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Your Directors present the 38^th Annual Report of the Company together with the Audited Accounts for the year ended Mar 31, 2023. Financial Highlights / Performance/ the Operating results of your Company as per IndAS Financial Statements for the year ended Mar 31, 2023 are given below:

Rs in lakhs

The turnover of the company has increased to Rs. 1116.46 Lakhs as compared to Rs. 948.68 Lakhs in the previous year. Sincere efforts taken by the Sales team together with the sustained marketing strategy evolved by the Company yielded sufficient growth with better prospects in the years to come. Your Company had maintained good relationship with all its Customers in US & Europe and has seen good improvement in capturing business from one of the big Customers inthe US. It is expected to improve production orders in FY 2023-24. The outlook for FY 2023-24 is good and SPEL has plans to introduce new Customers from Europe & US regions.

Due to insufficiency of profits during the year under, dividend could not be paid during the year.

The semiconductor industry has been experiencing significant growth in recent years, driven by the increasing demand for electronic devices and the rise of emerging technologies such as the Internet of Things (IoT), 5G, and artificial intelligence (AI). According to market research reports, the global semiconductor market is expected to continue growing at a compound annual growth rate (CAGR) of around 6% from 2021 to 2026. The demand for semiconductors is expected to remain strong due to the increasing adoption of connected devices, electric vehicles, and renewable energy systems.

1. Market Drivers

OSAT (Outsourced Semiconductor Assembly and Test) plays a crucial role in the semiconductor industry by providing assembly, packaging, and testing services to semiconductor manufacturers.

The semiconductor industry is driven by several market drivers, including:

1. Increasing demand for electronic devices: The growing popularity of smartphones, laptops, tablets, and other electronic devices has led to a surge in demand for semiconductors.
2. Emerging technologies: The rise of emerging technologies such as IoT, 5G, AI, and autonomous vehicles has created new opportunities for semiconductor manufacturers.
3. Digital transformation: The COVID-19 pandemic has accelerated the digital transformation of various industries, which has increased the demand for semiconductors.
4. Rising demand for renewable energy: The increasing adoption of renewable energy systems such as solar and wind power requires sophisticated power management systems that rely on semiconductors.
5. Growing demand for electric vehicles: The shift towards electric vehicles requires advanced power electronics that rely on semiconductors.
6. Increasing demand for data centers: The growth of cloud computing and big data analytics has led to a surge in demand for data centers, which require a large number of semiconductors.

Overall, the semiconductor industry is driven by the increasing demand for advanced technologies that require sophisticated semiconductors.

1. Increasing Demand for Consumer Electronics: The growing demand for consumer electronics, including smart phones, tablets, wearables, and other smart devices, drives the need for advanced semiconductor packaging and testing services. As consumers seek more powerful and feature-rich devices, OSAT companies play a vital role in ensuring the efficient assembly and testing of these semiconductor components.
2. Advancements in IoT and Automotive Technologies: The Internet of Things (IoT) and automotive sectors continue to experience rapid growth. These industries rely heavily onsemiconductor technology for sensors, connectivity, and autonomous systems. As IoT devices and autonomous vehicles become more prevalent, OSAT companies are essential for providing specialized packaging and testing solutions to meet the unique requirements of these sectors.
3. Increasing Complexity and Miniaturization of Semiconductors: The semiconductor industry is constantly striving for smaller, more powerful, and efficient chips. This trend toward miniaturization and increased complexity poses challenges in assembly and testing. OSAT companies specialize in advanced packaging technologies, such as wafer-level and 3D packaging, to accommodate these demands while maintaining high levels of reliability and performance.
4. Shorter Time-to-Market: The semiconductor industry operates in a highly competitive landscape, where time-to-market is crucial. OSAT companies offer quick and efficient assembly and testing services, enabling semiconductor manufacturers to accelerate their product development cycles. By outsourcing these processes, companies can focus on core competencies while relying on OSAT partners for fast and reliable assembly and testing solutions.
5. Cost Optimization and Flexibility: OSAT companies can provide cost advantages by leveraging economies of scale in assembly and testing operations. Semiconductor manufacturers can

benefit from the expertise and infrastructure of OSAT providers, avoiding the need for significant capital investments in their own assembly and testing facilities. Additionally, outsourcing offers flexibility in scaling production capacity up or down based on market demand, reducing overall operational costs.

6. Semiconductor Industry Consolidation: The semiconductor industry has witnessed significant consolidation, with larger companies acquiring smaller ones to gain a competitive edge. This consolidation drives the demand for OSAT services as integrated device manufacturers (IDMs) and fabless semiconductor companies outsource their assembly and testing needs to specialized OSAT providers.

1. Semiconductor Mergers:

Some recent mergers and acquisitions in the semiconductor industry include:

1. NVIDIA's acquisition of Arm: In 2020, NVIDIA announced its intention to acquire Arm, a leading provider of CPU and GPU technology, for $40 billion. The deal is currently pending regulatory approval.
2. Analog Devices' acquisition of Maxim Integrated: In 2020, Analog Devices acquired Maxim Integrated for $21 billion, creating a leading provider of analog and mixed-signal semiconductor solutions.
3. Marvell's acquisition of Inphi: In 2020, Marvell announced its intention to acquire Inphi, a leading provider of high-speed data interconnect solutions, for $10 billion.
4. Infineon's acquisition of Cypress Semiconductor: In 2019, Infineon acquired Cypress Semiconductor for $10 billion, expanding its presence in the automotive and IoT markets.
5. Renesas' acquisition of IDT: In 2019, Renesas acquired Integrated Device Technology (IDT) for

$6.7 billion, expanding its portfolio of analog and mixed-signal solutions.

6. Overall, these mergers and acquisitions are driven by the need to achieve economies of scale, expand product portfolios, and gain access to new markets. As the semiconductor industry continues to evolve, we can expect to see more consolidation and M&A activity in the future.

There has been a surge of semiconductor M&As after 2020 for reasons such as technology, capacity and resource expansion, geo-diversification, and resiliency planning. Increasingly, companies are looking at M&As as a way to acquire not only the technology and knowledge base but the human capital, talent, and expertise they need in growth areas such as AI.

2. Outsourced Assembly and Test (OSAT) Industry

The global outsourced semiconductor assembly and testing market size & share was valued at around USD 34.85 billion in 2021 and is estimated to grow around USD 50.9 billion by 2028, at a CAGR of approximately 4.8% during 2022 to 2028. The Outsourced Semiconductor Assembly and Test (OSAT) industry has been experiencing significant growth in recent years. This growth is driven by several factors, including:

1. Increasing demand for consumer electronics: The growing popularity of smartphones, laptops, tablets, and other electronic devices has led to a surge in demand for semiconductor chips, which
2. in turn has increased the demand for OSAT services.
3. Rising demand for automotive electronics: The increasing adoption of advanced driver assistance systems (ADAS), electric vehicles, and other automotive technologies has creatednew opportunities for OSAT providers.
4. Emerging technologies: The rise of emerging technologies such as the Internet of Things (IoT), 5G, and artificial intelligence (AI) has created new opportunities for OSAT providers.
5. Increasing complexity of semiconductor chips: The increasing complexity of semiconductor chips has made it more difficult and expensive for semiconductor companies to perform assembly and testing in-house, creating more opportunities for OSAT providers.

According to market research reports, the global OSAT market is expected to continue growing at a compound annual growth rate (CAGR) of around 7% from 2021 to 2026. The demand for OSAT services is expected to remain strong due to the increasing demand for electronic devices and the rising adoption of emerging technologies.

The increasing commercialization of technologies such as AI and 5G is driving advancements in packaging platforms, including fan-out packaging and 3D flip chip technology. These packaging solutions address the need for high-power consumption and offer benefits such as improved chip connectivity. As a result, the demand for Outsourced Semiconductor Assembly and Test (OSAT) services is expanding, particularly in emerging regions, with Asia witnessing significant growth in semiconductor manufacturing. Countries like China, Taiwan, South Korea, and Southeast Asian nations are becoming major markets for OSAT services, leading to increased collaboration between companies and OSAT vendors.

3. The Indian Semiconductor Industry

The Indian semiconductor industry has been experiencing significant growth and development in recent years. It plays a crucial role in the country's electronics manufacturing sector and contributes to the advancement of the nation. Here is an overview of the Indiansemiconductor industry:

Increasing demand for electronic devices: The growing popularity of smartphones, laptops, tablets, and other electronic devices has led to a surge in demand for semiconductor chips, which in turn has increased the demand for semiconductor manufacturing and design services in India.

Government initiatives: The Indian government has launched several initiatives to promote the growth of the semiconductor industry in the country. For example, the government has launched the Electronics Manufacturing Cluster (EMC) scheme to provide infrastructure and other support to electronics manufacturing companies.

Availability of skilled labor: India has a large pool of skilled engineers and technicians who are well- suited for jobs in the semiconductor industry. This has made India an attractive destination for semiconductor companies looking to set up operations in the country.

Emerging technologies: The rise of emerging technologies such as the Internet of Things (IoT), 5G, and artificial intelligence (AI) has created new opportunities for semiconductor companies in India.

According to market research reports, the Indian semiconductor industry is expected to continue growing at a compound annual growth rate (CAGR) of around 10% from 2021 to 2026. The demand for semiconductor manufacturing and design services is expected to remain strong due to the increasing demand for electronic devices and the rising adoption of emerging technologies.

1. Market Size and Growth: The Indian semiconductor market has been growing steadily, driven by factors such as increasing domestic demand, government initiatives to promote electronics manufacturing, and the expansion of the consumer electronics and automotive sectors. According to industry reports, the Indian semiconductor market was valued at around $32.35 billion in 2020 and is expected to reach $52.58 billion by 2025, growing at a CAGR of around 10.2%.
2. Domestic Consumption: India has a large and growing domestic market for semiconductors due to factors such as population growth, rising disposable incomes, and increased adoption of electronic devices. The demand for semiconductors is driven by various sectors, including consumer electronics, automotive, telecommunications, industrial automation, healthcare, and defense.
3. Electronics Manufacturing Initiatives: The Indian government has launched several initiatives to promote electronics manufacturing, including the "Make in India" campaign, National Policy on Electronics (NPE)& Production Linked Incentives ( PLI). These initiatives aim to boost domestic production, attract foreign investment, and create a favorable business environment for semiconductor companies.
4. Design and R&D: India has emerged as a significant hub for semiconductor design and research and development (R&D). The country is home to numerous design houses and R&D centers that contribute to global semiconductor innovation. Indian design companies specialize in areas such as chip design, embedded systems, semiconductor IP development, and verification services.
5. Semiconductor Manufacturing: While India is primarily focused on semiconductor design and assembly, efforts are being made to establish semiconductor fabrication (fab) facilities in the country. The government has launched the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) under ISM (India Semiconductor Mission)to attract investments in semiconductor manufacturing and encourage the establishment of semiconductor fabs in India.
6. Government Support: The Indian government has taken several measures to support the semiconductor industry. This includes providing incentives, tax benefits, and subsidies to semiconductor companies, promoting research and development activities, establishing semiconductor clusters and technology parks, and facilitating collaborations between industry, academia, and research institutions.
7. Skill Development: To meet the growing demand for skilled professionals in the semiconductor industry, India has been focusing on initiatives to enhance the skill set of its workforce. Skill development programs, vocational training, and collaborations between industry and educational institutions are being encouraged to bridge the skill gap and develop a highly skilled semiconductor workforce.

Overall, the Indian semiconductor industry is experiencing growth and transformation, driven by increasing domestic demand, government initiatives, and a focus on design and R&D. With continued support and investment, the industry is expected to contribute significantly to India's electronics manufacturing capabilities and emerge as a global player in the semiconductor sector.

Material changes affecting the financial position of the Company which have occurredbetween the end of Financial Year and the date of the report- Nil

Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future-Nil

Transfer to Reserves

There were no transfers made to any Reserves during the Year.

Adequacy of internal financial controls

The Company's internal financial controls systems are commensurate with the nature of business and the size and complexity of its operations. These are routinely tested by the Internal Auditors and cover all key business areas.

Subsidiary/Joint Ventures/Associate Companies

Your Company had incorporated a Wholly Owned Subsidiary Company during FY 2017-18, in the name and style of SPEL Semiconductor Packaging Limited. This Company is yet to commence production. It is envisaged to commence production after getting due statutory approvals from the authorities.

Deposits

The Company has not accepted any deposits from public 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.

Statutory Auditors

1. Mr. K. Nandhiswaran (M. No. 207644), Statutory Auditor of the Company, vide letter dated 15th May, 2023, has intimated the Company about his resignation as Statutory Auditor due to health issues. Pursuant to Section 139(8) of the Companies Act, 2013, in view of the casual vacancy caused by the resignation of Mr. K. Nandhiswaran, Statutory Auditor, the Company appointed M/s. Venkatesh & Co., Chartered Accountants (FRN:004636S) as the Statutory Auditors of the Company to audit the books of accounts of the company for the financial year 2022-23, through Postal Ballot on June 25, 2023, as per the provisions of Sections 108, 110 and other applicable provisions of the Companies Act, 2013.

Pursuant to Section 139 of the Companies Act, 2013, M/s. Venkatesh & Co., Chartered Accountants (FRN:004636S) shall hold office as Statutory Auditors of the Company till the conclusion of the ensuing Annual General Meeting. As per the provisions of Section 139, 142 and other applicable provisions of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, the Board, upon the recommendation of the Audit Committee, in its Meeting held on June 27, 2023 recommended the appointment of M/s. Venkatesh & Co., Chartered Accountants (FRN:004636S) as the Statutory Auditors of the Company for a further period of 4 consecutive years, to hold office from the conclusion of the 38th Annual General Meeting till conclusion of the 42nd Annual General Meeting to be held in the year 2027. M/s. Venkatesh & Co., Chartered Accountants (FRN:004636S) have confirmed their eligibility and willingness to hold office as Statutory Auditors of the Company. The Board recommends aforementioned appointment in the forthcoming AnnualGeneral Meeting of the Company.

2. The Notes on financial statement referred to in the Auditors' Report are self-explanatory and do not call for any further comments.
3. The Auditors' Report on the Financial Statements of the company for the financial year ended 31st March 2023 is modified i.e., it contains qualification opinion. The Management has provided its remarks on the same in the Statement of Impact of Audit Qualifications submitted along with Annual Audited Financial Results for the quarter and year ended 31.03.2023.

Details in Respect of Frauds Reported by Auditors-Nil Share Capital

There has been no change in the share capital of the Company during the year.

Extract of the Annual Return

Pursuant to the provisions of Section 92 (3) and 134 (3) (a) of the Companies Act, 2013, extract of the Annual Return (Form MGT-9) for the year ended March 31, 2022 will be placed on the website of the Company at http://www.natronix.net/forms.html.

Directors and Key Managerial Personnel

As per the provisions of the Companies Act, 2013, Mr. M.Jayashankar (DIN: 00048351), is retiring by rotation, being eligible, offers himself for re-appointment.

Declaration by Independent Directors

The Company has received declarations from all its Independent Directors that they meet the criteria of Independence as laid down under section 149(6) of the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 in respect of the financial year ended March 31, 2023.

Independent Directors have complied with the Code for Independent Directors prescribed in Schedule IV of the Companies Act, 2013.

Familiarization Programme for Independent Directors

The Company conducts an orientation program and presents power point presentation for Independent Directors in order to enable them to familiarize with the Company's policies, strategy, operations, product offerings, Organisation structure, human resources, technologies, facilities and risk management.

Five Meetings of the Board were held during the year the details of which are given in the Corporate Governance Report, which forms part of this report.

Audit Committee

The details pertaining to composition and meetings of Audit Committee are included in the Corporate Governance Report, which forms part of this report

Nomination and Remuneration Committee

The details pertaining to Nomination and Remuneration Committee are included in the Corporate

Governance Report, which forms part of this report.

Details Of Nomination and Remuneration Policy

Salient features of the Nomination and Remuneration Policy forms part of this report and the detailed policy is hosted placed on the website of the Company at http://www.natronix.net/.html.

The statement of disclosure of remuneration under Section 197 of the Act and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 ("Rules") is provided as part of this Report.

The information as per Rule 5(2) and Rule 5(3) of the Rules, forms part of this Report. However, as per first proviso to Section 136(1) of the Act and Second Proviso to Rule 5 of the Rules, the report and financial statements are being sent to the members of the Company excluding the statement of particulars of employees under Rule 5(2) and Rule 5(3) of the Rules. Any member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered office of the Company. The said statement is also available for inspection by the members at registered office of the Company during office hours till the date of Annual General meeting.

Managerial Remuneration

Managerial Remuneration is given as annexure which forms part of this report.

The Board of Directors have not carried out any annual evaluation of its performance, Committees of the Board and the individual directors pursuant to the provisions of the Act and Corporate Governance as prescribed under Regulation 17 (10) of SEBI (LODR) Regulation 2015 for the financial year ended 31^st Mar 2023.

Loans, guarantees or investments

Particulars of loans, guarantees and investments have been disclosed in the financial statements.

Contracts or arrangements with Related Parties

The particulars of every contract or arrangements entered into by the Company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arm's length transactions under third proviso thereto have been disclosed in Form AOC -2.

Secretarial Audit Report

The Board appointed M/s. MK Madhavan & Associates, Company Secretaries, as the Secretarial Auditor to conduct the Secretarial Audit of the Company during the Financial Year 2022-2023. Secretarial Audit Report is given as annexure, which forms part of this report.

Qualifications in Secretarial Audit Report

The Board of Directors and the Management affirm that the Company has been taking corrective actions to comply with the observations made in the Secretarial Audit Report and the Company has been taking sincere efforts to ensure full compliance with all applicable laws and statutes in letter and

spirit.

Vigil mechanism for Directors and Employees

The Company has a Vigil Mechanism by way of Whistle Blower Policy to provide a Vigil Mechanism for Employees and Directors to report genuine concerns. The provisions of this policy are in line with Section 177 (9) of the Act. A copy of the policy is uploaded in the website of the Company.

Risk management

The Board of Directors and Senior Management are undertaking measures to identify and monitor the risks faced by the Company and review and evolve the risk mitigation plan. Periodical action is taken to address the major risks identified.

Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition And Redressal) Act, 2013

The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All the employees (permanent, contractual, temporary and trainees) are coveredunder this policy. The Company has not received any complaint on sexual harassment during the financial year ended 31.03.2023.

Compliance With Secretarial Standards

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

Conservation of energy, technology absorption and foreign exchange earnings and outgo:

The details of conservation of energy, technology absorption, foreign exchange earnings and out go are as follows:

The Company has in place an Energy Committee which meets once a month. This Committee consists of Cross-functional Executives. It assesses the potential areas, develops means to save energy and implements the plan with the approval of the Management.

Measures were taken during the year to conserve water and electricity resorting to reuse of Dicing process water, rain water harvesting, power factor improvement and investment on air cooled chillers and air compressors.

Technology Absorption

The particulars regarding Technology Absorption are not applicable to your Company.

Foreign Exchange Earnings and Outgo

Your Company is a 100% Export Oriented unit and is constantly striving to increase its exports.

Foreign Exchange used during the year : 553.32 Lakhs Foreign Exchange earned during the year : 982.38 Lakhs

Research & Development

The Company has carved out an ambitious plan of investment in R&D. This will include investment in Package Intellectual Property, thereby assisting Company's revenue and profitability in the future years.

Corporate Governance Certificate

The Corporate Governance Certificate from the Auditors regarding compliance of conditions of Corporate Governance as stipulated in Regulation 23(4) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed with this report.

1. Pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, to the bestof their knowledge and ability confirm that:
2. in the preparation of the annual accounts, the applicable accounting standards havebeen followed along with proper explanation relating to material departures;
3. they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial year and of the loss of the Company for that period;
4. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
5. they have prepared the annual accounts on a going concern basis;
6. they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively and
7. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
8. Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory and secretarial auditors and external consultants and the reviews performed by the management and the relevant board committees, including the audit committee, the Board is of the opinion that the Company's internal financial controls were adequate and effective during the Financial Year 2022-23.

Acknowledgements

Your Directors place on record their gratitude especially to the Promoters, who had assisted significantly towards the recovery path. Directors also placed on record their gratitude to the Government of India, the Government of Tamil Nadu, Financial Institutions, Bankers, Insurance Companies, Customs & Excise authorities, valued overseas Customers & Vendors and the Promoters for the continued assistance and support extended to the Company.

Yours Directors wish to place on record, their appreciation of the efficient and loyal services rendered by the supportive Employees at all levels of the Company. Yours Directors wish to thank the Shareholders who constitute the mainstay of the Company for their unstinted support, forbearance confidence reposed on the Management.