DIVIDEND

The Directors are pleased to recommend a dividend of '10/- per equity share of '10/- each on the paid up equity share capital of the Company for the year ended 31st March, 2025, 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 ('S EBI Listing Regulations'), the Company has adopted a Dividend Distribution Policy. This policy can be accessed on the Company's website at https://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 3rd July, 2025, subject to deduction of tax at source.

TRANSFER TO RESERVES

It is proposed to carry forward an amount of '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.

BONUS ISSUE

During the year, your Company had issued Bonus Shares in the ratio of 10:1 i.e. ten new bonus equity shares of '10/- each for every one equity share of '10/- each fully paid up, to the eligible Members of the Company whose names appeared in the Register of Members/list of beneficial owners received from the NSDL/CDSL on the record date i.e. 6th September, 2024. With the issue and allotment of bonus shares, the nominal capital has increased from '15,44,19,200 to '1,69,86,11,200. The shares so allotted rank pari passu with the existing share capital of the Company.

SHARE CAPITAL

The paid up Equity Share Capital as on 31st March, 2025 was '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/ documents/vst-employee-stock-option-plan-2020.pdf

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 continues to witness volume growth, driven by a stable regulatory and taxation regime. Industry volumes grew at a high single-digit rate during the financial year 2024-25, following incremental growth in the preceding year. Policy stability over the past few years has led to structural changes in the industry, with the mid-premium price segment emerging as the most vibrant across the market.

However, illegal non-duty-paid cigarettes continue to pose a significant threat to legal players, benefiting from a substantial price differential compared to legal cigarettes. Despite coordinated efforts by the Government, the menace of illicit cigarettes remains an ongoing challenge for the legitimate cigarette industry.

In addition, the industry faced other challenges during the year, notably high inflation in raw material costs-particularly tobacco leaf.

COMPANY PERFORMANCE

Your Company's performance in its traditionally strong value segment outpaced the industry. However, with the mid-premium segment gaining momentum, it became imperative to introduce new brands at higher price points. In response, your Company developed and launched innovative offerings in the mid-price segment, which have received encouraging initial feedback across markets.

Unprecedented raw material cost inflation, coupled with intense competitive pressures, impacted margins in the short term. Nonetheless, these challenges were partially mitigated through business process restructuring and the strategic use of digitisation to enhance operational efficiency.

TOTAL, your Company's national trademark, continues to rank among the top 10 brands in the industry. The Company remains focused on strengthening TOTAL's consumer appeal through periodic upgrades and the introduction of relevant variants. EDITIONS, launched in several regions last year, is emerging as your Company's second national trademark.

Your Company is also enhancing its overall brand portfolio through a mix of product upgrades and market-relevant variants. Most of the new variants are showing strong early promise. Simultaneously, improved in-market execution has driven growth in heritage trademarks such as CHARMS, SPECIAL, and MOMENTS.

The Company's distribution capabilities have significantly improved over the past few years by effectively leveraging digital infrastructure for data-driven decision-making and targeted market activities. This has helped expand portfolio width and depth in both established and emerging markets.

LEAF TOBACCO

Leaf function has once again delivered exceptional results, achieving a record turnover of '472 Crores during the financial year 2024-25 reflecting a 6.7% year-on-year growth, with a PBIT of about '58 Crores. This strong

performance underscores our operational excellence and ability to navigate an evolving global landscape.

Amidst external challenges, we have reinforced relationships with key customers, expanded into new geographies, and enhanced operational efficiencies, further solidifying the position in international markets. Our unwavering commitment to quality, sustainability continues to drive our competitive edge.

You Company has made significant advancements in digital procurement and traceability, ensuring greater transparency and accountability across supply chain. Additionally, strategic investment in tobacco varieties aligns with shifting global market dynamics, positioning us for sustainable long-term growth.

At the core of our operations is a deep commitment to our farmers, fostering trust-based, long-term partnerships. Your Company continue to focus on optimising efficiency in tobacco procurement and processing, leveraging digital integration, streamlining operations, and good agricultural practices to enhance sustainability and excellence.

Looking ahead, Leaf function remains dedicated to driving sustainable expansion, strengthening partnerships, and capitalising on emerging opportunities, ensuring longterm value creation for all the stakeholders.

PRODUCTION AND PLANT MODERNISATION

Your Company has successfully transitioned its production to the new state-of-the-art facility in 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, water sustainability, and effective use of renewable energy.

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 strong traction in the market.

The R&D Centre Laboratory has been awarded the 'Certificate of Continuation' for ISO 17025:2017 by the

deeper engagement. The flagship Gold Star recognition programme continued to celebrate and reinforce the behaviours that shape a high-performance culture.

To ensure a safe and inclusive workplace, particularly for female employees, your Company has constituted an 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 31st March 2025, your Company employed 696 people—comprising 343 management staff and 353 workmen.

ENVIRONMENT, HEALTH & SAFETY (EHS) AND COMMUNITY SERVICES

300 employees and 120 contract workmen have undergone EHS training. 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 water consumption by 5% year on year 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, followed by the installation of a 10 KW solar lighting system in 2024. These initiatives reflect VST's ongoing commitment to renewable energy and sustainable development. Your Company remains focused on increasing the adoption of clean energy sources in alignment with its broader sustainability goals.

Through enhanced maintenance and operational efficiency, the solar plant's performance improved by 5% compared to FY 2023-24. Currently, the plant supplies approximately 31% of the Company's electricity needs, resulting in a 37% reduction in carbon footprint.

In support of clean mobility, your Company has also established electric vehicle (EV) charging stations for two and four wheelers at both its Azamabad and Toopran facilities.

CLEANER FUEL FOR BOILER/INCINERATOR

As part of its commitment to reducing emissions and carbon footprint, your Company has transitioned the primary fuel for its incinerator from High-Speed Diesel (HSD) to the more eco-friendly Piped Natural Gas (PNG). PNG is not only one of the cleanest-burning fuels but also offers greater safety and cost efficiency.

This strategic shift is aimed at enhancing environmental sustainability, resulting in an estimated 50% reduction in carbon emissions and annual fuel cost savings of approximately '174 Lakhs. Additionally, fuel efficiency for both the boiler and incinerator has improved by 6.5% compared to FY 2023-24.

FINANCE

a. Profits

The Profit after Tax of your Company for the year is '290.4 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 seven 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 five 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. 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 shortterm 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. Infringement 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 has formulated a Corporate Social Responsibility Policy with the objective to promote inclusive growth and equitable development of identified areas by contributing back to the society. Over the years, your Company has been involved in various social activities focusing on Rural Development, Health & Sanitation, Education & Sports and Environment sustainability.

Your Company has with the help of Gramalaya, a nonprofit organisation, was involved in creating awareness among women on menstrual hygiene, usage of cloth sanitary pads & production of cloth sanitary pads by the rural women to support their livelihoods under project Naari Shakti as part of Rural development initiative. Towards this initiative, women were mobilised and selfhelp groups were formed for better execution of the project and a cohort of women were formed who will produce the cloth sanitary pads for sale to make this project a self-sustaining one. Your organisation also supported rural students by enrolling for a vocational skill building programme aspiring for jobs conducted by Sambhav Foundation. Through this programme, your Company has been able to place close to 300 students in respectable jobs in retail, and other sectors.

Your Company has also in collaboration with Gramalaya constructed toilets in individual homes (of farmers living) in and around Jogulamba-Gadwal district of Telangana where your Company has its operations, under the 'Swachh Ghar' programme of your Company. These villages and the communities in the area were also sensitised regarding the importance of health & sanitation. Over 400 household toilets have already been constructed during the financial year, and your Company

has plans to extend it further to other houses in the same area and thereafter to other areas.

Your Company has touched lives of many families in Kurnool and Raichur areas and created a sense of healthy living and awareness through its mobile dispensary programme to address the health care needs. With this, almost 15,989 villagers have undergone health checkups and have access to medical support regularly.

Your Company had sponsored 12 Dialysis machines in partnership with Rotary Club, Secunderabad including setting up of an RO plant impacting about 10,800 lives yearly. In addition to this, your Company had sponsored an Audiometry machine, addressing the needs of differently abled children in their treatments.

In the field of Education, your Company sponsored school infrastructure to support the blind children education at Devnar School for Blind, Hyderabad and also supported construction of school infrastructure at Government Schools in Suraram, Medchal, Hyderabad and Government School, Medak. A unique pedagogy for identified school children enhancing their overall development in all fields like computer training, arts, sports etc. are being imparted in Government schools in Brahmanpally, Medak.

Your Company had provided Mid-day meals for more than 5,000 Government School children in Medak district, Hyderabad this financial year.

In order to protect environment, your Company had initiated supporting environment sustainability sponsoring 2 Electric Vehicles. Your Company has also supported conservation of Wildlife and protection of biodiversity by sponsoring the conservation activities through M/s Whale sharks project in Kerala.

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-policy.pdf

The CSR Policy of the Company the Annual Report on CSR activities during the year is annexed herewith as "Annexure B" and forms part of this 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 31st March, 2025 is annexed herewith as "Annexure C" and forms part of this Report.

BOARD EVALUATION

Pursuant to the provisions of the Act, as amended and SEBI Listing Regulations, the performance evaluation of the Board, the committees of the Board and individual Directors [including Independent Directors and Chairperson] has been carried out. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. The performance evaluation of the Chairman and the Non-independent Directors was carried out by the Independent Directors. The Board of Directors expressed their satisfaction with the evaluation process.

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. Infringement 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 has formulated a Corporate Social Responsibility Policy with the objective to promote inclusive growth and equitable development of identified areas by contributing back to the society. Over the years, your Company has been involved in various social activities focusing on Rural Development, Health & Sanitation, Education & Sports and Environment sustainability.

Your Company has with the help of Gramalaya, a nonprofit organisation, was involved in creating awareness among women on menstrual hygiene, usage of cloth sanitary pads & production of cloth sanitary pads by the rural women to support their livelihoods under project Naari Shakti as part of Rural development initiative. Towards this initiative, women were mobilised and selfhelp groups were formed for better execution of the project and a cohort of women were formed who will produce the cloth sanitary pads for sale to make this project a self-sustaining one. Your organisation also supported rural students by enrolling for a vocational skill building programme aspiring for jobs conducted by Sambhav Foundation. Through this programme, your Company has been able to place close to 300 students in respectable jobs in retail, and other sectors.

Your Company has also in collaboration with Gramalaya constructed toilets in individual homes (of farmers living) in and around Jogulamba-Gadwal district of Telangana where your Company has its operations, under the 'Swachh Ghar' programme of your Company. These villages and the communities in the area were also sensitised regarding the importance of health & sanitation. Over 400 household toilets have already been constructed during the financial year, and your Company

has plans to extend it further to other houses in the same area and thereafter to other areas.

Your Company has touched lives of many families in Kurnool and Raichur areas and created a sense of healthy living and awareness through its mobile dispensary programme to address the health care needs. With this, almost 15,989 villagers have undergone health checkups and have access to medical support regularly.

Your Company had sponsored 12 Dialysis machines in partnership with Rotary Club, Secunderabad including setting up of an RO plant impacting about 10,800 lives yearly. In addition to this, your Company had sponsored an Audiometry machine, addressing the needs of differently abled children in their treatments.

In the field of Education, your Company sponsored school infrastructure to support the blind children education at Devnar School for Blind, Hyderabad and also supported construction of school infrastructure at Government Schools in Suraram, Medchal, Hyderabad and Government School, Medak. A unique pedagogy for identified school children enhancing their overall development in all fields like computer training, arts, sports etc. are being imparted in Government schools in Brahmanpally, Medak.

Your Company had provided Mid-day meals for more than 5,000 Government School children in Medak district, Hyderabad this financial year.

In order to protect environment, your Company had initiated supporting environment sustainability sponsoring 2 Electric Vehicles. Your Company has also supported conservation of Wildlife and protection of biodiversity by sponsoring the conservation activities through M/s Whale sharks project in Kerala.

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-policy.pdf

The CSR Policy of the Company the Annual Report on CSR activities during the year is annexed herewith as "Annexure B" and forms part of this 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 31st March, 2025 is annexed herewith as "Annexure C" and forms part of this Report.

BOARD EVALUATION

Pursuant to the provisions of the Act, as amended and SEBI Listing Regulations, the performance evaluation of the Board, the committees of the Board and individual Directors [including Independent Directors and Chairperson] has been carried out. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. The performance evaluation of the Chairman and the Non-independent Directors was carried out by the Independent Directors. The Board of Directors expressed their satisfaction with the evaluation process.

REMUNERATION POLICY

Nomination and Remuneration Committee has formulated a policy relating to 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 at https:// 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 25th April, 2024, inter alia, to discuss:

• Evaluation of the performance of the Nonindependent 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 Nonexecutive 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 31st March, 2025, the Board comprises of six Directors out of which three are Independent Directors.

Directors retiring by rotation/Re-appointment Mr. S. Thirumalai

Pursuant to Article 93 of the Articles of Association of your Company, Mr. S. Thirumalai (DIN: 00011899) is liable to retire from the Board and being eligible, offers himself for re-election. Your Board recommends his reappointment. Further, in terms of Regulation 17(1A) of the SEBI Listing Regulations, the Board recommends continuation of his directorship who has attained the age of 76 years. A suitable Resolution for continuation of his directorship pursuant to Regulation 17(1A) of the SEBI Listing Regulations, is being put up for your approval.

Mr. Thirumalai (76 years) is a Fellow Member of Institute of Chartered Accountants of India, Institute of Company Secretaries of India, Certified Associate of Indian Institute of Bankers and also a law graduate. He has also attended the Advanced Management Program at Harvard Business School, Boston, USA. He has diversified experience of over four decades including a major portion in the tobacco sector and specialises in Finance, Taxation, Legal and General Management. The Board feels that the vast and diversified experience of Mr. Thirumalai will prove to be an asset to the Company.

Mr. Thirumalai is not a Director in any other Company in India. He is a Member of the Audit Committee, CSR Committee, Stakeholders Relationship Committee and Risk Management Committee. He has attended all the Board and Committee meetings held during the year. Mr. Thirumalai holds 275 shares in the Company and is not related to any other Director of the Company.

Directors Appointment/Cessation Mr. Nellaiappan Thiruambalam

The Board at its meeting held on 25th April, 2025 based on the recommendation of Nomination and Remuneration Committee of the Company approved the appointment of Mr. Nellaiappan Thiruambalam - [DIN 02121182] as an Additional Director designated as Independent Director

of the Company with effect from 25th April, 2025 for a period of five years not liable to retire by rotation subject to the approval of the Members at the ensuing Annual General Meeting.

Mr. Nellaiappan Thiruambalam (68 years) has requisite skills and expertise in Business Strategy, Marketing, Employee Engagement, Sales, Operations and P&L management in India and globally. He has over 40 years of experience in reputed firms viz. Heinz, Glaxo SmithKline Consumer, GE and a PE funded Indian Company. He has a Honours degree in Mechanical Engineering from NIT, Trichy and has a Masters Degree in Business Administration (Marketing & Finance) from IIM, Calcutta.

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

Mr. Alok Agarwal

Mr. Alok Agarwal [DIN 08655585] representing the interests of M/s. Bright Star Investments Pvt. Ltd. was appointed as an Additional Non-executive Director of the Company with effect from 25th April, 2025 who shall be liable to retire by rotation in accordance with the Article 93 of Articles of Association of the Company subject to the approval of the Members at the ensuing Annual General Meeting.

Mr. Alok Agarwal (71 years) has the requisite skills and expertise in Corporate & Business Management, Strategy, M&A in India and globally. He has over 47 years of experience in various industries and sectors. He is a Chartered Accountant from ICAI and has a Masters degree in Business Administration (FMS) from University of New Delhi and has attended executive education/programmes at Harvard Business School (Boston), Wharton Business School (Philadelphia), London Business School (London) and INSEAD (Paris).

Mr. Alok Agarwal do not hold shares in the Company and is not related to any other Director of the Company.

Mr. Sanjay Wali

Mr. Sanjay Wali [DIN 10868596] was appointed as an Additional Director and Whole-time Director of the Company with effect from 25th April, 2025 who shall also be a Key Managerial Personnel under Section 203 of

the Act subject to the approval of the Members at the ensuing Annual General Meeting.

Mr. Sanjay Wali (58 years) is an experienced professional with a career spanning over three decades, with expertise in Business Strategy, Sales, Marketing, Logistics, New Product Development, Business Development, and Project Management. His professional journey includes tenure at esteemed organisations such as Procter & Gamble, Godfrey Philips, and Dalmia Cement, where he has consistently taken on roles of increasing responsibility and demonstrated remarkable leadership. He has a Post Graduate Degree in Business Management (Marketing) from IMT, Ghaziabad and is an alumnus of Harvard Business School (AMP 2015).

Mr. Sanjay Wali hold 2200 shares in the Company and is not related to any other Director of the Company.

The resolution seeking Members approval at the ensuing AGM for the above mentioned Directors appointment along with other required details forms part of the Notice of the AGM.

Mr. Aditya Deb Gooptu

Mr. Aditya Deb Gooptu [DIN 07849104], resigned as the Managing Director & CEO and Director of your Company on 4th November, 2024 and is serving his notice period in accordance with the Articles of Association of the Company. The Board of Directors place on record their appreciation of the contribution made to your Company by Mr. Aditya Deb Gooptu during his tenure as Managing Director & CEO. He is being relieved from the services of the Company on 25th April, 2025.

Independent Directors

In accordance with Section 149 of the Act, the Members at the Annual General Meeting of the Company held on 29th August, 2024 have approved the appointment of Mr. Rajeev Bakshi as Independent Director of the Company with effect from 1st 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 1st April 2024 and 1st June, 2024 respectively to hold the office for a further term of five consecutive years from their respective dates.

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 31st March, 2025. 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 fulfill their duties as Independent Directors.

KEY MANAGERIAL PERSONNEL

Mr. Sanjay Wali, Whole-time Director, 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. in 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 31st March, 2025 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. Excise

a. 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 14.52 Crores. Demand for the period till October, 2013 has been adjudicated and the CESTAT decided in favour of your Company. Department preferred an appeal before Supreme Court which is pending. 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 ExDirectors 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. In 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 31st 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.1st April 2016 and is being duly complied with by your Company.

ii. Your Company also filed a writ petition in the Hon'ble High Court of Andhra Pradesh (now Telangana High Court) challenging The Cigarettes and Other Tobacco Products (Packaging & Labelling) Rules, 2006 and the Amendment Rules 2008, on the grounds inter alia that they are ultra vires of COTPA and therefore the notifications issued there under (including those seeking implementation of graphic health warnings) should be quashed. The said writ petition has been admitted but no interim orders were passed by the Hon'ble Court. The matter came up for hearing and the same was dismissed as infructuous.

iii. 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 15th 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 1st 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 15th December

2017 that the amendment made to the Packaging Rules imposing 85% graphic health warning is ultra vires the Constitution. Against the said Judgment, 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 28th 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. Judgment 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 at https://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 90th AGM to the conclusion of the 95th 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, .

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 to undertake Secretarial Audit of the Company for the financial year ended 31st March, 2025 and as Secretarial Auditor of the Company for a term of five years effective from 1st April, 2025 to 31st 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.

Further, as per Section 204 of the Act, read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, and read with SEBI (LODR) (Third Amendment) Regulations, 2024 the Board on the recommendation of the Audit Committee has recommended to appoint 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 1st April, 2025 to 31st March, 2030.

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 one

time settlement and the valuation done while taking loan from the Banks or Financial Institutions.

WAY FORWARD

While a consumer centric portfolio continues to be a top priority for your Company, a lot of efforts are being made to enhance your Company's portfolio in mid price segment. This will ensure that your Company is able to actively participate in overall industry growth.

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.