MAHINDRA & MAHINDRA LTD. | Integrated Annual Report 2022-23

MAHINDRA & MAHINDRA LIMITED 23 The Board recommends the Special Resolution set out at Item No. 10 of the Notice for approval of the Members. ITEM NOS. 11, 12 AND 13 The Securities and Exchange Board of India (‘SEBI’), vide its notification dated 9 th November, 2021, has notified SEBI (Listing Obligations and Disclosure Requirements) (Sixth Amendment) Regulations, 2021 (‘Amendments’) introducing amendments to the provisions pertaining to the Related Party Transactions under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’). The aforesaid Amendments inter-alia included replacing of threshold i.e. 10% (ten per cent) of the listed entity’s consolidated turnover, for determination of Material Related Party Transactions requiring Shareholders’ prior approval with the threshold of lower of Rs. 1,000 crores (Rupees one thousand crores) or 10% (ten per cent) of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity, with effect from 1 st April, 2022. Under the Listing Regulations, in addition to the approval and reporting for transactions by the Company with its own Related Party(ies), the scope extends to transactions by the Company with Related Party(ies) of any subsidiary(ies) of the Company or transactions by a subsidiary(ies) of the Company with its own Related Party(ies) or Related Party(ies) of the Company or Related Party(ies) of any subsidiary(ies) of the Company. As per Regulation 23(4) of the Listing Regulations, all Material Related Party Transactions shall require prior approval of the shareholders, even if the transactions are in the ordinary course of business and at an arm’s length basis. Given the nature of the Company’s presence in multiple businesses, the Company works closely with its subsidiaries, joint ventures and associates to achieve its business objectives and enters into various operational transactions with its related parties, from time to time, in the ordinary course of business and on arm’s length basis. Amongst the transactions that the Company enters into with its related parties, the estimated value of the contract(s)/ arrangement(s)/ agreement(s)/ transaction(s) of the Company with the Related Parties mentioned below and also the ‘Related Party Transactions’ under Regulation 2(1) (zc) of the Listing Regulations pertaining to a subsidiary of the Company, may exceed the threshold of Material Related Party Transactions within the meaning of Regulation 23(1) of the Listing Regulations i.e. Rs. 1,000 crores (Rupees one thousand crores) being the lower of Rs. 1,000 crores (Rupees one thousand crores) or 10% (ten per cent) of the annual consolidated turnover of the Company as per the last audited financial statements of the Company. Further, the Members of the Company at the Seventy-Sixth Annual General Meeting of the Company held on 5 th August, 2022 (“76 th AGM”), had approved Material Related Party Transactions of the Company with certain Related Parties viz. Swaraj Engines Limited, Classic Legends Private Limited and CIE Automotive India Limited (formerly known as Mahindra CIE Automotive Limited), with the monetary limit not exceeding 2% of the annual consolidated turnover of the Company or Rs. 2,000 Crores whichever is higher, per annum for each of the financial years (FY) from FY 2022-23 to FY 2026-27 i.e., five financial years. However, the estimated value of the contract(s)/ arrangement(s)/ agreement(s)/ transaction(s) of the Company with the aforesaid Related Parties is anticipated to exceed the aforesaid monetary limit approved by the Members at the 76 th AGM. Members may please note that the Company and its subsidiaries and associates have been undertaking such transactions of similar nature with related parties in the past financial years, in the ordinary course of business and on arm's length after obtaining requisite approvals, including from the Audit Committee of the Company/subsidiaries/ associates, as per the requirements of the applicable law. The maximum annual value of the proposed transactions with the related parties is estimated based on the Company’s current transactions with them and future business projections. SEBI, vide its Circular No. SEBI/HO/CFD/CMD1/CIR/P/2022/40 dated 30 th March, 2022, has clarified that a Related Party Transaction approved by the Audit Committee prior to 1 st April, 2022, which continues beyond this date and if it becomes material as per the materiality threshold provided above, requires approval of the shareholders in the first Annual General Meeting to be held after 1 st April, 2022. Considering the quantum of transactions, reduced thresholds of materiality and the extended framework for related party transactions under the amended Listing Regulations, approval of the Members is sought as per the requirements of Regulation 23 of the Listing Regulations read with the aforesaid SEBI Circular dated 30 th March, 2022, for the following specific Material Related Party Transactions, details of which are mentioned herein in accordance with SEBI Circular No. SEBI/HO/CFD/CMD1/ CIR/P/2021/662 dated 22 nd November, 2021: