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Directors Report of Kirloskar Brothers Ltd.

Mar 31, 2016

The Directors present the 96th Annual Report and the Audited Financial I Statements of the Company
for the year ended March 31,2016 together with the I reports of the Auditors and Board thereon.

FINANCIAL RESULTS

The financial results of the Company for the year 2015-16 as compared with the I previous year are
as under:

Year ended Year ended
March 31,2016 March 31,2015

Revenue from Operations 16,562,374,973 16,257,051,488

Other income 241,098,609 112,714,764

Total 16,803,473,582 16,369,766,252

Profit before tax 64,154,146 55,289,084

Tax Expense (53,916,131) (29,579,796)

Profit for the period 118,070,277 84,868,880

Surplus in Profit
& Loss Account

brought forward from
previous year 1,605,953,335 1,647,771,258

Depreciation and
amortization expense 389,427,899 496,764,630

Interim Dividend
for the year 2015-16 39,704,463

Available surplus 1,724,023,612 1,691,885,621

DIVIDEND

The Board of Directors declared and paid an Interim Dividend of 25% (Rs, 0.501 paise per equity
share) on March 29,2016 which is proposed to be considered as I final for the year 2015-16.

APPROPRIATIONS

Dividend of Rs, Nil (Rs,0.50)
@ - % (25%) on
79,408,926(79,388,176)

equity shares of Rs,2/- each - 39,694,088

Dividend distribution tax - 1,238,198

Corporate Social Responsibility - 45,000,000

Balance carried to
Balance Sheet 1,724,023,612 1,605,953,335

TOTAL 1,724,023,612 1,691,885,621


OPERATIONS OFTHE COMPANY

The revenue from the operations for the year under review is Rs, 1656 crores, which is more than
1.88% compared to the previous year. Drop in sales is mainly due to lower sales of project sectors,
partly attributable to liquidity issue in the market, non-receipt of dispatch clearances from the
customers and sluggish market and economic growth and subdued demand for fire fighting and HYPN
systems in the overall globe.

The performance of the Company was lower than planned due to shortfall in power sector and also a
lower rise in sales for small pumps in product sector.

The Company continued its focus of being selective in accepting orders depending on customers''
financial position. There was concentrated effort towards improvement of marketing initiatives and
brand presence. Overall efforts were made to improve the efficiencies at all plants.

For project business, the Company continues to focus on closure of old projects and recovery of
retention money. The main reason for major drop in sales of project sectors was unavailability of
funds from customers, delay in engineering and civil work by afewclients and non receipt of dues
from a few customers.

Our all women plant in Kaniyur won the Merit Award by the Confederation of Indian Industry (Cll)
under the 5S excellence category.

The Company scripted yet another success story in the global power market, having bagged another
repeat order from Calik Enerji of Turkey, for supply of pumps for its 230 MW CCPP project in
Georgia. The Company has successfully supplied 194 concrete volute pumps up to March 31, 2016. The
Company has also successfully commissioned Godavari Metropolitan Water Supply and Sewage Board
project valuingRs, 50 crores in November, 2015.

The Company has announced the launch of GK-P Pump at ACHEMA in Frankfurt, Germany. GK-P is a
process pump used for handling various types of chemical liquids from various process industries.
It is an End Suction centrifugal process pump having discharge capacity up to 500 m3/hr at 1450
rpm. The Company has also unveiled the technologically advanced ROMAK (RMK) Pump at ACHEMA in June
2015 which is used for handling various types of clear / clean chemical liquids without any
suspended particles by various process industries.

To its array of achievements for various innovative and indigenously developed products, the
Company has received national-level recognition for its Lowest Life Cycle (LLC) Pumps series. KBL''s
LLC Pumps series has been granted the prestigious "India Design Mark" by the India Design Council
which symbolizes product excellence in form, function, quality, safety, sustainability and
innovation and communicates that the product is usable, durable, aesthetically appealing while
being socially responsible.

Kirloskarvadi Plant has won ''Excellent Energy Efficient Unit'' Award in the national competition for
Excellence in Energy Management and Dewas & allied Plants received Safety award in regional level
"Manufacturing Today" competition.

There were no material changes or commitments to report which affect the financial position of the
Company that has occurred between the end of Financial Year and the date of this report.

STATUTORY DISCLOSURES

1. EXTRACT OF ANNUAL RETURN

Extract of Annual Return in Form MGT-9 as per provisions of Section 134 read with Section 92(3) of
the Companies Act, 2013 (the Act) is given in Annexure I to this report.


2. NUMBER OF MEETINGS OF THE BOARD

During the Financial Year under review, 5 (five) Board meetings were held, the details are
appearing elsewhere in this Annual Report.

3. DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3) (c) of the Act, the Board of Directors report that

(a) in the preparation of the annual accounts, the applicable accounting standards had been
followed;

(b) the directors had 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 view of the
state of affairs of the Company at the end of the Financial Year and of the profit and loss of the
Company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting
records in accordance with the provisions of this Act for safeguarding the assets of the Company
and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis; and

(e) the directors, had laid down internal financial controls to be followed by the Company and that
such internal financial controls are adequate and operating effectively;

(f) the directors had devised proper systems to ensure compliance with the provisions of all
applicable laws and that such systems are adequate and operating effectively.

4. INDEPENDENT DIRECTORS'' DECLARATION

All Independent Directors of the Company have given declaration under Section 149 (7) of the Act,
that he /she meets the criteria laid down in Section 149 (6) of the Act.

5. DISCLOSURE REQUIRED UNDERSECTION 134(3)(E)

The Board has adopted a Board Diversity Policy which sets the criterion for appointment as well as
continuance of Directors, including Independent Directors, at the time of re-appointment as
director in the Company. As per the policy the Board has an optimum combination of Members with
appropriate balance of skill, experience, background, gender and other qualities of directors
required for the effective functioning of the Board.

The Nomination and Remuneration Committee recommends remuneration of the Directors, subject to the
overall limits set under the Act, as outlined in the Remuneration Policy recommended by the
Committee and approved by the Board. As per the policy, the Executive Director(s) is/are entitled
for a fixed salary, other non-monetary benefits etc., and commission based on performance
evaluation of the Director. In case of Non Executive Directors, apart from receiving sitting fees,
they may be given commission on the basis of criterion as per the policy.

The Remuneration policy is given in Annexure II.

6. REPORTOFAUDITORS

During the Financial Year under review there are no qualifications or adverse remarks or
disclaimers made by the Statutory Auditors on the financial statements of the Company and by the
Company Secretary in practice in his Secretarial Audit Report, which is annexed herewith as
Annexure VIII.


M/s. R G. Bhagwat, Chartered Accountants (Firm Registration no. 101118W) the Auditors, retire at
the ensuing Annual General Meeting (AGM) and are eligible for re-appointment. The requisite
certificate as required under the Act has been received. The Audit and Finance Committee has
recommended their re-appointment and the annual audit fees.

Mr. M. J. Risbud, Practicing Company Secretary (CP No. 185) has been appointed as Secretarial
Auditor as per Section 204 of the Companies Act, 2013 for the Financial Year 2016-17.

Parkhi Limaye & Co. (Firm Registration No. 000191) have been appointed as Cost Accountant as per
Section 148 of the Act, read with applicable rules made there under for the Financial Year 2016-17.
Their remuneration is subject to approval by the Members.

7. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186

The details of loans, guarantees or investments under Section 186 of the Act, are available under
note no. A-11 and A-17 of notes to accounts, attached to the Standalone Financial Statements.

The full particulars are available in the Register maintained under Section 186 of the Act, which
is available for inspection during business hours on all working days (except Saturday and Sunday).

8. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All contract/arrangement/transactions entered by the Company during the Financial Year 2015-16 with
the related parties were in the ordinary course of business and on arm''s length basis. Hence, no
particulars are being provided in Form AOC-2. During the year, the Company has not entered into
contract/arrangement/transactions with related parties which could be considered material in
accordance with the Company''s ''Policy on Materiality of Related Party Transactions and Dealing with
Related Party Transactions''. The said policy is uploaded on the website of the Company.

Further, we draw your attention to Note no C-17 of the Standalone Financial Statements of the
Company.

9. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Details of energy conservation, technology absorption, research and development and foreign
exchange earnings as required under Section 134(3) (m) of the Act read with applicable rules are
given in Annexure III to this Report.

10. RISK MANAGEMENT

The Risk Management Committee meets at regular intervals and identifies the top risks and
prioritizes those risks. The progress and review status of those identified risks are presented to
the Audit and Finance Committee.

11. CORPORATE SOCIAL RESPONSIBILITY REPORT

The Company has developed a Corporate Social Responsibility Policy as per the requirement of the
Act and the same is available on the website of the Company.

The Corporate Social Responsibility Report in the required format is given in Annexure IV.

12. BOARD EVALUATION

The Board has formulated a Board Evaluation Policy for evaluation of individual Directors as well
as the entire Board and individual Committees thereof. The evaluation framework is divided into
parameters based on the various performance criteria to be done annually. The evaluation for the
year ended March 31, 2016 has been completed.

In compliance with the requirements under Regulation 25(3) of SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015, a meeting of Independent Directors was held on March
14,2016 primarily to discuss the matters mentioned under Schedule IV of the Companies Act, 2013.
All the Independent Directors of the Company attended the same.

13. PERFORMANCE AND FINANCIAL POSITION OF SUBSIDIARIES AND JOINT VENTURES

Subsidiaries:

i. Karad Projects and Motors Limited

The revenue under review is Rs,2,634,407,105/-which is 7% more as compared to the previous year.
ii. Kirloskar Systech Limited (KSL)

The revenue under review isRs,219,169,880/-which is 8% more as compared to the previous year. iii.
The Kolhapur Steel Limited

The revenue under review isRs,393,971,829/-which is 25% more as compared to the previous year. iv.
Kirloskar Corroborate Private Limited

The revenue under review isRs,455,988,050/-which is 36% less as compared to the previous year. v.
Kirloskar Brothers International B.V (consolidated)

The revenue under review is Rs, 8,725,365,002/- which is 10% less as compared to the previous year.
vi Kirloskar Ebara Pumps Limited (Joint Venture)

The revenue under review isRs,1,590,581,939/-which is 7% less as compared to the previous year.

The financial position of the subsidiaries and joint venture companies is given in AOC-1, elsewhere
in the Annual Report.

14. OTHER STATUTORY DISCLOSURES AS REQUIRED UNDER RULE 8(5) OF THE COMPANIES (ACCOUNTS) RULES,
2014

(i) Financial summary/highlights are already included elsewhere in the Report;

(ii) Change in the nature of the business during the year under review;

During the year under review, the process of amalgamation of the Kirloskar Systech Limited (KSL)
wholly owned subsidiary, with the Company was initiated and in order to enable the Company to carry
on the existing business of KSL i.e. System Engineering and Information Technology Solutions, the
Company has amended its Memorandum of Association by insertion of a new Objects Clause 43 (A) after
existing Clause No. 43.

The Members of the Company have accorded their approval vide Postal Ballot, the results of which
were declared on February 24,2016.


(iii) Directors and Key Managerial Personnel:

Mr. Vikram S. Kirloskar resigned as a Non-Executive Director of the Company with effect from May
26,2015.

Mr. J. R. Sapre ceased to be a Whole Time Director of the Company with effect from May 31, 2015.
Consequently he also resigned as a Director of the Company from the same date.

Mr. Umesh R. Shastry resigned from the post of Chief Financial Officer (CFO) with effect from June
01,2015 and Mr. C. M. Mate was appointed as CFO of the Company with effect from July 27,2015.

Mr. Kishor A. Chaukar was appointed as an Independent Director by the Members in the previous
Annual General Meeting

Subject to Member''s approval the Board has re-appointed Mr. Sanjay C. Kirloskar as a Managing
Director of the Company at its Board Meeting held on October 28, 2015; the Members are requested to
confirm his re-appointment with effect from November 19,2015 for a period of 5 (five) years, at the
ensuing AGM of the Company.

Mr. Alok Kirloskar, Non-Executive Director is liable to retire by rotation and being eligible
offers himself for re-appointment.

(iv) Companies which have become or ceased to be subsidiaries, joint ventures or associate
companies during the year:

Kirloskar Pompen B.V., Netherlands, (KPBV) Company''s step down subsidiary company in Netherlands,
has acquired a Dutch pump manufacturer "Rodelta Pumps International B.Y, Netherlands" (Rodelta) on
July 17,2015, who is into API and non API pumps for Oil and Gas, Pulp and papers, fluid, marine and
chemical applications etc. KPBV also incorporated "Rotaserve Overhaul B.Y" as its wholly owned
subsidiary as on January 04, 2016, who is into overhauling and will handle sales of spares and
service activities of KPBV.

SPP Pumps LP USA has now become SPP Pumps Inc. during the year.

SPP Pumps Holding LLC and SPP Pumps Management LLC, USA, who were the wholly owned subsidiaries of
SPP Pumps Limited UK, have ceased to operate during the year.

SPP Pumps France EURL who was subsidiary of SPP Pumps Limited has ceased to operate during the
year.

(v) Details relating to Deposits:

The Company neither accepts nor renews matured deposits since January 2003 and there were no
deposits accepted by the Company as covered under Chapter V of the Act read with Rules made there
under.

(vi) No significant and material orders were passed by the regulators or court or tribunals
impacting the going concern status and Company''s operations in future.


(vii) Details in respect of adequacy of internal financial controls with reference to the financial
statements:

The Company has an Internal Audit Charter specifying mission, scope of work, independence,
accountability, responsibility and authority of Internal Audit Department. The internal audit
reports are initially presented to the Chairman and Managing Director and significant observations
and follow up actions thereon are reported to Audit and Finance Committee.

The Auditors of the Company in Annexure B to their reports on financial statements have expressed a
qualified opinion on the operative effectiveness of two sub processes of the Internal Control
System over financial reporting of the Company and one of its jointly controlled entities. In this
regards, your directors wish to state that the respective companies have already initiated
necessary steps to strengthen their Internal Financial Control Systems with regard to these two
processes.

(viii) Other disclosures required under Companies Act, 2013 as may be applicable:

Composition of the Audit and Finance Committee has been disclosed under Corporate Governance
Report;

Establishment of vigil mechanism: The Company has already in place a Whistle Blower Policy1 as a
vigil mechanism since 2008. The details of the same are reported under Corporate Governance Report;

Disclosure as required under Section 197(12) of the Act read with applicable rules and details as
per Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014
are given in Annexure V& Annexure VI.

15. CASHFLOW

Cash flow statement for the year ended March 31,2016 is attached to the Balance Sheet.

SAFETY HEALTH AND ENVIRONMENT

Safety and Health

Our manufacturing plants at Kirloskarvadi, Dewas, Sanand (Ahmedabad), Kaniyur (Coimbatore) and
Kondhapuri are certified for Occupational Health and Safety Assessment Series standards (OHSAS
18001) and Environment Management System (IS014001).

The Company''s corporate office and four plants at Sanand (Ahmedabad), Kaniyur (Coimbatore),
Kirloskarvadi, Dewas are certified for SA8000 , implementation of SA 8000 is in progress at
Kondhapuri Plant and certification planned in 2016-17.

Achievements-

KBL Kirloskarvadi has been awarded "First Prize" by The Sangli District Industrial Safety Committee
for best Safety Performance in an Engineering Industry.

Dewas plant bagged ''Gold Safety Award 2015'', which was organized by Greentech Foundation New Delhi.

Dewas plant also secured winner (First) position in ''MT Award 2015 Excellence in Safety'', organized
by Manufacturing Today Magazine, Mumbai.

KBL Dewas won the 1st price in ENCON competition.

Safety Inspection/Audits -

Periodic internal audits of all our manufacturing units are being conducted to ensure legal
compliance, OHSAS 18001, IS014001 requirements and standard industrial practices.


More emphasis was given to ''Leading indicators'' rather than only concentrating on ''Lagging
indicators''. Nearly 300 incidents logged in the incident tracking system, Corrective Actions and
Preventive Actions (CAPA) are being tracked through the system, which helped to reduce the accident
rate. Safety Committees -

Safety committees in the manufacturing plants meet regularly to discuss various environment, health
and safety related issues. Workmen have equal number of participation in the safety committees. It
is encouraged to have departmental safety committees for bigger plants. Minutes of safety
committee meetings are made available to all for review. Issues raised in the meetings help to
Environment Health Safety improvement and reduce accidental situations.

New Initiative-

New initiatives were started to enhance the safety and increase safety awareness, which are as
under:

Online training course for machine guarding is conducted for shop floor staff and more than 98.5%
of staff has completed the training.

Behavioural Based Safety system is initiated at three locations namely Sanand, Kaniyurand Dewas.

Safety round by senior persons started on monthly basis at all manufacturing locations.

Departmental safety committees are established in Kirloskarvadi and Dewas plant.

Since, Kirloskarvadi plant is more than 100 years old, there are many Directorate of Industrial
Safety & Health (DISH) approved drawings, initiatives taken to prepare consolidated plan of factory
building and machinery layout, which got approved from DISH.

Environment Health Safety (EHS) Compliance -

Company strives for 100% compliance with EHS requirements. In order to verify that our facilities
are meeting regulatory compliances, all the project sites and manufacturing plants are audited
frequently.

Others-

Safety week and environment day are celebrated at all locations of manufacturing plants, offices
and project sites with number of activities, competitions and awareness programs.

Bi-monthly contractor''s safety meeting initiated.

Visit of safety committee members was organized in Kirloskarvadi and Kondhapuri plant.

A Safety meet of all persons looking after safety was organized in Sanand, which included the
safety visit to one Of the MNC plants.

Kirloskarvadi plant observed Safety Kaizen Month in September, 2015.

Environment and Energy

We monitor our direct and indirect energy consumption which is reported in our annual
sustainability report. A group wise Energy Conservation (ENCON) competition encourages all our
manufacturing plants to reduce the overall energy consumption.

Company has taken many steps to reduce energy consumption and water conservation which includes
maintaining power factor, use of alternative energy, installing VFD based equipments, replacing
streetlights by LED, installation of Bio-plant to recycle the canteen food waste at Dewas. Waste
heat recovery for Cupola furnace at Kirloskarvadi plant, installing close loop hydro testing at
Kirloskarvadi plant.


CORPORATE GOVERNANCE

Pursuant to Securities Exchange Board of India (SEBI) (Listing Obligations and Disclosure
Requirements), Regulations 2015, Management Discussion and Analysis Report, Report on Corporate
Governance, Auditors'' Certificate on Corporate Governance, Disclosure of unclaimed shares and the
declaration by the Chairman and Managing Director regarding affirmations for compliance with the
Company''s Code of Conduct are annexed to this report.

EMPLOYEE STOCK OPTION SCHEME (ESOS)

As you are aware, during the year 2007-08, the Company launched the Employees'' "Share a Vision"
Stock Option Scheme, 2007 (ESOS-2007).

The Management has formulated under ESOS - 2007, a proposal of providing stock options at Rs, 2/-
per option to award employees for their outstanding, exemplary performance in getting sustainable
results.

During the year, Mr. J. R. Sapre, ex-Whole Time Director of the Company and an employee of one of
the subsidiary companies have exercised their options and they were allotted 20,000 and 750 number
of shares respectively.

Auditors'' Certificate to that effect is provided as Annexure VII to this report.

DISCLOSURE UNDER THE "SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND
REDRESSAL) ACT, 2013.

In terms of Section 22 of the above mentioned Act, read with Sexual Harassment of Women at
Workplace (Prevention, Prohibition and Redressal) Rule, 2013, we report as follows for the year
ended on March 31,2016:

1 No. of Complaints received in the year Nil

2 No. of Complaints disposed off in the year Nil

3 Cases pending for more than 90 days Nil

4 No. of workshops and awareness
programmes conduced in the year 8

5 Nature of action by employer or
District Officer, if any NA

ACKNOWLEDGMENTS

Your Directors wish to place on record their appreciation of the unstinted support and co-operation
given by banks and financial institutions. Your Directors would further like to record their
appreciation of the efforts by the employees of the Company.

For and on behalf of the Board of Directors,

Sanjay C. Kirloskar

Chairman & Managing Director

DIN 00007885

Pune:May10,2016


Mar 31, 2015

TO THE MEMBERS

The Directors present the 95th Annual Report and the Audited Financial Statements of the Company for the year ended March 31,2015 together with the reports of the Auditors and Board thereon.

FINANCIAL RESULTS

The financial results of the Company for the year 2014-15 as compared with the previous year are as under: - Year ended Year ended March 31,2015 March 31,2014 (Rs) (Rs)

Revenue from Operations 16,257,051,488 17,598,053,185

Other income 112,714,764 53,149,058

Total 16,369,766,252 17,651,202,243

Profit before tax 55,289,084 697,546,094

Tax Expense (29,579,796) 220,671,149

Profit for the period 84,868,880 476,874,945

Surplus in Profit & Loss Account

brought forward from previous year 1,647,771,258 1,449,112,037

Depreciation impact due to

Companies Act, 2013 40,754,517 -

Available surplus 1,691,885,621 1,925,986,982

DIVIDEND

Your Directors recommend a dividend of 25% (Rs. 0.50 paise per equity share) for the year.

APPROPRIATIONS

Your Directors propose to appropriate the available surplus as under:-

Dividend of Rs 0.50 @25% (125%) on 79,388,176 (79,358,451) equity shares of Rs. 2/- each 39,694,088 1,98,396,128

Dividend distribution tax 1,238,198 32,132,101

Transfer to General Reserve - 47,687,495

Corporate Social Responsibility 45,000,000 -

Balance carried to Balance Sheet 1,605,953,335 1,647,771,258

TOTAL 1,691,885,621 1,925,986,982

STATE OF AFFAIRS OF THE COMPANY

The revenue from operations for the year under review is Rs. 1626 crores, which is less than 7.61% compared to the previous year. Drop in sales is mainly due to lower sales of project sectors, partly attributable to liquidity issue in the market and non-receipt of dispatch clearances from the customers.

The economic condition of the country continued to be sluggish throughout the year. The Company continued its focus of being selective in accepting orders depending on customers'' financial position. There was concentrated effort towards improvement of marketing initiatives and brand presence. Overall efforts were made to improve the efficiencies at all plants.

For project business, the Company continues to focus on closure of old projects and recovery of retention money. The main reasons for major drop in sales of project sectors was due to non receipt of advances / L/C from customers, delay in engineering and civil work by few clients and non receipt of dues from few customers.

The Company has launched towards the year end, highly-advanced "i-CAN" series of pumps, designed to reduce maintenance time and total cost of ownership (TCO) for the small scale industries.

Endorsing the Prime Minister''s "Make in India" call, the Company has also launched another product "i-NS" pump, which has been developed entirely with domestic technology. The new innovative features make the "i-NS" series pump ideal for dewatering function in the Water & Wastewater Treatment industries, Sewage, Building & Construction and other allied segments.

Kirloskarvadi plant received the National Energy Management Award. Kondhapuri plant developed and dispatched 1800 mm Sluice Valves (Largest size so far) & 2400 mm Turbine Inlet valves were manufactured and completed testing and inspection and received orders from State Water Supply & Sewerage Boards for various types of valves. Dewas plant was recognized by CII for "Significant achievement on the journey towards Business Excellence", was awarded TCM Level 4 by CII and produced all time highest DB pumps in the month of December 2014. Kaniyur plant received "Merit Award" for 5S by CII. Sanand plant received "Energy efficient unit" award in 15th CII national award for excellence in energy management 2014 and was recognized by CII for Greenco "Silver" certification.

There were no material changes or commitments to report which affect the financial position of the Company that has occurred between the end of financial year and the date of this report.

STATUTORY DISCLOSURES

1. EXTRACT OF ANNUAL RETURN

Extract of Annual Return in Form MGT-9 as per provisions of Section 134 read with Section 92(3) of the Companies Act, 2013 (the Act) is given in Annexure I to this report.

2. NUMBER OF MEETINGS OF THE BOARD

During the financial year under review, 6 (six) Board meetings were held, the details are appearing elsewhere in this report.

3. DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Act, the Board of Directors report that

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed;

(b) the directors had 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 view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis; and

(e) the directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively;

(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

4. INDEPENDENT DIRECTORS'' DECLARATION

All independent Directors of the Company have given declaration under Section 149 (7) of the Act, that he / she meets the criteria laid down in Section 149 (6) of the Act.

5. DISCLOSURE REQUIRED UNDER SECTION 134(3)(E)

The Board has adopted a Board Diversity Policy which sets the criterion for appointment as well as continuance of Directors, including independent Directors, at the time of re-appointment as Director in the Company. As per the policy, the Board will have an optimum combination of members with appropriate balance of skill, experience, background, gender and other qualities of Directors required for the effective functioning of the Board.

The Nomination and Remuneration Committee recommends remuneration of the Directors, subject to the overall limits set under the Act, as outlined in the Remuneration Policy recommended by the Committee and approved by the Board. As per the policy, the executive Directors are entitled for a fixed salary, other non- monetary benefits etc., and commission based on performance evaluation of the Director. In case of non- executive Directors, apart from receiving sitting fees, they may be given commission on the basis of criterion as per the policy.

The Remuneration policy is given in Annexure II.

6. REPORT OF AUDITORS

Your Company is already in the regime of unqualified financial statements. During the Financial Year under review also, there are no qualifications or adverse remarks or disclaimers made by the Statutory Auditor of the Company in their Audit Report and by the Company Secretary in practice in his Secretarial Audit Report, which are annexed herewith as Annexure VIII.

M/s. P G. Bhagwat, Chartered Accountants (Firm Registration no. 101118W) the Auditors retire at the ensuing Annual General Meeting and are eligible for re-appointment. The requisite certificate as required under the Act has been received. The Audit and Finance Committee has recommended their re-appointment and the annual audit fees.

Mr. M. J. Risbud, Practicing Company Secretary (CP No. 185) has been appointed as Secretarial Auditor as per Section 204 of the Act, 2013 for the Financial Year 2015-16.

Parkhi Limaye & Co. (Firm Registration No. 191) have been appointed as Cost Accountant as per Section 148 of the Act, read with applicable rules made thereunder for the Financial Year 2015-16. Their remuneration is subject to approval by the shareholders.

7. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186

The details of loans, guarantees or investments under Section 186 of the Act, are available under note no. A-11 and A-17 of notes to accounts, attached to the Standalone Financial Statements.

The full particulars are available in the Register maintained under Section 186 of the Act, which is available for inspection during business hours on all working days (except Saturday and Sunday).

8. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All contract/arrangement/transactions entered by the Company during the Financial Year 2014-15, with the related parties were in the ordinary course of business and on arm''s length basis. During the year the Company has not entered into contract/arrangement/transactions with related parties which could be considered material in accordance with the Company''s ''Policy on Materiality of Related Party Transactions and Dealing with Related Party Transactions''. The said policy is uploaded on the Company''s website.

Further, we draw your attention to Note no C-17 of the Standalone Financial Statements of the Company for details.

9. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Details of energy conservation, technology absorption, research and development and foreign exchange earnings as required under Section 134(3)(m) of the Act read with applicable rules are given in the Annexure III to this Report.

10. RISK MANAGEMENT

The Risk Management Committee meets at regular intervals and identifies the top risks and prioritises those risks. The progress and review status of those identified risks are presented to the Audit and Finance Committee every quarter.

11. CORPORATE SOCIAL RESPONSIBILITY REPORT

The Corporate Social Responsibility Report in the required format is given in Annexure IV.

12. BOARD EVALUATION

The Board has formulated a Board Evaluation Policy for evaluation of individual Directors as well as the entire Board and committees of the Board. The evaluation framework is divided into parameters based on the various performance criteria to be done annually. The evaluation for the year ended March 31, 2015 has been completed.

13. PERFORMANCE AND FINANCIAL POSITION OF SUBSIDIARIES AND JOINT VENTURES

Subsidiaries:

i. Karad Projects and Motors Limited

The revenue under review is Rs. 2,455,915,024/- which is 21.4% more as compared to the previous year.

ii. Kirloskar Systech Limited

The revenue under review is Rs. 203,124,070/- which is 660.2% more as compared to the previous year.

iii. The Kolhapur Steel Limited

The revenue under review is Rs. 314,178,244/- which is 39.3% more as compared to the previous year.

iv. Kirloskar Corrocoat Private Limited

The revenue under review is Rs. 715,580,568/- which is 94.6% more as compared to the previous year.

v. Kirloskar Brothers International B.V (consolidated)

The revenue under review is Rs. 9,747,974,297/- which is 10.5% more as compared to the previous year.

vi Kirloskar Ebara Pumps Limited (Joint Venture)

The revenue under review is Rs. 1,70,184/- which is 105% more as compared to the previous year.

The financial position of the subsidiaries and joint venture companies is given in AOC-1, elsewhere in the Annual Report.

14. OTHER STATUTORY DISCLOSURES AS REQUIRED UNDER RULE 8(5) OF THE COMPANIES (ACCOUNTS) RULES, 2014

(i) Financial summary/highlights are already included elsewhere in the Report;

(ii) There has been no change in the nature of the business during the year under review;

(iii) Directors and Key Managerial Personnel:

- Mr. Rahul C. Kirloskar - Non Executive Director, resigned as Director of the Company with effect from April 22, 2014.

- Mr. U. V Rao - Independent Director, demised on January 24, 2015.

- Mr. A. N. Alawani - Non Executive Director, resigned as a Director of the Company with effect from April 23, 2015.

- Mr. Kishor Chaukar - Additional Director appointed by the Board with effect from April 27, 2015, in the category of Independent Director. Board recommends his appointment as an Independent Director at the ensuing Annual General Meeting.

- Mr. Sanjay C. Kirloskar, Chairman and Managing Director, Mr. Umesh Shastry, Chief Financial Officer and Mr. Sandeep Phadnis, Company Secretary were appointed as Key Managerial Personnel pursuant to Section 203 of the Companies Act, 2013;

In view of the resignation of Mr. A. N. Alawani and in order to comply with the requirements of Section 152(6) of the Act read with Articles of Association of the Company, Mr. Sanjay C. Kirloskar - Chairman and Managing Director will be considered to be a Director whose period of office is liable to determination by rotation.

Mr. Alok Kirloskar, Non-Executive Director is liable to retire by rotation and being eligible offers himself for re-appointment.

(iv) Companies which have become or ceased to be subsidiaries, joint ventures or associate companies during the year:

Kirloskar Brothers International (Pty) Ltd. - South Africa, was formed during the year as a step down subsidiary of the Company.

(v) Details relating to Deposits :

The Company neither accepts nor renews matured deposits since January 2003 and there were no deposits accepted by the Company as covered under Chapter V of the Act read with Rules thereunder.

(vi) No significant and material orders were passed by the Regulators or court or tribunals impacting the going concern status and company''s operations in future.

(vii) Details in respect of adequacy of internal financial controls with reference to the Financial Statement:

The Company has an Internal Audit Charter specifying mission, scope of work, independence, accountability, responsibility and authority of Internal Audit Department. The internal audit reports are initially presented to the Executive Committee consisting of the Chairman and Whole Time Director and significant observations and follow up actions thereon are reported to Audit and Finance Committee.

(viii) Other disclosures required under Companies Act, 2013 as may be applicable:

- Composition of the Audit and Finance Committee has been disclosed under Corporate Governance Report;

- Establishment of vigil mechanism: The Company has already in place a ''Whistle Blower Policy'' as a vigil mechanism since 2008. The details of the same are reported under Corporate Governance Report;

- Disclosure as required under Section 197(12) of the Act read with applicable rules and details as per Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given in Annexure V & Annexure VI.

15. CASH FLOW

Cash flow statement for the year ended March 31,2015 is attached to the Balance Sheet.

safety; health and environment

Safety and Health

All our manufacturing plants are certified for Occupational Health and Safety Assessment Series (OHSAS) standards ISO 18001 and Environment Management System (ISO 14001).

The Company''s corporate office and four plants namely Sanand (Ahmedabad), Kaniyur (Coimbatore), Kirloskarvadi, Dewas are audited for SA8000.

Achievements -

Mega Plantation (6000 nos.) was carried out in Dewas on 31st July 2014 Dewas manufacturing facility bagged CII-Silver rating -Green-co certification.

Dewas manufacturing facility bagged ''Gold Safety Award 2014'', which was organized by ''Greentech Foundation'', New Delhi.

Dewas manufacturing facility secured winner (First) position in ''MT Award 2014 Excellence in Safety'', organized by ''Manufacturing Today Magazine'', Mumbai.

Safety Inspection/Audits -

Periodic internal audits of all our manufacturing units are being conducted to ensure legal compliance, OHSAS 18001, ISO 14001 requirements and standard industrial practices. Corporate procedures are developed implemented to ensure common understanding and requirements throughout the Company.

Safety inspections of all manufacturing plants, project sites and corporate office are being carried out frequently to find out short falls and to make improvements.

Internal audit non-compliances (NCs) and area for improvements are tracked through the issue tracking mechanism. Points raised during safety inspections and unsafe observations are tracked through the Incident management system, which is developed in 2014. All types of accidents/incidents are also tracked through this system.

Safety Committees -

Safety committees in the manufacturing plants meet regularly to discuss on various environment, health and safety related issues. Workmen have equal number of participation in the safety committees. It is encouraged to have departmental safety committees for bigger plants. Minutes of safety committee meetings are made available to all for review. Issues raised in the meetings help to Environment Health Safety improvement and reduce accidental situations.

Training -

Safety Training is provided to all employees including contract employees. Induction training is an initial activity for all new entrants. More than 1000 man-days were used for safety training in 2014-15 excluding induction training. Mock drills are regularly conducted to ensure the emergency preparedness. Lacunae observed in the mock drill are bridged immediately. A vigorous induction program is in place for all new entrants. Training programs on health awareness and food habits are organized for the benefit of employees.

An initiative is taken to implement the Safety passport system in Dewas and Kirloskarvadi plants. More than 1500 employees were trained by an external agency.

Environment Health Safety (EHS) Compliance -

Company strives for 100% compliance with EHS requirements. To verify that our facilities are meeting regulatory compliance requirements, all the project sites and manufacturing plants are audited frequently.

Others -

Occupation Health Centre (OHC) at corporate office and major manufacturing units provide immediate medical needs. Medical facility is extended to nearby villages around Kirloskarvadi. As part of preventive measures, all employees above 40 years of age undergo comprehensive annual medical check-up; counselling sessions are conducted for employees based on their medical check-up. Medical check-up of all the persons working in manufacturing plants are done annually.

A special drive was undertaken to report near miss, unsafe acts and condition throughout Company''s plants in September - October.

A new fire tender with latest facilities is procured for Kirloskarvadi plant.

Safety week is celebrated at all locations of manufacturing plants, offices and project sites with number of activities, competitions and awareness programs.

Environment

All our manufacturing plants are certified for the Environment Management System (ISO14000). Our Kondhapuri plant has also received certification for Energy Management System (ISO50001). It is the first company in Pune region to achieve this certification.

We monitor our direct and indirect energy consumption which is reported in our annual sustainability report. A group wise Energy Conservation (ENCON) competition encourages all our manufacturing plants to reduce the overall energy consumption.

Pumping systems consume around 30% energy in industries. Energy Audit services launched by the Company have helped industries in replacing old pumping systems by energy efficient pumping systems. Our energy efficient pumping solutions and Lowest Life Cycle Cost pumps have significantly reduced the energy consumption.

We have a special cell called Pump Energy Assessment and Solution Cell which provides sustainable solutions for reducing carbon footprint at customer''s end. The team consists of certified Energy Managers and Energy Auditors. We are certified by BEE i.e. Bureau of Energy Efficiency, as an Energy Service Company, Grade 2.

During the year 2014-15, we have saved around 2430183 kW of energy and prevented the emission of 2528.8 tCO2e at customer''s end.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, Management Discussion and Analysis Report, Report on Corporate Governance, Auditors'' Certificate on Corporate Governance (Annexure VII) and the declaration by the Chairman and Managing Director regarding affirmations for compliance with the Company''s Code of Conduct are annexed to this report.

EMPLOYEE STOCK OPTION SCHEME (ESOS)

As you are aware, during the year 2007-08, the Company launched the Employees'' "Share a Vision" Stock Option Scheme, 2007 (ESOS-2007).

The Management has formulated under ESOS - 2007, a proposal of providing stock options at Rs. 2/- per option to award employees for their outstanding, exemplary performance in getting sustainable results. During the year, 20,000 options have been granted to the Whole Time Director as a part of commission for the year 2013-14.

Auditors'' Certificate as required under the SEBI (Share Based Employee Benefits) Regulations, 2014 with regard to compliance of the regulations is provided as Annexure VII to this report.

DISCLOSURE UNDER THE "SEXUAL HARASSMENT OF WOMAN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013".

In terms of Section 22 of the above mentioned Act, read with Sexual Harassment of Woman at Workplace (Prevention, Prohibition and Redressal) Rule, 2013, we report as follows for the year ended on March 31,2015:

1 No. of Complaints received in the year Nil

2 No. of Complaints disposed off in the year Nil

3 Cases pending for more than 90 days Nil

4 No. of workshops and awareness programmes conduced in the year 75

5 Nature of action by employer or District Officer, if any NA

ACKNOWLEDGMENTS

Your Directors wish to place on record their appreciation of the unstinted support and co-operation given by banks and financial institutions. Your Directors would further like to record their appreciation of the efforts by the employees of the company

For and on behalf of the Board of Directors,

Sanjay C. Kirloskar Chairman & Managing Director DIN 00007885

Pune: April 27, 2015


Mar 31, 2014

THE MEMBERS

The Directors present the 94th Annual Report and the Audited Annual Accounts of the Company for the year ended March 31,2014.

FINANCIAL RESULTS

The financial results of the Company for the year 2013-14 as compared with the previous year are as under: -

Year ended Year ended March 31, 2014 March 31, 2013
Revenue from Operations 17,516,340,754 18,723,978,939

Other income 54,616,152 69,995,455

Total 17,570,956,906 18,793,974,394

Profit before tax 697,546,094 719,478,435

Tax Expense 220,671,149 135,001,177

Profit for the period from continuing 476,874,945 584,477,258 operations

Short Provision of income tax on account of earlier years - 150,000,000

Profit for the period 476,874,945 434,477,258

Surplus in Profit & Loss Account 1,449,112,037 1,241,391,915 brought forward from previous year

Available surplus 1,925,986,982 1,675,869,173

DIVIDEND

Directors are pleased to recommend a dividend of 125% (Rs. 2.50 per equity share) for the year.

APPROPRIATIONS

Your Directors propose to appropriate the available surplus as under:-

Dividend of Rs. 2.50 @ 125% (100%) on 79,358,451 (79,358,451) equity 198,396,128 158,716,902 shares of Rs. 2/- each

Dividend distribution tax 32,132,101 24,592,508

Transfer to General Reserve 47,687,495 43,447,726

Balance carried to Balance Sheet 1,647,771,258 1,449,112,037

Total 1,925,986,982 1,675,869,173

OPERATIONS

The revenue from operations for the year under review was Rs. 1752 Crores, which is less than 6.85% compared to the previous year.

The Company focused on improving operational efficiencies across the supply chain to increase productivity. Assembly of a pump in a record time of 20 seconds at Kaniyur (Coimbatore) plant, exemplifies our productivity improvement measures. Information Technology tools and processes were leveraged to streamline and enhance effectiveness of business functions like marketing, manufacturing, after sales support and human resource.

Product business was promoted by enhancing the channel network across India and introduction of new products for different market segments. We now have more than 15,000 retailers as a part of our channel network. We marketed value added products like solar pump, hydel turbines and energy saving Lowest Life-Cycle Cost (LLC™) pumps in line with our strategy to promote sustainability. We developed primary and secondary heat transfer pumps for the nuclear industry.

In the projects business, leveraging of financial control led to the improvement in balance sheet. Our strategy of being selective in projects business continued and we are glad to report that our customers have appreciated our organization''s stand on payment terms since it is of mutual benefit. Institutionalization of best in class project management practices helped in better project control and closure of the projects ahead of time with healthy cash flows.

STATUTORY DISCLOSURES

1. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE

Details of energy conservation, technology absorption, research and development and foreign exchange earnings and outgo as required under Section 217 (1) (e) of the Companies Act, 1956, are given in the Annexure I to this Report.

2. PARTICULARS OF EMPLOYEES

As per provisions of Section 219 (1) (b) (iv) of the Companies Act, 1956, the Directors'' Report and Accounts are being sent to the shareholders excluding the statement giving particulars of employees under Section 217 (2A) of the said Act. Any shareholder interested in obtaining a copy of the statement, may write to the Company Secretary at the Registered Office of the Company.

3. SUBSIDIARY COMPANIES

During the year, Kirloskar Brothers International B.V., Netherlands (KBI BV), a wholly owned subsidiary company of the Company, has acquired balance 40% holdings in Kirloskar Brothers Europe B.V., Netherlands (KBE BV). As a result, KBE BV has now become a wholly owned subsidiary of KBI BV

During the year, SPP Pumps LP Georgia, USA, has acquired SyncroFlo Inc., Georgia, USA. SyncroFlo is a pioneer in the domestic water booster industry. SPP Pumps LP is owned by SPP Pumps Limited, UK, which is a wholly owned subsidiary of Kirloskar Brothers International B.V, Netherlands, a wholly owned subsidiary of the Company.

As you were aware, the Scheme of Arrangement and Amalgamation of erstwhile, Hematic Motors Private Limited with Kirloskar Constructions and Engineers Limited (the ''Scheme''), was sanctioned by the Honourable High Court of the Judicature at Bombay on March 1, 2013. During the year 2013-14, the Honourable High Court at the Judicature at Madras, by its orders dated June 23,2013, has also sanctioned the Scheme and subsequently, the same was made effective on July 29,2013. Also, in terms of the said Scheme, the name of the erstwhile Kirloskar Constructions and Engineers Limited was changed as ''Karad Projects and Motors Limited''.

During the year Company has executed an agreement for the transfer of Corporate Information Centre (CIC) division of the Company to Kirloskar Systech Limited (KSL), a wholly owned subsidiary of the Company. CIC supported the Company for IT hardware and software maintenance, e-mail, internet and intranet facilities and other IT related services. All the existing assets of CIC shall now vest in KSL.

KSL is engaged in providing engineering design and information technology related services to the Company, its subsidiaries and external parties Transfer of assets from CIC will help KSL expand its business activities and become one of the competent players in the IT Industry.

The Kolhapur Steel Limited (TKSL), Company''s subsidiary, has incurred losses for the year ended March 31, 2014, exceeding the net worth as on that date. TKSL has, thus, become sick as per Section 3 (1) (o) of the Sick ndustrial Companies (Special Provisions) Act, 1985. TKSL is in the process of filing a reference to the Board set up under the said Act. TKSL has plans of revival. The Company has already initiated some measures to revive TKSL. The Company is considering infusing some fresh capital in TKSL in order to make it a viable entity.

The Government of India, Ministry of Corporate Affairs vide General Circular No. 2/2011, has granted general exemption under Section 212 (8) of Companies Act, 1956 to companies from attaching subsidiary companies'' documents viz. Balance Sheet, Profit and Loss account, Directors'' and Auditors'' Reports etc. to the Balance Sheet of a holding company.

Accordingly, we have attached certain information in respect of the Company''s subsidiaries for the respective financial years.

Further, we hereby undertake that annual accounts for the subsidiary companies and the related detailed information will be made available to shareholders seeking such information. The annual accounts of the subsidiary companies will also be kept open for inspection of shareholders.

The consolidated financial statement of subsidiaries prepared as per the applicable provisions and duly audited by the statutory auditors, is presented elsewhere in this annual report.

4. DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 217 (2AA) of the Companies Act, 1956, the Board of Directors report that

- In the preparation of the annual accounts, the applicable accounting standards have been followed and there was no material departure from the accounting standards;

- Accounting policies have been selected and applied consistently and that the judgements and estimates made are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31,2014 and of the profit of the Company for the period April 1,2013 to March 31,2014;

- Proper and sufficient care has been taken for the maintenance of adequate accounting records, in accordance with the provisions of Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

- The annual accounts have been prepared on a going concern basis.

5. CASH FLOW

A cash flow statement for the year ended March 31,2014 is attached to the Balance Sheet.

SAFETY, HEALTH AND ENVIRONMENT

Safety and Health

All our manufacturing plants are certified for Occupational Health and Safety Assessment Series (OHSAS) standards IS018001.

Periodic safety audits of all our manufacturing units and project sites including corporate office, ensures compliances to safety norms. Review of audit findings is conducted and actions are initiated to improve the safety performance. ''Safety Committees'' at corporate and manufacturing units have been formed to monitor the intent of safety throughout the organisation. Periodic emergency evacuation training programs and mock drills are conducted at corporate office, project sites and manufacturing locations to ensure preparedness to face the eventualities.

Safety scorecard is reviewed on regular basis. Contractors'' employees at sites and operation units are provided training on safety. Actions required in improving safety conditions are communicated to the relevant site through safety manager. EHS bulletins and safety guidelines are periodically circulated all across the organisation for sharing and creating awareness on safety related matters. Corporate safety committee guides and monitors all sites and manufacturing units, to improve near miss, accident and implementation of all statutory requirements related to safety, so as to achieve our goal of zero accident and zero man days lost.

Occupation health centre (OHC) at corporate office and major manufacturing units provide immediate medical needs and support to the employees in keeping their good health. Training programs on health awareness and food habits are organized for the benefit of employees. We also conduct First Aid training programs for creating awareness and developing basic skills amongst our employees to deal in emergency conditions.

As part of preventive measure, all employees above 30 years of age undergo annual medical check-up. Counselling sessions are conducted for employees based on their medical check-up.

A joint committee of workmen and management governs the canteen activities to ensure that hygienic and nutritious food is provided to employees.

Environment

All our manufacturing plants are certified for the Environment Management System (ISO 14000). Our Kondhapuri plant has also received certification for Energy Management System (ISO 50001). It is the first Company in Pune region to achieve this certification.

Our plants at Kaniyur, Kondhapuri and Dewas have applied for ''GreenCo'' certification of Confederation of Indian ndustries. We are happy to inform you that our Dewas plant has achieved ''Silver'' rating in its first attempt on GreenCo and has become the first Indian Pump manufacturing plant to achieve this rating. We monitor our direct and indirect energy consumptions which are reported in our annual sustainability reports. Energy Conservation (ENCON) competition encourages all our manufacturing plants to reduce the overall energy consumption.

Pumping systems consume around 30% energy in industries. The Energy Audit services launched by the Company have helped industries in replacing old pumping systems by energy efficient pumping systems. Our energy efficient pumping solutions and LLC™ pumps have significantly reduced the energy consumption.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the listing agreement with the Stock Exchanges, Management Discussion and Analysis Report, Report on Corporate Governance, Auditors'' Certificate on Corporate Governance and the declaration by the Chairman and Managing Director regarding affirmations for compliance with the Company''s Code of Conduct are annexed to this report.

EMPLOYEE STOCK OPTION SCHEME (ESOS)

As you are aware, during the year 2007-08, Company launched the Employees'' "Share a Vision" Stock Option Scheme, 2007 (ESOS-2007).

The Management has formulated under ESOS - 2007, a proposal for providing stock options at Rs. 2/- per option to award employee for their outstanding, exemplary performance in getting sustainable results. During the year, 35975 options have been granted.

Disclosures required to be made under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and a certificate from the Statutory Auditors with regard to compliance of the guidelines, is provided as Annexure 11 to this report.

FIXED DEPOSITS

The Company neither accepts nor renews matured deposits since January, 2003. The amount of the unclaimed matured deposits has been transferred to the Investor Education & Protection Fund Account as and when due and at present, there is no outstanding unclaimed deposit as on March 31,2014.

CORPORATE SOCIAL RESPONSIBILITY

The Company considers the society as one of the most important stakeholders. We continue to support the communities close to our manufacturing plants. Society related initiatives are implemented based on the needs and expectations of society which are collected through structured society perception survey and also feedbacks received through other forums of engagement.

We have continued our focus on development activities in the areas of education, health, sanitation and hygiene, combating diseases, promoting maternal health and employability.

Activities in Manufacturing plants

In the area of education, support was provided to upgrade school buildings and other facilities. Notebooks were distributed to children in schools near Dewas plant. School children were provided guidance for competitive examinations. Earn & Learn scheme for ITI apprentices in collaboration with Yashaswi Institute, Pune continued this year to improve employability of these apprentices. For empowering women, various training sessions on skill development were organized. Self-help groups have been created to address employment of women at Kirloskarvadi and Dewas. 40 schools near Kirloskarvadi participated in Adarsha Shala competition.

Health related initiatives for the community around Kirloskarvadi and Dewas plants included free medical check-up camps with free medicine distribution. These check-ups were conducted for anaemia, HIV, bone marrow density etc. To improve health of expecting mothers and eliminate infant mortality, antenatal care, Garbhsanskar check-up camps were organized for women. Blood donation camps were also organized at Kirloskarvadi and Dewas manufacturing units. Awareness sessions were conducted for life style management and overcoming addictions. Skits and rallies were organized to create awareness about AIDS in the local communities.

We have continued our efforts to communicate importance of sanitation and hygiene to school children through our initiative WASH (Water Sanitation and Hygiene). The awareness programs were conducted in municipal schools around Kirloskarvadi, Pune and Dewas. The programs included enactment of skits, cartoon videos and lectures on adolescent hygiene, distribution of water purifier systems for schools, etc.

Various awareness programs were organized under the aegis of Vasundhara Festival in the schools and nearby communities.

DIRECTORS

In terms of the provisions of Companies Act, 2013 and rules thereof (''the Act''), certain class of companies are mandatorily required to appoint at least 1/3rd of its total directors, who are complying with the requirements as mentioned in the Act, as Independent Directors of the company.

As per the existing composition of the Board of Directors of the Company. Mr. U. V Rao, Mr. S. N. Inamdar, Mr. PS. Jawadekar, Mrs. Lalita D. Gupte and Mr. Pratap B. Shirke are existing Independent Directors of the Company complying with the requirements of the Act. These Directors have given their declarations regarding fulfilment of conditions as given under the Act.

Their brief profiles along with other details, are included in the Explanatory Statement attached to the notice of the Annual General Meeting.

The Board proposes the appointment of these directors as Independent Directors at the ensuing Annual General Meeting, not liable to retire by rotation.

Mr. Vikram S. Kirloskar will retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

His brief profile is appearing in the Report on Corporate Governance of this Annual Report.

Mr. Rahul C. Kirloskar resigned from the Board of Directors with effect from April 22,2014, due to personal reasons. Mr. Rahul C. Kirloskar has been actively associated with the Company for more than a decade. The Board places on record its appreciation for contribution of Mr. Rahul C. Kirloskar during his tenure as a director of the Company.

AUDITORS

M/s. R G. Bhagwat, the Statutory Auditors, retire at the ensuing Annual General Meeting and are eligible for re- appointment. The requisite certificate as required under the Companies Act, 2013 has been received. The Audit and Finance Committee has recommended their re-appointment for the year 2014-15.

ACKNOWLEDGMENTS

Your Directors wish to place on record their appreciation for the unstinted support and co-operation given by banks and financial institutions. Your Directors would further like to record their appreciation for the efforts by the employees of the Company.

For and on behalf of the Board of Directors

Sanjay C. Kirloskar Chairman and Managing Director

Ahmedabad: April 22,2014


Mar 31, 2013

The Directors present the 93rd Annual Report and the Audited Annual Accounts of the Company for the year ended March 31, 2013.

FINANCIAL RESULTS

The financial results of the Company for the year 2012-13 as compared with the previous year are as under: -

Current Previous Year ended Year ended March 31, 2013 March 31, 2012 (Rs.) (Rs.)

Revenue from Operations 18,723,978,939 17,818,761,202

Other income 69,995,455 462,787,460

Total 18,793,974,394 18,281,548,662

Profit before tax 719,478,435 339,655,805

Tax Expense 135,001,177 24,669,152

Profit foe the period from continuing 584,477,258 314,986,653 operations

Short Provision of income tax on account of earlier years 150,000,000 3,100,000

Profit for the period 434,477,258 311,886,653

Surplus in Profit & loss Account 1,241,391,915 1,142,469,029 brought forward from previous year

Available surplus 1,675,869,173 1,454,355,682

DIVIDEND

Directors recommend a dividend of 100% (Rs. 2/- per equity share) for the year.

APPROPRIATIONS

Your Directors propose to appropriate the available surplus as under :-

Dividend of Rs. 2/- @100% (100%) on 79,358,451 (79,339,701) equity shares of Rs. 2/- each 158,716,902 158,679,402

Dividend distribution tax 24,592,508 23,095,700

Transferred to General Reserve 43,447,726 31,188,665

Balance carried to Balance Sheet 1,449,112,037 1,241,391,915

Total 1,675,869,173 1,454,355,682

OPERATIONS

The revenue from operations of the Company for the year under review was Rs.1872 crores, which is more than 5.08% compared to the previous year.

This year, our focus continued to be on the products business. We are catering to a broad base of utility and process pumping applications in the Products Business. In the Projects Business, while being selective on booking new orders, we are strengthening our project management and execution capabilities. We have aligned our marketing functions to provide comprehensive pumping solutions to our customers. Our manufacturing plants are geared up to the growing demand from the products business on account of productivity improvement initiatives.

In both Products and Projects businesses, our focus continues to be on value added solutions. We augmented our capability to deliver small pumps by commissioning a new plant in Sanand, Gujarat. At the same time, we are re-engineering our small pump operation''s supply chain to make it leaner and more responsive. In the current year, we commissioned spares warehouse and refurbishment centers and appointed service and spares dealers to improve the reach and responsiveness of the after sales support.

The economic scenario in the country continues to be challenging. In the coming year, we will focus on improving margins and cash generation.

Under Section 133A of the Income Tax Act, the Income Tax department carried out a survey at the Company premises in January, 2013. Based on the findings of the survey, the department has raised additional tax liability on the Company, which has been paid during the quarter. The short provision for tax in respect of earlier years, consequent to the additional tax claim, has been appropriately disclosed by the Company in the financial for the year ended on March 31, 2013.

STATUTORY DISCLOSURES

1. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE

Details of energy conservation, technology absorption, research and development and foreign exchange earnings as required under Section 217 (1) (e) of the Companies Act, 1956, are given in the Annexure to this Report.

2. PARTICULARS OF EMPLOYEES

The Information required under Section 217 (2A) of the Companies Act, 1956 and the rules made thereunder is provided in annexure forming part of this Report. As per provisions of section 219(1)(b)(iv) of the said Act, the Directors'' Report and Accounts are being sent to the shareholders excluding the statement giving particulars of employees under Section 217(2A) of the said Act. Any Shareholder interested in obtaining a copy of the statement, may write to the Company Secretary at the Registered Office of the Company.

3. SUBSIDIARY COMPANIES

During the year, a Scheme of Arrangement and Amalgamation of Hematic Motors Private Limited with Kirloskar Constructions and Engineers Limited (the ''Scheme'') was filed with the Hon''ble High Courts of Judicature at Bombay and Madras.

The Board of Directors of the Company have passed a resolution on November 29, 2012 approving the Scheme. The appointed date in terms of the Scheme is April 1, 2012. The Scheme has been approved by Honourable Bombay High Court and approval from Honourable Madras High Court is awaited. The effect of the Scheme will be taken into consideration from the appointed date after approval from Honourable Madras High Court.

Micawber 784 (Proprietary) Ltd., Kirloskar Brothers Limited''s step down subsidiary through Wholly Owned Subsidiary Company - Kirloskar Brothers International B.V. (KBI BV), Netherlands, has acquired balance 10% holding in Braybar Pumps (Proprietary) Ltd. (Braybar) on November 1, 2012. As a result, Braybar has become 100% subsidiary of Micawber 784 (Proprietary) Ltd.

The financials of the subsidiaries appear elsewhere in this annual report.

On February 8, 2011 the Government of India, Ministry of Corporate Affairs vide General Circular No. 2/2011, granted general exemption under section 212(8) of the Companies Act, 1956 for companies from attaching subsidiary companies'' documents viz. Balance sheet, Profit and Loss account, Directors'' and Auditors'' Reports etc. to the Balance sheet of a holding Company.

As per the said general exemption, instead of the annual accounts of the subsidiary companies, we have attached certain information in respect of the Company''s subsidiaries for the respective financial years.

Further, we hereby undertake that annual accounts for the subsidiary companies and the related detailed information will be made available to shareholders seeking such information. The annual accounts of the subsidiary companies will also be kept open for inspection for shareholders.

The consolidated financial statement of subsidiaries prepared as per applicable provisions and duly audited by the statutory auditors, is presented elsewhere in this annual report.

4. DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 217 (2AA) of the Companies Act, 1956, the Board of Directors report that

- In the preparation of the annual accounts, the applicable accounting standards have been followed and there was no material departure from the accounting standards.

- Accounting policies have been selected and applied consistently and that the judgements and estimates made are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2013 and of the profit of the Company for the period April 1, 2012 to March 31, 2013.

- Proper and sufficient care has been taken for the maintenance of adequate accounting records, in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities, and

- The annual accounts have been prepared on a going concern basis.

5. CASH FLOW

A cash flow statement for the year ended March 31, 2013 is attached to the Balance Sheet.

SAFETY, HEALTH AND ENVIRONMENT

Safety and Health

All our manufacturing plants are certified for Occupational Health and Safety Assessment Series (OHSAS) standards ISO 18001.

We conduct periodic safety audit of all our manufacturing units and all our project sites including corporate office. The audit outcomes are converted into action plans, implemented and periodically reviewed. A Corporate Safety Committee has been formed to monitor the implementation of safety standards throughout the organisation. Periodic mock drills are conducted at the Corporate Office, project sites and manufacturing locations in order to be prepared to face such eventualities.

Safety training is also imparted to contract employees at sites and operation units. We monitor on regular basis the safety statistics through monthly review sessions. Actions required in improving safety conditions are communicated to the relevant site through safety manager. Corporate safety committee guides and monitor all sites and manufacturing units, to improve near miss, accident and implementation of all statutory requirements related to safety, so as to achieve our goal of zero accident and zero man days lost.

We have Occupation Health Centers (OHCs) at the Corporate Office and major manufacturing units. These OHCs provide immediate medical needs and support the employees in keeping good health. To improve health awareness and food habits, various health awareness programmes are organised.

An annual medical check-up is conducted for all employees and their spouse, who are above 30 years of age. Based on medical reports, counselling sessions are conducted and health talks are arranged. Hygienic and nutritious food is provided to all employees in the Company canteens. The canteen activities are governed by a joint committee of workmen and management to ensure clean and hygienic food services.

Environment

As regards environment protection all our plants comply with the requirements of Environment Management System (ISO 14000). Our Kondhapuri Plant has been recommended for certification to the Energy Management System (ISO 50001) standard. We are planning to get the same certification for all other manufacturing plants by March 2014.

We have started reporting our direct and indirect energy consumptions in our sustainability reports. As an initiative to monitor our scope -3 emissions we have started monitoring the carbon emissions due to travel of employees to workplace and also business air travel. This will help us identify opportunities to reduce these carbon emissions and reduce our carbon footprint.

Our Energy Audit services to industries have helped in replacing old pumping systems consuming more electrical energy. Our energy efficient pumping solutions and Lowest Life Cycle Cost pumps have helped industries reduce their energy consumption and save electrical power for the nation.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, Management Discussion and Analysis Report, Report on Corporate Governance, Auditors'' Certificate on Corporate Governance and the declaration by the Chairman and Managing Director regarding affirmations for compliance with the Company''s Code of Conduct are annexed to this report.

EMPLOYEE STOCK OPTION SCHEME (ESOS)

As you are aware, during the year 2007-08, the Company launched the Employees'' "Share a Vision" Stock Option Scheme, 2007 (ESOS-2007).

The Management has formulated under ESOS - 2007, a proposal of providing stock options at Rs. 2/- per option to award employee for their outstanding, exemplary performance in getting sustainable results. During the year, 18750 equity shares of Rs. 2/- each have been allotted.

Consequent to allotment of the above shares under ESOS, the issued and paid-up share capital of the Company, at the end of the year 2012-13, stands at Rs. 158,716,902/- i.e. 79,358,451 equity shares of Rs. 2/- each.

Disclosures required to be made under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and a certificate from the Statutory Auditors with regards to compliance of the guidelines, is provided as Annexure to this report.

FIXED DEPOSITS

The Company neither accepts nor renews matured deposits since January, 2003. The amount of the unclaimed matured deposits has been transferred to the Investor Education & Protection Fund Account and at present, there is no outstanding unclaimed deposit as on 31.03.2013.

CORPORATE SOCIAL RESPONSIBILITY

Our Corporate Social Responsibility (CSR) is based on the CSR policy. We are committed to developing sustained and constructive relationship with all our stakeholders to improve the quality of life. We extend continuous support in development activities in communities located near our manufacturing units. Our main focus is on health, education for upliftment of economically backward and under privileged class of the society. As a socially responsible organization, the Company continued its efforts in implementing community programs based on the needs and expectations of society gathered through Society Perception Survey and other feedbacks through engagement with the society.

Our major CSR activities include career guidance to students, WASH (Water and sanitation and hygiene), pre- natal courses, women''s health check-ups, medicare facility for the society, course on effective parenting, adolescence hygiene, formation of self-help groups, awareness on de-addiction and oral cancer, AIDS awareness to nearby villagers, uniform, note books, school bags and sewing machines to school children and physically challenged children, a mega plantation at Dewas, blood donation camps, etc.

Activities in Manufacturing plants

As part of preventive measure, free medical check-up camps with free medicine distribution camps were conducted. Number of beneficiaries has increased during the year under review. We also conducted blood donation camps at Kirloskarvadi and Dewas manufacturing units.

In order to contribute to economic development of the society, Earn & learn scheme for ITI apprentices is implemented in collaboration with Yashaswi Institute, Pune.

Women empowerment : An Orientation programme on winding of pumps and motors was conducted for approx. 60 women in the premises of the manufacturing unit at Dewas for creating a Self Help Group. Under this scheme, women are given 15 days training after which they may get employment at our vendors or other industries.

In the field of education, training programme arranged for teachers, release of special issue on Environment, inauguration of Creativity Express, distribution of Water Purifier Systems, Pumps at schools, Kali Umaltana Project at 2 schools, Spardha Pariksha (Competitive Exams) at 25 schools were organized.

We have undertaken environment awareness through seminar, awareness films, cycle rally, Vasundhra Sanman and Vasundhara Mitra puraskar and Exhibitions.

Vasundhara International Film Festival organized in Indore and Dewas for creating awareness towards saving earth for next generation. On world environment day at Dewas factory "Mega Plantation Event" took place. Plantation of more than 9000 trees in Dewas area has been done and further plantation is planned in open land behind factory premises.

Kirloskar WASH (Water, Sanitation and Hygiene) initiative is conducted every year for Municipal school around Pune, Kondhapuri and Kirloskarvadi. KBL employees act as volunteers in this programme in which school children are made aware about hygiene and sanitation.

NEW MANUFACTURING UNITS

Our new plant located at Village Chharodi, Tal.:Sanand, Dist.:Ahmedabad, Gujarat, commenced production on the 20th of June, 2012. This state of the art manufacturing facility will produce energy efficient submersible pumps and cater to markets across the globe. The plant is set up on about 14 acres of land with a built-up area of 8500 square meters. This facility employs 64 associates, of which 14 are women.

DIRECTORS

With a deep regret, we report the sad demise of former Whole Time Director - Mr. R. K. Srivastava on February 21, 2013 and of Mr. M. S. Kirloskar, Director on February 28, 2013.

Mr. R. K. Srivastava was associated with our Company for about 23 years. He joined the company as a General Manager and quickly rose to the position of Vice President by 1994. His knowledge, experience and contribution to the pump industry were of great help to the Company and its growth. He was deeply involved in the design and execution of the world''s largest irrigation scheme for the Sardar Sarovar Narmada Nigam Ltd. He was also the Chairman of a few of KBL''s subsidiaries.

Mr. Mukundrao Kirloskar was associated with Kirloskar Brothers Limited, especially with the Kirloskar publications for many decades. His contribution in the field of Marathi literature is commendable. His social approach in every aspect helped the company to a great extent. His creativity, sensitivity and public relations helped him to be a leading figure in the field of Marathi literature. His contribution in creating awareness in society through ''Kirloskar'', ''Stree'' and ''Manohar'' magazines is praiseworthy.

The Board wishes to place on record their gratitude for the guidance received from Mr. R. K. Srivastava and Mr. M.S. Kirloskar during their tenures as Directors of the Company.

Mr. Vikram S. Kirloskar, Mr. U.V. Rao and Mrs. Lalita D. Gupte, retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment.

Mr. Alok S. Kirloskar was co-opted by the Board of Directors as an Additional Director of the Company with effect from July 18, 2012, after 92nd Annual General Meeting. As per Articles of Association of the Company, he holds office till the date of ensuing Annual General Meeting and is eligible for appointment.

AUDITORS

M/s. P. G. Bhagwat, the Auditors retire at the ensuing Annual General Meeting and are eligible for re- appointment. The requisite certificate pursuant to section 224 of the Companies Act, 1956 has been received. The Audit and Finance Committee has recommended their re-appointment and the annual audit fees.

ACKNOWLEDGMENTS

Your Directors wish to place on record their appreciation of the unstinted support and co-operation given by banks and financial institutions. Your Directors would further like to record their appreciation of the efforts by the employees of the Company.

For and on behalf of the Board of Directors

Sanjay Kirloskar

Chairman and Managing Director

Pune : May 27, 2013

 
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