To

The Members

Your Directors have pleasure in presenting the FORTY-SECOND ANNUAL REPORT together with the Audited Accounts of the Company for the year ended 31^st March 2026.

FINANCIAL HIGHLIGHTS

SUMMARY OF OPERATIONS:

During the financial year under review the overall performance of the company has shown significant improvement in its turnover when compared to previous financial year; the Overall turnover of the Company is 54. 27 lakhs as compared to last year turnover of Rs 13.72 Lakhs and the Net Profit of Rs. 12.18 Lakhs for financial year 2025-26 when compared to a Net Profit of Rs. 0.78 Lakhs during the previous year.

DIVIDEND DECLARATION:

Due to inadequate profits your Directors do not recommend any dividend for the Financial Year 2025-26. TRANSFER TO RESERVES:

The Company did not transfer any amount to the Reserves for the Financial Year ended March 31,2026. DETAILS OF SUBSIDIARIES, JOINT VENTURES, OR ASSOCIATE COMPANIES:

The Company did not have any subsidiary or joint venture or associate company.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL:

During the year under review, certain changes took place in the composition of Board of Directors or Key Managerial Personnel ("KMP"), the details of which are provided below:

• Mr. Sudhir Reddy Posireddy (DIN: 02813098) was initially appointed as an 'Additional Director' ('Chairman and Managing Director' ) of the Company with effect from July 28, 2025, and was subsequently regularized by the Members at their 41st Annual General Meeting held on September 27, 2025.

• Mr. Naraharisetty Mohan Krishna (DIN: 07126524) was initially appointed as an 'Additional Director' ('Whole-Time Director') of the Company with effect from July 28, 2025, and was subsequently regularized by the Members at their 41st Annual General Meeting held on September 27, 2025.

• Mrs. Ramreddy Swathi (DIN: 07199226) was initially appointed as an 'Additional Director' ('WholeTime Director') of the Company with effect from July 28, 2025, and was subsequently regularized by the Members at their 41st Annual General Meeting held on September 27, 2025

• Mr. Raju Koyyala (DIN: 10734973) was initially appointed as an 'Additional Director' ('Non-Executive Independent Director' )of the Company with effect from July 28, 2025, and was subsequently regularized, by the Members at their 41st Annual General Meeting held on September 27, 2025.

• Mr. Raja Suman Karingula (DIN: 11183097) was initially appointed as an 'Additional Director' ('NonExecutive Independent Director' ) of the Company with effect from July 28, 2025, and was subsequently regularized by the Members at their 41st Annual General Meeting held on September 27, 2025 .

• Mr. Sudhakar Navath (DIN: 06785232) has tendered his resignation from the position of Managing Director with effect from July 28, 2025.

• Mr. Jaya Mahadev Yerramsetti (DIN: 06661103) has tendered his resignation from the position of Independent Director with effect from July 28, 2025.

• Mrs. Lakshmi Satyasri Nekkanti (DIN: 07223878) has tendered her resignation from the position of Non Executive Director with effect from July 28, 2025.

• Ms. Tulika Srivastav, the Company Secretary and Compliance Officer of the Company has tendered her resignation with effect from December 31, 2025.

LISTING OF EQUITY SHARES:

The equity shares of the Company are listed on the trading platform of BSE Limited, a recognized stock exchange having a nationwide trading terminal.

SHARE CAPITAL:

The Authorized Share Capital of the Company as on March 31,2026, is Rs.12,00,00,000/- (Rupees Twelve Crores only) divided into 1,20,00,000 One Crore Twenty Lakhs Only Equity Shares of Rs.10/- (Rupees Ten Only) each.

The Paid-up Share Capital of the Company as on March 31, 2026, is Rs. 11,40,31,100/-(Rupees Eleven Crores Forty Lakhs Thirty One Thousand and One Hundred) divided into 1,14,03,110 (One Crore Fourteen Lakhs Three Thousand One Hundred and Ten) equity shares of Rs.10/- (Rupees Ten Only) each fully paid up.

During the year under review:

• The company has not bought back any of its securities.

• The Company has not issued any Sweat Equity Shares.

• No Bonus shares were issued during the year.

• Company has not issued any Preference shares/Debentures.

• Has not provided any Stock Option Scheme.

VARIATIONS IN NETWORTH:

The Standalone Net worth of the Company for the Financial Year ended March 31, 2026, is Rs. 442.22 Lakhs as compared to Rs. 430.00 Lakhs for the previous financial year ended March 31, 2025.

FIXED DEPOSITS

The Company has neither accepted nor renewed any deposits falling within the provisions of Section 73 and 76 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 from its member and public during the Financial Year.

NUMBER OF BOARD MEETINGS:

The Company has conducted 4 board meetings during the year on following dates with a gap not exceeding 120 days between any two meetings.

BOARD COMMITTEES AND THEIR COMPOSITION

We have in place all the Committees of the Board which are required to be constituted under the Companies Act, 2013, and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. A detailed note on the Board and its committees is provided under the Corporate Governance Report section in this Annual Report.

The Present Composition of various Committees of the Board is here under:

BOARD EVALUATION

The performance evaluation of all the Directors and that of the Board as a whole and its committees was conducted based on the criteria and framework adopted by the board. The Nomination and Remuneration Committee carried out independent evaluation of every Director's performance. The outcome of the board evaluation for the FY 2025-26 was discussed by the said committee as well as by the Board.

The manner in which the formal annual evaluation has been made by the Board and other related details are enumerated in the Corporate Governance Report, which is annexed to the Boards' Report. None of our Independent Directors is due for reappointment.

STATEMENT OF DECLARATION BY INDEPENDENT DIRECTORS:

"Pursuant to the provisions of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015, the Company has received necessary declarations from all Independent Directors confirming that they meet the criteria of independence as laid down under the said regulations. Further, in the opinion of the Board, all Independent Directors fulfill the conditions specified in the Act and LODR Regulations and are independent of the management."

POLICY ON APPOINTMENT, REMUNERATION OF DIRECTORS

The following policies are attached herewith as part of Corporate Governance as mentioned in "Annexure- D".

1. Policy for selection of Directors and determining Directors Independence; and evaluation mechanism.

2. Remuneration Policy for Directors, Key managerial Personnel and other employees.

INTERNAL FINANCIAL CONTROL SYSTEMS

The Company has adopted comprehensive policies and procedures which enable the implementation of appropriate internal financial controls across the organization and ensure the orderly and efficient conduct of its business. This includes strict adherence to the Company's policies, the safeguarding of its assets, the prevention and detection of fraud, structured error reporting mechanisms, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures.

Internal Financial Controls are an integrated part of the Risk Management Process, addressing financial and financial reporting risks. In line with the Company's strategic transition into the Defence and Locomotive component manufacturing sectors during the fiscal year under review, these control parameters and operational risk matrices have been rigorously evaluated and realigned to mitigate industry-specific engineering and regulatory risks. The Internal Financial Controls remain fully documented, digitized, and embedded in the business processes.

Assurance on the effectiveness of the Internal Financial Controls is obtained through ongoing management reviews, control self-assessments, continuous monitoring by functional experts, as well as testing of the systems by the Internal Auditor during the course of regular audits. The oversight framework was actively supervised throughout the year by the newly reconstituted Audit Committee. We believe that these systems provide reasonable assurance that our Internal Financial Controls are effectively operating and remain fully commensurate with the expanded scale and requirements of our organization.

POLICY ON PREVENTION, PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT AT WORK PLACE:

We strongly support the rights of all our employees to work in harassment - free environment. The Company has adopted a Policy on Prevention, Prohibition and Redressal of Sexual Harassment at workplace as per the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules made thereunder. The policy aims to provide protection to Employees at the workplace and prevent and redress complaints of sexual harassment and for matters connected or incidental thereto, with the objective of providing a safe working environment, where Employees feel secure. The Company has also constituted an Internal Committee, known as Anti Sexual Harassment Committee to address the concerns and complaints of sexual harassment and to recommend appropriate action.

We further confirm that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

CORPORATE SOCIAL RESPONSIBILITY

Since our Company does not fall within any of the parameters specified under the provisions of Section 135 of the Companies Act, 2013 read with Rules made thereunder, reporting pursuant to Section 134(3) (o) is Not Applicable.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to Section 134 (5) of the Companies Act, 2013, your Directors confirm that to the best of their knowledge and belief and according to the information and explanation obtained by them,

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

ii. Such accounting policies as mentioned in the notes to the financial statements have been selected and applied consistently and judgments and estimates that are reasonable and prudent made so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 202526 and of the profit or loss of the Company for that period;

iii. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. The annual accounts for the year 2025- 26 have been prepared on a going concern basis.

v. That proper internal financial controls were in place and that the financial controls were adequate and were operating effectively.

vi. That system to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

REMUNERATION POLICY:

The Board of Directors, on recommendation of the Nomination and Remuneration Committee framed a Nomination and Remuneration policy for selection, appointment and remuneration of Directors, KMP and Senior Management and matters covered u/s 178(3) of the Companies Act 2013.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

Pursuant to the provisions of section 177 (9) and read with all other applicable provisions of the Companies Act, 2013 and the Companies (meetings of board and its powers) Rules, 2014 (including any statutory modification(s) or re-enactment thereof for the time being in force) and Regulation 22 of SEBI (Listing Obligations & Disclosure Requirements) 2015, The Company has a Whistle Blower Policy framed to deal with instance of fraud and mismanagement, if any in the Group. The details of the Policy are explained in the Corporate Governance Report and also posted on the website of the Company.

RISK MANAGEMENT

Pursuant to the provisions of Section 134(3) (n) of the Companies Act, 2013, the Company has developed and implemented a comprehensive Risk Management Policy. This framework is designed to proactively identify, assess, prioritize, and mitigate strategic, financial, operational, and legal risks.

Consequent to the Company's strategic restructuring and expansion into the Defence and Locomotive component manufacturing sectors, the Board has thoroughly updated its risk matrix. The management has implemented rigorous monitoring protocols to manage industry-specific challenges, including stringent engineering compliance frameworks, raw material inventory dependencies, and long-term regulatory approval cycles.

The newly reconstituted Audit Committee periodically reviews the risk mitigation strategies to ensure controls remain effective and commensurate with the company's evolving operations. In the opinion of the Board, there are currently no elements of risk identified that threaten the immediate survival or existence of the Company.

STATUTORY AUDITORS:

At the 41st Annual General Meeting (AGM) held on September 27, 2025, the shareholders approved the appointment of M/s. P R S V & Co. LLP, Chartered Accountants, as the Statutory Auditors of the Company, replacing the retiring auditors, M/s. M N Rao Associates. Accordingly, M/s. P R S V & Co. LLP have conducted the statutory audit of the financial accounts of the Company for the financial year ended March 31, 2026.

The Auditors' Report issued by them for the financial year under review does not contain any qualifications, reservations, adverse remarks, or disclaimers. The notes on financial statements referred to in the Auditors' Report are self-explanatory and do not call for any further comments from the Board.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large.

All related party transactions are placed before the Audit Committee as also the Board for approval. Prior omnibus approval of the Audit Committee is obtained as per Regulation 23 of SEBI (Listing Obligations & Disclosure Requirement) 2015, for the transactions which are of a foreseen and repetitive nature. The Company has developed a Policy on Related Party Transactions for the purpose of identification and monitoring of such transactions.

The Policy on Related Party Transactions as approved by the Board is uploaded on the website of the Company. The particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 is referred in Notes to Accounts.

INTERNAL AUDITOR

Pursuant to the provisions of Section 138 of the Companies Act, 2013, read with Rule 13 of the Companies (Accounts) Rules, 2014, the Board of Directors at its meeting held on May 30, 2025, approved the appointment of M/s. M M R S AND CO, Chartered Accountants, as the Internal Auditors of the Company for the financial year 2025-26.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There have been no material changes and commitments affecting the financial position of the company between the end of the financial year (March 31, 2026) and the date of this report, except as disclosed below:

1. Fresh Certificate of Incorporation: Following the unanimous passing of a Special Resolution by shareholders at the EGM held on March 30, 2026, the Registrar of Companies (ROC), Hyderabad, officially issued a fresh Certificate of Incorporation on August 8, 2026 confirming the change of name to M/s. Arka Defence & Locomotives Limited.

2. Alteration of Name and Main Object Clauses of the Memorandum of Association: To counter capacity underutilization and stagnant operating margins in the legacy textile sector, the Board proposed a complete structural shift into high-precision heavy engineering, indigenous defense infrastructure engineering, and locomotive component manufacturing. The shareholders unanimously approved this operational overhaul via a Special Resolution passed at the Extraordinary General Meeting (EGM) held on March 30, 2026. Consequent to this approval, the Registrar of Companies (ROC), Hyderabad, officially issued a fresh Certificate of Incorporation on August 8, 2026, confirming the corporate name change from Source Industries (India) Limited to M/s. Arka Defence & Locomotives Limited.

3. Relocation of Registered Office: The Board of Directors at its meeting held on August 13, 2026, approved the relocation of the Registered Office within local limits to 1B, Meenakshi Tech Park, 11th Floor, Block C, Phase 2, Gachibowli , Hyderabad, Telangana, 500032, to optimize administrative and manufacturing oversight.

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

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of The Companies (Accounts) Rules, 2014, is annexed herewith as 'Annexure A' to this report.

MANAGEMENT DISCUSSION & ANALYSIS

Pursuant to the provision of Schedule V of SEBI (Listing Obligations & Disclosure Requirements) 2015, a report on Management Discussion & Analysis is set out as an "Annexure B".

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. PS Rao & Associates, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith as "Annexure C" to this report.

CORPORATE GOVERNANCE:

The Company has been making every endeavor to bring more transparency in the conduct of business. As per the requirements of Listing Agreement with the Stock Exchanges, a compliance report on Corporate

Governance for the year 2025-2026 and a certificate from the Secretarial Auditors of the Company are furnished as a part of this Annual Report "Annexure D".

ANNUAL RETURN

In accordance with Section 134 (3) (a) of the Companies Act, 2013, a copy of Annual Return in the prescribed format i.e. Form MGT-7 is placed on the website of the Company and may be accessed at Link: www.sourceindustriesindia.com

PARTICULARS OF EMPLOYEES:

The information required pursuant to Section 197 read with Rule 5 (1) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company is herewith annexed as 'Annexure F' to this report and Rule 5 (2) Of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, No employee of your company is in receipt of remuneration exceeding Rs. 8,50,000 per month or Rs. 1,02,00,000 per annum during the Financial Year.

COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND ANNUAL GENERAL MEETINGS:

During the year under review, the Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Board Meetings and Annual General Meetings.

LISTING FEE:

Your Company's shares are presently listed and traded on the BSE Limited; Your Company is regular in paying the listing fee to the BSE Limited.

DETAILS OF APPLICATION MADE OR ANY PROCEEDING PENDING UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016 (31 OF 2016) DURING THE YEAR ALONG WITH THEIR STATUS AS AT THE END OF THE FINANCIAL YEAR:

No application was made or any proceedings pending under the IBC, 2016 during the year ended on 31st March, 2026.

DETAILS OF DIFFERENCE BETWEEN AMOUNT OF THE VALUATION DONE AT THE TIME OF ONETIME SETTLEMENT AND THE VALUATION DONE WHILE TAKING LOAN FROM THE BANKS OR FINANCIAL INSTITUTIONS ALONG WITH THE REASONS THEREOF:

Not Applicable

ACKNOWLEDGEMENTS:

Your Directors place on record their appreciation and gratitude for the continuous support and assistance extended by all the Statutory Authorities. The Board also extends its heartfelt gratitude to the Creditors and Shareholders for the confidence reposed by them in the Company. Your Directors also place on record their sincere appreciation for the continued contributions made by the employees at all levels.