shipment timelines, moderating
demand momentum and price realisations in export
markets. Consequently, the Indian tobacco industry
faced subdued demand amid intensified competition
among exporting countries.

Against this backdrop, the pace of order and shipment
movements remained relatively slow during the year.
Accordingly, your Company recorded a turnover of
C 301 Crores and PBIT of C 34 Crores for FY 2025-26.

Despite these headwinds, your Company is continuing
to strengthen customer relationships, maintain
disciplined procurement practices, and ensure
efficient supply chain. Engagement with the farming
community through agronomic support and quality
focused crop development initiatives has reinforced
a resilient sourcing ecosystem. Your Company also
progressed in strengthening digital procurement and

traceability systems, enhancing transparency across
the supply chain.

Looking ahead, your Company remains cautiously
optimistic about the medium-term outlook for the
global tobacco market. As global inventories gradually
normalise and demand stabilises, India is expected
to retain its position as a reliable supplier of quality
tobacco.

PRODUCTION AND PLANT MODERNISATION

Your Company has successfully transitioned its
production to the new integrated world class
manufacturing platform at Toopran, near Hyderabad.
This upgraded plant is designed to enhance capital
efficiency, improve product quality, and optimise
costs. Built with a focus on sustainability and Industry
4.0 principles, the facility emphasises resource
conservation, data driven intelligence, ergonomic
design for safety, water sustainability, and effective use
of renewable energy.

Your Company has implemented TQM - Total Quality
Management, and 5S - Workplace discipline projects
successfully during the year in your integrated world
class new plant at Toopran ensuring all employees
involvement across grades & departments. This has
resulted in a significant swift in Quality Culture among
all employees.

RESEARCH & DEVELOPMENT ACTIVITY

Your Company's Research & Development Centre
has played a pivotal role in developing and delivering
innovative, competitive products that have been well
received by adult consumers and are gaining good
traction in the market.

The R&D Centre - Laboratory Management Systems
have been implemented in the new Factory location at
Toopran, and process of obtaining NABL certification for
the laboratory at its new location is initiated.

HUMAN RESOURCE DEVELOPMENT

The success of your Company is rooted in the enduring
belief that people make all the difference. Your
Company has built a culture that emphasises agility,
cost efficiency, and the consistent delivery of high-
quality outcomes at every level, enabling purposeful

and sustainable growth. A strong focus on quick and
effective decision-making, adherence to well-defined
systems and processes, and the collective commitment
to go the extra mile in achieving organisational targets
have further strengthened operational excellence.

Backed by a relentless pursuit of results and a deep
commitment to people motivation and morale, the
organisation has continued to drive performance and
create lasting value for all stakeholders, translating its
people-first philosophy into meaningful growth and
progress.

During the year, the Human Resources function
continued to actively support business growth and
capability building through onboarding the Right Talent
across functions and thereby strengthening key areas
of the organisation. Your Company also strengthened
its frontline talent pipeline through campus hiring
initiatives.

Talent development continued to remain a key
priority. The Leadership Development Journey, a year¬
long development programme for senior leaders,
continued to strengthen leadership capabilities across
the organisation. Your Company also implemented
multiple structured development initiatives, including
Development Centres for frontline Sales employees
transition to Sales Managers, where employees
were identified for the talent pool as Ready Talent.
A Development Centre for transiting from Sales
Manager to Regional Manager roles resulted in
promoting talent internally for key critical positions.

Your Company further reviewed Leadership successor
Individual Development Plans (IDPs) and conducted
periodic feedback sessions with identified successors
across the board. As part of the leadership
development journey, a 360-degree feedback
process was conducted for the Leadership to enhance
self-awareness and leadership effectiveness. In
addition, your Company developed a Leaf Leadership
Development Roadmap and reviewed action plans
aimed at building future-ready leaders. The Company
also continued to invest in managerial capability
building by providing access to online learning
platforms enabling them to enhance their leadership
and functional capabilities through curated digital
learning resources.

To further strengthen organisational effectiveness,
the Company carried out a comprehensive study of
the organisational structure for the Leaf and Technical
teams following which structural improvements were
implemented. Performance excellence continued to
be reinforced through regular performance reviews,
structured feedback mechanisms, and focused
performance interventions.

Employee engagement remained a key focus area.
Initiatives designed to strengthen connections
between employees and leadership included Quarterly
Town Halls, Leaf Hangouts, and Open House sessions,
which provided platforms for an open dialogue and
engagement.

In order to support operational excellence and
strengthen product quality, the Company also ensured
a quick turnaround in setting up the Quality team in
the Manufacturing Operations. In the manufacturing,
your Company institutionalised best manufacturing
practices such as 5S, TPM, and TQM, reinforcing
operational discipline and quality excellence. In
recognition of its progressive people practices and
strong management systems, VST was honoured with
the Best Management Award for 2025 by Telangana
Government.

To ensure a safe and inclusive workplace, particularly
for female employees, your Company has an
established Internal Complaints Committee in
accordance with the Sexual Harassment of Women at
Workplace (Prevention, Prohibition and Redressal) Act,
2013. No cases were reported during the year.

As of 31^st March 2026, your Company employed 712
people comprising 359 management staff and 353
workmen.

ENVIRONMENT, HEALTH & SAFETY (EHS) AND
COMMUNITY SERVICES

375 employees and 102 contract workmen have
undergone EHS training during the year. Mock drills
were also conducted for workers and management
during the period to comply with the Company's EHS
guidelines. Half-yearly and Annual EHS audits of the
Company's operations were carried out to ensure
compliance of EHS requirements. Your Toopran facility
was awarded "Gold rating" in Water Stewardship
Certification from Water Stewardship and Assurance

Services, AWS, Scotland. In view of the sustainability
efforts, your Company was able to reduce specific
water consumption by 5% yoy by adopting best
practices for sustainable development.

renewable/green energy

Your Company commissioned a 1.2 MW photovoltaic
(PV) solar power plant in September 2022, reaffirming
its commitment to renewable energy and sustainable
development. This commitment was further advanced
through the installation of a 10 KW solar lighting system
in 2024, followed by an upgraded 15 KW solar lighting
system in 2025. These initiatives reflect VST's ongoing
efforts to enhance the adoption of clean energy
solutions in alignment with its long-term sustainability
goals.

Supported by improved maintenance practices and
enhanced operational efficiency, the solar power
plant achieved a 3% increase in performance over
FY 2024-25. Currently, the plant fulfils approximately 33%
of the Company's electricity needs and has enabled
a 37% reduction in its carbon footprint. In addition, to
encourage sustainable transportation, your Company
has established electric vehicle (ev) charging stations
for both two-wheelers and four-wheelers at its Toopran
facilities.

CLEANER FUEL FOR BOILER/INCINERATOR

As part of its continued efforts to reduce emissions and
lower its carbon footprint, your Company has replaced
High-Speed Diesel (HSD) with cleaner and more
sustainable Piped Natural Gas (PNG) as the primary
fuel for its incinerator operations. Recognised as one
of the cleanest-burning fuels, PNG offers improved
safety, enhanced operational efficiency, and better
cost effectiveness. This strategic transition is expected
to result in an estimated 51% reduction in carbon
emissions while delivering annual fuel cost savings
of approximately C 189 Lakhs. Additionally, the fuel
efficiency of both the boiler and incinerator improved
by 4.5% over FY 2024-25, underscoring the Company's
continued commitment to operational efficiency and
environmental sustainability.

FINANCEa. Profits

The Profit after Tax of your Company for the year is
C 292.3 Crores.

b. Treasury Operations

Your Company follows a SLR model (Safety,
Liquidity and Return) in deployment of earmarked
funds.

c. The changes (change of 25% or more) as
compared to the immediately previous financial
year ratios of the Company including those listed
out and specified under Schedule V (b)(1)(i) read
with Regulation 34(3) of the SEBI Listing Regulations,
as amended are disclosed in Note No. 32 of Notes
on Financial Statements to the Accounts in the
Annual Report.

d. The financial statements have been prepared in
accordance with Indian Accounting Standards
specified under Section 133 of the Companies Act,
2013 ["the Act"], read with Rule 3 of the Companies
(Indian Accounting Standard) Rules, 2015, as
amended from time to time. The accounting
policies which are consistently applied have been
set out in the Notes to the Financial Statements.

PARTICULARS OF LOANS, GUARANTEES OR
INVESTMENTS

The Company has not taken any loans or given
guarantees or made investments in any other
Company covered and provided under Section 186 of
the Act, during the year.

FIXED DEPOSITS

The Company has not accepted any deposits from
public as per the provisions of the Act, and as such no
amount on account of principal or interest on deposits
from public was outstanding as on the date of the
balance sheet.

CORPORATE GOVERNANCE

In terms of Regulation 34 of the SEBI Listing Regulations,
a Report on Corporate Governance along with
Compliance Certificate issued by the Statutory
Auditors of the Company is annexed as "Annexure A"

and forms part of this Report. Your Company has
taken adequate steps for strict compliance with the
Corporate Governance guidelines, as amended from
time to time.

MEETINGS

The Board met four times during the financial year. The
Board and Committee Meetings are pre-scheduled
and a tentative calendar of the Meetings is finalised
in consultation with the Directors and are circulated
to them in advance to facilitate them to plan their
schedule. However, in case of special and urgent
business needs, the approval is obtained by way of
circular resolution. The details of the meetings of the
Board and Committees held during the year are given
in the Corporate Governance Report, which is part of
this report.

INTERNAL FINANCIAL CONTROL AND ITS
ADEQUACY

a. Your Company maintains an adequate and
effective internal control system commensurate
with the size and complexity. Your Company
also has well documented Standard Operating
Procedures (SOPs) for various processes which are
periodically reviewed for changes warranted due
to business needs.

b. Your Company remains committed to improve
effectiveness of internal financial controls and
processes which would help in efficient conduct
of its business operations, ensure security to its
assets and timely preparation of reliable financial
information. The policies and procedures laid out
by your Company capture the control environment
prevalent in the organisation. Over a period of three
years, the business processes of your Company
are reviewed through an internal audit process
which reviews the systems on a continuous basis.
The objective being to identify potential risk areas
and come up with a comprehensive risk mitigation
plan.

The Audit Committee of your Board met four times
during the year. Review of audit observations
covering the operations, consideration of
accounts on a quarterly basis and monitoring
the implementation of audit recommendations

were some of the key areas which were dealt
with by the Committee. The Statutory Auditors/
Internal Auditors were invited to attend the Audit
Committee Meetings and make presentations
covering their observations on adequacy of
internal financial controls and the steps required
to bridge gaps, if any. The Chief Financial Officer
is a permanent invitee to the Audit Committee
and other executives of the Company are invited
to address, respond or provide clarifications to
relevant issues as and when required.

RISK MANAGEMENT

Your Company has constituted the Risk Management
Committee as mandated by SEBI Listing Regulations to
frame, implement and monitor the risk management
plan for the Company. The Committee comprises of
Directors and Senior Management as its Members
as prescribed under Regulation 21 of the SEBI Listing
Regulations as amended. The Company Secretary
is the Secretary of the Committee. The Committee
is responsible for monitoring and reviewing the risk
management plan and ensuring its effectiveness. The
Audit Committee has additional oversight in the area
of financial risks and controls. The major risks identified
by the businesses and functions are systematically
addressed through mitigating actions on a continuing
basis.

Your Company has always endeavoured to
bring together elements of best practices for risk
management in relation to existing and emerging
risks faced by it at both strategic and operating level.
The Company faces a variety of risks from external
and internal sources. However, the objective is to be
aware of different kinds of risks affecting the business.
Rather than eliminating these risks, the decision
making process at your Company considers sensible
risk taking, and thereby proactive steps are taken to
ensure that business is undertaken in an environment
which encourages a reasonable amount of risk
taking and enables the Company to leverage market
opportunities effectively.

The Board is responsible for determining the nature
and extent of the principal risks that your Company
is willing to take to achieve its strategic objectives
and for maintaining sound risk management system.

With the support of the Audit Committee, it carries
out a review of the effectiveness of your Company's
risk management process covering all material risks
including strategic, financial, operational and also
compliance levels. Your Company has substantial
operations all over the country and competes on the
basis of brand appeal, loyalty, price value connotations
and strong trade relationships.

The Company's position is influenced by the economic,
regulatory and political situations both nationally and
at a state level and of the competitors. The principal
risks impacting your Company's business and steps
undertaken to mitigate them are as under:

i. Regulatory restrictions could have an impact on
long term revenue growth of the Company.

The Company operates under increasingly
stringent regulatory regime (COTPA guidelines
on packaging and labelling, advertising and
promotion). This further gets complicated with
adoption of differing regulatory regimes in different
states and/or lack of consensus on interpretation/
application. Such restrictive regulations which are
subjected to interpretation could result in not only
penalties being imposed/loss of reputation, but
also impair the Company's ability to communicate
with adult smokers and/or to meet consumer
expectations through new/innovative brand
launches or geographic expansion. The Company
addresses this risk by engaging in continuous
social dialogue with stakeholders and regulatory
community through industry bodies. At the
same time, it works on developing strategies and
capabilities to effectively launch competitive and
consumer acceptable brands within the changing
regulatory environment.

ii. Taxation changes could have an impact on short
term revenue growth of the Company.

The Company's business is subjected to GST,
excise and other cesses as may be made
applicable, which could require the Company to
take up product prices and in absence of such
action, impact its business. The impact increases
when due to changes in economic situation,
consumer's disposal income reduces, resulting
in down-trading to cheaper cigarettes including

non-duty paid illicit cigarettes or alternative
tobacco products. Such risks are addressed by
the company through: (a) engagement with tax
authorities at levels where appropriate; (b) regular
management review to build a well laddered
brand portfolio across new segments including
new brand creation; and (c) capability buildup
through investments in distribution infrastructure
to increase geographical spread.

iii. Geopolitical tension could have a short-term
impact on company's revenue growth and
profitability.

The Company's supply chain and normal business
processes are exposed to the risk of disruption.
Such disruption could be caused through
geopolitical tension, civil unrest, economic policy
changes, health crisis, violent weather conditions
or other natural disasters. This could result in
potential loss of assets and increased costs due
to more complex supply chain arrangements and/
or maintaining inefficient facilities. Such risks are
mitigated through a robust business continuity
planning process and having multiple sourcing/
delivery (supply chain) strategy.

iv. Illicit Trade could have a risk to Company's long
term revenue growth and profitability.

Non-Duty Paid (NDP) Cigarettes in the form
of counterfeit product, contraband (genuine
smuggled product) and locally manufactured
products on which applicable taxes are evaded,
represents a significant and growing threat to
the legitimate cigarette industry. Factors such
as increased product prices (either for retailer
or consumer) and economic downturn among
others encourage consumers shift to cheaper
cigarettes which results in commoditisation of
the Product and erosion of brand value resulting
in undermining company's investment in trade
marketing and distribution. As part of its mitigation
plan the company both directly as well as
through trade bodies engages with key external
stakeholders including periodical interaction with
law enforcement agencies in pursuit of priority
targets.

v. I nfringement of Intellectual property could
have a short term impact on revenue growth and
profitability.

The Company relies on its registered, trademarks
and copyrights under which it sells its products to
get competitive advantage. Risk of Infringement
happens due to delay in identification and action
taken including limitation of judicial protection.
In addition, as third-party rights (registered
trademarks) are not always identifiable, there may
be claims against the company for infringement of
their intellectual property rights. Such infringement
of trademarks results in reputational impact due
to inability to protect its trade marks, disruption to
normal business processes resulting in potential
loss of revenue, unnecessary protracted litigation.
Such risks are mitigated through constant training
to all team members to recognise misuse of
Company's trademarks and report to take legal
protection, Further, process is in place to ensure
new trademarks do not infringe with trademarks
belonging to others.

vi. Cyber Security- The Company's operations place
high reliance on its digital data. Loss or misuse of
any such sensitive information, or its disclosure
to outsiders, including competitors and trading
partners could potentially have a significant
adverse impact on the Company's business
operations and/or give rise to legal and financial
liability. For this purpose, the Company has put
in place cyber security policies and procedures
which are reviewed regularly. In addition, for
continuity of the operations we perform periodic
assessment of information technology controls
implemented like access controls, security
and operations management, data back-up &
recovery management, authorisation verification,
firewalls, etc.

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

Your Company's Corporate Social Responsibility (CSR)
initiatives are guided by a commitment to inclusive
growth and sustainable community development.
Through its CSR Policy, your Company seeks to create
meaningful impact in the areas of Rural Development,
Health & Sanitation, Education & Sports, and

Environmental Sustainability, thereby contributing to
the well-being of communities around its areas of
operation.

As part of its rural development initiatives, your
Company partnered with Gramalaya under Project
Naari Shakti to promote menstrual hygiene awareness
among women and encourage the use of cloth
sanitary pads. The initiative also focuses on enabling
rural women to produce cloth sanitary pads as a
means of livelihood. Women were mobilised into Self¬
Help Groups (SHGs) to facilitate implementation, and
a trained cohort of women has been established to
produce and market cloth sanitary pads, enabling
the project to evolve into a sustainable community
enterprise.

Your Company also collaborated with Milaan
Foundation to empower adolescent girls in rural
communities, particularly in Uttar Pradesh. The
programme focused on building confidence,
resilience, and awareness of rights among adolescent
girls through structured training and mentorship.
Peer learning cohorts were established to extend the
programme's reach and ensure sustained community
engagement.

In the area of health and sanitation, your Company,
in collaboration with Gramalaya, implemented the
Swachh Ghar Programme in Jogulamba-Gadwal
District, where your Company has operational
presence. The initiative involved the construction
of household toilets for rural families, along with
awareness programmes on sanitation and hygiene.
During the financial year, over 400 household toilets
were constructed, with plans to expand the programme
further within the region and subsequently to other
locations.

Your Company also continued to strengthen access
to rural healthcare through its Mobile Dispensary
Programme, benefiting communities in Kurnool and
Raichur. Through this initiative, nearly 30,000 villagers
received health check-ups and regular medical
support, contributing to improved awareness and
access to primary healthcare services.

Further, your Company supported the establishment
of an Eye Hospital in partnership with the Rotary Club
of Secunderabad, which is expected to benefit over

30,000 patients annually. In addition, an Audiometry
Machine was sponsored to support the diagnosis and
treatment of hearing impairments among differently
abled children.

In the field of education, your Company contributed
to the development of school infrastructure at
Government schools in Kollur and Kurnool. It also
supported a holistic development programme for
students in Government schools at Brahmanpally,
focusing on computer education, arts, and sports to
enhance overall learning outcomes.

Your Company further supported mid-day meals
for more than 5,000 Government school children in
Medak District during the financial year, reinforcing its
commitment to child welfare and education.

The composition of the CSR Committee is given in the
Corporate Governance Report forming part of this
Annual Report. The CSR policy and the projects approved
by the Board are available on the Company's website
at:https://www.vsthyd.com/mainsite/documents/
corporate social responsibility policylast updated
on 24.4.2025.pdf

The CSR Policy of the Company and the Annual Report
on CSR activities during the year is annexed herewith
as "Annexure B" and forms part of this Report.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY
REPORT

In terms of Regulation 34(2)(f) of the SEBI Listing
Regulations, a report on Business Responsibility and
Sustainability Report (BRSR) in the prescribed format
forms part of the Board's Report.

RELATED PARTY TRANSACTIONS

The related party transactions entered into by the
Company during the year are in its ordinary course
of business and on arm's length basis. There were
no materially significant related party transactions
between your Company and the Directors, Promoters
or Promoter group, Key Managerial Personnel and
other designated persons which may have a potential
conflict with the interest of your Company at large.
During the year, the Company has not entered into
any transactions with any person or entity belonging
to the promoter or promoter group which holds 10%

or more shareholding in the listed entity other than
the corporate actions applicable uniformly to all the
shareholders. Prior approval for all the related party
transactions is obtained from the Audit Committee.

Form AOC-2 pursuant to Section 134(3)(h) of the Act,
read with Rule 8(2) of the Companies (Accounts)
Rules, 2014 for disclosure of particulars of contracts/
arrangements, entered into by your Company with
related parties for the year ended 31^st March 2026 is
annexed herewith as "Annexure C" and forms part of
this Report.

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 Act and SEBI Listing Regulations. The manner in
which the evaluation has been carried out has been
explained in the Corporate Governance Report. The
performance evaluation of the Chairman, Non¬
independent Directors and Board as a whole was
carried out in a separate meeting of the Independent
Directors, taking into account the views of Executive
and Non-Executive Directors. The Board of Directors
expressed their satisfaction with the evaluation
process.

DIRECTORS' APPOINTMENT AND REMUNERATION
POLICY

Nomination and Remuneration Committee has
formulated a policy relating to Directors' appointment,
remuneration of directors, key managerial personnel
and other employees which has been revised and
approved by the Board. The Remuneration Policy and
the criteria for determining qualification, position,
attributes and independence of a Director as required
under Section 178(3) of the Act, are disclosed in the
Corporate Governance Report. The policy is also placed
on the website of the Company athttps://www.vsthyd.
com/mainsite/documents/remuneration-policy.pdf

MEETING OF INDEPENDENT DIRECTORS

During the financial year under review, all the
Independent Directors of the Company met on
24^th April, 2025, inter alia, to discuss:

• Evaluation of the performance of the Non
independent Directors and the Board as a whole.

• Evaluation of the performance of the Chairman
of the Company, Chairman of the Committee's
considering the views of the Executive and
Non-executive Directors.

• Evaluation of the quality, content and timelines
of flow of information between the Management
and the Board that is necessary for the Board to
perform its duties effectively and reasonably.

VIGIL MECHANISM

In terms of Section 177 of the Act, and Regulation 22 of
SEBI Listing Regulations, the Company has formulated a
Whistle Blower Policy as a vigil mechanism to encourage
all employees and Directors to report any unethical
behaviour, actual or suspected fraud or violation of
the Company's 'Code of Conduct and Ethics Policy'
which also provides for adequate safeguard against
victimisation of person who use such mechanism and
there is a provision for direct access to the chairman of
the Audit Committee inappropriate/exceptional cases.
The details of the Whistle Blower Policy is given in the
Corporate Governance Report and also available on
the Company's website at:https://www.vsthyd.com/
mainsite/documents/whistle-blower-policy-2022.pdf

DIRECTORS AND KEY MANAGERIAL PERSONNEL

As on 31^st March 2026, the Board comprises of eight
Directors out of which four are Independent Directors.

Directors Retiring by Rotation/Re-appointment
Mr. Naresh Kumar Sethi

Mr. Naresh Kumar Sethi [DIN: 08296486], a nominee
of the Raleigh Investment Company Limited, a British
American Tobacco group Company was appointed
as a Director of the Company with effect from 14^th
December 2018 whose office is subject to retirement
by rotation. His appointment was approved by
the Members at the AGM of the Company held on
28^th August, 2019.

Pursuant to Article 93 of the Articles of Association of
your Company, Mr. Naresh Kumar Sethi is liable to retire

from the Board and being eligible, offers himself for re¬
election. Your Board recommends his reappointment.

Mr. Naresh Kumar Sethi's [60 years] career spans 32
years as a Global Marketer, General Manager and
Strategy Transformation Officer. He has held various
marketing roles in India, Indonesia, West Africa Area
and Australasia prior to moving to Japan as President
of British American Tobacco, Japan. Mr. Sethi is a
chemical engineer from Indian Institute of Technology,
Varanasi and has an MBA from the Indian Institute of
Management, Calcutta, India.

Mr. Naresh Kumar Sethi is not a Director in any other
Company in India. He is a Member in Audit Committee,
CSR Committee, Stakeholders Relationship Committee,
Risk Management Committee Nomination &
Remuneration Committee and Strategy Committee.
Mr. Naresh Kumar Sethi does not hold any shares in the
Company and is not related to any other Director of
the Company.

Directors Cessation/Appointment
Mr. Sanjay Wali

Mr. Sanjay Wali [DIN 10868596] resigned as the
Whole-time Director of your Company effective 2^nd
March 2026. The Board of Directors place on record
their appreciation of the contribution made to your
Company by Mr. Sanjay Wali during his tenure as
Whole-time Director.

Mr. Piyush Srivastava

Mr. Piyush Srivastava [DIN 10775803] was appointed
as the Managing Director & CEO of the Company with
effect from 2^nd March 2026 who shall also be a Key
Managerial Personnel under Section 203 of the Act. The
Members have approved his appointment on 3^rd April
2026 through Postal Ballot.

Mr. Piyush Srivastava, aged 51 years, holds a Bachelor's
degree in Engineering from the National Institute
of Technology, Prayagraj, and a Master's degree in
Business Administration from the Xavier Institute of
Management, Bhubaneswar.

Mr. Srivastava has over 25 years of professional
experience across the FMCG and Alco-Beverage
sectors in India and other Asian markets. He has held
senior leadership positions with organisations such as

Pernod Ricard, PepsiCo, Marico and was associated
with ITC-AT and Tata Motors during the formative
years of his career. His experience spans commercial
strategy, sales and distribution, route-to-market
development, business transformation, and scaling of
operations.

Prior to his current stint as Chief Commercial Officer of
Pernod Ricard India, Mr. Piyush Srivastava served as the
Managing Director of Pernod Ricard for Hong Kong and
Macau and was also a member of the Asia Executive
Committee, contributing to strategic leadership across
the region.

Mr. Piyush Srivastava does not hold any shares in the
Company and is not related to any other Director of
the Company.

Independent Directors

In accordance with Section 149 of the Act, the Members
at the AGM of the Company held on 29^th August 2024
have approved the appointment of Mr. Rajeev Bakshi
as Independent Director of the Company with effect
from 1^st July 2024, and the Members through Postal
Ballot by way of Special Resolution have approved the
re-appointment of Ms. Rama Bijapurkar and Mr. Sudip
Bandyopadhyay to be effective from 1^st April 2024 and
1^st June 2024 respectively to hold the office for a further
term of five consecutive years from their respective
dates. The Members at the AGM of the Company held
on 23^rd July 2025 have approved the appointment of Mr.
Nellaiappan Thiruamblam as an Independent Director
of the Company with effect from 25^th April 2025.

All the Independent Directors have submitted the
declarations stating that they meet the criteria of
independence as prescribed under Section 149(6)
of the Act, and Regulation 16(1)(b) of the SEBI Listing
Regulations as amended for the financial year ended
31^st March 2026. The Board reviewed and assessed
the veracity of the aforesaid declarations, as required
under Regulation 25(9) of the SEBI Listing Regulations. In
the opinion of the Board, all the Independent Directors
fulfil the said conditions as mentioned in Section
149(6) of the Act and the SEBI Listing Regulations
and are independent of the Management. All the
Independent Directors of the Company have complied
with the provisions of sub rule (1) and (2) of Rule 6 of

the Companies (Appointment and Qualification
of Directors) Rules, 2014 with respect to registration
with the Indian Institute of Corporate Affairs for the
Independent Directors' Database.

There has been no change in the circumstances
affecting their status as Independent Directors of the
Company. In the opinion of the Board, the Independent
Directors possess the requisite integrity, experience,
expertise and proficiency required to fulfil their duties
as Independent Directors.

KEY MANAGERIAL PERSONNEL

Mr. Piyush Srivastava, Managing Director & CEO,
Mr. Anish Gupta, Chief Financial Officer and the
Company Secretary Mr. Phani K. Mangipudi are the Key
Managerial Personnel as per the provisions of Section
203 of the Act.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Act, your Directors
confirm that:

1. i n the preparation of the annual accounts, the
applicable accounting standards have been
followed along with proper explanation relating
to material departures, if any;

2. appropriate accounting policies have been
selected and applied consistently. Judgement
and estimates which are reasonable and prudent
have been made so as to give a true and fair view
of the state of affairs of your Company as on 31^st
March 2026 and of the profits of the Company for
that period;

3. proper and sufficient care has been taken for the
maintenance of adequate accounting records
in accordance with the provisions of the Act, for
safeguarding the assets of your Company and
for preventing and detecting fraud and other
irregularities;

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

5. proper internal financial controls have been laid
down to be followed by your Company and such
internal financial controls are adequate and were
operating effectively; and

6. proper systems to ensure compliance with the
provisions of all applicable laws have been
devised, and such systems were adequate and
operating effectively.

CRITERIA FOR SELECTION AND APPOINTMENT OF
DIRECTORS

The Nomination and Remuneration Committee is
responsible for identifying, screening, recommending
to the Board a candidate for appointment as Director.
Based on the recommendation of the Committee,
the Board identifies the candidate for the position of
Director. While identifying the candidate, inter alia the
following are taken into consideration:

• Qualification, experience and expertise;

• Skills, abilities and personal contribution;

• Commitment to spare time to attend Board/
Committee and other Meetings as may
be necessary;

• Diversity of perspectives brought to the
existing Board;

• Existing composition of the Board.

The qualification of the candidate is scrutinised by the
Committee considering educational degree, college/
institution, professional qualification if any, etc. In
addition, there is also a criteria regarding minimum
work experience and the positive attributes such as
leadership quality, level of maturity, management
capabilities, strategic vision, problem solving abilities,
etc., on which the candidate is judicially scrutinised. In
case of an internal candidate, the senior management
employee is also evaluated on the above criteria before
being recommended for promotion as a Director.
While considering re-appointment of the Directors,
their performance evaluation report is considered.
In case of Independent Director, the independence,

integrity, expertise, experience and interest pecuniary
or otherwise as per the statutory provisions are also
assessed before appointment.

SIGNIFICANT & MATERIAL ORDERS PASSED BY
THE REGULATORS OR COURTS OR TRIBUNALS

There are no significant or material orders passed by
the Regulators, Courts or Tribunals which impact the
going concern status of the Company and its future
operations.

However, Members' attention is drawn to the following:

TAXATION

i. Entry Tax

Entry Tax levy by the States of Jharkhand and Assam
has been challenged before the respective State
High Courts by your Company, basis the directions
of the Hon'ble Supreme Court. Demand of interest
on entry tax was challenged before the High Court
of Allahabad and is pending adjudication.

ii. Excisea. Tobacco Refuse

Your Company has received show cause
notices demanding recovery of duty on cut
tobacco used in the manufacture of tobacco
refuse since January 2005 till June 2017
amounting to C 14.52 Crores. Demand for the
period till October, 2013 has been adjudicated
and the CESTAT decided five appeals in favour
of your Company. Department preferred
appeals before Supreme Court, some of
which are pending adjudication. Demands
for period after October, 2013 till June, 2017 are
yet to be adjudicated by the original authority.

b. Service Tax

Your Company has received show cause
notices from the Excise Department seeking
to deny CENVAT credit availed on various
input services on the ground that the same
are not in relation to the manufacture of
final products. Upon adjudication, credit on
most of the services was allowed in favour

of your Company. Some of them have been
disputed and in such matters, the Company
is in appeal.

PUBLIC INTEREST LITIGATION (PIL)

i. Your Company has been impleaded in the petition
filed in the Supreme Court by an NGO called
'Centre for Transforming India' against the Union
of India along with other cigarette manufacturers,
Tobacco Institute of India, Bidi Manufacturers
and Bidi Manufacturers' Association, seeking
prohibition/ban of the manufacture, storage and
sale of all forms of tobacco within the territory of
India. This is being contested.

ii. Petitions have also been filed in other courts such
as High Court of Madhya Pradesh - Jabalpur,
National Green Tribunal, Delhi seeking ban on sale
of cigarettes and before High Court of Madhya
Pradesh - Indore Bench seeking directions to
mention tar and nicotine content on cigarette
packs by the manufacturers. All of the above are
being effectively contested by your Company.

FINANCIAL SERVICES BUSINESS

The Company petition filed by the Official Liquidator
before he High Court of Andhra Pradesh (now Telangana
High Court) seeking directions against some of the Ex¬
Directors of ITC Agro Tech Finance and Investments
Limited (ITCATF), the Company in liquidation, into
which one of the subsidiaries of your Company, viz. VST
Investments Limited was amalgamated, and its related
matters are still pending final adjudication.

THE CIGARETTES AND OTHER TOBACCO
PRODUCTS (PROHIBITION OF ADVERTISEMENT
AND REGULATION OF TRADE AND COMMERCE,
PRODUCTION, SUPPLY AND DISTRIBUTION) ACT,
2003 (COTPA)

i. I n view of the provisions of COTPA, various
restrictions such as ban on advertising in print,
visual media and outdoors, regulation of in-store
advertising, prohibition of sale of cigarettes to
persons below the age of 18 years, etc. have been
in force. Printing of pictorial warnings on cigarette
packets, came into effect from 31^st May 2009 were
further revised and the pictorial warning covering

85% of the front and back side of the packets was
implemented w.e.f. 1^st April 2016 and is being duly
complied with by your Company.

ii. Before the High Court of Karnataka, a Writ Petition
was filed by Tobacco Institute of India (TIi) on
behalf of your Company and other manufacturers
against the proposed notification dated 15^th
October 2014 by Health Ministry to print health
warning on both sides of the pack occupying 85%
of space. The 85% health warning came into effect
from 1^st April 2016. Your Company also filed a Writ
Petition before the High Court bench at Dharwad
against the implementation of 85% health warning.
The Hon'ble Supreme Court on hearing a PIL filed
by Health for Millions, constituted a Bench before
the Karnataka High Court to hear all the matters
relating to graphical health warning. The Writ
Petitions filed by TII and your Company were heard
before the Bangalore Bench and it was held on
15^th December 2017 that the amendment made to
the Packaging Rules imposing 85% graphic health
warning is ultra vires the Constitution. Against
the said Judgement, an appeal was filed by the
Ministry of Health before the Supreme Court. A stay
has been granted on the said judgement and the
case is pending before the Supreme Court.

REAL ESTATE

The then Government of Andhra Pradesh had filed a
land grabbing case against your Company in 1991 in
relation to a piece and parcel of vacant land which
has been under possession and occupation by your
Company for over four decades. By its judgement
dated 28^th July 2010, the Special Court had held that
your Company is not a land grabber but had given the
State Government the right to initiate proceedings to
recover possession of the land at some future date.
Against this part of the judgement, your Company
filed a writ petition before the then Hon'ble High Court
of Andhra Pradesh to expunge that part of the Order
giving such liberty to the Department despite the fact
that your Company has already been declared not to
be a land grabber. The writ petition is still pending.

The State Government has also filed a writ petition in
the Hon'ble High Court of Andhra Pradesh seeking to
set aside the said judgement of the Land Grabbing
Court. An interim Order was passed restraining your

Company from changing the status of the land or
creating any third party interest therein. Your Company
is taking all the necessary steps for speedy disposal
of the above writ petitions which are pending before
the Court.

One more case of land grabbing was filed by the then
Government of Andhra Pradesh against your Company
in the year 1989 on a piece of land along with building
called 'Lal-e-Zar', before the Special Court. In the year
2010, the Special Court passed a judgement stating
that your Company is not a land grabber. After 7
years, the Government of Telangana filed an appeal
before the Hon'ble High Court of Telangana and
Andhra Pradesh seeking a direction from the court
that the nature of the land is not to be altered and
no third party interest to be created. Your Company
filed a counter and vacate stay application seeking
permission to construct on the said land. Judgement
was pronounced on the vacate stay petition allowing
your Company to construct but with certain conditions.
The State Government preferred an appeal before the
Supreme Court which was dismissed.

PARTICULARS OF EMPLOYEES AND RELATED
DISCLOSURES

The information required pursuant to Section 197(12)
of the Act, read with Rule 5(1) of the Companies
(Appointment and Remuneration of Managerial
Personnel) Rules, 2014 as amended in respect of
employees of the Company, are annexed herewith
as "Annexure D" and forms part of this Report. The
statement containing particulars of employees as
required under Section 197 of the Act read with Rule
5(2) of Companies (Appointment and Remuneration
of Managerial Personnel) Rules, 2014 is provided in
a separate annexure forming part of this Report.
However, in terms of Section 136 of the Act, the Report
and Accounts are being sent to the Members and
others entitled thereto, excluding the information
on employees' particulars which is available for
inspection by the Members at the Registered Office
of the Company during business hours on working
days of the Company up to the date of the ensuing
AGM. In case any Member is interested in obtaining a
copy thereof, such Member may write to the Company
Secretary of the Company.

The Nomination and Remuneration Committee of the
Company has affirmed that the remuneration is as per
the Remuneration Policy of the Company. Your Directors
take this opportunity to record their deep appreciation
of the continuous support and contribution from all
employees of your Company.

ANNUAL RETURN

As required under Section 92(3) of Act, and Rule 12(1)
of Companies (Management and Administration)
Amendment Rules, 2020, Annual Return is available on
the Company's website athttps://www.vsthyd.com/
mainsite/Annual-Returns.html

AUDITORS
Statutory Auditors

M/s. BSR & Associates, LLP, Chartered Accountants,
were re-appointed as the Statutory Auditors of the
Company to hold office for a second term of five years
from the conclusion of the 90^th AGM to the conclusion
of the 95^th AGM. The Report given by the Auditors on
the financial statements of the Company is part of the
Annual Report.

There has been no qualification, reservation or adverse
remark in their Report. During the year under review, the
Auditors have not reported any matter under Section
143(12) of the Act, and hence, no details is required to be
disclosed under Section 134(3)(ca) of the Act.

The Board, based on the recommendation of the
Audit Committee, have approved and recommended
for the approval of shareholders at this AGM of the
Company, the appointment of M/s. Price Waterhouse
Chartered Accountants LLP as the Statutory Auditors
for a term of five consecutive years commencing from
the conclusion of the 95^th AGM of the Company till the
conclusion of the 100^th AGM.

Secretarial Auditor

Pursuant to the provisions of Section 204 of the Act,
read with Regulation 24A (1), (1A), (1B) and Rule 9 of
the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014 and other applicable
provisions, the Company appointed M/s. Tumuluru

and Company [Firm Registration No. P1988AP052200],
Company Secretaries as Secretarial Auditor of the
Company for a term of five years effective from 1^st April
2025 to 31^st March 2030. The Secretarial Audit Report is
annexed herewith as "Annexure E" and forms part of
this Annual Report.

There are no qualifications, reservations or adverse
remarks in the Secretarial Audit Report.

COMPLIANCE WITH SECRETARIAL STANDARDS

Your Company has complied with applicable
Secretarial standards, i.e. on Meetings of the Board of
Directors [SS-1] and on General Meetings [SS-2] issued
by The Institute of Company Secretaries of India (ICSI).

COST ACCOUNTS AND RECORDS

The maintenance of cost accounts and records and
requirement of cost audit as specified under Section
148(1) of the Act, are not applicable for the business
activities carried out by the Company.

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

Information in accordance with clause (m) of
subsection (3) of Section 134 of the Act, read with Rule
8 of Companies (Accounts) Rules, 2014 is given in the
"Annexure F" forming part of this Report.

subsidiary/associates/joint ventures

Your Company does not have any subsidiary company,
associates or joint ventures.

INSOLVENCY AND BANKRUPTCY CODE 2016

There was no application made or any proceedings
pending under the Insolvency and Bankruptcy Code
2016 (31 of 2016) during the financial year.

UTILISATION OF FUNDS

Your Company has not raised any funds during the year
through preferential allotment or Qualified Institutional
Placement, as a result question of providing details
of utilisation of such funds does not arise. Further,
during the year, there were no transaction relating

to difference between amount of valuation done at
the time of onetime settlement and the valuation
done while taking loan from the Banks or Financial
Institutions.

COMPLIANCE WITH MATERNITY BENEFIT ACT,
1961

The Company is compliant with the applicable
provisions of the Maternity Benefit Act, 1961 [now
The Code on Social Security, 2020] and has policies,
systems and processes in place to ensure ongoing
compliance.

WAY FORWARD

While your Company delivered a strong performance in
the current financial year, there are challenges ahead.
The recently introduced tax structure has resulted in
price increases across the board. The challenge ahead
lies in navigating this complex environment while
also negating the impact of illegal cigarettes where
the tax arbitrage has grown substantially. However,

your Company continues to stay focused on driving
consumer value while effectively managing the overall
tax impact.

ACKNOWLEDGEMENTS

The Directors are grateful to all valuable stakeholders
of the Company viz. customers, shareholders, dealers,
vendors, banks and other business associates for
their excellent support rendered during the year. The
Directors also acknowledge the unstinted commitment
and valued contribution of all employees of the
Company.

For and on behalf of the Board,

Naresh Kumar Sethi

Chairman

DIN: 08296486

Dated this 16^th day of April, 2026
Hyderabad