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Notes to Accounts of Kirloskar Oil Engines Ltd.

Mar 31, 2017

1. Aggregate number of bonus shares issued, share issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date:

The Board of Directors in its meeting held on 25 January 2012, had approved a buyback of fully paid up equity shares of the Company by way of open market purchase through stock exchange route at a maximum price of Rs, 170/- per share and the cumulative buyback value not exceeding Rs, 73.625 Crs. which represents 10% of total paid up capital and free reserves computed as per the latest available audited balance sheet as on 31 March 2011. The buyback commenced on 5 March 2012.

As per the terms of the Public Announcement dated 16 February 2012, the corrigendum to the said Public Announcement dated 1 March 2012 and the Post Offer Public Advertisement dated 24 January 2013 issued in relation to the completion of buyback, the buyback was closed on 24 January 2013.

The Company has bought back and extinguished 10,15,424 equity shares of Rs, 2/-each for R s, 15.67 Crs, at an average price of Rs, 154.34 under the Buyback Scheme, up to 24 January 2013.

2 Scheme of Arrangement and amalgamation

Hon''ble High Court of Judicature at Bombay vide its order dated 30 April 2015 had approved the Composite Scheme of Arrangement and Amalgamation (The Composite Scheme) between Kirloskar Brothers Investments Limited (''KBIL''-Transferor Company), Pneumatic Holdings Limited (PHL- Resulting Company) and Kirloskar Oil Engines Limited (''KOEL'' - Transferee Company) and their respective shareholders and creditors under Sections 391 to 394 and other relevant Sections of the Companies Act, 1956, and the relevant Sections of the Companies Act, 2013, to the extent applicable. The said Scheme has been effective from 30June 2015.

Pursuant to the said Composite Scheme, 8,03,88,514 equity shares held by KBIL in the Company were cancelled on account of Cross holdings and same number of equity shares were allotted to the shareholders of KBIL on 14 July 2015. In view of the same there is no change in the paid-up capital of the Company pre and post the Composite Scheme.

1. Capital redemption reserve is created out of General reserve being nominal value of shares bought back in terms of erstwhile section 77Aof the Companies Act, 1956 for equity shares buy back in the year 2012-13.

2. General reserve is created by setting aside amount from the Retained Earnings of the Company for general purposes which is freely available for distribution.

Proposed dividend on equity shares are subject to approval of the shareholders of the Company at the annual general meeting and are not recognized as a liability (including taxes thereon) as at 31 March.

3. The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

4. During the year ended 31 March 2016 and 31 March 2015, the Company has paid dividend to its shareholders. This has resulted in payment of dividend distribution tax (DDT) to the taxation authorities. The Company believes that dividend distribution tax represents additional payment to taxation authority on behalf of the shareholders. Hence dividend distribution tax paid is charged to equity.

5. There is no change in the applicable tax rate of 34.608 % compared to the previous year (31 March 2016: 34.608%)

6. The unused tax losses were incurred by the company on sale on Long term units of Mutual Fund in which company is not likely to generate taxable income in the foreseeable future. The losses can be carried forward as per the provisions of Income Tax Act.

1. Borrowings are measured at amortized cost.

2. Company''s fund and non-fund based working capital facilities aggregating to Rs, 410 Crs. are secured to the extent of Rs, 410 Crs. by way of hypothecation (First Charge) on the whole of the current assets of the Company both present and future in favour of the consortium of banks (SBI Consortium) comprising of State Bank of India, Pune (Lead Bank), Bank of Maharashtra, ICICI Bank Limited, HDFC Bank Limited, and The Hongkong and Shanghai Banking Corporation Limited (HSBC).

3. For explanations on the company''s Interest risk, foreign currency risk and liquidity risk management processes, refer to Note 40.6.16

1. Trade and other payables are measured at amortized cost.

2. For terms and conditions with related parties, refer to Note 40.6.12

3. For explanations on the Company''s Foreign currency risk and liquidity risk management processes, refer to Note 40.6.16

1. Employee benefits obligations

a. Gratuity

The Company provides gratuity for employees as per the Gratuity Act, 1972. Employees who are in continuous service for a period of five years are eligible for gratuity. The amount of gratuity is payable on retirement or termination whichever is earlier. The level of benefits provided depends on the member''s length of service and salary at retirement age. The gratuity plan is funded plan.

b. Pension, post retirement medical benefit and long term award benefits

The Company provides certain post-employment medical scheme and long term award benefits to employees (unfunded). For long-term award scheme, the Company has defined certain eligibility criteria and grade-wise benefit available to employees and is payable only at time of separation. Pension and medical benefits are payable to employees for 15 years after retirement.

c. Compensated absences

The lease obligation cover the Company''s liability for earned leaves.

Also refer Note 40.6.10 for detailed disclosure.

3. Others

a. Warranty is given to customers at the time of sale of engines and generating sets manufactured. Warranty cost includes expenses in connection with repairs, free replacement of parts / engines and after sales services during warranty period which varies from 1 yearto4years.

Provision is made for estimated warranty claims in respect of products sold which are still under warranty at the end of reporting period. It is expected that majority of these costs will be incurred in the next financial year and balance will be incurred in following years. Management estimates the provision based on historical warranty claim information and any recent trends that may suggest future claims could differ from historical amounts.

b. The Company has preferred an Appeal bearing No.125 of 2016 before the Chief Controlling Revenue Authority (CCRA) against the Stamp Duty Adjudication Order dated 2 May 2016 bearing ADJ/188/2015 passed by Collector of Stamps, Enforcement - II, Mumbai levying a total stamp duty amount of Rs, 14.94 Crs. on Company for amalgamation of KBIL with Company. For securing a Stay Order against the said Stamp duty Adjudication being ADJ/188/2015 dated 2 May 2016, the Company has deposited 50% of the stamp duty amount of Rs, 7.47 Crs. on protest on 30 June 2016. Considering the payment of 50% of stamp duty amount, through its Order dated 22 September 2016, CCRA has passed an Order granting stay on the effect and operation of said Stamp Duty Adjudication Order bearing ADJ/188/2015 dated 2 May 2016. Company''s Appeal bearing No. 125 of 2016 is still pending and listing for final hearing is awaited. Accordingly, provision for Stamp duty of Rs, 14.94 Crs. has been made. Refer Note 38 Exceptional Items.

1. Government grant income accrued for the year relates to the Industrial Promotion Subsidy under the Packaged Scheme of Incentives, 2001.

2. Sale of products includes excise duty collected from customers of Rs, 204.73 Crs. (Previous year Rs, 180.98 Crs.). Sale of products net of excise duty is 12,556.95 Crs. (Previous year Rs, 2,356.76 Crs.).

3. Export incentives includes incentive under EPCG scheme amounting to Rs, Nil (Previous year Rs, 0.52 Crs.)

1. During the year ended 31 March 2016, the Company had introduced Voluntary Retirement Scheme (VRS)for certain category of its workers. The total VRS compensation, amounting to Rs, 10.54 Crs. has been charged to the Statement of Profit and Loss and the same is shown as an Exceptional Item of expense.

2. Refer Note 27 Short Term Provisions

NOTE4: INCOME TAX

The note below details the major components of income tax expenses for the year ended 31 March 2017 and 31 March 2016. The note further describes the significant estimates made in relation to company''s income tax position and also explains how the income tax expense is impacted by non-assessable and non-deductible items.

5. Standards issued but not yet effective

The company has applied all the relevant Indian Accounting Standards which have been notified and effective under the Rules. In 31 March 2017, the Ministry of Company Affairs issued the Companies ( Indian Accounting Standards) (Amendments) Rules 2017, notifying amendments to lndAS7,''Statementof cash flows'' and Ind AS 102, ''Share-based payment. These amendments are in accordance with the recent amendments made by International Accounting Standards Board (lASB)to IAS 7,''Statement of cashflows'' and IFRS 2,Shared-based payments, respectively. Amendment related Statement of cash flows is applicable from 1 April 2017. Amendment to Share-based payments is not applicable to company.

Amendment to Ind AS 7:

The amendment to Ind AS 7 requires the entities to provide disclosure that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.

The Company is evaluating the requirements of the amendment and the effect on the financial statements is being evaluated

6. Salient features of the financial statements of subsidiary for the year ended 31 March 2017

7. Disclosure required as per SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is as follows:

Subsidiary Company

KOEL Americas Corp.

There are no loans and advances in the nature of loans to firms/companies in which Directors are interested.

There are no loans and advances in the nature of loans to Subsidiary companies.

There are no Investments in the firms/companies in which Directors are interested except as disclosed in Note 4(i) and (iii).

8. Previous year''s figures have been re-grouped wherever considered necessary to make them comparable with those of the current year.


Mar 31, 2014

1. Additional Notes to the Financial Statements

1.1 In FY 2012-13, after approval of Reserve Bank of India, Company had pre-paid entire outstanding ECB loan balance of JPY1,890.15 Million i.e. Rs.112.14 Crs on 4th March 2013. Resulting from re- payment of all ECBS, the Company has decided to dissolve the Security Trustee arrangements and sought no objection on 4 April 2013, from The Hongkong and Shanghai Banking Corporation Limited, Mumbai (HSBC), the Security Trustee, for release of the charge secured by way of hypothecation (First Charge) on all movable plant and machinery both present and future, located at Khadki, Pune, Nasik, Kagal and Rajkot forRs.750 Crs. The Company has filed Form 17 with Registrar of Companies, Pune for satisfaction of aforesaid charge on 3 May 2013. The Company has received certificate of satisfaction of charge from Registrar of Companies, Pune, on 3 May 2013.

2. Contingent Liabilities in Crs

As at As at

31 Mar 2014 31 Mar 2013

2.1(A) Contingent Liabilities not provided for

a. Disputed Central Excise Demands 4.58 3.32

b. Disputed Sales Tax &Octroi Demands 6.21 6.21

c. Disputed Customs Duty Demands 0.86 1.08

d. Disputed Income Tax Liability - matter under appeal 10.42 22.70

e. Claims against Company not acknowledged as debts 83.68 82.86

f. Bills discounted not matured 37.84 -

143.59 116.17

3. (B) The Company has imported Capital Goods under the Export Promotion Capital Goods Scheme of the Government of India, at concessional rates of duty on an undertaking to fulfill quantified exports against which, remaining future obligations aggregates USD 36.19 million (previous year USD 66.46 million). Non fulfillment of the balance of such future obligations, if any, entails options / rights to the Government to confiscate capital goods imported under the said licenses and other penalties under the above-referred scheme. Minimum Export obligation to be fulfilled by the company under the said scheme, by March 31, 2014 - has been fulfilled.

4. Prior period expenses for the year (net of income) is Rs. 0.58Crs. (PY Rs. 0.30Crs.)

5. The Sales for the current year includes an amount of Rs. 211.62Crs. (PY Rs. 62.15 Crs) on account of deemed exports of goods.

6. The company, as per Ministry of Corporate Affairs notification dated 31 March 2009 as amended vide G.S.R. 378(E) dated 11 May 2011, G.S.R. 913(E) dated 29 December 2011, & clarification provided vide circular 25 / 2012 dated 9 August 2012, had exercised the option of implementing the provisions of paragraph 46 of Accounting Standard (AS 11) "The effects of changes in Foreign Exchange Rates" prescribed by Companies (Accounting Standards) Amendment Rules, 2006. The Company had long term foreign currency loans during the previous year, which were categorized as long-term foreign currency monetary items as mentioned in the notification. The aforesaid loans were utilized for the acquisition of assets. Accordingly company had capitalised exchange difference loss of Rs.NIL (P.Y. loss Rs. 3.41Crs.) for the current financial year in respect of its foreign currency loans.

7. Disclosure pursuant to Accounting Standard (AS15) – Revised 2005 "Employee Benefits" prescribed by Companies (Accounting Standards) Amendment Rules, 2006

(A) Defined Contribution Plans:

Amount of Rs. 9.32 Crs. (P.Y. Rs. 8.39Crs.) is recognised as expenses and included in Note No. 26 "Employee Cost"

vi. Experience Adjustments on plan assets (Loss) / Gain Rs. (0.11) Crs. (P.Y. Rs. 0.52 Crs.)

vii. General Description of the plans :

The Company operates gratuity plan wherein every employee is entitled to the benefit as per scheme of the company, for each completed year of service. The same is payable on retirement or termination whichever is earlier. The benefit vests only after five years of continuous service.

8. The Company had in the previous year identified two separate reportable segments namely "Engines" and "Other". The "Other" comprised of Bearings business and revenue related to non- engine activity. In view of the disposal of Bearings business and with due consideration given to the criteria for reportable business segments as per AS 17 ("Segmental Reporting"), the requirement of Segmental disclosure is not applicable.

9. Related parties, as defined under Clause 3 of Accounting Standard (AS 18) "Related Party Disclosures" prescribed by Companies (Accounting Standards) Amendment Rules, 2006, have been identified on the basis of representation made by the Key Management Persons and taken on record by the Board. Disclosures of transactions with Related Parties are as under:

(A) Nature of Obligation

Warranty is given to customers at the time of sale of engines and generating sets manufactured. Warranty cost includes expenses in connection with repairs, free replacement of parts / engines and after sales services during warranty period which varies from 1 year to 4 years.

(B) Expected Timing of resulting Outflow

Majority of warranty claims will be incurred in the next financial year and balance will be incurred in the following years.

10. Disclosure required as per clause 32 of the Listing Agreement is as follows: Holding Company

Kirloskar Brothers Investments Limited

There are no loans and advances in the nature of loans to firms / companies in which Directors are interested.

There are no Investment in the firms / companies in which Directors are interested.

11. Previous year''s figures have been re-grouped wherever considered necessary to make them comparable with those of the current year.


Mar 31, 2013

1 Terms/Rights attached to the equity shares

The Company has only one class of equity shares having par value of Rs. 2/- each. Each equity shareholder is entitled to one vote per share and has a right to receive dividend as recommended by Board of Directors subject to the necessary approval from the shareholders.

The Board of Directors has recommended a dividend of 250% (Rs. 5/- per share) for the financial year.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

2 Aggregate number of bonus shares issued, share issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date:

Hon''ble High Court of Judicature at Bombay vide its order dated 31 July 2009 read with its order dated 19 March 2010 had approved the Scheme of Arrangement between Kirloskar Oil Engines Limited (now known as Kirloskar Industries Limited - Demerged Company) and Kirloskar Engines India Limited [now known as Kirloskar Oil Engines Limited - Resulting Company ("Company")] and their respective shareholders and creditors. The appointed date was 1 April 2009 and the Scheme has become effective from 31 March 2010. The Engines and Auto Components business of Demerged Company was transferred and vested with the Company i.e. Kirloskar Oil Engines Limited on the Scheme of Arrangement becoming effective retrospectively with effect from 1 April 2009.

14,56,29,750 Equity Shares of Rs. 2 each were issued and allotted on April 30, 2010 (out of which 465 equity shares of Rs. 2/- each were kept in abeyance) for consideration other than cash under the said Scheme becoming effective from 31 March 2010, sanctioned by the Hon''ble High Court of the Judicature of Bombay.

3 Buyback of shares

The Board of Directors in its meeting held on 25 January 2012, had approved a buy back of fully paid up equity shares of the Company by way of open market purchase through stock exchange route at a maximum price of Rs. 170/- per share and the cumulative buyback value not exceeding Rs. 73.625 Crs which represents 10% of total paid up capital and free reserves computed as per the latest available audited balance sheet as on 31 March 2011. The buyback commenced on 5 March 2012.

As per the terms of the Public Announcement dated 16 February 2012, the Corrigendum to the said Public Announcement dated 1 March 2012 and the Post Offer Public Advertisement dated 24 January 2013 issued in relation to the completion of buyback, the buyback was closed on 24 January 2013.

The Company has bought back and extinguished 10,15,424 equity shares of Rs. 2/- each for Rs. 15.67 Crs, at an average price of Rs. 154.34 under the Buyback Scheme, upto 24 January 2013.

Subsidy for setting up new industrial unit

The Company''s manufacturing facility at Kagal has been granted "Mega Project Status" by Government of Maharashtra and hence is eligible for Industrial Promotion Subsidy (IPS) under Packaged Scheme of Incentive (PSI) 2001. This scheme is for intensifying and accelerating the process of dispersal of industries to the less developed regions and promoting high tech industries in the less developed areas of the State coupled with the object of generating employment opportunities. The Company has been granted Eligibility Certificate issued by the Directorate of Industries, Government of Maharashtra, which stipulates that the eligible unit needs to invest Rs. 500.00 Crs in prescribed area for availing the "Mega Project Status" and the maximum fixed capital investment be restricted to Rs. 598.57 Crs. Additionally, the Eligible Investment should be incurred within a period from 13 April 2006 to 31 March 2013. As at 31 March 2013, the company has complied with the conditions stipulated for being considered "Mega Project Status". IPS consists of following entitlement available for a period of 9 years from the date of commencement of commercial production, i.e., from 1 April 2008 to 31 March 2017:

IPS equivalent to 100% of "Eligible Investments"; or Amount of MVAT and CST payable to the State Government (before adjustment of Set-off) on sales made from Kagal plant, less the amount of benefits availed by way of electricity duty exemption and stamp duty exemption whichever is lower.

In terms of the Accounting Standard (AS 12) "Accounting for Government Grants" prescribed by Companies (Accounting Standards) Amendment Rules, 2006, eligible incentive is considered to be in the nature of promoters'' contribution. Therefore, incentive of Rs. 22.74 Crs for the year (P.Y. Rs. 19.14 Crs) has been credited to the Capital Reserve. Subsidy Receivable as at 31 March 2013 is Rs. 37.36 Crs (P.Y. Rs. 43.42 Crs)

Buyback ofShares

Pursuant to the approval of the Board of Directors in its meeting held on 25 January 2012, the Company had bought back and extinguished 10,15,424 equity shares of Rs. 2/- each by way of open market purchases through stock exchange route for Rs. 15.67 Crs, at an average price of Rs. 154.34 under the Buyback Scheme, upto 24 January 2013.

Capital Redemption Reserve created out of General Reserve for Rs. 0.20 Crs, being the nominal value of shares bought back in terms of Section 77A of The Companies Act, 1956 is included in the amount utilized for equity shares buyback

Nature of Security and Terms of Repayment

1. The Company had availed Foreign Currency Term Loan i.e. External Commercial Borrowings ("ECB") of JPY 3,420.15 Million (equivalent to USD 30.00 Million) i.e. Rs. 124.48 Crs from BNP PARIBAS, Singapore at the rate of interest equal to six months'' JPY London Inter-bank Offer Rate i.e. "LIBOR" plus a Margin of 0.585% p.a. [balance outstanding as on 31 March 2013: Rs. NIL]. [P.Y. Rs. 117.30 Crs]

As per the original repayment schedule, this loan was to be repaid in five six-monthly installments starting from 2 March 2012. On 31 January 2013, the Company received approval from Reserve Bank of India, for pre-payment of entire outstanding balance of JPY 1,890.15 Million of the said ECB. Accordingly, on 4 March 2013, the Company has paid the entire outstanding balance of JPY 1,890.15 Million i.e. Rs. 112.14 Crs.

2. The Company had availed ECB of JPY 2,336.32 Million i.e. Rs. 79.70 Crs from ICICI Bank Limited, Hongkong at a rate of interest equal to six months'' JPY LIBOR plus a Margin of 0.84% p.a. [balance outstanding as on 31 March 2013: Rs. NIL].[P.Y. Rs. 18.12 Crs]

As per the repayment schedule, this loan was to be repaid in eight six-monthly equal installments starting from 31 October 2008. Accordingly, final installment of JPY 292.04 Million i.e. Rs. 19.01 Crs was paid on 27 April 2012.

3. The Company had availed ECB of JPY 405.28 Million i.e. Rs. 13.30 Crs from ICICI Bank Limited, Hongkong at a rate of interest equal to six months'' JPY LIBOR plus a Margin of 0.84% p.a. [balance outstanding as on 31 March 2013: Rs. NIL]. [P.Y Rs. 25.15 Crs].

As per the original repayment schedule, this loan was to be repaid in a single tranche on 20 June 2012. Based on approval received from ICICI Bank ("Authorised Dealer"), the loan was prepaid in a single tranche of JPY 405.28 Million i.e., Rs. 26.39 Crs on 27 April 2012.

ECB, to the extent repayable within one year from the balance sheet date, are grouped under ''Other current liabilities'' (Refer note 9)

ECBs were secured by way of hypothecation (First Charge) on all movable plant and machinery both present and future, located at Khadki, Pune, Nasik, Kagal and Rajkot, in favour of The Hongkong and Shanghai Banking Corporation Limited, Mumbai (HSBC), the Security Trustee for Rs. 750.00 Crs.

Resulting from re-payment of all ECBs, the Company decided to dissolve the Security Trustee arrangement and sought no objection from the Security Trustee for release of the aforesaid charge of Rs. 750.00 Crs. On 4 April 2013 the Company has received No Objection Certificate from the Security Trustee and is in the process of completing the formalities related to the registration for the satisfaction of charge with Registrar of Companies.

Company''s fund and non-fund based working capital facilities aggregating to Rs. 310.00 Crs. are secured to the extent of Rs. 310.00 Crs. by way of hypothecation (First Charge) on the whole of the current assets of the Company both present and future and to the extent of Rs. 60.00 Crs. by way of second charge on the whole of the movable fixed assets of the Company together with all its movable plant and machinery, machineryspares, tools, accessories and other movables both present and future, in favour of the consortium of banks (SBI Consortium) comprising of State Bank of India, Pune (Lead Bank), Bank of Maharashtra, ICICI Bank Limited, HDFC Bank Limited, and The Hongkong and Shanghai Banking Corporation Limited (HSBC).

4.1 Contingent Liabilities

Rs. in Crs. As at As at 31 March 2013 31 March 2012

4.1 (A) Contingent Liabilities not provided for

(a) Disputed Central Excise demands 3.32 1.04

(b) Disputed Sales Tax & Octroi demands 6.21 6.09

(c) Disputed Customs Duty demands 1.08 1.08

(d) Disputed Income-Tax Liability - matter under appeal 22.70 13.06

(e) Claims against Company not acknowledged as debts 82.86 82.18

(f) Guarantees given on behalf of third parties - 14.38

116.17 117.83

4.2 Prior period expenses for the year (net of income) is Rs. 0.30 Crs. (PY Rs. 0.01 Crs.)

4.3 The Sales for the current year includes an amount of Rs. 62.15 Crs. on account of deemed export of goods.

4.4 The company, as per Ministry of Corporate Affairs notification dated 31 March 2009 as amended vide G.S.R. 378(E) dated 11 May 2011, G.S.R. 913(E) dated 29 December 2011, & clarification provided vide circular 25/2012 dated 9 August 2012, had exercised the option of implementing the provisions of paragraph 46 of Accounting Standard (AS 11) "The Effects of Changes in Foreign Exchange Rates" prescribed by Companies (Accounting Standards) Amendment Rules, 2006. The Company had outstanding long term foreign currency loans during the year, which were categorized as long-term foreign currency monetary items as mentioned in the notification. The aforesaid loans were utilized for the acquisition of assets. Accordingly company has capitalised exchange difference loss of Rs. 3.41 Crs. (P.Y. loss Rs. 13.68 Crs.) for the current financial year in respect of its foreign currency loans.

4.5 Disclosure pursuant to Accounting Standard (AS15) - Revised 2005 "Employee Benefits" prescribed by Companies (Accounting Standards) Amendment Rules, 2006

(A) Defined Contribution Plans:

Amount of Rs. 8.39 Crs. (P.Y. Rs. 9.27 Crs.) is recognised as expense and included in Note No. 27 "Employee Cost"

i. Experience Adjustments on plan assets ( Loss ) /Gain Rs. 0.52 Crs. (P.Y. Rs. (0.34) Crs.)

ii. General Description of the plans

The Company operates gratuity plan wherein every employee is entitled to the benefit as per scheme of the company, for each completed year of service. The same is payable on retirement or termination whichever is earlier. The benefit vests only after five years of continuous service.

4.6 Segment information as required by Accounting Standard (AS 17) "Segment Reporting" prescribed by Companies (Accounting Standards) Amendment Rules, 2006 is set out in a separate statement annexed hereto.

(A) Nature of Obligation

Warranty is given to customers at the time of sale of engines and generating sets manufactured. Warranty cost includes expenses in connection with repairs, free replacement of parts / engines and after sales services during warranty period which varies from 1 year to 4 years.

(B) Expected Timing of resulting Outflow

Majority of warranty cost will be incurred in the next financial year and balance will be incurred in the following years.

4.7 Disclosure required as per clause 32 of the Listing Agreement is as follows:

Holding Company

Kirloskar Brothers Investments Limited

There are no loans and advances in the nature of loans to firms/companies in which Directors are interested.

There are no Investments in the firms/companies in which Directors are interested.

4.8 Previous year''s figures have been re-grouped wherever considered necessary to make them comparable with those of the current year.


Mar 31, 2012

Rs in Crs.

As at As at 31-Mar-12 31-Mar-11

1 (A) Contingent Liabilities not provided for

(a) Disputed Central Excise demands 1.04 0.98

(b) Disputed Sales Tax & Octroi Demands 6.09 7.09

(c) Disputed Customs Duty demands 1.08 1.08

(d) Disputed Income-Tax Liability - matter under appeal 13.06 17.22

(e) Claims against Company not acknowledged as debts 82.18 79.06

(f) Guarantees given on behalf of third parties 14.38 48.89

117.82 154.32

2. The company, as per Ministry of Corporate Affairs notification dated 31 March 2009 as amended vide G.S.R. 378(E) dated 11 May 2011, had exercised the option of implementing the provisions of paragraph 46 of Accounting Standard (AS 11) "The effects of changes in Foreign Exchange Rates" prescribed by Companies (Accounting Standards) Amendment Rules, 2006. The Company has outstanding long term foreign currency loans which are categorized as long-term foreign currency monetary items utilized for the acquisitions of assets as referred in the said notification. Accordingly company has capitalised exchange difference loss of Rs 13.68 Crs. [P.Y. loss Rs 14.27 Crs.] is pertaining to the current financial year in respect of its foreign currency loans.

vii. Experience Adjustments on plan assets ( Loss ) /Gain Rs 0.34 Crs. (P.Y. Rs (0.62) Crs.)

viii. General Description of the plans

The Company operates gratuity plan wherein every employee entitled to the benefit as per scheme of the company, for each completed year of service. The same is payable on retirement or termination whichever is earlier. The benefit vests only after five years of continuous service.

3. Segment information as required by Accounting Standard (AS 17) "Segment Reporting" prescribed by Companies (Accounting Standards) Amendment Rules, 2006 is set out in a separate statement annexed to the schedule.

* Chairman & Managing Director up to close of working hours of 25 January 2012 and appointed as the Executive Chairman with effect from 26 January 2012

** Joint Managing Director upto close of working hours of 25 January 2012 and appointed as the Executive Vice Chairman with effect from 26 January 2012 *** Whole Time Director upto close of working hours of 21 January 2012 and continues as Non Executive Director **** Managing Director with effect from 26 January 2012

i. Nature of Obligation

Warranty is given to customers at the time of sale of engines and generating sets manufactured. Warranty cost includes expenses in connection with repairs, free replacement of parts / engines and after sales services during warranty period which varies from 1 year to 4 years.

ii. Expected Timing of resulting Outflow

Majority of warranty cost will be incurred in the next financial year and balance will be incurred in the following years.

4. Pursuant to the approval of shareholders, obtained through postal ballot results of which were announced on 31 March 2011 and consent of the lenders, the Company has completed the hive off of Bearings Business Division (BBD) on 30 September 2011.

The information regarding comparison of sales, profitability and assets of the BBD against corresponding figures of the Company in respect of the year ended 31 March 2012 is given in the table below. Considering the insignificant scale of operations of the BBD compared to the Company's total operations, the hive off of the BBD does not have a material impact on the Company's financials. Hence, the management of the Company is of the view that the disclosure requirements under Accounting Standard (AS-24) relating to Discontinuing Operations will not apply.

5. Disclosure required as per clause 32 of the Listing Agreement is as follows:

A. Holding Company

Kirloskar Brothers Investments Limited.

There are no loans and advances in the nature of loans to firms/companies in which Directors are interested. There are no Investments in the firms/companies in which Directors are interested.

6. Previous year's figures have been re-grouped wherever considered necessary to make them comparable with those of the current year.


Mar 31, 2011

Rs. In 000s As at As at 31 March 31 March 2011 2010

4 (A) Contingent Liabilities not provided for

(a) Disputed Central Excise demands 9,832 13,166

(b) Disputed Sales Tax & Octroi demands 70,906 65,897

(c) Disputed Custom Duty demands 10,799 10,799

(d) Disputed Income Tax liability - matter under appeal 172,247 143,321

(e) Claims against the Company not acknowledged as debts 790,583 743,595

(f) Guarantees given on behalf of third parties 488,875 152

1,543,242 976,930



4 (B) The Company has imported Capital Goods under the Export Promotion Capital Goods Scheme of the Government of India, at concessional rates of duty on an undertaking to fulfill quantified exports against which, remaining future obligations aggregates USD 110.09 million (Previous year USD 97.40 million). Non fulfillment of the balance of such obligations, if any, entails options/rights to the Government to confiscate capital goods imported under the said licenses and other penalties under the above-referred scheme. Minimum Export obligation to be fulfilled by the company under the said scheme, by March 31 2011, has been fulfilled.

7. Security

A. Term Loans

1. Foreign Currency Term Loan i.e. External Commercial Borrowings (ECB) of JPY 1,417.46 Million (USD 12 Million) i.e. INR 526 Million availed from HSBC Bank plc, London [balance outstanding as on 31 March 2011: Rs. 190,729,012/-] [P.Y.Rs. 341,219,141/-]. This loan is to be repaid in eight six- monthly equal installment starting from 02 June 2008. Accordingly two installments of JPY 177.17 Million each i.e. Rs. 81,909,146/- were repaid on 01 June 2010 and Rs.87,077,897/- on 01 December 2010 respectively.

2. Foreign Currency Term Loan i.e. External Commercial Borrowings (ECB) of JPY 3,420.15 Million (USD 30 Million) i.e. INR 1245 Million availed from BNP PARIBAS, Singapore [balance outstanding as on 31 March 2011: Rs. 1,609,470,072/-] [P.Y.Rs. 1,496,792,974/-]. This loan is to be repaid in five six- monthly installments starting from 02 March 2012. However, JPY 430 Million i.e. Rs. 240,026,000 /- was prepaid on 03 September 2010.

3. Foreign Currency Term Loan i.e. External Commercial Borrowings (ECB) of c 2,336.32 Million i.e. INR 797 Million availed from ICICI Bank Limited, Hongkong [balance outstanding as on 31 March 2011: Rs. 471,577,988/-] [P.Y.Rs. 637,054,965/-]. This loan is to be repaid in eight six-monthly equal installments starting from 31 October 2008. Accordingly two installments of JPY 292.04 Million each i.e. Rs. 139,799,548/- were repaid on 30 April 2010 and Rs. 159,074,188/- on 30 October 2010 respectively.

4. Foreign Currency Term Loan i.e. External Commercial Borrowings (ECB) of JPY 405.28 Million i.e. INR 133 Million availed from ICICI Bank Limited, Hongkong [balance outstanding as on 31 March 2011: Rs. 218,144,919] [P.Y.Rs. 183,077,382/-]. This is to be repaid in a single tranche on 20 June 2012.

The above ECBs are secured by way of hypothecation (First Charge) on all movable plant and machinery both present and future, located at Khadki, Pune (except Auto Components Division), Nasik, Kagal and Rajkot. The Security Trustee Agreement entered into between Kirloskar Oil Engines Limited (now known as Kirloskar Industries Limited) and The Hongkong and Shanghai Banking Corporation Limited, Mumbai (HSBC) on 30 April 2008 has been suitably vested pursuant to the Scheme of Arrangement and resultantly the security created as above in favour of HSBC, the Security Trustee upto Rs. 7,500,000,000/- has been reorganized as created by the Company. The Company has received certificate of registration of charge from Registrar of Companies, Pune on 13 July 2010.

B. Working Capital

In respect of the working capital facilities sanctioned by the consortium of banks (SBI Consortium) comprising of State Bank of India, Mumbai (Lead Bank), Bank of Maharashtra, Pune, ICICI Bank Limited, Pune, HDFC Bank Limited, Pune and The Hongkong and Shanghai Banking Corporation Limited, Pune, have been transferred to the Company pursuant to the said Scheme. The Company has received certificate of registration of charge from Registrar of Companies, Pune on 13 July 2010.

Further the said consortium banks have reduced the working capital facilities from Rs. 350 Crores to Rs. 310 Crores on 25 March 2011. Accordingly, the first charge by way of hypothecation on the whole of the current assets of the Company (other than its Bearing Division) both present and future was reduced from Rs. 350 Crores to Rs. 310 Crores and also the second charge on the whole of the movable fixed assets of the Company (other than its Bearing Division) both present and future was reduced from Rs. 100 Crores to Rs. 60 Crores in favour of SBI Consortium as security for fund based working capital facilities. The Company has filed Form 8 for modification of charge with Registrar of Companies, Pune, on 19 April 2011.

13. Details of licensed and installed capacity, production, stock and turnover :

a Licenced capacity is given on the basis of IEM ( Industrial Entrepreneurs Memorandum) received by the company till FY 2010-11.

b Most of the plant and machinery being common for different products manufactured by the company and installed capacity being dependent on product mix, which in turn is decided by the actual demand for various products from time to time and also on availing of subcontracting facilities, it is not feasible for the Company to indicate the exact installed capacity. The Company has, however,indicated the installed capacity on the basis of years Product mix as certified by the Technical Personnel and accepted by Auditors, as correct, being technical matter.

c Includes 3,756 MT for internal consumption. (Previous year - 3,530 MT)

d Unit Closed.

e Production quantity represents number of components "meant for sale only" and includes components produced and kept on hold due to technical reason in earlier years and released after inspection which being a technical matter, is certified by technical personnel and accepted by auditors as correct.

f Includes 4,389 Nos.(000s) for internal consumption. (Previous year 4,203 Nos. (000s).

g Includes 2,325 Nos. for Internal consumption. (Previous year 2,235 Nos.).

17. The Company, as per Ministry of Corporate Affairs notification dated 31 March 2009 had exercised the option of implementing the provisions of paragraph 46 of Accounting Standard (AS 11) "The effects of changes in Foreign Exchange Rates" prescribed by Companies (Accounting Standards) Amendment Rules, 2006. The Company has outstanding long term foreign currency loans which are categorised as long-term foreign currency monetary Items utilised for the acquisitions of assets as referred in the said notification. Accordingly company has capitalised exchange difference loss of Rs.142, 653,475/- [P.Y. gain Rs. 243,517,627/-] pertaining to the current financial year in respect of its foreign currency loans.

18. Disclosure pursuant to Accounting Standard ( AS 15 ) – Revised 2005 " Employee Benefits" prescribed by Companies (Accounting Standards) Amendment Rules, 2006

a. Defined Contribution Plans :

Amount of Rs. 82,566,827/- (P.Y. Rs. 65,233,826/-) is recognised as expense and included in Schedule No.17 "Employee Cost".

(vii) Experience Adjustments on plan assets (Loss) / Gain Rs. (6,234,765/-), PY Rs. 49,742,481/-

(viii) General Description of the plans:

The Company operates gratuity plan wherein every employee entitled to the benefit as per scheme of the Company , for each completed year of service. The same is payable on retirement or termination whichever is earlier. The benefit vests only after five years of continuous service.

19. Segment information as required by Accounting Standard (AS 17) "Segment Reporting" prescribed by Companies (Accounting Standards) Amendment Rules, 2006 is set out in a separate statement annexed to the schedule.

20. Related parties, as defined under Clause 3 of Accounting Standard (AS 18) "Related Party Disclosures" prescribed by Companies (Accounting Standards) Amendment Rules, 2006, have been identified on the basis of representation made by the Key Management Persons and taken on record by the Board. Disclosure of transactions with Related Parties are as under:

(A) Name of the Related Party and nature of relationship where control exists :

1. Associate Companies

Kirloskar Integrated Technologies Limited

2. Companies Controlled by Key Management Personnel :

Cess Investments and Consultants Private Limited

Navsai Investments Private Limited

Kirloskar Consultants Limited

Kirloskar Chillers Private Limited

Kirloskar Integrated Technologies Limited (with effect from 06 December 2010)

Achyut and Neeta Holding and Finance Private Limited

Alpak Investments Private Limited

Green Tek Systems ( India) Limited

3. Key Management Personnel and their relatives:

Key Management Personnel Relatives Relationship

Name Designation

Atul C. Kirloskar Chairman & Managing Director Arti A. Kirloskar Wife

Gauri A. Kirloskar (Kolenaty) Daughter

Aditi A. Kirloskar Daughter

Sanjay C. Kirloskar Brother

Rahul C. Kirloskar Brother

Suman C. Kirloskar Mother

Gautam Kulkarni Joint Managing Director Jyostna G. Kulkarni Wife

Nihal G. Kulkarni Son

Ambar G. Kulkarni Son

Ashwini H. Parulkar Sister

Neeta A. Kulkarni Mother

Rahul C. Kirloskar Whole time Director Alpana R. Kirloskar Wife

Aman R. Kirloskar Son

Alika R. Kirloskar Daughter

Atul C. Kirloskar Brother

Sanjay C. Kirloskar Brother

Suman C. Kirloskar Mother

R. R. Deshpande Executive Director Veena R. Deshpande Wife

Kaustubh R. Deshpande Son

Sourabh R. Deshpande Son

D. R. Deshpande Brother

P. R. Deshpande Brother

* Kirloskar Industries Limited ceased to be a Holding Company w.e.f. 31 March 2010.

** KOEL has material inter company transactions with Kirloskar Integrated Technologies Ltd. As such transactions from 01 April 2010 to 31 March 2011 are included in associate company. These have been made at arms length basis.

Earnings per share is calculated in accordance with Accounting Standard (AS 20) "Earnings Per Share" prescribed by Companies (Accounting Standards) Amendment Rules, 2006.

24. i. Nature of Obligation

Warranty is given to customers at the time of sale of engines and generating sets manufactured. Warranty cost includes expenses in connection with repairs, free replacement of parts / engines and after sales services during warranty period which varies from 1 year to 4 years.

ii. Expected Timing of resulting Outflow:

Majority of warranty cost will be incurred in the next financial year and balance will be incurred in the following years.

25. Company has outstanding currency option contracts (hedging instruments) which are bought by the company to hedge a part of its highly probable forecast export transactions. These currency option contracts are designated as cash-flow hedges in terms of Accounting Standard (AS 30) "Financial Instruments – Recognition and Measurement" prescribed by Companies (Accounting Standards) Amendment Rules,2006. These currency option contracts are ineffective, on applying the principles of hedge accounting as set out in AS-30 and as per an expert opinion cannot be designated for hedge accounting. Consequently, the Mark to Market Losses recognized at the close of the previous year in the Hedging Reserve has been transferred to the profit & loss account during the current financial year. The Mark to Market (MTM) loss (as per the computation provided by the Forex consultant) in respect of these outstanding currency option contracts as at 31 March 2011 aggregating Rs. 114,302,441/- (P.Y. Rs. 162,355,976/-) has been reflected as an exceptional item.

26. The Board of Directors approved the hive off of the Bearing Business Division (BBD) consisting of two units located at Pune and Ahmednagar (except for land and buildings at Khadki and Ahmednagar) at its meeting held on 21 October 2010.

Pursuant to the aforesaid Board resolution, the management of KOEL held negotiations with the management of KSPG Automotive India Private Limited (KSPG India) and agreed on the terms of the Business Transfer Agreement (BTA). The Board of Directors approved the draft BTA for the slump sale of the BBD on a going concern basis for a lumpsum consideration of Rs. 87 crores payable on Completion Date, subject to obtaining approval of shareholders, lenders and other third party consents. The Company has obtained shareholder approval through postal ballot. The results of the postal ballot were announced on 31 March 2011. The Company has also obtained approval of its lenders for the hive off of the BBD. The Company expects to complete the transaction during the financial year 2011- 12, after obtaining other third party approvals and consents and complying with the requirements of the BTA.

27. The Company has from the current year changed the method of providing depreciation in respect of Electrical Installation and Aircraft from Written Down Value basis to Straight Line Method with retrospective effect. The change has been brought about to ensure that all class of assets for providing Depreciation are on Straight Line Method basis.

As a result of change in the method of computing, the charge for Depreciation is lower by Rs. 77,048,847/- and the profit for the period is higher by an equivalent amount and reserves are higher by Rs. 54,939,904/- net of deferred tax.

28. Interest includes an amount of Rs. 149,611,002/- (P.Y. Rs. Nil) which represents exchange differences adjusted as borrowing costs.

29. Disclosure required as per clause 32 of the Listing Agreement are as follows:

A. Associate Company

Kirloskar Integrated Technologies Limited

There are no loans and advances in the nature of loans to firms/companies in which Directors are interested.

There are no Investment in the firms/companies in which Directors are interested.

30. Previous years figures have been re-grouped wherever considered necessary to make them comparable with those of the current year.


Mar 31, 2010

Rs in 000s

As at 31 March 2010

1 Contingent Liabilities not provided for

(a) Disputed Central Excise demands 13,166

(b) Disputed Sales Tax & Octroi demands 65,897

(c) Disputed Custom Duty demands 10,799

(d) Disputed Income Tax liability - matter under appeal 143,321

(e) Claims against the Company not acknowledged as debts 739,689

(f) Guarantees given on behalf of third parties 152

973,024

2. Security

A. Term Loans

1. Term Loan of INR 300 Million availed from HDFC Bank Limited was prepaid 31 August 2009. It was secured by hypothecation by way of first charge of Specific movable Plant and Machinery. The Charge is satisfied during the period.

2. Foreign Currency Term Loan i.e. External Commercial Borrowings (ECB) of JPY 1,417.40 Million (USD 12 Million) i.e. INR 526 Million availed from HSBC Bank pic, London [balance outstanding as at 31 March 2010: Rs. 341,219,141/-]. This loan is to be repaid in eight six-monthly equal installment starting from 2 June 2008. Accordingly two installments of JPY 177.17 Million each i.e. Rs. 84,836,092/- were repaid on 2 June 2009 and Rs. 85,674,728/- on 1 December 2009 respectively.

3. Foreign Currency Term Loan i.e. External Commercial Borrowings (ECB) of JPY 3,420.15 Million (USD 30 Million) i.e. INR 1,245 Million availed from BNP PARIBAS, Singapore [balance outstanding as at 31 March 2010: Rs. 1,496,792,974/-]. This loan is to be repaid in five six-monthly installments starting from 2 March 2012.

4. Foreign Currency Term Loan i.e. External Commercial Borrowings (ECB) of JPY 2336.32 Million i.e. INR 797 Million availed from ICICI Bank Limited, Hongkong [balance outstanding as at 31 March 2010: Rs. 637,054,965/-].This loan is to be repaid in eight six-monthly equal installments starting from 31 October 2008. Accordingly two installment of JPY 292.04 Million i.e Rs. 149,227,755/- was repaid on 30 April 2009 and JPY292.04 Million i.e Rs. 150,546,620/-was repaid on 31 October 2009.

5. Foreign Currency Term Loan i.e. External Commercial Borrowings (ECB) of JPY 405.28 Million i.e. INR 133 Million availed from ICICI Bank Limited, Hongkong [balance outstanding as at 31 March 2010: Rs. 183,077,382/-]. This is to be repaid in a single tranche on 20 June 2012.

The Security Trustee Agreement entered into between Kirloskar Oil Engines Limited (now known as Kirloskar Industries Limited) and The Hongkong and Shanghai Banking Corporation Limited, Mumbai (HSBC) on 30 April 2008 has been transferred pursuant to the Scheme of Arrangement to the Company and resultantly the security by way of hypothecation (First Charge) on all movable plant and machinery both present and future, located at Khadki, Pune (except Auto Components Division), Nasik, Kagal and Rajkot in favour of HSBC Bank, the Security Trustee upto Rs. 7,500,000,000/- has been transferred to the Company.

B. Working Capital

In respect of the working capital facilities sanctioned by the consortium of banks (SBI Consortium) comprising of State Bank of India, Mumbai (Lead Bank), Bank of Maharashtra, Pune, ICICI Bank Limited, Pune, HDFC Bank Limited, Pune and The Hongkong and Shanghai Corporation Limited, Pune, the first charge by way of hypothecation on the whole of the current assets of the Company (other than its Bearing Division) both present and future for Rs. 350 Crores and also the second charge on the whole of the movable fixed assets of the Company (other than its Bearing Division) both present and future for Rs. 100 Crores in favour of SBI Consortium as security for fund based working capital facilities have also been transferred to the Company pursuant to the said Scheme.

The Company is under process of completion of formalities with respect to transfer of charges in respect of Terms Loans and Working Capital facilities with Registrar of Companies, Pune, Maharashtra.

3. The company, as per Ministry of Corporate Affairs notification dated 31 March, 2009 has exercised the option of implementing the provisions of paragraph 46 of Accounting Standard (AS 11) "The effects of changes in Foreign Exchange Rates" prescribed by Companies (Accounting Standards) Amendment Rules, 2006. The Company has outstanding long term foreign currency loans which are categorised as long-term foreign currency monetary items as referred in the said notification. Accordingly company has de-capitalised exchange difference gain of Rs 243,517,627/-pertaining to the current financial year in respect of its foreign currency loans.

Further, exchange difference so de-capitalized is amortised over the balance life of the asset and credit for the period is Rs 28,609,486/-included in depreciation.

As a result, profit for the period is lower by Rs 214,908,141/-.

4. In case of long term Investments made by the Company, diminution in the value of quoted investments, if any, are not considered to be of a permanent nature. However provision of estimated diminution in the value wherever considered necessary by the Management has been made in the Financial Statements.

5. Disclosure pursuant to Accounting Standard (AS 15) - Revised 2005 "Employee Benefits" prescribed by Companies (Accounting Standards) Amendment Rules, 2006

a. Defined Contribution Plans:

Amount of Rs 65,233,826/- is recognised as expense and included in Schedule No 17 "Employee Cost".

b. Defined Benefit Plans:

(vii) The liability for the compensated absences as defined in AS 15 (revised 2005) has been provided on actuarial basis. Para 132 of AS 15 (revised 2005) does not require any specific disclosure except where the expense resulting from compensated absences is of such size, nature of incidence that its disclosure is relevant under other accounting standard. In the opinion of the management, the expenses resulting from compensated absences is not significant and hence no disclosure is prepared under various paragraph of AS 15 (revised 2005). Unfunded liability as at 31 March 2010 is Rs 298,070,195/-.

(viii) General descriptions of Significant Defined plans:

The Company operates gratuity plan wherein every employee is entitled to the benefit as per scheme of the Company, for each completed year of service. The same is payable on retirement or termination whichever is earlier. The benefit vests only after five years of continuous service.

6. Segment information as required by Accounting Standard (AS 17) "Segment Reporting" prescribed by Companies (Accounting Standards) Amendment Rules, 2006 is set out in a separate statement annexed to the schedule.

7. Related parties, as defined under Clause 3 of Accounting Standard (AS 18) "Related Party Disclosures" prescribed by Companies (Accounting Standards) Amendment Rules, 2006, have been identified on the basis of representation made by the Key Management Persons and taken on record by the Board. Disclosure of transactions with Related Parties are as under.

(A) Name of the related party and nature of relationship where control exists:

1. Holding Company

Kirloskar Industries Limited

2. Associate Company

Kirloskar Integrated Technologies Limited

(Formerly Known as Kirloskar Kisan Equipment Limited)

3. Companies controlled by Key Management Personnel

Cess Investments & Consultants Private Limited #

Navsai Investments Private Limited #

Kirloskar Consultants Limited

Achyut & Neeta Holding & Finance Private Limited

Alpak Investments Private Limited

* Refer Note No 2

i. Nature of Obligation

Warranty is given to customers at the time of sale of engines and generating sets manufactured. Warranty cost includes expenses in connection with repairs, free replacement of parts / engines and after sales services during warranty period which varies from 1 yearto4years.

ii. Expected Timing of resulting Outflow:

Majority of warranty cost will be incurred in the next financial year and balance will be incurred in the following years.

8. Company has outstanding currency option contracts (hedging instruments) which are bought by the company to hedge a part of its highly probable forecast export transactions. These currency option contracts are designated as cash-flow hedges in terms of Accounting Standard (AS 30) "Financial Instruments - Recognition and Measurement" prescribed by Companies (Accounting Standards) Amendment Rules, 2006. These currency option contracts are effective hedges on applying the principles of hedge accounting as set out in AS-30. As detailed in Note No 2, the debit balance in Hedging Reserve is transferred and vested with the Company. Balance in this account of Rs 162,355,976/- represents mark to market (MTM) loss (as per the computation provided by the Forex consultant) in respect of these currency option contracts as at 31 March, 2010. Actual gain or loss on exercise of these currency option contracts or any part thereof is recognised in the profit & loss account. Hedge accounting will be discontinued if the hedging instrument is sold, terminated or no longer qualifies for hedge accounting.

9. Disclosure required as per clause 32 of the Listing Agreement are as follows:

A. Holding Company Kirloskar Industries Limited

B. Associate Company

Kirloskar Integrated Technologies Limited There are no loans and advances in the nature of loans to firms/companies in which Directors are interested. There are no Investment in the firms/companies in which Directors are interested.

10. The financial statements of the Company are prepared for the first time since incorporation for the extended financial year i.e. 12 January 2009 to 31 March 2010. Consequently,

i. Statement of cash flows has not been drawn up under the Indirect Method adopted by the Company.

ii. There are no previous years figures.

11. Information required in terms of Part IV of Schedule VI of the Companies Act, 1956 is attached.

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