1. Purpose and legal framework

Karan Letex Limited (the “Company”) seeks to contribute to inclusive social development through responsible, measurable and sustainable initiatives. This Policy sets out the principles for selecting, implementing and monitoring Corporate Social Responsibility (“CSR”) activities and for preparing the annual action plan.

This Policy shall operate in accordance with section 135, section 134(3)(o), Schedule VII to the Companies Act, 2013 (the “Act”), the Companies (Corporate Social Responsibility Policy) Rules, 2014 (the “CSR Rules”), and applicable amendments and directions. Statutory provisions shall prevail in the event of any inconsistency.

2. Applicability and objectives

The Company shall assess CSR applicability for each financial year by reference to the immediately preceding financial year: net worth of Rs. 500 crore or more, turnover of Rs. 1,000 crore or more, or net profit of Rs. 5 crore or more. Continuing obligations concerning unspent amounts and ongoing projects shall be separately reviewed and discharged as required by law.

The objectives are to improve access to education and healthcare, support rural communities and vulnerable groups, protect the environment and promote livelihoods. Projects shall respond to identified community needs, specify intended beneficiaries and outcomes, and use funds transparently. Preference shall be given to local areas and areas around the Company’s operations, particularly Kanpur and surrounding areas, without restricting eligible projects elsewhere in India.

Vision and mission

The Company’s vision is to build a sustainable business that respects individuals and contributes to inclusive growth. Its CSR mission is to translate this commitment into need-based community programmes with identifiable social benefits, responsible use of resources and transparent accountability. CSR shall be integrated into the Company’s governance while remaining distinct from normal business expenditure.

3. Meaning of key terms

“Board” means the Board of Directors of the Company. “Committee” means its duly constituted CSR Committee. “Ongoing project” means a multi-year CSR project with a timeline not exceeding three years excluding the financial year of commencement, including a project extended beyond one year by the Board on reasonable justification. Other terms shall have the meanings assigned under the Act and CSR Rules.

4. Governance and responsibilities

The Board shall constitute and maintain the Committee in accordance with section 135 and the CSR Rules. Ordinarily, it shall comprise three or more directors, including at least one independent director. Where the Company is not required to appoint an independent director, the statutory alternative of two or more directors may apply. Committee membership shall be recorded in the relevant Board resolutions and disclosures.

The Board may appoint or replace Committee members and designate its Chairperson by resolution, subject to applicable composition requirements. The Company shall maintain the current membership and terms of reference in its corporate records and update the prescribed disclosures after any change.

Where section 135(9) lawfully permits the Board to discharge Committee functions because the amount required to be spent does not exceed Rs. 50 lakh, the Board shall do so. This exemption shall be assessed together with the requirement under rule 3 to constitute a Committee where any amount remains in the Unspent CSR Account.

The Committee shall recommend this Policy and revisions, recommend expenditure and the annual action plan, and monitor implementation. It shall review project progress, utilisation, unspent balances and corrective action. Meetings shall be held at least twice in each financial year and additionally as needed, with proper records of deliberations and recommendations.

The Board shall approve the Policy and annual action plan after considering the Committee’s recommendations, ensure implementation and statutory spending or transfers, satisfy itself about fund utilisation, review ongoing projects against approved timelines, and ensure prescribed disclosures. The Chief Financial Officer or person responsible for financial management shall certify utilisation for approved purposes in the manner required by rule 4.

Committee meeting procedures

Meetings may be held at the registered office, corporate office or another place decided by the Committee, with participation through electronic mode where permitted. Notice stating the day, date, time, venue and participation arrangements, together with the agenda and supporting notes, shall ordinarily be circulated at least seven days in advance, or within any longer period required by the Articles. Urgent business may be considered at shorter notice only in accordance with the Act and applicable Secretarial Standards.

Quorum shall be as prescribed by applicable law, the Articles and the Board-approved terms of reference, read with Secretarial Standard-1. In the absence of a valid contrary stipulation, all Committee members shall be present to constitute quorum. Quorum shall be maintained throughout the meeting; conflicts of interest, attendance, recommendations and decisions shall be recorded. Proper minutes shall be maintained and placed before the Board in accordance with applicable requirements.

5. Priority areas

Education and livelihoods: access to education, special education, learning resources, vocational skills, employability and livelihood enhancement, particularly for disadvantaged children, women and persons with disabilities.

Healthcare and sanitation: preventive healthcare, medical support, nutrition, sanitation and safe drinking water for underserved communities.

Rural and community development: eligible rural development projects and support for socially and economically disadvantaged groups, including women and senior citizens.

Environmental sustainability: conservation of natural resources, ecological balance, protection of flora and fauna, waste reduction and measures to maintain the quality of soil, air and water.

Additional eligible areas: subject to Schedule VII and specific Board approval, the Company may support hunger and poverty alleviation; women’s empowerment and care facilities for vulnerable groups; animal welfare and agroforestry; preservation of heritage, art and traditional crafts; public libraries; welfare of armed forces, CAPF and CPMF veterans and their dependants; eligible sports training; notified slum-area development; and disaster relief, rehabilitation and reconstruction.

Eligible contributions may also be made to funds expressly covered by Schedule VII, including the Prime Minister’s National Relief Fund, PM CARES Fund, Swachh Bharat Kosh and Clean Ganga Fund, and to qualifying incubators, research projects and public-funded research or educational institutions within the statutory categories. Eligibility of each contribution shall be verified before release. Subscription to zero coupon zero principal instruments on a Social Stock Exchange may be considered only under specific Board approval and the applicable statutory framework.

Preventive health or naturopathy projects may be considered where their actual activities qualify under Schedule VII. A payment to a trust or society for spiritual purposes shall not automatically qualify as CSR; the underlying project and implementing entity must independently satisfy the applicable eligibility requirements.

Other activities falling within Schedule VII may be approved by the Board on the Committee’s recommendation. These focus areas do not constitute approval of a specific project or implementing agency; each proposal requires the appropriate assessment and approval.

6. Project selection and annual action plan

Proposals shall identify the Schedule VII category, community need, location, beneficiaries, project objectives, implementation method, budget, timeline, measurable outputs and monitoring arrangements. Selection shall consider feasibility, social benefit, agency capability, safeguards against misuse, and the potential for sustainable outcomes.

The Committee shall recommend an annual action plan specifying: the list of approved projects or programmes; their manner of execution; modalities of fund utilisation and implementation schedules; monitoring and reporting mechanisms; and details of need and impact assessment, if any. The Board may alter the plan during the financial year on the Committee’s recommendation and reasonable justification.

7. Implementation and due diligence

Projects may be implemented directly by the Company, through entities eligible under rule 4(1), or in collaboration with other companies where the Company can separately identify and report its contribution and outcomes. Any other legally permitted implementation route shall require specific Board approval and compliance with the applicable conditions and limits.

Before engagement, the Company shall verify the implementing agency’s legal status, eligibility under the relevant rule 4 category, CSR-1 registration where required, applicable income-tax registrations or exemptions and approvals, financial credentials, governance, and relevant experience. A three-year track record shall be verified where required for the applicable category. No blanket exemption shall be assumed merely because an organisation is charitable.

Written arrangements shall specify the approved purpose, sanctioned amount, milestones, disbursement conditions, utilisation reports, supporting records, inspection rights, ownership of assets, treatment of unutilised funds and termination provisions. Disbursement shall be linked to approved requirements and progress. A payment or advance to an agency shall not alone be treated as proof that funds have been utilised for eligible CSR purposes.

Day-to-day coordination

The Board shall designate the Whole-time Director or another director or officer as CSR Coordinator to coordinate approved projects and implementing agencies, maintain the project register, obtain progress and utilisation reports, and submit updates to the Committee. The finance function shall track expenditure and transfer deadlines. Delegation shall not displace the responsibilities of the Board, Committee or financial certifying officer.

8. Activities excluded from CSR

CSR shall exclude activities in the normal course of business except a specific legally operative exemption; activities outside India except the permitted training of Indian sports personnel; direct or indirect political contributions; activities benefiting employees within the statutory exclusion; sponsorships intended to derive marketing benefits for products or services; and activities undertaken to fulfil other statutory obligations. Employee participation in a wider public-benefit project shall not itself make an otherwise eligible project an employee benefit scheme.

Expenditure must fall within Schedule VII and the CSR Rules. General donations, corpus contributions or promotional expenditure shall not be counted merely because the recipient is a charitable organisation.

9. CSR budget and expenditure controls

For each applicable financial year, the Board shall ensure spending of at least two per cent of average net profits for the three immediately preceding financial years, or the applicable shorter period where legally relevant. Net profits shall be calculated under section 198 read with the CSR Rules, with prescribed adjustments and exclusions. The finance function shall retain the computation and reconciliation.

Administrative overheads shall not exceed five per cent of total CSR expenditure for the financial year. Costs directly attributable to designing, implementing, monitoring or evaluating a particular project shall be classified in accordance with the statutory definition, with supporting records.

Surplus from CSR activities shall not form part of business profits. It shall be ploughed back into the same project, transferred to the Unspent CSR Account and spent in pursuance of this Policy and the annual action plan, or transferred to a Schedule VII fund within six months of the financial year-end, as permitted under rule 7(2).

Eligible excess CSR expenditure may be set off against the requirement for the immediately succeeding three financial years, subject to rule 7(3), exclusion of CSR-generated surplus, and a Board resolution. The Company shall maintain a year-wise register of available and utilised set-off amounts.

10. Unspent CSR amounts and ongoing projects

An unspent amount not relating to an ongoing project shall be transferred to a fund specified in Schedule VII within six months of the end of the relevant financial year. The Board’s Report shall state the reasons for not spending.

An unspent amount relating to a qualifying ongoing project shall be transferred within thirty days of the financial year-end to a special account in a scheduled bank titled “Unspent Corporate Social Responsibility Account” for that financial year. It shall be spent within three financial years from transfer. Any amount remaining thereafter shall be transferred to a Schedule VII fund within thirty days of completion of the third financial year.

Ongoing-project status shall be supported by the approved project, its commencement, duration and implementation schedule. It shall not be assigned solely to defer a statutory transfer. Finance shall maintain financial-year-wise bank reconciliations and a transfer-deadline register. The Board shall monitor each ongoing project against its approved allocation and timeline and may make lawful modifications to ensure smooth implementation.

11. Capital assets

Capital assets created or acquired through CSR expenditure shall be held only by an eligible section 8 company, registered public trust or registered society having charitable objects and the prescribed CSR registration number; beneficiaries in permitted collective forms; or a public authority, as provided in rule 7(4). Asset ownership and handover records shall be retained.

12. Monitoring and impact assessment

The Company shall obtain periodic financial and progress reports, utilisation certificates, supporting vouchers and beneficiary or output records proportionate to the project. Monitoring may include site visits, discussions with beneficiaries, independent review and comparison with agreed milestones. Delays, diversion of funds or material departures shall be reported to the Committee and Board for corrective action, recovery or suspension of further disbursement where appropriate.

Each continuing field-based project shall ordinarily receive at least one on-site review during each financial year in which it is implemented. Where access is impracticable, a documented reason and suitable alternative verification shall be placed before the Committee. Contributions to statutory funds and other projects for which a site visit is inapplicable shall be verified through appropriate documentary evidence. The Coordinator shall report progress, expenditure, deviations and corrective action at each Committee meeting.

Where the average CSR obligation is Rs. 10 crore or more in the three immediately preceding financial years, the Company shall undertake impact assessment through an independent agency for qualifying projects having outlays of Rs. 1 crore or more and completed not less than one year before the assessment, subject to applicable statutory exemptions. Reports shall be placed before the Board and annexed to the annual CSR report in the prescribed manner. Eligible impact-assessment expenditure shall be subject to the limit under rule 8(3)(c), presently two per cent of total CSR expenditure for the financial year or Rs. 50 lakh, whichever is higher. Voluntary assessments may also be approved.

13. Reporting and public disclosure

The Board’s Report shall include the prescribed annual report on CSR and other disclosures required under section 134(3)(o), section 135 and the CSR Rules. The Company shall complete applicable statutory filings in the prescribed form and within the time limits in force.

The composition of the Committee, this Policy and Board-approved CSR projects shall be disclosed on the Company’s website, if any, for public access in accordance with rule 9. The responsible officer shall retain dated evidence of actual publication and updates. A website address alone shall not be treated as evidence that the required information was published.

14. Records and accountability

The Company shall maintain approval resolutions, Committee minutes, annual action plans, eligibility checks, agreements, fund-release records, bank statements, statutory transfer evidence, utilisation certificates, monitoring and impact reports, and disclosure records. Records shall be retained for at least eight financial years or longer where required by law or pending proceedings. Any conflict of interest shall be disclosed and addressed through applicable governance procedures.

15. Review and adoption

The Committee shall review this Policy periodically and recommend amendments for Board approval. Changes in mandatory law shall apply from their effective dates and shall be reflected in the next revision.

This Policy shall take effect from the date approved by the Board and recorded

Adoption / revision date: 31.03.2021; Board resolution reference: 11^th Meeting